Strategic Management Analysis

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II. COMPANY STRATEGY
A. APPLE INC.
A firm’s business strategy reflects its leaders. Under Steve Jobs, Apple differentiated itself through elegantly simple design. This piece explores Apple’s business strategy in the first full year of Tim Cook’s leadership. Already, we can see Tim Cook is changing Apple. In contrast to Jobs’ rare appearance before the press and analysts, Cook took the opportunity to discuss Apple’s business strategy at the recent Goldman Sachs’ Technology Conference. When questioned about the future of the iPhone, Apple’s largest revenue stream, Cook underscored that smartphones only represent 9% of the global handset market and even within smartphones, 3 out of 4 customers bought something other than Apple. Apple manufacturing partners and practices have also come into the spotlight following the unprecedented disclosure of their supply chain partner audit combined with the hiring of a third party employment practices review agency. Most recently, Apple invitedABC Nightline into their primary supplier Foxconn. In increasing increments, Cook is making Apple more accessible. In the past, his operational expertise has been a perfect counter to Jobs’ legendary product instincts and will serve Apple this year. What we won’t learn in 2012 is whether Cook can plant the seeds for a new platform in the years beyond. It’s a no-brainer to assume Apple Labs is cooking away. There just won’t be much evidence in 2012. What we can expect is that Apple will continue to get paid for the integrated value they deliver. Apple products initially cost more than most competitors. They win by tightly integrating hardware and software for a superior user experience. Many would argue Apple’s integration provides a lower aggregate cost as well. Apple 2012

2012 will be dominated by the following four themes, all targeted at cementing users and developers into Apple’s lush, walled garden of peerless user experience: 1.Scaling all operations (manufacturing, retail, Internet) to meet global demand 2.Rapid expansion in China and developing economies

3.New product form factor: Apple TV
4.Apple’s iCash Mountain Problem
1. Scaling: Flawlessly Synchronizing Billions of Transactions With revenue greater than $46B in the fourth calendar quarter of 2011, any conversation about Apple strategy has to begin with the challenges of scale. The iPhone and iPad have plenty of runway left for growth as does Apple retail, but as numbers grow, so do the consequences of the smallest hiccup. Meeting demand for hundreds of millions of annual units requires flawless execution across the supply chain, distribution and with their manufacturing partners. We’ve become so accustomed to high tech products that it’s easy to forget what a shortage of a single component can do. When floods struck Thailand last fall, it disrupted disk drive supplies for nearly six months. Last year, Apple sold 156 million IOS-based devices (iPhone, iPad and iTouch) which is more than the 122 million Macs sold since its 1984 introduction. In Tim Cook’s own words, “the trajectory is off the charts.” Geometric growth plays to Cook’s strengths. In fact, if there’s a hallmark to Apple’s business strategy in 2012, it begins with leveraging his unique competencies. 2. China…and other developing countries

Any conversation about scaling quickly turns to Apple’s China opportunity. Focusing just on iPhone, Apple currently sells it exclusively through China Unicom (196 million subscribers). This is slightly less than the combined subscriber base of Verizon Wireless and AT&T. But in a country of billions, it doesn’t compare to China Mobile’s 616 million subscribers. It’s no surprise that Cook visited China Mobile this past June. As important as Apple’s innovation machine has been for the developed world, 2012 success in China and emerging economies will be fed by incremental product improvements. They may be combined with creative cost and/or pricing...
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