Introduction Apple Inc. (Apple) is known as one of the biggest multinational electronics company and located in California, U.S.

Apple was established by Steve Jobs and Steve Wozniak in April 1976 and competed globally in all of the high-tech consumer electronics. Apple Inc. concentrated to the personal computer design industry in the estimation dawn but has now diversified into the range of products and services, in which it focuses on the four main sub-industries to fulfill its mission to make the Mac the hub of the [consumers] digital lifestyle. 4 sub-industries are relevant and associated products in the consumer demand and following offering as internet video downloading industry (Apple TV and Itunes), smartphones (IPhone), music industry-distribution of devices and services (IPod and Itunes) and the smart electronic tablet (IPad). Apple has driven not only these four main sub-industries in the last decade but also developed and designed the new technologies in their products to introduce throughout the world and to be desirably accepted in most of the different other countries and cultures in the globe. I. External Environment Analysis

1. General Environment Analysis

a. Demographic Segment The world age population is recorded the significantly increase and influenced directly to Apples product development, particularly in Southeast Asia and Europe region. The recovery of economies in developed countries increase the huge middle-class in society and the majority of this class is a main market in the high-tech industry. b. Technology Segment Electronics industry has increased rapidly each year as the results of the competitive design and innovative technology between the high-tech companies in the world. Internet access and wireless technology are more widespread than ever with the improvements of transferring data per second. Especially, Apple Inc. introduced the storage program ICloud (electronics cloud) in which bring not only the portability and flexibility but also the secret safety for users to control and connect the personal electronics devices to the music and games downloads (Itunes),

streaming videos and online activities (Apple TV). Unfortunately, the rapid innovations are main reason of faster the end of product cycle and outdate of Apples technology. c. Economic Segment The economic crisis in 2008 affected to the most of countries in the world and US is not an excluding circumstance. United States (US) is impacted a downturn in its economy in a decade, therefore; a high unemployment rate is the essential issue in the US and no expecting to be recovered immediately. Simultaneously, Asia is one of the emerging regions as a cheap labor cost e.g. China and India after the global financial crisis. d. Socio cultural Segment The young populations are the potential trend towards cool technology and digital lifestyle products. Thus, the global explosion in the consumer electronics devices especially the huge development of smartphone and electronics tablet is as the essential demand of young generations, similarly serve technology savvy and to satisfy the high demands of popularity consumers in online market, downloading and sharing the information. Thereby, Apple should determine each market as an individual market and make the different marketing strategies to be effective in the separated market. e. Political/Legal Segment More governments are implementing the intellectual property (IP) rights safety (patents, copyrights, license, etc.) in the world. Therefore, the patents and copyrights were required to be protected through the stringent law and enforcement for innovative ideas in the competitive technological markets. Besides that, Apple ensure clearly that the specified rules, regulations and rights when extend market in the different countries such as employment rules, tax rates to be paid and the many other aspects. Conclusion The development of wireless technology system and intelligent products brings the opportunities for Apple in the consumer electronics devices. This is proved clearly by the increasing of middle class in society which is a largest segment of Apple market. In addition, the advancements of the

upgrade high-tech devices are the threats because of the improvement of designing innovation and technology. Apple is known as the unique and differentiated product manufacture, easily leading to the shortage ideas for the new inventions, reducing the product life cycles. In the online market, the combination of service between the suppliers of consumer electronics and legal online networks segment provide both the opportunities and threats for Apple. Apple requires a legal online downloading and sharing copyrights while the Android already supply the free online segment for users. Thus, the IP laws in this case have a negative impact in the Apples music online and Apple TV. Summarily, there is a mix market of threats and opportunities for Apple Inc.

Industry Analysis Threats of new entrants Medium to high. Since we are in a much diversified world, there are so many segments for individuals to choose. For each niche market, there will be a potential new entrants. However to compete with a whole set of digital lifestyle products, there will cost many financial and personnel resources. Low. There costs substantial amount of money to simply get into this business. The established supplier-business relationship will further squeeze potential new entrants.

Digital lifestyle industry

Middle to high end Computers industry Multi-functional TV industry Tablet industry Premium Mobile phone industry Premium music player industry

Digital lifestyle industry

Middle to high end Computers industry Multi-functional TV industry Tablet industry Premium Mobile phone industry

Bargaining power of suppliers Low. Due to the rampant online piracy behavior and the lack of effective management method to control that kind of behavior, the suppliers hold little power over the industry. Low to Medium. The supply chain for hardware have been established for many years, which leads to a stable supplierbusiness relationship. However due to the uncertainty of natural disasters in Asia and

Premium music player industry

the availabilities of many major players, suppliers still hold certain power over the industry. Bargaining power of buyers Medium to High. Since the nature of the industry is based on lifestyle choice and the availabilities of many major choices, buyers have pretty high power. However, since many of these type of software are linked to their specific hardware, it reduces the buyers power to medium. Medium to High. Although multi-functional TV could be the new future for households, there are just too many other functional electronic units that could substitute for buyers. Moreover, there has been more attention exerted on the customer demand which could be seen by different types of models available. However, since customers are willing to pay premium prices for such products, it indicates that buyers have little power over the industry. In addition, there is certain switching costs to certain brands which could further diminish the bargaining power of buyers. Threat of substitute products Low. Since the world is trending towards a more digital end, the substitute for such products could decline and fall within the next few generations. Low to medium. Computers plays a vital part in peoples daily life apparently. However with the development of technology, computers may face the threat of other products with similar functions. However, companies could develop new products to spread the risk for potential substitute for any one particular type of product. Rivalry among competitors Medium to high. Each company is trying to

Digital lifestyle industry

Middle to high end Computers industry Multi-functional TV industry Tablet industry Premium Mobile phone industry Premium music player industry

Digital lifestyle industry

Middle to high end Computers industry Multi-functional TV industry Tablet industry Premium Mobile phone industry Premium music player industry

Digital lifestyle industry

Middle to high end Computers industry Multi-functional TV industry Tablet industry Premium Mobile phone industry Premium music player industry

develop methods to lock in their customers within their products. However the need of compatible products help relief this pressure among competitors. High. There are many strong competitors to split the market share. Each of them possess significant influence in their specific customer base. The patent laws for different regions across the world are different, which means there is a potential that company would be willing to be sued to get a lead position in attaining market share by using grey technologies. Especially for music player industry where competing companies strive only to survive. Conclusion Fairly attractive. The key to be successful is to identify the customers need and provide more quality features so that customers could not resist. Fairly attractive. The limited bargaining power of suppliers, threats of new entrants and substitute products gives the industry some attractive attributes. However how to overcome the rivalry between competing companies and retain customer loyalty become the key force to success.

Digital lifestyle industry

Middle to high end Computers industry Multi-functional TV industry Tablet industry Premium Mobile phone industry Premium music player industry

Competitors Analysis The digital lifestyle industry comprises of the digital music sector, video-on-demand (VOD), and cell phones.

Digital music sector There are five other key players competing in the digital music who are Napster, Kazaa, RealNetworks Inc., WalMart, and Amazon.

Napster (now Napster 2.0) has a library of music with up to 12 million songs where uses can gain unlimited access to it for $5 to $10 per month. Napster includes access from mobile and is

compatible on connected computers, iPhone, iPod, iPod touch, Android, BlackBerry, TV, Bluray players, and other various home audio.

Kazaa has been in the digital music market for a long time. During its early days, it was rumoured of being littered with spyware and ad-based programs. However, today Kazaa allows unlimited plays and downloads, playlists, and music from all popular genres. Kazaa allowed users to share playlists, rate and review their favourite artists, albums, songs, and shout out to people they would like to contact. Furthermore, Kazaa synchronises with Facebook, Twitter, and MySpace such that users can follow people they like. Kazaa has ringtones for smartphones and is capable on iPads, iPhones, and Android-based devices.

RealNetwork Inc. provides its digital music through a program called Rhapsody which is partnered with MTV Networks. Rhapsodys online music subscription service cost $10 per month while providing over 10 million songs. The Rhapsody app was made available for iPhone, iPod Touch, Android, and Blackberry.

WalMart is currently the number two music retailer in the digital music market, just behind Apple. WalMart sells its music at price points of $0.64, $0.94, and $1.24 per song, with many albums offered at $7.00 or less.

Lastly, Amazon offers more than 15 million songs and albums which can be played on any Android device, PC, or Mac. However, Amazons digital downloads are only available to customers in the US who have a credit or debit card issued by a US bank with a US billing address, and customers must be physically located in the US at the time of purchase.

Video-on-Demand (VOD) sector Netflix, Amazon Unbox, CinemaNow, Disney, Netflix, Walmart, and Warner Brothers compete with AppleTV in the VOD sector.

Netflix has more than 20 million subscribers by 2011 where it gained many new subscribers during the recession as people stayed home to save money and looked for inexpensive sources of entertainment. Netflix plans on investment heavily on streaming content and possible agreements with pay TV channels and networks such as HBO. DVD rentals are also available for delivery through the US Postal Service. Netflix plans to expand its online streaming service internationally.

CinemaNow had an early entry in 1999. However, it is only compatible with Microsoft products, and only on Internet Explorer.

WalMart also entered the VOD segment through its purchase of movie download service, Vudu. Customers were saved running back and forth to the video store or waiting for the movie to come in mail from Netflix or Blockbuster. Additionally, Vudu offered more movie titles than other VOD providers. Vudu is available on many brands such as LG, Mitsubishi Electric, Vizio, Samsung, Viore, Panasonic, Sharp, Sony Playstation, Philips, Sanyo, Toshiba, Magnavox, and RCA. Furthermore, Vudu is compatible on HDTVs, Blu-ray disc players, PS3 consoles, and home theatre systems. Vudu is however only available in the US. A relatively new competitor would in this segment is Amazons Amazon Unbox. It was introduced in 2006. Amazon Unbox allows instant viewing of TV shows through Amazon instant video which is not compatible with Mac or Linux computers. Furthermore downloaded videos cannot be transferred to iPods. Disney has also entered the VOD market through its Disney Movies Online Website. Customers online movie library does not require downloading to a computer. Disney also distributes films and TV shows through Apples iTunes store and that Steve Jobs is Disneys largest individual stockholder at 7%. Disney Movies Online Website works best on dedicated computer and cannot be accessed through most portable devices. Disney also has a 30% stake in Hulu, the digital content distribution service.

Warner Brothers came into the scene with its partnership with Facebook, where Facebook has 500 million active users. The price of Netflix shares dropped when Warner Brothers announced its service. However, Warner Brothers currently offers only pay-per-view and is not available on a centralised storefront. The videos downloaded cannot be easily viewed on larger-screen televisions.

Cell phone sector Motorola Mobility, HTC, and Blackberry compete with Apple in the cellphone (hardware) market. However, deeper into this sector, Apple has to compete in cell phone operating system (software) market. Apple mainly goes against Googles Android OS, and the BlackBerry OS. The other minor competitors are Hewlett Packards Palm Web OS, and Nokias Symbian OS. Motorola was the long-time leader in mobile phone sales until Apples iPhone and Research in Motions BlackBerry came into the market. Motorolas sale was seen to drop where in 2008 sold 100 million, 2009 sold 55 million a drop of 45% in sales. Motorola spun off its business in 2011 to become Motorola Mobility and currently operates in 40 countries. It holds its major facilities in Brazil, China, Taiwan, and US.

BlackBerry sells in approximately 170 countries and its largest markets in the US, followed by Canada and then the United Kingdom. Besides competing with Apple on phone sales, BlackBerry also competes on its operating system (OS), and its app store BlackBerry App World vs. App Store. It is noted that BlackBerry is a strong contender in the smartphone market with its loyal fans albeit the failure of its BlackBerry Torch 9800. BlackBerry commands 27% of the OS market, which is on par with Apple iOS.

HTC, a Taiwanese company has vast partnerships in this market. HTC partners with Microsoft for its Windows Mobile OS, but also uses Google OS. Other strategic partners are Intel, QUALCOMM, and Texas Instruments. Dopod is a subsidiary of HTC. The Windows Mobile OS demands a 10% market share while Googles Android OS commands a strong 29% market share.

MP3 players and Tablets Zune HD (32GB), SanDisk Sansa Clip+ (4GB), and the Sony X-Series Walkman (16GB) are competitors to Apples iPod who leads the MP3 market. In addition, the Apple iPad leads the tablet market, and only Motorolas Xoom (that uses Googles Android) is the only tablet considered to be in the same league with the iPad and iPad 2. Coming in third is Samsungs Galaxy Tab. Furthermore, iPad sales alone in 2011 were forecasted at 48million compared to 13.9 million tablets that use Googles Androids operating system.

Analysing the Internal Environment: Apple is a very large company, based in the USA, with a market capitalization (base 25 December 2010) of US$300 billion. On 19 January 2011 it reported its highest profit on record (US$6 billion), which was some 40% better than its previous best result. It has around 50,000 employees world-wide. The Case discloses that Apple possesses strategic tangible and

intangible resources (in particular) in its key support and primary value chain activities.

Tangible and Intangible Resources. Tangible: It has excellent financial resources both in terms of its growing revenue and a very healthy balance sheet. In the period 2006-2010 annual revenues tripled; net income grew by a factor of 7; and earnings per share grew by a factor of 6.5. On the balance sheet side, cash and cash equivalent reserves grew by a factor of 5; assets grew by a factor of approximately 4.4; and share-holder equity grew by a factor of approximately 4.8. Against the good news however, it should be noted that current liabilities grew by a factor of 3.8 which is probably a relatively modest figure by industry standards. Importantly, it has no long term debt at all. It has very good financial slack. Organizational resources appear to be very good. The Case does not provide a comprehensive description about its born global reporting/controlling structures/processes. What we do know though is that it has six operating/reporting segments they are the Americas (North and South America), Europe, the Middle East, Africa, Japan and the Asia-Pacific region (which includes Australia). The USA based headquarters appears to keep tight control over each of its operating

segments, which is important because they in turn span very diverse demographic, economic and socio-cultural segments of its external environment. This control can be implied from a key observation in the Case. While each of the economic segments of its external environment was affected in different ways by the GFC (and sometimes responded to differently in each environmental segment), it emerged from the GFC stronger than ever (Case, p. 16). This observation is no surprise given the financial information provided in the Case clearly shows that its revenues and balance sheet grew throughout the GFC (2007-2008). Physical resources also appear to be very good, though these need to be viewed as two distinct types of physical assets. First, there is the classic tangible physical resource story about the manufacturing plant and equipment used to produce its i devices; its access to the components and chips used to manufacture them; and the bricks-and-mortar retail stores through which its devices are sold. The second is the less traditional raw materials used by it to provide the services through which the digital entertainment content used on its devices is installed. The Case does not provide any detailed information about the number/location of its manufacturing plants; though we are told that there are 300 owned/operated bricks-and-mortar retail stores in the USA, with another 80 in other countries, but not the number or geographic locations of licensed resellers of its various i devices. In terms of access to the components needed to manufacture its i devices, it appears to have very reliable/reputable suppliers who are primarily based in Japan and Korea. Surprisingly, some of these suppliers are also its competitors (Samsung, Toshiba). The operating segment financial information indicates that its i devices are sold world-wide. The iPhone, we are told, is available in over 90 countries. The Case notes that in addition to its own retail stores it markets and sells its i devices on-line. The interesting story here however is the physical/virtual resource used to not only market and sell its i devices but (in most instances) to put third party digital entertainment products (music, movies, TV shows, some productivity software applications, and most phone apps) on its devices this is more than just about iTunes (surprisingly iTunes stores can only be accessed in 23 countries); the App Stores and iCloud. For convenience we will call them iServices. This is an asset/resource that it does not own - the internet. This free resource is open to access/use by just about anyone (including its competitors) but it is absolutely essential to the provision of its iServices. This is generally the only means by which customers can actually derive digital

entertainment value from iPods, iPhones (for most entertainment phone apps), iPads, iMacs, and Apple TVs. The technological resources are very good to excellent. This generally takes the form of the ubiquitous trademarked/copyrighted iProduct name approach to branding its products. Given the recent dispute with Samsung, it also appears that Apple has patented its operating interface (or aspects of it) for its touch screen devices certainly Apple has always been aggressive in asserting its intellectual property. The Case does not go into any detail about whether it relies upon any proprietary chip/component technologies, as it did in its early Apple I/II history. Intangible: Apples human resources appear to be excellent. In terms of size, it has a world wide workforce of 50,000 people. It has a reputation for employing the most talented people in the disciplines it values and probably has a strong knowledge sharing network. It presents as a company with a management culture which largely reflects the style/personality/attitudes of Steve Jobs though the current organizational culture seems to be the product of a blend of Steve Jobs obsession for detail, the mature industry experience of John Sculley (with Pepsi -Cola) and the internally groomed specialist (and hand-chosen successor to Jobs) in Tim Cook. Its innovation resources are excellent. This is clearly demonstrated by the fact that since 2003 it has produced either a new product or upgraded product every calendar year all of which have met with outstanding sales success. This can be explained in terms of the drive provided by the Jobs factor and the innovation that appears to inevitably flow from its spend on R&D. While the Case does not provide any comparative R&D spend information from its competitors the data provided for Apple is interesting. For the period 2008-2010 its spend on R&D as a percentage of its operating expenses was 22.3%, 24.3%, and 24.4% respectively. This seems to be a significant and consistent level of R&D spending. The reputational resources are excellent. Apple is almost the paradigm in terms of stakeholder trust shareholders cannot but be impressed with its financial performance (profit and loss) and financial health (balance sheet assets). The growth in sales clearly implies that customers like (read trust its products in terms of brand value) as well. The story about suppliers is also good while it has a reputation for driving a hard bargain over the price it pays third party suppliers of components and the quality, this is offset by Apples practice of paying up front for orders.

Value Chain Analysis: The value chain cannot be determined with any precision from the Case but for its i devices it looks like this third party chip/component manufacturer > Apple manufacturer > Apple Stores (bricks-and-mortar and on-line) > Apple fanatic. For its iServices it looks like this third party record label/movie house/app developer > iTunes/App Store (on-line) > customer.

Capabilities Apple has many capabilities to meet customer demands and compete with different market competitors. 1. Product innovation 2. Strategic partnership with other companies to improve product services 3. Well thought marketing strategy 4. Ability of learning what people want 5. Eye catching design of products 6. Ability of quick response from customers feedback 7. Born Global company 8. Differentiate the products 9. Most talented people and high skilled specialist team 10. Strong vision and leadership Core Competencies All of above capabilities are core competencies for Apple, but numbers 1,2,3,5,6,8 and 10 are rare, valuable and non-substitutable. Apple has strong product innovation capabilities (number 1). This gives Apple competitive advantage and market prowess. To achieve digital life style to customer, Apple introduced products (I phone, I pod, I pad, Apple TV, I tune and Apple computer) which could be one package of digital life. Innovations were achieved based on demands of customers and product launches were well thought. Strategic partnership with competitors and other companies is important capability (number 2) in order that Apple achieve different services to customers. This is not only services, but also productions. Marketing is the one of Apples strengths (number 3). Well-thought-out and carefully executed marketing strategies keep the good reputation for products and customers through different

sources. Strategic partnership with famous brand also contributes success of marketing. Apple marketing makes customers feel to be into a hip global family. Apple is very good at listening and implementing what people want (number 4). Customers voices were taken into innovation. That improves Apples reputations for product and customer satisfaction. First market Apple has eye-catching design of products (number 5). Apple makes their product design different from competitors even other competitors focus on cost reduction. Using their good marketing Apple advertising focuses more on a lifestyle with Apple products. Quick response from customer feedback is one of Apples strength (number 6). Quick price adjustment of I phone made improve their profit and quick capture of cheap downloads trend and quick implementation of I tune changed whole distribution of music. From the start of Apple, differentiate product was always focused (number 8). Design of product, unique operation system and strategic marketing with life style establish Apple at different positions compare to other competitors. Steve Jobs has strong leadership and clear vision Apple aim (number 10). After Jobs death, some people has concern, but his leadership and clear vision still lives in Apple.

Weaknesses Apple has great competencies, but there are a lot of competitors. There is a risk to lose market share once competitors launched innovative products. Second the relationships with suppliers are challenge to maintain. Apple relies on certain suppliers for supply of some components of products. If the relationships with suppliers go wrong, Apple has a risk to keep supplying the same quality product. Third is loss of Mr. Steve Jobs. He was in charge of product development, and he had a great design sense. He hid marketing communications too. He was the hub of Apples strengths during growth of Apple and product decisions making. A lot of his them have been ingrained into Apple culture, but it would be some time to adjust without him.

Current Strategy At the business level their strategies are typically focused differentiation. This differentiation being around design, innovation, branding and premium positioning.

The product group (computers, ipods, ipads, iphones, iTV) are linked by proprietary Apple operating system(s) and enriched by a comprehensive level of digitally delivered products through iTunes (music, movies, books, IV shows), iCloud (could storage and file sharing), and a global network of mobile telephony/data providers. This global strategy offers consumers a branded fully integrated bundle of industry leading, consumer products to any one of the products being valid on its own. The Apple logo is central to the global corporate strategy. It is a brand capturing aspirational and counter culture values, for the true Apple believers it is even somewhat revolutionary. However, with the success of the iPhone, its appeal and reach, supported by design excellence, edgy retail outlets and intuitive software took it mainstream made Apple a mass consumer product. From a supply perspective, there is intense global collaboration with component suppliers and manufacturers. The Chinese manufacturers and assemblers enabled the exponential growth in consumer demand to be met. There is a clear strategy to benefit from economy of scale. In the fast cycle electronic consumer products industries, there benefits are maintained through a limited product range but regular evolutionary improvements. There is only one iPhone or one iPad but they keep on evolving and improving with tangible consumer benefits. New product or improved product launches are events which are globally resonant. Sales are then conducted almost simultaneously across the key global markets of the USA and Europe. Apple is a global distributor of digital content. By creating the innovative iTunes service, Apple delivered on its strategy to capture the distributor margin and force owners or suppliers to accept its business terms. It benefited from this first mover innovation locking it more widely when opening it up to the PC/Microsoft platforms but keeping it proprietary to its hand held, mobile devices. Today, Apples current strategies continue to reflect those implemented by Steve Jobs maxim, Apple must build the best products period. As the case notes Steve Jobs philosophy was that if you make something really great, then everybody will want to use it.

Future Strategy 1. 2. 3. 4. 5. 6. 7. Tactical global expansion Focus on business computing community (iMac, iPad, iOS) Acquisition Continue with brand image Visionary leadership Slack resources Form a competitive corporate structure