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CASE 8 APPLE COMPUTER, INC.

(1997)

Introduction
Apple Inc. (Apple), incorporated on January 3, 1977. Manufacturing and marketing mobile communication and media devices, personal computers. During 1997 Apple experienced declines in net sales, units shipped, and share of the personal computer market.

Cont.
Net sales for 1997 were $7.081 billion compared to $9.833 billion only the year before which was 28% decrease in net sales. Market share dropped to 4%, the smallest market share in Apple's history. Steven job hold the title of acting CEO at that time.

Internal and External Analysis

SWOT Analysis
Strengths Jobs return Maintain loyal customer base Strategic alliances R&D / Innovation Name recognition Strong cash position Weaknesses Financial losses Market share losses

Opportunities High demand for PC Public acceptances New markets Competitors

Threats

Home market flat

IFE Matrix
Internal Strategic Factors Weight Rating Weighted Score

Strengths:
Jobs return Maintain loyal customer base Strategic alliances R&D / Innovation Name recognition Strong cash position 0.10 0.05 0.10 0.05 0.10 4 3 3 4 4 0.40 0.15 0.3 0.2 0.4

0.15

0.45

Weaknesses:
Financial losses

0.25 0.20

1 1

0.25 0.20

Market share losses

TOTAL SCORES

1.00

2.35

Interpretation (IFE)
The IFE total weighted score is 2.35 as per (Annexure: A) which is less than the average score of 2.5, indicate that the company has weak internal position, which mean that the company is unable to properly utilize their strengths and they are unable to minimize their weaknesses.

EFE Matrix
External Strategic Factors Opportunities
On-line selling is the new marketing tool High demand for PC Public acceptances Affordable New markets 0.20 0.10 0.20 0.10 0.10 4 3 3 1 2 0.8 0.3 0.6 0.1 0.2

Weight

Rating

Weighted Score

Threats
Competitors Home market flat
TOTAL SCORES 1.00

0 0.20 0.10 3 2 0.6 0.2

2.80

Interpretation (EFE)
The EFE total weighted score is 2.80 which is above the average score of 2.5, indicate that the company is responding in a good way to existing opportunities and threats in its industry. In other words, the firms strategies take advantage of existing opportunities and minimize the potential adverse effects of external threats.

Competitive Profile Matrix (CPM)


Apple Critical success factors Product quality Management Financial position Customer loyalty Market share Total Weight 0.20 0.15 0.20 0.25 0.20 1 Rating 4 2 1 3 1 Score 0.8 0.3 0.2 0.75 0.20 2.25 Rating 4 4 4 3 3 0.8 0.6 0.8 0.75 0.6 3.55 Microsoft score

Interpretation(CPM)
From the result of the CPM we found that the score of the Apple company is 2.25 as compared to its major competitor Microsoft which has rate score on CPM table is 3.55 which interpret that the apple company in 1997 was very weak as compared to the Microsoft.

Problems

Minor Problems
Uncertainty of the strength of reseller and distributor loyalty due to decreased demand and sales of Macintoshes. Problems with the cloners that lead to a cannibalization of Apple's own sales. Constant turnover of the top management.

Major Problem
The major problem which was faced by the apple company in 1997 is the decline in the sales with a loss of $161million and the decrease in the share value from 11% to 4% in the market due to the launch of new product Macintoshes.

Alternative Strategies

TOWS Analysis
Strengths S
S1:Steven Jobs return S2:Maintain loyal customer base S3:Strategic alliances S4:R&D / Innovation S5:Name recognition S6:Strong cash position

Weaknesses W
W1:Financial losses(1997 &1996 $1.8 billion) W2:Market share losses

Opportunities O
O1:On-line selling is the new marketing tool O2:High demand for PC Public acceptances O3:Affordable O4:New markets S6O5 W1O5 W2O2

Threats T
T1:Competitors

S4T1 S6T1 W2T2

T2:Home market flat

TOWS Analysis
S6T1: By utilizing strong cash position due to the infusion of the Microsoft can

get the competitive advantage. By advertising and promotion increase the


demand of the shares.(Market penetration) S4T1: The apple company has effective research and development department which they have to utilize which avoid the company from the treat from

competitors side. (Product development)


W1O5: Financial losses which make weak the apple company can be minimize but availing the opportunity as new market. (Market development) W1O2: High demand for pc which is the big opportunity for the apple company which help in minimizing the weakness of financial losses. (Market penetration)

Cont...
S6O5:The strength strong cash position which come from the Microsoft

who purchase the minority shears of the apple company can be easily
utilize to take advantage from the new market available.(Market development)

W2T2: One of the weaknesses of the apple company market shear losses due to its one of the product for which the home market is flat. If the

company sells that product line for which the product line is flat and
concentrate on the core product in which they made profits. (Retrenchment)

SPACE Matrix
Financial position(FP)
Cash flow: 2

Industrial position(IP)
Growth potential: 2

Earning per share:


Leverage:

1
3

Profit potential:
Financial stability :

2
5

Competitive position(CP)

Stability position(SP)
-3
-2 -6

Market shares:
Product quality: Control over distributer :

Barriers to entry:
Competitive pressure: Technological changes:

-2
-3 -3

Y axis: FP + SP 6 + (-8) = -2 X axis: IP + CP 9 + (-11) = -2

SPACE Matrix
Conservative FS
+6 +5 +4 +3 +2

Aggressive

+1

CA
-6 -5 -4 -3 -2 -1 -1 -2 -3 -4 +1 +2 +3 +4 +5 +6

IS

Defensive

-5 -6

Competitive ES

Interpretation(SPACE)
The result of SPACE matrix shows that the company directional vector is located in the defensive (3rd) quadrant, so the company is in average position in the industry which interpret that the apple strengths are less effective on the opportunities available in the market, Overcome internal weaknesses, and avoid external threats. Therefore market penetration and the retrenchment strategy are specific to the apple in this condition.

BCG Matrix
Relative Market Share Position High 1.0 Medium .50 Low 0.0

High +20
Industry Sales Growth Rate

Stars II

Question Marks I

Medium 0

Cash Cows III


Low -20

Dogs IV

Interpretation(BCG)
As per the point of Apple company on the Boston Consulting Group (BCG) Matrix is in the cash cow because the industry sales growth rate is medium and the relative market share position is also medium

IE Matrix
IFE Weighted Scores
4.0 4.0 3.0 2.0 1.0

EFE Weighted Scores

I 3.0 IV 2.0 VII

II

III

VI

VIII

IX

1.0

The IFE score is 2.35 and EFE score is 2.8 so the apple company laid down in region V which can be described as Hold and maintain stage. Market penetration strategies are the appropriate strategies for this division.

Grand Strategy Matrix


RAPID MARKET GROWTH
1. 2. 3. 4. 5. 6.

Quadrant II Market development Market penetration Product development Horizontal integration Divestiture Liquidation Quadrant III Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification Liquidation

1. 2. 3. 4. 5. 6. 7.

WEAK COMPETITIVE POSITION


1. 2. 3. 4. 5.

Quadrant I Market development Market penetration Product development Forward integration Backward integration Horizontal integration Concentric diversification Quadrant IV Concentric diversification Horizontal diversification Conglomerate diversification Joint ventures

1. 2. 3. 4.

STRONG COMPETITIVE POSITION

SLOW MARKET GROWTH

Recommended Strategy and Plan of action

Quantitative Strategic Planning Matrix


Strategic Alternatives
Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/Environ mental Technological Weight 0.30 0.10 0.10 0.20 Market penetration 2 1 4 2 0.6 0.1 0.4 0.4 Retrenchment 3 3 2 3 0.9 0.3 0.2 0.6

Competitive

0.30
1.00

0.6

0.6

Key Internal Factors Management Marketing 0.20 0.20 2 3 0.4 0.6 3 2 0.6 0.4

Finance/Accounting
Production/Operations Research and Development Computer Information Systems Total:

0.10
0.20 0.10 0.20 1.00

2
3 2 2

0.2
0.6 0.2 0.4 4.5

4
3 3 3

0.4
0.6 0.3 0.6 5.5

Conclusion
The result shows that, Market penetration valued 4.5 and retrenchment valued as 5.5. After going through all these matrixes I found that retrenchment and market penetration are the most useful strategies for Apple Company, and by applying QSPM on these two strategies, I found that retrenchment is valued more as compare to market penetration. Apple Company should adopt retrenchment strategy because of the decrease in sales in which losses are recorded about 28% and the market shears loss its value from 11% to 4% so for this Apple Company has to sell off the some of its product line that is Macintosh.