Apple Inc.

A Global Business Case Study

(I could talk about this for hours)

By Victoria Huxtable
BCom Dip Ed COGE
Apple Overview
 Apple Overview
Who is Jonathan
Schwartz? What
about Larry Ellison,
Olli-Pekka
Kallasvuo, Steve
Ballmer or Eric E
Schmidt?
Perhaps you’ve
heard of Steven
Jobs?
 Apple Overview
Steven P. Jobs - CEO and co-
founder of Apple Computer Inc
(with Steve Wozniak) in 1976
(Jobs and Woz)
2007 name changed to Apple
Inc.
Steve Jobs 132nd on Forbes
Rich List ($5.7 billion)
What is it about Steve Jobs
and Apple that has this man
and his company trumpeted as
the technology industry’s
answer to the Terminator?
Apple Origins
 Apple’s Origins:
Jobs and Woz - 20 something
college drop outs, founded Apple
Computer on April Fools Day 1976.
Worked out of Jobs’ garage and built
computer circuit board named Apple I
Sales reached 200 in first few months
Formal business plan sets goal to
increase sales to $500 million in 10
years.(REASONS FOR EXPANSION:
INCREASE SALES)
 Apple’s Origins:
New partner - Mike
Markkula Jr (millionaire
recently retired from Intel)
Attracted venture capital
Woz - tech genius
Jobs - visionary seeking to
“change the world through
technology”
Apple moves from Jobs'
garage to a building in
Cupertino Calif (current
global HQ in Silicon Valley)
Apple’s Global Expansion
 Apple’s Global Expansion
Apple II launched in 1977.
In only its second year, sales
increased tenfold
Dealer network grown to over
300.
Unveiling at first West Coast
Computer Fair (largest booth
and projection). Markkula
walks floor to sign up dealers.
1979 Apple employs 250
people working in 4 buildings
 Apple’s Global Expansion
By December 1980, Apple was the
industry leader.
Apple II’s business ready platform
containing “VisiCalc” contributed to
its success
Apple launched a successful IPO
(Initial Public Offering).
IPO generated more money than any
IPO since Ford Motor Company in
1956
Apple facilities occupy more than half
a million square feet in the US and
Europe.
Apple employee count breaks 1000
800 independent retailers in US +
Canada, plus 1000 abroad.
Apple’s Falling Market Share
IBM entered PC market in 1981,
fundamentally changing Apple’s
position.
IBMs were able to be cloned by
other producers and used DOS
operating system (OS)
IBM = open system
Apple = private and closed
Interestingly, Apple experienced
sharp fall in market share (6.2%
in 1982)
Yet Apple’s revenue continued
to grow in 1982 (a “billion dollar
(sales) party was thrown for
employees in 1982)
 Introducing the Apple
Macintosh
The Macintosh was hailed a
breakthrough PC in terms of
ease of use, industrial design
and technical elegance.
This was greatly needed as the
company was in crisis in 1983-
84, with net income falling 17%.
Apple became a household
name in the third quarter of
SuperBowl XVIII when it aired
the enormously popular 1984
ad promoting the upcoming
release of the Macintosh

Click on image
 Introducing the Apple
Macintosh
Steve Jobs was responsible for
developing the Mac (and Lisa)
computers
Production was based on the
VERTICAL INTEGRATION
model
Apple facilitates all aspects of its
hardware and creates its own
operating system that is pre-
installed on all Macs.
This is in contrast to IBM PC
compatibles
First PC to feature mouse and
graphical user interface.
 Job’s NeXT Step
Macintosh not entirely
successful
Net income was down by
17%, despite launch of the
Macintosh and Lisa (a
disaster and eventually
discontinued in 1985) in PCs
in January 1984.
 Jobs’ NeXT Step
Jobs’ leadership at the
Macintosh project was
short-lived.
After an internal power
struggle with new CEO
John Sculley (ex Pepsi
man), Jobs angrily
resigned from Apple in
1985, went on to found
NeXT, another
computer company, and
did not return until 1997.
 1985-1997
Sculley (1985-1993)
Desktop publishing and education
Apple into the corporate world
Desktop publishing (Aldus Pagemaker)
Networking and connectivity
1990 market share stabilised at 8%
Education market actually 50% market
share
Apple customers “love their Macs”vs
IBM users “put up with” their machines
Apple and IBM formed a JOINT
VENTURE to create a new OS and
other software.
 1985-1997
M Spindler and G Amelio (1993-
1997)
Reinvigorate core markets (education
K-12 and desktop publishing) as
market share was 60% and 80%
Scrapped Sculley’s plan to put Mac
OS on Intel chips ($500 mill)
Apple would LICENSE a handful of
companies to make Mac clones ($50
per copy of a MacOS license)
Spindler lost momentum (140
corporate buyers would not consider
buying a Mac)
$69 mill loss and more layoffs
Amelio lost $1.6 billion, worldwide
market share went from 6-3%
 The second coming of Steve
Jobs (1997-present)

• Yes the allusion to Jesus is deliberate!

 The Apple Turnaround
Jobs
Ended licensing plan to an abrupt
end (clones were 20% of Mac
sales, and value of Mac fell 11%)
Focus on Microsoft Office for the
Mac
iMac launched 1998 (plug and
play peripherals) - sold 6 million in
3 years (300 million PCs sold in
same time)
Re-energize Apple’s image (Jobs
retained role as CEO of his
company Pixar to this end)
 Apple’s Turnaround
Shortly after Mr. Jobs returned
to Apple in 1997 as part of the
company's acquisition of
NeXT,Dell's founder and
chairman, Michael Dell, was
asked at a technology
conference what might be done
to fix Apple, then deeply
troubled financially.
(Michael Dell - pictured)
 Apple’s Turnaround
"What would I do?" Mr. Dell said to an audience of
several thousand information technology managers.

"I'd shut it down and give the money back to the

shareholders."
 Steve Jobs’ Email

Mr. Jobs sent a brief e-mail message to

Apple employees, soon after, which read:
"Team, it turned out that Michael Dell
wasn't perfect at predicting the future.
Based on today's stock market close,
Apple is worth more than Dell. Stocks go
up and down, and things may be different
tomorrow, but I thought it was worth a
moment of reflection today. Steve."
 Lessons from Apple’s
Marketing
Interbrand Study (2008) Ranks Apple's
Brand as 24th most valuable in the
world.
Coca - Cola remained the #1 global
brand.
IBM traded places with Microsoft to rise
from #3 to #2.
Nokia (#5), Intel (#7), Google (#10), HP
(#12), Cisco (#17), Samsung (#21), and
Oracle (#23) are the other tech
companies ahead of Apple in the
rankings.
 Perceptions of Apple
Apple has enjoyed since
founding in 1976 a prominence
out of proportion to its modest
share of the PC market
Leaders have cultivated the
image that Apple is hip, stylish
and humane - “the computer for
the rest of us”
1984 ad promised a machine
that would liberate mankind from
the tyranny of large, impersonal
computer companies
 Perceptions of Apple
“We started out to get a
computer in the hands of
everyday people, and we
succeeded beyond our
wildest dreams.”—Steve
Jobs
 Apple’s Marketing Lessons
Make the product king
Quality products that offer
customers exceptional value.
Macintosh has a significantly
longer life-span than PC's is
testament to Apple's commitment
to quality
Quality and innovation waned
after the departure of Jobs and
Woz for a decade
Apple's turnaround is largely
owing to the return of innovative
products like the iMac and iPod.
 Apple’s Marketing Lessons
Make the customer king
Apple customers have tremendous brand loyalty.
Mac users (Mac Marines) would protest to
journalists who wrote derogatory articles about
the iPod’s shorter than expected battery life that
many journalists would avoid writing about
Apple's struggles altogether.
Mac User Groups were vocal in their attempt to
keep Apple executives focused on quality when
they perceived the company was lowering its
standards.
Apple patrons feel as if they are part of a
community - the result of the "us against them"
mentality. Customers are loyal and have a sense
of independence and an anti-establishment
perspective.
 Apple’s Marketing Lessons
Break the marketing mould
Company motto
Jobs did away with “Big Box” stores
Opened 1st retail store in Virginia in 2001
June 2008 - 215 stores
Global chains (Australia, Canada, China,
Italy, Japan, UK)
Retail strategy a huge success - the
“Nordstrom of technology”
1997 Macworld Expo Conference that
Apple would be selling Microsoft 5%
of the company for a $150 million,
and be working with their archrival on
new projects (Microsoft)
 Apple’s Marketing Lessons
Other observed features of Apple’s
marketing:
Product Placement (Sex in the
City)
Celebrity endorsement (U2,
Madonna, Seinfeld is rumoured
to be next big celebrity in “Get a
Mac” advert)
High level of secrecy/active
rumour mill
No “hard sell” - the products sell
themselves, emphasis on
experiencing Apple products
Pivotal role of Apple Stores
STANDARDISED
Zen look and feel of stores
(stainless steel, granite, wood)
Apple’s Marketing Lessons
Other observed features of Apple’s
marketing - the Apple Store
Glass staircase suspended
from roof
Genius Bar - son-in-law for hire
Training/classes
All amounting to the attractive
Apple design factors (Designs
that turn heads), ease of use (it
just works), security (114000
viruses - not on a Mac), high
quality bundled software
(awesome out of the box)
iPod and iPhone halo effect
The halo effect is disputed, though
there is strong evidence for its
existence.
iPhone and iPod are many
consumers first exposure to Apple,
leading them to purchase other
Apple products
Technology debuts in Oceania
before USA
It’s a great test market - as
Australians are early adopters
98% of population has access to 3G
network
In the USA it’s more like 20% (NY,
Boston, LA and San Francisco are
the major 3G hubs)
 Appstore
Originally, Apple had planned
on establishing a Venture
Capital fund to promote iPhone
Apps
Taken off guard by a hundred
thousand or so downloads of
the kit on Day 1
Surprised that there were
15000 for sale by the time
iPhone was launched.
Must deliver customer value
I am Rich - Ruby picture pulled
($999.99)
70% revenue to Apple
Developers, 30% to Apple
Examples Shazam, Mi Do Mi
 Employment Relations
1981 - Loan- to Loan Program for
employees (each Apple employee can
borrow an Apple II to use at home, then
after a year was theirs to keep) - provides
an insight into the Apple philosophy
Apple (an anti-establishment company)
nurtures talents so that great things could
be accomplished. Rules were things meant
to be broken, as symbolized by the pirate
flag Jobs raised before team meetings.
In retrospect, Apple's mistake wasn't
bringing on a new CEO in 1983 to help
manage the company's growth.. .the
mistake was bringing in a CEO who wasn't
a good fit with the company culture.
 Employment Relations
Apple is really “Apple-centric” in its staffing.
Approx 50% of Apple store staff come from pre-exiting
stores (such as the US and UK for the Sydney store)
Positions at the Apple store are part time initially
In retrospect, Apple's mistake wasn't bringing on a new
CEO in 1983 to help manage the company's growth..
.the mistake was bringing in a CEO who wasn't a good
fit with the company culture.
21,600 employees work at Apple
Talented senior executives and product managers who
share a common vision for what the company is about.
One of Jobs' talents is hiring and grooming talented
people who are committed to executing that vision.
 Employment Relations
The majority of Apple's employees have been
located in the United States but Apple has
substantial manufacturing, sales, marketing,
and support organisations worldwide, and some
engineering operations in Paris and Tokyo.
Training for Apple stores occurs at Cupertino
HQ
Apple celebrates diverse experience and
backgrounds - focuses on finding the best talent
Apple seeks certain personality types and those
enthusiastic about technology
Daily and quarterly staff briefings
 Employment Relations
• Cupertino HQ
employs in the
following areas:
– Engineering
– Marketing
– Sales
– Legal
– HR
– AppleCare
 Employment Relations
• Marketing advertises • Part of what drives
as follows: this innovation is our
“prompting the challenging and
competition to creative environment
and the fierce
emulate us. As the dedication and talent
only company that of our team. In
designs the hardware, marketing, you have the
the software, and the unique opportunity to
operating system, we work on revolutionary
stand alone in our products from concept
ability to innovate to launch with the best
beyond the status creative minds in the
industry.
quo.”
 Operations
AMR Research released The iconic iPod and
its fifth-annual "Supply iPhone maker took the
Chain Top 25" list, and top spot due to "an
leading the supply chain intoxicating mix of
pack this year is Apple. brilliant industrial
"Apple is No. 1 in 2008, design, transcendent
signifying an epic shift software interfaces
away from the 20th- and consumable goods
century production- that are purely
efficiency mentality to
digital," write AMR's
a new era of value based
on ideas, design and
Tony Friscia, Kevin
content," notes the AMR O’Marah, Debra Hofman
Research report. and Joe Souza in the
report.
 Operations
"The mechanical and the Top 25 rankings.
financial benefits of AMR determines the
this approach include top supply chains
extremely high by analyzing a
inventory turns,
minimal material or
combination of
capacity limitations corporate financial
to growth, and measures, inventory
excellent margins." data, and peer
Apple’s "outstanding" company and AMR
financials proved analyst opinion.
impressive in all the
categories AMR used
to calculate
 Accounting and Finance
Apple is deliberately For example, how many Mac
vague and conservative Pros Apple sells? No one
when talking about knows, and Apple won't
their financials, so tell. There is a lot of
revealing this info is info on iPhone deferred
rather extraordinary. sales and income however,
Analysts and pundits due to GAAP (Generally
have constantly Accepted Accounting
criticised Apple for Principles) rules.
poor corporate All Apple’s pricing is set
governance by not in Cupertino and remains
breaking out their same until new release.
revenue streams more
clearly. Takes into account
exchange rates, size in
market, potential sales
 Accounting and Finance
The non-GAAP financial Jobs - “If this isn’t
results are truly stunning, I don’t know
stunning. By
eliminating
what is — all due to
subscription (of the incredible success
iPhones) accounting, of the iPhone 3G.”
adjusted sales for the 2008 revenues at Apple Inc.
quarter were $11.68
billion, 48% higher
totaled $32.5B, while annual
than the reported earnings equaled $5.36 per
revenue of $7.9 share.
billion, while adjusted Quarter 1 2009, Apple
income was $2.44
billion, 115% higher
reports $1.78 a share
than the reported in earnings, beating
income; analysts forecasts.
 iTunes store

Free download of iTunes system

for Mac and PC (loss leader)
Key element of the iPod system
Launched in April 2003
From 99cents/song
5 major record labels - guards
INTELLECTUAL PROPERTY of
artists
By mid-2007, users had
downloaded 500 mill copies of
the Windows version of iTunes
By June 2008, sold 5 billion
songs - a galvanic impact on
iPod sales
 Legal Issues
VBST in BC Canada
- trademark dispute
with Apple
Matter is on-going
Click here to see
more about the
issue
 Legal Issues
Beatles owns Apple
Music
Apple Inc. has reached
an agreement with
Apple Corps Ltd., the
record label started by
The Beatles in 1968,
concerning the use of
the name "Apple" and
related logos.
 iPhone - Regulation Issues in
China
“The two big ones we just
didn’t have a chance to get
closed were Russia and China…
and I think you’ll see those
happen later this year… we
have to get through the
regulatory bodies in China,
which we’re in the process of
doing, and I think later on
this year you’ll hear some
announcements. 70 countries
is a lot of countries and
we’re launching 22 of the
biggest on July 11th 2008” -
Jobs 2007
 Environment/Green Apple
Apple has unveiled the
Green MacBoook
The new MacBook
family embodies Apple’s
continuing
environmental
commitment. Each new
MacBook is designed
with the following
features to reduce its
environmental footprint:
 Environment/Green Apple
Arsenic-free glass
Mercury-free LED-backlit
display
Brominated flame retardant-
free internal components
PVC-free internal cables
Highly recyclable aluminium and
glass enclosure
Up to 41 percent smaller
packaging
See Greenpeace’s criticisms of
Apple
• Thank you!
• (This is how Steve
Jobs closed a press
conference in 2005
to stop further
questions about his
health)

www.getbusinesssmart.com.au