Project of 411 MNG

Apple Inc

Supervised By : Tr. Hanan Alankari

Done by :
Students Name ID Section No
Ghosoon AlQahtani 431200742 29500
Razan AlAqeel 431201626
Time:
Eithar AlMujalli 431200194
1-2
Afnan AlOmar 431200855
Ghadah AlHanaya 431202843

2013-2014

1
 Table of content Page
introduction 3
Vision and mission 4
Develop the EFE matrix 5
Develop the IFE matrix 6
Evidence 6-14
Develop the CPM matrix 15
Evidence 15-25
Value chain of apple company 25
Evidence 25-28
Global Strategy 28-29
Strategies that apple apply it 30-35
TWOS matrix 36

The quantitative strategic planning matrix (QSPM) 37-40

Linking performance to pay 40

apple's evaluation system 41
Reference 42-43

2
  Introduction
The Organization of Apple was established in 1976 as a computer company.
However, in the last decade, Apple has expanded into a complex company that
specializes in much more than just computers. In 2001, Apple broke the barrier with
the iPod, eventually becoming the dominant market leader in music players. In
following, Apple joined the phone industry in 2007 with the iPhone, which has also
been widely successful. Apple is known as a consumer goods company, therefore
evaluating its value requires understanding its products and consumers. This would
be very challenging where Apple competes with many different companies
throughout the different industries it takes part in. Apple has established a unique
reputation in the consumer electronics industry since it is flexible from its philosophy
of comprehensive aesthetic design to its distinctive advertising campaigns. The
unique characteristic about Apple is that it has a very strong customer base, which is
extremely important in understanding Apple. Meanwhile, more press is associated
with their CEO; Steven P. Jobs (Apple chief executive) who is seen as the architect
of many of Apple's amazing products, and the reason for their success due to his
presentations at Apple's media events that are electrifying and revolutionary. Given
his superstar image, his status and health as Apple's CEO ties into how investors
value Apple. For instance, earlier in the year there was an inaccurate report that he
sustained a heart attack, and rumors flew through the internet, briefly dropping
Apple's stock price 5%. Apple's major products are considered as iTunes, TVs,
Macintosh computers, software iPod and recently iphone.
So , we chose Apple's company because it is famous , most of people know it and use
their products. Also , this company is one of the most successful company in
technology. So , we want to know about their strategies and how it became
successful .

3
  Vision and mission

Apple's Vision Statement:- 

"Apple is committed to bring the best personal computing experience to students, educators,
creative professionals and consumers around the world through its innovative hardware,
software and Internet offerings."

Apple has a vision statement that sounds like a mission and could be used as one .it is short
and clear to understand, but the good vision statement should answer this question " what do
we want to become ?"not " what is our business?" and talk about the main goal and future
not what they are should do like the Apple's vision.

Apple's Mission Statement:-

"Apple designs Macs, the best personal computers in the world(3), along with OS X, iLife,
iWork and professional software(4). Apple leads the digital music revolution with its iPods
and iTunes online store(2). Apple has reinvented the mobile phone with its revolutionary
iPhone and App Store, and is defining the future of mobile media and Computing devices
with iPad.(2)"

Evaluation:-

1- Does not include costumer .

2- Include the produces or services.

3- Include the market .

4- Include the technology.

5- Does not include the concern for survival.

6- Does not include the philosophy.

7- Does not include the Self-concept.

8- Does not include the Concern for public image.

9- Does not include the Employees.

4
About some of characteristic : prod in scope, not be length it is about 250 words ,there are
some kind of positive felling and social policy and not clear because does not provide for
generating and screening strategic option . The company doesn’t explain what values guide
its decision making. So , we think mission statement of Apple is not clear is define the line
products of Apple not the mission statement.

 Develop the EFE matrix

Key external factor Rating

: Opportunity
1. Apple's Siri and the Future of Artificial Intelligence 2

Three ongoing trends have created the environment for Apple to .2 4

.continue its ascent: Smartphones, tablets, and Asia

3.High demand of iPad mini and iPhone 5 4

Also

4.Increasing demand for cloud based services . 3

5. iTV launch 2

6.Emergence of the new provider of application processors 3

7.Obtaining patents through acquisitions 4

: Threat
Apple's China problem.1 3
Jailbreak .2 3
tax increases 2013 .3 3
Intense competition with Samsung .4 3
5.What will replace the iPod? 1
6.The stock price is plummeting 3
7.Rapid technological change 4
8.Rising pay levels for Foxconn workers 2
9.Breached IP rights 2
IFE
10.Price pressure from Samsung over key components 2
11.Strong dollar 3 matrix
11.Android OS growth 4
12.Competitors moves in online music market 1

5
  Develop IFE matrix
Key internal factor Rating
: Strength
1.Brand reputation 4
2.Strong marketing and advertising teams 3
3.Apple is a leading innovator in mobile device technology. 4
4.strong financial performance ($10,000,000,000 cash, gross 3
profit margin 43.9% and no debt).
5.Customer loyalty combined with expanding closed ecosystem. 3
6. Retail stores 4
: Weakness
1. High price. Apple’s products cost much more than its
competitors devices. 1
2. Incompatibility with different OS 2
3. Patent infringements. 3
4. Defects of new products 2
5.Further changes in management 2
6.Long-term gross margin decline 3

 Evidences of EFE & IFE matrix :

http://www.strategicmanagementinsight.com/swot-analyses/apple-swot-
analysis.html

6
http://
www.forbe
s.com/
sites/
susanadam
s/
2013/09/2
7/is-apple-
the-worlds-
most-
innovative-
company-
/still

http://
www.forbes
.com/
sites/
erikkain/
2011/10/1
5/apples-
siri-and-
the-future-
of-artificial-
/intelligence

http://business.time.com/
2012/04/25/why-apple-
wins-innovation-opportunity-
/ and-execution

/http://www.forbes.com/companies/apple

7
www.see
kingalpha
.com
http://
seekingalp
ha.com/
article/
1696222-
apples-
big-
opportunit
y-chinas-
not-going-
anywhere

www. business.time.com

http://business.time.com/2012/04/25/why-apple-wins-innovation-
/opportunity-and-execution

Opportunity: Three ongoing trends have created the environment for Apple to continue
its ascent: Smartphones, tablets, and Asia. In March, for the first time, smartphones
8
outnumbered basic mobile phones. Fifty percent of Americans now own a smartphone,
and this secular shift has fueled an entirely new, re-enforcing industry — the “app
economy.” Meanwhile, tablet sales, which were slow to catch on over the last decade, are
soaring. Apple sold 11.8 million iPads, a 151% increase over last year. Now, millions of
consumers are lining up to buy tablets, and with little lower-priced competition — other
than the nice but comparatively limited Amazon Kindle — Apple has smartly positioned
itself at the high end of this market.
On the other side of the world, Asian and new developing markets are just beginning to
boom — and the potential is truly staggering: hundreds of millions of possible new
consumers. Apple’s Chinese sales have tripled over the last year — and that’s without the
new iPad, which Apple has held back because it simply can’t produce enough of them.
Some 55% of the company’s sales came from foreign countries. If Apple can keep up its
innovative product pipeline, it’s easy to be very bullish about sales growth internationally.

Read more: Why Apple is Winning: Innovation, Opportunity and Execution | TIME.com
http://business.time.com/2012/04/25/why-apple-wins-innovation-opportunity-and-execution/
#ixzz2lUyIYMxN

The evidence of THREATS

9
News Analysis: Apple might seem to have everything in order and all is well,
but a closer look shows Apple's business prospects are shakier than they
have been in a long time.

Apple looks invincible at first glance. For years now, the company has been delivering products that
customers can't wait to get their hands on, and most of its competitors have been unable to answer
with products of their own that can match the same level of quality and buyer appeal. The iPhone
maker seems to have it all together.
But a closer look at Apple reveals something much different. The Cupertino, Calif., company isn't
necessarily in the greatest position right now, and there's no indication that things will turn around
any time soon. The iPhone is now outclassed by the Samsung Galaxy S; Chinese government-
controlled media seems to be turning on Apple, accusing it of arrogance and criticizing its warranty
policies as onerous.
Now Tim Cook seems a little too willing to run Apple as a business, rather than an innovative
company. Apple is simply facing more threats now than ever. It would be a mistake not to
acknowledge that Apple's market situation has changed.
Read on to find out about the threats Apple will face and why the company's position in the
technology industry might not be as cemented in success as some think.

1.Apple's China problem

Apple has a very big problem that the company doesn't like talking about much: China. Android is the
dominant force in the mobile space in China, and even the government has announced plans to build
its own Linux-based processor to reduce reliance on Apple's computers. Apple CEO Tim Cook
responded to Chinese media criticism with a surprisingly contrite apology to customers for its
warranty policies. He has made several trips to China to improve relations with the government and
its biggest carrier, China Mobile, but so far, there is no indication that Apple's efforts to improve its
relations in China will bear fruit.

2. Intense competition with Samsung

Samsung is an obvious one, isn't it? The company has been the only Apple competitor to crack the
code of beating Apple on product design and innovation, and its sales reflect that victory. Apple has
downplayed Samsung's success, saying that it's simply trying to copy the iPhone maker. But
perhaps it's not as simple as Apple thinks.
3. What will replace the iPod?
The iPod is becoming a bit of a concern in Cupertino. Apple is watching the iPhone cannibalize
iPod sales, and its percentage contribution to Apple's revenue is sliding each quarter. Still, the iPod
is generating billions of dollars in revenue every quarter. And unless Apple finds a way to replace
the iPod, it might have an increasingly difficult time hitting Wall Street's targets.

4. The stock price is plummeting

Apple's stock price is near its lowest point in the last year, trading as of this writing at $429.16.
Over the last 52-week period, Apple's shares had at one time hit a high of $705.07. So, what's going
on? Shareholders are reportedly concerned with Apple's cash management, and they don't believe
that it can continue to post such huge profits. It's a problem. And as a public company, it should
matter greatly to Apple.
10
www.eweek.com

http://www.eweek.com/mobile/apple-faces-10-threats-to-future-growth-prosperity

http://beta.fool.com

http://beta.fool.com/makinmoney2424/2012/10/31/apple-strengths-weaknesses-
/opportunities-and-threa/15405

:Opportunities

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1. High demand of iPad mini and iPhone 5. iPad mini sales will increase Apple’s market share in the tablet
market and, will strengthen firm’s competitive advantage.
2. iTV launch. iTV launch will support Apple TV sales and the products’ ecosystem.
3. Emergence of the new provider of application processors. Samsung, the main Apple’s competitor, is also
the only provider of application processors for Apple’s products. Apple has to find a new source for the
component but could not find a suitable one yet. Nonetheless, new manufacturers with superior engineering
capabilities are arising and it’s just a matter of time, when Apple will seize upon the opportunity of being less
dependent on its direct competitors.
4. Growth of tablet and smartphone markets. Growth of tablet and smartphone markets is a good opportunity
to expand firm’s share in these markets.
5. Obtaining patents through acquisitions. Apple lacks of some patents to sustain its growth and the best way
to acquire those patents is to acquire the firms holding them. In addition, Apple could develop new skills and
competencies.
6. Damages from patent infringements. Apple patents are often infringed by its competitors. Thus, collecting
the damages from the companies that do so is a viable opportunity to not only increase the cash reserves but
to damage the competitor’s reputation and sales as well.
7. Strong growth of mobile advertising market. Apple has developed iAd advertising platform, which allows
advertising on Apple iPhone, iPad and iPod touch. The growth of mobile advertising market is an opportunity
which could be further seized upon.
8. Increasing demand for cloud based services. Apple could expand its range of iCloud services and software
as the demand for cloud-based services is expanding.

:Threats
1. Rapid technological change. One of the most severe threats Apple and the other tech companies are facing
is rapid technological change. Companies are under the pressure to release new products faster and faster.
The one that cannot keep up with the competition soon fails. This is especially hard when a business wants to
introduce something new, innovative and successful. Apple was able to bring very innovative products to the
market so far but for the moment, even Apple hasn’t unveiled any plans for the new products (except iTV) and
may lack new introductions to keep up with competition.
2. 2013 tax increases. Tax increases in USA in 2013 will negatively affect Apple.
3. Rising pay levels for Foxconn workers. Pay levels for Foxconn’s workers already rose 3 times from 2010 to
2012. Foxconn is the main manufacturer of Apple products and the rising pay level for Foxconn’s workers will
likely raise the prices for Apple products.
4. Breached IP rights. The companies that breach Apple patents might not be discovered soon and may benefit
from it, while weakening Apple at the same time.
5. Price pressure from Samsung over key components. Samsung has already asked Apple to pay higher
price for its application processors. Due to intense competition and no viable substitutes, Apple may be asked
to pay even more.
6. Strong dollar. Apple earned more than half of its revenues from outside US. Dollar appreciation against other
currencies reduces potential profits from those countries.
7. Android OS growth. Android OS is the main competitor for iOS in mobile device market. The domination of
Android decreases iOS power over influencing consumers to join Apple.
8. Competitors’ moves in online music market. Apple faces threat from online music stores, such as Amazon,
Wal-Mart and online music subscription companies, such as Spotify.

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strengt :
h
1.Customer loyalty combined with expanding closed ecosystem. While at first Apple’s closed ecosystem was
a weakness for the business, this has now changed. First, Apple now has a full range of apps, software and
products that are interlinked and support each other. Second, new products and supplements will be released
soon (iTV), hence expanding the ecosystem. Third, Apple has a strong customer loyalty, which increases due to
Apple’s closed ecosystem, which, in turn, is supported by customer loyalty. So the combination of Apple’s
expanding closed ecosystem and customers’ loyalty increases firm’s competitive advantage.

2.Apple is a leading innovator in mobile device technology. Apple has been chosen as the most innovative
business in the world for the 3rd time in 2012. Company’s core competency of producing innovative products is the
strength the company builds upon and is able to bring the most innovative products to the market.

3.Strong financial performance ($10,000,000,000 cash, gross profit margin 43.9% and no debt). Apple’s
financial performance is one of the best among many companies. Company currently (end of 2012) holds about
$10,000,000,000 in cash, which can be used for acquisitions, buying back company shares and other matters. It
also has higher gross profit margin than its main competitors, which is equal to 43.9%. Company has no debt and
is not directly affected by interest rates or credit markets.

4.Brand reputation. Apple has a reputation of highly innovative, well designed, and well-functioning products and
sound business performance. Apple brand is valued at $76.5 billion and was the second most valuable brand in
the world in 2012.

5.Retail stores. Apple’s retail stores ensure high quality customer experience; provide direct contact with
knowledgeable staff and increases brand awareness. Besides, Apple’s stores are one of the most profitable in
terms of sales/ft2.
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 6.Strong marketing and advertising teams. Marketing is one of the strongest functional areas Apple has. It can
sell pricier products, build superior stores (they are more or less built to achieve marketing goals) and advertise
their products in a compelling manner.

:Weaknesses
1. High price. Apple’s products cost much more than its competitors devices. Some critics argue that the
price is not justified. When there’s such a fierce competition, Apple products price becomes a weakness
because consumers can easily opt for similar quality but lower price products.
2. Incompatibility with different OS. The iOS and OS X are quite different from other OS and uses software that
is unlike the software used in Microsoft OS. Due to such differences, both in software and hardware, users
often choose to stay with their accustomed software and hardware (Microsoft OS and Intel hardware).
3. Decreasing market share. The less market share Apple has, the less it can influence its potential customers
and persuade them to jump into using Apple’s closed ecosystem products.
4. Patent infringements. The firm is often accused of infringing other companies’ patents and has even lost
some trials. This damages Apple brand and its financial situation.
5. Further changes in management. Apple has lost Steve Jobs in 2012 and Tim Cook became the new CEO.
Scott Forstall and John Browett (chief of retail) left the company too and this will have an impact on company’s
management, which, as many think, will be negative.
6. Defects of new products. This is not current Apple weakness but one that jumps out time to time. Some of
Apple’s iPod and iPhone releases had clear faults and thus disturbed sales of the products and firm’s
reputation of superior product performance.
7. Long-term gross margin decline. Current Apple’s gross margin is one of the highest in the tech industry but
analysts fear that due to increasing component prices and competition current margins will not be sustained.
Hence, glooming firm’s future financial performance.

 Develop CPM matrix

Samsung HP Google Dell

Critical Success Factors :
Rating
Advertising .1 3 2 4 2
Product Quality .2 3 3 2 3
Price competiveness .3 3 2 2 2
Management .4 4 2 4 3
Financial Position .5 3 2 3 2
Consumer Loyalty .6
4 2 4 2
Global Expansion .7
4 4 3 1
Market Share.8
Innovation.9 3 3 3 2
10.Web Development 3 3 2 2
3 2 4 1

: First competitor is Samsung company

CPM matrix help us to identify major competitor and its particular strength and weakness in relation
to Apple Inc strategic position

So, we are find financial statement of Samsung company on 2012

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: From this link below

http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downloads/
2013/SECAR2012_Eng_Final.pdf

15
:Also , we found this survey from this link below
http://appleinsider.com/articles/13/11/05/apple-samsung-lengthen-us-smartphone-marketshare-
lead-in-q3

According to the firm's MobiLens survey, Apple's iPhone built on its lead by taking 40.6 percent of all
smartphone subscribers in the U.S. for the three month period ending in September. The performance
is a sequential 0.7 point change from the June quarter's 39.9 percent share.

Rival handset maker Samsung also grew its user base over quarter three, jumping from 23.7 percent at
the end of June to 24.9 percent in September, a change of 1.2 points. Third and fourth place HTC and
Motorola saw negative growth of 1.4 percent and 0.4 percent, respectively, while fifth place LG held
steady at 6 percent.

As for operating system share, Google's Android continued to lead as the number one platform in the
U.S., with a 51.8 percent market share. The change is down 0.2 points quarter-to-quarter. Apple's iOS,
meanwhile, retained the second place spot and gained users over the same period, as did Microsoft's
Windows Phone. Apple saw a 0.7 point bump in users, while fourth place Microsoft gained 0.2 points.

Beleaguered Blackberry continued to lose marketshare and ended September with 3.8 percent of the

16
market, down 0.6 percent sequentially. Defunct mobile platform Symbian held on the fifth place with a
0.3 percent share, unchanged from June.

Overall, comScore found 147.9 million people in the U.S. owned smartphones during the September
quarter, good for a mobile market penetration of 62 percent, up 4.5 percent since June.

A few other interesting data points were offered as well. The firm ranked the top 15 mobile app
properties for smartphones, finding Google sites ranked at the top with an astounding reach to 90
percent of the nation's mobile media audience. Facebook followed with 84 percent, Yahoo! apps and
browsing at 82.2 percent, while Amazon came in with 65.5 percent. Top apps included Facebook,
Google Play, Google search and YouTube.

Of note, the Pandora Internet radio app broke into the top five for the first time ever, reaching 49.3
percent of the market. Apple's first-party app suite ranked seventh with 44.2 percent reach, while the
company's servers reached 50.8 percent of the app and web browsing audience for a fifth place finish.
Cupertino's Maps app netted a 25.6 percent reach in the smartphone app audience, compared to
Google Maps' 43 percent.

17
18
Also ,we find
Source: Consumer Intelligence Research Partners (CIRP)
http://www.forbes.com/sites/chuckjones/2013/08/20/apple-and-samsung-who-could-win-the-smartphone-

/war

19
?Apple Vs. Samsung: Who Could Win The Smartphone War
Consumer Intelligence Research Partners (CIRP) conducts a quarterly survey of 500 consumers who have
bought a mobile phone in the past three months. It analyzed the results over the past four quarters
from July 2012 to June 2013 to determine where Apple AAPL +0.83% and Samsung got their customers.
(NOTE THAT MY FAMILY AND I OWN APPLE SHARES).
While having higher market share of any given market is not necessarily the best strategy, not having a
mid-priced smartphone will hamper Apple’s ability to get users into the Apple ecosystem. Since its users
have a high likelihood of sticking with Apple, the potential September 10 announcement of a more
entry level smartphone could have major long-term benefits for Apple.
One of the biggest game changers is Apple striking a deal with China Mobile CHL -0.42% for the carrier
to support the iPhone. While there are probably over 20 million China Mobile customers who have
bought an iPhone and hacked it onto China Mobile’s system the iPhones run at 2G speeds for a
suboptimal experience. If Apple can get China Mobile to carry the iPhone, it will help stem market share
losses to Android and create tens of millions of long-term customers.
In the chart below 42% of iPhone owners had owned an iPhone previously while 43% of Samsung
owners had previously owned an Android phone. Apple does a better job of getting Android users to
convert to iOS with about 20% of its customers coming from Android vs. only 7% of Samsung
customers coming from iOS.
Samsung makes up for not getting iOS customers to switch by having 37% of its customers coming
from a basic or non-feature phone while Apple only has 26% of its customers upgrading from these
lower functionality phones.

Source: Consumer Intelligence Research Partners (CIRP)

Not many users switch from Apple to Samsung at only 11%. This is critical to Apple’s long-term survival
since Apple users are sticking with iOS and not defecting to Samsung, the biggest Android player by
far.  Apple is having about one-third of its users coming from Android with a substantial percentage,
about 14% coming from BlackBerry.
It is interesting to note that similar to all buyers first time buyers favor Samsung by about a three to one
margin, approximately 6% vs. 2%, over Apple.

20
Source: Consumer Intelligence Research Partners (CIRP)
Brand loyalty is very important to any manufacturer but is extremely important in the smartphone
market due to the quick replacement cycles. Apple has a bit higher retention rate at 42% vs. 38% for
Samsung. Apple does a better job of switching Samsung customers at 19% vs. Samsung only converting
.7% of its users from Apple
Both Apple, at 79%, and Samsung, at 75%, users tend to keep their phones between one and three
.years with Apple turning them over slightly sooner than Samsung owners
It will be interesting to see if Android vendors become even more price competitive and only wind up
stealing customers from each other. I don’t think it will surprise anyone to see additional Android
vendors such as NEC withdraw from the smartphone market since the smaller players won’t be able to
.capture enough market share to remain viable

Source: Consumer Intelligence Research Partners (CIRP)

Apple could be in a better position since it seems to be retaining a higher percentage of its users and
doing a better job of getting Android users to convert to iOS. While I don’t expect Samsung to falter
anytime soon, if the Android market becomes extremely price competitive and it is not able to make
inroads in Apple’s install base Samsung’s profitability could be negatively impacted. Samsung will need
.to be at the leading edge of functionality and develop its own ecosystem
The CIRP report also includes which carriers benefit the most from Apple or Samsung along with market
shares for type of location that sells smartphones (mobile carrier, Apple store, retailer or Internet site). It
.also has information regarding the age, income and education of buyers for each vendor

: Second competitor is HP company

http://h30261.www3.hp.com/phoenix.zhtml?c=71087&p=irol-reportsannual
21
22
: Third competitor is Google company

http://investor.google.com/earnings/2013/Q1_google_earnings.html

: Financial Summary of Google company

Google Inc. reported consolidated revenues of $13.97 billion for the quarter ended March 31, 2013,
an increase of 31% compared to the first quarter of 2012. Google Inc. reports advertising revenues,
consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the
first quarter of 2013, TAC totaled $2.96 billion, or 25% of advertising revenues.
Operating income, operating margin, net income, and earnings per share (EPS) are reported on a
GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative
non-GAAP measure of liquidity, are described below and are reconciled to the corresponding
GAAP measures at the end of this release.

 GAAP operating income in the first quarter of 2013 was $3.48 billion, or 25% of revenues. This
compares to GAAP operating income of $3.39 billion, or 32% of revenues, in the first quarter of
2012. Non-GAAP operating income in the first quarter of 2013 was $4.22 billion, or 30% of
revenues. This compares to non-GAAP operating income of $3.94 billion, or 37% of revenues,
in the first quarter of 2012.
 GAAP net income including net income from discontinued operations in the first quarter of
2013 was $3.35 billion, compared to $2.89 billion in the first quarter of 2012. Non-GAAP net
income in the first quarter of 2013 was $3.90 billion, compared to $3.33 billion in the first
quarter of 2012.
 GAAP EPS including impact from net income from discontinued operations in the first quarter
of 2013 was $9.94 on 337 million diluted shares outstanding, compared to $8.75 in the first
quarter of 2012 on 330 million diluted shares outstanding. Non-GAAP EPS in the first quarter
of 2013 was $11.58, compared to $10.08 in the first quarter of 2012.
 Non-GAAP operating income and non-GAAP operating margin exclude stock-based
compensation (SBC) expense, as well as restructuring and related charges recorded in our
Motorola Mobile business.  Non-GAAP net income and non-GAAP EPS exclude the expenses
noted above, net of the related tax benefits, as well as net income from discontinued operations.
23
 In the first quarter of 2013, the expense related to SBC and the related tax benefits were $681
million and $149 million compared to $556 million and $118 million in the first quarter of
2012.  In the first quarter of 2013, restructuring and related charges recorded in our Motorola
Mobile business were $66 million, and the related tax benefits were $23 million. In addition, net
income from discontinued operations, in the first quarter of 2013, was $22 million.

Fourth competitor is Dell company :

24
 http://i.dell.com/sites/doccontent/corporate/secure/en/Documents/FY11_Form10K.pdf

 Value chain of apple company :

Firm infrastructure
Protecting company knowledge, patents ,general management
HR management
recruiting, training, development
Technological development
recruiting, training, development
Procurement
contact relationships ,third party
Inbound Operations outbound Marketing and Service
sales Apple care,
logistics Manufacturing logistics advertisement Genius bar ,
,china
Support activity

Sourcing packaging ,d
assembly , product Free
and istribution
plants placement , consultation
purchasing
marketing
campaigns

Primary activity

http://www.mindmeister.com/263419799/apple-inc-value-chain

25
http://

www.supplychain247.com/article/is_apples_supply_chain_really_the_no._1_a_case_study

26
27
 /http://prezi.com/a23yvk0pbhbc/apples-value-chain

Global Strategy

Apple Inc., an exceptionally successful firm has accessed the global markets and expanded its presence
in ways that maximize the company’s revenues. The one of strategy options that Apple Inc. utilizes
.most frequently for global market development is the exporting

.Foreign operations of Apple Inc. are conducted in the Americas, Europe, Japan, and Asia Pacific

28
:iPhone

Apple Inc. began with Mobily as the first authorized distributor of the iPhone in Saudi Arabia and then
.with STC and Zain

Apple Inc. determine and specify the price of the iPhone and the certain percentage of the profit for the
distributors even the distributors don't manipulation in prices and the customers in Saudi Arabia can
.buy the iPhone at same price specific from Apple Inc

:Support

Customers can have the support for its iPhone by the distributer or the apple website from support tab

:Mac, iPad and iPod touch

.Authorized distributors are Arab computers and Metra

:Arab computers
Adopted as a distributor for the marketing of Apple products in the Kingdom of Saudi Arabia, and the
Apple oversees all marketing operations and services provided by Arab computers from its office in
.Abu Dhabi

:Support

Arab Computers is the Apple Authorized Service Provider in the Kingdom of Saudi Arabia. Itprovides
.MAC repair and upgrade Services for the Apple computers

Apple Inc. has the sole distributor in the Middle East it is Arab Business Machine LTD, where Arab
.Computers been delegated to do all responsibilities for the customers in the KSA's market

:Arab Business Machine

Arab Business Machine Ltd (ABM) is Apple's authorized distributor for the Middle East region. ABM
also provides consulting services for pre and post-sale technical marketing support, new product
.support, resellers and customer education and marketing support

ABM sells through its network of Apple Authorized Premium Resellers, Apple Authorized Resellers
and Solution Experts, and Authorized Retailers in the following countries: Lebanon, Egypt, United Arab
.Emirates, Bahrain, Oman, Qatar, Kuwait, Jordan, Yemen and the Kingdom of Saudi Arabia

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  Strategies that apple apply it :

1- Innovation:
Apple has built an Innovation Factory – one that harnesses unbridled creativity from its
people, stimulating bold & enterprising new ideas, and launching successful, profitable new
innovations.

Apple leverages its diverse ecosystem of employees, customers, suppliers, partners & global
networks, proven innovation process, and a winning culture that doesn't accept second place
- to seize the new opportunities in the marketplace and grow its business exponentially.

The company’s innovation strategy involves terrific new products and models. The company
delivers consumers with a succession of presents and great software in fabulous hardware in
beautiful packaging.

Apple innovation leaders think in terms of platforms and pipelines and relentlessly push the
pace of innovation. Competitors that chase Apple's find themselves behind.

Focusing on where they can make a significant contribution Apple hires great innovators
who want to make the best things in the world.

Apple’s Innovation System

Apple’s commitment to innovation is cultural, not process driven. The most successful
products at Apple were started with only a few people with no formal structure or hierarchy
and little corporate oversight. Yet, “to turn really interesting ideas and fledgling
technologies into a company that can continue to innovate for years, it requires a lot of
disciplines,” says Steve Jobs.

Apple has built an effective innovation system to harnesses creativity in its people, stimulate
new ideas, streamline the design process, and launch successful, profitable new innovations.

How did Apple do it?

By :
• Increase revenue more than 1,200% since 2000
• Increase net profit more than 3,000% since 2000

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• Increase market cap more than thirty five times to over $300 billion and
counting.

Apple Innovation Strategy :

Creativity -> Ideas -> Innovations -> Success -> Profits

"A true Innovator finds new ways to do new things, making them easier,
cheaper, better! Be an Innovator!" - Sanjay Dalal

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2- product development:

The dynamics of markets, technology, and competition have brought changes to virtually
every market sector and have made new product development one of the most powerful
business activities.In turn, this has made new product development one of the most complex
and difficult business functions. However, firms must innovate in order to survive. The
power of innovation is revealed in numerous studies, which show that companies leading
their industries attribute about half of their revenues to products developed in the most
recent five years.

A firm's new product development efforts are shaped by its size, as well as the nature of the
industry in which it operates. New products may be defined as any product, service, or idea
not currently made or marketed by a company, or which the consumer may perceive as new.

Various studies suggest that between 50 and 80 percent of new products fail—the greater
the rate of new product development, the higher the failure rate. New Product News predicts
that more than 36,000 new products will be brought to market in 2005. Although there are
numerous reasons why new products fail, faulty management and planning are at the core of
most failures. Therefore, managing the new product development process is a key to a
healthy organization.

Apple uses the Apple brand to compete across several highly competitive markets, including
the personal computer industry with its Macintosh line of computers and related software,
the consumer electronics industry with products such as the iPod, digital music distribution
through its iTunes Music Store, the smart phone market with the Apple iPhone, magazine,
book, games and applications publishing via the AppsStore for iPhone and the iPad tablet
computing device, and movie and TV content distribution with Apple TV. For marketers,
the company is also establishing a very strong presence to rival Google in the advertising
market, via its Apps business and iAd network.

Steve Jobs, Apple's co-Founder, described Apple as a "mobile devices company" - the
largest one in the world (Apple's revenues are bigger than Nokia, Samsung, or Sony's
mobility business).

For several years Apple's product strategy involved creating innovative products and
services aligned with a "digital hub" strategy, whereby Apple Macintosh computer products
function as the digital hub for digital devices, including the Apple iPod, personal digital
assistants, cellular phones, digital video and still cameras, and other electronic devices.
More recently, the full impact of a very well throughout brand strategy has come into focus
- and one in which customer experience is central: the Mac is no longer the hub of all things
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Apple. Now, Apple offers a harmonised, synchronized, and integrated user experience
across all of its main devices (iPad, iPhone, and Mac), using iCloud as the hub. It is in the
process of extending this experience outside Apple-controlled environments by introducing
deep integration with Facebook and Twitter on iPad, iPhone and Mac.

Apple owes its overwhelming success in the last years to the iPhone and to the smart iPod
and iTunes product combination, a combination of a great hardware piece with great style,
great software, great performance, user friendly interface, with a good e-business service.
The iPod + iTunes halo effect and new great Mac computers and Mac OS software did the
rest in increasing Apple revenue stream.

In the 5 years between 2003 to 2008 the Apple share value increased 25 times, from $7.5 to
$180 per share. At july 2008 prices, before the US Financial Crisis, Apple stock market
capitalization was $160 billion.
In January 2010 Apple shares topped the $210 mark. But even the best companies with the
best products have bottleneck factors which often avoid full exploitation of the
opportunities.

The iPod:

Few people are aware - and few market analysts too - that for the first 3 years the iPod was
an absolute flop. The iPod was launched in october 2001, and between 2001 and 2004 iPod
sales were between 100-200 thousand units per quarter, very far from today's 10-20 million
units per quarter, and the iPod sales were not even covering the product research &
development costs.
Then, in June-Aug 2004 something happened, and iPod sales began to grow strongly,
quarter after quarter. Today, we all know where the iPod stands, and what a remarkable
success it is.

The iPod made the fortune of Apple, and it stands out as the major turning point in the
company growth.

The iPhone:

The pipeline of new products which came out from Apple in the last years is impressive,
and overwhelming. In 2007, with the successful launch of the iPhone, Apple has marked
another milestone in its development and growth.

Moreover, the iPhone enters a market - the market of mobile phones - a market which is
mature, and saturated. Nonetheless, Apple has been able to develop a revolutionary product,
and to change the paradigm in the mobile phone market.

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The iPhone is 5 years ahead of all its competitors. A wonderful product, amazing user
interface, great design. It is not only a mobile phone, it is a product between a mobile phone
and a laptop computer. Even calling it a smartphone is not enough.

3- Vertical integration Strategy:

How apple uses Forward & horizontal integration strategy?

The forward integration strategy has been commonly used by many companies due to its
popularity in different industries which includes automobiles, fast food, information
technology and etc.

Forward integration strategy is adopted to gain ownership over its distributors and retailers.
This strategy could be implemented by acquiring the existing dealers or company can start
opening its outlet on the main locations.

In technology, Apple for 35 years has championed a vertical model, which features an
integrated hardware and software approach. For instance, the iPhone and iPad have
hardware and software designed by Apple, which also designed its own processors for the
devices. This integration has allowed Apple to set the pace for mobile computing.

Apple started out as a company just making and selling their computers, they expanded over
the years and now their product list is as follows;

Mac, iPod, iPhone, iPad, Apple TV, OS X, iLife, iWork, iOS, iPad Mini.

Although Apple is such a big company they do not have their own production facilities,
everything is produced in China because the costs are less over there. This means they have
not expanded vertically in the production line, they still have other companies producing
components for their products. Apple have expanded their product line but not their
production line except for their shops which they own and operate themselves.

Apple have integrated horizontally because they have expanded on services. Expanding
horizontally is much simpler than vertically. Horizontally integrating simply means a
strategy to increase your market share by including a similar company.

Their services now involve;

 Apple Store
 Apple Store Online
 Mac App Store
 iOS App Store
 iTunes Store
 iBooks
 iCloud

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 Strengths Weaknesses
SWOT Matrix Brand reputation-1 High price. Apple’s -1
Strong marketing and -2 products cost much more
advertising teams than its competitors
Apple is a leading -3 .devices
innovator in mobile device Incompatibility with -2
.technology different OS
strong financial -4 .Patent infringements -3
performance Defects of new products -4
($10,000,000,000 cash, Further changes in -5
gross profit margin 43.9% management
.and no debt) Long-term gross margin -6
Customer loyalty -5 decline
combined with expanding
.closed ecosystem
Retail stores -6
Opportunities
1- Apple's Siri and the Future of
SO WO
Artificial Intelligence Increase iPhone and -1 1-Creating departament
related product sales through responsible for recalls and
Three ongoing trends have created -2
online product warranties to
the environment for Apple to continue
)S1,O3( maximize customers
its ascent: Smartphones, tablets, and Capitalize on the smart- -2
.Asia satisfaction(W1,W4,O2)
phone revolution(S3,O2)
High demand of iPad mini and -3 Expand product range to -2
continue to aggressively -3
iPhone 5 develop mobile app market the masses by offering
Increasing demand for cloud based -4 (S4,O1) lower-cost variants(W1,O2)
. services Lack of debt results in -4 Continuously innovate to -3
iTV launch -5 higher R&D budget driving reduce competition with the
Emergence of the new provider of -6 innovation and new product other
application processors ideas(S4,O1,O4) companies(W1,W6,O1)
Obtaining patents through -7
acquisitions
Threats
1- Apple's China problem
ST WT
Jailbreak .-2 Pursuit of production and-1 Participation in local -1
tax increases 2013 -3 innovation of new communities and charities
Intense competition with Samsung -4 products(T4,T7,S1,S3) to create positive image
?What will replace the iPod -5 Focus on R & D and -2 which was shadowed by
The stock price is plummeting -6 innovation to increase lawsuits(W4,W5,W3,T4,T6)
Rapid technological change -7 customer confidence in the With increased -2
Rising pay levels for Foxconn -8 world(S3,S5,T4,T5,T7,T12) competition and the growth
workers Develop iTunse store -3 of technology on Apple to
Breached IP rights -9 and add new features to invest in innovation and
Price pressure from Samsung over -10 it(S4,T13) create products and new
key components applications(,T4,T7,W1,W6
Strong dollar -11 )
Android OS growth -12 The development of the -3
Competitors moves in online music -13 system and make it more
market attractive and
strength(W2,T12)

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The quantitative strategic planning matrix (QSPM):
product
Key factors
Innovation
development
weight Attractiveness Total Weight Attractiveness Total
Score attractiveness Score attractivene
Score ss Score
Opportunity
1. Apple's Siri 0.10 2 0.2 0.11 2 0.22
and the Future of
Artificial
Intelligence

Three ongoing .-2

trends have
created the 0.05 4 0.2 0.07 4 0.28
environment for
Apple to continue
its ascent:
Smartphones,
.tablets, and Asia
High demand .-3
of iPad mini and 0.05 4 0.2 0.05 4 0.2
iPhone 5

Increasing -4
demand for cloud 0.07 3 0.21 0.02 3 0.06
. based services
iTV launch -5
0.03 2 0.06 0.08 2 0.16

Emergence of -6
the new provider 0.03 3 0.09 0.07 3 0.21
of application
processors

Obtaining -7
patents through 0.05 4 0.2 0.07 4 0.28
acquisitions
Threat
Apple's China .-1
problem 0.03 3 0.09 0.03 3 0.09

Jailbreak -2
0.02 3 0.06 0.02 3 0.06

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tax 2013 -3
increases 0.05 3 0.15 0.03 3 0.09

Intense -4
competition with 0.09 3 0.27 0.03 3 0.09
Samsung

What will .-5

?replace the iPod 0.04 1 0.04 0.08 1 0.08

The stock -6
price is 0.05 3 0.15 0.02 3 0.06
plummeting

Rapid -7
technological 0.10 4 0.4 0.03 4 0.12
change
Rising pay -8
levels for 0.03 2 0.06 0.05 2 0.1
Foxconn workers

Breached IP -9
rights 0.06 2 0.12 0.06 2 0.12
Price -10
pressure from 0.03 2 0.06 0.05 2 0.1
Samsung over
key components
Strong dollar -11
0.05 3 0.15 0.03 3 0.09

Android OS -12
growth 0.05 4 0.2 0.01 4 0.04

Competitors -13
moves in online 0.02 1 0.02 0.09 1 0.09
music market

100% 100%

Strength

Brand .1
reputation 0.15 4 0.6 0.15 4 0.6

Strong .2
marketing and 0.15 3 0.45 0.14 3 0.42
advertising teams
Apple is a .3
leading innovator 0.10 4 0.4 0.12 4 0.48
in mobile device
.technology
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strong financial .4
performance 0.13 3 0.39 0.15 3 0.45
($10,000,000,000
cash, gross profit
margin 43.9%
.and no debt)
Customer .5
loyalty combined 0.10 4 0.4 0.05 4 0.2
with expanding
closed
.ecosystem
Retail stores .6
0.03 3 0.09 0.01 3 0.03

Weaknesses

High price. .1
Apple’s products
cost much more
0.05 1 1
than its
competitors 0.05 0.09 0.09
.devices

Incompatibility .2
2 0.08 2 0.08
with different OS 0.04 0.08

Patent .3
3 3
.infringements 0.05 0.15 0.03 0.09

Defects of new .4
0.09 2 2
products 0.18 0.07 0.14

Further .5
changes in 2 2
management 0.05 0.1 0.08 0.16
Long-term .6
gross margin 3 3
0.18
decline 0.06 0.03 0.09

100% 100%

Sum total
attractiveness
6.54 > 5.37
score

The best strategy that apple should follow is innovation

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Linking performance to pay :-

A clear evidence on how Apple's company is linking performance to pay who is working
in Apple's company is Mr. Cook .

Mr. Cook will get as many as 80,000 shares each year, half of which is tied to the stock
price. If Apple’s share performance is in the top third of Standard & Poor’s 500 Index
companies that year, Cook will receive the full amount. If it’s in the middle third, he’ll
get 60,000 shares, and 40,000 for any year that Apple is in the bottom third.

More information about Mr. Cook :- Cook, who received one of the largest stock-reward
packages on record in 2011, requested the modification to his bonus, Apple’s board said
in a filing yesterday. The change means about third of the CEO’s stock rewards will now
be subject to a drop in value, the directors said. Cook was given 1 million Apple shares
vesting over a decade after succeeding Steve Jobs as CEO in 2011. As a result of the new
plan, part of that bonus will now be based on stock performance, rather than just on
Cook remaining at the iPhone maker. Investors including the California Public
Employees' Retirement System have urged Apple and other companies

to link pay more to the stock price.

apple's evaluation system:

Apple's auditors:

Apple's board of directors has Audit and Finance committees

Apple's independent registered public accounting firm is Ernst & Young LLP.
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An Apple auditor leads every onsite audit, supported by local third-party
auditors who are experts in their fields. Each expert is trained to use Apple’s
detailed auditing protocol. At each audited facility, the teams conduct physical
inspections, interview workers and managers, and observe and grade suppliers
based on more than 100 data points corresponding to each category of apple's
Supplier Code of Conduct. Apple use this data not only to ensure compliance and
sustainable improvement over time, but also to consider new programs that will
meet the changing needs of Apple's suppliers and their workers.

In addition to regularly scheduled audits, Apple conduct a number of surprise

audits during which Apple's team visits a supplier unannounced and insists on
inspecting the facility within an hour of arrival. Apple conducted 28 of these
surprise audits in 2012. During regular audits, apple may also ask a supplier to
immediately show them portions of a facility that are not scheduled for review.

References:

 http://www.studymode.com/essays/An-Introduction-To-Apple-Company-
242967.html
 http://www.bloomberg.com/news/2013-06-21/apple-ceo-adjusts-bonus-in-
shift-to-performance-rewards.html
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  http://www.businessinsider.com/apples-new-mission-statement-2013-8
 http://www.strategicmanagementinsight.com/mission-statements/apple-
mission-statement.html
 http://creativityandinnovation.blogspot.com/2010/02/apples-innovation-
strategy-learn-how.html
 http://www.innovarsity.com/coach/bp_innovation_strategies_apple.html
 http://www.marketingminds.com.au/branding/apple_branding_strategy.html
 http://www.referenceforbusiness.com/management/Mar-No/New-Product-
Development.html
 http://www.vertygoteam.com/apple_marketing_strategy.php
 http://knowledge.wharton.upenn.edu/article/vertical-integration-works-for-
apple-but-it-wont-for-everyone/
 http://www.mba-tutorials.com/strategy/1530-forward-integration-
strategy.html
 http://georgiafrend.wordpress.com/understanding-the-media-sector/vertical-
and-horizontal-integration/
 http://www.forbes.com/sites/erikkain/2011/10/15/apples-siri-and-the-future-of-
artificial-intelligence/

 http://business.time.com/2012/04/25/why-apple-wins-innovation-opportunity-
and-execution/
 http://www.strategicmanagementinsight.com/swot-analyses/apple-swot-
analysis.html
 http://www.apple.com/hotnews/
 http://seekingalpha.com/article/1696222-apples-big-opportunity-chinas-not-going-
anywhere

 https://www.apple.com/sa/buy/

 http://www.arabcomputers.com.sa/index.php/support/warranty-policy.html
 http://www.abmme.com/about-us.php?lang=EN
 http://www.slideshare.net/Kakie/apple-strategic-management-case-analysis
 http://hussamkhalafallah.wordpress.com/2012/04/19/apple-inc-tows-matrix/

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  http://shekhar-guddudada.blogspot.com/2012/02/step-8-tows-matrix-
apple.html
 http://investor.apple.com/faq.cfm?FaqSetID=6
 http://www.apple.com/supplierresponsibility/accountability.html

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