Apple Case Study, University of the Philippines by Banzon, Chan, Lulu, Miranda, Panganiban, Salazar

1. BANZON / CHAN / LULU / MIRANDA / PANGANIBAN / SALAZAR
BA 190 - STRATEGIC MANAGEMENT
UNIVERSITY OF THE PHILIPPINES
PROF. MITA ANGELA M. DIMALANTA
APPLE

2. INTRODUCTION
FOUNDERS: Steve Jobs, Steve Wozniak and Mike Markkula (est. 1976)
CEO: Tim Cook
INDUSTRY: Computer hardware and software; Consumer electronic; Digital
distribution
PRODUCTS: iPhone, iPad, Mac, iPod, Apple TV, Apple Watch, OS X, iOS, iLife,
iWork
SERVICES: Apple Store, Mac AppStore, iOS AppStore, iTunes Store, iBook, iCloud
NUMBER OF STORES WORLDWIDE: 463 stores
REVENUE: $ 233.72 B
ENTERPRISE VALUE: $ 724.7731 B

3. July 1, 1976 Apple I
April 1, 1977 Apple II
December 1, 1981 Apple III
August 11, 1988 OneScanner
October 21, 1991 Powerbook 140
July 21, 1999 iBook
October 23, 2001 iPod Classic
July 17, 2002 iPod Second Generation
April 23, 2003 iPod Third Generation
July 19, 2004 iPod Fourth Generation
September 1, 2005 iPod Shuffle
October 12, 2005 iPod Fifth Generation
March 21, 2007 Apple TV First Generation
June 29, 2007 iPhone 1
September 5, 2007 iPod Touch First Generation
September 6, 2007 iPod Sixth Generation
January 2008 Macbook Air
July 11, 2009 iPhone 3G
April 30, 2010 iPad
June 24, 2010 iPhone 4
March 2, 2011 iPad 2
October 14, 2011 iPhone 4s
October 24, 2011 MacBook Pro
March 5, 2012
September 5, 2012 iPhone 5
October 5, 2012 iPad 3
November 5, 2012 iPad Mini
November 5, 2012 iPad 4
November 5, 2012 iMac
February 5, 2013 MacBook Pro Retina
September 20, 2013 iPhone 5s
September 20, 2013 iPhone 5c

4. THE IBM PC AND ITS AFTERMATH
• IBM had a huge and very profitable mainframe computer business, but failed to
develop a personal computer, despite two attempts.
• “Open architecture”
• Microsoft had been in the industry from its inception, writing a version of BASIC
software programming language for MITS Atari in 1977, the 1st PC produced.
• Introduced in 1981, IBM PC was an instant success. Over the next 2 years, IBM
would sell over 500,000 PCs, seizing market leadership from Apple. IBM had
what Apple lacked, an ability to sell into corporate America.

5. THE BIRTH OF THE MACINTOSH
By 1980 two other important projects were underway at Apple: Lisa and Macintosh.
Funded out of Xerox’s successful copier business, PARC was set up to do advanced research on office
technology.
Jobs was astounded by what he saw at PARC, and decided on the spot that these innovations had to be
incorporated into Apple’s machines.
• “reality distortion field”
• “Do you want to sell sugar water for the rest of your life, or do you want to change the world?“
In 1984, Macintosh captured attention for its stylish design, and utilization of a GUI, icons, and a mouse, which
made the machine easy to use and were not found on any other personal computer at that time.
In early 1985, Apple posted its first loss.
In late 1985 an embittered Jobs resigned from Apple, sold all of his stock, and left to start another computer
company, named NeXT.

6. SCULLEY’S APPLE
Fixed shortcomings of original Mac - changed it to Mac Plus
Created relationships with Adobe for better graphics in Mac computers
Proposed to license Mac operating system to other computer manufacturers,
allowing them to make Mac Clones

7. APPLE IN DECLINE
Due to the decline in market, Apple became a Niche player instead
Sculley’s Strategic Plan:
1. Appointed himself Chief Technological Officer and CEO
2. Committed to bring out a low cost version of Macintosh to compete with IBM
clones
3. Cut costs - reduced workforce, cut salaries of top management, used
subcontractors were instead of manufacturing its own
4. Brought out hit products every 6 to 12 months
5. Entered into an alliance with IBM

8. APPLE UNDER MICHAEL SPINDLER & GILBERT AMELIO
After Sculley stepped down, Michael Spindler took over
• Licensed Mac OS to other companies, allowing them to make Mac clones
• Not able to predict demand for products & overestimated demand in 1995
• Board could not take it
After Spindler stepped down, Gilbert Amelio took over,
• Apple purchased NeXT - which was owned by Steve Jobs
• Hired Steve Jobs as a consultant for Apple but he was busy with his other
company, Pixar
• Apple incurred more losses and Board asked Amelio to step down

9. STEVE JOBS
THE SECOND COMING OF

10. STEVE JOBS:
- Appointed interim CEO in 1998
- Made a deal with Microsoft
- Microsoft agreed to invest $150M in Apple
- Continued to produce Office for the Mac
- Ended licensing deals with Mac clone makers
- bought leading Mac clone maker for $100M
- Stopped selling slow-selling products (Apple Newton handheld computers)
- Reduced number of products lines from 60 to 4
- Pursued online distribution
These remedies brought a favorable reaction from the stock market, but was not
enough to generate growth.

11. NEW MARKET OFFERINGS
iMac
- Released in May 1998
- Differentiator: design of machine itself (combined monitor and CPU)
- Team of designers: led by Jonathan Ive
- made plastic shell look exciting rather than cheap, visited a candy factory
- worked with Asian partners to come up with a sophisticated process capable of
producing millions of iMacs a year
- redesigned internal electronics, so they looked good through the thick shell
- 100,000 units were ordered even before iMac was available, at $1,299 each

12. NEW MARKET OFFERINGS
iBook
- Released in 1999
- Same design theme as the iMac
- Priced at $1,599 each
1999
Revenue: $6.1B
Profit: $420M
2000
Revenue: almost $8B
Profit: $611M

13. NEW MARKET OFFERINGS
OS X
- First version of Apple’s new operating system
- Introduced in 2001
- Capable of running multiple programs at once
- Supports multiple users
- Connects easily to other devices
- Easier for developers to write applications for
- Well-designed and intuitively appealing interface
- OS X Mountain Lion was introduced in 2012 at $19.99

14. NEW MARKET OFFERINGS
Apple had to offer applications to entice Mac users
to upgrade to OS X
- Deal with Microsoft (Office for Mac)
- which didn’t convince others to write programs for OS X
- Adobe refused to write video-editing program for Mac in 1998
Jobs: Apple to start working on its own applications
- Final Cut Pro (professionals) & iMovie (consumers)
- iLife
- iMovie, iPhoto, Garage Band, iTunes
- Safari

15. NEW MARKET OFFERINGS
Titanium Powerbook G4 Notebooks
- Released in 2001
- Ultralight and fast notebooks
- Clean post-industrial look
iMac G5 Computer
- Released in 2004
- Simple, stunning all-in-one design
Ultrathin MacBook Air
- Released in 2008
- Weighs 3 pounds
- 0.76 of an inch thick at its widest point

16. NEW MARKET OFFERINGS
Early 2000s
- Apple had relatively low market share
- Falling behind Dell, Hewlett Packard & IBM/Lenovo
*Weak demand and low market share led to another loss for Apple in 2001.
*Some started doubting the capability of Steve Jobs in managing Apple.
Market Share: 3% - 2004, rose in 2005
8.5% - 2008
*Growth in 2005-2008 mainly driven by the popularity of the iPod and the iPhone.

17. INTEL INSIDE, WINDOWS ON THE DESKTOP
- In 2005, Apple announced that they would be using Intel microprocessors,
because PowerPC chip failed to keep up with Intel chips.
- faster and had lower power consumption
- Risks: old applications and OS X must be rewritten to run on Intel processors
- In Spring 2006, Apple produced Intel-compatible versions of OS X, but many
other applications hadn’t been rewritten for Intel chips
- To make the transition easier:
- Rosetta - enabled users to run old applications on Intel-based Macs
- Boot Camp - enabled Mac owners to run Windows XP on their Macs
- In late 2006, Apple announced that its transition to Intel-based architecture was
complete

18. Moving into retail

19. “We spent a lot of time
designing
the store, and it
deserves to be built
perfectly.”
• personal attention paid to
customer by smiling sales staff,
• a “genius bar” where technical
experts helped customers fix
problems with their Apple
products
• wide-open interior space

20. iPod and iTunes
• “Commercial value of music is being widely devalued by mass
copying and piracy.” - Phonographic Industry in 2003
• Music industry was desperate for a legal alternative to illegal
downloading.
• Macs did not have a CD burner, or software to manage their
digital music collections.

21. • iTunes program: to help Mac users manage their growing
digital music collections
• iPod: portable MP3 player to take music with them

22. • Licensed software from PortalPlayer
• Apple cut a deal with Toshiba
• Apple focused on designing the user interface, the
exterior styling, and the synchronization software
to make it work with the Mac

23. • Priced at $399
• Consumers’ high willingness to pay
for iPod’s high storage capacity
• Developed a version of iPod that is
compatible with Windows

24. Jobs: “Digital distribution is going to happen, and the best way to protect
your interests is to support a legal online music distribution business.”
• iTunes files would be downloaded for $0.99 each.
• Apple launched online iTunes store in April 2003.
• Customers were downloading over 4 million songs per week, which
represented a run rate of over 200 million a year by the end of 2004.
• iTunes store had a song catalog of 20 million, and Apple was seeing
15,000 downloads a minute, by the end of 2012.
• Apple announced that 25 billion songs had been downloaded from
iTunes, in February 2013.

25. • Apple was not making much money from iTunes downloads,
probably only $0.10 a song.
• Good margins of sales of the iPod- and sales of the iPod ballooned
after the launch of the iTunes online store.
• Downloads from iTunes accounted for 64% of the entire U.S. digital
music market and 29% of all music sold in the U.S. (including both
digital and physical formats), in mid 2012.

26. The iPhone and the App Store

27. Timeline of the iPhone Evolution

28. “This changes everything”
• The first iPhone introduced in 2007
• Designed by team led by Jonny Ive, iPhone
was differentiated from established smart
phone offerings by revolutionary touch
screen

29. Pricing strategy
• Priced between $599 and $499 depending
on the model, iPhone was positioned at the
high end of the smart phone market
• Uses a price skimming strategy

30. Reaching targets
• Steve Jobs announced the goal was to try
and grab 1% of the total global market for
wireless phones in the first full year that the
iPhone was on the market.

31. “The first phone to beat the iPhone”

32. Third party applications

34. iPhone 4 and iPhone 5

37. Competition in the Smart
Phone Market

40. The Android Evolution

41. Windows Phone

43. Operating systems

44. THE IPAD
- Released in 2001
- Revolutionary tablet computer
- Touch screen keyboard
- WiFi ready
- 3G wireless service support
- Same iOS as found on iPhone
- Elegant design (aluminum case & Gorilla glass)
- Powerful enough to download and watch full-length movies on HD
- Light enough

45. “STYLUS ISN'T MY STYLE”
- 2002 - Microsoft’s table computers “stylus”
- Jobs: “stylus” is a “failure”
- He wanted a glass touch screen
- 2010 - iPad was a success (300,000 units sold in the first day)
- 2013 - iPad 4 was released (with retina display and better features)

46. THE IMITATION GAME
- Tablets using Google’s Android OS
- Galaxy Tablet (Samsung)
- Amazon.com - Kindle Fire Tablet
- Microsoft - Surface Tablet - Windows

47. HEADS IN THE ICLOUD
2011
- Cloud storage
- Computing
- Synchronization device
- Allowed customers to store data
- Music
- Movies
- Books
- Documents
- Remote Servers
*Most comprehensive offering yet
- 20 million users n 1 week
- 2012 - 250 million subscribers
- It is for free but with small annual subscription for music storage and
synchronization services

48. STRATEGIC
ISSUES

49. STRATEGIC ISSUES
- 2013
- Lost its visionary
- Motivate?
- Tim Cook (COO); Johnny Ive (Design Op)
- Google - Google Drive and Google Chrome
- Microsoft - 90% of the world’s 1.5 billion PCs
- How to match Tham?
- Continued growth when you’re no. 1?

50. REFERENCES
Apple. (2016). The Apple Timeline. Retrieved November 16, 2016, from The History
of Apple, In One Place: http://www.theappletimeline.com
Hill, C. W., Jones, G. R., & Schilling, M. A. (2013). Strategic Management: An
Integrated Approach (11th ed.). Stamford, USA: Cengage Learning.
Linzmayer, O. W. (2006, March 30). 30 pivotal moments in Apple's history. Retrieved
November 16, 2016, from Macworld:
http://www.macworld.com/article/1050112/macs/30moments.html