Steve Jobs – Creator of Apple

1. Summary
Everything started on April 1, 1976, when Steve Jobs, 20, and Steve Wozniak, 25, both electronic experts, decided to create and sell personal computers designed by the latter. Their little company was located in Job’s garage. They called their company Apple and their first machine, Apple I. It was just a simple computer with no case, keyboard and power supply. However, in October 1976, through the efforts of Woz, an improved version of Apple I was introduced, called the Apple II. Mike Markkula, a retired millionaire because of Fairchild and Intel, decided to visit Jobs’ garage and invested one-third in the company and helped in running it. The Apple II was introduced in 1977, with a Motorola microprocessor, keyboard, a power supply, a monitor, and a programming software. In 1978, Apple sold an improved version of Apple II which contained a disk drive for third-party developers to write software programs for the computer such as EasyWriter and VisiCalc. By the end of 1980, Apple became the leader in the embryonic personal computer industry because of the high sales generated by Apple II. It even introduced its next product, Apple III. However, such product was still outsold by Apple II, with the latter becoming a standard computer in American classrooms.

Apple then introduced other products which were Lisa and the Macintosh, and high-end business machine and a low-end portable machine, respectively. Jobs wanted the Lisa product to contain innovations that are to be integrated into the machine but was turning people insane with his different specifications. In 1982, he even insisted that the Mac be shipped early which caused some friction in the company. With all Jobs’ demands, Apple started to change for the worse. Significant employees started to clash with executives. Jobs even tried to ask John Sculley, former marketing vice president of Pepsi to join Apple as CEO. On the other hand the Lisa line had its own problems. In 1984, the Macintosh was introduced in the market which had early strong sales but then lacked some important features such as a hard disk drive and insufficient computer memory which were present in other machines. Such absence caused Apple to incur its first loss in 1985. Due to drastic actions that happened in Apple, Jobs had no other choice but to resign from Apple. He then created another computer company he called NeXT.

Together with his resignation, Sculley closed the Lisa line which generated minimal sales due to its high selling price. In January 1986, an improved version of Macintosh, called the Mac Plus, was introduced. Apple had its golden years for the period between 1986 and 1991 because it was able to offer both hardware and software to customers to “plug and play”. In 1990, the sales of Apple were around $5.6 billion, representing 8% of the global market share. Apple even had a strong statement of financial position and was regarded as one of the top income generating companies worldwide. This period raised concerns on whether MAC operating systems should be cloned. Sculley was in favor of cloning such systems. However, Jean-Louise Gassee, head of Research and Development at Apple, disagreed. However, in 1985, the company pursued licensing its Mac clones to Microsoft which were later on called Windows, which looked like a typical Mac operating system.

Around the 1990s, Microsoft introduced Windows 3.1 has been introduced which caused Apple’s unique display of an operating system to disappear. It even turned the company into a niche player. Dan Eliers, the vice president of strategic planning said that “The company was on a glide path to history.” On the same period, it was found out that Apple was spending 8% of its sales on Research and Development costs which was significantly higher than its rivals. Sculley decided to respond to the situation through different possible situations. He appointed himself as CEO of the company despite his marketing background. Next, he brought out low-cost versions of the Mac to compete with competitors such as IBM. It produced Mac Classic, which was introduced in October 1990. He cut the prices of the other produces by 30%. He also reduced the workforce by 10% and the salaries of top management, including his, by 15%. He also attempted to have a technological lead through introducing new products, such as the Powerbook notebook, which are introduced every 6 to 12 months.

Last, he made Apple enter into a contract with IBM, which lost its share of the PC market to companies like Intel, Microsoft and Compaq. Sad to say, despite Sculley’s best efforts to regain a competitive advantage, low gross margins and continuing high costs experienced by Apple made him leave the company. He was then replaced by Michael Spindler, the head of Apple Europe in 1994. Under Spindler’s management, he allowed the licensing of the Mac-OS to companies but was too late since Microsoft was already ready to introduce its Windows 95. Apple was in a bad position. In 1995, it even overestimated its demand for low-end products and underestimated demand for its high-end products. Spindler also announced a massive layoff of 23% of the entire workforce of Apple. He was then replaced in February 1996 by Gilbert Amelio of National Semiconductor.

Amelio approached Steve Jobs to be his consultant, the latter being busy with his computer animaton company, Pixar. Amelio failed to improve the condition of Apple with the company’s falling market share and massive losses. He was fired in July 1997. Steve Jobs replaced Amelio to become the interim CEO of Apple. He gained the permanent position in April 1998. He then visited Bill Gates for Microsoft to produce Microsoft Office for Mac until 2002. Jobs then eliminated low profitable products and reduced the product line from 60 to 4. In May 1998, the iMac, a stylish unit combined with a monitor and a central processing unit was introduced to the market. One-third of iMac purchases came from first-time buyers. In 1999, the iBook portable followed, with students as its target market. Both products helped Apple to regain profitability.

On the other hand, Adobe Systems refused to produce softwares for Mac which were already available for Windows PCs. That is why Jobs realized that they should start developing their own programs. It produced Final Cut Pro, a video-editing program for professionals and iMovie for consumers. iLife, a multimedia program which contained iMovie, iDVD, iPhoto, Garage Band, and the iTunes digital jukebox. It also introduced Safari as its own Web Browser. In 2001, Apple introduced its first retail store which showcased a stylish design just like their products which are clean, attractive, and with a postindustrial feel. The competent and warm sales staff also paid attention to their valued customers. The iStore generated 20% of the company’s total revenues. There was also an immediate need for a remedy against illegal downloading of music. Then the iPod and iTunes were introduced. The iPod was unveiled in October 2001. Jobs sought dealing with music companies to support him in his advocacy of a legal music download business. And in 2003, most major labels had signed with him. In 2001, Titanium Powerbook G4 notebook was introduced.

It was designed by the team of Jonathan Ive. Other Titanium notebooks followed, some even offering wide screen cinema displays. In 2004, the iMac G5 computer, considered as a simple stunning all in one design computer, was introduced. Apple started to pick up again in 2005. In June 2007, the iPhone, a smartphone capable of taking pictures, browsing the web and playing digital music was introduced. It even used the operating system of Mac and the Safari Web browser. Apple even signed a deal with AT&T to serve as the official wireless provider of the iPhone. In June 2008, the second version of the iPhone, the iPhone 3G, followed, which ran on faster 3G networks. In July 2008, Apple opened an online store for iPhone applications.

Then in 2008, the ultra-thin MacBook Air was introduced. The company made strong share gains in 2008. In 2008, the shipments for Apple’s products were up over 40% compared to the previous year. It was also accompanied by strong dividend growth. Apple then was able to recover its competitive position through the introduction of its new products such as the iPod, iPhone and its newest invention, the iPad. However, in the PC market, the company is still a niche player with a strong brand among its patrons. The challenge for Apple is to maintain their competitive edge and its growth rate as a whole. 2. Internal Environment Analysis

There has been a reduction of the product lines from 60 to just 4. This was achieved through Steve Jobs cutting the slow-selling products which were almost obsolete. Apple exhibited manufacturing competence in terms of an increase of innovations of its products and implementing improved versions of certain products or introduction of new products to the market within 6 to 12 months regularly. It incurs certain Research and Development costs for the innovation of its products to take place. Apple has been in the gadgets industry for decades now and it has tried to establish its unique branding to the public. Its logo could be easily identified together with its goal of producing products which are stylish, unique, and provide a unique experience to their customers.

In the financial perspective, the company has experienced its own ups and downs. It started out as a competitive business, and then incurred losses along the way. Currently, it is regaining its strong position in the industry and is finding its niche to cater to a particular market of customers. Apple is managed by engineers and programmers instead of the typical managers who occupy executive positions in the company. Steve Jobs, who was once the CEO of Apple, started out as a programmer. Also, there was one point in the company’s life that there was a high turnover of officers. There were also massive layoffs made by the company. Internal conflict also causes some of its key officers to be forced to resign from their position when rivals are backed by management. 3. External Environment Analysis

Analyzing Apple’s external environment involves determining the driving forces in its industry. Porter’s Five Forces will be used in this analysis to determine the intensity of competition in Apple’s industries. Porter’s Five Forces

Industry Rivalry
Apple operates mainly in the following industries: computer hardware, computer software, consumer electronics, and digital distribution. Apparently, the existing rivals of Apple are those companies under the same industry and of comparable size. Dell, HP, Acer, Toshiba are some of its competitors in the personal computer industry, to name a few. Apple has a acquired a low market share notwithstanding its popularity among its markets considering the fact that it is only the manufacturer that refused to adhere to the Windows architecture. Its major rivals in the consumer electronics industry are Blackberry, Samsung, Nokia, Sony, and Motorola. Apple is competing aggressively in this industry as it continues to gain high regard for its iPhone for the mobile phone manufacturing, and the iPod and iTunes for the portable digital music players and digital media distribution, respectively. Bargaining Power of Suppliers

A large variety of suppliers provide the components of Apple’s products. This means that the company outsources most of the assembly parts, gaining a high bargaining power over its suppliers. For example, Motorola, Samsung, IBM, and Intel supply the processors and computer memory of its Macintosh computers. Because the suppliers are diverse, Apple now is in an advantageous position over the former. The company has the liberty to negotiate more favorable terms and pricing. More favorable terms mean that Apple has a lower cost structure for their products which will eventually result to higher gross margins compared to other competing products. Bargaining Power of Buyers

This force is contingent to customer demand. Apple, despite its low market share, is highly in-demand for its unique style and innovative features. Apple is complacent to set its products at premium prices because the consumers, by looking into what sets the products apart from the competing ones, become insensitive how much they cost. Apple’s products are effectively differentiated, and such cannot be easily replaced by substitutes. Threat of New Entrants

The threat of new entrants depends on the extent to which there are barriers to entry. In Apple’s case, entry barriers for new companies would include high start-up costs, cost advantages to Apple in relation to the low bargaining power of its suppliers, and brand loyalty. Competitors may have a hard time measuring up to the extent of Apple’s relationship with its suppliers, thus, implying a higher cost structure on their part. Furthermore, as Apple’s products are well differentiated, the consumers have set their preference standards on the company’s level, manifesting brand loyalty. Threat of Substitutes

This force is evident on the much lower-priced products of Apple’s competitors. Apple has been assertive with setting its products at premium prices which are much higher than their substitutes. However, the company has as well taken pride in its unique features and high performance parameters, offsetting the aforementioned threat. Further, Apple has established close-customer relationships by setting up the iStore where patrons and prospective buyers are well-assisted. Brand loyalty also weighs the threats down, as Apple focuses on product differentiation. 4. SWOT Analysis

| H E L P F U L | H A R M F U L
INTERNAL | StrengthsBrand is important. Apple is one of the most established IT brands in the world. A favorable brand perception has increased sales of its products which also provides an edge over its competitors.It has a large segment of loyal customers that advocate the brand. It means that it doesn’t only find new customers but also retains them. By that, the company is assured of successfully extending new products to them.They also came up with the idea of retailing because they felt that it was hurt by a lack of retail presence. Their retail stores exhibit stylish designs that characterized its products and provide an Apple experience.It also has a website which guides the prospective customers about the products they offer.Strong Research and Development Department driving innovation.The first one to develop innovative and high-tech quality products such as iPod, iPhone, iPad and Mac.It is highly diversified since it produces personal computers, computer software and consumer electronics.They have always had a strong presence in the educational segment having the Apple II as standard in American classrooms because of its intuitive ease of use.

The company has a very great leader. Steve Jobs, a very charismatic and visionary person, had a great role in Apple’s success. Being the one who believes imaginations into reality, the others are convinced that they can do more!The strong financial performance of Apple makes the investors feel confident about the capital they have invested which will give them favorable returns with regard to their investment. | WeaknessesA couple of products were considered failure. Product recalls may harm its reputation and add significant warranty and other expenses. Replacing of such items would add up to their expenses. Compared to Microsoft and other competitors, Apple has a lower market share and has higher prices for its computer products.The company is well-known also because of its iPod (portable MP3 player) and iTunes program (which helps Mac users manage their growing digital music collections). Because of that, the music industry might want Apple to increase its price for music download which would also indirectly affect its iPod sales.

Decision to have a deal with AT&T as the exclusive provider of wireless service for the iPhone was unpopular in several markets around the world. It has been compared to the faster 3G network. However, Apple decided to also run on a 3G network later.Because of the focus on research and development, they also incur higher R&D costs compared to its competitors. Apple is said to be facing strong criticisms for its environmental, contractors’ labor and business practices.Apple is somewhat dependent to Steve Jobs and the absence of him might also affect the performance of the whole company. Internal conflict poses risk for officers who could be easily stripped from their management role if another official is backed by the board of directors. | EXTERNAL | Opportunities A joint venture with other big companies will result to good relationships and together they can bring out new inventions that would be a future hit to the market The personal computer and mobile industry is constantly growing. Apple must look at mobile advertising as a growth opportunity.

The company can make more international expansions especially in Asian countries like Japan and Korea where a lot of people are obsessed with things brought by new technology. The increase demand of online music and applications such as cloud based services can boost their iPhone sales. Advancement and improvement in technology will allow Apple to create new products are conquer new market segments as well and will be able to introduce efficient manufacturing systems that will provide them with a savings in the overall production cost. Consumer tastes and preferences change often. Being a consumer-oriented company, they always aim for what the people wants and will always look for new and updated products.

Threats Apple is facing competition with others in the PC industry and mobile industry. Apple is facing a strong competition in sustaining its market share. The intense competition can also affect its profitability. The rise of the Android market serves as threat to the iTunes store. There is a high product substitution effect given that the technology market is always innovating. Tomorrow’s technology might be completely different from what it is now. Obsolescence might also be a problem. It is involved in several actions, including lawsuits about patent infringement. An unfavorable judgment imposes a grave threat. It also entails ongoing costs associated with legal defenses.It is facing political instability, government regulations in developing countries. The fluctuation of currency in these countries might create problems.Dependence with outside supplier might pose a threat to the operations of Apple. | 5. Strategic Options

MAXI-MAXI (Strength and Opportunity). How can you use your strengths to take advantage of these opportunities? Apple should continue making innovative products and distributing it internationally. Mobile technology is fast growing in Asia. It is a smart step to build a stable market in the mobile industry there. Apple could diversify new growth businesses and at the same time have partnerships with other corporations to discover broaden market coverage and at the same time exploit new market segments. Apple could also improve their financial management through enlarging their corporate portfolio which yields beneficial results. This could be done through reinvesting excess earnings in profitable companies. The company could improve its brand name reputation by applying brand name capital in areas which do not have leading competitors.

The company could improve human resource competencies by employing workers who are employed in their home country who are competitive but at the same time able to share represent the cultural differences and serve as bridges in resolving them. Apple should also offer products which are sensitive to the needs of their international customers who need to be given devices which complement language and cultural differences. MAXI-MINI (Strength and Threat). How can you take advantage of your strengths to avoid real and potential threats? Apple should continue investing more in research and development since their company is in the technology industry. If they are able to create new products regularly, they can be assured that, if not increase their market share, sustain it somehow. This might also be a good move to counter the substitution effect. The company should offer some of its products in the product line to be adaptable to the changes in consumer tastes and preferences which could be unpredictable sometimes. Apple could produce gadgets which are so unique that cannot be easily be substituted by competitors.

The company should also exercise good financial management when it comes to its resources to be able to respond to the changes in the economic conditions of the industry it is in. It should improve its marketing skills which could match the rise in regional competition among companies. Apple should also hire highly competitive workers who are very efficient in their work and could compensate for rising labor costs. MINI-MAXI (Weakness and Opportunity). How can you use your opportunities to overcome the weaknesses you are experiencing? Even though coupled with higher costs as compared with other competitors, Apple should maintain product differentiation to have a competitive edge. There is always a tradeoff between incurring costs and regarding a product as highly differentiated. It’s best for Apple to focus on product differentiation as what it is doing through the years. The company should not engage in high conflict and politics to avoid a much disorganized disposition in the company.

Instead the officials must join forces in order to defeat the rivals in the industry. Better financial position could be achieved if Apple seeks markets which exhibit fast growth. This could be done by proper research of prospective markets and assessing their profitability. Also, better financial management is achieved if the company considers carefully the acquisition of profitable investments and whether they actually benefit the company as a whole. MINI-MINI (Weakness and Threat). How can you minimize your weaknesses and avoid threats? Since Apple is pricing its products higher than its competitors, it could also opt for lower sales price or reduced costs. In that way, it might be able to increase its market share and intensify its competitive edge. The company could also outsource the manufacturing of their products in other countries where changes in demographic and economic factors are insignificant and at the same time they could have products of high quality and minimal cost. 6. Cost/ Benefit Analysis

Through the years, Apple has focused on catering to the needs of the consumer market. The decision to enter the corporate world has not been given much consideration. However, the business market is yet to keep up with the drastic changes in technology. Apple, being in this line of industry, may consider venturing into this territory. Investing in research and development entails great costs, especially in this decision since setting foot in the enterprise world is something new to Apple. Extensive researches have to be conducted, concentrating on the needs of the business market. There is a tradeoff between incurring high research and development costs to increase the value of the products offered.

However, since the market shifts towards the commoditization of electronic products instead of creating high value for their products, so it is important to consider reducing such research and development costs which sometimes is not considered since costs are tried to be kept at minimum so as to increase profit given the same level of sales. Apple still has to maintain its unique brand image because such has conferred the company a competitive advantage over other companies in the same industry. Serving a brand new market need not diminish Apple’s earnings by compromising its product differentiation strategy. Apple may choose to integrate business-friendly features into their products rather than hastily creating another product line exclusive for the corporate market. Aside from having to incur higher R&D costs, the earnings may not be as high as projected since another customer base has to be established. The gross margin of the new product may still be low during the early years, bringing down that of the rather profitable products. 7. Action Plan

Strategy | Action | Who is responsible | When to implement | Budget | Minimization of Research and Development Costs | Reduce R and D costs through extensive cost reduction measures | Research and Development Head | 6 months from now | Reduction of 10% of current R and D costs | Minimization of Cost of Operations | Selection of minimum costs for material, machines and labor that still add value to the products sold | Operations Head | 1 year from now | Reduction of 10% of Operation Costs | Production of New Products | Additional products are produced to generate profit | Operations Head | 1 year from now | 5% of Total Sales | Marketing of New Products | New products are marketed to make sure that such products are bought by consumers | Marketing Head | 2 years from now | 5% of Total Sales | Extensive Marketing of Both Existing and Current Products

Continuous marketing to identified target market (students, professionals, government agencies) to make sure that continuous patronage is also expected | Marketing Head | 3 years from now | 10% of Total Sales | Development of Customer Care Services | Improvement of responses for customer complaints regarding defective products, warranties, and similar issues | Marketing Head | 4 years from now | 3% of Total Sales | Widespread Distribution of Products across new areas in the Pacific | More aggressive market penetration across the Pacific region through intensive distribution and marketing strategies | Marketing Head | 4 years from now | 10% of Total Sales | Investment of Excess funds in Long-term investments | Invest excess funds through acquiring long term investments | Chief Financial Officer | 5 years from now | 5% of excess funds | 8. Recommendations

Apple is a typical company which has its own Strengths, Weaknesses, Opportunities and Threats basing it from the SWOT Analysis. One of the most noticeable strengths that this company has is that it has a very respectable brand name reputation. Apple is one of the most recognized brands in the world. However, despite its competitive advantage, it is still essential to note the other aspects of the company in formulating some recommendations for continuous improvement. Recommendations for Apple could be given per functional area of the organization. For example in Marketing, products and products lines should be marketed properly to the target market so as to position them in the minds of the target buyers who would like to buy the product. This could be achieved through intensive marketing of Mac PCs to schools and offices that have students and employees who need computers in their studies and work. On the other hand, gadgets such as the iPod, iPad and iPhone should be marketed to teens and tech savvy individuals who want to keep themselves updated with the latest in technology.

Such campaign strategy should be intensive enough to penetrate the target market per product or product line. Given intensive marketing procedures, it is also important to improve Customer Services. It is because product defects and warranties are inevitable in relation to the sale of electronic products. Proper treatment of customer concerns and complaints should be handled well so that customer patronage and loyalty will prevail. Competent and well-trained customer assistance specialists should be always present to respond to customer needs. Apple could also offer additional products which could contribute additional income to the company. These products should be different in the particular product line to prevent cannibalization of products. This would just emphasize that the company is actually engaging in innovating their products from time to time. Such products should be unique so that they cannot be easily copied by competitors and make them an asset to Apple. Next, the company could go with minimizing cost or minimizing the selling price or their products to achieve a higher profit. When they go for minimizing the selling price, they should make sure that they could reduce the selling price of their products at the lowest price possible without hurting sales.

On the other hand, when they opt for minimizing cost, they could refer to the minimizing costs in operations or minimizing costs in research and development. In terms of Operations, the company could assess the productive systems so that inputs when transformed into outputs are of their greatest value. This could be achieved through making sure that Materials, Machine, Labor, Management, and Capital are acquired at the lowest cost possible without sacrificing quality to transform the final products into their best state with the minimum cost possible. That is why Apple is currently and could improve the outsourcing of their products in countries like China so that they could get the best value for their money. In terms of Research and Development Costs, such costs must be reasonable enough to generate sales an acceptable level. There must be a favorable increase in sales with a minimal increase in such Research and Development Costs. Such percentage of R and D costs must fit within industry standards since the focus of today’s technology is the commoditization of such gadgets. Apple should not be dependent on one or few suppliers for the manufacturing of their products.

They must seek alternative suppliers who could provide them with the needed materials for their products in case that there will be failure on the part of the regular supplier in giving them the needed materials for production. Last but not the least, for the Human Resources aspect, it is very important to know that the people who comprise the organization are essential to its success. There should be proper selection, training, assessment, and rewarding of employees in an organization. For Apple, executives should be competent enough to handle large matters in an organization. They should not resign immediately. High turnover of employees and massive layoffs, without basis, should be discouraged. Apple should not entertain political conflict inside their organization. Also, the Board of Directors should not side with any employee because it would just create chaos in the organization.