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Teaching Note: Case 16 – Apple Inc.: Still Taking a Bite Out of the Competition?
Case Objectives
1. To investigate strategic options in a fast-moving industry.
2. To examine how external and internal forces affect competitive strategy.
3. To discuss the leadership implications for managing innovation.
See the table below to determine where to use this case:
NOTE: This case can be used as a COMPREHENSIVE CASE, covering all the chapters in the
textbook. However, since the primary focus of this case for most instructors is probably
Chapter Use Key Concepts Additional Reading and/or
Exercises
1: Strategy Concept Strategic management; vision,
2: External Environment Industry competition five
NOTE web links, stock price
3: Internal Analysis Value-chain analysis; resource-
NOTE additional reading web
4: Intellectual Assets Intellectual and human capital;
5: Business Level
Competitive strategy; generic
NOTE embedded video, Jobs
6: Corporate-Level
Diversification; synergy; core
NOTE additional reading web
7: International Strategy International expansion NOTE additional reading web
articles
8: Entrepreneurial
Strategies
Opportunity recognition
9: Strategic Control Informational vs. behavioral
NOTE additional reading web
10: Organizational Design Organizational structure NOTE additional reading web
11: Strategic Leadership Leadership; learning
NOTE additional reading, video
12: Managing Innovation Innovation; scope of
NOTE additional reading,
Case Synopsis
Apple, founded by two guys in a garage in 1976, produced the first computer with a graphical
user interface (communicating with the user via icons on the screen), and had continued to
As an example of innovation in digital entertainment, the iPod portable digital music player
introduced by Apple in 2001 became one of its most famous products. This success was linked to
the iTunes software, and subsequently spawned the iPod Touch, Apple’s initial invasion of the
gaming world. The iPhone likewise stole market share from other mobile devices, especially
In October 2011, founder Steve Jobs succumbed to the pancreatic cancer that had sidelined him
from active participation in Apple’s day-to-day activities since 2009. COO Tim Cook, who had
Apple’s ongoing stated strategy had been to leverage “its unique ability to
design and develop its own operations system, hardware, application
Given Apple’s global growth in multiple product categories, and the associated complexity in
strategic execution, would CEO Tim Cook be able to sustain the level of innovation the company
had been known for? Would Apple still be considered a hyper growth innovator, or was it now
just a major consumer products company, like all others in the industry? In the coming years,
would Apple still be able to take a bite out of all competition?
Teaching Plan
1 From the Apple, Inc., 2008 Annual Report, 10-K filing, available at www.apple.com/investor
The Apple case is a good example of vertical integration, and the role of entrepreneurship in
maintaining the pace of innovation within an industry with a volatile product life cycle. This is a
comprehensive case, and so it can be used to illustrate the complete arc of strategic management:
from analysis through formulation to implementation. Since Apple is a well-known company,
If instructors choose to focus on only one chapter, perhaps the question of Business-Level
Used to encourage more advanced analysis among exceptional students, the instructor may
suggest possible external research sources and possible supplemental assigned reading. It may be
especially interesting to initiate a discussion among advanced students to consider whether the
traditional design/Harvard model or the Mintzberg process/emergent strategy model is more
applicable here (Mintzberg, 1990). See the discussion about this in the textbook, Chapter 1. Just
ICEBREAKER
Since probably all students have at least heard of Apple’s products, and probably most of them
have either used or owned one, it might be illustrative to ask:
How many of you own a Mac computer? How many of you have used an iPod? An iPhone or
iPad?
It’s very possible that at least one student is currently using an Apple computer or tablet, and
more probable that many more students own an iPhone.
What do you think of Apple’s products?
Some students might be interested if the instructor asks those who use a Mac computer what they
think of it. The same question can be asked about the iPod or iPhone– whether these products
truly are the best mp3 players or cellphones out there (they are not, but still remain the best-
Here’s where the instructor can click on the link to Apple’s product website,
http://store.apple.com and scroll down to show all the products Apple offers. What does this say
The instructor might want to put a list on the board of students’ responses to the question “what
One interesting discussion might provide further insight: ask students how many have ever
owned an iPod (show of hands), then how many still USE one? (Hands will almost all go down.)
Finally, the instructor can ask
How many of you think Steve Jobs is responsible for Apple’s success?
Probably everyone has heard about Jobs’ death. Ask students who they think is responsible for
Apple’s success. Many may say it was due to Jobs’ leadership, but the actions of Tim Cook since
Before engaging in discussion, you might want to test student’s basic knowledge regarding the
Which of the following statements is most true?
a. The Apple iPhone is the most popular smartphone in the world.
b. The Apple iPhone is the most profitable smartphone in the world.
ANSWER: b. Although the iPhone is Apple’s most profitable product, also beating out Android-
based phones in operating profit, it is not the most popular smartphone in the world. Samsung
Apple manufactures all of its own products.
a. Yes
b. No
ANSWER: b. This is a deceptive question. Apple outsources most of manufacturing to plants in
Summary of Discussion Questions
Here is a list of the suggested discussion questions. You can decide which questions to assign,
and also which additional readings or exercises to include to augment each discussion. Refer
back to the Case Objectives Table to identify any additional readings and/or exercises so they can
be assigned in advance.
1. How does Apple use strategic management to compete?
2. What are key forces in the general and industry environments that affect Apple’s choice
of strategy?
3. What internal resources and assets does Apple have that may give it a competitive
advantage? How does Apple use those assets to craft strategy?
4. What is leadership’s role in Apple’s strategic implementation?
Discussion Questions and Responses
1. How does Apple use strategic management to compete?
To start with, the instructor might want to position the discussion by reviewing what strategic
management really is:
Referencing Chapter 1: Strategic Management
Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter
1, Exhibit 01: Strategic management consists of the analyses, decisions, and actions an
organization undertakes in order to create and sustain competitive advantages:
●strategy directs the organization toward overall goals and objectives;
●includes multiple stakeholders in decision making;
Leaders face a large number of complex challenges. Leaders must be proactive, anticipate
change and continually refine changes to their strategies. This requires a certain level of
“ambidextrous behavior,” where leaders are alert to opportunities beyond the confines of their
See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision,
mission and strategic objectives. Leaders must communicate their initial vision of the
The organizational mission also needs to be considered: a mission encompasses both the purpose
of the company, as well as the basis for competition and competitive advantages. In writing a
Organizations must respond to multiple constituencies if they are to survive and prosper, and the
mission provides a means of communicating to diverse organizational stakeholders. Although
Anticipating that things might change, an organization’s leadership must then establish strategic
objectives to operationalize the mission statement. That is, objectives help to operationalize the
Steve Jobs’ original vision of Apple was as the digital hub of a creative entertainment lifestyle.
(Not in the case. See his keynote address at Macworld Expo in January 2001, described at
http://db.tidbits.com/article/6268.) At least part of Apple’s mission was articulated by Steve Jobs
Now Tim Cook was displaying his single-minded emphasis on pursuing only those projects
where Apple could be the best at making a “significant, lasting difference” (and never
“cheapening” the product offering), where Apple could use this philosophy and vision to attract
These vision and mission statements can lead to strategic objectives that have implications for
how to analyze opportunities, manage innovation, and provide leadership to encourage growth. It
Here is where students can be reminded how the chapters in the book are linked. See Chapter 1,
Exhibit 1.3 for a depiction of the strategic management process. During strategic analysis, the
leader does “advance work” to anticipate unforeseen environmental developments, identify
In strategy implementation, depending on the type of organization structure, the leader might
include key individuals in a discussion around selecting which strategies might be best to
implement at which level within the organization. The leader must ensure proper strategic
The basic question strategic management tries to answer is: How can we create competitive
advantages in the marketplace that are not only unique and valuable but also difficult for
competitors to copy or substitute?
An interesting question that the instructor can ask at this point is: What IS that “marketplace”?
What business is Apple in? Some students might say computers or cellphones, some may say
technology, some may say consumer electronics or digital entertainment. The answers to this
Since Jobs originally envisioned Apple as “the digital hub of a creative entertainment lifestyle”,
Jobs had stressed innovative design coupled with reliable performance that would wow the
Answering this question is essential to proceeding with strategic analysis. Once students have
Referencing Chapter 5: Business-Level Strategy
In order to achieve a sustainable competitive advantage, Apple had to assess its ability to contend
with other consumer electronics products companies. The question of how to compete in a given
business to attain competitive advantage requires an assessment of the types of competitive
strategies, including the three generic strategies:
●Overall cost leadership
oLow-cost-position relative to a firm’s peers
●Differentiation
oCreate products and/or services that are unique and valued
●Focus strategy
oNarrow product lines, buyer segments, or targeted geographic markets
Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The
Given Apple’s goals, low-cost leadership is not an option. Apple has a focused niche strategy,
targeting a differentiated market - first adopters for the new computers, tablets and the initial
NOTE – ADDITIONAL READING, VIDEO INTERVIEWS WITH STEVE JOBS, PC vs
MAC TV COMMERCIALS:
One area where Apple’s differentiation strategy is apparent is in its approach to retail. See this
video interview with Steve Jobs on CNBC on the opening of the Apple Store on 5th Avenue in
New York City in 2006:
http://www.youtube.com/watch?v=y6BFhRkUJEI&mode=related&search=
For fun viewing, here are links to the various Mac vs PC TV commercials, and the original
“1984” Macintosh commercial:
http://www.youtube.com/watch?v=DZSBWbnmGrE
http://www.youtube.com/watch?v=vNy-7jv0XSc
How does Apple’s retail strategy support its overall approach to competitive strategy?
Many people thought Apple’s move into the mobile handset market with the iPhone may have
been a risky one. View this video interview with Steve Jobs at the introduction of this product in
2007:
http://www.youtube.com/watch?v=SX1Lz8PDgg8&NR=1
How important was the introduction of this product into the Apple product lineup? What has this
done to the other handset competitors? What other industries did this product introduction affect?
Regarding Apple’s compatibility with business enterprise software, when Microsoft expanded its
“Enterprise App Store” in 2012, some wondered if Apple shouldn’t have tried harder to woo
business enterprise converts to its operating system, by opening up Apple software to the
corporate market: “The corporate market is far too important to ignore, and it’s not, as Apple
seems to believe, ceding the selection of devices and software to its employees. Bring your own
device (BYOD) may indeed be the future, but bring your own software (BYOS) will not. And
over time, as you will see, Apple will become more insular, while the rest of the market opens
up.”
http://www.forbes.com/sites/markfidelman/2012/08/15/microsofts-enterprise-app-store-will-be-
apples-demise-again/
Do you think Apple should be making a bigger play for business software compatibility?
2. What are key forces in the general and industry environments that affect Apple’s
choice of strategy?
Referencing Chapter 2: Analyzing the External Environment of the Firm
Organizational leaders must become aware of factors in the overall environment that might affect
their ability to create a competitive advantage. So how do managers become environmentally
Environmental scanning involves surveillance of a firm’s external environment to predict
environmental changes and detect changes already under way. It is a BIG PICTURE viewpoint
Environmental monitoring is a firm’s analysis of the external environment that tracks the
evolution of environmental trends, sequences of events, or streams of activities. Leaders need to
What factors or trends might be most important to Apple? To assess how the external
environment might affect Apple’s strategy, it’s necessary to take a look at the factors in the
general external environment. Apple must consider the political/legal, economic and global,
Demographic: Certainly the demographics had changed. Baby boomers were getting older,
Sociocultural: Customers were growing increasingly sophisticated. They knew what they
wanted and didn’t want to pay a lot for it, but they could be seduced by a “sexy” design.
Technological: Technology, especially the growth of the Internet, had created new opportunities
for delivery of content and for promotion. Companies like Intel and Samsung were making many
advances in memory and display technology. The pace and direction of change required
considerable monitoring and possibly risk taking.
Political-Legal: Political-legal issues, especially the issues around copyrights, monitoring of
content distribution (digital rights management), environmental waste, and the possibility of
It’s also necessary to assess the segments of the external competitive environment that include
Help students apply Porter’s Five Forces of Competition to the consumer electronics industry by
drawing a diagram on the board similar to the following, and having students fill in the details.
Based on the external environmental factor analysis, the consumer electronics business has many
Rivalry
High
Substitutes
Buyers’
Power
Med-High
Suppliers’
Power
Med-Low
Suggested: many rivals
compete for market share.
Suggested: corporate
computing customers
demand customization and
Suggested: depending on the
commodity, lots of competition
Suggested: substitutes for
the Mac computer include
Threat of
Suggested: most components are
