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NOTE – ADDITIONAL WEB LINKS TO FINANCIAL DATA:
Do a search for Apple Inc.’s current financial performance. Start by plotting percent change in
stock price for the last two years, compared to computing competitors Dell, HP, and Microsoft:
http://finance.yahoo.com/echarts?
s=AAPL#chart2:symbol=aapl;range=2y;compare=dell+hpq+msft;indicator=volume;charttype=li
ne;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
Also look at the numbers for a direct competitor comparison:
http://finance.yahoo.com/q/co?s=AAPL
Apple has a very large market cap. To whom should Apple be compared? Originally, as Apple
Computer, certainly Apple competed directly with Hewlett-Packard (HPQ) and Dell (DELL).
Should Apple now be included in the diversified telecommunication industry along with
BlackBerry Limited? Or digital music, competing with San Disk (SNDK), and Singapore-based
Creative Technology Limited (SGX: C76.SI)? Or compared with the diversified businesses of
Korean-based Samsung Electronics (LSE: BC94.L) and LG Electronics (KRX: 066570.KS)? Or
businesses like Google (GOOG) and Microsoft (MSFT)?
2. What internal resources and assets does Apple have that may give it a competitive
advantage? How does Apple use those assets to craft strategy?
Referencing Chapter 3: Analyzing the Internal Environment of the Firm
When one firm outperforms others by a wide margin over a long period of time, it’s important to
figure out how this could be. The answer may lie in how that firm arranges its activities and
Remember, value chain analysis is a strategic analysis of an organization that uses value-creating
activities. Value is the amount that buyers are willing to pay for what a firm provides them and is
measured by total revenue, a reflection of the price a firm’s product commands, and the quantity
Every activity should add value. Take a look at Exhibit 3.1 to see the value chain activities.
Value chain activity How does Apple create value for the customer? What
challenges does Apple have in its value chain?
Primary:
Inbound logistics (distribution
facilities, material control
systems, warehouse layouts)
Apple supplies its retail stores successfully.
Operations (efficient work flow
Has traditionally been a strength. Tim Cook’s area of
Outbound logistics
scheduling, finished goods
processing)
Distribution is effective, except for certain product
Marketing and Sales (motivated
sales people, innovative
distribution channels)
Multichannel distribution through Apple retail, third-
party resellers, Internet, direct mail, word-of-mouth.
Service (ability to solicit
Many blogs and Apple-related websites provide lots of
Secondary (or support):
Procurement (win-win
relationships with suppliers,
Relying on multiple international partners for sourcing
of some components allows for hedging against
Technology development (state
of the art hardware & software,
innovative culture & qualified
personnel)
Absolutely one of Apple’s great strengths.
Human resource management
After major shake-ups in the 1990’s and 2013, and in
General Administration
(effective planning systems to
establish goals & strategies,
access to capital, effective top
management communication,
relationships with diverse
stakeholders)
Cook seems to excel at this. Witness 2014 financials.
Primary Activities
In terms of primary activities, the key to Apple’s ability to differentiate itself in the market
resided in its operations and marketing. Apple placed a lot of attention on every aspect of
Support Activities
With regards to support activities, a competitive advantage is achieved by developing a strong
general administration that is built around visionary leadership and a culture that pushes for
In addition, see the concept of the resource-based view of the firm, and the three key types of
resources: tangible resources, intangible resources, and organizational capabilities. A firm’s
strengths and capabilities – no matter how unique or impressive – do NOT necessarily lead to a
An important issue to focus on here is the importance of intangible resources like innovation and
reputation. Especially in mature brands, sustaining reputation is essential. Look at resources that
Tangible Resources:
Financial: Financially sound. Cash reserves can fund more R&D.
Physical: Historically adequate.
Technological: Biggest asset here is Apple’s human resource – capable, motivated and highly
Organizational: Jobs’ strategy of focusing on the digital “lifestyle” opened up what may have
Intangible Resources:
Human: Focus on innovation continually revitalizes the workforce.
Innovation and creativity: One of Apple’s major strengths.
Reputation: This is one of Apple’s most significant strengths. The Apple brand is known world-
wide.
Determining whether the internal resources are valuable, rare, difficult to imitate, or difficult to
substitute (VRIN) can help a firm sustain a competitive advantage. See Exhibit 3.6. Applying the
NOTE – ADDITIONAL READING, WEB LINKS:
Responding to the marketing & sales value chain activity, as an indication of how Apple creates
value with this link in the chain, there’s substantial evidence that Apple fans can become true
evangelists for the brand:
See “Brand Loyalty” in “Apple Inc.” at Wikipedia, http://en.wikipedia.org/wiki/Apple_Inc.
For another take on the issue of market share, see
Dilger, D.E. “Market Share Myth 2007: iPod vs Zune and Mac vs PC”, Roughly Drafted
Magazine, March 16, 2007, http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/FFE4A8E2-
9816-4344-9FB0-61BED246674C.html
and
Dilger, D.E., “Market share vs installed base: iPod vs Zune, Mac vs PC”, RoughlyDrafted
Magazine, March 18, 2007, http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/9E601E8E-
2ACC-4866-A91B-3371D1688E00.html
Should Apple be worried about computer market share, or should they focus instead on long-
term installed base? What’s the trade-off in terms of the long-term revenue picture? Does the
Referencing Chapter 4: Recognizing a Firm’s Intellectual Assets
See the concepts of intellectual capital, human capital, and social capital, all of which are
intangible assets that a company such as Apple needs to have in order to compete successfully.
Intellectual capital is a measure of the value of a firm’s intangible assets, its reputation,
Human capital involves the individual capabilities, knowledge, skills, and experience of the
company’s employees and managers. This knowledge is relevant to the task at hand, as is the
Success in retaining human capital could also be attributed to the nurturing of the “social ties” or
social capital. Social capital is a function of the network of relationships that individuals have
throughout the organization and beyond. Relationships are critical in sharing and leveraging
Dynamic capabilities involve a firm’s capacity to build and protect a competitive advantage,
which rests on knowledge, assets, competencies, complementary assets, and technologies.
Dynamic capabilities include the ability to sense and seize new opportunities, generate new
Intellectual assets or intangible resources are critical to organizational success. The growing
importance of knowledge, coupled with the move by labor markets to reward knowledge work,
Human capital: does the organization effectively attract, develop, and retain talent? Does the
organization value diversity?
Social capital: does the organization have positive personal and professional relationships
among employees and alliance partners?
Technology: does the organization effectively use technology to transfer best practices across the
organization, codify knowledge, and develop dynamic capabilities for competitive advantage?
Presence of Organizational Capabilities:
Specific Competencies or Skills: Jobs’ initial focus on the design professional, and education
consumer seems to have gotten Apple its initial loyal customer base. Apple’s additional skills
Capacity to combine resources: How to combine the above competencies to continue to
Referencing Chapter 6: Corporate-Level Strategy
Thinking about combining resources to achieve a competitive advantage, corporate strategy
focuses discussion on the questions of what businesses a corporation should compete in, and how
Diversification is the process of firms expanding their operations by entering new businesses. In
related diversification, a firm enters a different business in which it can benefit from leveraging
core competencies, sharing activities, or building market power. Some possibilities include:
●Mergers and acquisitions
●Strategic alliances
Whatever the choice, it should create value for all stakeholders – employees, suppliers,
Companies can achieve synergy through diversification in two ways:
Through related businesses (horizontal relationships)
●Sharing tangible resources
Or through unrelated businesses (hierarchical relationships)
Core competencies reflect the collective learning in organizations – how to coordinate diverse
production skills, integrate multiple streams of technologies, and market diverse products and
Apple diversified through creating horizontal relationships in related businesses: all business
units – computers, music, communication – related to Jobs’ vision of a digital lifestyle, one
Sharing activities means that value chain elements are shared across business units, so that two
or more activities are done by one of the businesses. This allows for cost savings, but businesses
The Apple case is a good example of vertical integration, and the role of entrepreneurship in
maintaining the pace of innovation in the face of a volatile product life cycle industry. Apple’s
1 Fisher, A. 2008. “America’s most admired companies”, Fortune, March 17: 74.
Acquisition is the incorporation of one firm into another through purchase. It can be a means of
obtaining valuable resources that can help an organization expand its product offerings and
Although not in the case, Apple had also quietly pursued many acquisitions of software
companies over the years, and, in 2008, Apple spent a reported $278M to purchase P.A. Semi, a
small U.S. microprocessor design company with an energy efficient chip capable of doing high
Further recent acquisitions include Quattro Wireless, a U.S. mobile advertising firm, in 2010, for
$275M; C3 Technologies, a Swedish 3D mapping firm, in 2011, for $267M; Anobit, an Israeli
flash memory provider, also in 2011, for $390M – this memory was for use in iPhones and iPads;
AuthenTec, a U.S. security firm providing security hardware and software for computers and
Here’s also where advanced students can be asked their opinion of Mintzberg’s (1990) emergent
strategy: does Apple appear to be learning as it goes along, never “sure in advance whether an
established competence will prove to be a strength or a weakness”? After discussing this case,
Referencing Chapter 7: International Strategy
International expansion is a viable diversification strategy – however, before pursuing this, a
firm needs to determine why an industry in a given country is more (or less) successful than the
same industry in another country. When choosing a country to expand into, firms must assess the
There are two opposing forces that firms face when entering international markets: cost
Apple followed a global strategy. Advantages of a global strategy included a unified approach
that allowed users to purchase items that worked in multiple markets (with some changes due to
processing modes, i.e. cell phone signals and voltage differences). Having a unified product line
Entry modes available for international expansion differ based on the extent of investment and
risk, and the degree of ownership and control. See Chapter 7, Exhibit 7.9. In order from low to
high, they include:
●Exporting
●Licensing
Apple wanted to grow cell phone market share in China, India, and Russia, but needed in-
country partners to subsidize the iPhone via the existing wireless networks. Apple lost out to
Nokia in China, presumably because CEO Tim Cook wouldn’t offer better financial terms to the
biggest cell phone service provider, China Mobile. The Asia-Pacific environment, especially, is
UPDATE: For more on the China Mobile story from August 2013, Tim Cook met again with the
China Mobile chairman. Issues appeared to be the degree to which China Mobile is willing to
subsidize the iPhone (deals require cell signal providers to pay Apple a certain amount for the
Referencing Chapter 8: Entrepreneurial Strategy and Competitive Dynamics
Entrepreneurship involves the creation of new value by an existing organization or new venture
that involves the assumption of risk.
For an entrepreneurial venture to create new value, three factors must be present – an
entrepreneurial opportunity, the resources to pursue the opportunity, and an entrepreneur or
Entrepreneurs need to understand the concept of opportunity recognition: the process of
discovering and evaluating changes in the business environment, such as a new technology, socio
cultural trends, or shifts in consumer demand that can be exploited. Changes in the external
environment can lead to new business creation, but the discovery of these new ideas is not
Resources are an essential component of a successful entrepreneurial launch. The most important
resource is usually money, but human resources, strong and skilled management, is also an
Launching a competitive venture requires a special kind of leadership involving courage, belief
in one’s convictions, and having the energy to work hard. Three characteristics of entrepreneurial
leaders are:
●Vision
To achieve excellence, venture founders must understand the customer, provide quality products
With Steve Jobs as the founding entrepreneur, the competitive advantage offered by the resources
he acquired and developed, and the opportunities present in the external environment, could
