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TEACHING NOTE
CASE 28
Tim Cook’s Leadership and Management
Style
Overview
In March 2015, Tim Cook (Cook), the CEO of technology giant, Apple Inc. (Apple), was named as the “world’s
greatest leader” of the world’s most valuable company by Fortune magazine. Apple, a US-based company,
designed, manufactured, and marketed mobile communication and media devices, personal computers, and
portable digital music players, and sold a variety of related software, services, peripherals, networking solutions,
and third-party digital content and applications. Despite being regularly compared with his immediate predecessor
and legendary founder CEO, Steve Jobs (Jobs), Cook had his own strengths. Since becoming the CEO, Cook
had transformed himself from a soft-spoken operations manager to a high-profile leader of an increasingly
decentralized, team-oriented culture at Apple. The company also offered dividends and share repurchases to
investors for the first time in its history, boosting its stock price. Cook still faced a number of management
challenges, including consumers’ disappointment with some of new products like Apple Maps and Siri and the
hiring fiasco of John Browett as Apple’s retail chief.
By 2014, Cook was finally stepping out of the shadow of Jobs. In October 2014, Cook announced publicly that
he was gay. Cook also used the platform as Apple’s CEO to opine on subjects as diverse as human rights, access
to education, female representation on Wall Street, immigration reform, privacy rights, and racial inequality in
his home state of Alabama. Cook also took an interest in philanthropy and had plans to give away all his wealth.
Under him, Apple was also gradually shedding its image of a sustainability laggard, becoming a much more
socially aware and philanthropic company, and working to improve conditions in its overseas factories. By 2015,
as markets for Apple’s iPhone and iPad had matured, it was yet to be seen whether a new product like the Apple
Watch, or a new service like Apple Pay, or Apple’s acquisition of Beats would restore Apple’s past growth rate
or even be financially successful.
Suggestions for Using the Case
This is a high-interest case and one that will certainly trigger lively classroom discussion. Students are very
interested in discussing the Tim Cook case, given the extensive coverage of his predecessor as CEO, Steve Jobs,
and also given the popularity of Apple’s services and products across many computing platforms. Many are
likely to have read in the popular press about CEO Tim Cook’s efforts to promote diversity and sustainability and
how he has inherited and nurtured a unique culture while putting on his own strategic imprint and managerial
style at Apple.
Building His Own Legacy at Apple*
*This teaching note reflects the thinking and analysis of the case author, Professor Armand Gilinsky, Sonoma State University. We
are most grateful for his insight, analysis and contributions to how the case can be taught successfully.
:
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The case also provides students with the opportunity to make recommendations that will yield even stronger
positions in Apple’s ecosystem, comprising diversified products and service businesses, as well as specific action
steps to improve Apple’s position in the rapidly-growing wearable computer and complementary digital media
streaming industries.
This case is extremely versatile: it is well suited for use in your introduction to strategy module in Chapter 1. Al-
ternatively, it can be positioned to introduce your business strategy module, covered in Chapters 4-6, and paired
with the Amazon case, or even used late in the course to illustrate the strategy execution and corporate culture
concepts in Chapters 10 and 12.
Regardless of where the case is placed in the course, it has ample information for students to introduce the fol-
lowing concepts and utilize the tools of analysis:
nDevelop an appreciation for the major concepts introduced in Chapter 1:
• How good strategy and good strategy execution are the most telling signs of good management.
• How a company achieves sustainable competitive advantage when an attractively large number of
buyers develop a durable preference for its products or services over the offerings of competitors,
despite the efforts of competitors to overcome or erode its advantage.
• How a company’s business strategy incorporates responding to changing market conditions,
strengthening competitiveness via strategic alliances and collaborative partnerships, strengthening
capabilities and competitively valuable resources, and managing the functional areas of the business
in order to achieve, not revise, financial and strategic performance targets.
• That a company’s strategy is the set of actions that its managers take to outperform the company’s
competitors and achieve superior profitability.
• That a company’s strategy provides direction and guidance, in terms of not only what the company
should do but also what it should not do.
• How a broad differentiation strategy aims to differentiate the company’s product or service from
that of rivals in ways that will appeal to a broad spectrum of buyers.
nEstablish the importance of conducting a financial analysis of a company, which will be covered in
Chapter 4.
• The financial ratio summary presented in Table 4.1 of the text should be a very valuable guide
for students in doing the financial calculations to support their assessment of Amazon’s financial
performance.
• Alternatively, we strongly recommend that students use the ratios provided in the text Appendix to
complete their financial analyses.
nEvaluate Apple’s product and services portfolio and develop recommendations to improve the company’s
strategy in the markets for mobile phones, other portable computing devices (MacBook and iPad and
Apple Watch), and cloud-based computing products and services (iTunes and iCloud) which will be
covered in Chapter 5.
nPreview the three managerial tasks that are used to build resources and capabilities for superior strategy
execution that will be covered in Chapter 10.
The assignment questions and teaching outline presented below reflect our thinking and suggestions about
how to conduct the class discussion and what aspects to emphasize.
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To give students guidance in what to think about and what analytical tools to utilize in preparing the Tim Cook’s
Leadership and Management Style case for class discussion, we strongly recommend providing class members
with a set of study questions and insisting that they prepare good notes/answers to these questions in preparing
for class discussion of the case.
To facilitate your use of study questions and to make them available to students, we have posted a file of the
assignment questions contained in this teaching note for the case in the instructor resources section of the
Connect Library.
You may also find it beneficial to have your class read the Guide to Case Analysis that is also posted in the
instructor resources section of the Connect Library. Students will find the content of this Guide particularly
helpful if this is their first experience with cases and they are unsure about the mechanics of how to prepare a
case for class discussion, oral presentation, or written analysis.
Videos for Use with the Tim Cook’s Leadership and Management Style Case. There are two videos
available for use with the Rosen case.
nOne is a 24:11-minute 2016 CNBC Mad Money video profile of Apple CEO Tim Cook that can be
accessed at https://www.youtube.com/watch?v=kFdUa_WeTcQcQ.
nThe second is a 2:37-minute 2016 video entitle “Apple: Five Years with Tim Cook.” It can be accessed
at https://www.youtube.com/watch?v=LLBRVZk9Ynk.
Both can be shown at the beginning of class. If you prefer that students simply watch the videos on their own
before or after the class discussion, all you have to do is provide them with the links.
This case is suitable for both written and oral presentations. Our recommended assignment questions are as fol-
lows:
1. As part of your internship requirements with Apple Inc., you have been asked to prepare an analysis of
Apple’s efforts to protect its competitive position in the markets for personal computers, mobile phones,
tablets, and digital streaming services. Your report should contain 2-3 pages of recommendations for
sustaining the company’s success in mobile phones, improving its position in personal computers,
tablets, wearable media devices and subscription services for streaming digital media content, and
a recommendation about potential new areas for diversification. Write an executive summary of
recommendations of no more than 2–3 pages, accompanied by supporting exhibits. These exhibits may
include an overview of Apple’s strategy, a competitive strength assessment, and a financial analysis.
2. A key executive at Apple has learned of your considerable skills in strategic analysis and has hired you
to develop a strategic plan that will enable Apple to improve its position in the mobile phone industry,
continue to build a strong position in the market for wearable devices and streaming of content, and make
decisions about its personal computer and tablet businesses. In developing your recommendations, you
should assess the e-commerce, cloud computing, digital media streaming, and personal media player
industries. You should also assess Apple’s competitive strength in its key product categories and analyze
its recent financial performance. Finally, the plan should offer specific, actionable recommendations that
will allow Apple to further improve its position in all of its product categories, while remaining mindful
of its public commitment to diversity and social responsibility. Your recommendations should be well
supported with arguments and justifications for each recommendation. Your report should include 4-6
pages of recommendations and whatever supporting charts, tables or exhibits you deem useful.
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Assignment Questions
1. What are the chief elements of Tim Cook’s overall leadership and managerial style? How well is it working?
Is his style evolving?
2. Explain Apple’s business model. How — if at all — has it changed over the first five years under Cook’s
leadership?
3. How would you rate Tim Cook in terms of the three main managerial areas used to build an organization, as
shown in Figure 10.1? Which are strengths, and which are areas for improvement?
4. What is your assessment of Apple’s financial performance over the past five years under Cook’s leadership?
(Use the financial ratios in the Appendix of the text or in Figure 4.1 as a guide in doing your financial
analysis.)
5. What recommendations would you make to Tim Cook to allow Apple to strengthen its position in its most
important markets?
Teaching Outline and Analysis
1. What are the chief elements of Tim Cook’s overall leadership and managerial style? How
well is it working? Is his style evolving?
Students should immediately recognize that Tim Cook has done a formidable job of transforming himself
from a shy, soft-spoken manager to a high profile leader at Apple.
After replacing the legendary Steve Jobs, Cook not only led the company to even greater financial success,
but also changed the culture of the company along the way by fostering a democratic, more decentralized
management approach.
Cook emulated his predecessor’s style when it came to launching new products, but not in managing the
company. Cook promoted straightforwardness, teamwork, and public exposure of his key executives, as
opposed to Apple’s prior culture, a culture that had been plagued by centralized command, deception, internal
competition, and secrecy. Cook’s coming out as gay in October 2014 was indicative of his willingness to not
only be a role model but also his personal commitment to human rights and gender equality.
Cook’s emphasis on building upon the existing strengths of the organization, his belief in achieving
consensus among leading executives, and his lack of interest in micromanagement indicated a democratic
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Perhaps most telling about Cook were his 2014 pledge to surrender up to one-third of his total stock-based
compensation if Apple’s stock underperformed compared to the S&P 500 for the next eight years, and his
statement at Apple’s 2014 annual shareholder meeting that not all of his decisions were based on profits, that
there should be no trade-offs between the economy and environmental sustainability.
On balance, one can say that Cook had not only stepped out of the shadow created by his predecessor, but
also led Apple in a new, more robust direction. Case Exhibit 4 clearly shows that Apple’s stock outperformed
both the S&P 500 index and the Dow Jones US Technology Super Sector index, between September 2009
and September 2014. If students remain unconvinced regarding the impact of Cook’s leadership, you can
point out that from 2010-2015:
nApple’s cash on hand had more than tripled to $130 billion, despite the company’s expenditure of $92.6
billion on dividends and stock repurchases
2. Explain Apple’s business model. How — if at all — has it changed over the first five years
under Cook’s leadership?
At the core of every sound strategy is a company’s business model. In the textbook, a business model is
management’s blueprint to provide a customer the best value deal along with keeping costs low enough to
make profits.
Students should recognize that Apple had achieved unparalleled success with its products not just because of
its technological prowess, but also because of a culture that encouraged innovation. Apple’s business model
consisted primarily of an appealing, differentiated customer value proposition and a profit formula from an
optimal cost structure that provided for superior cash generation and market capitalization, relative to other
public companies.
Part and parcel of Apple’s business model is a differentiation strategy linked to innovation with its three core
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As to the evolution of Apple’s business model under Cook’s leadership, its offerings in the mobile phone
industry with its iPhone and the tablet computer industry with its iPad have clearly begun to mature. Lower
cost versions of those products as well as higher-end versions (iPhone 6 plus and iPad Pro) are rounding out
3. How would you rate Tim Cook in terms of the three main managerial tasks used to eectively
build an organization, as shown in Figure 10.1? Which areas are strengths, and which are
areas for improvement?
Successful strategy execution depends on management’s ability to direct organizational change and do a
good job of allocating resources, building and strengthening competitive capabilities, instituting strategy-
supportive policies, improving processes and systems, motivating and rewarding people, creating and
nurturing a strategy-supportive culture, and consistently meeting or beating performance targets. Three
types of organization building actions are paramount: staffing the organization, acquiring and upgrading
resources and capabilities, and structuring the work effort.
Staffing the organization—putting together a strong management team and recruiting and retaining
employees with the needed experience, technical skills, and intellectual capital
nAccording to the case, Cook always stressed teamwork. His aim to work as a team often led to slower
decision-making, but it also reduced a certain disorder that came from managing Apple vigorously like
Jobs did.
Acquiring, developing, and strengthening strategy-supportive resources and capabilities—accumu-
lating the required resources, developing proficiencies in performing strategy-critical value chain activities,
and updating them to match changing market conditions and customer expectations.
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Apple’s strategy-supportive resources and capabilities are strengths, but remain always in need of continuous
improvement.
Structuring the organization and work effort—organizing value chain activities and business processes,
establishing lines of authority and reporting relationships, and deciding how much decision-making authority
to push down to lower-level managers and frontline employees.
nAnalysts opined that Apple under Cook had gone through a necessary but sometimes painful transition
period from a highly authoritarian centralized structure to a more decentralized, egalitarian structure.
4. What is your assessment of Apple’s financial performance over the past five years under
Cook’s leadership? (Use the financial ratios in the Appendix of the text or in Figure 4.1 as a
guide in doing your financial analysis.)
This is an ideal time in the discussion to bring in financial performance metrics. Students should be able to
use the financial information provided in case Exhibit 2 and the financial ratios provided in the Appendix of
the text to make calculations similar to those shown in Table 1.
TABLE 1. Selected Financial Statistics and Ratios for Apple Inc., 2010 – 2014
Performance Ratios 2014 2013 2012 2011 2010
Year-on-year growth, net sales % 7.0% 9.2% 44.6% 66.0% n/a
Year-on-year growth, net income % 6.7% -11.3% 60.6% 85.5% n/a
Year-on-year growth, EPS (diluted) % 13.6% -10.0% 59.7% 82.9% 21.5%
Year-on-year growth, dividends % 11.0% 331.6% n/a n/a n/a
Return on sales, % (ROS) 21.6% 21.7% 26.7% 24.0% 21.5%
Return on assets, % (ROA) 17.0% 17.9% 23.7% 22.3% 18.6%
Return on equity % (ROE) 35.4% 30.0% 35.3% 33.9% 29.3%
Total asset turnover, x 0.79 0.83 0.89 0.93 0.87
Cash turnover, x 1.18 1.16 1.29 1.33 1.28
n/a = not applicable or impossible to calculate.
Calculated from case Exhibit 2.
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Clearly, Apple’s earlier double-digit growth in revenues and profits, propelled by the new product introductions
of iPhones and iPads, has appeared to be abating. Students should quickly recognize that, although Apple’s
dramatically to -11.3% between 2012 and 2013 and rebounded slightly to about 7% between 2013 and 2014.
There were, however, some bright spots in Apple’s financial performance:
nAlthough they have dropped slightly, Apple’s ROS and ROA have been relatively stable at about 22%
and 17%, respectively, over the most recent two-year period
5. What recommendations would you make to Tim Cook to allow Apple to strengthen its
position in its most important markets?
Apple needs to revitalize its product portfolio by making significant improvements to its existing products,
introducing new products, or both. Apple’s tremendous success has been largely due to its successful line of
“cutting edge” consumer electronics; now, with the exception of the Apple Watch, those products are rapidly
becoming dated. Apple needs an enhanced product portfolio with sizzle to revitalize its brand.
The four discrete operating systems software that controls the functionality of its diverse product line — OS,
IOS, TVOS, WatchOS — need to be integrated and made to work as seamlessly as possible.
Product lines that need to be discontinued, merged and rationalized, or vastly improved and refreshed
include:
Products and services that Apple needs to focus on include:
nReinvention of the iPhone as there have been relatively few radical improvements to the look-and-feel
of the device since the introduction of the iPhone 5s
On the horizon products and services that Apple could conceivably develop include:
nExtension of Apple Health mobile app into a system that could conceivably function remotely with a
user’s physician and pharmacist to foster preventive health and health maintenance
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Wrapping Up The Class
The Tim Cook case can provide instructors with an important “bridge” to strategy evaluation, formulation, and
execution concepts covered in later chapters, or it can even be paired with those chapters. We would encourage
you to conclude by foreshadowing the material in those chapters and by making the following points:
nTim Cook’s leadership tenure at Apple thus far has passed the three tests of a winning strategy— the Fit
Test, the Competitive Advantage Test, and the Performance Test — and is usually regarded as a winning
strategy. These three tests, as noted in the introductory chapter (Chapter 1) measure a strategy’s fit to a
company’s situation, its ability to bestow competitive advantage, and good performance. Regarding
nApple’s financial performance under Cook has shown mixed results, based on recently deteriorating growth
in revenues and profitability, but a deeper analysis reveals a strengthening of Apple’s balance sheet and
nCook has also been gradually but firmly expanding Apple’s repertoire to include diversity, philanthropy,
social awareness, and environmental responsibility, as will be covered in Chapter 9 on business ethics and
corporate social responsibility.
nCook’s ability to retain the strengths of Apple’s prior business model while making incremental adjustments
to improve that model has maintained the culture of innovation while empowering employees and pushing
authority down to teams, a topic which is covered in Chapter 10 on managing the strategy execution effort.
Epilogue
Fiscal 2015 Highlights from Apple Inc. 10-K, filed October 28, 2015:
Net sales rose 28% or $50.9 billion during 2015 compared to 2014, driven by a 52% year-over-year increase
net sales increased in each of the Company’s reportable operating segments, with particularly strong growth in
Greater China where year-over-year net sales increased 84%.
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In April 2015, the Company announced a significant increase to its capital return program by raising the expected
total size of the program to $200 billion through March 2017. This included increasing its share repurchase
2015 2014
Net sales $ 233,715 $182,795
Net income $ 53,394 $ 39,510
Earnings per share:
Greater China 58,715 31,853
Japan 15,706 15,314
Rest of Asia Pacific 15,093 11,248
Total net sales $ 233,715 $ 182,795
Mac 25,471 24,079
Services 19,909 18,063
Mac 20,587 18,906
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First Quarter Fiscal 2016 Highlights from Apple Inc. 10-Q, filed January 27, 2016:
Net sales grew 2% or $1.3 billion during the first quarter of 2016 compared to the first quarter of 2015,
primarily driven by strong growth in Other Products and in Services, partially offset by lower iPad net
sales. Additionally, the effect of weakness in most foreign currencies relative to the U.S. dollar negatively
impacted the Company’s net sales. Other Products and Services net sales increased in all of the Company’s
reportable operating segments.
During the first quarter of 2016, the Company released OS X El Capitan, its 12th major release of OS X, and
its new tvOS™ operating system. Following the release of its new iPhones 6s and 6s plus late in the prior
quarter, the Company began shipping iPad Pro and the new Apple TV, and launched its Apple TV App Store.
* * *
Second Quarter Fiscal 2016 Highlights from Apple Inc. 10-Q, filed April 27, 2016:
Net sales decreased 13% or $7.5 billion during the second quarter of 2016 compared to the same quarter in
2015, primarily driven by lower iPhone sales and the effect of weakness in most foreign currencies relative
to the U.S. dollar. The Company had strong year-over-year net sales growth in Services and Other Products.
During the second quarter of 2016, the Company introduced iPhone SE and the 9.7-inch iPad Pro™, both of
which were available beginning in the third quarter of 2016.
The Company utilized $7.0 billion to repurchase shares of its common stock and paid dividends and dividend
equivalents of $2.9 billion during the second quarter of 2016. Additionally, the Company issued $15.5
billion of U.S. dollar-denominated long-term debt.
* * *
Third Quarter Fiscal 2016 Highlights from Apple Inc. 10-Q, filed July 27, 2016:
Net sales decreased 15% or $7.2 billion during the third quarter of 2016 compared to the same quarter in
2015, primarily driven by lower unit sales and a reduction in the average selling price (“ASP”) for iPhone.
The Company had strong year-over-year net sales growth in Services.
During the third quarter of 2016, the Company began shipping iPhone SE and the 9.7-inch iPad ProTM.