Strategic Management

| January 23, 2016

Strategic Management

Paper details:

Apple Inc. – Managing a global supply chain. Read the attached case study and then prepare a paper answering the questions asked in the “Apple Case Questions.docx” Textbook is: Contemporary Strategy Analysis 8th edition. Additional sources ok.
Strategy Question – Apple Inc.: Managing a Global Supply Chain

Part 1 (50%)
Analyze Apple’s resources and capabilities, then describe their five main sources of competitive advantage (and/or disadvantage). The analysis itself can be placed partially or wholly in an appendix to preserve word count, but material in the appendix will not be marked.

Part 2 (25%)
Define the scope of the industry Apple competes in, then analyze that industry using Porter’s Five Forces analysis. Show the main findings for each section, as well as a summary on the state of the industry.

Part 3 (25%)
Based on your analyses from Part 1 and 2, prepare a persuasive argument about whether you think new product development is integral to Apple’s future success.

Answer Formatting Guidelines:
• Additional content may be included in appendices for reference, though it will not be marked.
• State all major assumptions made in preparing your answer.
• Use APA formatting for any references used, other than the case study itself.
• You have 1000 words (plus the usual 5% overage) to answer Parts 1, 2, and 3. Plan your word count accordingly.

9B14D005
APPLE INC.: MANAGING
A GLOBAL SUPP
L
Y CHAIN
1
Ken Mark
wrote this
case under the supervision of Professor P. Fraser Johnson
solely to provide material for class
discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have
disguised
certain names and other identifying information to protect confidentiality.
This publication may not be
transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction righ
ts
organization. To order copie
s or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)
cases@ivey.ca
;
www.iveycases.com
.
Copyright © 2014, Richard Ivey School of Business Foundation
Version: 2014

0
6

1
2
INTRODUCTION
Jessica Grant was an analyst with BXE Capital (BXE), a money management firm based in Toronto.
2
It
was February 28, 2014, and Grant was discussing her U.S. equity mandate with BXE’s vice president,
Phillip Duchene. Both Grant and Duchene were trying to identify what changes, if any, they should make
to BXE’s portfolio. “Apple is investing in its nex
t generation of products, potentially the first new major
product lines since Tim Cook took over from Steve Jobs,” she said. Apple Inc., the world’s largest
company by market capitalization, had introduced a series of consumer products during the past doze
n
years that had transformed it into the industry leader in consumer devices.
Apple managed a global supply chain with creative development in the United States, outsourced
manufacturing in Asia and components sourced from suppliers around the world. Appl
e was in the centre
of a complex ecosystem that produced market

leading consumer devices. With $160 billion
3
in cash in
February 2014, the company was well

capitalized. Despite its commercial success, Apple’s stock was at
$524.47 on February 28, 2014, 25 p
er cent below the $700 level it had reached in 2012. Cook reassured
investors that the firm was focused on the future, and it had a solid pipeline of new products. This was his
way of signalling to stakeholders that he would be able to run the firm followi
ng the death of Steve Jobs,
one of Apple’s co

founders and the man responsible for rebuilding the firm. “We’re working on some
things that are extensions of things you can see and some that you can’t see,” Cook said at Apple’s annual
shareholders’ meeting
on February 28, 2014.
4
Industry observers were skeptical that the company could deliver new product successes:
It is unclear whether the spread

sheeting

loving, consensus

oriented, even

keeled Cook can
successfully reshape the cult

like culture that Jobs
built. Though Cook has deftly managed the
iPhone and iPad product lines, which continue to deliver enormous profits, Apple has yet to
launch a major new product under Cook; talk of watches and televisions remains just that . . . in
the day

to

day at Apple
, Cook has established a methodical, no

nonsense style, one that’s as
different as could be from that of his predecessor. Job’s bi

monthly iPhone software meeting, in
which he would go through every planned feature of the company’s flagship product, is gon
e.
“That’s not Tim’s style at all,” said one person familiar with those meetings. ‘He delegates.’
5
Authorized for use only in the course CPEX-506 at Athabasca University taught by Dr. Aris Solomon from Jan 20, 2016 to Jan 26, 2016.
Use outside these parameters is a copyright violation.
Page
2
9B14D005
Nevertheless, it was clear to Jessica that Apple’s product range would get more complex in the next few
years. As part of her analysis of Apple’s stock, she
wanted to take a look at the company’s supply chain to
see if she could gain some insight into whether to continue with Apple as a key holding in BXE’s fund.
APPLE INC.
Apple Computer was founded on April 1, 1976, by Steve Jobs, Steve Wozniak and Mike
Markkula to
manufacture and distribute desktop computers. Both Jobs and Wozniak started tinkering with computing
devices in a time when enthusiasts who wanted a fully functioning computer had to assemble the parts by
themselves from individual components.
They struck a deal to sell an initial order of 50 units of their
“Apple I” computer to a local computer shop, and negotiated a 30

day credit term to pay for the parts,
effectively using their suppliers to fund the startup. After selling 200 units of the Ap
ple I, Wozniak
improved the design and showcased the Apple II in April 1977. Needing capital for the next phase of their
company, they brought on Markkula, a marketing manager at Intel who had retired after making millions
on his stock options. The company
became the largest private manufacturer of personal computers in the
United States and held its initial public offering in December 1980, thereby creating 300 millionaires.
Although it had a great product, the team at Apple soon found that IBM’s entry
into the market in 1981
would change the industry. By 1983, IBM’s personal computer (PC) became the best

selling computer in
the United States, heralding the beginning of its domination of the PC market. Even Apple’s popular 1984
Superbowl commercial,
6
com
bined with a heavy marketing campaign, was not enough to stop IBM’s
growth. Jobs left Apple in 1985. The company stumbled along for the next decade, and even though it
launched a line of Macintosh computers such as Quadra, Centris and Performa, it failed t
o gain traction in
the marketplace. Worse, its retail partners such as CompUSA and Sears did not devote resources to
displaying its products properly. Apple also suffered from a perception that its machines were more
expensive than comparable Windows PCs.
The company had poor operating controls and inventory
management, failing to properly estimate demand for its products and leading to both stock

outs and
excess inventory.
7
Apple squandered its goodwill from the 1980s Macintosh era
.
In 1996,
Microsoft wa
s one year into the
launch of Windows 95, which was turning out to be a very popular operating system.
Apple’s s
ales of
Macintosh computers fell dramatically and
Apple, in an attempt to reverse the trend,
began
licensing the
Mac operating sy
s
tems to third

party manufacturers. From 1993 to 1996, Apple went through three
CEOs: John Sculley, Michael Spindler and Gil Amelio.
8
In 1996,
Jobs returned to the company as CEO at a time when Apple’s future was in question.
Apple’s
market capitalization had fallen
from $11.6 billion in 1987 to $3.1 billion at the end of 1996. In 1996,
sales were $9.8 billion. In the early 1990s, Apple had begun licensing its Mac operating system to third

party manufacturers who would produce their own lines of devices powered by Mac
’s operating system.
Its licensing model was similar to that employed by Microsoft, allowing the operating system producer to
earn additional revenues by selling copies to generic computer manufacturers. With the objective of
reasserting control over its
product, o
ne of Jobs’ first decisions was to stop licensing Apple’s Mac
operating system. This resulted in a fall in computer unit market share from 10 per cent to 3 per cent.
Throughout this time,
Apple
continued to manufacture its own devices. In 1997,
Jobs announced a
partnership with Microsoft
that
would see the latter invest $150 million in Apple and release the dominant
office software

Microsoft Office

for Macintosh. At the time of the announcement, Apple’s market
capitalization
had continued to
fall to
$2.5 billion.
Authorized for use only in the course CPEX-506 at Athabasca University taught by Dr. Aris Solomon from Jan 20, 2016 to Jan 26, 2016.
Use outside these parameters is a copyright violation.

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