Apple Inc. in 2008

 “Apple Inc. in 2008”

Viewpoint:

Chief Executive Officer of Apple Inc.

Time Context:

Last Quarter of 2008

1. Statement of the Problem:

What action/s Apple Inc. should take in order to solve its decreasing gross profit margin which affected its performance in 2008?

1. Statement of objective:

To increase Apple’s gross profit margin to 40% and increase its profitability by 20% for the next three years.

1. Areas of Consideration(SWOT Analysis):

Strengths:

1. Strong brand image associated with quality and superior design
2. Apple’s competitive edge in innovating technology
3. Differentiated product lines (software and hardware)
4. Large loyalty customer base
5. Steve Jobs leadership style
6. Ease of use, attractive design, good security and bundles software
7. Skilled management team
8. Innovative online retail store (iTunes and Apple Store)
9. Became the 3rd largest PC maker in the 2nd quarter of 2008
10. Effective sales online
11. Products have unique features and characteristics

Weaknesses:

1. High price proprietary system
2. Decreasing market share
3. Decreased profit margins
4. Closed system of the Apple products
5. Limited distribution network
6. Sales limited mainly to high-end market
7. Management is not stable and frequent changes of strategies
8. Premium segment, research oriented, hence costly
9. Previous decision making failures that affects Apple’s revenue
10. Steve Job’s current health condition that bothers some investors and analyst regarding Apple’s continuity on its impressive performance and leadership.

Opportunities:

1. Growth of developing economies
2. Development of new technologies
3. The increase of internet users and the popularity of online retail stores
4. Increase network of distribution partners (Strategic partnership)
5. Fast growing industry (customer electronic industry and computer industry)
6. Rising demand for tablets and smart phones
7. Creation of new product lines
8. Projection that Apple’s greatest opportunity for growth would come from the projected halo effect of iPods and iPhones.

Threats:

1. Extensive competition which may affect revenues and profitability
2. High threat of substitute products which are widely available in the market
3. Low prices of competitors
4. Risk of change in customers taste
5. Microsoft dominance- most of the world’s computers use the Microsoft OS
6. Strong bargaining power of suppliers
7. Global financial crisis
8. Rapid  change in technology
9. The break-up of suppliers’ relationship
10. Currency risk and fluctuation in the external environment

1. Alternative Courses of Action (ACA):

1. Strategic partnership with India based companies for the manufacturing of Apple’s products.

1. Increase marketing/advertising budget which may expand its current market share and sales. Promote product awareness through intense promotional campaigns (e.g. newspaper ads, radio spots, an Internet Web page, and social media)

1. Remodel the computers and other products with a better technology and enter new customer segments (particularly low-end consumers) by trying to produce products with high value at a lower prices.

1. Analysis of ACA:

1. Conclusion

Decision Matrix

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Definition of Terms: