Table of Contents

1. PESTEL analysis 2
2. Porter's five forces model 4
3. Strengths and weaknesses of Apple, Inc (7-s model) 6
4. Core competency of Apple Inc and VRIO model. What were Apple’s competitive advantages? 8
5. New formula to create a sustainable competitive advantage 8
6. Assessment of Apple’s initial strategy for the iPhone. Quick change to a different strategy. 8
7. EFE and IFE matrix; strategic recommendations on Apple Inc SWOT matrix; SPACE matrix; evaluation of strategic choices on QSPM. 9
8. Balanced scorecards 13

PESTEL analysis
Beginning in the 1950's, research on organisations emphasised the importance of understanding the wider macro-economic environment in which organisations operate. An organisation on its own cannot affect environmental factors, nor can environmental factors affect the profitability of an industry or an organisation. Conducting a strategic analysis entails scanning the general or macro-economic environment to detect and understand the broad, long term trends. [1] The PEST analysis divided the general environment into the following categories: 1. Political 2. Economic 3. Social 4. Technological 5. Environmental 6. Legal

1) Political-Legal Forces * Different countries have different legislations and these in some ways restrict the company or give opportunities to the company. * NAFTA, European Union and other regional trade unions open doors to market in Europe, Asia, Latin America that offer enormous potential. Moreover, they have uniformed legislation, which can ease entrance to the market of different countries. * The company has to comply with the environment regulations such as environment safe disposal or recycling.
2) Socio-Cultural Forces * The computer and internet usage is growing worldwide and is a good source of opportunities for the computer industry. * Customers had become more experienced and computer literate. * Education has become a fundamental issue for the new generation, which is a key factor for the company’s business.
3) Economic * In the past year, the industry has been affected by the slow economic and that resulted in low consumer spending. However the current economy shows some sign of improvement, consumer spending and investment might increase as well. * Sales of products that include components obtained from foreign suppliers can be adversely affected by currency exchange rate fluctuations and by international trade regulations (tariffs and antidumping penalties).
4) Technology * Technology is evolving at a rapid pace today, and people appreciate more & more advances in their systems and are switching over to new information appliances. * Internet availability and usage is growing and leads to good opportunities for the industry. * The traditional desktop might become outdated by the entrance of new revolutionary products. * Increasing demand for new technology in schools and professionals.
5) Environmental forces * Apple has been criticized by some environmental organizations for not being a leader in removing toxic chemicals from its new products, and for not aggressively or properly recycling its old products. [2] * Greenpeace, an environmental organization, has confronted Apple on various environmental issues, including promoting a global end-of-life take-back plan, non-recyclable hardware components, and toxins within the iPhone hardware. [3] * In Greenpeace’s Guide to Greener Electronics that scores electronics manufacturers on their policies regarding toxic chemicals, recycling and climate change, Apple ranked 5th out of 18 leading electronic makers in May 2010 with a score of 4.9/ 10. [3] * The Environmental Protection Agency rates Apple highest amongst producers of notebook computers, and fairly well compared to producers of desktop computers and LCD displays. [3]
Porter's five forces model Porter's five forces represent a framework for the analysis of the industry and the development of the business strategy formed by a professor Michael E. Porte from Harvard business School. These five forces are outlined on the diagram below (Diagram 2.1 Poster’s five forces)

Suppliers
According to the case, supplier power over Apple Inc. was quite low – Apple Inc. choose the suppliers itself (there were a lot of suppliers who would like to deal with Apple Inc.). The suppliers’ raw materials had to meet the highest quality standards. Moreover, suppliers who dealt with Apple Inc. had to keep the highest confidentiality standards to avoid the information on new products to be leaked.
Potential entrants
The risk of new companies entering the market of PC industry at the year 2008 was quite low (disregarding the industry’s rapid growth) due to the large amount of money required for entering the market and severe industry rivalry. There are no governmental barriers for the entrants.
Buyers
Buyers’ volume at this market is extremely high since every household tends to have a personal computer at present. Apple Inc products are targeted on a wide range of consumers, mainly with the average above income. Apple products are clearly differentiated and are superior in terms of design, performance and reliability in comparison with the competitors’ products.
Substitutes
The prices for substitutes are usually lower. The quality of the substitutes depends on the producer and varies from inferior to top-notch.
Industry Rivalry
There is a severe competition in the PC industry. The major Apple Inc. competitors are Microsoft, HP, Acer, Dell, Asus, Toshiba and Samsung. The overall dynamics of the PC industry are positive in terms of market growth andthe growth of the consumer market.

Strengths and weaknesses of Apple, Inc (7-s model)
Internal Audit: 7-s model

Strategy * Unique features and characteristics * Commands premium price * High customer service * Superior quality * Prestige * Rapid innovation | Structure * Quite flat structure * Simplification of internal communication of company objectives * Allowance for greater consistency in the implementation | Skills * Organized person * A talent for negotiation * Ability to think strategically and tactically * The flexibility to adapt to fast-moving situations | Shared Values * Think Differently * Creation of innovative products that continue to define the world of computer design | Systems * Choice of technologies * Monitoring and the evaluation of the technology progress * Capacity building | Staff * Apple-Centric in staffing * Protection of health and safety of employees * Apple’s creation of the Apple Fellows program to recognize the best of its employees and award individuals who made extraordinary technical or leadership contributions | Style * Each employee is a key individual contributor * A quirky style of Steve Jobs that was not too formal or hierarchical * A more results-driven approach which works best and today * Not shareholder-friendly |

Apple’s long-standing problem with the Macintosh

The aim was to turn around the Apple Mac business and Steve Jobs have undertaken the following steps to achieve it: 1. Agreement with Microsoft to invest $150 million in Apple 2. Macintosh licensing program was abolished thus restricting clones 3. Consolidated product range from 15 to 3 4. Launched iMac, plug and play with multiple colors 5. Outsourcing and restricting while expanding to national chains 6. Notebook Product launched: a. Macbook b. Macbook Pro c. Macbook Air
Technology and Innovation * Integrated with the Intel platform * Leopard OS launch * Web browser Safari * MS-Office suit for MAC * Ability to operate both Windows and Mac based application
Distribution and Sales: * Opening of the retail stores * Collaboration with Best buy * Benefited sales of iPod halo effect
Due to all the above mentioned measures, the Mac sales grew incredibly as fast as the overall PC market.

Core competency of Apple Inc and VRIO model. What were Apple’s competitive advantages?
Apple’s core competency is superior design and innovative technologies. VRIO Framework | Competitive Advantages | V | R | I | O | Competitive Advantage | Brand name | √ | √ | √ | √ | Sustained | Design | √ | x | x | √ | Parity | Innovation | √ | √ | √ | √ | Sustained | Customer loyalty | √ | √ | √ | √ | Sustained | Unique hardware and software | √ | x | x | √ | Parity | Retail strategy | √ | √ | x | √ | Sustained |

The VRIO analysis shows that Apple’s competitive advantage is mostly achieved through its brand, innovation, and customer loyalty, as well as combinations of the three.

New formula to create a sustainable competitive advantage
The creation of iPod and ITunes revolutionised the way the people listen and search for music. Moreover, it had the direct impact on the music producers, who had to accept the invention and offer the songs in a digital format for a lower price (the approximate cost for a song at ITunes online store is only 0.99 US dollars). The keys for the success of iPod and ITunes are their simplicity, outstanding design, reliability and functionality. Apple Inc. was the first to combine all these factors in one product, which guaranteed its success. Initially, these products brought Apple Inc. back on track and lead to the rapid development of the company.

Assessment of Apple’s initial strategy for the iPhone. Quick change to a different strategy.
Rational to launch iPhone: to integrate the iPod with a mobile phone service and to reinvent the phones as a multifunction communication device. iPhones: * Version 1 * Version 2 (upgraded)
The initial launch of the iPhone on the high price band and with exclusivity around it was a good Apple’s move. The level of exclusivity built a tremendous hype and expectation over the launch of the product. The early adapters were ready to shell out the price which was definitely on the higher side. Apple focused on this and was thus able to offer better prices in its following versions.
Reasons for changing the strategy: * Revenue-sharing model was not generating profit * Price band was on the higher side while early adopters were not interested * Design improvement * Availability of 3G bandwidth and battery life improvement * Retail channel instead of single distribution channel

EFE and IFE matrix; strategic recommendations on Apple Inc SWOT matrix; SPACE matrix; evaluation of strategic choices on QSPM. EFE | Key External Factors | Weight | Rating | Weighted score | Opportunities | 1. Success of an IPhone – possibility to attract new users who previously had not owned an Apple computer. | 0.1 | 4 | 0.4 | 2. Poor public perception of the operating systems offered by Windows allows Apple to push its OS as an attractive alternative option | 0.05 | 2 | 0.1 | 3. Increase the support of applications | 0.15 | 1 | 0.15 | 4. Allows easy hardware and software upgrades | 0.15 | 1 | 0.15 | 5. Improve the warranty plan for their products | 0.05 | 1 | 0.05 |

Threats | 1. High level of competition in the technology markets | 0.2 | 4 | 0.8 | 2. Possibility of popularisation of the open-source operating systems | 0.05 | 1 | 0.05 | 3. Global economic situation reduces demand for higher-priced items, no lower-end alternatives | 0.05 | 1 | 0.05 | 4. Increasing piracy may reduce the revenues of iTunes | 0.1 | 2 | 0.2 | 5. Windows 7 can force Mac users to change their preferences | 0.1 | 1 | 0.1 | TOTAL | 1.0 | | 2.05 |

IFE | Key Internal Factors | Weight | Rating | Weighted score | Strengths | 1. Strong brand loyalty among the customers | 0.2 | 4 | 0.8 | 2. Innovative products (like iPod) | 0.1 | 4 | 0.4 | 3. Small product footprints - saves office space | 0.05 | 3 | 0.15 | 4. Attractive design | 0.1 | 4 | 0.4 | 5. Product integration (all Apple products can be connected with each other) | 0.05 | 3 | 0.15 | Weaknesses | 1. High research and development costs | 0.1 | 2 | 0.2 | 2. Limited product range | 0.05 | 2 | 0.1 | 3. High cost | 0.1 | 3 | 0.3 | 4. Limited application support (need for Windows applications) | 0.2 | 2 | 0.4 | 5. Non upgradable | 0.05 | 1 | 0.05 | TOTAL | 1 | | 2.95 | SPACE matrix | Financial strength | Raitings | 1. Return on investment 2. Liquidity 3. Cash flow 4. Risk involved in the business | +5+4+4+3 | Total | +16 | Industry strength | | 1. Growth potential 2. Profit potential 3. Financial stability 4. Technological know-how | +6+5+4+4 | Total | +19 | Environmental stability | | 1. Technological changes 2. Price range of competing products 3. Competitive pressure 4. Price elasticity of demand | -2-5-3-4 | Total | -14 | Competitive advantage | | 1. Market share 2. Product quality 3. Customer loyalty 4. Control over suppliers and distributors | -3-2-2-3 | Total | -10 | Conclustion | | ES averageIS averageCA averageFS average | -14/4=-3.519/4=4.75-10/4=-2.516/4=4 | Directional Vector Analysisx-axisy-axis | 2.5-4.75=2.253.5-4=-0.5 | | | | y | | | | | | | | | | | | | | | | | x | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

As Apple appears in the ‘competitive’ quadrant, thus it should continue performing its competitive strategies such as market penetration and product development.

QSPM | | | Apple | HP | Key Factors | Weight | AS | TAS | AS | TAS | Opportunities | 1. Market share | 0.1 | 3 | 0.3 | 4 | 0.4 | 2. Poor public perception of the operating systems offered by Windows | 0.05 | 2 | 0.1 | 1 | 0.05 | 3. Increase the support of applications | 0.15 | 1 | 0.15 | 1 | 0.15 | 4. Allows easy hardware and software upgrades | 0.15 | 1 | 0.15 | 3 | 0.45 | 5. Improve the warranty plan for their products | 0.05 | 1 | 0.05 | 3 | 0.15 | Threats | 1. High level of competition in the technology markets | 0.2 | 4 | 0.8 | 3 | 0.6 | 2. Possibility of popularisation of the open-source operating systems | 0.05 | 1 | 0.05 | 4 | 0.2 | 3. Global economic situation reduces demand for higher-priced consumer items | 0.25 | 1 | 0.05 | 3 | 0.15 | Strengths | 1. Strong brand loyalty among the customers | 0.2 | 4 | 0.8 | 4 | 0.8 | 2. Innovative products (like iPod) | 0.1 | 4 | 0.4 | 1 | 0.1 | 3. Small product footprints - saves office space | 0.05 | 3 | 0.15 | 2 | 0.1 | 4. Attractive design | 0.1 | 4 | 0.4 | 3 | 0.3 | 5. Product integration | 0.05 | 3 | 0.15 | 2 | 0.1 | Weaknesses | 1. High research and development costs | 0.1 | 2 | 0.2 | 2 | 0.2 | 2. Limited product range | 0.05 | 2 | 0.1 | 3 | 0.15 | 3. High cost | 0.1 | 3 | 0.3 | 1 | 0.1 | 4. Limited application support (need for Windows applications) | 0.2 | 2 | 0.4 | 3 | 0.3 | 5. Non upgradable | 0.05 | 1 | 0.05 | 3 | 0.15 | TOTAL | 1 | | 4.6 | | 4.45 |

Recommendations: 1. Continue investing in the innovation to be always able to offer customers the newest products; 2. Increase the product range; 3. Develop Mac OS applications in order not to be dependent on Windows applications; 4. Improve the warranty plan

Balanced scorecards
The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.[4]

Finance perspective | Customer perspective | CSF | Measures | CSF | Measures | Financial prosperity | * Return on capital employed * Financial results * ROI * Cash flow * Revenue | Excellent customer serviceIncrease market share | * Quality performance for customers * Customer satisfaction rate * Delivery performance to customers * Market share | Internal process perspective | Growth and learning perspective | CSF | Measures | CSF | Measures | Increase economies of scale experiences | * Process bottlenecks * Employee turnover * Process automation | Constant increase workforce knowledge and skillsContinuous improvement use of technology | * Job satisfaction * Training/learning opportunities |

References
[1] Oxford University Press www.oup.com
[2] Apple Inc official web site http://www.apple.com/hotnews/agreenerapple/
[3] Wikipedia, the Free Encyclopedia http://en.wikipedia.org/wiki/Apple_Inc.
[4] Balanced Scorecard Institute http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx