Apple Computers Strategic Audit
Guillermo Magana
Embry-Riddle Aeronautical University

Abstract
This paper analyzes Apple Computers current state as a business and industry leader. Each part of their strategic audit is dissected and broken down to have a better understanding of it. From the company’s current performance and strategic posture to its leader, Steve Jobs, and the team that drives the company to its incredible success. Strengths, Weakness, Opportunities and Threats (SWOT) analysis is discussed to determine how External and Internal factors affect the decisions being made by management. Finally and attempt is made to provide alternatives and a strategy to further the success Apple currently enjoys. So kick back play your favorite song on iTunes, check your stocks on your iPad and make sure to put your iPhone on silent before we start.

Apple Computers Strategic Audit
Current Situation Current Performance: Strong financial results for the third fiscal quarter in 2011; no debt. Best quarter ever recorded with $28.57 Billion in revenue. Record $7.31 Billion in net profits. The number of retail stores amounted to over 300 retail stores worldwide. Strategic Posture: The company strategic posture is clearly stated, and is also backed up by its strong performance. Mission, Apple is committed to bringing the best personal computing and music experience to its customers. The company has a unique ability to design and development its own hardware and software. Objectives, Apple is committed to lead the industry with its award-winning computers, OS X operating system and iLife and professional applications. The company objectives are clearly in line with its mission, and both internal and external environments. Strategies involve the continual investment in research and development critical to facilitate innovation of new and improved products and technologies. Apple is also committed to expand its digital footprint in the music industry, and worldwide expansion of its retail operations. The company strategies are in line with its mission, objectives, and both internal and external environments. They include a number of policies which involve: award-winning design, user-friendly products, high quality, environmental sustainability, unique customer experience, and above all, innovation.
Corporate Governance Board of Directors: Six members-five outsiders and one internal. Board members own a significant share of the stock. Stock is publicly traded-different classes of stock with different voting rights. Board members contribute different skills to the corporation: retail operations, software technology, marketing experience, and environmental sustainability. Several of the board members have international experience. Board members serve for well over five years, some ten years. Board members take the leading role in establishing and modifying the mission, objectives, strategy and policies. Top Management consists of highly skilled individuals in the computer industry. Their experience in international operations is reflected on their performance. Not all executive from acquired companies considered top management. The team, as a whole, has been responsible for the strong performance. Some are promoted from within and others are externally hired. They have an established approach to strategic management which is highly involved within the company. A sense of a flat organization is maintained with constant communication with lower level management. This in turn guarantees that decisions are made ethically in a socially responsible manner. Management is highly concerned with the environment and the company carbon footprint. They own a significant amount of stock in the corporation. Top management is sufficiently skilled to cope with the future with several products in the pipeline.
External Environment: Opportunities and Threats Natural physical environment brings forth sustainability issues. The availability of raw materials for production is one. Acquiring the needed materials is possible in shipment from China and can be affected by weather delays. No other major threat from the natural environment. Societal environment includes economic issues. Though economic times prevent consumers from purchasing high-ticket items which added to the current global economic crisis has resulted in tight credit markets, and a volatile fixed income. This leads to consumers postponing spending. Technological factors involve an intense rivalry with Adobe and Google over the non-use of Flash on Apple’s portable devices. Mobile technology and cloud computing have become increasingly important. An unquestionable strength in the technological arena is the fact that Apple dominates the music player market. Political-legal issues include the pressure from EU countries requiring iPod player and iTunes online store compatibility with rival offerings. A growing amount of legal battles with a series of competitors to include Samsung, Nokia and HTC over patent infringements are to be considered. Congress has also inquired and started an investigation on iPhone exclusivity, and negative effects on competition. Sociocultural factors that can be seen as an opportunity include the growing need of mobile devices and cloud computing technology, consumer and business applications. A focus on the use of technology in education and delivering tools to help educators and students learn. There has been an increased growth on the consumer’s demand for a single device as they face the economy by cutting on additional gadgets. In a highly competitive industry as this, the forces that drive competition include but are not limited to: price, product quality, service, rapid changing technologies and standards. Apple must continue to innovate to keep in pace with technological changes and the consumer demands.
Internal Environment: Strength and Weaknesses Corporate structure: The Company is structured around its portfolio of products. Decision-making authority is centralized at headquarters. The corporation is organized based on a combination of functions, projects, and geography. Present structure consistent with current corporate objectives, strategies, policies, and programs, as well as with the firm’s international operations. Corporate culture it’s all about the brand, Apple. The company projects a humanistic corporate culture and a strong corporate ethic, characterized by volunteerism, support of good causes or involvement in the community. The company has a unique visual and verbal vocabulary, expressed in product design and advertising. Products are designed around people. Apple still has a reputation for fostering individuality and excellence that reliably draws talented people into it employs. Apple has the highest brand and repurchases loyalty of any computer manufacturer. Apple is extremely concerned with environmental sustainability. A great majority of the employees believe that there is no better place to work. Strong focus on career opportunities and employability security, compensation, and benefits offered to the employees by the company. Corporate resources include marketing, financial, R&D, operations, HR, and IT. Its marketing department includes key concepts. Apple believes in high quality buying experience with a knowledgeable salesperson. To provide a new retail experience to customers and attract new ones remains a focus. Just like product design is essential, stores were designed to enhance the presentation and marketing of personal computing products. Apple has a competitive advantage over its competitors (local and international) in terms of market analysis and marketing mix. Able to charge a premium for personal computing devices, it has created a niche that is growing exponentially with every new product. Product life cycle is short, part of the company strategy of always innovating to maintain competitive advantage. This strategy seems to be working very well, keeping competitor focus on models. Apple’s financial performance continued to strengthen over the last several quarters. Financial performance can be evaluated by how Apple’s stock price performed against the market and against its main competitors. In terms of return on assets, return on equity and profit margin, Apple strengthened financially and now has similar ratios to that of its competitors and the overall computer hardware industry. The company has strong liquidity measures over its competitors, industry, and market in general. During periods of strong financial performance, Apple accumulated cash. This strengthens Apple’s position should they choose to access the capital markets. Currently, Apple is debt free and with over $40 billion of cash on hand. Research and Development (R&D) and innovation are part of Apple’s DNA, competitive advantage, and core competency. Apple is getting big returns in its R&D over other large tech companies. Competitors are not able to keep up with R&D and new product release. What Apple does is enters a market, takes it over, raises the bar whether it’s in notebooks, music, cell phones, or tablet computing device. Compared to the amount it invests in it, Apple’s R&D is extraordinarily cost efficient. Operations and logistics are managed by outsourcing most manufacturing, thus reduces operating cost. Manufacturing of many components used in final products performed by third-party vendors like China. It markets products to end-users, and resellers through online retail stores, alliances such as the one with AT&T and partnering with Best Buy as an exclusive reseller. Its operations are consistent with providing a specific experience to customers. In the tech industry, outsourcing is key to remaining or gaining a competitive advantage. Human Resources Management (HRM) employs experienced and knowledgeable staff to achieve its objectives and goals. It is known in the industry for having very good relationship with employees. Apple has 14,800 full-time employees and 2,200 temporary employees and contractors. Information Technology (IT) flourishes by producing rapid technological advances. R&D in IT is a key competency. Apple carries high brand equity and is one of the most established brands. Strength in finance translates into further development of personal computing devices. Its following of loyal customers which are becoming more and more tech savvy are also its prime marketers. Powerful online presence coupled with originality of products and services. Apple believes in high quality buying experience with a knowledgeable salesperson. Product life cycle is short, part of the company strategy of always innovating to maintain competitive advantage.
Analysis of Strategic Factors SWOT Analysis. Strengths: high brand equity, debt-free, lots of cash on hand, extensive customer base, customer loyalty, quality products, strong retail and online presence, knowledgeable staff. Weaknesses: unique brand-no diversification, AT&T exclusivity in USA, dependence on 3rd party providers. Opportunities: growing niche of tech savvy customers, high potential software, growing mobile industry, international opportunities. Threats: immense competition, new powerful entrant-Google, many similar substitute products.
Strategic Alternatives and Recommend Strategy Developing strategic alternatives for an industry leader such as the case of Apple can be daunting specially when the current strategy appears to be working very well and is in line with objectives and mission. Only feasible strategy for Apple is growth, anything else would not fulfill current mission, objective, and goals. Recommend strategy for the sake of argument would be to: end current exclusivity with AT&T, a more aggressive horizontal growth, specifically in the international market, to offer consumer specific customization of products, lowering cost of product while maintaining high quality, a more aggressive approach to marketing. Implementation of the recommended strategy will have to include a more aggressive program to expand current international operations. With over $40 billion of cash on hand, Apple has more than enough financial strength for growth and acquisition and should subsequently purse those avenues to stimulate growth. This will have to include minor changes to standard operating procedures to support new growth programs. Also, its current information system will need to be expanded to accommodate all the new growth opportunities. With its continued growth, Apple will need more standards and measures to control suppliers in the international markets.

References
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All other information can be found on the web at http://www.apple.com/pr/library/2011/07/19Apple-Reports-Third-Quarter-Results.html
Angeli, E., Wagner, J., Lawrick, E., Moore, K., Anderson, M., Soderlund, L., & Brizee, A. (2011, November 16). General format. Retrieved from http://owl.english.purdue.edu/owl/resource/560/01/