Arab academy for Science, technology and maritime transport

Graduate school of business

Apple Inc. Comprehensive Strategic

Analysis
Under the supervision of

Dr. Cherine Soliman

Presented By:

Hesham Rabie

Hend Madkour

Heba Hady

Mustafa A. Salim
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Contents
Step 1: Apple Inc.’s existing vision, mission, objectives, and strategies............................................................3
Apple Inc.’s Vision Statement......................................................................................................................................... 3
Apple Inc.’s Mission Statement...................................................................................................................................... 3
Apple Inc.’s Objectives....................................................................................................................................................... 3
Apple Inc.’s Strategies.........................................................................................................................................................4
Step 2: Proposed vision and mission statements for Apple Inc.............................................................................5
Proposed Vision Statement............................................................................................................................................... 5
Proposed Mission Statement............................................................................................................................................ 5
Step 3: Apple Inc.’s external opportunities and threats...........................................................................................6
External Opportunities....................................................................................................................................................... 6
External Threats.................................................................................................................................................................... 7
Step 4: Competitive Profile Matrix (CPM)....................................................................................................................8
Step 5: External Factor Evaluation (EFE) Matrix......................................................................................................9
Step 6: Apple Inc.’s internal strengths and weaknesses.........................................................................................10
Internal Strengths...............................................................................................................................................................10
Internal Weaknesses..........................................................................................................................................................11
Step 7: Internal Factor Evaluation (IFE) Matrix.....................................................................................................12
Step 8: Strategic Alternative Formulation and Evaluation..................................................................................13
Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix..................................................................13
Strategic Position and Action Evaluation (SPACE) Matrix............................................................................13
Boston Consulting Group (BCG) Matrix................................................................................................................13
Internal-External (IE) Matrix.......................................................................................................................................13
Grand Strategy Matrix.................................................................................................................................................... 13
Quantitative Strategic Planning Matrix (QSPM)................................................................................................13
Step 9: Strategic Recommendations and Cost Projections...................................................................................14
Step 10: Strategic Implementation and Performance Forecasting...................................................................14
Step 11: Recommended annual objectives and policies.........................................................................................14
Step 12: Recommended procedures for strategy review and evaluation.......................................................14
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Step 1: Apple Inc.’s existing vision, mission, objectives, and strategies

Neither at its corporate website nor in its Form 10K does Apple provide a written vision or mis-
sion statement labeled as such. There are statements such as the following, however, that perhaps
serve as Apple’s vision and/or mission.

Apple Inc.’s Vision Statement

“We strive to provide users of Apple products the best experience possible though
innovative product designs and software.”

Apple Inc.’s Mission Statement

"Apple designs Macs, the best personal computers in the world, along with OS X, iLife,
iWork and professional software. Apple leads the digital music revolution with its iPods
and iTunes online store. Apple has reinvented the mobile phone with its revolutionary
iPhone and App Store, and is defining the future of mobile media and computing devices
with iPad".

Apple Inc.’s Objectives

 Sustain Premium Market Position: Apple aims to be "the best" rather than striving for
"the most" market share, implying a focus on quality, innovation, and user
experience, which supports premium pricing.
 Achieve Record Sales and Revenue Growth: Demonstrated by record third-quarter
sales of iPhone and Mac, and all-time record revenue from services in fiscal 2015,
and record financial results for fiscal first quarter 2015 in revenues and profits.
 Expand Global Reach: International sales accounted for 64 percent of quarterly
revenue in Q3 2015 and 65 percent in Q1 2015, with the iPhone becoming the most
popular phone in China. Retail expansion around the world also supports this.
 Drive Innovation and Product Development: Continuous release of new products
(iPhone 6/6+, Apple Watch, Apple Pay, Apple Music, iOS 9, OS X El Capitan,
watchOS 2) and significant investment in R&D ($6 billion in 2014) highlights this
objective.
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 Enhance Ecosystem and Services Revenue: Record revenue from services in Q3 2015
and the successful launch of Apple Music indicate a focus on this segment. The App
Store also generated a record $1.7 billion in transactions in July 2015.
 Manage Financial Structure: Authorized a $90 billion stock repurchase and raised
dividends, indicating a commitment to shareholder returns. Also, used debt to finance
operations for the first time since 1994, seeking further financing by debt and bonds.

Apple Inc.’s Strategies

 Product Differentiation and Innovation: Focus on "innovative product designs and
software" and releasing new, often revolutionary, products like iPhone, iPad, and
Apple Watch. This includes offering larger screens on iPhones to compete.
 Premium Pricing and User-Friendly Design: Apple's "overriding strategy always has
been to produce elegant, easy-to-use products, often at a premium price point".
Products are "generally more user friendly" than competitors.
 Strong Brand and Customer Loyalty: Apple designs products for "the best experience
possible" and has "strong customer loyalty" in a hypercompetitive industry. Its well-
trained salespersons and excellent customer service contribute to this.
 Ecosystem Lock-in and Control: Apple approves all third-party digital content
through its iTunes, App, and iBooks stores, exerting more control than competitors
like Android. This creates a cohesive user experience.
 Vertical Integration (in part) and Control over Retail: Operates 450 Apple stores and
owns iTunes. This allows for direct sales, strong customer service, and control over
the brand experience.
 Strategic Acquisitions: Acquired firms like NeXT (bringing Steve Jobs back) and
Beats Music/Headphones (gaining streaming service and a headphone firm).
 Supply Chain Management: Almost all hardware products are manufactured in Asia,
often at single locations, to keep costs low, though this poses risks. Apple mitigates
this by stocking up to 150 days of supply.
 Intellectual Property Protection: Sued Samsung for patent infringements to impair
rivals' ability to sell certain products.
 Financial Management: Aggressively financing through debt and bonds, repatriating
cash through stock repurchases, and raising dividends. Keeping much cash in foreign
 4

banks to avoid U.S. corporate taxes.

 Corporate Values: CEO Cook emphasizes doing "things for other reasons than a
profit motive...because they are right and just," in response to questions about
environmental initiatives, indicating a commitment to social responsibility.

Step 2: Proposed vision and mission statements for Apple Inc.

Proposed Vision Statement
“To enrich lives globally by continuously pioneering unparalleled innovation and seamless,
intuitive technology that empowers creativity and redefines human interaction with the
digital world."

This statement is future-oriented, inspiring, and broad enough to encompass all of Apple's
current and future endeavors. It captures the essence of "best experience possible through
innovative product designs and software" and "defining the future of mobile media and
computing devices". It also reflects their pursuit of "best" over "most" and their user-centric
philosophy.

Proposed Mission Statement

"Apple designs, manufactures, and markets premium mobile communication, media, and
computing devices, including iPhones, iPads, Macs, and Apple Watch, along with a
comprehensive suite of software, services, and accessories such as iOS, OS X, iTunes,
iCloud, and Apple Pay. We are committed to delivering the highest quality user experience
through elegant design, advanced technology, and exceptional customer service, while
fostering a secure and integrated digital ecosystem for our customers worldwide".

This statement incorporates the key elements of a good mission statement:

o Customers: "for our customers worldwide"
o Products/Services: "premium mobile communication, media, and computing
devices, including iPhones, iPads, Macs, and Apple Watch, along with a
comprehensive suite of software, services, and accessories such as iOS, OS X,
iTunes, iCloud, and Apple Pay".
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o Markets: "globally," "worldwide".

o Technology: "advanced technology".
o Concern for Survival/Growth/Profitability: Implied by "premium" and market
leadership.
o Philosophy: "delivering the highest quality user experience through elegant
design, advanced technology, and exceptional customer service, while fostering a
secure and integrated digital ecosystem".
o Public Image: Implied by quality and commitment to user experience.
o Employees: Implied by delivering "highest quality" and "exceptional customer
service," which requires a dedicated workforce.

Step 3: Apple Inc.’s external opportunities and threats

External Opportunities
1. Growth in Developing Smartphone Markets: The "real exponential growth" for
smartphones is projected to come from developing markets such as Brazil, India,
and China, where Apple already has a strong presence and growth. China's
smartphone market increased nearly 55 percent from 2010 to 2014, with
projections of 20% annual industry revenue growth to $180 billion by 2020.
2. Expanding Global Tablet Market: Tablet sales in the Asia Pacific region
(excluding Japan) are expected to increase 43 percent from $65 billion to $93
billion by 2018. U.S. tablet sales are also projected to increase by 15 percent,
from $55 billion to $63 billion.
3. Growth of the Digital Music/Streaming Market: The digital music market,
particularly paid subscribers, generated $1.6 billion in 2014, and Apple Music
quickly gained 11 million trial members (2 million opting for a family plan) in its
first month, indicating strong demand for streaming services.
4. Increasing Demand for Wearable Technology (Smartwatches): The total
watch market, though small in 2014 (less than 10 million units), is expected to
expand to 35 million units by year-end 2015, with Apple projecting a 35% market
share in this growing segment.
5. Expansion of Mobile Payment Systems (Apple Pay): Apple Pay, with its
fingerprint technology, offers convenience and security, and 83% of U.S. credit
card transactions were compatible in late 2014, with potential for Apple to
transition to its own in-house credit system.
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6. Continuous Cycle of Smartphone Upgrades: Customers are trained to update

their phones at least every two years, ensuring a promising long-term outlook for
smartphone providers.
7. Shift towards Smartphones for Internet Connections: The U.S. smartphone
Internet connections grew approximately 35% from 2009-2014, with a forecast of
313 million connections by 2019. Worldwide, 70% of mobile phone shipments
were smartphones in 2014, projected to rise significantly by 2018.
8. New Laptop Technologies: Ultrabooks (thin laptops without battery sacrifice)
and touch-glass laptops offer opportunities to boost laptop sales, which could
benefit Apple's Mac line.
External Threats
1. Intense Competition and Price Pressure: Apple operates in a "highly
competitive and rapidly changing industry". Many rivals offer comparable
products at "50 to 70 percent lower" prices, and competition is expected to
increase as rivals duplicate Apple's products. Samsung and Lenovo are top
competitors.
2. Dominance of Android Operating System: Android products "trail Apple
products substantially in market share" for smartphones and tablets. Android-
based phones account for over 60% of smartphone OS, with iOS picking up much
of the balance, and this outlook is projected to remain the same through 2018.
3. Slowdown/Decline in PC Sales: Computer manufacturing is a declining industry,
with sales falling over 17% per year between 2009-2014 and overall projections
of 5% declines through 2020. Worldwide PC sales are expected to drop from
$190 billion in 2015 to $160 billion by 2018.
4. Tablet Market Cannibalization by Larger Smartphones: The introduction of
larger iPhones (6 and 6+) may lead many customers to "opt only for having one
device," potentially cannibalizing iPad sales. iPad sales were already down 22%
in Q1 2015.
5. Patent Infringement Challenges: Apple's legal actions against Samsung for
patent infringements have not guaranteed significant damage to Samsung's sales
or ensured compensation, and such disputes consume resources.
6. Rapid Technological Duplication by Rivals: Competitors like Samsung already
have similar mobile payment technology, and "all phones will likely have a
similar technology moving forward". This implies a short innovation lead time.
7. Market Fragmentation in China: While a growth market, China has "growing
fragmentation" with new entrants comprising over 50% of the market, increasing
competition.
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8. Currency Fluctuations: A significant rally in the U.S. dollar against foreign

currencies in 2014 negatively impacted international sales, despite strong
underlying growth.

Step 4: Competitive Profile Matrix (CPM)

Apple Samsung Lenovo
Ratin Rating
Critical Success Factors Weight Rating Score Score Score
g
1. Market Share (Smartphones) 0.15 2 0.30 4 0.60 3 0.45
2. Market Share (Tablets) 0.10 4 0.40 2 0.20 1 0.10
3. Product Innovation/Design 0.15 4 0.60 3 0.45 2 0.30
4. User-Friendliness/Elegance 0.08 4 0.32 2 0.16 2 0.16
5. Pricing Competitiveness 0.05 1 0.05 3 0.15 4 0.20
6. Brand Loyalty/Reputation 0.10 4 0.40 3 0.30 2 0.20
7. R&D Investment 0.08 4 0.32 3 0.24 2 0.16
8. Product Ecosystem (S/W/S) 0.10 4 0.40 2 0.20 1 0.10
9. Global Retail/Distribution 0.05 3 0.15 4 0.20 3 0.15
10. Manufacturing/Supply Chain 0.04 3 0.12 3 0.12 3 0.12
11. Financial Strength 0.05 4 0.20 3 0.15 1 0.05
12. Operating System Control 0.03 4 0.12 2 0.06 2 0.06
13. Product Breadth/Diversification 0.02 2 0.04 4 0.08 4 0.08
Total 1.00 3.42 2.91 2.13

Analysis:

 Apple (Total Weighted Score: 3.42): Apple shows a strong competitive position,
particularly in product innovation, user-friendliness, brand loyalty, R&D, and its
integrated product ecosystem. Its main weakness is pricing competitiveness compared to
many rivals, and to some extent, overall smartphone market share compared to Android.

 Samsung (Total Weighted Score: 2.91): Samsung is a formidable competitor, strong in

market share (smartphones), product breadth, and global distribution. Its top products
compete directly with Apple in pricing. It trails Apple in ecosystem integration and
perhaps perceived innovation.

 Lenovo (Total Weighted Score: 2.13): Lenovo is a significant player, particularly

through acquisitions (Motorola for smartphones, IBM's PC business) and strong in
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emerging markets with its lower-priced smartphones. Its primary competitive advantage
lies in pricing and market development in developing economies, but it lags Apple and
Samsung in financial strength, brand premium, and innovation perception.

Step 5: External Factor Evaluation (EFE) Matrix

External Factors (O & T) Weighted
Weight Rating
Score
Opportunities
1. Growth in Developing Smartphone Markets (nearly 55%
0.12 4 0.48
from 2010 to 2014)
2. Expanding Global Tablet Market (expected to increase 43%
0.08 3 0.24
from $65 billion to $93 billion by 2018)
3. Growth of Digital Music/Streaming Market (generated $1.6
0.09 4 0.36
billion in 2014)
4. Increasing Demand for Wearable Technology (expected to
0.08 4 0.32
expand to 35 million units by year-end 2015)
5. Expansion of Mobile Payment Systems 0.07 4 0.28
6. Continuous Cycle of Smartphone Upgrades 0.06 4 0.24
7. Shift towards Smartphones for Internet (The U.S.
smartphone Internet connections grew approximately 35% 0.04 3 0.12
from 2009-2014)
8. New Laptop Technologies 0.03 2 0.06
Threats
1. Intense Competition and Price Pressure (Many rivals offer
0.15 2 0.30
comparable products at "50% to 70% lower" prices)
2. Dominance of Android Operating System (Android-based
0.10 2 0.20
phones account for over 60% of smartphone OS)
3. Slowdown/Decline in PC Sales (sales falling over 17% per
0.06 2 0.12
year between 2009-2014)
4. Tablet Market Cannibalization by Larger Smartphones (iPad
0.05 1 0.05
sales were down 22% in Q1 2015)
5. Patent Infringement Challenges 0.03 2 0.06
6. Rapid Technological Duplication by Rivals 0.02 2 0.04
7. Market Fragmentation in China 0.01 2 0.02
8. Currency Fluctuations 0.01 1 0.01
Total 1.00 2.90

Analysis:

 Total Weighted Score: 2.90. A total weighted score of 2.90 indicates that Apple is doing
above average in responding to the existing opportunities and threats in its external
environment. The average score is 2.50.
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 Apple is highly effective in capitalizing on opportunities related to smartphone and

wearable growth (iPhone, Apple Watch), the digital music market (Apple Music), and
mobile payments (Apple Pay). Its focus on innovation and strong brand allows it to
penetrate developing markets effectively.

 However, Apple's response to threats, particularly intense competition, the dominance of

Android, and the ongoing decline in PC/cannibalization of iPad sales, receives lower
ratings. Its premium pricing strategy, while core, makes it vulnerable to lower-priced
competitors. The company is actively addressing patent infringement but with mixed
success. Managing currency fluctuations and market fragmentation are also areas that
could see improved response effectiveness.

Step 6: Apple Inc.’s internal strengths and weaknesses

Internal Strengths
1. Strong Financial Performance and Market Capitalization: Apple is the
world's largest corporation with a market capitalization of $650 billion. It reported
$49.6 billion revenue and $10.7 billion net profit in Q3 2015, and $182.8 billion
revenue and $39.5 billion net income in fiscal 2014.
2. Leading Product Portfolio: Designs and manufactures the "single-most popular
smartphone, the iPhone". Strong sales of iPhone and Mac, and the successful
launch of Apple Watch. Mac sales were up 12% in fiscal 2014, gaining market
share.
3. Powerful Brand and Customer Loyalty: Renowned for "elegant, easy-to-use
products" with "strong customer loyalty". Its brand culture emphasizes "best"
over "most".
4. High Investment in R&D: Invested over $6 billion in R&D in 2014, nearly
100% up from 2012, driving continuous innovation.
5. Robust Ecosystem of Software and Services: Owns iTunes, App Store, iCloud,
iLife, iWork, AppleCare, Apple Music, and Apple Pay, which provides "all-time
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record revenue from services". This integrated ecosystem creates a high barrier to
exit for users.
6. Extensive and Growing Retail Presence: Operates 450 Apple stores and is
expanding globally, staffed with "well-trained and knowledgeable salespersons
with excellent customer service".
7. Proprietary Operating Systems (iOS, OS X): Apple owns and controls its
operating systems, allowing for seamless integration and a consistent user
experience.
8. Privacy-Focused Corporate Culture: CEO Cook emphasizes a culture of not
collecting every detail about users and strong encryption, comparing Apple to "an
electronic Fort Knox," which differentiates it in an era of data concerns.
9. Effective Use of Debt and Shareholder Return Programs: Successfully used
debt financing in 2013 and 2014, and authorized a $90 billion stock repurchase
and raised dividends.
10. High Revenue per Employee: With 92,000 employees and $182.8 billion
revenue, Apple has approximately $2 million revenue per employee, comparable
to Samsung.
Internal Weaknesses
1. Declining Sales in Certain Product Categories: iPod sales are in "constant
decline," down 61% from 2012-2014, leading to discontinuation of the classic
iPod. iPad sales were down 22% in Q1 2015.
2. Reliance on Single Manufacturing Locations: "Almost all Apple hardware
products are manufactured in Asia and many of these are manufactured at a single
location," which puts Apple "at risk over strikes, poor management, or other
disruptive activities".
3. Limited Product Customization: Apple products offer less user customization
compared to Windows, Android, and other operating systems, which might deter
some users.
4. Premium Pricing Vulnerability: While a strength for margins, the "premium
price point" makes Apple vulnerable to rivals offering "50 to 70 percent lower"
prices for comparable products.
5. Legal Battles and Intellectual Property Costs: Frequent patent infringement
lawsuits (e.g., with Samsung) are costly and time-consuming, with limited success
in blocking rival products.
6. Cannibalization Between Product Lines: The larger iPhone 6+ has
"cannibalized iPad sales".
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7. Supply Shortages: Despite stocking supplies, during new iPhone issues, "there
can be supply shortages," causing customer waits.
8. Less Diversified Product Portfolio than Rivals: Compared to Samsung's vast
array of electronics and medical equipment, or Lenovo's servers and diverse PC
lines, Apple's product lines are more focused.
9. High Goodwill from Acquisitions: Acquisitions in 2014 increased goodwill from
$1.5 billion to $4.6 billion, representing a significant intangible asset on the balance
sheet that requires monitoring for impairment.

Step 7: Internal Factor Evaluation (IFE) Matrix

Internal Factors Ratin Weighted
Weight
g Score
Strengths
1. Strong Financial Performance/Market Cap (the
world's largest corporation with a market capitalization of 0.15 4 0.60
$650 billion)
2. Leading Product Portfolio (iPhone, Mac) (sales were
0.13 4 0.52
up 12% in fiscal 2014)
3. Powerful Brand and Customer Loyalty 0.12 4 0.48
4. High Investment in R&D (over $6 billion in R&D in
0.10 4 0.40
2014)
5. Robust Ecosystem of Software and Services 0.10 4 0.40
6. Extensive and Growing Retail Presence (Operates 450
0.07 3 0.21
Apple stores and is expanding globally)
7. Proprietary Operating Systems 0.05 4 0.20
8. Privacy-Focused Corporate Culture 0.03 3 0.09
9. Effective Use of Debt & Shareholder Returns 0.03 3 0.09
10. High Revenue per Employee (Apple has
0.02 3 0.06
approximately $2 million revenue per employee)
Weaknesses
1. Declining Sales (iPod, iPad) (iPod sales are down 61%
0.06 1 0.06
from 2012-2014)
2. Reliance on Single Manufacturing Locations 0.05 1 0.05
3. Limited Product Customization 0.04 2 0.08
4. Premium Pricing Vulnerability (rivals offering 50% to
0.03 2 0.06
70% lower" prices for comparable products)
5. Legal Battles and IP Costs 0.01 1 0.01
6. Cannibalization Between Product Lines 0.01 1 0.01
Total 1.00 3.32
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Analysis:

 Total Weighted Score: 3.32. This score significantly above the average of 2.50 indicates
that Apple has a very strong internal strategic position.

 Apple's core strengths, such as its financial might, leading product portfolio, brand, R&D,
and ecosystem, are highly valued and effectively managed. These factors contribute
substantially to its overall success.

 However, the company shows weaknesses in areas like declining sales for some products
(iPod, iPad), over-reliance on single manufacturing sites, and potential cannibalization,
which receive lower ratings for their current impact. Addressing these weaknesses could
further enhance Apple's internal efficiency and market responsiveness.

Step 8: Strategic Alternative Formulation and Evaluation

Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

 Internal Strengths (S):
1. Strong Financial Performance/Market Cap
2. Leading Product Portfolio (iPhone, Mac)
3. Powerful Brand and Customer Loyalty
4. High Investment in R&D
5. Robust Ecosystem of Software and Services
6. Extensive and Growing Retail Presence
7. Proprietary Operating Systems
8. Privacy-Focused Corporate Culture
 Internal Weaknesses (W):
1. Declining Sales (iPod, iPad)
2. Reliance on Single Manufacturing Locations
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3. Limited Product Customization

4. Premium Pricing Vulnerability
5. Legal Battles and IP Costs
6. Cannibalization Between Product Lines (iPhone 6+ vs. iPad)
 External Opportunities (O):
1. Growth in Developing Smartphone Markets
2. Expanding Global Tablet Market
3. Growth of Digital Music/Streaming Market
4. Increasing Demand for Wearable Technology
5. Expansion of Mobile Payment Systems
6. Continuous Cycle of Smartphone Upgrades
7. New Laptop Technologies
 External Threats (T):
1. Intense Competition and Price Pressure
2. Dominance of Android Operating System
3. Slowdown/Decline in PC Sales
4. Tablet Market Cannibalization
5. Patent Infringement Challenges
6. Rapid Technological Duplication by Rivals
7. Currency Fluctuations
 Interpretation: A total weighted score of 2.90 indicates that Apple is doing above average
in responding to the existing opportunities and threats in its external environment. The
average score is 2.50.
 Apple is highly effective in capitalizing on opportunities related to smartphone and
wearable growth (iPhone, Apple Watch), the digital music market (Apple Music), and
mobile payments (Apple Pay). Its focus on innovation and strong brands allows it to
penetrate developing markets effectively.
 However, Apple's response to threats, particularly intense competition, the dominance of
Android, and the ongoing decline in PC/cannibalization of iPad sales, receives lower ratings.
Its premium pricing strategy, while core, makes it vulnerable to lower-priced competitors.
The company is actively addressing patent infringement but with mixed success. Managing
currency fluctuations and market fragmentation are also areas that could see improved
response effectiveness.
1.
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Strategic Position and Action Evaluation (SPACE) Matrix

The SPACE Matrix is a four-quadrant framework that indicates whether aggressive, conservative,
defensive, or competitive strategies are most appropriate for an organization. It considers Financial
Strength (FS), Competitive Advantage (CA), Environmental Stability (ES), and Industry Strength
(IS).
 Key Factors and Sample Ratings (1 = worst, 6 = best for FS/IS; 1 = best, 6 = worst for
ES/CA):
o Financial Strength (FS):

 Return on Investment (Net Income/Total Assets 2014): $39.5B/$231.8B =

17% (Strong) -> Rating: 6
 Liquidity (Current Ratio 2014): $68.5B/$63.4B = 1.08 (Adequate, but lower
than 2013's 1.68) -> Rating: 4
 Long-Term Debt: $29B in 2014 (Manageable given huge cash) -> Rating: 5
 Cash Flow: High cash reserves ($13.8B cash, $130B long-term securities) ->
Rating: 6
 Average FS: (6+4+5+6)/4 = 5.25
o Competitive Advantage (CA):

 Market Share: iPhone 15% (lower than Samsung), iPad 45% (good), Mac 6%
(niche) -> Rating: 3
 Product Quality/Innovation: High -> Rating: 1
 Customer Loyalty: Strong -> Rating: 1
 Product Life Cycle: Varies (iPhone Star, iPad Question Mark, iPod Dog) [BCG
Analysis] -> Rating: 3
 Control over distribution: Strong retail presence, App Store -> Rating: 2
 Average CA: (3+1+1+3+2)/5 = 2.0 (Note: lower score is better for CA)
o Environmental Stability (ES):

 Technological Changes: Rapid -> Rating: 5

 Rate of Inflation: Not specified but generally stable.
 Demand Variability: High (rapid product cycles) -> Rating: 5
 Price Elasticity of Demand: Apple's premium pricing suggests low elasticity
for core users, but high for price-sensitive segments. -> Rating: 3
 Competitive Pressure: Intense -> Rating: 6
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 Average ES: (5+5+3+6)/4 = 4.75 (Note: higher score indicates more

instability)
o Industry Strength (IS):

 Growth Potential: High in smartphones, wearables, services; moderate in

tablets; negative in PCs -> Rating: 4
 Profit Potential: High (Apple's net income is significant) -> Rating: 5
 Financial Stability: Generally strong industry players.
 Resource Utilization: High R&D investment -> Rating: 4
 Average IS: (4+5+4)/3 = 4.33
 SPACE Matrix Calculations:
o X-axis: CA (Average) + IS (Average) = -2.0 + 4.33 = 2.33

o Y-axis: FS (Average) + ES (Average) = 5.25 + (-4.75) = 0.50 (Note: ES is reversed in

sign for plotting)
 Implications: With an X-axis value of 2.33 and a Y-axis value of 0.50, Apple falls into the
Aggressive Quadrant.
o This suggests that Apple can utilize its strong financial position (FS) and
competitive advantages (CA) to take advantage of industry opportunities (IS),
even within a somewhat unstable environment (ES).
o The aggressive posture implies that Apple should continue to pursue strategies of
market penetration, market development, product development, and related
diversification. This aligns with Apple's current trajectory of aggressive product
launches (Apple Watch, Apple Pay, Apple Music), R&D investment, and global
expansion.

Boston Consulting Group (BCG) Matrix

The BCG Matrix categorizes a firm's products based on their relative market share and industry
growth rate. This helps in allocating resources.
 Assumptions for Market Share and Growth Rate (Based on case data and reasonable
inferences for 2015/2016 timeframe):
o Market Growth Rate: (High: >10%, Medium: 0-10%, Low: <0%)

 Smartphones: High (Global 20% annually to $180B by 2020, developed

markets still 2-year cycle).
 Tablets: Medium (US +15% by 2018, APAC +43% by 2018, but overall
PC+Tablet shipments, tablets gaining market share from PCs).
 16

 Mac (PC Market): Low/Negative (US computer manufacturing sales fell

>17% per year, global PC sales expected to decline). Mac sales up 12% in
2014, gaining share, so relative growth is better than market, but market
itself is declining.
 iPod: Low/Negative (Sales down 61% from 2012-2014).
 iTunes, Software, and Services: High (Up 12% from 2013, Apple Music
successful launch, record App Store revenue).
 Apple Watch: High (Market expected to expand to 35 million units by 2015
from <10 million in 2014).
o Relative Market Share (RMS): (High: >1.0, Low: <1.0; compared to largest
competitor)
 iPhone: Apple 15% global smartphone market share. Samsung 21% (2013
leader, still top rival). RMS < 1.0 (0.71 vs. Samsung), but strong.
 iPad: Apple 45% of tablets made in China (leader), Samsung 12%, Lenovo
8%. Global market share Apple 45%, Android 51%. RMS ~1.0 (0.88 vs.
Android).
 Mac: Apple >6% global PC market share. Top US players HP 25%, Dell 19%,
IBM 18%. RMS < 1.0 (e.g., 0.24 vs. HP).
 iPod: Declining market, no clear leader specified in the case for current
competitive status. Assume very low RMS in overall music players market.
RMS << 1.0.
 iTunes, Software, and Services: iTunes "remains an industry leader". Apple
Music quickly gained members. Very strong position. RMS > 1.0.
 Apple Watch: Projects 35% market share in 2015, reducing Android's share
to 42%. In 2014, Apple 0%, Android 67%. Early 2015: RMS < 1.0 (but
rapidly gaining).
BCG Matrix Plot:
 Stars (High RMS, High Growth):
o iPhone: While its overall market share is 15% (lower than Samsung), it's the
"single-most popular smartphone" and shows strong year-over-year revenue
growth (59% in Q3 2015) in a high-growth market. Its relative market share against
its immediate direct competitor (Samsung's top phones) is strong, even if Android as
an OS has higher overall share. It generates significant revenue and profit.
o Apple Watch: High market growth for wearables and Apple projects a significant
share acquisition in 2015 (35%). It's a new product with high potential.
 Cash Cows (High RMS, Low Growth):
o iTunes, Software, and Services: "All-time record revenue from services", "industry
leader", and this segment "continues to grow". While high growth is also evident for
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streaming (O3), some core services are mature and generate consistent cash. Its
relative market share in digital music/apps is very strong.
 Question Marks (Low RMS, High Growth):
o iPad: Moderate market growth, but Apple's market share is strong (45% in China).
However, sales are declining overall and cannibalized by iPhone 6+. It's a "question
mark" in terms of its future trajectory given declining sales, but still holds significant
market share and potential within the expanding tablet market. Needs strategic
investment to turn into a star or face decline.
 Dogs (Low RMS, Low Growth):
o iPod: In "constant decline," sales down 61% from 2012-2014, and the classic model
discontinued. This product has clearly reached the end of its life cycle.
o Mac: While Mac sales were up 12% in 2014 and gained market share against
Windows, the overall PC market is declining significantly. Despite Apple's relative
success within the segment, the segment itself is a dog.
 Implications:
o Stars (iPhone, Apple Watch): Continue to invest heavily to maintain growth and
market leadership. The iPhone is Apple's primary revenue driver, and the Apple
Watch represents a critical future growth area.
o Cash Cows (iTunes, Software, and Services): Harvest cash, but also strategically
invest in growth areas (e.g., Apple Music, Apple Pay) to maintain its "leader" status
and expand its cash-generating potential, especially as service revenue is growing.
Question Marks (iPad): Needs a clear strategy to either reposition and invest (e.g., for
productivity/enterprise) to become a star or accept its decline and potentially harvest it. Current
cannibalization is a serious concern
o Dogs (iPod, Mac): Phase out iPod. For Mac, continue to leverage its niche market
and brand loyalty (as seen by recent market share gains), but do not expect
significant growth. Focus R&D on new laptop technologies to perhaps push it back
into a "question mark" for future potential or maintain it as a niche cash generator
for loyal users.

Internal-External (IE) Matrix

 Apple's Overall Position:
o IFE Total Weighted Score: 3.32 (Strong internal position)

o EFE Total Weighted Score: 2.90 (Above average external response)

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 Implications: An IFE score of 3.52 (falling into the Strong region: 3.0 to 4.0) and an EFE
score of 2.90 (falling into the Average region: 2.0 to 2.99, borderline high) places Apple into
Cell II (Grow and Build).
o This indicates that Apple should pursue intensive strategies (market penetration,
market development, product development) or integrative strategies (backward,
forward, horizontal integration).
o This aligns with the company's current activities: aggressively launching new
products (Apple Watch, Apple Music), expanding geographically (China, retail
stores), and enhancing its ecosystem.

Grand Strategy Matrix

The Grand Strategy Matrix is based on two evaluative dimensions: competitive position and market
growth.
 Apple's Position:
o Competitive Position: Apple has a Strong Competitive Position due to its high IFE
score (3.32), market leadership in key products (iPhone, Mac share gains, iPad
share), powerful brand, and financial strength [1, 3, 17, 21, 25, IFE Analysis].
o Market Growth: The industry Apple operates in (smartphones, wearables, digital
services) is generally characterized by Rapid Market Growth, especially in
developing countries and new segments like wearables [24, 29, 32, 33, EFE
Analysis].
 Implications: Apple is in Quadrant I (Strong Competitive Position, Rapid Market
Growth).
o Firms in this quadrant are in an excellent strategic position. Strategies that should
be considered are market development, market penetration, product
development, and forward/backward/horizontal integration.
o This further supports Apple's current direction, such as expanding in China,
launching new iPhones, Apple Watch, Apple Music, and Apple Pay. With ample
resources, Apple can take risks and be innovative.

Quantitative Strategic Planning Matrix (QSPM)

 Process for QSPM:
1. List Key External Factors (from EFE) and Key Internal Factors (from IFE):
These are the opportunities, threats, strengths, and weaknesses already identified,
along with their assigned weights.
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2. Identify Feasible Alternative Strategies: Select a set of attractive strategies

generated from the SWOT, SPACE, IE, and Grand Strategy Matrices (e.g., SO1, WO1,
ST1, etc.).
3. Calculate Attractiveness Scores (AS): For each key external and internal factor,
ask: "Does this factor affect the choice of strategy?" If yes, assign an Attractiveness
Score from 1 (not attractive) to 4 (highly attractive) for each alternative strategy
based on how that strategy would leverage or mitigate the factor. If no, leave blank.
4. Calculate Total Attractiveness Scores (TAS): Multiply the weight of each factor by
its attractiveness score.
Calculate Sum Total Attractiveness Scores (STAS): Sum the TAS for each strategy. The strategy
with the highest STAS is considered the most attractive

Step 9: Strategic Recommendations and Cost Projections

Market Development for iPhone and Apple Watch in Developing Markets (SO1) is
being evaluated:
 For O1: Growth in Developing Smartphone Markets (Weight 0.12): This
strategy directly addresses O1, so its AS would be 4. TAS = 0.12 * 4 = 0.48.
 For W4: Premium Pricing Vulnerability (Weight 0.03): This strategy
might require some price adjustments in developing markets, but Apple's
premium is still a challenge, so its AS might be 2. TAS = 0.03 * 2 = 0.06.
This process is repeated for all factors and all alternative strategies

Step 10: Strategic Implementation and Performance Forecasting

Step 11: Recommended annual objectives and policies.

Step 12: Recommended procedures for strategy review and evaluation.