Strategic Management

Strategic ManagementPaper 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 ChainPart 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.9B14D005APPLE INC.: MANAGINGA GLOBAL SUPPLY CHAIN1Ken Markwrote thiscase under the supervision of Professor P. Fraser Johnsonsolely to provide material for classdiscussion. Theauthors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may havedisguisedcertain names and other identifying information to protect confidentiality.This publication may not betransmitted, photocopied, digitized or otherwise reproduced in any form or by any means without thepermission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rightsorganization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, WesternUniversity, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)cases@ivey.ca;www.iveycases.com.Copyright © 2014, Richard Ivey School of Business FoundationVersion: 2014–06–12INTRODUCTIONJessica Grant was an analyst with BXE Capital (BXE), a money management firm based in Toronto.2Itwas 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 maketo BXE’s portfolio. “Apple is investing in its next generation of products, potentially the first new majorproduct lines since Tim Cook took over from Steve Jobs,” she said. Apple Inc., the world’s largestcompany by market capitalization, had introduced a series of consumer products during the past dozenyears that had transformed it into the industry leader in consumer devices.Apple managed a global supply chain with creative development in the United States, outsourcedmanufacturing in Asia and components sourced from suppliers around the world. Apple was in the centreof a complex ecosystem that produced market–leading consumer devices. With $160 billion3in cash inFebruary 2014, the company was well–capitalized. Despite its commercial success, Apple’s stock was at$524.47 on February 28, 2014, 25 per cent below the $700 level it had reached in 2012. Cook reassuredinvestors that the firm was focused on the future, and it had a solid pipeline of new products. This was hisway of signalling to stakeholders that he would be able to run the firm following the death of Steve Jobs,one of Apple’s co–founders and the man responsible for rebuilding the firm. “We’re working on somethings that are extensions of things you can see and some that you can’t see,” Cook said at Apple’s annualshareholders’ meetingon February 28, 2014.4Industry observers were skeptical that the company could deliver new product successes:It is unclear whether the spread–sheeting–loving, consensus–oriented, even–keeled Cook cansuccessfully reshape the cult–like culture that Jobsbuilt. Though Cook has deftly managed theiPhone and iPad product lines, which continue to deliver enormous profits, Apple has yet tolaunch a major new product under Cook; talk of watches and televisions remains just that . . . inthe day–to–day at Apple, Cook has established a methodical, no–nonsense style, one that’s asdifferent as could be from that of his predecessor. Job’s bi–monthly iPhone software meeting, inwhich he would go through every planned feature of the company’s flagship product, is gone.“That’s not Tim’s style at all,” said one person familiar with those meetings. ‘He delegates.’5Authorized 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.Page29B14D005Nevertheless, it was clear to Jessica that Apple’s product range would get more complex in the next fewyears. As part of her analysis of Apple’s stock, shewanted to take a look at the company’s supply chain tosee 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 MikeMarkkula tomanufacture and distribute desktop computers. Both Jobs and Wozniak started tinkering with computingdevices in a time when enthusiasts who wanted a fully functioning computer had to assemble the parts bythemselves 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 Apple I, Wozniakimproved the design and showcased the Apple II in April 1977. Needing capital for the next phase of theircompany, they brought on Markkula, a marketing manager at Intel who had retired after making millionson his stock options. The companybecame the largest private manufacturer of personal computers in theUnited 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 entryinto the market in 1981would change the industry. By 1983, IBM’s personal computer (PC) became the best–selling computer inthe United States, heralding the beginning of its domination of the PC market. Even Apple’s popular 1984Superbowl commercial,6combined with a heavy marketing campaign, was not enough to stop IBM’sgrowth. Jobs left Apple in 1985. The company stumbled along for the next decade, and even though itlaunched a line of Macintosh computers such as Quadra, Centris and Performa, it failed to gain traction inthe marketplace. Worse, its retail partners such as CompUSA and Sears did not devote resources todisplaying its products properly. Apple also suffered from a perception that its machines were moreexpensive than comparable Windows PCs.The company had poor operating controls and inventorymanagement, failing to properly estimate demand for its products and leading to both stock–outs andexcess inventory.7Apple squandered its goodwill from the 1980s Macintosh era.In 1996,Microsoft was one year into thelaunch of Windows 95, which was turning out to be a very popular operating system.Apple’s sales ofMacintosh computers fell dramatically andApple, in an attempt to reverse the trend,beganlicensing theMac operating systems to third–party manufacturers. From 1993 to 1996, Apple went through threeCEOs: John Sculley, Michael Spindler and Gil Amelio.8In 1996,Jobs returned to the company as CEO at a time when Apple’s future was in question.Apple’smarket capitalization had fallenfrom $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 toearn additional revenues by selling copies to generic computer manufacturers. With the objective ofreasserting control over itsproduct, one of Jobs’ first decisions was to stop licensing Apple’s Macoperating system. This resulted in a fall in computer unit market share from 10 per cent to 3 per cent.Throughout this time,Applecontinued to manufacture its own devices. In 1997,Jobs announced apartnership with Microsoftthatwould see the latter invest $150 million in Apple and release the dominantoffice software—Microsoft Office—for Macintosh. At the time of the announcement, Apple’s marketcapitalizationhad continued tofall 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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