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Harvard Business School Apple Inc 2008 Case Study

Case | HBS Case Collection | February 2008 (Revised September 2008)

Apple Inc., 2008

by David B. Yoffie and Michael Slind

Abstract

In January 2007, three decades after its incorporation, Apple Computer shed the second word in its name and became Apple Inc. With that move, the company signaled a fundamental shift away from its historic status as a vendor of the Macintosh personal computer (PC) line. Mac sales remained vital to Apple's future, but they now accounted for less than half of its total revenue. The company's line of iPod media players, its iTunes online content store and its newly launched iPhone mobile handset business made up increasingly large shares of its operations. In early 2008, on the strength of sky-rocketing sales in those areas and by resurgent sales of Macintosh products, Apple's revenues and its stock price reached record levels. The case explores the sustainability of Apple's current business model, one that positioned the company simultaneously in the PC industry and the consumer electronics industry. While Apple enjoyed a high market share in digital media players and in online music sales, it remained a niche player in the worldwide PC industry. The case examines the history of Apple's strategic moves under the leadership of CEOs Jobs, Sculley, Spindler, Amelio, and (again) Jobs; places those moves in the context of structural features of the evolving PC industry; and covers the iPod and iPhone businesses at considerable length.

Keywords: Business Model; Leadership; Industry Growth; Corporate Strategy; Hardware; Online Technology; Consumer Products Industry; Electronics Industry; Technology Industry;

 

3

I. EXECUTIVE SUMMARY

Incorporated by Steve Jobs and Steve Wozniak in 1977, Apple Computer, Inc. wasincorporated with a net worth of US$250,000. It has since grown leaps and bounds to theApple Inc. of today, employing close to 50,000 employees worldwide, with a net worth of US$209,379 million in 2010, placing it 56

th

among the Fortune 500 companies. From theiPod revolution in 2000, to the iPhone in 2007 and most recently, the iPad in 2010, Apple hasintroduced, amidst much fanfare, ground-breaking products that revolutionized the marketssince the start of the 21

st

century.

This report serves to provide some insight of a firm that has been named Fortune magazine‟s

most admired company in the world for three consecutive years from 2008 to 2010. Astrategic analysis of the firm will examine the opportunities and threats in the general

environment and the firm‟s strengths and weaknesses.

Apple operates in many aspects of consumer electronics, such as personal computers (PCs),mobile communication devices, digital music and video devices. The industry presents thefirm with ample growth opportunities such as the emerging economies, the shift towards themobile era and increasing consumer digital lifestyle. However, global markets for consumerelectronics are highly competitive

as Apple‟s competi

tors are quick to respond to its majorproduct launches. As Apple operates across many geographical locations, the firm is alsoexposed to international operation risks and risk of product imitation.

Apple‟s strengths put the firm in a prime position to t

ake advantage of the opportunities andminimize the impact of inherent risks. With its commitment to research and development,

Apple‟s Digital Hub strategy, coupled with strong brand marketing and retail efforts, has

resulted in the success of many Apple p

roducts. An integral ecosystem is also one of Apple‟s

competitive advantages. However, many industry observers believe that Apple may be too

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