Apple Consultation

Apples Past and Current Positions in the

Computing Industry
To Infinity and Beyond Consulting Company
John Braune, Nico Hylton,
Kelsey Jorgensen, and Alexandra Smiraglia

October 8, 2015

MNGT 481.401
Dr. Mariana Lebron

Apple, Inc. is a very successful and established company within the computer
manufacturing industry. The electronic computer manufacturing industry includes companies
that manufacture and/or assemble electronic computers, including mainframes, personal
computers, workstations, laptops, and computer servers (North American, n.d.). Each product
in the industry has the ability to store the processing programs and data that are necessary, can be
programmed with the requirements of the specific user, can perform arithmetical computations
for the user and can execute a program that modifies the computers execution by using a logical
decision during processing (North American, n.d.). This report will provide an industry
analysis of the computer manufacturing industry, an analysis of Apples competitive position in
the market in 2014 and an analysis of the strategic leadership that has led Apple to succeed. The
industry analysis will include barriers to entry, substitute products, power of suppliers, power of
buyers, and rivalry within the industry. The analysis of Apples position will include Apples
performance and its competitors, with references to figures like revenue, profits and stock prices,
and an analysis of the competition as a whole. To supplement this information, there are
accompanying exhibits in Appendix B. Finally, the description of strategic leadership includes
an analysis of both Steve Jobs as a leader and the current status of strategic leadership for Apple.
Industry Analysis Computer Manufacturing Industry
High Barriers to Entry Discourage New Entrants
The computer manufacturing industry is a very well established industry with multiple
competitors. In order for a new company to enter the industry and be competitive, it needs a
significant amount of capital and the spending power to incur fixed costs, along with marketing
and advertising expenses (Ireland, Hoskisson & Hitt, 56). Within the computer industry, there is
a large focus on being unique, leading to high research and development costs (Yin, 22). If

companies do not have the funds to invest in research and development, it will be extremely hard
for them to compete with the diverse products already in the market. However, between 1999
and 2005, the prices for key components of computers dropped by an average annual rate of 30%
(Yoffie & Kim, 4). The standardization of components also led PC manufacturers to cut their
spending on research and development and by the early 2000s, close to 1% of revenue was
devoted to research and development (Yoffie & Kim, 4). This decrease in prices of both the
materials needed and the research and development for computers could potentially create an
advantage for new entrants to the market. While this did decrease entrance costs, the costs
overall were still very high for a new company. Therefore, due to the high cost of capital
required for the industry, this barrier is moderate to high for new entrants.
The four top PC manufacturers in the industry are Hewlett Packard (HP), Dell, Acer, and
Lenovo (Yoffie & Kim, 5). These companies make up 55% of the market worldwide (Yoffie &
Kim, 5). These firms are able to achieve economies of scale and gain a competitive advantage,
as they have the ability to initiate price reductions due to more efficient operating structures (Yin,
22). Economies of scale are the improvements in the overall efficiency of a company due to
increases in the size of a firms operations, leading to lower costs per unit as the production
increases (Ireland, Hoskisson & Hitt, 56). Therefore, larger established companies have an
advantage due to large production size, decreasing unit costs. New entrants are at a disadvantage
because without large production, unit costs are higher. The computing industry has few
companies that maintain a large share of the industrys profits, leading the computer industry to
have a high barrier for economies of scale.
Each company in the computer industry has its own strengths and products offered, making
each company unique to the consumer. Therefore, switching from one company to another can

lead to potential switching costs, one-time costs incurred when products are purchased from a
different supplier (Ireland, Hoskisson & Hitt, 57). Switching costs can deter customers from
buying from new companies in the computer industry. In addition, as a result of having four
companies that control a majority of the computer industry, many consumers have high brand
loyalty and will look for specific functions while shopping and are hesitant to switch to a
company that does not meet these same needs. While each company has different factors that
differentiate their specific products, each product meets the same four basic functions of a
product in this industry (North American, n.d.). Because the products meet the needs of
consumers, it is easy to switch between computers without incurring additional costs. Due to the
availability of the same software across the computer industry, many users are able to
accomplish the same tasks no matter the product. For example, Office 2016 was created to work
on all products in the industry, including Mac and PC (Hernandez, 2015). Due to the
incorporation of the main software that the consumers of the industry utilize on all products,
there is a low switching cost to consumers to switch from one product to another, meaning that
the barrier is low to moderate for the industry.
In order to successfully enter the computer manufacturing industry, a company has to be
able to sell a product efficiently and distribute the product so that consumers will buy it. In
many cases, established companies form relationships with their distributors, which can cause
switching costs for the distributors (Ireland, Hoskisson & Hitt, 57). This can cause firms to
hesitate before helping new companies distribute a product. In the early 1990s, many PC
customers moved away from buying from full-service dealers that primarily sold established
brands to businesses (Yoffie & Kim, 4). These customers provided an opportunity for new
entrants to have more options for distributors and less of a chance there would be established

relationships between the distributors and companies. Larger enterprises began buying directly
from the manufacturer and home and medium-sized business customers started to buy PCs from
superstores, electronic retailers and web-based retailers (Yoffie & Kim, 5). Along with these
new methods of distribution, there was also an increase in the white-box channel, generic
machines made by local entrepreneurs, representing about 30% of the market in 2009 (Yoffie &
Kim, 5). This provides both an opportunity and a barrier for firms entering the market. Due to
the recent switch in distributors, there is a chance that the relationships between the existing
companies and distributors are not as strong, leading to a lower price difference between the
existing firms and the new firms. However, because of the large production and large supply, the
existing companies will still have the advantage due to a powerful brand reputation and large
supply. In addition, distributors will be hesitant to take on the new companys product for fear
that the product will not sell as well as others. Therefore, the barrier for access to distribution for
new entrants is moderate to high.
The constant competition in the computer industry requires that companies are
continuously innovating various products and applications. Many customers decide that an
established firms product uniquely meets their needs and this high product differentiation can
make it difficult for a new company to compete in the existing market (Ireland, Hoskisson &
Hitt, 57). Leading companies in the industry are able to meet the changing needs of customers
with diverse product lines and devotion to investing in research and development (Yin, 22). It is
very hard for a new firm to compete with the diversity in the market and to create a product that
can be seen as unique and desired by the consumer. In 2009, a new sub-product category of
networks took off that were optimized for the Web (Yoffie & Kim, 4). This demonstrates the
frequency of new products becoming popular among consumers. Due to ever-changing products

and new trends in the computer industry, it is extremely hard for new companies to compete and
create a unique and desired product. Therefore, the barrier for product differentiation is high for
new entrants into the industry.
When a company attempts to enter into an industry, it often has to comply with
government policies. Entry can be limited by government policy, as some industries are more
regulated than others (Ireland, Hoskisson & Hitt, 57). However, the computer industry does not
have any particularly difficult government policies to face, leading there to be a low barrier for
entry for new companies.
Substitute Products Give Apple Competition
Product substitution is very important in order for a product to survive. Porter's Five
Forces discuss how substitutable products could potentially harm an industry's profitability
(Ireland, Hoskisson, & Hitt, 58). If there is a substitutable product in the market, it could
decrease a firms profits if consumers choose a substitute instead. In 2010, two products were
considered substitutes for Apple products: smartphones and gaming consoles.
In many ways, a smartphone is a computer. On a smart phone, users are able to surf the
internet and communicate with others via text messages and voice calls. This could become a
problem for Apple in the future with advancements on smartphones and the rising competition
from Googles Android. It wont be long before everyone just has a smartphone. They are
getting bigger each year and cheaper for the common consumer. Apple had a competitive
advantage but lost it because they were not as innovative as Google. Googles Android is more
advanced in technology for example Androids waterproof phone. Also in 2013 Androids
market share in the world rose to 84.8%, as shown on Table 4 (IDC, 2015).

Another substitute in the way people communicate around the world is through online
gaming consoles. Millions of console users, from Xbox to PlayStation, compete with other
gamers all over the world. Players are able to communicate with each other through headsets
and even send text and voice recording messages to each other. People on computers do this
every day when they type something in a chat or skype with someone.
Microprocessors and Operating Systems Have Strongest Bargaining Power
Porters Five Forces model informs consultants that when the forces are strong, industry
profits decrease (Ireland, Hoskisson, & Hitt, 58). For bargaining power of suppliers, the
suppliers are powerful when the suppliers product is differentiated, there is a lack of substitutes,
and there are not many suppliers for a specific product (Ireland, Hoskisson, & Hitt, 58).
There are two different types of suppliers for Apple (Yoffie & Kim, 5). The first type is
the suppliers with many different sources that make products like memory chips, disk drives, and
keyboards (Yoffie & Kim, 5). When Apple needs these products, they are easily accessible at
competitive prices because there are various sources to find the products (Yoffie & Kim, 5).
These suppliers have little power over personal computer manufacturers. While it is true that
the manufacturers rely on the suppliers to provide them with the correct products to create their
overall final product, these products are not differentiated, there are substitutes available, and
there are many suppliers. While these products may be a bit different, it is more difficult to
differentiate memory chips, disk drives and keyboards. Additionally, because there are many
different suppliers, there are substitute products available if one supplier is not meeting Apples
needs. The memory chips, disk drives, and keyboards are easily accessible, meaning that there
are many suppliers for these specific products. It would be simple for Apple to find a new
supplier if their partnerships with a certain supplier were no longer meeting Apple's needs.

The second type of suppliers are those with only a few different sources that make
microprocessors and operating systems (Yoffie & Kim, 5). These suppliers have a significant
amount of power over the personal computer manufacturers because the products are
differentiated in that they are the best, there is a lack of substitutes, and there are very few
suppliers for the microprocessors and operating systems. As these products are mainly supplied
by Microsoft and Intel, without these suppliers, Apple would not have other sources in which to
find the specific microprocessors and operating systems needed, giving Intel and Microsoft
significant power over Apple in the computer industry.
Buyers Present Moderately Strong Forces
As mentioned, Porters forces informs consultants that when the forces are strong, the
industry profits decrease (Ireland, Hoskisson, & Hitt, 55). In the case of buyers, the forces are
strong when the firm is dependent on buyers for a significant portion of its revenue (Ireland,
Hoskisson, & Hitt, 59). Apple is moderately reliant on buyers for revenue each year.
There were five specific categories of buyers of Apple products in 2010 (Yoffie & Kim,
4). These categories include home, small-and medium-sized businesses (SMB), corporate,
education, and government buyers (Yoffie & Kim, 4). Different buyers value different aspects of
products. The greatest amount of purchases in the computing industry comes from home buyers,
which accounts for almost half of all computer purchases (Yoffie & Kim, 4). Home consumers
value design, mobility, and wireless capabilities (Yoffie & Kim, 4). These consumers are likely
pleased with the computing industry because with continued innovation, companies create
products with the latest designs, improved mobility, and increased wireless capabilities.
Business consumers include small-and medium-sized businesses, corporate businesses and
governments (Yoffie & Kim, 4). Service and support is vital to the success of these consumers

as there will be many people within the companies and government using the computer products.
Additionally, companies in the computing industry not only have excellent customer service, but
also have an effective tech support staff on hand to aid customers in need. Educational
customers valued the different software available, most likely so that students can use different
programs to facilitate learning (Yoffie & Kim, 4). The computing industry offers efficient
products that provide various software options and updates on a regular basis.
As mentioned above, buyers are powerful when the manufacturer is dependent on the
consumer for a majority of its revenue (Ireland, Hoskisson, & Hitt, 59). The home buyers have
moderate power over personal computing manufacturers, as they account for almost half of all
computing purchases. Millennials, as home buyers, have a very powerful influence over
manufacturers because they are the consumers that are most likely to rush to the nearest store
when a new product is introduced. If all home buyers decide together that they do not want to
purchase computers anymore, this has the ability to substantially hurt Apple. However, it is
unlikely that this decision will be made by 100% of home buyers. In addition, business and
government consumers are likely to have contracts with specific computing companies. This
gives them some power over manufacturers because when the contracts expire, companies could
decide to change their products or software. Buyers, therefore, have a moderate power over
manufacturers.
Rivalry Between the Four Computer Heavyweights in Personal Computing Industry
In order to understand Apples position in the market it is also important to understand
the industries competitors and rivalry between them. The rivalry in an industry is strong when
products are undifferentiated, there are low switching costs for buyers, there are many similar
competitors, and high fixed costs (Ireland, Hoskisson, & Hitt, 59-61). As of 2009, other PC

vendors including HP, Dell and Lenovo made up a significant portion of the market (Yoffie &
Kim, 5). The three of these companies were all very similar and as a result battled with each
other constantly to win more customers. The similarity of products offered by these companies
is just one factor that demonstrates the strong rivalry that exists in the industry. The consumers
of computing products, as mentioned earlier, have relatively low switching costs if they decide to
change their brand of choice. Although Apple was not one of the top 3 competitors in 2009, as it
began to release other new technological innovations, it repositioned itself as the center of new
technological innovations (Yoffie & Kim, 6). Apples repositioning was an attempt to raise the
barriers by increasing the switching costs for customers. By positioning itself as the central hub
for the new technological advances apple tried to make it more difficult for customers to switch
to other companies after they had already begun working with apple.
The competitors in the computing industry, HP, Dell and Lenovo are all very similar.
Though they each have specific areas that they focus on, they ultimately produce very similar
products, but attempt to portray themselves as unique to gain more customers. Finally, as
mentioned earlier, there are high fixed costs associated with entering and maintaining success in
the industry, further proving that a strong rivalry exists between the existing firms in the industry.
Apples Position in 2014
iPhone and iPad Keeping Apple in Business
Apple Inc. is an iconic company that has dominated the technology field, with countless
products over multiple industries. These successful and innovative products encourage investors
to buy stock in Apple, which is no easy feat considering that Figure 3 depicts that one share of
Apple stock cost $400 in 2014 (Yahoo Finance, 2015). As shown on Figure 2, Apple recorded a
net income of $182,795 million, which was a 7% increase from 2013 (Apple Inc., 21). The

firm is able to compete in multiple industries against various competitors due to the large scale of
products and brands, including iPhone, iPad, Mac, iMac, iPod, iTunes, App Store, iCloud, iOS,
OS X, Apple TV, Apple Watch, Apple Pay and Beats (Apple Inc., 20). Apples product variety
provides revenue through six different product lines: iPhone, iPad, Mac, iTunes, software and
services, accessories and iPod (Apple Inc., 21). As displayed on Figure 1, Apple reported a
revenue of close to $70 billion at the end of 2014 (Statista, 2015). While there are multiple
different products creating revenues for Apple, the majority of Apples revenues are generated
through the iPhone and iPad, accounting for 72.4% of the companys total revenue in 2014
(Apple Inc., 25). Due to the large majority of profits that these two products create, they are a
large focus for the company.
The iPhone has become a major part of society and culture overall. The iPhone
composed 55.8% of the total revenues, or $101,991 million, for Apple in 2014 (Apple Inc.,
21). The company sold approximately 169.2 million iPhones during 2014 (Apple Inc., 4). The
global shipments for smartphones were expected to increase to 1,250 million in 2014 from 1,004
million units in 2013 (Apple Inc., 26). Due to the high ratio of revenues connected with the
iPhone, the increased shipments would mean increased profits for Apple in the future. Despite
this prediction for growth, Apples share in the smartphone market declined .9% from the third
quarter of 2013 to the third quarter of 2014 (Apple Inc., 25). While iPhones are a major
contributor to the overall profits of Apple, in the overall industry Apple does not have a strong
stance when compared to its competitors. According to industry estimates, Googles Android OS
accounted for 83.6% of smartphone shipments, while Apples iOS only accounted for 12.3% of
the shipments in the third quarter of 2014 (Apple Inc., 24). Android has a major advantage
over Apple in the smartphone industry, accounting for more than 6 times the shipments (Apple

Inc., 24). Despite the major portion of profits iPhones provides, Apple is not competing in the
smartphone industry effectively.
Apples other main product that generates a majority of its sales is the iPad. As the
second highest grossing product contributing 16.6% of total revenues in 2014, the iPad is
extremely valuable to Apple (Apple Inc., 21). In 2014, Apple sold approximately 68 million
iPads and recorded revenues of $30,283 million in 2014 (Apple Inc., 5- 21). While the iPad is
still a high profit source for Apple, it is currently decreasing in profit. According to industry
estimates, the iPad market share decreased 6.4% from the third quarter of 2013 to the third
quarter of 2014 (Apple Inc., 25). The iPad is still a popular product for Apple, but due to the
intense competition that exists in the tablet market, it is hard for the iPad to maintain its
superiority.
Another extremely important product for Apple is the product that started the company,
the Mac. Although the Mac is no longer the main product, it is still essential to Apple overall.
The Mac accounted for 13.2% of the total revenues in 2014 and is the third highest grossing
product line for Apple (Apple Inc., 21). Macs have been able to stand alone in the market due
to their unique operating system of Apple separating Macs and PCs and has remained a strong
profit source. Apple sold approximately 18.9 million Mac products in 2014 (Apple Inc., 5).
The product line also recorded revenues of $24,079 million in 2014, which increased 12.1%
from 2013 revenues demonstrating the expected growth of the product in the future (Apple
Inc., 21). In addition, the shipment of PCs is estimated to grow from 233 million units in 2014
to more than 304 million units by 2018, providing an incredible opportunity for increased sales
and continued success (Apple Inc., 26). Overall, Apple has been able to maintain a strong
presence as an innovative company by continuously creating new products.

PC Competitors Have Significant and Effective Presence in Computing Industry

The three top PC vendors, Lenovo, Hewlett Packard (HP) and Dell, made up 53.1% of
the worldwide shipments in 2014 (PC Leaders, 2015). The top competitors for Apple are HP
and Dell. HP is the second largest company in the PC market with a 19.7% market share as of
the fourth quarter of 2014, as shown on Table 1 (PC Leaders, 2015). HP is also the 15 largest
th

company in the United States and is the 43 largest in the world (Hewlett Packard, 4). This
rd

dominant presence makes HP a fierce competitor and though HP has not been able to compete in
the smartphone industry, it has found success in the PC industry. In 2012, HP surpassed Apple's
PC shipments by about 40,000 units and became the top supplier in the world (Preimesberger,
2012). With this success came $112,298,000 in revenues and $5,113,000 in net income in 2013,
as shown on Table 2 (HPQ, 2015) (LexisNexis, 2015). While the company has posted
decreasing revenues the past few years, it still maintains the spot as second in the industry and is
an extremely successful company.
Another competitor, Dell, is the third largest player in the worldwide PC market with
shipments of 9.5 million units in the first quarter of 2014, which accounted for 12.5% of the
market (Dell Inc., 16). In addition, Dell held its standing as the third largest player with 13.5%
of the worldwide shipments in the fourth quarter of 2014, as shown on Table 1 (PC Leaders,
2015). One disadvantage Dell faces is its weak presence in the growing smartphone market, but
despite the lack of presence in the smartphone industry, Dell has still managed to remain
successful. In 2013, Dell accumulated $56,940,000 in revenues and $2,372,000 in net income,
as shown on Table 3 (Dell Inc. 10-K, 2015) (LexisNexis, 2015). While Dell has faced
decreasing revenues, the company has been increasing its research and development expense.
Dell has increased its research and development expense from $661,000 in 2011 to $1,072,000

in 2013 (Dell Inc. 10-K, 2015) (LexisNexis, 2015). This increase in cost demonstrates that
Dell is focusing on creating new and innovative products. Although Dells profit has decreased,
they have maintained their spot as third in the industry and are still a strong competitor and
company.
Smartphone Competitors More Successful than Apple
Google is one of the biggest search engines used on the internet. Besides being the
biggest search engine out there, it also has acquired key companies like YouTube, DoubleClick,
and Waze (Rosoff, 2011). One of Googles biggest and most successful acquisitions is Android.
Google purchased Android in 2005 for about $50 million (Rosoff, 2011). In 2008, Google
released their very first smartphone (Jackson, 2008). With the iPhone already in the market,
Google had to capture the attention of the already awed iPhone consumers. In 2014, Google
recorded revenue of $66,001 million, an increase of about 15.8% compared to 2013, as shown in
Table 5 (LexisNexis, 2015). In 2014, the Android operating system increased from 79.8% to
84.8% of the worldwide market share, as shown on Table 4 (IDC, 2015).
Google has started to build its competitive advantage within the smartphone market.
Some things that Google provides that Apple does not are additional memory and battery for
phones and more frequent upgrades (Bajaj, 2012). With Androids, users can switch out the SD
card which gives the phone more memory. Apple does not have this advantage and if users run
out of memory, they can either delete files to create space or buy a new phone. Additionally, in
the past four years, Android has provided eight software upgrades, while Apple iOS has come
out with only five upgrades (Bajaj, 2012).
Android phones are also waterproof. Otterbox and Lifeproof are phone case companies
that market waterproof cases, but users knew that there would eventually be a phone that did not

need a waterproof case. In 2013, Android released its first waterproof smartphone, the Galaxy
S4 (Seifert, 2013). Apple does not yet have any phones that are waterproof, only cases that are
waterproof.
Microsoft is well-known for its Microsoft Office Suite, which includes Word,
PowerPoint, and Excel. Microsoft's other products include: Xbox, Kinect, Surface Pro, tablets,
and Microsoft Cloud (Microsoft, 2015). In 2014, the company recorded revenues of $86,833
million, an increase of about 10% compared to 2013, as shown in Table 6 (LexisNexis, 2015)
(Microsoft Corporation, 2015). Microsofts main revenue comes from commercial licensing,
with about 42% of the total revenue, and device and consumer licensing as the next biggest
source of revenue, with about 19.5%, as shown in Table 7 (Statista, 2015). Though Microsoft is
third behind Apple and Google in the smartphone industry with 2.5% of the market, it is more
popular in Europe due to the expensive cost of alternatives, as shown in Table 4 (IDC, 2015).
Microsoft incorporated Cortana to compete with Apple's Siri and Google's Google Now
(Warren 2014). Microsoft used one of its most famous characters to reach out to the gaming
market as this digital assistance comes directly from one of Microsofts original Xbox series,
Halo (Warren, 2014). When first used, Cortana asks the user a series of questions to gain an
understanding of the user. Then, prior searches aid future suggestions (Warren, 2014). One of
Cortanas useful features is her understanding of voice queries and their context (Warren, 2014).
For example, if the user is looking for the best restaurant around, Cortana will suggest one
particular restaurant but asked for the best restaurants, multiple places will be provided.
Success of Competitors can Provide Benefits for Future Apple Endeavors
The competition that exists between Apple, HP and Dell in the computer industry is vital
to the success of Apple. Though HP experienced troubled times in 2002, they have quickly

bounced back and remain one of the most important competitors for Apple today (Yoffie & Kim,
5). Apple should be concerned about HP as a competitor because as mentioned above, HP has a
very large market share and posts high revenues. Furthermore, Dell has recently increased its
research and development costs, which is concerning for Apple because Dell is likely to release a
new and improved product in the near future. If this product rivals the iPhone or iPad, Apple
might not only lose revenue, but could lose market potential as well.
Additionally, the competition that exists between Apple, Google and Microsoft is also
worth noting because Apple can benefit from learning how these companies are performing in
certain aspects. As an example, Googles smartphones use the Android operating system and
have a very effective maps system. If Apple could master the maps system so that it was better
than the Android system, it is likely that more consumers would prefer the iPhone over Android
phones, giving Apple a stronger competitive advantage over Google phones.
Strategic Leadership
When Steve Jobs took over Apple in 1997, he built the company from the ground up. He
is viewed as a strategic leader, for creating a top management team with an entrepreneurial
culture and establishing with integrity and ethical behavior amongst his employees.
Steve Jobs created a heterogeneous team for Apple. He did this by cleaning house and
starting with a fresh new board of directors in 1996. The former board of directors wanted to sell
apple to the highest bidder. Within about two weeks, Jobs had forced the resignation of most of
the current board and hired a new one that was entrepreneurial and ready to innovate. Some of
the new board that Jobs hired included Larry Ellison, CEO of Oracle, Jerry York, a former chief
financial officer at IBM and Chrysler Corporation, and Bill Campbell, CEO of Intuit
(CNNMoney, 1997).

As a strategic leader, Steve Jobs also promoted integrity and ethical behavior. Strategic
leaders should determine the boundaries of acceptable behavior and ensure that the ethical
behaviors are expected, praised, and rewarded (Ireland, Hoskisson, & Hitt, 36). Before Steve
Jobs took over Apple in 1997, Apple employees were leaking information to the press about the
current CEO, Gil Amelio. By leaking information to the press about Apple, the employees were
being unethical and dishonest to Apple. After Jobs took over, he banned the employees from
talking to the press (Edwards, 2012). To ensure that his employees would not leak information
to the media, he started to lay off employees who would speak out against Apple (CNNMoney,
1997). With his employees under control, Jobs was able to keep the media wondering what new
product Apple would come out with next.
After losing Steve Jobs, Apple faced the problem of moving forward and still maintaining
the same level of innovation and success. Following Jobs departure, Apple turned to Tim Cook,
the companys Chief Operating Officer, to head the company (Richtel & Chen, 2014). Cook
achieved the key actions a great strategic leader should take, including establishing the firms
vision and mission, developing a management team, managing the resource portfolio, building
and supporting an entrepreneurial culture, promoting integrity and ethical behavior, and using
effective controls to keep Apples presence as a top innovator (Ireland, Hoskisson & Hitt, 26).
Jonathan Ive, the head of design at Apple, believes that Cook has not neglected the
companys central mission of innovation (Richtel & Chen, 2014). Cook has continued Apples
innovative success and tried to ensure the same culture that existed when Jobs was leading.
After working with both Jobs and Cook, Ive believes that Cook has managed to keep the Apple
legacy moving forward with the same mission as Jobs.

Cook has continued to ensure Apples growth for the future with many management
decisions. First, Cook pushed Apple products into a potentially large market, China, which
provided a large opportunity for profit growth (Richtel & Chen, 2014). Cook also bought an
extremely profitable and popular music company, Beats, to increase music profits and expand the
customer base (Richtel & Chen, 2014). Cook also created a well-rounded and diverse
management team. Cook hired Angela Ahrendts, the former head of Burberry, Kevin Lynch, the
former chief technology officer of Adobe, and Michael OReilly, former medical officer of the
Masimo Corporation (Richtel & Chen, 2014). By hiring these executives with diverse
knowledge, Cook was able to gain a heterogeneous team that could help provide insight into
different business sectors when making major decisions. This allows Apple to have a major
advantage over other companies without diverse teams. By ensuring a unique team of different
backgrounds, Cook has enabled Apple to make unique decisions and succeed even further.
Overall, Cook has done an excellent job of leading Apple into the future. After taking on
the nearly impossible task of replacing Jobs, Cook has been able to maintain the mission of
continuous innovation and obtain an extremely diverse and successful management team. He
also has been able to maintain the culture and strong market presence. Cook has been able to
become a successful strategic leader by maintaining and growing Apples success with
continuous release of new products into the market.
Apple is Responding to Most Industry Trends
In our current society, there is a significant value placed on preserving the environment
and making environmentally friendly decisions. Cook emphasizes the use of sustainable
products and Apple has transitioned to using 100% renewable energy sources in its data centers
(Richtel & Chen, 2014). Apple is also doing its part for the environment by using toxic free

products that are recyclable and energy efficient (Casey, 2014). Cook has also established a
program to match charitable employee contributions and donations (Richtel & Chen, 2014).
Cooks emphasis on the environment and community improves the public's view of the
company and helps the community at the same time.
Additionally, streaming music and TV shows is a current technological trend that Apple
can improve on. Apple created Apple TV allowing the user to watch and stream movies and TV
shows that have been downloaded from iTunes (Yoffie & Kim, 13). Competitors like Netflix are
able to charge a monthly fee and users are able to watch whatever is offered, while Apple TV
requires payment for all episodes and shows watched. Apple could also improve iTunes Radio.
iTunes Radio allows users to stream music for free, with ads, or pay $9.99 for ad free listening
(Cabebe, 2013). This service is similar to Pandora, but iTunes needs to advertise this service on
all iPhones like Pandora does to remain competitive.
Apple needs to focus more on two specific trends in the computing industry: waterproof
smartphones and two-in-one laptops. In 2013, Android introduced a waterproof smartphone
(Seifert, 2013). As of right now, Apple does not have a waterproof phone, but sells waterproof
cases for phones. If Apple wants to keep their customers, they should start developing a
waterproof phone. Additionally, two-in-one laptops are touch screen and can flip to become a
tablet. Apples competitors Dell and HP have this technology in their products already. Apple
needs to begin to make these products as well if they want to remain innovative.
Apple Does Not Have Competitive Advantage in Computing Industry
Competitive advantage depends on the value, inimitability, rarity, and non-substitutability
of products in a specific market. In the computer manufacturing industry, Apple is valued among
its consumers. However, Apple is not an inimitable, rare, or non-substitutable company. Apple

is not inimitable because Apples competitors produce similar products. Additionally, Apples
products are not rare because similar products are held by competitors like HP, Dell, Google and
Microsoft. Apple computers are also substitutable because smartphones and online gaming
consoles have similar capabilities as computers. Though Apple is valued among consumers,
because it is not inimitable, rare, or non-substitutable, Apple does not have a competitive
advantage in the computing industry.
Conclusion
The computer industry is highly competitive and fast-paced. There are constantly new
items and trends in the industry, along with changing needs for consumers. When broken down,
there are some barriers that are easier to overcome, yet overall the barriers are moderately high,
leading the threat of new entrants to be low. Therefore, there is a high profit potential for the
firms in the computer manufacturing industry. In addition to moderately high barriers to entry,
the computer manufacturing industry has substitutes that create competition for the industry and
semi-powerful buyers, including millennials. Though competition and rivalry can be negative,
Apple can benefit from the rivalry within the industry because they can learn from the successes
of other companies. Apple should take note of HP, Dell, Google and Microsoft as those
companies are performing well within the market and industry. Finally, Apples efficient and
effective strategic management system will aid the company in being competitive for years to
come.

Appendix A - To Infinity and Beyond Consulting Company

To Infinity and Beyond Consulting Company was founded in 2015 by the managing and
directing partners John Braune, Nico Hylton, Kelsey Jorgensen, and Alexandra Smiraglia. The
managing partners formed this company with the plan to provide consulting services that were
not only infinitely more advanced than the competing consulting firms in the area, but also to
provide services that were beyond the competition.
The organizational mission statement of To Infinity and Beyond Consulting Company is
to provide the best analyses to companies using the most effective client services possible. The
operational goals include providing reliable and accurate information to clients, composing
industry and competitor analyses, and providing market analyses to clients that are interested in
receiving additional consulting services and information.
The organization has competencies that are valuable, rare, difficult to imitate, and nonsubstitutable. To Infinity and Beyond Consulting Company provides value to clients because the
managing partners work with these clients to create industry analyses and aid company
improvements. Additionally, the partners also offer market analyses, advisory services, and
accounting and tax services. It is very rare to find consulting companies that can provide clients
with all of these services. There are companies that provide consulting, advisory, and tax, but do
not offer a market analysis in the process of their accounting services. The services provided by
To Infinity and Beyond Consulting are difficult to imitate because in order to deliver the
extensive services offered, the consultants offer a talented team of associates with various
professional backgrounds. This heterogeneous team comes from different education
backgrounds and varying amounts of experience. John Braune comes from a background of
Management, while Nico Hylton, Kelsey Jorgensen, and Alexandra Smiraglia bring an
accounting proficiency to the consulting company. The Infinity and Beyond team believes that

because the team is so diverse, the consultants bring opportunities to the market that no other
consulting company can. Although there are various other consulting organizations in the
Baltimore-Metro Area, the Infinity and Beyond practice is non-substitutable as it offers services
that no other organization can offer. Such services include specific market analysis, advisory
services, and accounting and tax services for our clients.
The consultants of To Infinity and Beyond Consulting Company believe that the firm has
a competitive advantage in the context of organizational consulting. A competitive advantage is
when an organization utilizes its resources, core competencies and capabilities that are superior
to competitors (Ireland, Hoskisson, & Hitt, 83). Therefore, this consulting organization has a
competitive advantage over the competition because the company not only provides services that
are valuable, rare, difficult to imitate, and non-substitutable, but the company also has access to
powerful resources that aid the consultants in completing various organizational analyses.

Appendix B Accompanying Exhibits

Table 1: PC Manufacturers: Worldwide Market Shares

Vendor

4Q14 Market Share

4Q13 Market Share

Lenovo

19.9%

18.5%

HP

19.7%

16.7%

Dell

13.5%

12.1%

Acer Group

7.7%

7.3%

Apple

7.1%

5.8%

Others

32.2%

39.6%

(PC Leaders, 2015).

Table 2: Apples Competitors: Selected Financial Information Hewlett Packard

Hewlett-Packard (HP)

2011

2012

2013

Total Revenues

127,245,000

120,357,000

112,298,000

Cost of Sales

97,418,000

92,385,000

86,380,000

R&D

3,254,000

3,399,000

3,135,000

SG&A

13,577,000

13,500,000

13,267,000

Net Income

7,074,000

(12,650,000)

5,113,000

Total Assets

129,517,000

108,768,000

105,676,000

Total Liabilities

86,332,000

78,407,000

Total Shareholders Equity

22,436,000

27,29,000

Gross Margin

.2308

.2324

R&D/Sales

.0256

.0282

.0279

SG&A/Sales

.1067

.1122

.1181

(HPQ, 2015); (LexisNexis, 2015)

Table 3: Apples Competitors: Selected Financial Information Dell Inc.

Dell Inc.

2011

2012

2013

Total Revenues

61,494,000

62,071,000

56,940,000

Cost of Sales

50,098,000

48,260,000

44,754,000

661,000

856,000

1,072,000

SG&A

7,302,000

8,524,000

8,102,000

Net Income

2,635,000

3,492,000

2,372,000

Total Assets

38,599,000

44,533,000

47,540,000

Total Liabilities

30,833,000

35,616,000

36,860,000

Total Shareholders Equity

7,766,000

8,917,000

10,680,000

R&D

Gross Margin

11,396,000

13,811,000

12,186,000

R&D/Sales

.0107

.0138

.0188

SG&A/Sales

.1187

.1373

.1423

(LexisNexis, 2015); (Dell Inc. 10-K, 2013)

Table 4: Worldwide Smartphone OS Market Share

Company

2Q13

2Q14

Android (Google)

79.8%

84.8%

iOS (Apple)

12.9%

11.6%

Windows Phone

3.4%

2.5%

(IDC, 2015)
Table 5: Apple Competitors: Selected Financial Information - Google
Google

2012

2013

2014

Total Revenues

50,175,000

55,519,000

66,001,000

R&D

6,793,000

7,137,000

9,832,000

SG&A

9,988,000

10,986,000

13,982,000

Net Income

10,737,000

12,920,000

14,444,000

Total Assets

93,789,000

110,920,000

131,133,000

Total Liabilities

22,083,000

23,611,000

26,633,000

Total Shareholders Equity

71,715,000

87,309,000

104,500,000

.5888

.6039

.6107

Gross Margin

(LexisNexis, 2015)
Table 6: Apple Competitors: Selected Financial Information - Microsoft Corporation
Google

2012

2013

2014

Total Revenues

73,723,000

77,849,000

86,833,000

R&D

9,811,000

10,411,000

11,381,000

SG&A

18,426,000

20,425,000

20,632,000

Net Income

16,978,000

21,863,000

22,074,000

172,384,000

176,223,000

Total Assets

142,431,000

Total Liabilities

63,487,000

82,600,000

96,140,000

Total Shareholders Equity

66,363,000

78,944,000

89,784,000

.7622

.7399

.6898

Gross Margin

(LexisNexis, 2015); (Microsoft Corporation, 2015)

Table 7: Breakdown of Microsofts Revenue for 2014

Revenue Type

Percentage

Commercial Licensing

42.09

Device and Consumer Licensing

19.53

Computing and Gaming Hardware

9.09

Commercial Other

7.55

Devices and Consumer Other

7.01

Phone Hardware

1.98

Corporate and Other

.42

Total
(Statista, 2015)

Figure 1: Revenue of Apple, Inc.

(Statista, 2015).

Figure 2: Net Profit of Apple, Inc.

(Apple, 2015).

100

Figure 3: Historical Stock Prices of Apple

(Yahoo Finance, 2015).

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