Strategic Business Management Case Study- Apple Inc
CASE 32
APPLE INC.: WHERE’S THE NEXT INNOVATION?*
In April 2019, Apple CEO Tim Cook held the second quar- ter earnings presentation at the Apple Park corporate cam- pus in the 1,000-seat auditorium named the Steve Jobs Theater. Part of a 175-acre campus developed in 2017, the ring-shaped 2.8-million- square-foot facility with walls of curved glass surrounding an inner greenspace courtyard was possibly the last evidence of the direct vision and inno- vation of Apple co-founder Steve Jobs. Originally envi- sioned by Jobs in 2011 as a center for creativity and collaboration, the building honored his legacy, memory, and enduring influence. Jobs, who died in 2011, would have turned 64 in February 2019. As Apple’s current CEO Tim Cook said, “Steve’s vision for Apple stretched far beyond his time with us. He
intended Apple Park to be the home of innovation for generations to come.”1
Yet the pace of innovation at Apple had slowed consid- erably. Since Steve Jobs’s death, the only new physical prod- uct launched had been the Apple Watch in 2014. The iconic iPhone, in FY2018 representing 63 percent of total reve- nues, was over 10 years old, and even though upgrades kept customers coming back, competition had eroded Apple’s smartphone market share such that second quarter 2019 iPhone revenues had declined by over 17 percent year over year. Mac computer and iPad sales had declined as well. Although Apple’s FY2018 revenues were up by about 16 percent overall, the bulk of that increase came from ser- vices and other products such as the Apple Watch. In this environment, there was some concern that although re- search and development spending was up in FY2018, re- search output had not produced any recent meaningful breakthroughs. This posed yet again the unavoidable ques- tion that still seemed to haunt the 42-year-old Apple: What happens to a modern company whose
innovations and in- spirations are so closely tied to the vision of one leader when that leader’s influence is no longer present?2
Tim Cook was considered a highly effective leader, yet had been criticized for “lack of ambition and vigor,” for be- ing perhaps too cautious about entering new product cate- gories, pursuing acquisitions, or driving employees to achieve almost impossible
stretch goals.3 On the other hand, investors had been mostly very pleased with the stock performance under Cook. Since he was named CEO in August 2011, Apple share price had risen from an average * This case was prepared by Professor Alan B. Eisner of Pace University and Professor Pauline Assenza, Western Connecticut State University. This case is based solely on library research and was developed for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2019 Alan B. Eisner. of over $45 to a high of $230 in August 2018, and when the company reached a market capitalization of over $1 trillion in 2018, that made it the most valuable company in the world. In addition, Cook had instituted Apple’s first dividend since 1995 in 2012,
and bought back more than $200 billion of shares, producing strong free cash flows and an “impressive” balance sheet.4 This had made investors happy. Cook had done what CEOs of public companies are sup- posed to do—drive up value. But revenue from the flagship products— iMac, iPad and iPhone—was falling or stagnant, and only the services and other products sectors were see- ing growth. In addition, operating margins were declining in products, indicating that high iPhone prices may have been the only thing keeping margins stable at around 30 percent. If iPhone sales were increasingly challenged by lower price competitors such as China’s Xiaomi, and Huawei, something would have to change. Was Apple’s recent shift into services and other products going to be the answer? (See Exhibits 1 to 3.) “Other products” included wearables such as the iWatch and the AirPod wireless ear- phones, and home products such as the HomePod voice- controlled smart speaker system. These were new, but perhaps not as innovative as Apple’s other products. Were expectations of major breakthroughs unrealistic? As one analyst said, it is hard to find “ways to make the world’s most valuable company even more valuable when it’s al- ready so big that conventional growth strategies—
extending product lines, moving into new territories—would barely move the needle.”5
Apple, Fortune Magazine’s “world’s most admired com- pany” since 2008,6 had distinguished itself by excelling over the years not only in product innovation but also in revenue and margins (since 2006 Apple had consistently reported gross margins of over 30 percent). By 2019, Apple Inc. was known for having top-selling products not only in desktop (iMac) and notebook (MacBook) personal computers but also in online music and “app” services (iTunes and App Store), mobile communication devices (iPhone), digital consumer entertainment (Apple TV), tablet computers (iPad), operating systems (macOS and iOS), software (Sa- fari web browser) and online services (iCloud), as well as wearable technology (Apple Watch, AirPods) and home ac- cessories (HomePod, Beats products), mobile payment sys- tems (Apple Pay), and a subscription-based music streaming service (Apple Music). Additional services roll- ing out in 2019 included Apple TV+ original content, sub- scription services Apple Channels, Apple News+ and C252 CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? Strategic Management: Text and Cases EXHIBIT 1 Apple Sales, 2015–2018 (dollars in millions and units in thousands)
2018 Change 2017 Change 2016 2015
Net Sales by Reportable Segment:
Americas $112,093 16 % $ 96,600 12 % $ 86,613 $ 93,864
Europe 62,420 14 % 54,938 10 % 49,952 50,337
Greater China 51,942 16 % 44,764 (8 )% 48,492 58,715
Japan 21,733 23 % 17,733 5 % 16,928 15,706
Rest of Asia Pacific 17,407 15 % 15,199 11 % 13,654 15,093
Total net sales $265,595 16 % $ 229,234 6 % $215,639 $233,715
Net Sales by Product:
iPhone (1) $166,699 18 % $ 141,319 3 % $136,700 $155,041
iPad (1) 18,805 (2 )% 19,222 (7 )% 20,628 23,227
Mac (1) 25,484 (1 )% 25,850 13 % 22,831 25,471
Services (2) 37,190 24 % 29,980 23 % 24,348 19,909
Other Products (1)(3) 17,417 35 % 12,863 16 % 11,132 10,067
Total net sales $265,595 16 % $ 229,234 6 % $215,639 $233,715
Unit Sales by Product:
iPhone 217,722 — % 216,756 2 % 211,884 231,218
iPad 43,535 — % 43,753 (4 )% 45,590 54,856
Mac 18,209 (5 )% 19,251 4 % 18,484 20,587
1. (1) Includes deferrals and amortization of related software upgrade rights and non-software services. 2. (2) Includes revenue from Digital Content and Services, AppleCare, Apple Pay, licensing, and other services. Services
net sales in 2018 included a favorable one-time item of $236 million in connection with the final resolution of various lawsuits. Services net sales in 2017 included a favorable one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information.
3. (3) Includes sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and other Apple-branded and third-party accessories.
Sources: Annual Report. Apple Inc. 2017.; Annual Report. Apple Inc. 2018. EXHIBIT 2 Apple Product Performance—Percentage of Total Sales iPad 7% 8% 10% Services 14% 13% 11%
Product 2018 2017 2016
iPhone 63% 62% 63%
Ma c
10% 11% 10%
Source: Annual Report. Apple Inc. 2018. Apple Arcade for games, and Apple Card, a credit card stored in Apple Wallet. (see Exhibit 4). As the time line shows, most of the product innovations occurred after 1998, when Apple was under Steve Jobs’s lead- ership. However, there was also a 12-year period in which Jobs was not in charge. The company’s ongoing stated strategy was to leverage “its unique ability to design and develop its own operations systems, hardware, application software and ser- vices to
provide its customers products and solutions with in- novative design, superior ease-of-use and seamless integration.”7 This strategy required not only product design and marketing expertise but also scrupulous attention to Strategic Management: Text and Cases CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? C253 EXHIBIT 3 Apple Products and Services Revenue and Gross Margins
Second Quarter Comparison 2018 to 2019
Three Months Ended Six Months Ended
March 30, 2019 March 31, 2018 Chang March 30, 2019 March 31, 2018 Change
e
Net sales by category:
iPhone (1) $31,051 $37,559 (17)% $ 83,033 $ 98,663 (16)%
Mac (1) 5,513 5,776 (5)% 12,929 12,600 3%
iPad (1) 4,872 4,008 22% 11,601 9,763 19%
Wearables, Home and Accessories (1)(2) 5,129 3,944 30% 12,437 9,425 32%
Services (3) 11,450 9,850 16% 22,325 18,979 18%
Total net sales $58,015 $61,137 (5)% $142,325 $149,430 (5)%
1. (1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.
2. (2) Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and Apple-branded and third-party accessories.
3. (3) Services net sales include sales from the company’s digital content stores and streaming services, AppleCare, Apple Pay, licensing, and other services. Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud services, which are bundled in the sales price of certain products.
Three Months Ended Six Months Ended
March 30, 2019 March 31, 2018 March 30, 2019 March 31, 2018
Gross margin:
Products $14,518 $17,351 $39,715 $45,940
Services 7,303 6,071 14,137 11,394
Total gross margin $21,821 $23,422 $53,852 $57,334
Gross margin percentage:
Products 31.2% 33.8% 33.1% 35.2%
Services 63.8% 61.6% 63.3% 60.0%
Total gross margin percentage 37.6% 38.3% 37.8% 38.4%
Source: Quarterly Report Form 10-Q. Apple, March 30, 2019. operational details. Given Apple’s global growth in multiple product categories, and the associated complexity in strategic execution, CEO Tim Cook would be challenged to sustain the level of innovation for which the company was known. Company Background Founder Steve Jobs Apple Computer was founded in Mountain View, California, on April 1, 1976, by Steve Jobs and Steve Wozniak. Jobs was the visionary and marketer, Wozniak was the technical genius, and A. C. “Mike” Markkula Jr., who had joined the team several months earlier, was the businessman. Jobs set the mission of empowering individu- als, one person–one computer, and doing so with elegance of design and fierce attention to detail. In 1977, the first version of the Apple II became the first computer ordinary people could use right out of the box, and its instant suc- cess in the home market caused a computing revolution, essentially creating the personal computer industry. By 1980, Apple was the industry leader and went public in December of that year. C254 CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? Strategic Management: Text and Cases EXHIBIT 4 Apple Innovation Time Line
Date Product Events
1976 Apple I Steve Jobs, Steve Wozniak, and Ronald Wayne found Apple Computer.
1977 Apple II Apple logo first used.
1979 Apple II1 Apple employs 250 people; the first personal computer spreadsheet software, VisiCalc, is written by Dan Bricklin on an Apple II.
1980 Apple III Apple goes public with 4.6 million shares; IBM personal computer announced.
1983 Lisa John Sculley becomes CEO.
1984 Mac 128K, Apple IIc Super Bowl ad introduces the Mac desktop computer.
1985 Jobs resigns and forms NeXT Software; Windows 1.01 released.
1986 Mac Plus Jobs establishes Pixar.
1987 Mac II, Mac SE Apple sues Microsoft over GUI.
1989 Mac Portable Apple sued by Xerox over GUI.
1990 Mac LC Apple listed on Tokyo Stock Exchange.
1991 PowerBook 100, System 7 System 7 operating-system upgrade released, the first Mac OS to support PowerPC-based computers.
1993 Newton Message Pad (one of the first Sculley resigns; Spindler becomes CEO; PowerBook sales reach 1 million units. PDAs)
1996 Spindler is out; Amelio becomes CEO; Apple acquires NeXT Software, with Jobs as adviser.
1997 Amelio is out; Jobs returns as interim CEO; online retail Apple Store opened.
1998 iMac iMac colorful design introduced, including USB interface; Newton scrapped.
1999 iMovie, Final Cut Pro (video editing iBook (part of PowerBook line) becomes best-selling retail notebook in October; software) Apple has 11% share of notebook market.
2000 G4Cube Jobs becomes permanent CEO.
2001 iPod, OS X, iTunes software, Apple iTunes software is a mobile device management application. First physical retail Store store opens, in Virginia.
2002 iMac G4, iLife Apple releases iLife software suite.
2003 iTunes Store Apple reaches 25 million iTunes downloads.
2004 iMac G5 Jobs undergoes successful surgery for pancreatic cancer.
2005 iPod Nano, iPod Shuffle, Mac Mini First video iPod released; video downloads available from iTunes.
2006 MacBook Pro Apple computers use Intel’s Core Duo CPU and can run Windows software; iWork software competes with Microsoft Office.
2007 iPhone, Apple TV, iPod Touch Apple Computer changes name to Apple Inc.; Microsoft Vista released.
2008 iPhone 3G, MacBook Air, App Store App Store launched for third-party applications for iPhone and iPod Touch and brings in $1 million in one day.
2009 17-inch MacBook Pro, iLife, iWork ’09 iTunes Plus provides DRM-free music, with variable pricing; Jobs takes medical leave.
2010 iPad, iPhone 4, Mac App Store iPhone 4 provides FaceTime feature; iTunes reaches 10 billion songs sold.
2011 iPad2, iPhone 4S, iCloud iPhone available on Verizon Wireless; Jobs resigns as CEO, dies on October 5th. Tim Cook becomes CEO.
Strategic Management: Text and Cases CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? C255 Continued EXHIBIT 4 Continued
Date Product Events
2012 iBook Author, iPhone5, iPad Mini, Apple Wallet
iBook supports textbook creation on iPad. Retina displays, skinny Macs. Apple Wallet stores coupons, tickets. Apple becomes world’s most valuable company by market capitalization.
2013 Mega Mac, iPad Air Workstation in a small aluminum cylinder.
2014 iPhone 6 Plus, Apple Watch, Apple Pay
Biggest iPhone yet, Apple Watch = computer on your wrist introduced in 2014, actual delivery in 2015, Apple Pay mobile payment service, acquisition of Beats Electronic for headphones, streaming digital content.
2015 Apple Music Streaming music subscription service, including Internet radio station Beats 1, blog platform Connect.
2016 iPhone 7, iPhone 7 Plus, iPad Pro, Apple AirPods, Apple Watch Series
Seventh generation iPhone, AirPods wireless earphones, Apple Watch multiple series included Nike and Hermes; over 1 billion Apple devices are in use worldwide.
2017 iPhone 8, iPhone 8 Plus, iPhone X
Fall 2017 release.
2018 HomePad, iPhone XS & XR, iPadPro with Face ID, iPad Air with Apple Pencil support
HomePad smart speaker with voice control; Apple reaches $1 trillion market value, becomes the largest publically traded corporation in the world by market capitalization.
2019 Apple TV+, Apple Channels, Apple News+, Apple Arcade, Apple Card
Apple TV+ will produce original content, Channels subscription gives access to premium network TV, News+ subscription gives access to digital magazines & newspapers, Apple Arcade gives access to games via the App Store, Apple Card is a credit card stored in Apple Wallet.
Sources: Timeline of Apple Inc. products. Wikipedia; author estimates. In 1983, Wozniak left the firm and Jobs hired John Sculley away from PepsiCo to take the role of CEO at Apple, citing the need for someone to spearhead marketing and operations while Jobs worked on technology. The result of Jobs’s creative focus on personal computing was the Macintosh. Introduced in 1984, with the now-famous Super Bowl television ad based on George
Orwell’s novel Nineteen Eighty-Four,8 the Macintosh was a breakthrough in terms of elegant design and ease of use. Its ability to handle large graphic files quickly made it a favorite with graphic designers, but it had slow performance and limited compatible software was available. That meant the product as designed at that time was unable to help significantly Apple’s failing bottom line. In addition, Jobs had given Bill Gates at Microsoft some Macin- tosh prototypes to use to develop software and, in 1985, Mi- crosoft subsequently came out with the Windows operating system—a version of GUI for use on IBM PCs. Steve Jobs’s famous volatility led to his resignation from Apple in 1985. Jobs then founded NeXT Computer. The NeXT Cube computer proved too costly for the business to become commercially profitable, but its technological con- tributions could not be ignored. In 1997, then Apple CEO Gilbert Amelio bought out NeXT, hoping to use its Rhapsody—a version of the NeXTStep operating system—to jump-start the Mac OS development, and Jobs was brought back as a part-time adviser. Under CEOs Sculley, Spindler, and Amelio John Sculley had tried to take advantage of Apple’s unique capabilities. Because of this, Macintosh computers became easy to use, with seamless integration (the original plug-and- play) and reliable performance. This premium performance meant Apple could charge a premium price. However, with the price of IBM compatibles dropping, and Apple’s costs, especially research and development (R&D), way above industry averages, this was not a sustainable scenario. Sculley’s innovative efforts were not enough to substan- tially improve Apple’s bottom line, and he was replaced as CEO in 1993 by company president Michael Spindler. Spindler continued the focus on innovation, producing the PowerMac in 1994. Even though this combination pro- duced a significant price-performance edge over both previ- ous Macs and Intel-based machines,
the IBM clones continued to undercut Apple’s prices. Spindler’s response was to allow other companies to manufacture Mac clones, a strategy that ultimately led to clones stealing 20 percent of Macintosh unit sales. Gilbert Amelio, an Apple director and former semicon- ductor turnaround expert, was asked to reverse the compa- ny’s financial direction. Amelio intended to reposition Apple as a premium brand, but his extensive reorganiza- tions and cost-cutting strategies could not prevent Apple’s stock price from slipping to a new low. However, Amelio’s C256 CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? Strategic Management: Text and Cases decision to stop work on a brand-new operating system and jump-start development by using NeXTStep brought Steve Jobs back to Apple in 1997. Steve Jobs’s Return One of Jobs’s first strategies upon his return was to strengthen Apple’s relationships with third-party software developers, including Microsoft. In 1997, Jobs announced an alliance with Microsoft that would allow for the creation of a Mac ver- sion of the popular Microsoft Office software. He also made a concerted effort to woo other developers, such as Adobe, to continue to produce Mac-compatible programs. In late October 2001, Apple released its first major non- computer product—the iPod. This device was an MP3 music player that packed up to 1,000 CD-quality songs into an ultra- portable, 6.5-ounce design: “With iPod, Apple has invented a whole new category of digital music player that lets you put your entire music collection in your pocket and listen to it wherever you go,”
said Steve Jobs. “With iPod, listening to music will never be the same again.”9 This prediction became even truer in 2002, when Apple introduced an iPod that would download from Windows—its first product that did not require a Macintosh computer and thus opened up the Apple “magic” to everyone. In 2003, all iPod products were sold with a Windows version of iTunes, making it even easier to use the device regardless of computer platform. In April 2003, Apple opened the online iTunes Music Store to everyone. This software, downloadable on any com- puter platform, sold individual songs through the iTunes application for 99 cents each. When announced, the iTunes Music Store already had the backing of five major record labels and a catalog of 200,000 songs. Later that year, the iTunes Music Store was selling roughly 500,000 songs a day. In 2003, the iPod was the only portable digital player that could play music purchased from iTunes, and this intended exclusivity helped both products become dominant. After 30 years of carving a niche for itself as the premier provider of technology solutions for graphic artists, Web de- signers, and educators, Apple had reinvented itself as a digital entertainment company, moving beyond the personal com- puter industry. The announcement in 2007 of the iPhone, a product incorporating a wireless phone, a music and video player, and a mobile Internet browsing device, meant Apple was also competing in the cell phone/smartphone industry. That year, Apple changed its name from Apple Computer to Apple Inc. Also introduced in 2007, the iPod Touch incorporated Wi-Fi connectivity, allowing users to purchase and down- load music directly from iTunes without a computer. Then, in 2008 Apple opened the App Store. Users could now pur- chase applications written by third-party developers specifi- cally for the iPhone and iPod Touch. In 2010, Apple launched the large-screen touch-based tablet called the iPad and sold over 2 million of these devices in the first
two months.10 That same year, Apple’s stock value increased to the extent that the company’s
market cap exceeded Microsoft’s, making it the biggest tech company in the world.11 In 2011, Steve Jobs made his last product launch appearance to introduce iCloud, an online storage and syncing service. On October 4, 2011, Apple announced the iPhone 4S, which included “Siri,” the “intelligent software assistant.” The next day, on October 5, came the announcement that Steve Jobs had died. Apple continued to innovate, however, and on September 21, 2012, Apple had its biggest iPhone launch ever with the iPhone
5.12 On September 19, 2012, Apple stock reached $702.10, its highest level to date, which made Apple the most valuable company in the world. 2013 saw the iPhone5C and the high-range iPhone5S, which intro- duced the Touch ID fingerprint recognition system. The iPhone 6 and 6 Plus, with larger displays, faster processors, and support for mobile payments, were
released in Septem- ber 2014.13 The prototype of the Apple Watch was unveiled in 2014. Also introduced in 2014 was Apple Pay, a mobile payment system meant to augment all Apple mobile prod- ucts. February 2015 saw Apple reach the highest market cap of any U.S.-traded company. During 2016 Apple intro- duced Apple Music, a streaming music service meant to take advantage of its already strong relationship with artists and music publishers, and therefore positioned to success- fully compete with Pandora and Spotify. In addition, iPhone 7 and 7 Plus and the Apple Watch Series 2 all had a positive response from customers. Apple products had more than 1 billion users worldwide by the end of 2017. Apple had become a diversified digital entertainment corporation. Back in 2005 analysts believed Apple had “changed the rules of the game for three industries—PCs, consumer electronics, and music and appears to have noth- ing to fear from major
rivals.”14 On top of steady sales of its computers, of the iPod, and of iTunes, the added categories of iPhone and iPad had shown
substantial growth; but by 2013, Samsung had outperformed Apple in worldwide smartphone sales,15 and Google’s Android had captured the largest market share of cell phone operating systems. At the same time, both the Amazon Kindle Fire HD and Microsoft’s Surface tablet had emerged to challenge the iPad. 2015 was marked by competition in the wearable tech space, and 2017 saw the Windows 10 operating system become four times more popular than the macOS, the Microsoft Surface defeating iPad in user satisfaction, and customers frustrated that the MacPro had not yet been redesigned to recover from its 2013 design misstep. Could Apple continue to grow, and, if so, in what categories?
Apple’s Operations Maintaining a competitive edge required more than innova- tive product design. Operational execution was also impor- tant. For instance, while trying to market its increasingly diverse product line, Apple believed that its own retail stores could serve customers better than any third-party retailers. By the beginning of 2019, Apple had 506 stores open, including 234 international
locations.16 Some of Strategic Management: Text and Cases CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? C257 these stores worldwide were considered architectural wonders, including the iconic Fifth Avenue glass cube in New York City.
Apple had even received trademark protec- tion for its retail stores’ “distinctive design and layout.”17 Partly due to the appealing design of both the shopping ex- perience and the products being sold within, Apple retail stores had traditionally generated more
sales per square foot than any other U.S. retailer, including its closest luxury rival Tiffany & Co.18
To solidify its supply chain, Apple had entered into mul- tiyear agreements with suppliers of key components. Apple had had
historically excellent margins, partly because of its simpler product line, leading to lower manufacturing costs.19 Apple had outsourced almost all manufacturing and final assembly to its Asian partners, paying close attention to scheduling and quality issues. Outsourcing to Asian manu- facturers was not without its problems, however. In 2012, headlines worldwide exposed China’s Foxconn manufactur- ing facility for labor abuses that led to worker suicide threats. Apple, as well as most other technology companies, used Foxconn facilities to assemble products, including the iPad and iPhone. After the story broke, Apple CEO Tim Cook visited the Foxconn plant and reviewed an audit of working conditions that found violations in wages, overtime, and environmental standards. Apple stated that it remained “committed to the highest standards of social responsibility across our
worldwide supply chain,”20 and Cook announced that Apple would be bringing some of the production of Mac computers back to the United States, starting in 2013. They could do this without affecting the company’s profit- ability, because of automation
cost savings.21
Apple had also historically paid attention to research and development, increasing its R&D investment year after year. In the second quarter of 2019, Apple spent $3.9 billion on R&D, an increase of 1 percent from the previous year. As one of Steve Jobs’s legacies, Apple had traditionally kept the specifics of its research and development a closely guarded secret and fiercely protected its innovative patents. For example, a well-publicized series of lawsuits in 2012 highlighted rifts between Apple and Samsung, who was both a rival and supplier. Samsung smartphones had cap- tured more market share than Apple’s iPhones in the begin- ning of 2012, and Apple argued that Samsung had succeeded with both its phones and tablets
only by copying Apple’s designs. Samsung replied by claiming that Apple had infringed on Samsung’s patents.22 U.S. intellectual property courts found in favor of Apple, but Japanese courts found in favor of Samsung. The threat of ongoing battle meant Apple needed to look for other suppliers of chips and displays. Supply chain watchers pointed out that Apple still had a major challenge finding reliable suppliers for increasingly scarce components, and that the continued reliance on Foxconn as the
sole manufacturer of the iPhone meant that any disruption there could have major conse- quences for delivery.23
Status of Apple’s Business Units in 2019 The Apple Computer Business In the computer market, Apple had always refused to com- pete on price, relying instead on its reliability, design ele- gance, ease of use, and integrated features to win customers. An opportunity for increased market share was realized when Apple began using Intel processors in the iMac desk- top and the MacBook portables, which allowed them to run Microsoft Office and other business software. However, in FY2018 Apple’s worldwide Mac computer sales decreased 5 percent over the previous year, continuing to signal the decline of this category since the introduction of the iPad in 2010. Overall it appeared that sales of desk- top computers, especially, were slowing worldwide as the tablet and smartphone markets grew, and this was evident in the worldwide PC market share data from 2018, where only Dell saw any significant growth (see Exhibit 5). Apple EXHIBIT 5 Worldwide PC Market Share, Calendar Year 2018 (units in thousands)
Company 2018 Shipments 2018 Market Share 2017 Shipments 2017 Market Share 2018/2017 Growth
1. HP 59,986 23.2% 58,809 22.6% 2.0%
2. Lenovo* 59,857 23.2% 58,049 22.4% 3.1%
3. Dell Inc 44,170 17.1% 41,822 16.1% 5.6%
4. Apple 18,021 7.0% 19,010 7.3% −5.2%
5. Acer Group 17,841 6.9% 18,033 6.9% −1.1%
Others 58,621 22.7% 63,925 24.6% −8.3%
Total 258,497 100.0% 259,647 100.0% −0.4%
Source: Inventory and Processor Supply Issues Weigh Against Holiday PC Shipments, According to IDC. IDC, January 10, 2019. C258 CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? Strategic Management: Text and Cases EXHIBIT 6 Worldwide SmartPhone Shipments, First Quarter 2019
Vendor Q1 2019 shipments (million)
Q1 2019 Market share
Q1 2018 shipments (million)
Q1 2018 Market share
Annual growth
Samsung 71.5 Apple 40.2 Oppo 27.3 Total 313.9 22.8% 79.5 12.8% 52.2 8.7% 25.7 100.0% 336.8 23.6% 15.5% 7.6% 100.0% −10.0% −23.2% +6.4% −6.8%
Huawei 59.1 18.8% 39.3 11.7% +50.2%
Xiaom i
27.8 8.9% 28.2 8.4% −1.3 %
Others 88.0 28.0% 111.9 33.2% −21.3%
Source: Canalys: Apple iPhone shipments fall 23% as global smartphone market remains in freefall. Canalys, May 1, 2019.
saw the greatest decline amongst its rivals, a decline also evident in its own revenue profile, which had seen the Mac’s share of Apple overall revenue drop from more than 40 percent in 2007 to about 11 percent in 2016, and slip- ping further to 9.5 percent
in the first quarter of 2019.24
There had been rumors Apple was planning to refresh the iMac, and completely revamp the Mac Pro. Targeting professional users, and very expensive at around $3,000, the Mac Pro product had never had a large market share, but the creative professionals—the videographers, designers, and photographers—who embraced the original product were still waiting for a
delayed redesign.25 The iMac did see new processors and graphics in 2019, but the basic design remained the same. Personal Digital Entertainment Devices: iPod Although many analysts at the time felt the MP3 player mar- ket was oversaturated, Apple had introduced the iPod Touch in 2007, intending it to be an iPhone without the phone, a portable media player, and Wi-Fi Internet device without the AT&T phone bill. The iPod Touch borrowed most of its fea- tures from the iPhone, including the finger-touch interface, but it remained mainly an iPod, with a larger viewing area for videos. Apple released the fifth-generation iPod Touch in September 2012, and the sixth-
generation version debuted in 2015. A seventh-generation was released in May, 2019.26 The iPod Touch had sold well over 100 million units since its debut in 2007, and although it was no longer promoted on the Apple website, it was still for sale. The device was still a cheap way to get entertainment, and used for portable gam- ing, this device augmented with a cheap phone for calling and texting was still less expensive than an iPhone. Mobile Communication Devices: iPhone In 2007, Apple’s iPhone combined an Internet-enabled smart- phone and video iPod. The iPhone allowed users to access all iPod content and play music and video content purchased from iTunes. Subsequent smartphone models increased the quality of the photo and video components to make even the digital camera or camcorder appear obsolete. By the fourth quarter of 2015 Apple had achieved almost 19 percent market share, in a close tie with Samsung, and by July 2016 it had sold over 1 billion units, becoming “one of the most impor- tant, world-
changing and successful products in history.”27 However, competition was fierce and by 2019 Apple’s smart- phone market share had dropped by over 23 percent. The main challenge was coming from Huawei (see Exhibit 6). In addition, the smartphone market was increasingly turning into a battle between mobile operating systems. Ap- ple’s iPhone, running on iOS, had considerable competition from Samsung’s line of smartphones. This was partly due to Samsung’s use of Google’s Android operating system. By 2018, the operating system map had Android devices captur- ing the majority of market
share (see Exhibit 7).28
Over the years, in Asian markets especially, Apple’s shares of mobile devices had lost considerable ground to Samsung, Huawei, and other smartphones produced by Asian manufacturers. Younger Asian users, the 20-something college students and fresh
graduates, were looking for the next new thing, and that was increasingly an Android-driven device.29
In 2019, overall iPhone second quarter sales were down 17 percent from the previous year. The overall smartphone market was slowing down as mature markets were increas- ingly dependent on replacement purchases, and emerging markets appeared more interested in low-cost devices. Other than the removal of the headphone port, Apple had not made any significant technological changes to the iPhone lineup, so if Apple wanted to address its declining market share, it might have to lower prices, which, given the iPhone’s major contribution to Apple’s bottom line ($167B or 63 percent of total sales in 2018), would make it difficult for the company to maintain its profit margins or grow net income going forward. Even so, the iPhone was Apple’s most important and potentially lucrative product. Tablet Computer: iPad In April 2010, Apple released the iPad, a tablet computer, as a platform for audio-visual media, including books, periodicals, Strategic Management: Text and Cases CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? C259 EXHIBIT 7 Smartphone Operating System Market Share, Fourth Quarter 2018 100 Android iOS 88.0% 87.6%
84.3% 87.8%
86.8% 81.8%
85.0%
14.7%
11.8% 12.4% 80.3% 19.6%
15.7% 18.2%
12.1% 13.2%
90 80 70 60 50 40 30 20 10 0 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 Quarter 2018Q4 Source: Smartphone Market Share: OS Data Overview. IDC. https://www.idc.com/promo/smartphone-market-share/os movies, music, games, and web content. More than 300,000 iPads were purchased by eager tech consumers during the de- vice’s first day on store shelves. Weighing only 1.5 pounds, this lightweight, portable, and touch-screen device was seen as a gigantic
iPod Touch.30 Features like the sleek design, touch screen, multiple apps, and fast and easy-to-navigate software made the iPad popular in business, education, and the enter- tainment industry. The iPad was selected by Time magazine as one of the 50 Best
Inventions of the Year 2010.31
Up until September 2010, Apple iPads had accounted for 95 percent of tablet computer sales,32 but by the end of 2012, that figure had fallen to 78.9 percent; and by the end of 2018 Apple held only about 26 percent of the market. The loss of share was partly due to tablet devices, such as Samsung’s Galaxy, that were based on Google’s open- source Android system. Other platforms and devices had
also appeared, including Google’s Chromebook, Amazon’s Kindle Fire, and Microsoft Windows’ Surface tablet.33 Going into 2019 there were signs that the iPad models’ sales—as well as the entire tablet industry—were in decline, perhaps due to the “jumbo” phones coming from the likes of Samsung (and Apple), and low-cost Google-based Chromebook laptops (see Exhibit
8).34
Apple finally redesigned the iPad lineup in 2019, provid- ing a major upgrade in power with Apple’s new A12 Bionic chip, and introducing a new iPad Mini and iPad Air, both ultra-portable with Apple Pencil support. The iPad Pro, although expensive, was redesigned to incorporate a full- screen Liquid Retina display, Face ID, as well as the powerful A12X Bionic chip with Neural Engine and sup- port for the new Apple Pencil and Smart Keyboard. Even though the category had seen reduced activity as a whole, EXHIBIT 8 Worldwide Quarterly Tablet Market Share, Third Quarter 2018
Company 3Q18 Unit Shipments
3Q18 Market Share
3Q17 Unit Shipments
3Q17 Market Share
Year-Over-Year Growth
1. Apple 3. Amazon.com 5. Lenovo Total 9.7 26.6% 10.3 4.4 12.0% 4.4 2.3 6.3% 3.1 36.4 100.0% 39.9 25.9% 11.0% 7.7% 100.0% −6.1% −0.4% −24.5% −8.6%
2. Samsung 5.3 14.6% 6.0 15.0% −11.4%
4. Huawei
3.2 8.9% 3.0 7.6% 7.1%
Others 11.5 31.6% 13.1 32.9% −12.1%
Lenovo (excluding Fujitsu volume in 3Q17)
2.3 6.3% 3.0 7.4% −22.1%
Source: Tablet Market Sees Modest Decline of 8.6% as Slate and Detachable Categories Continue to Struggle, According to IDC. IDC, November 2, 2018. C260 CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? Strategic Management: Text and Cases the iPad continued to perform for Apple, with 2018 seeing the strongest growth in years. Part of this growth was due to customer response to the iPad Pro and the adoption of the iPad in operational scenarios such as in airline pilots’ flight bags and maintenance ground crews’ service bays as an easy portable source for key information. The Software Market Although Apple had always created innovative hardware, software development also had been an important goal. Software had been Apple’s core strength, especially in its computers, due to its reliability and resistance to virus infections and resulting
crashes.35 The premier piece of Apple software was the operating system. The iOS allowed Apple to develop software applications such as Final Cut Pro, a video-editing program for professionals’ digital cam- corders; GarageBand, for making and mixing personally created music; the iTunes digital music jukebox; and iWork, containing a PowerPoint-type program called Keynote and a word-processor/page-layout program called Pages. Apple’s Web browser, Safari, was upgraded in 2009 to compete with Windows Internet Explorer, Mozilla Firefox, and the new
entrant, Chrome from Google. Apple announced, “Safari 4 is the world’s fastest and most innova- tive browser,”36 but analysts were quick to point out that Google’s Chrome, which debuted six months earlier, was perhaps the first to take the browser
interface in a new direction. One commentator called Chrome “a wake-up call for the Safari UI guys.”37 Browser market share data in 2019 showed Chrome in the top spot, with its various versions grabbing over 65 percent of global market share. Recent versions of Microsoft Internet Explorer and Edge held second place with 14 percent, and Firefox had 9.6 percent. Safari had 3.7
percent share.38
iCloud was introduced in 2011 during one of Steve Jobs’s last public appearances. The web-based storage ser- vice initially struggled to get traction, but in 2014 was upgraded to iCloud Drive, allowing users to interoperate with Windows and connect all iOS devices. As an alterna- tive to Google Drive and Dropbox, this gave Apple an intro into the enterprise/corporate user space, a
market CEO Tim Cook had begun to successfully target.39
In other software development areas, Apple had not been that successful. In 2012, Apple stumbled badly with its Maps software. Released in iOS6, Apple Maps was meant to replace Google Maps on the iPhone, but instead produced distorted images and gave really bad directions. CEO Tim Cook had to apologize that Apple had fallen short of its commitment to making “world-class
products,” and suggested customers go back to using its competitor’s mapping software.40
iTunes/Apple Music Arguably, Apple’s most innovative software product was iTunes, a free downloadable software program for con- sumers running on either Mac or Windows operating systems. It came bundled with all Mac computers and iPods and connected with the iTunes Music Store for pur- chasing digital music and movie files that could be downloaded and played by iPods, iPads, and the iPhone, and by iTunes on PCs. Although the volume was there, iTunes had not neces- sarily been a profitable venture. Traditionally, out of the 99 cents Apple charged for a song, about 65 cents went to the music label; 25 cents for distribution costs, including credit card charges, servers,
and bandwidth; and the bal- ance to marketing, promotion, and the amortized cost of developing the iTunes software.41
However, if not wildly profitable, iTunes was still considered a media giant— especially with its over 50 million songs, and
100,000 TV shows and movies available in its database as of 2019.42
Growth, however, was occurring in the streaming service market, especially with the rising popularity of online radio and Internet streaming providers Pandora and Spotify, and by 2015 music sales on iTunes had fallen by over 14 percent worldwide. This trend helped explain why Apple acquired the monthly subscription streaming service Beats Music in 2014. The $3 billion acquisition
included headphone maker Beats Electronics,43 and ultimately led to the development of Apple Music in 2015. By April 2019,
Apple Music had over 28 million U.S. subscribers, beating out Spotify.44 Worldwide, Spotify still had a lead, especially when factor- ing in non-paying users, but Apple was working to draw from its base of 900 million iPhone users to increase this. The App Store – Apple Arcade, Apple News+ In March 2008, Apple announced that it was releasing the iPhone software development kit (SDK), allowing develop- ers to create applications for the iPhone and iPod Touch and sell these third-party applications via the Apple App Store. The App Store was made available on iTunes, and it was directly available from the iPhone, iPad, and iPod Touch products. This opened the window for another group of Apple customers, the application developers, to collabo- rate with Apple. Developers could purchase the iPhone Developer Program from Apple for $99, create either free or commercial applications for the iPhone and iPod Touch, and then submit these applications to be sold in the App Store. Developers would be paid 70 percent of the down- load fee customers paid to the App Store, and Apple would get 30 percent of the revenue.
By 2019, over 180 billion apps had been downloaded from Apple’s App Store,45 but Google Play, the app store for Android users, had grabbed more of the download business. In the third quarter of 2018 the App Store saw 7.6 billion downloads, while
Google Play had 19.5 billion. The most popular App Store downloads were games.46 It was worth noting that the mobile app industry was large—in 2019 there were an estimated 2.7 billion smartphone users and 1.35 billion tablet users worldwide, and this number was expected to continue to grow. Data showed that 90 per- cent of mobile time was spent on apps, and this was a po- tentially lucrative business for both the app developer and Strategic Management: Text and Cases CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? C261 the platform host. Apple was intending to capitalize on this by offering its new Apple Arcade, an ad-free subscription service, providing access to over 100 exclusive or new games. Apple was attracting game developers who appreci- ated the superior iPhone animation technology and, unlike on the Google Play platform, Apple had the ability to pro- vide security and protection against malware, counterfeit- ing, and piracy. This meant high quality games would be available for Apple products
exclusively.47
Also available in 2019 in the App Store was Apple News+, a $9.99 per month subscription to 300 magazines including Time, Vogue, Popular Science, Sports Illustrated, and Fortune. Premium digital content from The Wall Street Journal, Los Angeles Times, and TechCrunch made this an attractive offering. Apple Pay/Apple Card Introduced in late 2014, Apple Pay allowed iPhone users in the United States to make secure payments for goods and services using their phones. With over 1 million credit and debit card activations within the first 72 hours of its release, Apple Pay was intended to replace the user’s wallet and, according to CEO Tim Cook, would “forever change the way all of us buy things,” primarily because the process was more secure than a traditional card-based transaction. Major retailers such as Macy’s, Walgreens, McDonald’s, Whole Foods, and Disney had all agreed to accept Apple Pay. Apple reportedly received 0.15 percent of each pur- chase, making the service a potentially lucrative venture, but adoption had been poor, with only one-third of iPhone users trying it once or more. In 2019, Apple debuted the Apple Card in partnership with Mastercard and Goldman Sachs. This was both a digital and physical credit card option that provided better security in its physical form, since nothing was printed on the card. The digital card could be used anywhere Apple Pay was accepted, while the physical version could be used in other places. Apple was hoping this option would increase the use of Apple Pay. Other Products: Apple Watch, AirPods, HomePod, Apple TV Apple Watch was the first all-new product since the iPad, and therefore CEO Tim Cook’s most ambitious gamble. Once again, Apple was not the first company to enter the wearable tech space, following the lead of Samsung, Sony, and Motorola, and competing against fitness trackers produced by Nike, FitBit, and others. However, Apple’s pre- orders for the launch in 2015
indicated demand would run to a combined five to six million units of the three watch models.48 This category was a bit of a departure for Apple as it had positioned the Watch as a personalized device, with the market segmented between mass market and
luxury.49 Although initial sales appeared disappointing, Apple continued to innovate the product, and by 2019 had sold over 46 million, making the Apple Watch the number one smartwatch in the world. Software improvements using HealthKit and ResearchKit had helped wearers monitor and improve their health and fitness, showing that this device was more than just an iPhone extension on the wrist. Apple’s AirPods, first released in 2016, were Apple’s most popular accessory product, with over 35 million units sold in 2018. These wireless Bluetooth earphones not only played audio but could handle phone calls and receive assistance from Siri, Apple’s digital assistant. AirPods had full functionality with all Apple products, including Apple Watch and Apple TV. The Apple HomePod was another way to interact with Apple devices. This smart speaker introduced in early 2018 was intended to compete with Amazon’s Echo and Google’s Home device, and by 2019 the Apple device had captured a 6 percent share. Reviews had been mixed, however, especially since the HomePod version of Siri was not as helpful as Ama- zon’s Alexa or
Google’s Assistant, so the initial price had been lowered, presumably to attract more Apple users.50 Once again, the intention was to use the device for its high quality speaker capability, pairing it with AppleTV, Apple Music, and the iPhone, extending the reach of the Apple ecosystem.
Apple TV, around since 2007, had undergone four upgrades, and had partnered with NBC Universal to offer users access to seven of its networks’ most popular series. Similar to rivals Roku, Amazon Fire, and Chromecast, Apple TV was a digital media player that could stream con- tent to a compatible television. Unlike its rivals, Apple TV could play all the content from iTunes, apps, and games from the iPhone, and use Siri voice recognition software to search and recognize viewer choices. However, it was more expensive and did not provide easy access to Amazon Prime content, a popular destination for many viewers. 2019 saw the
addition of new services Apple TV+ streaming service, designed to cement loyalty among Apple users.51 Original content designed for Apple TV+ and access to streaming content from other providers may be a new and developing revenue source for
Apple.52
Product Extensions, Growth of Services Rumors surfaced in 2015 that Apple had acquired resources, primarily engineers and related technology, that would enable it to develop an automobile ready for market by 2020. Speculation was that the Apple would not do the actual assembly but, as with its other products, would use its sophisticated supply chain expertise to outsource manu- facturing, focusing its considerable
innovation skills on the design and sales of a product that incorporates Apple tech- nology in multiple configurations.53 By 2019, restructuring had led to the dismissal of over 200 employees from Apple’s Project Titan autonomous driving unit. Rumors had spread that Apple would not pursue the actual automo- bile, but instead was investigating the development of self- driving car software, or the application of artificial intelligence in multiple products, using its available cash to acquire both businesses and
people, making a “heavy invest- ment in machine learning and autonomous systems.”54
C262 CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? Strategic Management: Text and Cases With the existing hardware products all appearing to stagnate, analysts were looking to Apple’s services and “other products” for growth opportunities. While the “other” products such as Apple Watch, Apple TV, AirPods, and HomePod grew 35 percent in FY2018, the services category—which included Apple Pay, Apple Music, iCloud, iTunes, and the App Store—grew 24 percent to a record $37.2 billion and accounted for 14 percent of all revenues, beating every category except the iPhone. In addition, mak- ing this sector more attractive, profit margin estimates aver- aged almost 64 percent. In particular, the App Store, having tripled
revenue between 2013 and 2016, was projected to produce about two-thirds of Apple’s growth target for 2020.55 In 2019, Apple reported over 390 million paid subscriptions across its services portfolio, an increase of 120 million since the previous year. Many analysts were wondering whether Apple could create “the world’s greatest subscription model, where users can opt to have the latest iPhone and many services for a fixed fee. This would lock many into its ecosystem and create a constant stream of 56 recurring revenues.” Others cautioned that Apple’s strength is “using the services division to boost the sales of the iPhone and keep people locked into an ever-growing cycle of updated
hardware.”57 This may be Apple’s exact intention. The Future of Apple Under Cook, Apple had transitioned itself “from being a hypergrowth company to being a premium, branded con- sumer
company.”58 Apple was a truly vertically integrated designer and marketer of products and services. If long-time Apple fans were not satisfied with the state of Apple’s innovation today, they might have to realize, as former Ap- ple marketing guru Guy Kawasaki did, that [It is] difficult for Apple to top itself. .... It would be foolish to bet against Apple based on my experience.... If nothing else, Apple
will once again force everyone to improve their game.59
As CEO Tim Cook said during the second quarter earnings call of 2019: One of Apple’s great strengths is our culture of flexibility, adaptability, and creativity. This quarter featured some important announcements that speak to the power of our commitment to innovation and long- term thinking... we previewed a game- changing array of new services, each of them rooted in principles that are fundamentally Apple.... These features aren’t just nice to have. They actually help to eliminate the boundary between hardware, software, and service, creating a singularly exceptional
experience for our users.60
It is entirely possible Apple is not done innovating. ENDNOTES 1 Apple Press Release. 2017. Apple Park opens to employees in April. Apple Newsroom, February 22, http://www.apple.com/newsroom/ 2017/02/apple-park-opens-to-employees-in-april.html. 2 Stone, B. and P. Burrows. 2011. The essence of Apple. Bloomberg Businessweek, January 24–30; Kahney, L. 2019. The big question hanging over Tim Cook’s tenure at Apple. Yahoo! Finance, April 15, https://finance.yahoo.com/news/tim-cook-leander- kahney-163732037. html. 3 Dudovskiy, J. 2017. Apple leadership–an effective leadership by Tim Cook that is difficult to sustain. Research Methodology, March 2, http://research-methodology.net/apple-leadership-and-apple- organizational-structure/. 4 Sure Dividend. 2017. Will Apple be the next AAA-rated company? Seeking Alpha, March 21, https://seekingalpha.com/article/4056857- will-apple-next-aaa-rated-company?app=1&auth_param=70583:1cd2qfc :b996ecb86441181f700647f3f12dfd52&uprof=14.
5 Colvin, G. 2016. Tim Cook’s epic growth challenge at Apple. Fortune, January 7, http://fortune.com/2016/01/07/tim-cook- apple-growth- challenge/. 6 Fortune. 2018. World’s most admired companies. http://fortune.com/ worlds-most-admired-companies/. 7 Apple Inc. 2018. 2018 annual report, 10-K filing. www.apple.com/ investor. 8 January 24, 2009, was the 25th anniversary of the Macintosh, unveiled by Apple in the “Big Brother” Super Bowl ad in 1984. www.youtube. com/watch?v5OYecfV3ubP8. See also the 1983 Apple keynote speech by a young Steve Jobs, introducing this ad: www.youtube.com/ watch?v5lSiQA6KKyJo. 9 Apple Inc. 2001. Ultra-portable MP3 music player puts 1,000 songs in your pocket. October 23, www.apple.com/pr/library/2001/oct/23ipod. html. 10 Apple Inc. 2010. Apple sells two million iPads in less than 60 days. Press release. May 31, www.apple.com/pr/library/2010/05/ 31Apple-Sells-Two-Million-iPads-in-Less-Than-60-Days.html. 11 BBC News. 2010. Apple passes Microsoft to be biggest tech company. BBC News, May 27, www.bbc.co.uk/news/10168684. 12 Keizer, G. 2012. Apple drains iPhone5 pre-order supplies in an hour. Computerworld, September 14, www.computerworld.com/s/article/ 9231285/Apple_drains_iPhone_5_pre_order_supplies_in_an_hour. 13 IDC. 2015. In a near tie, Apple closes the gap on Samsung in the fourth quarter as worldwide smartphone shipments top 1.3 billion for 2014, according to IDC. IDC, January 29, http://www.idc.com/getdoc. jsp?containerId=prUS25407215. 14 Schlender, B. 2005. How big can Apple get? Fortune, February 21, money.cnn.com/magazines/fortune/- fortune_archive/2005/02/21/ 8251769/index.htm. 15 Tofel,K.C.2012.WhyonlySamsungbuildsphonesthatoutselliPhones. GigaOM, November 9, www.businessweek.com/articles/2012-11-09/ why-only-samsung-builds-phones-that-outsell-iphones. 16 MacRumors Staff. 2019. Apple stores: Keep track of Apple’s retail stores worldwide. MacRumors, February 6, https://www.macrumors. com/roundup/apple-retail-stores/. 17 AppleInc.2012.2012AnnualReport;Palladino,V.2013.AppleStore receives trademark for “distinctive design and layout.” Wired, January 30, www.wired.com/design/2013/01/apple-store-trademark/. 18 Wahba, P. 2015. Apple extends lead in U.S. top 10 retailers by sales per square foot. Fortune, March 13, http://fortune.com/2015/03/13/ apples-holiday-top-10-retailers-iphone/. 19 Fox, F. 2008. Mac Pro beats HP and Dell at their own game: Price. LowEndMac.com, May 16, lowendmac.com/ed/fox/08ff/mac-pro-vs- dell-hp.html. 20 Lowensohn, J. 2012. Lingering issues found at Foxconn’s iPhone factory. CNET, December 14, news.cnet.com/8301- 13579_3-57559327- 37/lingering-issues-found-at-foxconns-iphone-factory/. 21 Bennett, D. 2012. Apple’s Cook says more Macs will be born in the U.S.A. Bloomberg Businessweek, December 10, www.businessweek. com/articles/2012-12-10/apples-cook-says-more-macs-will-be-born-in- the-u-dot-s-dot-a-dot. 22 Jones, A. and J.E. Vascellaro. 2012. Apple v. Samsung: The patent trial of the century. Wall Street Journal, July 24, online.wsj.com/ Strategic Management: Text and Cases CASE 32 :: APPLE INC.: WHERE’S THE NEXT INNOVATION? C263 article/SB10000872396390443295404577543221814648592. html?mod5wsj_streaming_apple-v-samsung-trial-over-patents.
23. 23 Noel, P. 2014. iProblems: Learning from Apple’s strained supply chain. MBTMag, November 11, http://www.mbtmag.com/ articles/2014/11/iproblems-learning-apple%E2%80%99s- strained- supply-chain.
24. 24 Rexaline, S. 2017. Amid reports of a revamp how much does the Mac mean to Apple? Yahoo Finance, April 7, https://finance.yahoo.com/ news/amid-reports-revamp-much-does-180029678.html; Share of Apple’s revenue by product category from the 1st quarter of 2012 to the 2nd quarter of 2019, https://www.statista.com/statistics/382260/ segments-share-revenue-of-apple/.
25. 25 Haslam, K. 2017. New Mac Pro 2018 latest rumours: Release date, UK price, features & specs. Mac World, April 10, http://www.macworld. co.uk/news/mac/new-mac-pro-2018-latest-rumours-release-date-uk- price-features-specs- 3536364/.
26. 26 MacRumors Staff. 2019. What’s next for the iPod Touch? MacRumors, March 19, https://www.macrumors.com/roundup/ipod-touch/.
27. 27 Apple Newsroom. 2016. Apple celebrates one billion iPhones. July 27, https://www.apple.com/newsroom/2016/07/apple-celebrates-one- billion-iphones.html.
28. 28 IDC. 2012. Worldwide mobile phone growth expected to drop to 1.4 % in 2012 despite continued growth of smartphones, according to IDC. IDC, December 4, www.idc.com/getdoc.jsp?containerId5prUS23818212#. UQSn- _J5V8E.
29. 29 Wagstaff, J. 2012. In Asia’s trend-setting cities, iPhone fatigue sets in. Reuters, January 27, news.yahoo.com/asias- trend-setting-cities-iphone- fatigue-sets-212849658-finance.html.
30. 30 Pogue, D. 2010. Looking at the iPad from two angles. New York Times, March 31, www.nytimes.com/2010/04/01/technology/personaltech/ 01pogue.html?_r51&pagewanted5all&partner5rss&emc5rss.
31. 31 McCracken, H. 2010. iPad. Time, November 11, www.time.com/time/ specials/packages/article/0,28804,2029497_2030652,00.html.
32. 32 Cellan-Jones, R. 2011. iPad 2 tablet launched by Apple’s Steve Jobs. BBC News, March 2, www.bbc.co.uk/news/technology-12620077.
33. 33 Johnson, J. 2013. Kindle Fire, Android tablets chip away at iPad marketshare. Inquisitr, January 2, www.inquisitr.com/465784/kindle- fire-android-tablets-chip-away-at-ipad-marketshare/#Q2bAVTfXbEpu7 2tB.99.
34. 34 Inquisitr. 2015. Galaxy Tab S2 tries to kill Apple’s ‘already dying’ iPad Air. Inquisitr, February 18, http://www.inquisitr.com/1853887/ samsung-galaxy-tab-s2-tries-to-kill-apples-already-dying-ipad-air/.
35. 35 Schlender. 2005. How big can Apple get? 36. 36 Apple Inc. 2009. Apple announces Safari 4—the world’s fastest and
most innovative browser. Press release. February 24, www.apple.com/ pr/library/2009/02/24safari.html.
37. 37 Siracusa, J. 2008. Straight out of Compton: Google Chrome as a paragon of ambition, if not necessarily execution. ars technica, September 2, arstechnica.com/staff/fatbits/2008/09/straight-out-of- compton.ars.
38. 38 Widder,B.2014.Battleofthebestbrowsers.DigitalTrends, November 25, http://www.digitaltrends.com/computing/the- best- browser-internet-explorer-vs-chrome-vs-firefox-vs-safari/; https://www. netmarketshare.com/browser-market- share.aspx?options.
39. 39 Sanders, J. 2014. iCloud Drive: Apple’s appealing recipe for cloud storage. TechRepublic, June 5, http://www.techrepublic.com/article/ icloud-drive-apples-appealing-recipe-for-cloud-storage/.
40. 40 Cheng, R. 2012. Apple CEO: We are “extremely sorry” for Maps flap. CNET, September 28, news.cnet.com/8301- 13579_3-57522196-37/ apple-ceo-we-are-extremely-sorry-for-maps-flap/.
41. 41 Cherry, S. 2004. Selling music for a song. Spectrum Online, December, www.spectrum.ieee.org/dec04/3857. 42. 42 https://www.apple.com/itunes/music/.
43 Karp, H. 2014. Apple iTunes sees big drop in music sales. Wall Street Journal, October 24, http://www.wsj.com/articles/itunes-music-sales- down-more-than-13-this-year-1414166672. 44 Aycock, J. 2019. WSJ: Apple Music passes Spotify in U.S. paying subscribers. Seeking Alpha, April 5, https://seekingalpha.com/ news/3448760-wsj-apple-music-passes-spotify-u-s-paying-subscribers. 45 https://www.statista.com/statistics/263794/number-of-downloads- from-the-apple-app-store/. 46 Blair, I. 2019. Mobile app download and usage statistics (2019). https://buildfire.com/app-statistics/. 47 Dilger, D.E. Editorial: The new services–Apple Arcade plays to win, but what game? Apple Insider, May 3, https://appleinsider.com/ articles/19/05/03/editorial-the-new-services---apple-arcade-plays-to-win- but-what-game. 48 Luk, L. and D. Wakabayashi. 2015. Apple orders more than 5 million watches for initial run. Wall Street Journal, February 17, http://blogs. wsj.com/digits/2015/02/17/apple-orders-more-than-5-million-watches- for-initial-run/?mod=rss_Technology. 49 Cybart, N. 2015. Don’t focus on Apple Watch edition pricing. SeekingAlpha, February 25, http://seekingalpha.com/article/2950516- dont-focus-on-apple-watch-edition-pricing. 50 Sun, L. 2018. Apple gains a foothold in the smart speaker market: A foolish tale. USAToday, August 18, https://www.usatoday.com/story/ tech/news/2018/08/18/apple-market-share-smart-speaker-google- amazon/37458353/. 51 https://www.macrumors.com/2019/11/01/hands-on-with-apple-tv-plus/ 52 Dilger, D.E. 2019. Editorial: Apple’s super obvious secret–Services is software. Apple Insider, May 1, https://appleinsider.com/ articles/19/05/01/editorial-apples-super-obvious-secret---services-is- software. 53 DoctoRx. 2015. The real importance of the Apple car project. SeekingAlpha, February 20, http://seekingalpha.com/article/2935276- the-real-importance-of-the-apple-car-project?auth_param=70583:1aeel0c: 036a6dfaf470ca644123bac661ffb276&uprof=14. 54 Painter, L. 2017. iCar release date rumours, features and images– Apple Car rumours. MacWorld, March 3, http://www.macworld.co.uk/ news/apple/icar-apple-car-release-date-rumours-news-caros-evidence- patents-march-2017- 3425394/; Betz, B. 2019. Apple increased autonomous testing in 2018 (update). SeekingAlpha, February 13, https://seekingalpha.com/news/3432866-apple-increased-autonomous- testing-2018-update. 55 D.M. Martins Research. 2017. App store: Key to apple’s growth target. Seeking Alpha, March 29, https://seekingalpha.com/article/4058813- app-store-key-apples-growth-target?app=1&auth_param=70583:1cdnih 0:243d936e23ab6d685e106ccb80db6615&uprof=14. 56 The Growth Guy. 2019. What is the next big phase in Apple’s growth? Subscriptions. SeekingAlpha, March 28, https://seekingalpha.com/ article/4251532-next-big-phase-apples-growth-subscriptions. 57 Spence, E. 2019. 2019 iPhone hints suggest a lack of innovation. Forbes, January 14, https://www.forbes.com/sites/ewanspence/ 2019/01/14/apple-iphone-new-leak-rumor-innovation-camera-boring- failure/#27e8c28b2315. 58 Russolillo, S. 2013. Apple losing luster: Is it now a value stock? Wall Street Journal, January 14, blogs.wsj.com/marketbeat/2013/01/14/ apple-growth-or-value-stock/. 59 Clifford, C. 2019. Ex-Apple exec Guy Kawasaki: I want a product that will make me ‘wait like a fool outside an Apple store.’ CNBC, March 26, https://www.cnbc.com/2019/03/26/guy-kawasaki-on-the-state-of- innovation-at-apple.html. 60 Apple, Inc. Q2 2019 Earnings Conference Call April 30, 2019 5:00 PM ET. https://seekingalpha.com/article/4258275-apple- inc-aapl-ceo- tim-cook-q2-2019-results-earnings-call-transcript?part=single.