BUSINESS ASSIGNMENT

BA 490: Senior Seminar in Business

Dr. Lori D. Paris

March 11, 2012

Table of Contents Basic Company Information/History 3 Industry Dominant Economic Features 5 Five Forces Analysis of the PC industry 14 Strategic implications of Five Forces 17 Driving Forces in the Industry 18 Industry Key Success Factors 20 Identify Industry Competitors 21 Strategic Maps 24 Summary of the industry and the overall attractiveness 27 Defining Strategy 28 SWOT analysis 30 Key Resources & Competencies 36 Competitive Strength Assessment 37 Apple’s Leadership and Corporate Culture 37 Financial Analysis 38 Recommendations 42 Appendix A: Financial Ratios 45 References 53

History

In 2011, Diane Hamilton described Apple Inc.’s mission statement as; “Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and internet offerings” (para.3). Apple’s vision statement is “Man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them" (Huzefa et al, 2009, p.15). With a common objective to create a low-cost and easy to use computer, the consummate salesperson Steve Jobs and the technical genius Steve “Woz” Wozniak got together in 1976 and founded Apple. In that same year, their first system, the Apple I, was launched and sold for $666.66 per unit (Powell, para 1). In 1977, Apple II was released and sold for $1,298.00, and sales spiked significantly (Huzefa et al., 2009, p.15).

By 1980, Apple became a publicly traded company, and the Apple III was released. A number of business and technical issues, such as overpricing of the product, resulted in a profitable fiasco. The poor revenue and technical failure resulted in the firing of 40 employees by the CEO at the time, Michael Scott. The 40 employees accounted for nearly half the original Apple II team. The first commercially successful personal computer was Apple’s Macintosh (Mac). Released in 1984 under the guidance of chairman Steve Jobs, it was the first computer that included a mouse and a graphic. The Mac sold for $2,495.00. “By the time the Apple II and the Mac rolled around, Jobs and Woz had popularized the personal computing revolution, and the rest, as they say, is history” (Powell, para. 1).

During the years between 1985 and 1993, Apple grew from $600 million in annual sales to $8 billion by 1993. Business issues for Apple in the following years included the release of Microsoft’s Windows 95 operating system and cheap PC clones able to run the Macintosh operating system, resulting in significant quarterly losses in 1996 (Huzefa et al, 2009, p. 11-12).

In 1985, Steve had been fired from Apple by the board of directors after ongoing internal conflict within the company. He began a competing company, NeXT, which designed high-end computer systems and a refined operating system. Much of NeXT’s mission was to personally compete with Apple due to a longstanding grudge Steve carried against the board. 1997 saw the triumphant return of Steve Jobs to Apple. The great icon and visionary of the Macintosh, returned to the company when Steve negotiated the buyout of NeXT by Apple.

Steve Jobs’s return to Apple “steered the company away from the clones and reversed direction with a back-to-basics approach” (Powell, para. 15). He officially became the CEO in January 2000. Steve reinvented Apple’s product line by introducing stylish hardware and a revamped operating system. His first success back with the company was the release of the iMac. The computer’s stylish colors and simple design quickly became a cultural icon and brought Apple out of near bankruptcy.

In October 2001, Apple and the entire music industry were revolutionized, by the released of the iPod. Jobs’s ability to innovate new products and ideas, as well as implementing several key structural changes, helped turn the company’s previous poor performance in the right direction (Thompson et al, Case 7, p. 148). Between 2001 and 2010, Apple has seen the international opening of a total of 324 stores (approximately 72% are in the U.S), and sales that have been steadily increasing year after year (Fig. 1) (Jade, 2011, para. 5). As of January 2012, Apple had 60,000 full time employees.

FIGURE 1.

Sales for Apple retail stores between 2001-2010

Note: Store total for fiscal year

Industry Dominant Economic Features

Apple operates in the personal computer (PC) industry. They have experienced incredible growth in the last decade, somewhat due to the overall year-after-year growth in the PC industry, as well as their innovative approaches to shaping the future of the industry. The analysis of the dominant economic features in the PC industry will focus on the global market rather than just the U.S. alone, because PC manufacturers sell there products world-wide.

Before analysis of the industry can be performed, it is crucial to decide whether to include tablets as part of the PC industry. Tablet computers, such as the iPad and various competing products, can arguably be considered personal computing devices, or alternatively, a separate niche product of an emerging industry. This potential ambiguity is an important consideration because the growth of tablet devices could be a potential “industry-changer” resulting in the future success of companies such as Apple. For this analysis, tablet devices will be included in the broader PC industry, and not as a separate niche industry. Tablet devices contain all the major internal components of traditional laptop computers, and current operating systems allow them to nearly replace traditional computers in some applications.

Market size and growth rate

PC sales have grown exponentially since the beginning of the century, but have plateaued in recent years. A sharp upswing in growth rate is apparent after the introduction of tablets. Figure 2 is telling of the industry’s position and product life cycle as growth generally has been slow for traditional PCs, but with the advent of tablet computers, has sharply risen. Before the introduction of the tablet, computer sales consisted of laptops and desktop PCs. It is difficult to say if in recent years the stagnation in sales of standard PCs is the result of consumers finding their needs met by tablets, whereas in the past they would have purchased a standard PC. In any case, the global success of Apple’s iPad is a clear indication of the shift of sales from standard PCs towards tablets accounting for present growth in the industry.

FIGURE 2

Worldwide PC Unit Shipments, 2000-2015

Note: Source IC Insights. From Electronics.ca Research Network (2012).

As evidenced in Figure 2 (“Impressive Growth Continues,” 2012) the industry life cycle excluding tablets, is clearly at the maturity stage. Sales of standard PCs have slowed from their previous growth years. When including tablets, a different trend can be observed. There is clearly an exponential growth in sales for the PC industry, indicating that they are yet again in a growth stage of their life cycle. The PC industry has gone from growth stages to maturity in sales of standard PCs, but the innovation of the release of the tablet has resulted in a renewed growth stage.

Number of rivals

Five corporations have approximately 70% of the PC market. These are Acer, Apple, Dell, HP, and Lenovo. Although there are a number of companies that are competing in the PC industry, there are only five that can be considered very large players dominating the industry (Fig. 3) (Elmer-DeWitt, J. 2012). There exist a number of small companies that put together standard PCs for niche markets, such as gaming and certain high-end graphic design machines. While small companies cater to niche markets, the five largest compete for market share amongst your average computer customers.

FIGURE 3

Global computing share including and excluding iPads

Scope of competitive rivalry

As shown in Figure 4 (Arthur, 2011), the majority of the PC makers sell their goods in global markets. Consolidations have also led many companies to become global through the acquisition of international operating units. Overall, between 2006-2009, profit margins for the companies in the PC industry increased significantly, mainly due to consolidations in the industry (“Market Environment.” 2011 para. 2). Therefore, the significance for PC manufacturers to have a presence in the foreign market is obvious in order to survive in a competitive market.

FIGURE 4

Millions of PC sales by region, 2009 Q1-2001Q3

Degree of product differentiation

The importance of contrasting products and services among rivals in the PC industry is an absolute necessity for all players trying to improve their market share in a far from perfect competitive environment. However, the number one reason for the high price competition in the PC industry is due to the similarity among marketed products due to mimicking. Copying other companies’ product releases is as common as the PC itself. HP’s European personal systems group head, Eric Cador, announced HP’s response to the successful iPad and claimed that: “In the tablet world, we’re going to become better than number one. We call it number one plus” (Tung, 2011 para. 2). Along with mimicking other company products, the five main players in the PC industry are constantly trying to win customer base through product differentiation.

· Acer are striving to distinguish its products by focusing on value-added benefits, and strive to become the very first super brand ultra extreme notebook (Ren, 2012 para. 1), as well as designing environmentally friendly products (Tarsus, para. 2)

· Apple’s have clearly succeeded to differentiate their products form others, with its regular innovative approach in improving the features (i.e. style and ease of use) and groundbreaking technology of its products (Welker, para. 2-3). Apple also boasts incredible customer support.

· Dell differentiated its products with a strategy on delivering solutions. “To deliver solutions those are highly capable, affordable and flexible to meet the needs of large enterprises, public institutions, small and mid-size businesses” (Dell, para. 2). They have focused on enterprise users, providing scalable products for different business needs.

· HP has a genuine commitment to sustainability, as well as striving to provide superior customer service (HP. 2010 para. 2).

· Lenovo differentiates itself by its in-house manufacturing expertise as well as its corporate target audience, rather than the individual market (Garg, 2011 p. 32).

Product innovation

Perhaps the most vital part of a company’s economic feature is the product innovation aspect. The PC has undergone considerable rapid innovation and change since its introduction, and the steady price decline in recent years, mainly credited to globalization of cheaper production, has further stimulated the urge for innovation (Dedrick, et al, 2006 p. 4).

An effect caused by the rapid innovation is the shortening of product lifecycles, which is the time between a products release day until the day it is withdrawn from the market. There is an inverse relationship between shortening product lifecycles and PC makers spending in research and development (R&D) (Bayus, 1998, para. 1). The importance of R&D rests in its ability to satisfy customers needs for innovative PC products that fit different lifestyles, ultimately resulting in increased market share for the successful company.

Supply and Bargaining Power

There are mainly two segments in the PC industry supply-chain, peripheral components providers and operating systems providers. There are manufacturers that supply the PC makers with components such as memory chips, keyboards, and monitors. The majorities of these components are homogeneous and are available from a large number of suppliers. The other component of the PC suppliers is the manufactures that supply PC makers with key components products, such as microprocessors and operating systems (OS).

FIGURE 5

Market Share of PC Suppliers

Hardware components are becoming increasingly commoditized, which limit the bargaining power of suppliers. Therefore, the PC maker is not limited to a single supplier, but instead chooses among the best suitable alternative. The latter part of the supply-chain has considerably more bargaining power. Microsoft and Intel are good examples of suppliers in the PC industry that have established a dominant strategic position in the industry and have significant bargaining power (Simister, 2011 para. 3). This is due to their considerable dominant market shares. Figure 5 shows that multinational semiconductor chip maker, Intel, possessed a 60.7% market share in the graphics processor industry, and their share is forecasted to grow through the future (GfxS Staff, 2011). Microsoft also has significant bargaining power due to their 80% market share in operating systems and is therefore the single major supplier of that component (Keaton, 2011) (Fig, 6)

FIGURE 6

Total Market Share of the Larges Operating System Makers

Demand and Bargaining Power

As shown in Figure 7, PC buyers are divided into three categories: business, home, and education. Not only does this show a 27.7% increase in Apple’s total growth of shipments versus a decline of 1.2% in the rest of the market, but it also illustrates a generalized picture of the PC markets overall segmentation sizes of its buyers. The PC market is dominated by large-scale buyers, such as business and educational institutions, that in turn have significant more influence in price setting.

FIGURE 7

Mac Growth vs. the PC Market

Pace of technological change

The exponential increase of technological change in the past is not by any means expected to change. Bill Gates, Microsoft Chairman, predicted in 2008 that technological spikes in the next 10 years would be even larger that what we have seen in the past decade (Barakat, 2008 para 1). Hence, it is clear that big players in the PC industry need to be at the forefront of any technology advancement in order to stay in business, since technology is the core factor behind all computers.

Prevalence of background/forward integration

Even though vertical integration can be a complex and costly strategy to implement successfully, it can be beneficial for a company in many ways. There are benefits such as increased control over the value chain, improved cost control through the distribution process, and increase competitive advantage while blocking competitors access to valuable resources. Apple is one of the most vertically integrated companies in the world. In addition to

operating their own retail chains, they design the hardware and software in-house, and run their own digital content store, iTunes (Chen, 2011). In 2008, they acquired the microprocessor design house, Palo Alto Semiconductor (Fish, 2011). A decade ago, Dell was one of the world’s most integrated companies in the world, after acquiring Compaq and Electronic Data Systems (EDS). As of 2011, HP switched approach and are now at its shedding stage becoming less vertically integrated in an effort to trim operating expenses (Takahashi, 2011). A vertical integration strategy has both pros and cons, but it is necessary to understand that “for each big company, the calculation is always different” (Takahashi, 2011, para. 5).

Economies of scale/experience curve effect

Two commonly known concepts: economies of scale and experience curve effect, which can be used by players in the computer industry in order to decrease unit costs as volume rises. Hence, it widens a business’s chances to win market share over rivals, which in turn is a decisive factor, especially in the PC industry. When the PC producers double their production volume, the unit cost is approximately 50% (Bailom et al. 2007 p. 48). Consequently, it would be almost prohibitively competitive for any small firm to enter the PC industry, while in absence of these competitive advantages: economies of scale and experience curve effect.

Entry/exit barriers

The economics of scale as well as the experience curve effect advantages possessed by the dominant players in the PC industry works as a barrier for new competitors to enter the industry. Even though it is relatively cheap to enter the PC industry due to cheap raw material of building PCs, the capital requirement that would be required to compete with the established industry giants is prohibitively large. Taking into account that Apple spent an estimated $109 billion in research and development (R&D) last year alone makes a person likely to think twice about entering the industry (Dignan, 2011). Finally, well-known brand names established by the big players like Apple and Dell, have certain intrinsic value that is associated with their products. Not only is the brand name a great determinant of the company’s market position, but also works as a barrier to enter the extremely competitive industry.

Conclusively, the barriers to entry the PC industry are a challenge. They reduce the rate of entry of new firms, thus maintaining the level of profits for those already in the industry. However, with technological savvy, the opportunity to develop an innovative product that can be marketed to the large companies exists. The most probable situation for creating profit with the PC business would be to sell a technology to currently established companies.

Five Forces Analysis of the PC industry

Threat of new Entrants (WEAK)

· The presence of dominant players with established brands deters the entry of new players into the market. Strong brand preferences and customer loyalty works as a high barrier to entry.

· Because the five leading companies in the PC industry can take advantage of economies of scale associated with large-scale operations, the threat of new entries is lowered.

· There is a tremendous disadvantage for new entrants due to the resource disadvantage associated with the possession of proprietary technology by large players.

· The presence of copyrights on software etc. works as an absolute cost advantage for the firms possessing the rights, therefore working as a barrier to entry.

· The ease in making computers and the low capital requirement lowers the entry barrier.

The threat of new entrants in the PC industry is very weak, due to the evidence provided above. The possibility of newcomers entering the industry and succeeding is therefore extremely slim.

The Threat of Substitute Products and Services (LOW)

· The price of substitutes, such as netbooks and handheld mobile devices, with a lower price tag, increases the threat of substitutes in the PC market.

· The performance characteristic of substitute products does not reach the standards of PCs capabilities. This lowers the threat of substitute products.

· The switching cost to substitutes is low, another factor that increases the treat of alternative products.

The relative price/performance relationship of substitutes in the PC industry implies that the PCs still are way beyond any such substitute device due to its wide variety of functions. Even though smartphones can be considered a threat, the PC has itself come to work as a substitute to many products in the market such as TV, CD-player, photo album, book etc. Conclusively, the threat for substitute products is low. However, it is worth mentioning that if we were excluding iPads as a category of PCs, the treat of substitutes would be significantly stronger, because iPads are clearly cannibalizing the traditional PC sales.

Bargaining Power of Suppliers (Moderate/High)

· Suppliers of highly standardized/commodities components such as memory chips, keyboards, monitors etc., have low bargaining power due to the availability and the low switching cost of these products from a large number of suppliers.

· Suppliers such as Intel and Microsoft dominate the industry in their field. They supply the PC makers with differentiated components and therefore have large bargaining power.

· Intel and Microsoft also have a significant impact on many large PC makers value chain. This further increases their barging power.

Consequently, since there are mainly two segments in the PC industry supply-chain, it is fairly straightforward to determine the bargaining power of those suppliers. The large bargaining power possessed by Intel and Microsoft due to their differentiated products as well as their importance in the value chain of PC makers, weights more than the lack of bargaining power owned by the commodity suppliers. Therefore, supplier bargaining power in the PC industry is moderate to high, making the industry unattractive.

Bargaining Power of Buyers (Moderate)

· Bargaining power of large quantity buyers is large, such as government and large corporation/businesses, while individual buyers do not have much barging power.

· Because switching costs are low, buyers have the ability to switch when quality, service or price offered elsewhere is more competitive.

The overall bargaining power of buyers is moderate, making the industry unattractive from a profit making standpoint.

Industry Rivalry (Strong)

· Five large players dominate approximately 70% of the entire PC industry, which increases rivalry between the firms.

· HP and Apple, are the two largest players in the PC industry. Their market shares are within approximately 10% of each other. All the other players have market shares within 5% of each other. This balanced segmentation of market shares between players, increases the rivalry and makes the industry less attractive.

· The relative low strategic difference among large PC players in the industry also increases the rivalry between players, because they are, to an extent, fighting for the same market.

· The PC industry growth rate for standard PCs is maturing, which increases rivalry. On the other hand, the growth rate for tablet PCs has realized rapid growth since its birthdate. So while there is less rivalry in the market for tablet PCs, it is fierce rivalry between standard PC makers.

· All players in the PC industry realize revenue from other industries, but the majority of the revenue is from PC sales. This increases the rivalry among firms.

· The cost for buyers to switch between the industries giants is minimal, therefore stronger rivalry in the industry.

· Because the market share of the tablets are mainly in Apple, companies make aggressive moves to improve their market prospects, rivalry increases.

Clearly, the PC industry rivalry is very strong and unattractive from an earnings standpoint.

Strategic implications of Five Forces

By evaluating Porter’s Five Forces the PC industry’s potential profit and attractiveness can be examined through an assessment of its competitive environment. Strong rivalry among the players in the PC industry, the moderate bargaining power of customers, and the moderate/high bargaining power of suppliers makes the competitive environment unattractive from an earning standpoint. On the other hand, the competitive environment is ideal from a profit-making standpoint because entry barriers are high, and good substitutes do not exists. While it would be relatively unwise for newcomers to enter the PC industry, the industry itself has moderate opportunities for profit making.

Driving Forces in the Industry

Product Innovation

Gartner, the world’s leading technology research company, recognized netbooks as the one force driving the PC industry in 2009 (Hruska, 2008, para. 1). Today, the innovative introduction of tablets appears to be a driving force that will cause the PC industry environment to change. A potential effect of product innovation could be a wider customer base, renewed industry growth, and broadening the degree of product differentiation. Rivals that successfully incorporate product innovation can see a strengthening market share, to the expense of less successful competitors (Chaneta, p. 41).

Technological Improvement

Ultimately, product innovation in the PC industry is based upon technological improvement. Technological improvements generally are focused on building smaller and more energy efficient components. Most computer components depend on the size of semiconductor materials to create the various microchips and circuitry. Moore’s Law describes that roughly every two years the number of transistors that can be placed on an integrated circuit doubles. The decrease in size and cost of building components from cheaper and small semiconductors allows smaller products to be developed. These developments result in cheaper devices and smaller products (Kanter, 2011 para. 1-3).

The past is evidential enough to conclude that technological improvement can alter the industry landscape significantly. Not only does it allow for the development of advanced product lines, but it can also present an opportunity to minimize unit cost, which in itself can result in lower price to customers. This can positively affect large players in the industry that can take advantage of economies of scale and experience curve effect to increase profit margin.

Changes in Customer Expectations & Demographics

Industry conditions will change along with the realized consumers expectation philosophy of: “access everything, everywhere”. Prices of computers have decreased throughout the PC industry’s existence to a price affordable to most households. Also, “we use them for everything from storing home movies, music and photos, through to planning trips and holidays, socializing, online shopping, gaming, finding a cure for cancer and searching for extraterrestrial life” (Dexter, 2011 para. 5).

Leslie Fiering, research vice president at Gartner, strongly believes that kids, under the age of 15, will account for 50% of touchscreens users as of 2015. Garner also expects a significant increase in touchscreen devices for educational purposes (Schroeder, 2010 para. 2-5). According to J. Thomas, “Apple totally flipped the demographics of the tablet market almost overnight” (para, 11). As of 2010, males made up approximately 66% of the tablet market, and 62% were younger than 34, while no more than 10% were over 65. As of 2011, 49% of all users are women and 30% of users were 55 and older (Thomas, 2010).

The availability of information at our fingertips will have a profound effect on the PC industry and force adjustments to adapt to market demand. The result will force an extension in PC maker’s product line and the potential for increased profits is large. An expansion in target markets to women, as well as younger and older generations will arguably increase profits as well.

Impact of Driving Forces

PC makers that are able to successfully incorporate innovation will most likely be able to win market share and realize positive returns. Less successful players will loose market share, but an overall renewal of growth and profitability in the PC industry will most likely be the effect of product innovation. The technological driving force will undoubtedly present an opportunity for an increased profitability among large players in the PC industry, which can take advantage of economies of scale lower cost and increase unit shipments. Geographic shifts, such as changes in those who buy the products and how the products are used, will most likely expand the PC makers’ product lines and target market. This can have a profound effect on competitor’s income statements.

Industry Key Success Factors

There are particular competitive factors that are important to all players within the PC industry. These are termed “key success factors” (KSF). All of these are core elements that determine the future competitive success of the players in the PC industry.

Technology-related KSFs

Technological advancement is the core factor in the PC industry. According to Moore’s law, the number of transistors on a microchip will double about every two years. This law lays the foundation for the survival of any player in the PC industry. Without the ability to adopt new technological capabilities at the same time as improving energy efficiency, there is no chance of survival in this highly competitive industry.

Skills-related KSFs

There are two main reasons why Apple manufactured the iPhone in China rather than in the U.S. The principal and most obvious reason is the utilization of the cheap workforce in China. The second reason is the lack of qualified engineers in the U.S. Approximately 8,700 industrial engineers were required to oversee the assembly-line production, and Apple analyst’s forecasted that it would take as much as nine months to acquire the needed workforce. On the other hand, it would take 15 days in China (Chan, 2012 para. 3).

Effective cost control KSFs

The constant lowering of prices of PCs are predicted to continue. Because of this reason, PC manufactures need to establish an efficient cost control system, in order to make profit and to keep or improve market share.

Innovation KSFs

Figure 8 illustrates the significance of innovation in the fierce competitive PC industry. The shift away from traditional PCs to tablets and smartphones highlights the innovative approach that PC manufacturers need to focus on in order to maintain market share (Kingsley. H, 2012 para.1).

Figure 8

Units Shipped Per Year (Log Scale)

Marketing-related KSFs

During FY2010, Apple spent approximately $691 million on advertising. This was an increase of $190 million from 2009. Apple saw a tremendous increase in revenue due to efficient advertising strategies (Dilger, 2010 para 1). PC makers need to use efficient marketing related strategies such as advertising is clearly essential for the survival of the companies.

Identify Industry Competitors

There are primarily five competitors in the PC industry: Apple, Dell, HP, Lenovo, and Acer. A brief introduction of each corporation follows herein.

Apple Inc.

Apple Inc. and its wholly owned subsidiaries, collectively called “Apple,” are designing and manufacturing a wide range of technological product/services such as digital music players, software, personal computers, and mobile communication devices. The company was founded in 1977 in California. Apple is a global vendor who sells its products through its retail stores, online stores, direct sales force, and retailers. Apple’s customers are consumer, businesses, educational institutions, enterprises, as well as government and creative markets (Apple Inc., 10-K, 2010 p. 1). As of 2011, Apple has approximately 22% of the computer market share (see Fig. 6) and a net income of $14,013 million in 2010 (Apple Inc., 10-K, 2010 p. 47).

Hewlett-Packard (HP)

HP was founded in 1939 and was incorporated from California to Delaware 1947. HP is a global, leading provider of software and technologies to businesses, government, enterprises, and educational institutions (HP, 10-K, 2010 p. 3). In 2011, HP retained approximately 15% computing market share in the PC industry (see Fig. 6) and a net income of $8,761 million as of 2010 (HP, 10-K, 2010 p. 73).

Lenovo

1984 is the year when Legend Holdings was formed in China. They were incorporated in Hong Kong in 1988. Legend Holding changed its name to Lenovo as of 2004. Lenovo is a global corporation with employees in 60 countries, but serves customer in more than 160 countries. Lenovo supply customers (businesses, educational institutions, government) with technology products and services such PCs, servers, mobile devices, and workstations (About Lenovo, 2012 para. 1-5). Lenovo had, as of 2011, approximately 12% computing market share in the PC industry (see Fig. 6), with a net income of $76 million in 2010 (Lenovo, 10-K, 2010 p. 71).

Acer Inc.

Acer, the now globally operating corporation was founded in 1976. Acer supply customers (consumers, businesses, and educational institutions) with services and products such as PCs, netbooks, tablets, and projectors. (About Acer, 2012 para. 1). Acer maintained approximately 11% computing market share in the PC industry in 2011 (see Fig. 6), and realized $519 million as of 2010 (Acer Inc., 10-K, 2010 p. 75).

Dell Inc.

Dell is a global corporation and was founded in 1984. They offer a broad range of products (mobile products, desktop PCs, software, and servers) to a broad customer based including businesses, educational institutions, and consumers (Dell Inc., 10-K, 2010 p.1). As of 2011, Dell had accumulated approximately 7% global computing market share in the PC industry (see Fig. 6), and realized $1,433 million in net income as of 2010 (Dell Inc., 10-K, 2010 p.51).

Strategic Mapping

In order to analyze current market position of the five main rivals in the PC industry, strategic group mappings are presented in Figures 9, 10, and 11. The figures represent the competitive characteristics that separate the major rivals in the industry such as price, quality, support, inventory levels, and product-line breadth.

According to Fig. 9, the PC rivals product line breadth has an inverse relationship with the product price, quality, and support. While Apple has a narrow product line relative to rivals, this is not necessarily “the best place to be” for all companies. Apple has adopted a narrow product-line. Their position on the strategic map is clearly favorable for them, because their narrow product-line along with high quality products and excellent customer support, allows them to charge premium prices for niche products.

Fig. 10 reveals the inverse relationship between PC makers inventory turnover ratio and the product price, quality, and support. Apple’s high inventory turnover along with its high profit margin reveals two competitive advantages that Apple can use to win market share over rivals.

Lastly, Fig. 11 shows the inverse relationship between the PC maker’s profit margin ratio and the total asset turnover ratio (TATO). Analysis demonstrates that there is not “best place to be” on the strategic map. It depends on the specific company strategy. Nonetheless, a company that has a high PM along with a low TATO, ultimately have a so called “consumer advantage”. For Apple, this comes from their strong brand name as well as their ability to take advantage of economies of scale (Meier, 2010).

FIGURE 9

FIGURE 10

FIGURE 11

Summary of the industry and the overall attractiveness

The current state of the competitive environment in the PC industry was assessed with Porter’s five forces. Conclusively, there is an opportunity to make profit in the PC industry, mainly because entry barriers are relatively high and the lack of any real threatening substitute products. A cause of concern is the strong rivalry, moderate bargaining power of customers, and the moderate/high bargaining power of suppliers working as barriers for industry members to make profit.

Product innovation, technological change, and changes in who buys the products and who use it, are all driving forces that can alter the industry landscape in the near future. Players in the industry that successfully incorporate product innovation strategies have the opportunity to realize large profits and gain market share. Technology development in the PC industry will benefit large players that have the capabilities to take advantage of economies of scale and experience curve effect. Changes in buyers demographics puts a tremendous pressure on PC makers to adapt to market demand, but success in doing so will most likely result in large profits. Overall, successful adaption to future changes in the PC industry will positively favor the industry profitability.

The PC industry clearly has tremendous growth potential, mainly because our whole lives is dependent on technology and computers. Past evidence shows that worldwide PC unit shipments have growing steadily from FY2000 and is expected to grow even more up until FY2015 (Fig. 4).

Mounting competition between large players in the industry will inevitably squeeze industry profitability. Even though there is a relatively balanced segmentation of market positions and rivalries, Apple and HP currently have the largest market shares. This competitive position among rivals in the industry may inevitably result in plenty of opportunity for profitability for the top rivals, while the smaller rivals having to fight an intense battle with stronger rivals, and this will inevitably hurt their success.

Defining Strategy

Arenas

Apple offers a wide range of products such as Macintosh desktops and laptops, software, iPod, iPhone, iPad, iTunes, Apple TV, and iCloud (K10 p. 3). Apple’s main customers are in the consumer, small to medium businesses, education, enterprise and government market (10k p. 6). Apple has business operations in the U.S., Asia, and Europe. As of July 2011, the company had 357 retail stores in ten countries. However, Apple’s largest geographic market is the U.S., which accounted for approximately 39% of sales, as of 2011. (10k p. 8)

Apple’s operating system, Mac OS X, contains highly sophisticated core technologies such as Grand Central Dispatch, OpenCL, and 64-Bit throughput. These are developed so that the users can increase the speed and responsiveness while using applications (Core Technologies, 2012).

Differentiators

Apple’s logo, the symbol of lust and knowledge, is one of the most recognized brand symbols in the world. Apple’s unmatchable aesthetics as well as premium quality and reliability, allow them to charge premium prices due to the quality of the products. According to PC World’s “Reliability and Service Survey,” Apple “smoked” its competitors when it came to quality and reliability (Mick, 2010 para. 1-3).

Vehicle

On top of Apple’s internal development team that strives to create value for the customer, they have established many acquisitions in eight countries, as well multiple licensing agreements to many entities worldwide.

Staging

Apple opened their first retail outlet in 2001, located in Virginia. While pundits projected failure of Apple’s retail expansion, the company had 10 years of aggressive expansion, opening location after location. In the end of March 2011, Apple had openef 323 retail stores around the world, and they planned to open another 40 stores by the end of September (Zibreg, 2011 para. 1-2).

Economic logic

Due to Apple’s extraordinary innovative approach to aesthetics, they have the advantage to charge customer premium prices due to unmatchable services and proprietary product features.

Apple’s Strategy

With an aggressive approach of retail expansion, as well as its own internal development team, acquisitions, and licensing agreements worldwide, Apple strives to add value to its customer’s throughout the globe. The company’s unmatchable aesthetics, premium quality and reliability, superior ease-of-use, and seamless integration, allow them to charge premium prices for high quality, differentiated products. Apple’s successful innovative approach, as well as its operating system, hardware, and software, has established one of the most recognized brand symbols in the world.

SWOT analysis

Strengths

1. Brand Recognition & Customer Loyalty

According to Brand Finance, a consulting company that value brands names of large corporations, Apple’s logo rated second in the world, after Google. Apple’s logo was valued in 2011, to $39.3 billion. This was a 33% increase from the previous year, as well as the first year they beat corporate giants such as Microsoft, IBM, Wal-Mart, and General Electric (Elmer-DeWitt, 2011). Apple’s brand loyalty among users is extraordinary. When Apple has any issues with its products, users are very patient and forgiving, and keep buying their products.

2. Design and Innovation

Apple’s aesthetic product design, ease of use, and reliability has allowed them to maintain tremendous customer loyalty all over the globe. Even though Apple’s product design is consistent, their portfolio is not. Innovation has allowed Apple to offer customers a variety of ways to utilize their products, such as the iPad, iPod, and MacBook Air.

3. Marketing

Apple and advertising go hand in hand. Their first significant ad campaign was the “1984” Super Bowl commercial, marking the beginning of two decades of an extremely successful marketing career. The very successful “Think Different” ad campaign that was debuted in 1997 came to be remarkably popular (Hormby, 2009 para. 28). Ultimately, Apple’s success in marketing their products has been a major reason for their successful earnings history.

4. Research and Development (R&D)

As illustrated by Figure 11, Apple’s R&D budget is significantly more effective than its rivals, with less than 10% of net income devoted to R&D. Hence, Apple have not spared expenses on its R&D (see Figure 12). The following thesis is still valid: “Apple develops market-dominating products on a bargain-basement R&D budget” (Apple’s Research and Development Advantage, 2011 para. 2).

FIGURE 11. R&D as a Percentage of Net Income

FIGURE 12. Research & Development Dollars

5. Retail Location

Between 2009 and 2010, Apple’s retail sales increased by $3.1 billion or 47%, and $4.3 billion or 44% the following year. In the end of 2009, 2010, and 2011, Apple owned 273, 317, and 357 retail stores, respectively. The vast majority of stores are in the U.S. (Apple Inc., Form 10-K, 2011 p.34). This illustrates Apple’s magical retail store success and according to RetailSales, Apple ranked number one in sales per square feet as it generates, annually, more than $5,626 per square foot (Reisinger, 2011)

Weaknesses

1. Ultimate Control

Apple is in complete control over operations, supply chain and manufacturing activities. It can be argued that this is the secret behind their overall success. On the other hand, the fact they only offer their own OS on their own devices, can be seen as a significant weakness, particularly in the mobile phone market. The Android OS works on many various devices, and this is the main reason why Android are ahead of the iPhone, as far as sales goes.

2. Yearly Upgrades

Apple recently announced that they are moving OS X to a yearly release cycle. Some might argue that this is on of Apple’s strengths, because it poses a great opportunity to introduce new features for consumers. However, it is more than likely to create problems and dissatisfaction among consumers, especially large-scale buyers such as businesses and schools (Faas, 2012). When a relatively expensive product becomes obsolete after only 12 months, many consumers become unsatisfied, and one can only speculate on whether consumers will be loyal enough to pay for pricy Mac system upgrades. Albeit, to date Apple has done an excellent job of pricing OS upgrades.

3. Higher Prices & Less Market Share than Rivals

Apple is known for charging premium prices for niche product designs. This could be seen as a weakness due to the limited market segmentation that they can target. Also, as illustrated in Fig 6, Apple has a larger market share than its four largest rivals, when including the iPad as a PC. However, when we take away the iPad out of the calculation, Apple’s PC market share is far below all four rivals. This phenomenon tells us that Apple’s PC sales are significantly dependable upon one product, the iPad. Hence, it can be seen as an internal weakness.

4. Little Sales to Businesses

According to IDC, Mac sales in the last quarter of 2010 were seven times as much as the overall PC market. This is also the 19th quarter that Mac has surpassed the whole market. Hence, their biggest increase came from business and government sales. For the last quarter in 2010, business sales grew 65.4% and government sales grew 549.5%. Even though this arguably is a very large number, compared to the overall market, there is a drawback that is easily overlooked. Government sales are still only 1% of the overall total sales of the Mac, while business accounts for as little as 3% (Foresman, 2010 para. 1-2). This small-scale sale to business and government can be seen as an internal weakness of Apple’s ability to efficiently sell their product to vital enterprises.

Opportunities

1. International Sales and Growth rate of PC industry

As of FY2011, 35% of Apple’s net sales were domestic. However, the fastest growing market was Asia-Pacific, with a growth rate of 174% from the previous year (Apple Inc., Form 10-K, 2011 p.30). This clearly indicates that Apple have the opportunity to grow in other market segments worldwide.

2. Innovative Products

It is no question that Apple iPad is the driving force behind tablet computers. As illustrated in Fig. 4, tablet computers are projected to grow at double-digit growth rate at least until 2015. This demonstrates the opportunities that lie behind an innovative product strategy.

3. Increase Market Share

With a large enough scope of market share, a company has monopoly power. Approximately 90% of all PC users worldwide run Windows. Microsoft’s dominance in the software market have allowed them to earn generous profits, primarily because they have been able to hold about 90% of the market. As of 2011, Windows market share dropped below 90%, due to other operating systems such as Apple’s OS X (Brodkin, 2011 para. 1). Clearly, there is an opportunity for successful companies to win market share from rivals and realize larger returns.

4. Changing Demographics

In 2010, when the original iPad was released, things changed. It suddenly became “cool” to use an iPad. According to J. Thomas, “Apple totally flipped the demographics of the tablet market almost overnight” (para, 11). Apple also made it extremely easy to use the iPad, which in turn changes their target market to an even younger generation. As of 2010, males made up approximately 66% of the tablet market, and 62% were younger than 34, while no more than 10% were over 65. As of 2011, 49% of all users are women and 30% of users were 55 and older (Thomas, 2010).

Threats

1. EHS Liabilities

Foxconn has one of the most sophisticated manufacturing system on earth, which has allowed Apple and many other companies to increase the speed of manufacturing to a level that could only be dreamed of. There has been some serious safety problem and issues associated with this multi-billion dollar corporation such as excessive overtime, underage workers, improperly disposal of hazardous waste, serious work injuries, and suicides among workers. These hazards also included the well-known explosions that occurred at the Chengdu plant in 2011. According to the Chinese group that publishes the warning for hazardous conditions inside the plant, Apple was well aware of the situation but did not do anything to prevent it from happening (Duhigg, 2012 para. 5-8). This could potentially harm Apple’s reputation tremendously, and that can ultimately have a negative effect on the company’s profit.

2. Competition in Technology

The fierce global competition over technology between the main players in the PC industry can be seen as a threat for all players. Even though there are not more suppliers than buyers, the existing suppliers are enormous in size. They all have sizeable resources to employ threatening competitive moves than can come to affect other companies’ profitability negatively. Hence, competition can be a threat for Apple.

3. Steve Jobs Death

The death of Apple’s founder Steve Jobs will possibly have a negative effect on the company’s future. Steve Jobs reinvented Apple and brought it back from the brink of insolvency in 1997. He has been an integral part of the design of all the Apple products over the last decade. Analysts speculate on the effect this could have on rivals, and weather this will work as an opportunity for competitors to catch up with Apple’s technological superiority (Kim, M. et al, 2011 para. 1).

Key Resources & Competencies.

Apple’s resources, both tangible and intangible, have allowed them to gain a competitive advantage in multiple areas.

· As of December 2011, Apple reported $138,681 million in total assets and $25,922 in net income.

· Apple undeniable influence in the technological world has changes how people see technology, and the list of technological advancement is endless. Some examples are Mac OS X, the iPad, iPhone, and iTunes.

· Apple’s human resources (HR) team, with its diverse employee base, has added enormous value to the company throughout its history. Steve Jobs exceptional business approach was evidently one of the most important, if not the most important, resource they ever had.

· Apple’s retail locations, which are rare in the PC industry, have added tremendous value to the company’s success. Even though speculators were extremely pessimistic when the first store opened, Apple has shown otherwise. Apple makes approximately $5,626 per square foot of floor space in stores annually, making them by far the most profitable retailer in the U.S. Second to Apple was Tiffany & Co, with sales of $2,974 per square foot (Reisinger, 2011 para. 2-3).

· Innovative design and technology is definitely their most significant core competence, and the reason why they are realizing enormous returns, year after year. The “Think Differently” advertising campaign illustrates this core competence.

· Apple’s well-known reputation and brand loyalty is a key resource that takes years to build up. This is evident when their logo was valued, in 2011, to $39.3 billion.

Competitive Strength Assessment

Table 1 demonstrates a weighted competitive strength assessment of Apple’s two closest rivals, Dell and HP.

TABLE 1.

Leadership and Corporate Culture

Apple’s solid corporate result driven culture and leadership have clearly promoted successful strategy implementation and execution. Many would agree that the legend, Steve Jobs, is the primary reason for the Apple’s success. According to Denny Strigl, Steve Jobs “created, lived and drove Apple’s culture” (para.2). All managers of Apple clearly want to improve their customer’s existence, and they also “live” the company’s culture (Strigl, 2011). Steve Jobs’ description of Apple’s corporate culture was “that of a startup” (Merchant, 2010, para.1). It is mimicking the entrepreneurship and innovation characteristics of any new business, as well as the superior products, velocity, and growth. What Jobs did to Apple right before its potential collapse in the end the 1990’s, was something historical. He gave all focus on establishing a high-performance culture. This was done in three ways. First, Jobs changed Apple’s strategy to a “one-thing” strategy, which meant that he got rid of certain business segments, even profit generating ones. Jobs also encouraged more debates when developing new ideas, at the same time as eliminating any earlier passive-aggressiveness. Finally, he imposed cohesion in all operational stages throughout the company, from concept to product to sales (Golson, 2011).

Financial Analysis

One of the most accurate tools to evaluate how well a company’s strategy is working, is by analyzing the company’s financial statements and comparing the numbers with benchmarks. This does not only allow us to see if the company has achieved strategic success, but it let us see whether the company has successfully accomplished the corporations primary goal to maximize shareholders wealth. A detailed ratio analysis will be presented, containing Apple’s finances between FY2008-FY2010. Three benchmarks, Dell, HP, and Lenovo, will be used to evaluate whether Apple is above or below close rivals in the PC industry. All graphs related to the financial analysis are in Appendix A.

Profitability & Leverage Ratios

In order to see how Apple is performing in terms of its ability to generate profit, a number of profitability ratios are assessed and evaluated. As shown in Figure 13, Apple had a gross profit margin of 39%, 40%, and 35% for 2008, 2009, and 2010, respectively. This figure was almost double its closest rival, HP, for all three years. Figure 14 reveals Apple’s operating profit margin, and it is significantly higher than its rivals, with a positive trend line from 2008 to 2010. This indicated that Apple has a favorable position when it comes to paying off their fixed costs. The company’s profit margin (PM) (Figure 15) from 2008-2010 is also significantly higher than all of the benchmarks. It is worth mentioning here that one reason for Apple’s high profit margin is because they have no long-term debt, and therefore no interest expense. The profitability of the entire enterprise, measured by the PM also shows a positive trend line from 2008-2010. This indicated that Apple’s overall operations are efficient relative to the benchmarks.

Return on Asset (ROA) (Fig 16), shows how efficient management is at using its assets to generate earnings. Apple’s ROA is also here showing a positive trend from 2008-2010, and relative to its rivals, Apple’s management team have efficiently succeeded to allocate its resources.

Apple’s return on equity (ROE) (Fig 17), which indicates the company’s return on the owners’ investment, was 42%, 26%, and 29% in 2008, 2009, and 2010, respectively. Relative to its rivals, Apple is outperforming all of them in 2010, but comes only at second place, after Dell, in 2008 and 2009. Also, there is no specific trend that can be seen over the three years. A more extensive analysis needs to be made in order to see why Apple is showing this relative inefficiency and inconsistency in its ROE.

In order to do so, a so-called DuPont analysis is executed. It is an expression that breaks down ROE into three components, PM, total asset turnover (TATO), and equity multiplier (EM). As already established, Apple’s PM is well above its benchmarks, and this indicates the company’s efficiency in generating profits, therefore it is not the cause to the firm’s low ROE. As illustrated by Figure 18, Apple’s TATO is below all of its benchmark companies. This ratio demonstrates how many times the profit margin is earned each year, and Apple’s relatively low TATO indicates that the firm may have an asset management problem and are not utilizing its assets as efficiently as its benchmarks. Finally, Apples EM (Fig 19) is also lower than its benchmarks for all three years, and there is no clear trend line going in any one direction.

This relatively low EM indicates lower financial leverage, and this once again has to do with Apple’s lack of interest expense. Other financial ratios that further prove Apple’s unleveraged approach are their debt-to-equity ratio (Fig.20) as well as their debt-to-asset ratio (Fig.21). This approach eliminates the firm’s risk of going bankrupt.

Conclusively, there are mainly two reasons why Apple has a lower ROE in comparison to Dell: a low TATO ratio as well as a low EM. Hence, this does not necessarily need to be seen as a negative thing, because of primarily two reasons. First, a company that has a high PM along with a low TATO, ultimately have a so called “consumer advantage”. For Apple, this consumer advantage can come from a number of different sources. One is their strong brand name, which in turn allows them to charge premium prices for niche products. This consumer advantage also comes from the company’s ability to take advantage of economies of scale (Meier, 2010). The second reason to why Apple’s ROE is low, but not necessarily bad, is because their low EM will inevitably push down their ROE. Hence, a low EM simply means that the company does not use much debt to finance its operations, which in turn means that the company is operating with less risk of going into default.

Liquidity Ratios

In order to appraise Apple’s ability to pay off short-term debt obligations, three liquidity ratios will be evaluated: current ratio (Fig. 22), quick ratio (Fig. 23), as well as its working capital (Fig. 24).

Apple’s current and quick ratios are well above its benchmarks, in all three years. As for both ratios, the values went up slightly from 2008-2009, but fell 0.7x the following year. Hence, even with this latter decrease, Apple’s ability to meet creditor’s demands is still significantly larger than the benchmarks. As shown by Figure 24, Apple’s working capital has been stable between 2008-2010, and drastically higher than its benchmark companies. This further supports proof that Apple clearly has the ability to pay off short-term creditors. Overall, Apple does not seem to have any problem when it comes to their ability in paying off short-term obligations.

Activity Ratios

The final class of financial metrics that will be analyzed is activity ratios, which illustrates a company’s ability to convert its balance sheets accounts into sales. Days of inventory (Fig. 25), inventory turnover ratio (Fig. 26), and average collection period (Fig. 27) are some of those ratios.

Days of inventory ratio estimates how long it takes for the firm to turn its inventory into cash. Apple and Dell have significantly lower measures than HP and Lenovo. Hence, Apple lacks a preferably negative trend between 2008-2010. The second metric, inventory turnover ratio, shows how many times the company’s inventory is sold and replaced over the year. Apple’s relatively high inventory turnover in comparison to its benchmarks implies strong sales and healthy inventory levels. Hence, even though there was a dip of approximately 32% from 2009-2010, it does not imply ineffective buying because the benchmarks ratios overall trend was the same as Apple’s. The average collection period ratio shows whether the company is effective in collecting payments from customers, in terms of account receivables. As illustrated in Figure 28, Apple’s average collection period was the same in 2008 and 2009, but increased by 0.03x the following year. Hence, in 2010, Apple had the largest collection period in comparison to its rivals. This implies that Apple may take too long to turn its receivables into cash.

Overall, Apple’s ability to convert its balance sheets accounts into sales are relatively weak in comparison to its benchmarks, due to their days of inventory negative trend between 2008-2010 as well as their relatively high average collection period.

Recommendations

Even though Apple are financially preforming above average in the PC industry, proven by the financial analysis, it does not mean there is no room for improvements. Ultimately, there is no need for radical changes in the company’s strategic approach, but a number of recommendations will be given in regards to their operations in order for them to further keep improving and prospering as one of the most successful companies in the world and for to secure their strategic success.

Aggressive Expansion Outside the U.S.

Between 2010 and 2011, Apple’s sales in Europe, Japan, and Asia-Pacific grew 49%, 37%, and 175%, respectively. Retail net sales grew 44% (Apple Inc., Form 10-K, 2011 p.30).

According to these historical sales figures, Apple could earn large revenues by expanding their already established retail segment and operations outside the U.S. As of 2010, approximately only 28% of Apple’s retail stores are located outside the U.S. Apple would be able to earn even more revenue if they aggressively expanded their already established retail base in emerging markets such as China and India.

Elimination of Product Bottlenecks

One of Apple’s weaknesses is the fact that they have actually less market share than rivals, if the iPad were taken out of the equation. This could be improved by taking advantage of opportunities in the external environment. The opportunity being the changing customer expectations philosophy of “access everything, everywhere”. Recognizing and removing current bottlenecks throughout the product line could achieve this (Figure 28). One example of a product that seems to negatively affect Apple’s sales is the iPod. The iPods net sale decreased by 12% between 2008-2009 and increased only 2% the following year (Apple 10-k, 2010). Hence, redirecting resources, such as R&D, from the bottlenecks to more efficiently revenue generating innovations, such as the iPad, could potentially result in larger overall profits and therefore increase the company’s market share.

FIGURE 28

Apple’s Revenue Mix

Source: Apple Business Model Is Iconic And Sustainable. (2011)

Seeking Alpha

Decrease Marketing Spending

Apple has and always will be subject to external competitive threats. The company’s ability to remain successful is heavily depended on their ability in continuing to innovate new technologies and products. In order to do so, Apple needs to take advantage of its already established internal strengths, more specifically their core competence in innovation as well as their well established brand recognition and well known marketing capabilities. The company did spend $486, $501, and $691 million on advertising alone in 2008, 2009, and 2010, respectively. R&D for the same years was, $1,333, $1,782, and $2,429, respectively. Hence, efficiency could be improved by cutting costs in advertising at the same time as further increase spending in R&D, in an attempt to further secure their innovative competence. Apple’s brand name is already so incredibly strong that a cut in spending on that front would not hurt the company’s revenue by any significant amount.

Aggressive sales to business segment

Apple could take advantage of the opportunity of growth rate in the PC industry, to improve their relatively low sales figures to enterprises such as businesses and government. As of the last quarter in 2010, Apple’s Mac sales to businesses was only 3% (a 64.5% increase from the previous quarter) of their net sales, and as little as 1% (549.5% increase from the previous quarter) to government. Also, this was the 19th quarter that Mac sales have outgrown the overall market. Clearly, there is a potential for Mac sales increase, nonetheless to business and government, but the current percentages of sales to these entities are very small. Conclusively, if Apple were to aggressively promote their product to the business segment and the government, they could increase revenue significantly. This was a 66% increase from the previous year, as well as the highest figure since 1997 (Evans, 2011 para. 2).

Appendix A: Financial Ratios

Profitability Ratios

FIGURE 13

FIGURE 14

FIGURE 15

FIGURE 16

FIGURE 17

FIGURE 18

FIGURE 19

FIGURE 20

FIGURE 21

FIGURE 22

FIGURE 23

FIGURE 24

FIGURE 25

FIGURE 26

FIGURE 27

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Gross Profit Margin

Apple 2010.0 2009.0 2008.0 0.393775392870832 0.401398438410442 0.352004481075459 Dell 2010.0 2009.0 2008.0 0.175059544062606 0.179326033943798 0.19091161892922 HP 2010.0 2009.0 2008.0 0.237588568073441 0.235945247573155 0.244246561454496 Lenovo 2010.0 2009.0 2008.0 0.107798855 766335 0.120604026845638 0.14983793040181

Operating Profit Margin

Apple 2010.0 2009.0 2008.0 0.281870448447681 0.273627782309754 0.222106638926676 Dell 2010.0 2009.0 2008.0 0.04105704888284 0.052208638156495 0.056270753929956 HP 2010.0 2009.0 2008.0 0.0910793204954258 0.0884838326698792 0.088481294988341 Lenovo 2010.0 2009.0 2008.0 0.0131887985546522 -0.01288 59060402685 0.0305180111308177

Profit Margin

Apple 2010.0 2009.0 2008.0 0.214840935224224 0.19193567183312 0.163212504334374 Dell 2010.0 2009.0 2008.0 0.0270878227666251 0.0405558010507193 0.0482063697184826 HP 2010.0 2009.0 2008.0 0.0695135401045758 0.0668691947761715 0.0703676793619682 Lenovo 2010.0 2009.0 2008.0 0.00776874435411021 -0.0151677852348993 0.0296617943856645

ROA

Apple 2010.0 2009.0 2008.0 0.186385220063046 0.173364771267973 0.154629536035581 Dell 2010.0 2009.0 2008.0 0.0425829074052063 0.0935094339622642 0.106930333817126 HP 2010.0 2009.0 2008.0 0.0727934266644178 0.0695650658977865 0.0763956904995104 Lenovo 2010.0 2009.0 2008.0 0.0214381420276909 -0.0256720024161885 0.0634700 315457414

ROE

Apple 2010.0 2009.0 2008.0 0.293214203511121 0.260271807838179 0.421070740434902 Dell 2010.0 2009.0 2008.0 0.254032972877149 0.580191992507609 0.769451697127937 HP 2010.0 2009.0 2008.0 0.214830435742135 0.187910901776077 0.213882183760464 Lenovo 2010.0 2009.0 2008.0 0.0803237858032378 -0.172519083969466 0.221851145038168

TATO

Apple 2010.0 2009.0 2008.0 0.867549845044757 0.903244142228586 0.94741231173557 Dell 2010.0 2009.0 2008.0 1.572031380007131 2.305698113207542 2.218178519593614 HP 2010.0 2009.0 2008.0 1.012288860509386 0.997848413313706 1.044409737847544 Lenovo 2010.0 2009.0 2008.0 1.854064314426083 2.25007550588946 2.063217665615144

Equity Multiplier

2010.0 2009.0 2008.0 1.573162310895357 1.50129582806574 1.881692819781266 2010.0 2009.0 2008.0 5.96560893458607 6.204635916647145 7.195822454308094 HP 2010.0 2009.0 2008.0 3.078024178595268 2.833353900831748 2.910251142725078 Lenovo 2010.0 2009.0 2008.0 1.93462017434620 4 2.335114503816794 4.673899566026027

Debt-to-Equity-Ratio

Apple 2010.0 2009.0 2008.0 0.573162310895356 0.50129582806574 0.881692819781265 Dell 2010.0 2009.0 2008.0 4.96560893458607 5.204635916647145 6.195822454308094 HP 2010.0 2009.0 2008.0 2.078024178595268 1.833353900831752 1.910251142725078 Lenovo 2010.0 2009.0 2008.0 4.576587795765882 4.051106025934401 3.67389956602604

Debt-to-Asset-Ratio

Apple 2010.0 2009.0 2008.0 0.364337682720828 0.333908759815583 0.468563630850096 Dell 2010.0 2009.0 2008.0 0.832372518721027 0.838830188679245 0.861030478955007 HP 2010.0 2009.0 2008.0 0.675116262258741 0.647061385552139 0.656387043262655 Lenovo 2010.0 2009.0 2008.0 0.345992919214678 0.404380516508663 0.786045894680993

Current Ratio

Apple 2010.0 2009.0 2008.0 2.011292346298619 2.742482183208752 2.461680386034628 Dell 2010.0 2009.0 2008.0 1.278744725738397 1.356147789218656 1.072854830005397 HP 2010.0 2009.0 2008.0 1.096775499463596 1.221751970792735 0.977124615123067 Lenovo 2010.0 2009.0 2008.0 1.515384615384613 1.504469987228608 1.044739022369511

Quick Ratio

Apple 2010.0 2009.0 2008.0 1.960573303735161 2.702937597775076 2.425560601759864 Dell 2010.0 2009.0 2008.0 1.22331223628692 1.297799313547343 1.009174311926605 HP 2010.0 2009.0 2008.0 0.965892759549016 1.079250284863848 0.828292940932015 Lenovo 2010.0 2009.0 2008.0 0.388461538461538 0.929757343550447 0.947183098591549

Working Capital

Apple 2010.0 2009.0 2008.0 20956.0 20049.0 20598.0 Dell 2010.0 2009.0 2008.0 5285.0 5292.0 1350.0 HP 2010.0 2009.0 2008.0 4781.0 9536.0 -1211.0 Lenovo 2010.0 2009.0 2008.0 402.0 395.0 216.0

Days of Inventory

Apple 2010.0 2009.0 2008.0 9.70170203080347 6.46633960207141 7.646102559881465 Dell 2010.0 2009.0 2008.0 8.790243120001802 6.310924537332463 8.707694796005014 HP 2010.0 2009.0 2008.0 24.56150027578588 25.55550477583292 32.14875802088226 Lenovo 2010.0 2009.0 2008.0 21.63145460681744 12.53529726016943 10.86802927075448

Inventory Turnover Ratio

Apple 2010.0 2009.0 2008.0 37.62226450999044 56.44615384615391 47.73673870333993 Dell 2010.0 2009.0 2008.0 41.52331113225505 57.83621683967705 41.91694915254222 HP 2010.0 2009.0 2008.0 14.86065573770493 14.28263707571803 11.35347125269705 Lenovo 2010.0 2009.0 2008.0 16.87357630979499 29.11777777777779 33.58474576271185

Average Collection Period

Apple 2010.0 2009.0 2008.0 0.151303552370788 0.116870811185579 0.124260355029586 Dell 2010.0 2009.0 2008.0 0.109580040174968 0.0769693814466534 0.125050817139605 HP 2010.0 2009.0 2008.0 0.146212756530958 0.143903861047539 0.142576792527521 Lenovo 2010.0 2009.0 2008.0 0.0829748364664977 0.0461155508974191 0.0676597272074659

KSF/Strength MeasureImportance WeightStrength RatingScoreStrength RatingScoreStrength RatingScore

Technology 0.25 82.00 82.00 82.00

Skills 0.15 91.35 71.05 71.05

Effective cost control 0.25 102.50 20.50 51.25

Innovation 0.25 102.50 51.25 51.25

Marketing 0.10 101.00 60.60 60.60

Sum of importance Weight 1.00

Weighted overall strength rating 479.35 285.40 316.15

Dell HPApple Inc.

Weighted Competetive Strength Assessment