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Apple - from the iPod to the iPad - a case study in Corporate Strategy

Over the last ten years, Apple sales have increased from $5bn to $65bn and profits have soared to $18 billion. In 2011 sales revenues will exceed $110 billion, thanks to the tremendous success of the iPod, the iPhone and the iPad. In 2001, Apple sales fell by a third and the company reported an operating loss of $350 million. The company was thought by many to be in trouble. In that year, the the iPod was launched, the concept of the digital hub emerged. The company went from strength to strength. This is the case study of Apple in the digital age.

I have always been something of a computer geek. My first computer was a Commodore Pet in 1978. It had 8k of RAM and a cassette player for storage. Programmed effectively, a two dimensional pencil sketch of a rocket would take off and zoom off screen. Beyond that and a few simple games, I don’t recall it did much at all. 

My first experience of Apple was the Apple II in the early 1980’s. The combination of Apple and a Visicalc spreadsheet, greatly enhanced financial and business plan modelling. Business models were more easily produced and what-if simulations were available at the click of a button. It was a great step up from the pencil and calculator.

Seven years ago, I abandoned Microsoft and converted entirely to Apple. Apple Macs, MacBooks, MacBook Air, iPods, iTouch, the iPhone and the iPad, I had to try them all and never looked back 

I have just updated my Strat Man case study on Apple in the digital age from the iPod to the iPad. I shall be guest lecturing at Salford Business School next week and so a copy has been posted on the pro.manchester web site to share with all.

The case study covers the years from 2000 to 2010. The great era of the iPod, the discovery of the digital hub and Apple’s move into the mainstream consumer market with the iPod, the iPhone and the iPad. It has many great examples for enthusiasts of marketing, leadership, organization, financial analysis and strategic management. I hope you enjoy the case study.

Students of strategic management will be familiar with the BCG Growth Share Matrix with dogs, cows, stars and question marks. This is basis two dimensional strat man analysis. In the case study Steve Jobs outlines, 3D strat man analysis in preparation for the launch of the iPod. From 3D I have now expanded corporate strategy analysis into four and five dimensional analysis deriving technique from contemporary architecture and engineering methodologies.  Download Apple Case Study 2011 

The full presentation includes charts, slides and some great video clips.

First Dimension             Relative Market Attraction

Second Dimension         Relative Market Share

Third Dimension             Relative Financial Strength

Fourth Dimension         Relative Economic Position

Fifth Dimension             Relative Financial Management

An extract of Apple Case Study was published in late 2010 in the 9th Edition of Exploring Strategy Johnson, R. Whittington and K. Scholes,  Pearson,  9th edition 2010.

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JKA is CEO of pro.manchester, a director of Marketing Manchester and a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University. The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts.

 

 

Prime Minister’s update : The Pound in your pocket

Since 2008, Sterling has devalued by 20% but there has been no discernible impact on the trade deficit as policy makers have hoped (and as we have consistently predicted). According to policy makers, what does devaluation mean to the British Economy. Here is a quote from the Prime Minister.

“What it [devaluation] does mean is that we shall now be able to sell more goods abroad on a competitive basis. This is a tremendous opportunity for all our exporters and for many who have not yet started to sell their goods overseas. But it will also mean the goods we buy from abroad will be dearer and so for many of these goods, it will be cheaper to buy British. Because one of the great problems we in Britain have had over the past [five or six  years] has been the great increase year by year in imports of goods manufactured abroad.

Saving imports, and still more the export drive, will mean that industrial production will go up. Many industries and firms which are now working below capacity, will have a chance to get into full production. This means more work, more jobs in the development areas, because we intend to be ruthless in diverting new enterprise to those areas.

Is this the "march of the makers" speech from Chancellor Osborne? If the quote sounds familiar, it should do. But it would be even more familiar if prefaced by the words, “from now on the Pound abroad is worth less but it does not mean the Pound in your pocket, or in your purse or in your bank has been devalued.” 

The quote is from Prime Minister Harold Wilson in 1967 speaking of the 14% devaluation of the currency, “creating a great opportunity for exporters and manufacturers and salesmen, what a great opportunity for them”.

So what really happened? In 1967, the pound was devalued by 14% but in the following year, the cost of imports went up by 12.5% and the price index of exports increased by 8%. The following year 1969, export prices rose slightly ahead of imports but by the third year any price gain had been eroded. Import costs and export costs had both risen by 20% compared to 1967. In volume terms by 1970 import and export volumes had risen by 28% compared to 1966. (Source Pink Book ONS).

There had been no relative gains to prices or to volumes relative to imports. Devaluation did little or nothing to solve the problems of the British Economy in 1931, 1945, 1967 and 1992. It  has done little and will do little to solve the problems of the British Economy from 2008 to 2011. 

“The pound in your pocket” is being devalued by higher inflation especially on dollar denominated prices paid for food, energy and commodity imports from abroad. The devaluation will not lead to a rebalancing of the economy. 

A rise in interest rates would increase the value of the pound abroad and the pound in your pocket as the inflation effect of international commodity price rises is moderated. Devaluation isn’t working, it never did.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University

 

January UK Trade Data offers hope to rebalancing - if you ignore the facts!

Is it possible to look at the world through rose coloured glasses with your head in the sand? If you are an economic analyst it appears you can. According to the Daily Telegraph, “January’s trade figures lift hopes of an export led recovery.” 

“Economists said the figures raised hopes that trade will make a positive contribution to GDP growth in the first quarter. The Government is pinning its hopes on exports to lead the economy back to health to offset the hit to consumer spending from the austerity measures.” 

According to the Financial Times, “Britain’s deficit in trade in goods narrowed by much more than expected in January, raising hopes that the economy can rebalance away from its dependence on domestic consumption of goods and services.”

The latest trade figures released by the ONS yesterday are the source of all the excitement. The UK’s seasonally adjusted deficit on trade in goods was £3.0 billion in January compared to a deficit of £5.5 billion in December.

The trade in goods deficit was £7.1 billion in the month compared to a deficit of £9.7 billion in December. 

For some analysts, the latest data is welcome confirmation of the “rebalancing of the economy towards export led manufacturing growth. David Cameron said the numbers were "exactly the sort of rebalancing our economy needs".

No doubt the Governor of the Bank of England will be pleased as he stated during the February presentation of the Inflation Report. “I think it would be very peculiar if a 20% fall in the real exchange rate did not lead to some rebalancing. There are very few examples where if you have a persistent fall in the real exchange rate you don't see a rebalancing. You clearly see it in the figures for exports. I think there is certainly evidence that some forms of import expenditure switching is occurring.”

But here is the problem, monthly data on trade can be erratic and subject to revision. Over the latest three month period, the deficit on goods was £25.4 billion compared to £22.5 billion over the same period last year. The deficit is getting worse not better. A quick look at the chart shows the ten year data and the trend line. The deficit was too high in December and too low in January.

In the pro.manchester Economics Review we forecast the trade in goods to continue to deteriorate through the year. The January data does nothing to change this view.

In our forthcoming paper on “Forty years of UK trade data” we will explain why.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

Inflation, the Governor sends another letter, If you didn't get to Davos get to The Point