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Strategic management Apples Inc.

University of Southern Queensland Australia


Master of Business Administration (MBA) Faculty of Business Through SEGi College Kuala Lumpur

Strategic Management (MKT8002) Assignment 2


Apple Inc.

BY: Name Student ID Course Examiner: Dr. Bruce Millet : Joren Diong Wei Zhi : 0061013095

Strategic management Apples Inc.

Introduction Strategic capability and strategic planning are key determinants of an organizations performance. Strategic capacity, in simple terms, is the capacity or the potential of a business organization to achieve its set goals and objectives in a highly competitive business environment (Ansoff, 2007, p.97). Strategic planning entails mapping the organizations road to attainment or accomplishment of its vision, mission, goals, and objectives (Martinez, 2009). Apple is one business organization in which these two aspects of business management can largely be characterized as superior, effective, and outstanding (Muro, Murray and Goode, 2009, p.3). This paper explores Apples strategic capability as well as its strategic planning process. PART I Apples Strategic Capability Strategic capability is the ability and capacity of a corporation to achieve its objectives and goals and further succeed in satisfying its customers in the future within a highly competitive business environment (Ansoff, 2007, p.97). Strategic capability involves various components which includes evidence of strategy in action and strategic progress in operational attainment, transparency of thinking and action in goals and strategy (Future Value, n.d); sensitivity to the future and to the effect of controllable and uncontrollable trends and factors on future performance (Nieman and Pretorius, 2004); an approach to socio-ethical and environmental matters integral to the strategic achievement of the organization; and investment in resources, strengths in addition to less tangible value drivers (Besanko et al., 2010, p.359). Analyzing an organizations strategic capability helps in evaluating its relative potential to create and drive value, sustain profitability, and attaining growth. Strategic capability defines what an

Strategic management Apples Inc.

organization should do in order to execute its defined business strategy (Salaman and Asch, 2003, p.1). Capability management as a business concept uses an organizations customer value proposition to define performance goals for capabilities according to value contribution (Armstrong, 2011, p.232). Strategic capability, as far as strategic and change management are concerned, indicates that an organizations competitive advantage rests on the manner in which it does what it does. It is not only about the market or domain in which it operates (Blackwell Publishing, n.d). This does not mean that market choice is of no significance, but an excellent plan amounts to nothing if the necessary capabilities are absent. Similarly, a plan which may seem ordinary on paper may be highly successful if executed by a team with excellent capability (Teece, 2009). Operations are instrumental and building capabilities which make them successful is an issue of high strategic importance. Throughout its many years of operation, Apple has been able to develop substantial value in the largely competitive computer manufacturing industry (Masi, 2009). This is attributable to the firms ability to innovate and forge a path which can be characterized as considerably distinct from those of its major competitors in the industry in addition to its successful differentiation of its products from those of its competitors by choosing to emphasize on quality, design elegance, and outstanding customer service and satisfaction. This has also been aided by outsourcing of real manufacturing to reputable original equipment manufacturers (Sehgal, 2011, p.80). However, even with the competitive advantage Apple has built for itself, the vigorous competition in the industry it operates besides other external factors stand as formidable obstacles to the operations of the company (Masi 2009). The personal computer market is

Strategic management Apples Inc.

increasingly becoming commoditized resulting in stiff rivalry among those in the industry, consequently pushing down prices and building potentially harmful price battles. However, even with this increasing competition, Apple has remained on a competitive edge (DixDoor, 2011). The organization has utilized key resources as well as capabilities such as industry-leading design teams, talented, and proficient hardware and software designers and a sizeable research and development budget backed by the strategically and excellent stewardship of its top management including the former CEO, Steve Jobs (Masi, 2009). The company has successfully managed to build its way to a stable position in the market while commanding premium prices. However, the competent IT firm cannot afford to stop at its laurels (Jones and Hill, 2010, p.318). This comfortable position it has so far attained is not permanent and as such the organization must engage in a continuous process of finding new approaches to maintain profitability and create value for its client base and shareholders. The developing personal notebook market is increasingly becoming saturated, leaving lesser new customers and more replacement customers (Masi, 2009). To maintain growth, Apple must explore new as well as expanding markets as sources of revenue (DixDoor, 2011). Taking into account the organizations strategic war chest, which entails key competencies, core resources, and capabilities and considering its current position within the industry together with multiplying factors in the form of patterns from the general environment, it is clear that the firm stands to develop substantial value via continued related diversification (DixDoor, 2011). This is evident from its history of superior products such as iPods and iPhones which provide adequate certainty that the company is well-equipped as far as maintaining its innovation path is concerned (Ireland, Hoskisson and Hitt, 2009, p.C-27).

Strategic management Apples Inc.

Apples leadership, culture and organizational structure its relevance and impacts The success of Apple emanates mostly from its type of leadership in its top leadership and the organizational culture that Steve Jobs introduced after coming back into the company. The leadership of Jobs transformed the way the organization was run and the way employees also worked and perceived the type of leadership. Being a technology driven corporation, innovation and creative minds are highly valued. Perfection and quality also was a symbol of identity for Apples products. As such, Apples leadership transformed to one that promoted teamwork and inclusive decision making, especially among employees who were on the ground. The top level of leadership was also less bureaucratic as evidenced by the type of organizational structure of Apple. The organizational structure is also matrix in type and makes use of teams that concentrate on the different products and functions in Apple like internet services, education, Apple care and global outsourcing among others. Such functions and product lines are directly controlled and managed by executives who report directly to the CEO. The operations and structure of leadership in Apple thus favor innovation and self drive as instilled by visionary leadership of Jobs. The organizational culture in Apple is one that encourages training and provide supportive environment for innovative and self driven minds. The management is also focused on eliminating unnecessary subordination and long queues involved in decision making and giving more time to developing strong and motivated workers who are constantly trained and are given a chance to do their job with less supervision.

Strategic management Apples Inc.

The effect of Apples leadership techniques are obvious Apple has created digital lifestyle convergence gadgets that bridge the gap between users home lives and mobile digital lives (Masi 2009). This is depicting in the organizations market-leading industrial design capabilities which accrue from the culture developed for quality and passion for technology products. The matrix organizational structure supports broad scale of strategies that targets customers stretching from unsophisticated beginners to special needs customers (Masi, 2009). As stated earlier Apple outsources its basic production to third party trusted original equipment manufacturers which is well supported also by the Apples geographical structure. This helps the company reduce costs by capitalizing on scale economies while domesticating design elements to lure and maintain customers from each geographical locations (Jones and Hill, 2010, p.318). The structure also enables critical departments like hardware, OS Software, finance, legal, global communications, software engineering, product marketing, retail and design among others helps to decentralize strategic capacities and planning that are supervised by the vice presidents. The leadership and nature of the Apples business model is well designed to attract collaborative and strategic partnership with other technology product/service makers like Google and Microsoft. This help also to maintain competitiveness globally by ensuring every market segment like Americas &Asian Regions and EMEAI regions are well secured and operate with effective levels of autonomy (Masi, 2009). The geographical organizational structure also helps to bridge change management from the top leadership to the customer level smoothly. Adaptation strategies adopted by Apple in delivering fine detailed products like an iPhone with customized details for almost each market. Strategic approaches such as Anoffs Matrix and the strategy cloak strategy also becomes with Apples culture, leadership and horizontal hierarchy

Strategic management Apples Inc.

that advocates team work and result plus market oriented approach (Bircall and Tovstiga, 2005, p.92). The combined implication is that change management becomes easier to undertake under the competitive and dynamic markets. This is because of the style of leadership that Jobs introduced in the company that has over time integrated with Apple as an entity (Masi 2009). The invention of the personal computer has resulted in an industry explosion which entails tens of organizations pursuing hundreds of millions of customers across the globe while the industry is highly defined by large manufacturers as well as extremely expensive products (Masi, 2009). Due to the penetration of digital technologies in entirely every aspect of life and business, the personal computer is increasingly becoming a commodity product. This has led Apple to undertake low-cost and best-cost provider approaches. Apple is one of the firms in the industry which has opted for elegant and intricate designs and as such commanding higher prices for its products. The organization stresses on customer customizability and as such offers products designed for high performance applications (DixDoor, 2011). Apple has developed an eco-system that offers flawless integration between their personal computers, iPhones, iPods, software as well as other devices. It is true that Windowsbased personal computer manufacturers produce compatible peripherals but their level of integration cannot beat that of Apple (Masi, 2009). The fact that Apple users are able to do more than just going online when they set up their PCs is a substantial competitive advantage. The companys most fundamental resources and capabilities include its competent management and design team in addition to its integrated system of software and hardware that it has successfully developed and marketed to create value (Angwin, Cummings and Smith, 2011).

Strategic management Apples Inc.

Apples former CEO, Steve Jobs, brought the company back to incredible success preceding considerable decline in relevance (Masi, 2009). However, even as Apples superior team of designers, programmers, and engineers represent critical resources, the key strategic capability of the organization is its ability to take advantage of its capacity to develop its entire hardware and software base (Angwin, Cummings and Smith, 2011). Each individual resource only represents a competitive party and temporary advantage but a combination of them all forms the companys key strategic capability that has continued to maintain the firm on a sustainable and competitive advantage in addition to above average performance within its industry of operation (DixDoor, 2011). PART II Apples Strategic Planning Process As a process, strategic planning involves everything to do with defining the direction of an enterprise and getting the best road to get there. In essence, a business plan may be designed for multiple purposes (Martinez, 2009). For instance, it may be crafted to provide a blueprint, approaches and strategies, resources as well as personnel requirements of undertaking a new venture. Most business plans often answer the Who, What, Where, Why, When and How questions of a business enterprise (Olsen, 2011, p.1). Even though a business plan is not such a necessity in establishing an enterprise, drawing a plan always helps the organization to think through their business processes as well as to allow others to ask questions that it might have overlooked (Brockman and Lacho, 2008). Apples strategic planning can be seen to adopt two dimensions, which are intended and emergent strategies. The companys management from the top has adopted a clear way of

Strategic management Apples Inc.

strategic planning such that any actions on a specific plan are expected to be carried out and certain outcomes are also anticipated. The nature of Apples organization and leadership also shows heavy use of intended strategies. This makes it easier to follow up and also give clear direction for the company as a whole. On the other hand, emergent strategies are also inevitable due to the nature of markets and the globalized economy. With volatile technological trends, Apple has demonstrated adaptability in its strategy especially in the software segments and internet marketing departments (The University of Adelaide, 2012). During the research period of a strategic plan, the management often realizes alternative markets, previously unknown competition, and additional applications, in addition to technology that impact on the initial thought processes (Brockman and Lacho, 2008). Apples strategic approach encompasses leveraging limited resources in order to place a business in a certain position for success in future as well as challenges in the highly competitive business environment (Matthews, 2012). The company pursues strategic planning as a process (Muro, Murray and Goode, 2009, p.2). It entirely involves achieving priorities given conflicting demands and scarce resources (Wittmann and Reuter, 2008). The major intent of strategic management is positioning the business for future success and challenges (San Diego State University, 2011). Strategic planning has a host of steps after the first phase of laying down the strategies for implementation, which is the most challenging phase, ensued (Shane, 2003). To achieve high end results in strategic planning process as a whole, information flow within Apple has been taken seriously. The organizational structure provides for communication departments which entirely process and analyze data, facilitate communication and develop efficient ways to streamline strategies with operations, leaderships and implementation process. Communication is also linked with research

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and development where Apple utilizes wide range of information within its members. Being a technology driven firm, feedbacks and information from customers up to the CEO is important and thus well taken care of. Communication and interaction in Apple is also integrated in their strategic plans. Steve Jobs in most cases insisted on learning within teams in the firm in order to improve innovation and productivity (Masi 2009). Sharing with junior employees on the ground and focusing on feedback from customers has made Apple adopt a double loop learning as opposed to a single loop learning which is not suitable for such a dynamic corporation. Apple is always trying to learn how solutions work and why do some strategies fail, thus helping in strategy evaluation process. Triple loop learning model is also gaining ground in Apple as has been seen through Jobs leadership and also the organizational structure. Even under current leadership of Tim Cook triple-loop learning is highly in use in Apple as it tries to understand and develop new ways of learning to improve their products and productivity of the employees (Apple Inc. 2012). According to an evaluation of Apples practices, procedures, and policies, its strategy for its products is one characterized by extensive differentiation targeting a broad range of clients from complex power customers to inexperienced new customers and from individual customers to bulk customers (Muro, Murray and Goode, 2009, p.2). The organizations major goal is to deliver the best personal computing experience to its customers by offering superior user friendly, faultless integration, and innovative products like the latest iPad designed to perform more than what a personal computer would do. Apple also expects to sale over 145million units of iPhone in 2012 (Apple Inc. 2012). Globalization and need to perform educational, business and personal task anywhere around the world has made Apple respond with more use of

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emergent strategies as seen in the launch of the new iPad which has 4G wireless networks technology considered the future of wireless technologies after the 3G. Using emergent strategies give Apple the drive and motivation for learning by understanding customer needs, developing the right technologies and also learning to see into the future of their products and industry. Surprisingly, R&D spending in Apple has been rising from $1.3billion in 2009 to $2.4billion in 2011, buts is still a small percentage (2.2%) of revenues compared with 14% and 13% for Google and Microsoft respectively. However, responding to market uncertainties in future will need a knowledge ready workforce and Apple is building its second R&D center in Israel, indicating a learning and knowledge ready corporation (Masi 2009). The company has a comprehensive patent filing process not only in the US but throughout the world in a bid to safeguard its intellectual capital. Human resource management is also well practiced at Apple which effectively makes it a learning organization in that it is always ready to facilitate learning and respond to new information and needs. Apple is also enhancing various ways to help its members to learn as a team or as Apple (Apple Inc. 2012). Procurement is also part of the organizations strategic planning process. It has maintained healthy relationships with its suppliers in addition to developing its own Supplier Code of Conduct to govern the conduct of its suppliers (Hill and Jones, 2008, p.343). Apples strategic management processes stretch from general administration, human resource management, technical development, procurement, inbound and outbound logistics and marketing and sales to customer service (Muro, Murray and Goode, 2009, p.3). Recently, the company redesigned its packaging for most of its popular products so as they would be lighter and occupy lesser space during transit thus cutting cost. The organization holds large cash

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reserves and has no long-term debt in its capital structure. This enables the firm to finance expansion operations and capital purchases, and to develop internally with no liabilities dependence on third-party financiers (Apple Inc. 2012) Apples inbound logistics consist of sophisticated automated receiving systems that enhance the receiving process and reduce storage space requirements and facility footprint. The company uses an economical and stylist packaging so as to save on shipment costs as well as attract customers (Wallace, 2006, p.196). The organization controls its brand by selling its products through authorized retailers and first-party establishments. Its stores act as advertisements for its brand and bridge the gap between the company and its customers. Marketing and sales takes the form of TV commercials that compare its products to those of rivals through direct and indirect approaches to develop a lifestyle brand icon (Hill & Jones, 2009, p.17). Apples corporate strategic approaches can be summarized using the Ansoffs Model (1998). The corporation is pursuing product development to suite dynamic trends in ICT and at the same time diversifying its markets which steadily growing as computing becomes more home based and highly personalized (Masi 2009). Its business strategies also are focusing on differentiating the products range to suite divergent tastes and needs in the market. This is also obvious in the matrix organizational structure which has products and market segments strongly represented by high level management teams (Apple Inc. 2012). All these processes call for a comprehensive strategic planning process, which commands cooperation and collaboration horizontally and vertically from all stakeholders and participants (Mohr, Sengupta and Slater, 2010, p.69). The company has had an effective strategic planning

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process that has seen it register tremendous growth the company has always desired to achieve. Coordinating all the above mentioned tasks is not an easy process. It can only be successful with the presence of effective approaches to the execution and implementation of the stipulated strategies and operations (Muro, Murray and Goode, 2009, p.5). Furthermore, the pace with which change is happening is high and competition will as well be more intense than it has ever been thus necessitating dynamic strategies and being ready to incorporate emerging strategies (Business Vitality LLC, n.d). As such, Apple has crafted growth strategies aimed at transforming the dominant organizational culture founded on past ideologies and paradigms into contemporary view of management practices that are adaptive to fast changing business environment (Mohr, Sengupta and Slater, 2010, p.68). This has helped the company leaders to develop and lead an enterprise to achieve competitive advantage even during these challenging and turbulent economic times. The organization has a strategic planning process that entails conduct that mirrors new and diverse social and organizational values, which are attributable to the growth of the company to a reputable and multinational organization (Joakim, n.d). Apples strategic approach to business globally is closely linked with learning process that constantly changes according to environment changes where new challenges are discovered, strategies are developed and the chosen solution are acted upon with strong focus on implementation.

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Conclusion Strategic capability is the capacity of an organization to thrive and prosper in a competitive environment and deliver value to its customers in the future. Analyzing an organizations strategic capability helps in evaluating its relative potential to create and drive value, to sustain profitability, and to attain growth. Apple has been on a positive trend as far as its strategic capability is concerned. Strategic planning is another major aspect of business planning. It is a process in itself and may be undertaken for various purposes. For instance, it may be crafted to provide a blueprint, approaches and strategies, resources as well as personnel requirements of undertaking a new venture. Even though a business plan is not such a necessity in establishing an enterprise, drawing a plan always helps the organization to think through their business processes as well as allow others to ask questions that it might have overlooked. Apple is one business organization in which strategic planning can only be described as outstanding, excellent, superior, and extraordinary. If any business organization is to continue thriving in the highly competitive 21st century business environment then effective strategic planning and firm positioning for strategic capability is highly inevitable.

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Appendix 1 1.0 Brief Introduction to Apple Inc Apple is a multinational corporation based in the US that deals in electronics and software. The company draws its competitiveness from extremely innovative products include software, hardware, personal computers, smart phones, and digital media/music among others (Apple Inc. 2012). The history of the company dates back to 1976 when it first introduced its products in the local market. The company reinvented itself in the late 1990s. In 1998, iMac was launched then the iPod media player was introduced in 2001, followed by iTunes music in 2002. Apple computers changed to Apple, Inc to focus on consumer electronics and digital media distribution (Apple Inc. 2012). 2.0 SWOT Analysis of Apple Inc. SWOT analysis of an organization involves evaluating internal and external factors, which have either beneficial or detrimental impacts on the competitiveness of an organization. 2.1 Advantages and Disadvantages of SWOT Analysis The advantage of SWOT analysis is that it enables businesses to craft and execute business strategies that turn their weaknesses into resources and strategic capabilities to achieve competitive advantage (Apple Inc. 2012). The disadvantage of SWOT analysis unlike other models such as the Bowmans strategy clock and Porters five forces of competitive advantage, is that it is insufficient in determine an organizations strategic position. 2.1.1 Strengths Apples competitive strengths comes from its innovative products such as iPod and iTunes, highly dynamic and interactive iTunes online stores, as well as innovative processes

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embedded within the organizations routines making it extremely hard for competitors in the market place to imitate. 2.1.2 Weaknesses One of the weaknesses of Apple computers is that its market segment target is highly limited as the organization has failed to target the segment of the market that is not computer literate. Another weakness results from lack of customization of their computer and digital media products and services (PRnewswire 2012). 2.1.3 Opportunities Opportunities for Apple Inc include; the growing demand for computers and digital media, buyers of computers and digital media who are increasingly becoming more educated in terms of what they really want, the expansion of communication and technological integration and partnering with other industry leaders. 2.1.4 Threats The ever changing nature of the computer industry, competition, price difference between computer and other digital media products and brands and the pace at which technological advancement is taking place are the key threats to Apple Inc.