The computer industry Essay Example

corporation experienced a decrease in performance levels, leaving them vulnerable to extinction.

The competition capabilities of Apple were affected by an internal power struggle between Steve Jobs, the founder, and John Scully, the president and CEO. When Scully prevented Jobs' takeover attempt, Jobs left Apple to establish his own company. The struggle resulted in a decline in Apple's ability to anticipate industry changes and appropriately respond to external threats. Meanwhile, Microsoft's popularity grew among PC users with their introduction of the "windows" operating system. Apple attempted to prevent Microsoft from using a similar system citing copyright infringement but was unsuccessful.

Despite attempts to improve their company through product development, production, distribution, and marketing, Apple lost market share to Microsoft. Microsoft gained a stronger foothold in the computer industry after defeating Apple's user-friendly interface system. Apple faced challenges such as failures, distribution policy changes, and a new CEO. This resulted in a first quarter loss of $69 million in January 1996.

Following substantial losses, Apple underwent a significant organizational restructuring, which involved the dismissal of 1,300 employees. However, the losses persisted and in the March quarter of that year, the company suffered an extraordinary $740 million loss. Consequently, it was evident that urgent action was required to tame the bleeding of Apple Computer, Inc. Even Steven Jobs' return to the company in December did not halt the staggering losses, with a total loss of $816 million for 1996 and nearly $1.5 billion for 1997.

Apple was in dire straits and required significant transformations to ensure its survival. The company's decline was brought about by various strategic decisions that placed it at a disadvantage in competing within the industry.

Apple made errors in assessing both external and internal environments leading to the loss of their competitive edge. Examining their strategic choices provides insight into why the company declined. During the industry's early stages, Apple Computer, Inc. made these decisions.

Apple chose an Intensive Strategy for their product, targeting a specific market segment through the Market Penetration technique. Their focus on education led to heavy promotion of their product to this market, with the aim of migrating their products into the business environment through assimilation. Although successful in penetrating the educational market, residual demand for Apple products in business did not materialize as Microsoft's "windows" interface made switching from Apple to Microsoft products relatively easy.

Despite the popularity of PC computers in the business market, Apple struggled to gain a foothold. To address this, they employed an Integration Strategy and opted for Forward Integration. This allowed for close control over where Apple products were sold, which is done through third-party resellers rather than directly to customers like many PC companies. However, the distribution points remain much lower than in the PC segment.

Apple's decision to exercise control over the manufacturing of their systems, and not allowing "cloning" of their products, has greatly decreased the accessibility of their products to the general public. This has made it considerably easier to purchase and get service for PCs compared to Apple computers. Additionally, Apple miscalculated the potential growth of the computer industry.

With the successful debut of Windows, Microsoft became a new competitor to Apple. IBM's decision to permit cloning of their systems created a surge in PC manufacturers. As a result, Apple has suffered significant market share losses, leading to the

potential need for a reversal of this trend in order for Apple to survive as a prominent player in the industry.

Apple had to implement Defensive Strategies after their ineffective approaches failed. To shield the company from major losses, they enacted a Retrenchment Strategy. This involved laying off 1,500 employees in 1993 and a further 4,100 employees in 1997 due to higher than anticipated losses. These cost-cutting measures were an effort to turn around the trend towards operating losses and restructure the company for better financial performance. Such actions were necessary to satisfy their stakeholders, including investors and financiers.

Apple needs to create and execute new tactics to counter industry threats. The reemergence of Steven Jobs has brought some vital excitement, however, more is essential for Apple's survival. Steven Jobs is presently the interim head of the company and has declined the position of CEO. This requires immediate resolution, including the prompt placement of a permanent CEO. There are numerous strategic decisions to be taken and it's crucial to resolve the internal corporate structure. The company vision should be established and imparted effectively throughout the organization.

Apple's survival is heavily reliant on their company culture. Several issues must be resolved before they can determine their next course of action. Despite this, many issues still exist such as how to improve their competitive position. Potential solutions could include increasing their R;D budget for new products, maintaining their current distribution strategy, focusing on education, publishing, and graphics markets, or penetrating the business and PC markets. Additionally, Apple must consider marketing efforts, placement, product, price, and promotion to effectively penetrate the computer industry. It is crucial to answer these questions to

determine Apple's future strategy based on their declining financial performance.

Despite having a positive outcome for shareholders in 1995, Apple Computer experienced a slump in performance during 1996 and 1997 due to a significant decrease in sales. The sales figures dropped by 12.5% and 38%, respectively.

Over the past two years, Apple's business suffered an 86% decline resulting in net losses. To prevent bankruptcy, Apple had to increase its debt by 213%, from $303 to $951. However, this caused a surge in their Debt/Equity ratio from 10.4% to 79.25%.

Apple's financial situation worsened due to declines in retained earnings, which made it challenging for them to secure future financing. Their high debt load resulted in increased interest expenses and reduced profitability. Additionally, rising operating expenses and declining sales since 1996 further impacted their financial performance. Despite taking retrenchment actions in 1997, Apple continued to experience net sales below operating expenses during that time. It wasn't until 1998 that the positive effects of this retrenchment became apparent.

Apple's financial situation was apparent from their weak Earnings per Share. The figure was $3.45 in 1995 but plummeted due to losses in 1996 and 1997 that mirrored poor sales and profits. Consequently, the company became unattractive to investors and more reliant on debt financing, exacerbating their already substantial debt burden of 79.

From 1996 to 1998, Apple experienced a steady sales decrease of 12.5%, 38.5%, and 33%. This made it challenging for the company to generate new capital, especially since the sales drop of 38.5% was significant and resulted in a substantial revenue decline.

Despite a decrease in sales, Apple managed to achieve profitability in 1998 through significant restructuring and cost reduction measures

resulting from retrenchment. To restore financial stability, Apple needs to strive for better sales performance. The company has experienced both successful and challenging periods. In 1998, despite sales dropping to 16.1%, Apple successfully restored profitability, with sales previously reaching 86%.

The future of this company hinges on their chosen strategic direction. To ensure survival in this industry, it is recommended that they focus on expanding their research and development endeavors, as the development of new products and technology is crucial for success and can quickly become obsolete. Maintaining a position as a leader in developing innovative products is vital.

Previously, reducing the R&D budget was done to save costs, but this is not recommended because it is essential to create new technology. One example is the licensing of clones. "Apple is the only company in the PC market that makes both computers and the operating systems to run them, whereas the market is dominated by computers that combine Intel processors with Microsoft operating systems." Due to their financial situation, they must improve their ability to quickly produce and distribute newly developed products. In the event of introducing a groundbreaking new product, cloning companies could aid in its production and distribution.

By establishing licensing agreements, Apple can quickly introduce new technology to the industry and regain its position as a technology development leader. In addition, improving the marketing and distribution of their products is necessary as Apple products are not as widely available in retail markets as PCs. For instance, in Greenfield, Mass. where multiple PC retailers exist, Apple products cannot be purchased.

To reach the nearest Apple retailer, I need to travel approximately 20 miles. Apple's success in

the future will rely on their strategic decisions. Developing an integrated and user-friendly computer system could target young children and older individuals who want to use computers without the hassle of equipment setup. Despite various strategies to consider, Apple has enjoyed success recently with the iMac, G3 processor, OS 8.5, and cost-cutting measures. The iMac had a significant impact on increased revenues.

Apple has introduced a new product that is being heavily advertised and is available in bright primary colors to differentiate it from other systems. The system emphasizes simplicity and appeals to consumers who want an easy-to-use computer. In response to declining sales, Apple is targeting customers in the graphic design, advertising, and publishing industries.