Question 2 (50 marks)

Read the case below and answer the questions that follow:

Apple

When most firms were struggling in 2008, apple increased its revenue from$24.0 billion to $32.4 billion in 2008, up to $3.5 prior year-wonderfully impressive in a global slump. Fortunate Magazine rated Apple as their number one most admired Company in the World in terms of their management and performance. Number One of millions of companies around the world. In the global recession, technology purchases were deemed disposable or discretionary for most businesses and individuals. New orders for business and consumer tech products plummeted, and technology firms shed workers rapidly. This led to massive layoffs in the computer industry and related industries. The meltdown permeated all the way down the supply chain to chip maker, hard drive makers, software vendors peripheral makers and other segments. Hewlett-parchard recently cut 2400600 employees and Dell laid off 8,900 employees. Microsoft recently cut its travel budget by 20 percent and laid off 5000 employees.

Amid recession and faltering rivals, Apple is doing great. Brisks sales of iPad, iPhone, and laptops are yielding higher and higher revenues and profits every quarter. Legendary CEO Steve Jobs and his colleagues are implementing a great strategic plan. Apple has no manufacturing plants but does have retail stores. Apple continues to amaze the world with its new, innovative products, being one of the best examples of a first mover firm in developing new products. Apple has loyal customers and has about $25.6 billion in cash on their balance sheet to along with the zero long-term debt. Based in Cupertino, California, Apple has not cut prices of computers much at all during the recession, even as competitors have slashed prices dramatically.

On June 9, 2009, Apple did however lower the price of its entry-level iPhone by 50 percent to $99 and rolled out a next-generation model named iPhone 3GS which is faster than existing models and can capture videos. Apple by mid Magazine rated -2009 had sold over 20 million iPhones and reported in July 2009 that the company was unable to supply enough iPhones and Macintosh computers to meet demand. Apple sold 5.2 million iPhones in the quarter ending that month, more than 7 times what it sold the same quarter the prior year. Shipments of Macintosh computers that quarter were up 4 percent to 2.6 million. For the first 7 months of 2009, Apple's stock rose 80 percent compared to the Nasdaq Composite being up 25 percent. Apple has aggressive new plans to design its own computer chips in order (1) obtain better chips for its unique products, and (2) share fewer details about its technology with external chip manufacturers.

Questions

a. Identify Apple's biggest strength that allowed it to flourish even during the recession. (20 marks)

b. Draw this strength with other strategic decision of the company that propelled the company business successes. (10 marks)

c. Explain the role of management in the profitability of business such as Apple. (10 marks).

d. Explain how Apple without a manufacturing plant made great profits margins amid fears competition in the computer industry. (10 marks)