1 Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC Session #4 Strategic Management Dr. Mark H. Mortensen Sessions 001 and 270 Thursdays 6:00PM to 9:00PM

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 2 Fall 2008 You Will be Prepared for Today Iff You: Have studied for the Quiz on Chapters 1-3 Have read Chapter 12 Have re-read the Apple Case and thought about the two questions (extra! Prepared some thoughts on SWOT, Major Issues, mapped out some possibilities, …)

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 3 Fall 2008 Today 6:00Begin Errata from last class Important points from last week Assignment #1 papers back Quiz on Chapters 1-3 – 30 minutes Discussion on Apple Case Study 7:30BREAK Lecture/Discussion on Chapter 4 Introduce Assignment #2 (due next week) 8:50 End

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 4 Fall 2008 Errata from Last Week "There is nothing so useless as doing efficiently that which should not be done at all." -- Peter F. Drucker Drucker, revered as the father of modern management in his numerous books and articles stressing innovation, entrepreneurship and strategies for dealing with a changing world, died Friday [11 November 2005]. He was 95. Drucker's management books included: The Effective Executive (1966); Management: Tasks, Responsibilities, Practices (1974); and Managing in a Time of Great Change (1995).

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 5 Fall 2008 Key Points from Last Week - Ethics To be a good manager, and a good human being, you need to find a moral and ethical compass to guide your decisions. “Everyone else is doing it” didn’t work with your parents – and won’t work in life. “I was only following orders” didn’t work at Nuremberg, and does not work in US courtrooms.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 6 Fall 2008 Key Points from Last Week - Apple Various strategies, under a list of CEOs, have been tried, Current product strategy is closer to their “roots” of differentiated, Apple-controlled products with great “cool factor” from excellent product ease- of-use, industrial design, and deliberate customer experience planning Retail strategy is combination of direct web sales, Apple-owned stores, and retail distributors They are not just computers anymore (iPod, iTunes, Apple TV, iPhone), hence, “Apple Computer”  “Apple”

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 7 Fall 2008 Assignment #1 Returned Name, Date, page numbers, please. Summary up front is good Headings are good Comparison tables are good Combination of hard data, observations, opinions (yours and others) is good An analysis of the above, describing “so what,” especially in the context of theory, is good. Everyone did quite well – and “got it.” Some articulated it better. Some gave a deeper analysis. Some organized it well. Some wrote “singing prose.”

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 8 Fall 2008 Quiz Chapters minutes Individual effort Closed book

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 9 Fall 2008 Apple Case Study

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 10 Fall 2008 Questions for Apple Case Study Has Steve Jobs finally solved Apple’s long-standing problems a. With respect to the Macintosh business? b. With respect to its broader strategic position?  Going forward, what should Steve Jobs do?

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 11 Fall 2008 Doing a Case Study -1 Read the case thoroughly. Read the case thoroughly. Read the case thoroughly.  The first time to get an overview of the industry, the company, the people and the situation.  Read the case again more slowly, making notes as you go. Define the central issue. Many cases will involve several issues or problems.  Identify the most important problems and separate them from the more trivial issues  After identifying what appears to be a major underlying issue, examine the related problems.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 12 Fall 2008 Apple SWOT(1): PC Business StrengthsWeaknesses OpportunitiesThreats Fanatically loyal customers who pay for yearly OS updates Domination of niche markets Industrial design expertise - “Cool factor” Apple-owned software applications FLASH technology procurement agreements Mobile Me & Apple Care New Intel architecture Hub for Apple iPod, iPhone, etc. Higher prices Low market share of the PC business Low penetration of business computing High cost of designing, manufacturing, and supporting proprietary computer architecture and OS Many fewer software and peripheral developers provide products for Macintosh than for PCs mean lower value for the “solution” Transition from desktop to laptop Move to solid state disk technology Cloud computing SaaS Price decline – OLPC Freeware OSs (LINUX) Microsoft juggernaut Jobs rumored sickness Macintosh: MacBook (Air, Pro), Mac Mini, iMac, Mac Pro xServe, Airport, Time Capsule, Mobile ME, Apple Care.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 13 Fall 2008 Apple SWOT(2): Consumer Electronics Business StrengthsWeaknesses OpportunitiesThreats FLASH technology procurement agreements Integration with Macintosh, but works also with Wintel Device/iTunes integration Mobile ME Excellent user experience Industrial design – “cool factor” Agreements with record labels Open computing environment Higher prices Few video agreements with owners DRM hassles iPhone is more an entertainment appliance than a SmartPhone for business Dependent upon constant product innovation to succeed, not structural attributes Video market explosion Increasing complexity – features and maintenance Proliferation of important files (image, video, audio) by consumers SaaS models and acceptability Myriad competitors (including Microsoft) innovating as fast as they can Open source software (LINUX, Android) coming out Video DRM complexity Jobs rumored sickness iPod, iPhone, Apple TV, Apple Care, Mobile Me

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 14 Fall 2008 Doing a Case Study - 2 Define the firm’s goals (only if applicable)  Inconsistencies between a firm’s goals and its performance may further highlight the problems discovered in step 2  Identifying the firm’s goals will provide a guide for the remaining analysis. Identify the constraints to the problem (only if applicable)  The constraints may limit the solutions available to the firm  Typical constraints include limited finances, lack of additional production capacity, personnel limitations, strong competitors, relationships with suppliers and customers, and so on.  Constraints have to be considered when suggesting a solution.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 15 Fall 2008 Apple’s Goals Observation: When you go to the web site, you get information about their products. You have to search – hard – for corporate information! Apple's mission statement Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone. FAQs at Product, Product, Product.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 16 Fall 2008 Apple’s Constraints Microsoft Office is the entrenched standard application, although cheap competitors are nipping at its heels, as well as OpenDocs-based free software The Wintel hardware architecture is well entrenched – getting others to build hardware to a new open standard to run OS-X would be very difficult Features to support large business use by IT shops would be very expensive, and time- consuming, to implement for Apple.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 17 Fall 2008 Doing a Case Study - 3 Identify all the relevant alternatives  The list should include all the relevant alternatives that could solve the problem(s) that were identified  Use your creativity in coming up with alternative solutions  Even when solutions are suggested in the case, you may be able to suggest better solutions Select the best alternative  Evaluate each alternative in light of the available information  Resist the temptation to jump to this step early in the analysis  You will also need to explain the logic you used to choose one alternative and reject the others.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 18 Fall 2008 Alternatives – PC Business 1. Get out of the hardware business, keep the software business, licensing the hardware to others 2. Keep to the niche with the proprietary software, manage to profitability and expand tactically with the PC as the hub of the home entertainment system as laptops move to silicon storage as hardware running Windows expand iTunes into application downloads for PC users 3. Attempt to Change the Game Further bundling software and hardware support, offering a “total package” for computing, building on the Apple Care program – playing to the people tired of complexity and hassle Build on the Mobile Me offering to offer expanded backup and recovery, SaaS, and cloud computing capability for heavy graphics users. Thus, MACINTOSH/Mobile Me > iPOD/iTunes

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 19 Fall 2008 Alternatives – Consumer Electronics Business Continue with the current consumer-focused strategy, constantly innovating new products (where does Apple TV fit?) Expand into video distribution with Apple TV and iTunes, building the catalog as done with iTunes Expand into gaming segment with Apple-produced and third party games, built on an Apple TV base and incorporating MMPGs via cloud computing infrastructure Expand into the business realm with:  Corporate offerings based on iTunes and Mobile Me technology as a platform  SaaS with major players such as SAP, Oracle, and Salesforce.com

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 20 Fall 2008 Doing a Case Study - 4 Develop an implementation plan  Plan for effective implementation of your decision. Lack of an implementation plan, even for a very good decisions can lead to disaster for a firm and for you  Don’t overlook this step. It is important as a future manager to be able to explain how to implement the decision.

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 21 Fall 2008 Break – 15 minutes, please

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 22 Fall 2008 Chapter 4: Environmental Scanning and Industry Analysis Environmental Variables

Mortensen Consulting Group (c) Copyright 2008 Mortensen Consulting Group LLC 23 Fall 2008 Reminder for Next Week Read Chapter 4 Do Assignment #2 (Dunkin’ Donuts) either by yourself, or with your group. Due by start of class next week Three people/groups can present – please volunteer – each person needs to do one during the term.