Operational Balanced Scorecard: Apple, Inc.

Increasing customer expectations and a rapidly changing market are continually putting pressure on Apple to maintain a balanced scorecard. From the information reviewed, it is evident both financial and non-financial measures of Apple operations constitute the management of their strategic decisions and evaluations of the cost of quality measures. Using the balanced scorecard approach to define the financial positioning of Apple creates a clear picture as to what they can and should measure to balance the financials accordingly.

It is a management system that enables them to illuminate their corporate strategy, mission, and vision—and put them into action, while providing current feedback for improving performance and results. The Learning and Growth Perspective In today’s fast-paced world of swift technological change, the level of knowledge and training held by Apple’s employees is imperative to their ability to remain a key competitor in a highly competitive market. Yahoo! Finance Investor Relations illustrates some qualities of the non-financial measures of Apple’s balanced scorecard in respect to the Learning and Growth perspective.

It is necessary for employees to be in a continuous learning mode, and it is evident through Apple’s recent investments in training their rapidly growing number of employees. As of 2010, Apple Inc. employed 49,400 employees on a full time basis. That number has risen 34. 2% from 2009, a clear reflection of company efforts to foster formidable growth through innovations, development, and market ability. Employee satisfaction is also relatively high at Apple. Their “Think Different” philosophy is evident through all levels of operations, from product development and marketing, to the corporate culture amongst employees.

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According to PC Mag, “Steve Jobs has passed away, but Apple employees will remember him fondly. When Jobs left Apple in August, he had one of the highest approval ratings for a chief executive by his employees, as documented by Glassdoor. com. Employee empowerment at Apple creates an opportunity for Apple employees to express their creativity through innovative design and foster continual improvements on a business process, customer, and financial measures perspective. Apple’s success is heavily reliant on the intelligence and abilities of their employees.

It is imperative Apple continue to promote employee empowerment, boast low employee turnover, and generate high employee satisfaction, as the Learning and Growth perspective establishes the foundation of a balanced scorecard. Continually improving performance in the Learning and Growth perspective will enable Apple to improve its Internal Processes, and therefore increase customer satisfaction, and generate better financial performance. The Business Process Perspective Internal business processes are imperious in Apple’s ability to evaluate their business and understand whether they are meeting and exceeding their customer expectations.

In July, 2011 Steve Jobs said “We’re thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent”. Considerable growth and record profits are a clear indication that internal processes at Apple are working effectively. Apple’s ability to conform to customer requirements at an internal level are illustrated through their success and double-digit revenue growth. The Customer Perspective Apple operates in different market segments with their multiple personal computing products, mobile communication and media devices, and portable digital music players.

The customers are at the heart of Microsoft’s operations. From reviewing Apple’s 2011 third quarter results, it is clear from increased revenues in three out of four of their market segments are reporting growth in revenues. Although revenue growth is not the sole indicator of customer satisfaction, it is clear their good financial performance is directly related to their decision to target specific customer segments, while distinguishing their customer needs and wants throughout each segment, thus creating future value.

According to NY Times, “In the last decade, Apple has redefined the music business through the iPod, the cellphone business through the iPhone and the entertainment and media world through the iPad. Again and again, Mr. Jobs gambled that he knew what the customer would want, and again and again he was right. ” Exponential growth in each of these market segments illustrates a high level of customer satisfaction. Consistent improvement of design qualities have led to increased revenue growth. To Steve Jobs, “Design is not just what it looks like and feels like. Design is how it works. ” Financial Perspective

The financial perspective demonstrates the customary need for financial data to be manipulated through metrics in a way that illustrates the fitness of Apple’s core businesses. This information is imperative for Apple to publish to their shareholders and potential investors. As Apple Inc. is a publically traded company, their financial data is available online. Investors can look for potential risks facing the company, which may or may not deter potential investors.

The following is an excerpt from Investor Relations, Earnings and Financials; Third quarter results for 2011 illustrate Apple’s ability to create increasing shareholder value. We’re thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent…We are extremely pleased with our performance which drove quarterly cash flow from operations of $11. 1 billion, an increase of 131 percent year-over-year,” said Peter Oppenheimer, Apple’s CFO.

Looking ahead to the fourth fiscal quarter of 2011, we expect revenue of about $25 billion and we expect diluted earnings per share of about $5. 50. ” Increases in operating income from productivity gain, operating income from growth and revenue growth allow Apple Inc. o manage their costs and unused capacity and build strong customer relationships, resulting in increased shareholder value.

Costs of Controlling Quality vs. Costs of not Controlling Quality According to the text from class, “The American Society for Quality defines quality as the total features and characteristics of a product or service made or performed according to specifications to satisfy customers at the time of purchase and during use. ” There is no doubt that Apple is a successful company. From reviewing the Apples’ financial statements, it is clear Apple has cornered the market on “cool”.

Apple has bravely marketed themselves as a company that makes products that “just work. ” However, this success does come at a cost.

Costs of Controlling Quality Prevention Cost: Apple, Inc.

According to AppleMatters. com, “In terms of hardware, Apple’s success is overloading its own Quality Control. With manufacturers that need to produce a record number of Macs, iPods, iPhones, and accessories, it is without a doubt that some testers overlook several tests in order to ship out as many Apple products as possible to the world.

By appealing to business, education and the general consumer, Apple’s products reach a larger target audience than other computer manufacturers, requiring more units to be produced and shipped as soon as possible. ” Maintaining consistency in quality in regards to Apple suppliers, design engineering, and testing of new materials is imperative to the future success of Apple. Investments in research and development and quality control are an example of one of Apple Inc. prevention Costs. From the material reviewed, it is evident that Apple has invested considerable amounts of their time and money into R&D.

The calculated estimate is that these investment costs will create future revenue growth through the reduction of internal and external failure costs incurred by re-work and spoilage, and customer support, while increasing value in their value chain. Appraisal Cost Apple Inc. is well known for their high quality products, and quality control is imperative to their success.

The costs of quality (COQ) Apple incurs to prevent the production of low quality products is high, as they differentiate themselves from their competitors. Jobs obsesses about competitors and forces his employees to do the same, to make sure Apple doesn’t grow complacent he pushes all products to have leading edge components. Mr. Jobs embraces Disruption, doesn’t fear seeing it in his company, doesn’t mind it amongst his people, and works to create it in his markets. And he makes sure Apple constantly keeps White Space projects open and working to see what works with customers – testing and trying new things all the time in the marketplace.

Just as investments in testing and R&D are an example of controlling the cost of quality (COQ), Apple’s process of inspecting the goods before sale is an example of a COQ and can be referenced as an appraisal cost. The continual process of managing Apple’s COQ, such as the inspection of finished goods will ensure decreases in the costs of not conforming to quality standards, in respect to external failure costs, including warranty repair and customer support, maintaining their high levels of current customer satisfaction and fostering further growth opportunities. With the amazing success of Apple Inc. ver the last decade and rumors of new products on the way, Apple’s Quality Control will need to grow and continue to expand to maintain Apple’s standards of products that just work.

Apple Inc. in the Context of the Theory of Constraints

In context to the Theory of Constraints, and according to material reviewed regarding Apple Inc. , it is clear the company strives to maximize their “throughput” while minimizing their operating expenses for labor, sales, and administration, while simultaneously decreasing investment costs incurred from inventories, plant and equipment.

In the market for technology, Apple faces the biggest bottleneck, created by the increasingly demanding market for new technology and innovations. Early adopters of technology want the products Apple Inc. produces yesterday, respectfully. There is tremendous pressure for Apple to continue to produce the most innovative products in a time-sensitive matter in order to meet the needs and wants of their customers, foster future growth and capitalize over competitors.

When there is a delay, such as in the production level incurred by a potential supplier shortage for a component part, or lack of quality from a particular supplier, Apple’s system performs at a lower rate than the rest of the production system, and the system fails to operate at maximum capacity. Internal inspection of supplier products must be inspected prior to being used by Apple to produce their products, and because the delay would translate into a low production level, and increase costs everywhere else, the point of limited production becomes the source of the bottleneck.

The bottleneck in this example for Apple could be solved by ensuring there is more than one supplier, or increasing the level of quality control for internal inspection, as to reduce the risks of experiencing a bottleneck in production because of the supplier shortages or lack of quality control from the component parts, while being able to react swiftly to potential risk factors and maintaining their production system efficiently and effectively.

Critical Success Factors: Apple, Inc.

Cost and efficiency, quality, time, and innovation are the critical success factors that can make or break a company. Customers expect companies to exploit the benefits of maximizing their critical success factors through the value chain. The competition in the software market and in the rapidly changing technological market is fierce, and it is clear Apple Inc. stands strong throughout their decision making process concerning their cost and efficiency, quality, time, and innovation. Cost and Efficiency From analyzing Apple Inc.

SEC findings, it is evident they intend on creating value in the value chain to customers through ability to produce highly differentiated products at a low cost in regards to R&D, while simultaneously producing products at a relatively low cost to consumers. The figure below illustrates Apple’s level of R&D investment in respect to other key competitors. R&D expenditures at Apple are merely 2% of overall Revenue. This is five times lower than Google and six times lower than Microsoft. Figure 1.

It is clear Apple has made considerable investments towards the level of their cost and efficiency, a low cost in respect to performing the activity in the value chain function. It is clear the benefits in sales revenues and customer relationship acquisition and management at Apple Inc. are complimented through their low levels of investment in their R&D, separating them from their key competitors, and thus giving them a competitive advantage in the market. Quality “Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected. ” Steve Jobs.

Quality is what has separated Apple from the competition year after year. Record breaking revenues are an indication that Apple’s customers keep coming back for more. Apple’s success can be seen through their unprecedented levels of quality at a cost affordable to the mass consumer market. According to the text used in class, Cost Accounting: A Managerial Emphasis, quality as a key success factor is defined as the philosophy behind total quality management (TQM), in which “…management improves operations throughout the value chain to deliver products and services that exceed expectations.

TQM encompasses designing the product or service to meet the needs and wants of customers, as well as making products with zero (or minimal) defects and waste and with low inventories. ” Time The time it takes to develop user friendly hi-tech products is imperative to Apple’s success in the fast paced market of hi-tech products and software development. The speed in which Apple produces products is what has defined and created their image thus far. Short product life cycles are communal throughout the market, and Apple Inc. is constantly being pressured to be first in industry in the market year over year.

Innovation Steve Jobs on Apple, Inc. “A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets. ” Innovation is the final key success factor. Without innovation, Apple would be worthless. “A constant flow of innovative products or services is the basis for ongoing company success. The management accountant helps managers evaluate alternative investment decisions and R&D decisions.

As cited above from the text used in class, innovation breeds success. Apple’s success is largely due to their ability to be very calculated in decision making pertaining to investments of time and money in their R&D. In the many examples of innovation Apple has demonstrated through their products, it is evident Apple Inc. is aware of the market needs and wants and is consistently capable on capitalizing on the opportunities that come from being a market leader with the newest and “coolest” products.

To Steve Jobs, “Design is not just what it looks and feels like. Design is how it works. Over the past decade, Apple has launched five legitimately groundbreaking innovations:

  1. The iPod. The elegant MP3 player that started Apple’s decade of disruption.
  2. iTunes. Beautiful software with a powerful business model that showed that people would, in fact, pay for music if the price was right and the interface was simple enough.
  3. The iPhone. Dubbed the “Jesus Phone” by supporters, a smartphone that three years later still hasn’t been matched by rivals.
  4. The AppExchange. Sure, no one needs 98 percent of the apps that Apple offers, but wow, what a selection.
  5. The Apple Store.

The quietest part of Apple’s revolution, today close to $2 billion worth of goods move through Apple revolutionary stores. It is very evident through the success over the last decade that Apple consistently exceeds the mark on innovation again and again, even in a market that is highly competitive and dominated by other very strong competitors. ——————————————–

References:

  1. http://biz. yahoo. com/ic/12/12644. html
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  3. http://www. apple. com/pr/library/2011/07/19Apple-Reports-Third-Quarter-Results. html
  4. http://files. shareholder. com/downloads/AAPL/1432412872x0xS1193125-10-238044/320193/filing. pdf
  5. http://www. apple. com/pr/library/2011/07/19Apple-Reports-Third-Quarter-Results. html
  6. http://topics. nytimes. com/top/news/business/companies/apple_computer_inc/index. html
  7. http://www. hobo-web. co. uk/the-best-steve-jobs-quotes-putting-a-ding-in-the-universe/
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  10. http://www. applematters. com/article/apples-quality-control-is-overloaded/
  11. http://www. applematters. com/article/apples-quality-control-is-overloaded/
  12. http://www. quora. com/Apple-Inc-2/Why-is-Apples-R-D-budget-so-low-relative-to-competitors
  13. http://www. quora. com/Apple-Inc-2/Why-is-Apples-R-D-budget-so-low-relative-to-competitors
  14. Horngren, C. T. , Datar, S. M. , and Rajan, M. (2012). Cost Accounting: A Managerial Emphasis. New Jersey: Prentice Hall, Fourteenth Edition. ISBN: 978-0-13-210917
  15. Horngren, C. T. , Datar, S. M. , and

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Apple Inc Marketing Case Study. (2017, Dec 24). Retrieved from https://paperap.com/apple-inc-marketing-case-study/

Apple Inc Marketing Case Study
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