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174 PART 2 • STRATEGY FORMULATION

Strategy analysis and choice largely involve making subjective decisions based on
objective information. This chapter introduces important concepts that can help strate-
gists generate feasible alternatives, evaluate those alternatives, and choose a specific
course of action. Behavioral aspects of strategy formulation are described, including
politics, culture, ethics, and social responsibility considerations. Modern tools for
formulating strategies are described, and the appropriate role of a board of directors is
discussed.

Doing Great in a Weak Economy. How?

Apple

When most firms were struggling in 2008, Apple
increased its revenues from $24.0 billion in 2007 to
$32.4 billion in 2008. Apple’s net income was $4.4 billion
in 2008, up from $3.5 billion the prior year—wonderfully
impressive in a global slump. Fortune magazine in 2009
rated Apple as their number-one “Most Admired
Company in the World” in terms of their management
and performance. That’s right, number one out 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 both business and con-
sumer 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
makers, hard drive makers, peripheral makers, software
vendors, and other segments. Hewlett-Packard recently
cut 24,600 employees and Dell laid off 8,900. Microsoft
recently cut its travel budget 20 percent and laid off
5,000 employees.
Amid recession and faltering rivals, Apple is doing
great. Brisk sales of iPods, iPhones, 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. billion in cash on their balance sheet to go along with
Apple continues to amaze the world with its new, zero long-term debt.
innovative products, being one of the best examples of Based in Cupertino, California, Apple has not cut
a “first mover” firm in developing new products. prices of computers much at all during the recession,
Apple has very loyal customers and has about $25.6 even as competitors have slashed prices dramatically.