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Binus Business School,

MM Executive Batch 20

Presented by Group I

Alexander Christian

Dina Sandri Fani

Jenna Widyawati

Ridwan Martawidjaja

Case Study AnalysisApple, Inc. (2008)

Table of Contents

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2

Apple at a Glance

Competitive Analysis

Product and Marketing Strategy

Problem Statement

Conclusion and Recommendation

1

2

3

4

5

Table of Contents

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Apple at a Glance

Competitive Analysis

Product and Marketing Strategy

Problem Statement

Conclusion and Recommendation

1

2

3

4

5

Apple’s Business Evolution

Experienced upturns and downturns in its journey to become Industry’s Giant

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1970s

• Apr 1976:

Apple

Computer

was founded

• Vendor

specialized of

the Mac PC

line

1980s

• Dec 1980:

launched IPO.

Became the

industry leader

• 1981: IBM entered

the market.

Apple’s

competitive

position changed

• 1982: market

share dropped to

be 6.2%

• 1983-1984: net

income fell 17%;

company in crises

• Apr 1985: Jobs

removal; replaced

by Sculley

1990s

• 1990 shift away to low-cost

producer of computers under

Sculley era. Shorten the

product development cycle

• 1991: Forged an alliance with

IBM by forming a JV named

Taligent. A goal is to create

revolutionary OS

• 1993: Gross margin dropped

to 34%; forced Sculley down

and replaced by Spindler

• 1995-1996: parted the JV.

Reported $69 mio loss.

Splinder replaced by Amelio.

Worldwide market share

dropped from 6% to 3%

• Late 1996-1998: Jobs

returned. First used of

website to sell products

2000s

• The Apple turnaround.

Apple to streamline

operations &

reinvigorate innovation

• Reenergize Apple’s

image: not just a

techno company but a

cultural force

• Fully outsourced the

manufacturing

• Provided retail

experience. Operated

215 stores; logged

>350 mio visits

• Facing a downward

pricing pressure to

keep revenue growth

• Major shift by providing

multi product lines

Apple’s Product EvolutionFocus in technology and innovation excellence. Shift away from specialized of the Mac PC

line to multiple products line up

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5

Apple’s Philosophy

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Empathy

“We will truly understand our customers’ needs better than any other company”

Focus

“In order to do a good job of those things we decide to do we must eliminate all of the unimportant opportunities”

Impute

“People DO judge a book by its cover. We may have the best product, the highest quality, the most useful software, etc. ; …; if we present them in a creative, professional manner, we will impute the desired qualities”

Apple’s Current Business Model

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Customer Segments

Fragmented segment for each product. Tapping more into upper class segment due to its premium price

Customer Relationships

Self service

Automated services

Retail experience

Personal assistance at Apple store

Co-creation through Apple store

Value Proposition

Compatible experience with digital & entertainment hub

Sleek design

Easy-to-use products

High-end, premium products line

Endless innovation

Apple’s Current Business Model

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Key Resources

Apple brand

Constant innovation

Intellectual/patent

Customer-obsessed, empathetic employees

Physical assets and facilities

Key Activities

R&D through customer observation

Hardware & software development

Managing cooperation through tight quality control

Marketing

Key Partners

Manufacturers

App store developers

Telco operators

Publishers

Music, television, and movie industries

Apple’s Current Business Model

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Channels

Owned website (Apple.com)

Apple retail stores

iTunes stores

National & international distributors

Cost structure

Manufacturing cost

Labor cost

Marketing & advertising cost

R&D cost

Revenue Streams

Sale of products

Media sales/licensing

Rental & subscription fee

Purchased apps

Accessories

Advertising

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10

Apple at a Glance

Competitive Analysis

Product and Marketing Strategy

Problem Statement

Conclusion and Recommendation

1

2

3

4

5

Problem Statements

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Deteriorated market share

Apple’s share of the worldwide PC

market had edged up only slightly

in recent years; remained in the

2% to 3% range

1

Strong downward pricing pressure

Upshot of the pricing trends was

persistently low profitability.

Average selling price for a PC

declined by a compound annual

rate of 8% per year

Consumers’ behavior evolution

Complexity in handling customers

needs arose as they become

more knowledgeable about PC

3

1. Was Apple’s recent success just

another temporary “up” in its up-

and-down history?

2. Had Apple finally established a

sustainable strategy?

2

Exclusive, limited vs. Open platform

Compete with the other players

that provide unlimited offers due

to its open plaftorm

4

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12

Apple at a Glance

Competitive Analysis

Product and Marketing Strategy

Problem Statement

Conclusion and Recommendation

1

2

3

4

5

Competitive AnalysisDetermine Apple’s model of competition using Porter’s Five Forces

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Rivalry amongst sellers

Threat of New

Entrants

Bargaining powers of customers

Threat of substitute products

Bargaining power of suppliers

Low

• Massive capital investment

• Copyrights for patents and

technologies made new entries difficult

to adopt

Very high

• Multiple competitors-fierce battle

• PC: HP (27%), Dell (25%), Acer

(11.4%), Apple (8%)

• Personal media: strong position (73%)

• Smartphone: RIM (43%), Apple (24%)

• Tablets: outright leader

Low

Suppliers compete

among themselves

to obtain exclusive

contracts with Apple

and therefore have

no bargaining power

Very high

• Lots of substitute models throughout

the phone, PC, tablet industry

• Substitutes within Apple’s product

range, makes not easy to choose

Medium

• End-user are

mostly loyal

• General buyers

have high

bargaining

power

Competitive AnalysisApple SWOT Analysis: maintain its strength, leverage market opportunities, and minimize

threats are key areas to maintain Apple’s leading position

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S W

T

Strengths

• Powerful brand image associated

with quality & superior design

• Large loyal customer base

• Innovation is a company’s DNA

• Strong financial performance

• World market capacity

• Product diversification &

differentiation

Opportunities

• Entry to emerging economy

• Smart phones and tablet market

is expanding

• Robust outlook for mobile

advertising market provides

growth opportunity

Threats

• Rising popularity of Google

Android platform may affect its

market share

• Intense competition may affect

revenues and profitability

• High dependency on specific

suppliers may affect its operations

• Substitute products are widely

available in the market

O

Weaknesses

• Decreasing market share

• Incompatibility with famous apps

• High cost structure due to heavy

investment on R&D

• Long product development cycle

due to lack of lean operations

management

Competitive AnalysisApple is perceived as a brand that provides a premium, pricy products

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Low quality High quality

Expensive

Less expensive

PC market Digital music player market

Less expensive Expensive

High product range

Low product range

Head to head competition with Sony

Vaio. Both are perceived as

premium, expensive brand

Head to head competition with

SanDisk. iPod offers higher product

range than SanDisk

Competitive AnalysisApple is perceived as a brand that provides a premium, pricy products

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Pricing

model: RigidFlexible

pricing model

High product range

Low product

range

Online music store market Smartphones market

Has a distinct market positioning

compared to the other players.

Control the price model 100% but

successfully offers the most products

iPhone has unique proposition as it

is the only brand that associated

with 3 imagery, i.e. style/design,

features, and durability

Competitive AnalysisNumbers told everything: Apple grew as industry’s giant by having a double digit CA

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5,742 8,279

13,931

19,315

24,006

2002 2004 2005 2006 2007

Net Sales Development Year 2002- 2007

46 349

1,650

2,453

4,409

2002 2004 2005 2006 2007

Operating Income DevelopmentYear 2002-2007

5-year CAGR: 149%5-year CAGR: 149%

65 276

1,335

1,989

3,498

2002 2004 2005 2006 2007

Net Income DevelopmentYear 2002-2007

6,298 8,050

11,551

17,205

25,347

2002 2004 2005 2006 2007

Total Assets DevelopmentYear 2002-2007

5-year CAGR: 122% 5-year CAGR: 32%

Competitive AnalysisRapid growth in revenue, store network, and sales per store. Revenue of $6bn from 247

stores globally in 2008

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1. calculated based on average number of stores for the year in order to adjust for the non-full year of revenues of stores opened during the year

Source: “Inside Apple Stores, a Certain Aura Enchants the faithful,” New York Times, December 27, 2007; Oppenheimer & Co., May 21, 2008;

press search; BCG analysis

Competitive AnalysisApple Stores network account for ~20% of total Apple sales: growing faster than overall

average sales

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1. Online sales are only from Apple.com and are best guess estimates from 2001-2008

Source: Company annual reports; IfoAppleStore; Apple retailer (for online store sales)

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Competitive AnalysisApple Stores revenue per sq. ft. exceptionally high. Outperforms other retailers by a factor

of 4

Notes:Sales exclude non-retail revenue streams (service fees, online sales, direct marketing sales, etc.); banner level data excludes online sales

prorated based on banner share of total company sales; data reflects restated (vs. reported) amounts for each year; square feet is gross (vs.

selling); if only selling square feet is provided, figures are increased by a factor appropriate for the sector; Lowe's includes Canada operations; Due

to an accounting change, Apple numbers are only comparable to 2005; Gamestop 2005 data pro forma as if EB merger occurred first day of FY.

Sources: 10Ks, company web sites, BCG analysis, Internet Retailer;

Competitive AnalysisOne driver of high sales per sq. ft. is high value Macs

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211. Apple-branded operating system and application software, third-party software, AppleCare, and Internet services; 2. Apple-branded and third-

party displays, wireless connectivity and networking solutions, and other hardware accessories; 3. After removing iTunes Store sales. Includes iPod

services, and Apple-branded and third-party iPod accessories; 4. And related accessories

(Source: Piper Jaffray; Company reports; Press search; BCG analysis

Competitive AnalysisStrong price control across channels helps maintain margins (except in multi brand stores

in IT malls)

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Source: BCG survey; BCG

analysis

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23

Apple at a Glance

Competitive Analysis

Product and Marketing Strategy

Problem Statement

Conclusion and Recommendation

1

2

3

4

5

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Product & Marketing StrategyApple’s 4 Ps (Marketing Mix)

Pricing

Simplistic

approach

Focus in creating

emotional appeal.

Utilize the powers

of WoM marketing

Hybrid

distribution

channel

Online store, physical

outlet, exclusive

carrier agreement

Premium brand

Target a less price

sensitive customers

Diversified

product mix

Multi product lines

to be suiting up

with the customer

needs

High price

charged portrays

the high quality

of products

Product & Marketing StrategyMacBook competition model under Porter’s Five Forces

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Rivalry amongst sellers

Threat of New

Entrants

Bargaining powers of customers

Threat of substitute products

Bargaining power of suppliers

Low

• High capital investment –

commoditized market makes difficult to

differentiate

• Substantial dominance of low-cost

large-scale players

Very high

• Multiple competitors-fierce battle

• PC: HP (18.8%), Dell (14.9%), Acer

(7.9%), Apple (2.6%%)

• Very low switching cost

Low

Suppliers compete

among themselves

to obtain exclusive

contracts with Apple

and therefore have

no bargaining power

Medium

• Huge network externalities for PCs

• No Mac clone available, no

competing product in the Mac market

Medium

• End-user are

mostly loyal

• High cost of

switching to PC

Product & Marketing StrategyMacBook’s SWOT Analysis

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S W

T

Strengths

• Pioneer in the personal

computer industry

• Self-sufficient: be able to

build their own OS

• Complete package of HW

and SW

Opportunities

• Taking advantage of the Mac

OS: leverage the difference

over competing OS

• Taking advantage of its

innovation excellence to

head-on Microsoft image

Threats

• Highly competitive industry

may affect its market share

• Existence of low-cost large-

scale players

• Substitute products are

widely available in the market

O

Weaknesses

• Inconsistency in quality and

technology

• High cost structure due to

high R&D investment

• High dependency to

processor chips’ supplier

Product & Marketing StrategyMacBook’s Positioning and its Target Segments

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StudentsProfessional &

business people

Teenagers and young adults

Government

Market SegmentsPositioning

High premium charges that

offered a cutting-edge,

tightly integrated user

experience

“Everything-ready” device

that worked well with other

devices

Product & Marketing StrategyMacBook’s Marketing Mix

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• Multi product range to cater

wider segment

• Available for high-end user,

mass-segment user, and low-

end user

• Bundled software

Product

• Different pricing model applied to

be suiting with customer needs

Pricing

• Focus on strength in marketing

Mac products

• scientific, professional, stylish

and fashionable elements

respectively

• Emphasizing Mac interoperability

with other machines

Promotion

• Direct distribution channels:

online store, physical outlet

• Indirect distribution channels:

outsourced the manufacturing of

Mac products

Placement

Product & Marketing StrategyiPod competition model under Porter’s Five Forces

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Rivalry amongst sellers

Threat of New

Entrants

Bargaining powers of customers

Threat of substitute products

Bargaining power of suppliers

Low

• Significant economies of scale

• Consumers are brand loyalVery high

• Multiple competitors-fierce battle

• Industry is stagnant or declining

• Very low switching cost: creating

pressure to downward the price

High

Availability of

supplier input;

competitiveness of

input market

High

• Emerging smartphones market

• Price value characteristic (not be the

2008 case but now become an issue)

Medium

• End-user are

mostly loyal

• High cost of

switching to PC

Product & Marketing StrategyiPod’s SWOT Analysis

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S W

T

Strengths

• Product design excellence

• Great functionalities

• Compatible with either Mac

or Windows platform

• Multiple product lines with

different storage capacity

• Presence of brand loyalist

Opportunities

• Leverage existing features

• Additional revenue from

accessory market

Threats

• DRM-free copies of music

from the four big labels

• Economic condition that

lower customer purchasing

power

• Emerging smartphone

product that replace its

functionality as media player

O

Weaknesses

• Lack of additional features

like wireless music sharing

capability & FM tuner

• Health concern such as

hearing impairment and

effect on pacemaker

• Fixed pricing structure

Product & Marketing StrategyiPod’s Positioning and its Target Segments

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Youngster/ teenager

Urban & professionals

Music loversTech savvy individuals

Market SegmentsPositioning

An icon of the Digital Age

A portable digital music

player based on the MP3

compression standard

Product & Marketing StrategyiPod’s Marketing Mix

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• Wide product ranges with

storage capacity and

functionality

• iPod shuffle, iPod nano, iPod

classic, and iPod touch

Product

• Different pricing model applied to

be suiting with customer needs

• ASPs ran $50 to $100 higher

than that of other MP23 players

• Gross margin 30-35%

• Additional revenue stream from

accessories sale

Pricing

• Unique advertising – silhouette

ads

• Benefiting from mouth-to-mouth

advertising

• Message focus on experience

and lifestyle

• Utilize iTunes channel

Promotion

• Sale through owned web and

retail stores

• iTunes Music Stores

• Forging deal with flash

manufacturers

Placement

Product & Marketing StrategyiTunes competition model under Porter’s Five Forces

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Rivalry amongst sellers

Threat of New

Entrants

Bargaining powers of customers

Threat of substitute products

Bargaining power of suppliers

High

• Access of entrants to key input,

including know-how is easy

High

• Multiple competitors-fierce battle

• However, iTunes manage its

leadership in online music store market

• Monthly subscription plan allowed

unlimited listening

High

• Competitiveness of

the input market

• Ability to supplier to

price discriminate

High

• Availability of close substitution from

pirate product

High

• Indirect power

to competitive

market

• Availability of

substitute

product

Product & Marketing StrategyiTunes’ SWOT Analysis

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S W

T

Strengths

• Apple brand

• Brand loyalist

• The first store that offer

revolutionary way to buy

music

• Affordable song pricing

compared to conventional

music market

Opportunities

• Enlarge the market to reach

all entertainment audiences

• Open platform system that

compatible to the other

platform

• Connect iTunes store to

other social media to

increase awareness

Threats

• Existence of other online

digital entertainment and

music store

• Piracy entertainment product

• DRM-free music copies from

big labels

O

Weaknesses

• Rigid pricing strategy

• “Trojan Horse” image due to

its FairPlay piracy protection

• Limited main users to Apple’s

product customers

Product & Marketing StrategyiTunes’ Positioning and its Target Segments

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Market SegmentsPositioning

Innovative online music

stores with wide range of

music selection

Integrated, seamless digital

experience due to TV

episodes and film selection

offering

Youngster/ teenager

Urban & professionals

Music loversEntertainment

seeker

Product & Marketing StrategyiTunes’ Marketing Mix

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• Wide range of digital

entertainments that are easy to

be downloaded

Product

• Fixed pricing structure

• Very low gross margin

• Most of the revenue goes to the

music label

Pricing

• Offering free songs in promotion

cooperating with other brands as

Pepsi, Coca Cola, Gap

• Automatic advertising for Apple’s

product users

Promotion

• Owned web

Placement

Product & Marketing StrategyiPhone competition model under Porter’s Five Forces

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Rivalry amongst sellers

Threat of New

Entrants

Bargaining powers of customers

Threat of substitute products

Bargaining power of suppliers

Medium

• New entrants need to have economies

of scale

• High capital investment

High

• Multiple competitors-fierce battle

• Existence of iPhone killer products

rapidly appearing on the market

• Competition become tougher due to

Google Android dominance

Low

Suppliers compete

among themselves

to obtain exclusive

contracts with Apple

and therefore have

no bargaining power

High

• Existence of iPhone killer products

• Less expensive products

Medium

• End-user are

mostly loyal

• General users

will have more

options

Product & Marketing StrategyiPhone’s SWOT Analysis

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S W

T

Strengths

• Apple’s strong brand image

• Advanced email security

• Support for the Microsoft

Exchange email platform

Opportunities

• Entry to emerging economy

• Smart phones and tablet

market is expanding

• Robust outlook for mobile

advertising market provides

growth opportunity

Threats

• Rising popularity of Google

Android platform may affect

its market share

• High dependency on specific

suppliers may affect its

operations

• Substitute products are

widely available in the market

O

Weaknesses

• Battery was non-replaceable

and had a 5 hours lifetime

• High cost structure due to

high R&D investment

• Features limitation compared

to other smartphones

Product & Marketing StrategyiPhone’s Positioning and its Target Segments

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Tech savvy individuals

Professional & business people

Teenagers and young adults

Government

Market SegmentsPositioning

Multifunction

communication device

“The internet in your

pocket” that shared many

qualities with smartphones

Product & Marketing StrategyMacBook’s Marketing Mix

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• Multiple premium products line

up to cater wider segment

• Available for high-end user,

mass-segment user, and early

adopter

Product

• Bundling offers with 2-year

contract of service plan

• Different pricing model applied to

be suiting with customer needs

Pricing

• Attractive advertising both ATL &

BTL campaign

• Activation to community rather

than ATL campaign

• Digital and word of mouth

marketing

Promotion

• Direct distribution channels:

online store, physical outlet

• Indirect distribution channels:

outsourced the manufacturing of

iPhone products

Placement

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Apple at a Glance

Competitive Analysis

Product and Marketing Strategy

Problem Statement

Conclusion and Recommendation

1

2

3

4

5

ConclusionsApple offering designed around customer experience

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Elements of Offering Two overarching themes

Making a great product greater

Simplicity

Sell experience, not products

Tight integration between HW & SW

Own strong retail channel

Outsource manufacturing facilities

“Insanely great” and

simple user

experience

Best-in-class

consistency across

operations

It will not be just another temporary “up” in

Apple’s up-and-down history

ConclusionOwn retail required to provide desired consumer experience. 3rd party sales channels could

not meet the desired consumer experience standards

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43Steve Jobs wanted “total, complete control” of retail experience

Source: Press search, www.ifoapplestore.com

ConclusionA careful design of Apple Stores management will help Apple to gain sustainable growth in

the future

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e A

nal

ysis

–A

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le, I

nc

(20

08

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ConclusionRetail data captured used to improve performance across supply chain

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e A

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ysis

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le, I

nc

(20

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Recommendation

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Don’t change marketing mix for the sake of gaining some market

share!

Increase presence on emerging market. Retail is all about large

number!

Shortened the NPD cycle time or Apple will loose sales

momentum!

Keep innovating. Show what matters!