report on apple inc 2008

8/12/2019 Report on Apple Inc 2008

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The CTL EURO COLLEGE

Title: Research project on Apple Inc

Student name: Yogesh arande

Registration no! "#$#%"#

Course: &'A

Super(isor: Dr.Andreas Constantinou

)ate: August #%* #%"+

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Strateg. /@

5roduct )i11erentiation /@

Strategic Alliances 3+

Recommendations 33

Conclusion 3uic;l. enough! Apple =ought out Amelio7s contract

a1ter just " P .ears on the jo=! Bo=s e(entuall. claimed the CEO position! Then*

he cleaned house =. re(amping the =oard o1 directors and e(en replacing &i;e&ar;;ula!Bo=s simultaneousl. put an end to the 1ledgling clone licensing

agreements D4hich created a 1e4 &ac clones and entered into cross$licensing

agreements 4ith &icroso1t! On &a. 3* "@@8* Apple introduced the ne4 i&ac* a

product so secret that most Apple emplo.ees had ne(er heard o1 it! The ne4 i&ac

4as a runa4a. success 4ith its translucent case* all$in$one architecture* and ease

o1 use! It =rought Apple to a ne4 mar;et o1 users those 4ho had ne(er o4ned a

computer =e1ore! Bo=s 1urther simpli1ied the product lines into 1our >uadrants

along t4o a2es: )es;top and 5orta=le on one* 5ro1essional and Consumer on the

other! Apple completed the matri2 4ith the introduction o1 the consumer$=ased

i'oo; in "@@@!

The .ear #%%" 4as an important .ear 1or consumers o1 Apple products! Apple

opened their 1irst #/ retail stores Dtotaling "3+ stores in , countries as o1 &a.

2001! In Septem=er #%%"* Apple introduced the ne4 i&ac 1eaturing a screen on

a s4i(el!The ne4 i5ods Dporta=le music pla.ers 4ere a tremendous success!

Apple sold so man. that Apple7s dependence on &ac sales 4as signi1icantl. less!

This 4as no small 1eat considering that the #%%" i&ac =ecame Apple7s =est$

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selling product H=. a long shot! Apple o11ered iTunes Da 1ree application to help

their consumers organie music on i5ods and &acs!

In #%%+* Apple e2panded iTunes =. " opening the iTunes music store to allo4

&ac users to purchase music online and # e2panding iTunes to 9indo4s users!

Sales o1 i5ods s;.roc;eted and currentl. pro(ide the =ul; o1 product sales to

Apple! In 2012* Apple announced that it 4ould start using Intel$=ased chips to run

&acintosh computers! In April 2005* Apple announced 'oot Camp* 4hich

allo4s users o1 Intel$=ased &acs to =oot either &ac or 9indo4s OS! This

1unctionalit. allo4s users 4ho ma. need =oth OSs to o4n just one machine to run

=oth* al=eit not simultaneousl.!

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T/e PC Industry

9e can glean Insight into the histor. and composition o1 the 5C Industr. 1rom its

epon.mous title! In the late "@


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Some argue that not licensing the &ac OS 4as a mista;e! 'ill Gates and

&icroso1t 4ere encouraging Apple to license their OS in the earl. "@8%s* =ecause

the. 4ere de(eloping so1t4are 1or Apple and had much riding on the success o1

the compan.! 9hen Apple did not license* &icroso1t =egan de(eloping their

operating s.stem* 9indo4s!

T/e 0nline *usic Industry

9hile Apple clearl. dominates the online music industr.* the =attle 1or

domination is not o(er! Although digital music sales are gro4ing rapidl.* theRecording Industr. Association o1 America DRIAA states that digital sales

account 1or onl. ,Q o1 all music sales! D'orland Anal.sts at 6orrester

D'artiromo and Gartner D'runo (alidate this! Apple7s sales are =et4een 33Q

and


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do4nstream hard4are producers such as )ell! Apple (erticall. integrated =oth the

operating s.stem so1t4are and hard4are completel. under Apple! A consumer

running &icroso1t 9indo4s can choose 1rom a m.riad o1 s.stems =ased on the

Intel processor* 4hile a consumer running Apple7s OS M must purchase Apple

hard4are!

Apple is adjusting this strateg. =. migrating their microprocessors 1rom I'& and

&otorola 5o4er5C to Intel! Anal.sts =elie(e that the Intel$=ased &acintosh ma.

=e a=le to run &icroso1t 9indo4s applications =. the end o1 2009! D'urro4s

In addition to s4itching processors* Apple positioned their computers as an

immediate option 1or the traditional &icroso1t 9indo4s user! 9ith Apple 'oot

Camp* users ma. no4 use &ac OS M or 9indo4s on an Apple computer!

DSutherland!'. allo4ing users to run 9indo4s on an Intel &ac* Apple reduced

the s4itching costs 1or traditional 5C users! Apple ma. steal a4a. customers that

are 4illing to pa. a premium 1or a s.stem that runs =oth 9indo4s and &ac OS M!

Apple continues to retain a strategic option to license its technolog. to clone

ma;ers such as )ell! 5ast attempts at licensing Apple technolog. Dto I'&*

Gate4a.* and others 1ailed on accord o1 Apple7s rigid demands! &an.

technolog. leaders Dsuch as a "@8/ letter =. 'ill Gates to Apple CEO Bohn

Sculle. criticied Apple 1or ;eeping a closed architecture! Apple co1ounder

Ste(e 9onia; criticies this strateg.* H9e had the most =eauti1ul operating

s.stem* =ut to get it .ou had to =u. our hard4are at t4ice the price! That 4as a

mista;e!9hether Apple 4ould =e 4illing to pursue this re(ersal o1 (ertical

integration is unclear! Although such a mo(e 4ould canni=alie a portion o1

Apple7s o4n hard4are sales* it 4ould also pro(ide ro.alt.$=ased re(enue that

could approach J" =illion annuall.!

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&trategic Alliances and (ntertain'ent

Bo=s had the earl. strategic (ision to complement computing 4ith mo(ie

entertainment! A1ter 1ounding eMT* he personall. ac>uired a majorit. interest in

the .oung mo(ie compan. 5i2ar in 6e=ruar. "@83! Bo=s 4ent on to in(est o1 his

personal 4ealth into 5i2ar!

In "@@/* 5i2ar solidi1ied its position 4ithin animated mo(ies 4ith the de=ut o1 To.

Stor.! Grossing J+/8 million 4orld4ide* it =ecame the +rd$largest grossing

animated mo(ie in histor.! A1ter this success* Bo=s too; 5i2ar pu=lic and

negotiated 1ar =etter terms 4ith )isne.! Later successes included Toy Story 2*

&onsters Inc!* and 6inding emo. The alliance =et4een 5i2ar and )isne. has

tremendous potential 1or economies o1 scope! As CEO o1 Apple and )isne.7s

largest shareholder* Bo=s is the strategic lin; =et4een )isne.* Apple* and 5i2ar!

Opportunities include com=ining the animated mo(ie e2pertise o1 )isne. and

5i2ar* as 4ell as sharing the content o1 )isne.7s A'C or ES5 net4or;s o(er

Apple7s digital o11erings! D'urro4s* Gro(er* and Green

A current e2ample o1 the 1usion =et4een )isne.* Bo=s* Apple* and technolog. is

(ideo on the i5od! )isne.7s )esperate -ouse4i(es 4as one o1 the 1irst tele(ision

programs a(aila=le 1or purchase and do4nload to the ne4er (ideo$ena=led i5od!

There are concerns a=out 4hether these s.nergies 4ill come to 1ruition! There are

1ears that the personalit. and st.le o1 Bo=s ma. con1lict 4ith )isne.* and that

)isne. CEO Iger could =e HAmelioed $$ dri(en out o1 o11ice =. Bo=s in a manner

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similar to ho4 Bo=s dro(e Amelio out o1 the CEO post at Apple! D'urro4s*

Gro(er* and Green!

()ternal Aanalysis

Tec/nological (n,iron'ent

'rand A4areness St.le at a 5remium

Apple7s products are trend. and st.lish! A1ter Bo=s returned in "@@


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encased in a (er. small and distincti(e pac;age! Apple portra.s this computer as

HSmall is 'eauti1ul! DApple Li;e4ise* the i5od Shu11le 4as Apple7s 1irst entr.

into the lo4er$end DJ"%% range o1 1lash$memor.$=ased porta=le music pla.ers!

Interoperability

Although Apple competes directl. 4ith &icroso1t 1or operating s.stems* the

release o1 iTunes 1or 9indo4s in #%%# 4as a ;e. strategic mo(e! This decision

e2panded the potential customer =ase to nearl. all personal computer o4ners*

e(en though Apple onl. has #Q$+Q o1 all personal computer sales! Con(ersel.*

Apple depends on &icroso1t 1or a (ersion o1 &icroso1t O11ice! As the most

4idel. used o11ice suite o1 applications* &acintosh users rel. on O11ice to

correspond 4ith companies that standardied on 9indo4s! This is 1rom a

strategic alliance =et4een Apple and &icroso1t a1ter Bo=s returned in "@@

Apple7s iTunes ser(ice has a technological hoo; Dasset speci1icit. to

Apple7s i5od! Although (ersions o1 iTunes e2ist 1or =oth Apple and &icroso1t

operating s.stems* the iTune7s AAC 1ile 1ormat pre(ents other porta=le music

pla.ers Dsuch as iRi(er or Samsung 1rom pla.ing purchased songs!

Tec/nology and t/e Digital ifestyle

Apple not onl. dominates the music pla.er mar;et* its iLi1e suite pro(ides

consumers 4ith eas.$to$use so1t4are 1or music and (ideo composition! 9ith

Hpodcast a household 4ord* Apple7s Garage 'and application ma;es the

recording o1 podcasts and music (er. eas.!

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+egulatory (n,iron'ent

9hile introducing ne4 technologies* there is a persistent threat o1 legal action =.

competitors! 6or e2ample* Apple sued &icroso1t in "@88 Dsettled in "@@< 1or an

undisclosed amount 1or percei(ed similarities =et4een &icroso1t 9indo4s and

&acintosh audio(isual 4or;s!&icroso1t has generall. =een the 1ocus 1or

go(ernment antitrust charges Dsuch as U!S! (! &icroso1t DUS )OB* 2009! 'oth

1ederal and state go(ernments assert that &icroso1t7s dominance =loc;ed 1air

competition 4ithin the so1t4are industr.! This is an ad(antage 1or Apple* =ecause

its operating s.stems are a (ia=le su=stitute 1or 9indo4s! 6urthermore*

&icroso1t7s continued support 1or O11ice 1or &acintosh reduces the percei(ed

le(el o1 mar;et monopol. and a=use! &anu1acturers 4ill continue to trespass on

Apple7s intellectual propert.! In #%%#* Apple too; legal action against te2@* 4ho

then altered the programme and renamed it sumi! Legal threats can sur1ace 1rom

some4hat unusual sources! Apple Corps Ltd! is the London$=ased compan. that

o4ns the rights to the music o1 the 'eatles! 5aul &cCartne. and Ringo Starr

recentl. sued Apple o(er the use o1 the Apple logo in iTunes* claiming that it

(iolated Apple7s agreement not to produce music under an apple$=ased logo!

Research and de(elopment is a ;e. component to Apple7s sustained competiti(e

ad(antage! Apple is currentl. ta;ing legal action against se(eral popular technical

4e= sites 1or releasing proprietar. product research! Sites such as

appleinsider!com ha(e allegedl. posted (er=atim content 1rom documents

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protected =. emplo.ee non$disclosure agreements! D&cCullagh Release o1

critical insider in1ormation could gi(e Apple7s competitors a jump in producing

ri(al products!

Industry Analysis 2sing Porter3s i,e orces *odel

Apple operates in t4o primar. industries:

Computing $ -ard4are and So1t4are

)eli(er. o1 Entertainment and &edia

Apple has al4a.s =een under intense competition 4ithin the computer*

so1t4are* and entertainment industries! HLoo;ing to 2012!!!E(er. time that Apple

had jumped into the lead in a product categor. during the past t4o decades* it had

had di11icult. in sustaining its leadership position! 9e use 5orter7s 6i(e 6orces

&odel to understand 4h. Apple7s industries are so competiti(e!

6igure: 5orter7s 6i(e 6orces &odel

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6igure: Summar. o1 Industr. Threats DComputer E>uipment and Entertainment

)istri=ution

Type and&e,erity of

T/reat

0rgani4ation

(ntry 5

Hig/

T/reat

0erion Streaming audio and (ideo 4ith 0 CAST!

Amaon On demand online ser(ices to purchase music

Dsimilar to iTunes!

Google The. ma;e e(er.thing!

The He2t

Google

e4 entrants 4ith disrupti(e technolog.!

+i,alry 5 &icroso1t 9indo4s Operating S.stem* 9indo4s &edia

Threat of

New

Entrants

Bargainin

g power

of

Suppliers

Threat of

Substitutes

Bargainin

g power of

Buyers

Level of

Threat in

an Industry

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Hig/

T/reat

5la.er 1or pla.ing music and (ideo!

Linu2 Competition to &ac OS M Operating S.stem!

apster*Rhapsod.

Online music sources alternati(es to iTunes&usic Store!

)ell* -5*

Leno(o

Alternate sources 1or computer hard4are!

iRi(er*

Samsung*

Creati(e

Small* st.lish &5+ 5la.ers!

)ream9or;s Animated mo(ies!

YouTu=e!com Online (ideo!

&ubstitutes

5

*oderate

T/reat

M&* Sirius Satellite Radio 1or music!

M'o2* 5S# Entertainment &edia* &edia and &usic!

0arious Internet Streaming Radio and 5odcasts!

&usic C)s*

)0)$Audio

and

SuperAudio

C)

Alternati(e means to ac>uire music!

'roadcast*

Ca=le*

Satellite*

et6li2* Ti0o*

Theatres

Alternati(e sources 1or (ideo!

&uppliers &otorola* Suppliers o1 5rocessors and computer memor.!

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5 Hig/

T/reat

I'&* Intel*

Samsung

&icroso1t Strategic Alliance Supplier o1 O11ice 1or &ac!

The 'ig 6i(e $'&G* E&I*

Son.*

Uni(ersal* and

9arner

Sources o1 music! 9ill the. raise prices and =rea;the dollar per song model Some in the record

industr. resent Apple7s distri=ution model! HApple

reaps =illions 1rom selling its hit music pla.er* =ut

there are sparse pro1its 1rom the songs =eing sold

o(er the et! D'urro4s* Gro(er* and Green

)isne.* A'C*'C* C'S*

6o2* 5i2ar*

Son.

Suppliers o1 Tele(ision and &o(ies! 9ill the. signe2clusi(e contracts 4ith other online ser(ices

ote that this threat is reduced 1or )isne. 5i2ar!

uyers 5

*oderate

T/reat

Consumers and

Illegal peer$to$

peer 1ile

sharing

Consumers share music using peer$to$peer

net4or;s 4ithout pa.ing 1or music!

)istri=utors Apple retailers ma. pressure 1or lo4er prices or

=etter terms! 6or e2ample* the release o1 the Apple

Store in #%%" Hin1uriated longtime independent

Apple retailers that didn7t appreciate Cupertino

canni=aliing their sales! DLinma.er* +%%

Consumer

Attitudes and

'eha(iors

Consumers or =usinesses ma. reduce spending on

personal computers or non$essential Dpotentiall.

high elasticit. o1 demand music pla.ers i1 the.1ear economic do4nturns!

Consumer

Re1resh C.cles

Consumers and =usinesses ma. continue to use

pre(ious$model i5ods and &acs rather than

upgrade to current i5ods* i&acs* or OS

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The total industr. threat 1or the industr. space that Apple occupies is a high threat

industr.!Apple must continue to pursue product di11erentiation Di!e! the st.le and

ease$o1$use o1 an i5od and economies o1 scope Di!e! o11ering A'C tele(ision

sho4s on iTunes to maintain their sustained competiti(e ad(antage in this

industr.!

/ic/ ()ternal T/reats are *ost &ignificant

Computer -ard4are and So1t4are : Open Source so1t4are such as the

Linu2 Operating S.stem and Open O11ice applications threaten =oth Apple

and &icroso1t! The lo4 Do1ten* 1ree cost o1 the so1t4are ma. allo4 it to

o(erta;e Apple and &icroso1t* especiall. in de(eloping mar;ets such as

China!

&usic 5roducts : &ajor online retailers such as Amaon are considering

entr. into the online music mar;et! 9ith a 4ide internet presence and a

household name* Amaon could present a 1ormida=le challenge to Apple! I1

the major record la=els DUni(ersal* Son. '&G* E&I* and 9arner negotiate

=etter terms 4ith ne4 competitors to iTunes* Apple ma. =e una=le to

pro(ide some o1 the music content that the. currentl. o11er! The major

music la=els disli;e Apple7s dollar per song pricing! The. 4ould pre1er to

earn higher pro1its 4ith H(aria=le pricing!

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Suppliers : The recent shi1t to Intel processors could present a signi1icant

threat to Apple! 9ith onl. t4o companies DIntel and A&) producing

Intel$compati=le processors* there is a strong potential 1or tacit collusion

and oligopol. po4er =et4een these suppliers! Apple purchasing must no4

directl. compete 4ith -5* Leno(o* and )ell! I1 shortages or e2clusi(e

agreements materialie* Apple could 1ace pro=lems 4ith o=taining ra4

materials! Apple should consider additional sources such as Ad(anced

&icro )e(ices DA&)!

6igure: C5U &ar;et Share

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Additional ()ternal T/reats

Securit.

Apple so1t4are* li;e all large so1t4are products* has securit. (ulnera=ilities that

hac;ers ma. e2ploit! A signi1icant e2ploitation in the 1uture could damage man.

=usinesses and households using Apple computers! This 4ould a11ect 1uture

customer purchasing decisions! Apple enjo.s a competiti(e ad(antage* =ecause

their OS M is mature and sta=le due to its =asis on 'S) Uni2! In 1act* Hcomputer

securit. 1ol;s =ac; at 6'I -? use &acs running OS M! -o4e(er* the increased

use o1 Apple computers is prompting hac;ers to target the plat1orm! In 6e=ruar.

2009* there 4as documentation o1 the 1irst ;no4n Apple OS M 4orm! '. using

iChat instant messaging* it spreads to other users and deletes 1iles 1rom their &ac

computers! I1 &ac OS M =ecomes as 4ide o1 a target as 9indo4s* Apple7s

percei(ed di11erentiation as the more secure plat1orm ma. disappear!

%ertical Integration of Co'petitors

Son. is an e2ample o1 a competitor 4ith a uni>ue position against Apple! Son.

&usic supplies Apple 4ith man. o1 the songs 1or iTunes! Son. also creates a

(ersion o1 the 9al;man porta=le music pla.er that is a direct competitor to the

i5od!

Son. is attempting to (erticall. integrate 1or4ard directl. to the music =u.er!

Son. integrated their music s.stem D&ora into the Son. 9al;man! Son. is

e2clusi(el. distri=uting certain songs on &ora! D-all &ora currentl. targets

Bapanese consumers! I1 Son. can gain additional momentum Dsuch as

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e(er =e1ore! Apple continued to command a mar;et premium 1or producing a

H=etter mousetrap throughout its histor.!

Custo'er &er,ice

-o4 has Apple retained su=stantial cash reser(es during the e2plosi(e gro4th and

dominance o1 5Cs 4orld4ide Apple created a (irtual lo(e a11air 4ith their

customer =ase =. deli(ering technicall. superior products Di5ods (s! other &5+

pla.ers* &acs (s! 5Cs* etc!* and aggressi(el. pursuing hard4are and so1t4are

updates! Apple integrated their primar. acti(ities so 4ell that it is transparent to

the consumer 4here one acti(it. =egins and the other ends! A per1ect e2ample o1

this is Apple7s 4illingness to de(elop so1t4are to run 9indo4s M5 on its ne4

Intel$=ased i&ac and then post it online 1ree to i&ac users! D9ing1ield In such an

en(ironment* customer ser(ice merel. =ecomes the realiation o1 recei(ing a little

more than e2pected! Although Apple emplo.s man. resources and capa=ilities to

support their primar. acti(ities Dhuman resources* suppl. procurement* etc!* the

most strategicall. rele(ant 4ould =e Legal Ser(ices!

egal &er,ices

In a mar;et climate o1 constant change and inno(ation* it is ine(ita=le that the

dri(e to e2pand product and ser(ice o11erings 4ill su=ject Apple to patent and

cop.right in1ringement claims! The dispute o(er the Apple logo on its iTunes

&usic Store* 1or e2ample* continues despite a pre(iousl. reached settlement 4ith

'eatles7 Apple Corps Ltd! in "@@"! D)o4 Bones e4s4ires 9hile such litigation

as &icroso1t7s 9indo4s in1ringement on &ac OS patents has =een highl.

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pu=licied* use o1 legal guidance to dri(e ac>uisition (ersus internal de(elopment

strategies 1or such products as Garage'and and i&usic ha(e pro(en highl.

(alua=le!

&0T Analysis of Apple Inc:

Although participation in such acti(ities ma. add (alue* the. ma. not =e a source

o1 competiti(e ad(antage! Ultimatel.* the (alue* rarit.* inimita=ilit.* andor

organiation D0RIO o1 an acti(it. or resource determine its sustaina=ilit. as a

source o1 competiti(e ad(antage! 9ithin this conte2t* 4e can identi1. a 1irm7s

strengths* 4ea;nesses* opportunities* and threats DS9OT!

In S9OT anal.sis Strength and 9ea;nesses are depends on Internal 1actors and

Opportunities and Threats )epends on E2ternal 6actors o1 and Organiation!S9OT anal.sis is use1ul in decision ma;ing a=out the organiation going 1or an.

ne4 or e2isting project!

Apple &0T Analysis

&trengt/:

iTunes &usic Store is a e2cellent source o1 re(enue* especiall. 4ith the

i5od and the accessi=ilit. on 9indo4s plat1orm!

Apple Computer are e2pert in )e(eloping o4n so1t4are and hard4are!

Apple7s niche audience pro(ides the compan. 4ith some lagging 1rom the

direct price competition!

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Gi(ing a 1ace$li1t to des;top and note=oo; lines!

technolog. can =e used to impro(e product a4areness and sales!

Lo4 de=tmore maneu(era=le!

Apple Computers ha(e good =rand lo.alt.!

Strong Research )e(elopment )epartment!

ea8nesses:

9ea; relationship 4ith Intel and &icroso1t!

9ea; presence in =usiness arena!

The product li1e c.cle o1 Apple products are (er. small 1or that reasons

re(enues are more depend on launch o1 ne4 products and ser(ices!

9ea; presence in mar;ets other than education and pu=lishing!

Slo4 turn around on high demand products!

Apples mar;et share is 1ar =ehind 1rom major competitor &icroso1t!

In past the relationship =et4een Ste(e jo=s and emplo.ee 4ere not good

4hich result in reputation loss!

0pportunities:

Increase in 4orms and (iruses on 5Cs so the anti(irus solution can =ede(eloped =. Apple

Large population DGen MY 4hich are e2tremel. indi(idualistic and name

=rand conscious!

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The ties o1 apple other companies are 4ea;* Apple can de(elop good

relationship 1or joint (entures

)o4nloada=le music and &5+ pla.ers are highl. mar;eta=le!

The online sales o1 computer are increasing 4ith rapid speed!

The laptop mar;et gro4th is highK Apple Computers should 1ocus to

de(elop ne4 models to cater the need o1 customers!

T/reats:

Companies not seeing Apple as compati=le 4ith their so1t4are!

Apple 1acing strong competition 1rom )ell* -5* Son. and Toshi=a inlaptop segment!

)o4nloading 1ree music 1rom other online source 4ithout pa.ing cost is

common it ma. impact the iTunes sales!

Apple so1t4are* Cell phone and hard4are are e2pensi(e as compared to

other competitors such as )ell!

The long lasting recession ma. impact the sales o1 the compan. due to

higher prices o1 the products and ser(ices

&icroso1t launched &icroso1t 0ista* 9indo4s < 4hich is gaining mar;et

share!

The s4itching in technolog. is (er. 1ast

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'oston Consulting Group D'CG model is a techni>ue de(eloped =. 'RUCE

-E)ERSO o1 the 'oston Consulting Group in earl. "@ue =usinesses or products are classi1ied as lo4 or high per1ormers

depending upon their mar;et gro4th rate and relati(e mar;et share! It is (er.

use1ul tool to identi1. the product line o1 an organiation!

C 'odel classified in four 'ain categories are

1. &tar ;. Cas/ Co- .


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/at is dri,ing *acintos/ acceptance=

Supporters agree that it is the products eas. to use graphic inter1ace! FOnce a user

sits do4n and 4or;s 4ith a &acintosh* the. ne(er go =ac; to an I'& 5ersonal

Computer*F proclaimed 5rice Collins* a programming manager at General Electric

Co! in 'ridgeport* Conn!The ease o1 use 1eatures translate into su=stantial sa(ings

1or man. corporations! F9e spend much less time training &acintosh users than

4e do training I'& microcomputer users*F noted 5earson at the e4 Yor; )ail.

e4s!

Studies comparing &acintosh and I'& microcomputer training costs 1ound that it

ta;es t4ice as long 1or an I'& user to learn ho4 to operate his machine and three

times longer 1or the user to understand ho4 to opeate a second application! A

sur(e. commissioned =. Apple 1ound the a(erage cost o1 training an I'& user

4as J


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+e'o,ing arriers for 2sers

Anal.sts reported that another reason 1or acceptance 4as aggressi(e Apple

actions! FApple remo(ed =arriers that corporations erected to ;eep &acintoshes

out o1 users hands*F said Richard ollme.er* the director o1 mar;eting and

technical ser(ices at The Support Group Inc!* a 9ellesle.* &ass!* microcomputer

reseller!

FOne o1 the initial concerns 4as the ina=ilit. to run &S$)OS so1t4are on a

&acintosh! ?uic;l.* Apple deli(ered hard4are so users could run those

applications!F

To date* &acintoshes ha(e =een relegated to personal producti(it. tools in most

companies! F&ost users purchase a &acintosh to more e11icientl. do their o4n

4or;*F noted &ichael &asterson* a microcomputer s.stems specialist at Arthur

Young Co! in San Bose* Cali1!

Users are primaril. 4or;ing 4ith traditional microcomputer applications* such asspreadsheet and 4ord processing! -o4e(er* there are nuances in the t.pes o1

applications emplo.ed =. I'& 5C and &acintosh users!

Application Preferences

In a sur(e. o1 "*#"3 large companies Deach ha(ing more than /%% emplo.ees*

)ata>uest Corp!* a mar;et research 1irm in San Bose* Cali1!* reported that 4ord

processing 4as the &acintoshs most 4idel. used application$$named =. /,Q o1

respondents! Graphics applications 1ollo4ed 4ith ,3Q* and spreadsheets placed

third 4ith +8Q!On the I'& 5ersonal Computer* the response 4as as 1ollo4s: 3/Q

used spreadsheetsK /


35/76

s.stems! 6e4 o1 the companies that dominate the I'& microcomputer so1t4are

mar;et ha(e had much success pl.ing &acintosh 4ares! 6or e2ample* Lotus

)e(elopment Corp! o1 Cam=ridge* &ass!* and Ashton$Tate o1 Torrance* CAli1!*

ha(e had little success in the mar;et! The most nota=le e2ception* &icroso1t

Corp!* Redmond* 9ash!* o11ers the three =estselling applications: E2cel* a

spreadsheetK 9ord* a 4ord processing pac;ageK and 9or;s* an integrated

spreadsheet* 4ord processing and data=ase application!

+/


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AppleInsiderreports on a research note 1rom '&O anal.st eith 'achman that

could ha(e =een 4ritten 1or Cra. Apple Rumorsi1 the. hadnt gone ghost$site

on us! It turns out the success o1 the &ac in recent .ears isnt =ecause o1 &ac OS

M* or Intel C5Us* or the i5od -alo E11ectK rather* its =ecause &icroso1t suc;s!

FThus 1ar* user satis1action ratings 1or 0ista ha(e =een 4ea;* and startup times 1or

0ista ha(e =een ;no4n to =e much slo4er than the &ac OS M*F 'achman sa.s!

FThus* more than /%Q o1 recent customers =u.ing &acs in Apple retail stores are

1irst$time =u.ers!F

9hile its great that the si2$1igure anal.st projects #!, to #!/ million &acs sold 1or

the >uarter just ended* his rationale is* 4ell* cra.! Setting aside the image o1 some

grandma dropping J#*3%% 1or a &ac'oo; Air 4ith SS)* theres nothing FrecentF

a=out hal1 o1 &ac =u.ers in Apple Stores =eing ne4 to the plat1orm! Its =een that

4a. since =e1ore 0ista 4as released!

6urther* as the chart =. the 1our$1igure anal.st clearl. sho4s* the surge in &ac

sales started around the time Apple transitioned to Intel C5Us! Ironicall.* one

could argue that &ac sales are rising =ecause o1 0ista* =ut not in the 4a.

'achman suggests! 5rior to the release o1 Leopard and the discontinuation o1 'oot

Camp as a separate product* Apple reported huge do4nloads o1 the program that

let &ac users launch 9indo4s 0ista (er.* (er. slo4l.!

+3
http://www.appleinsider.com/articles/08/07/08/apple_may_have_shipped_2_5_million_macs_in_spring_thanks_to_vista.htmlhttp://www.appleinsider.com/articles/08/07/08/apple_may_have_shipped_2_5_million_macs_in_spring_thanks_to_vista.html


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Apple eats Co'petitors at In,entory Turn 0,er

)espite a 4ea;ening econom. and a need to meet customer demand* Apple has

=een a=le to maintain a 1ast in(entor.turno(er rate! The &ac and i5honema;er is

sitting at 1i(e da.s 4orth o1 in(entor. on an. gi(en da.* =eating )ells se(en da.s

4orth o1 in(entor.* according to data 1rom U'S!

Other 5C ma;ers are ha(ing e(en more trou=le matching Apples in(entor.

e11icienc.! Leno(o* 1or e2ample* is a(eraging "/ da.s o1 in(entor.* and -5 is

sitting at +# da.s! Intel* ho4e(er* is sho4ing a much slo4er in(entor. turno(errate at 8@ da.s* and )$Lin; is sitting on a staggering "+" da.s 4orth o1 in(entor.!

Apples >uic; turno(er rate ma. ha(e =een due in part to preparing 1or its just

announced i&ac* &ac mini and &ac 5ro updates! The compan. released ne4

des;top computer models on &arch +* and ;eeping in(entor. lo4 helped assure

that there 4ould =e 1e4er o1 the pre(ious model machines sitting on store shel(es!

9hile maintaining a higher in(entor. le(el can help a compan. cope 4ith sudden

increases in demand* it can also sho4 a compan.s ina=ilit. to ade>uatel. gauge

mar;et interest in their products! 6or no4* it loo;s li;e Apple is managing

in(entor. =etter than its competition!

IPod: T/e *ar8eting of an Idea Pro>ect

Apple7s i5od has ta;en the 4orld =. storm! earl. u=i>uitous* it has changed not

onl. the 4a. people listen to music* =ut it has trans1ormed its parent compan.

Apple into an entertainment giant! In order to understand ho4 this change came

a=out* 4e7ll ta;e a loo; at Apple7s ongoing e11orts to ma;e i5od s.non.mous 4ith

+


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hip! 9e7ll also discuss e2actl. 4hat customers are =u.ing 4hen the. =u. an i5od*

and 4e 4ill ta;e a deep loo; at se(eral aspects o1 Apple7s mar;eting o1 this

e2citing ne4 product* 1rom the i5od itsel1* Apple7s strategic planning* possi=le

research 1indings that supported their approach* segmentation strategies that ma.

ha(e =een emplo.ed and 4h.* as 4ell as pricing strateg. across these segments!

Li;e &agritte7s surrealist painting o1 a pipe 4ith the caption Ceci n7est pas une

pipe DThis is not a pipe* the i5od is not merel. an &5+ pla.er! It is a s.m=ol

4hich encompasses man. grand ideasK ideas that in(ol(e 4orld change* and ho4

cool 4e all can =e i1 4e are part o1 that change! Apple7s care1ul and deli=erate

e2ploitation o1 this concept* comprising an entire mar;eting ecos.stem 4hichnurtures that idea 4ill =e the su=ject o1 this paper! On Banuar. @th* 2010* Ste(e

Bo=s* reno4ned CEO o1 Apple* announced that the compan. 4hich he 1ounded

4ould no longer =e ;no4n as Apple Computer* Inc! Its ne4 name 4ould just =e

Apple* Inc!" This seemingl. tri(ial change represents a 1undamental shi1t 4ith

deep implications that 4ere the result o1 man. changes Apple had engineered o(er

the past si2 or se(en .earsK transitioning itsel1 1rom a computer compan. slugging

it out 1or a meager share o1 an increasingl. competiti(e hard4are and so1t4are

mar;et* to a =usiness that promoted an entirel. ne4 concept: the digital li1est.le!

'e1ore 4e dig do4n into 4hat this radical shi1t entailed* =oth 1or the compan. and

the 4orld* a compan. alread. 1irml. rooted in se(eral notions that allo4ed this

transition to ma;e sense! Apple made a name 1or itsel1 =. =eing instrumental in

ushering in the home 5C re(olution! 6or millions* Apple 4as single$handedl.

responsi=le 1or this re(olution =. (irtue o1 the 1act that it created radical ne4

1eatures such as 4indo4s$t.pe graphical user inter1aces* pull$do4n menus and

simpli1ied computer control (ia the mouse! The histor. o1 the 5C re(olution is a

histor. o1 4ar =et4een Apple* a num=er o1 losers that no one remem=ers an.

more* and archri(al &icroso1t 4ith its du=ious counterclaims o1 ha(ing pioneered

+8


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the concept o1 9indo4s! 6rustrating to an.one 4ho o4ned a &ac =ac; in the

"@8%7s is the ;no4ledge that Apple did indeed pioneer the 4indo4s metaphor as a

distinct 1eature o1 its operating s.stem! This 4as at a time 4hen &icroso1t users

4ere still struggling 4ith te2t$=ased )OS commands* and .et the commercial

success o1 &icroso1t has ser(ed to re4rite histor. to some degree! 'attles ensued

o(er the .ears* =ut no matter 4hose side .ou 4ere on* =. the late @%7s it 4as clear

that Apple 4as not gaining an. ground 4hatsoe(er as a computer and so1t4are

manu1acturer! In 1act due to man. e2ternal e(ents* Apple7s position 4as in clear

threat!

The leading de(ice at the time 4as Sonic=lue Rio0olt &5+ C) 5la.er* 4hich

retailed 1or less than J"%%! Creati(es omad Bu;e=o2 4as selling its recentl.

introduced 3G' hard dri(e 1or a=out J#/%* and e!)igital Corp! 4as touting its

4alloping "%G' palm$sie Treo "% 1or J #,@ Treo! Against these contenders*

i5od7s J+@@ price tag 1or a mere / G' o1 storage doesn7t seem to ma;e sense"3!

Also* at this time* i5od 4as onl. compati=le 4ith &acs* 4hich amused 'ill Gates*

and continued to do so e(en as late as 20124hen USA toda. >uoted him as

sa.ing: I thin; .ou can dra4 parallels here 4ith the computer here* too* Apple

4as once e2tremel. strong 4ith its &acintosh and graphic user inter1ace* li;e 4ith

the i5od toda.* and then lost its position!"< It is our contention that the initial

release o1 iTunes "!%* 4hich as noted 4as practicall. laughed at* 4as a Trojan

-orse that deli(ered >uite a =it o1 =usiness intelligence to Apple!

+@


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Historical Perfor'ance

Although sales remained stagnant during "@@8$#%%#* sales more than

dou=led since Dsee graph =elo4! This dramatic shi1t in per1ormance is primaril.

due to the increase in sales 1rom the i5od product line!

&toc8 Price Perfor'ance

,%


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Another interesting 4a. to consider the 1inancial per1ormance is to e(aluate ho4

Apple7s stoc; price per1ormed against the mar;et and against its main

competitors! Apple7s per1ormance has =een inconsistent o(er the last #% .ears

compared to the S5 /%%! It also has not per1ormed at the same le(el as its main

competitors* )ell and &icroso1t! -o4e(er* per1ormance impro(ed since then!

Profitability *easures

Apple su=stantiall. impro(ed in its ;e. measures o1 pro1ita=ilit. in the last 1e4

1iscal .ears! In terms o1 return on assets* return on e>uit. and pro1it margin*

Apple strengthened 1inanciall. and no4 has similar ratios to that o1 its competitors

and the o(erall computer hard4are industr. !

200

9

201

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2012 *icroso

ft ?1$

Dell

?1$

Indust

ry ?1$

&@P

$$

+eturn on

Assets

"!%"

Q

+!,+

Q

""!/3

Q

"@!


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+eturn on

(Buity

"!3+

Q

/!,,

Q

"

Q

#8!/3Q 3

Profit

*argin

"!""

Q

+!++

Q

@!/8

Q

+"!/uarter 2012earnings releases* gross margins

dropped slightl.!Apple attri=utes this decline primaril. to price pressures*

especiall. in the i5od product line! D"st?uarter "%? This 4ill continue to a11ect

per1ormance o(er time! -o4e(er* Apple7s a=ilit. to maintain the momentum it=uilt in the mar;etplace 4ill control the speed 4ith 4hich erosion 4ill occur!

iBuidity and e,erage *easures

Apple historicall. held (er. little long$term de=t! The ta=le =elo4 compares

Apple7s li>uidit. measures to their competitors* their industr.* and the general

mar;et! )uring the period o1 strong 1inancial per1ormance* Apple accumulated

cash! This strengthens Apple7s position should the. choose to access the capital

mar;ets!

200

9

201

0

201

2

*icrosoft

?1$

Dell

?1$

Industry

?1$

&@P

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Current+atio #!/ #!3 + #!88 "!"" "!8" "!8#


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com=ined sales o1 computers Ddes;topnote=oo; lost share* dropping 1rom


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*ar8et %alue Analysis

9e used )iscounted Cash 6lo4 D)C6 anal.sis to assess the appropriate e>uit.

(alue o1 Apple! To complete this anal.sis* 4e de(eloped a pro$1orma income

statement and e2tracted 1ree cash 1lo4! 9e then discounted these cash 1lo4s

using a calculated 9eighted A(erage Cost o1 Capital D9ACC! Apple7s 9ACC

e>ualed their cost o1 e>uit. since the. carr. no long$term de=t! 9e used the

Capital Asset 5ricing &odel DCA5& to calculate the cost o1 e>uit.!

CA5& consists o1 a ris;$1ree rate* a mar;et ris; premium* and a compan. 'eta!

The .ield on the "%$.ear Treasur. is the standard 1or a ris;$1ree rate! To

determine the mar;et ris; premium* 4e used the a(erage return that an in(estor

4ould re>uire 1or an in(estment 4ith a(erage ris;! 9e used data a(aila=le online

to determine

Apple7s 'eta* projected to =e "!,3! The =elo4 chart summaries Apple7s cost o1

e>uit.!

,/


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Cost of (BuityACC ote %alue

+is8 ree +ate "% Yr Treasur. /!"#

*ar8et +is8 Pre'iu' DAnal.sis ,

eta 6rom Google "!,3

Ad>usted Apple +is8

Pre'iu'

/!8,

Cost of (BuityACC "%!@3

inancial Analysis

Apple7s 1inancial per1ormance continued to strengthen o(er the last se(eral

>uarters! In the most recent earnings announcement* Apple reported signi1icantgro4th in net re(enues dri(en =. the strong per1ormance o1 its i5od product line!

et sales 1or the #nd>uarter gre4 to J,!+3 =illion* 4hich is a +,Q increase o(er #nd

quarter 2012results! et income increased =. ,"Q to J,"% million!

The i5od product line continues to dri(e the 1inancial per1ormance o1 the

compan.! In the #nd>uarter alone* Apple sold 8!/ million i5ods* representing a

3"Q increase o(er the /!+ million units sold in the #nd

>uarter o1 the prior .ear!&ac sales sho4ed slight gro4th o1 onl. ,Q!

Apple7s .ear$to$date re(enues total just o(er J"% =illion and earnings total just

under J" =illion! 6or the +rd >uarter* C6O 5eter Oppenheimer stated* H4e

,3


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e2pect re(enue o1 a=out J,!# to J,!, =illion 4hich 4ill push total sales a=o(e last

term7s annual num=ers!

Apple ;$1; 1< financial analysis

#%"# April #/ 5osted =. admin under #%"# "?* Apple* Technolog.* USA

Apple #%"# "? results continues to impress! Re(enue has jumped 1rom #,*< =n!J

to +@*# =n!J or =. /@Q compared to #%"" ?"! -igh re(enue increase lead to e(en

more rapid et Income =e1ore depreciation increase! 9hich has risen 1rom 3*, =n!

J to "#*, =n!J or almost du==ed! This 4as lead =. slo4er re(enue cost DV,+Q and

operating cost increase DV+3Q then re(enue!

,


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Companies sales =. geograph. is good! "+ o1 sales are 1rom US and "+ is 1romAsia 4hich are the regions 4ith highest estimated gro4th! Europe ta;es ##Q o1

sales! Asia sales has du==ed compared to last .ear so this mar;et has gro4n the

most! &ost o1 companies re(enue is generated =. i5hone /8Q 4hich sales has

increased =. V8/Q! &ost rise 4as in i5ad 4here re(enue has increased =. V"+#Q

and no4 contains "


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In general co'panies results are positi,e.

'alance sheet continue to =e (er. strong! E>uit. le(el has increased to 38Q! That

did not e11ect high return on E>uit. le(el 4hich is ,/Q at ?"! Since

compan. announced di(idend pa.ments and share repurchases companies E>uit.

should not increase in the 1uture! Li>uidit. ratio is "*3 4hich is good! Compan.

has cash surplus o1 ""% =n!J 4hich has increased 1rom @< =n!J 1rom ?,!

Companies in(entor. and Account recei(a=les are minimal so as lia=ilities!

o other major changes at the =alance sheet! In general co'panies balance

structure is strong.

&/are ,alue:

,@


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Co''on &toc8s ",*@ =n!J %*@+/ =n!"/*@ J

V Retained earnings 8uarter .earl. earnings should =e

around /# =n!J.ear D"+ =n!>uarter or //*3Jshare 4hich ma;es it F9 year* ne(erthe less indicator is >uit high! Share pro1ita=ilit. DShare mar;et priceet income

=e1ore )epreciation i1 calculating projected income D/# =n!J.ear is 9#1G 4hich

is a =it o(er a(erage!

Annual Inco'e state'ent,alue in $$$3s et


51/76

0perating ()penses

Research and)e(elopment

J+*+8"*%%% J#*,#@*%%% J"*


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Earnings 'e1ore Ta2 J//*uit. EarningsLoss

Unconsolidated

Su=sidiar.

J% J% J% J%

et Income$Cont!

OperationsJ,"*


53/76

t ,alues in $$

Period (nding: Trend 9;9;$1; 9;";$11 9;2009 9;6;$$9

Current Assets

Cash and Cash

E>ui(alentsJ"%*


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Long$Term

In(estmentsJ@#*"##*%%% J//*3"8*%%% J#/*+@"*%%% J"%*/#8*%%%

6i2ed Assets J"/*,/#*%%% J


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Short$Term )e=t

Current 5ortion o1Long$Term )e=t

J% J% J% J%

Other Current

Lia=ilitiesJ/*@/+*%%% J,*%@"*%%% J#*@8,*%%% J#*%/+*%%%

Total Current

Lia=ilitiesJ+8*/,#*%%% J#


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Total Lia=ilities J/


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Total Lia=ilities

E>uit.

J"


58/76

C/anges in

0perating

Acti,ities

Accounts

Recei(a=le

DJ3*@3/*%%% DJ"*


59/76

Acti,ities

Capital

E2penditures

DJ8*#@/*%%% DJ,*#3%*%%% DJ#*%%/*%%% DJ"*",,*%%%

In(estments DJ+8*,#


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E11ect o1

E2change Rate

J% J% J% J%

et Cash 6lo4 J@+"*%%% DJ"*,,3*%%% J/*@@8*%%% DJ3*3"#*%%%

3%


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Period (nding: Trend 9;9;$1; 9;";$119;200

99;6;$$9

iBuidity +atios

Current Ratio "/%Q "3"Q #%"Q #


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An

Income Statement D(alues i %%%shttp:444!nasda>!coms.m=olaapl1inancials

>uer.Xincome$statementi2#0("&Z.Y,

Proor'a Inco'e &tate'ent

6irm made se(eral ;e. assumptions in compiling a pro$1orma income statement!

6irst* to complete the estimate 1or the 2009data*Compan. merel. annualied the

earnings 1or the 1irst t4o >uarters! The. then projected a declining rate o1 gro4th

in sales 1or the ne2t 1our 1iscal terms o1 +%Q* #%Q* "/Q* and "%Q* respecti(el.!

9e do not =elie(e that the gro4th in i5ods is sustaina=le 1or the long$term! The.

also used the percent$o1$sales method to calculate cost o1 goods sold* research

de(elopment* SGA* and interest!As applied the 2012 ta2 rate 1or all 1uture

periods! As the ta=le =elo4 sho4s* the mid$term earnings gro4th is positi(e!

Pro>ected ree Cas/ lo- and (Buity %aluation

Apple 4ill continue 4ithout long$term de=t! There 4ill =e no signi1icant changes

in capital e2penditures and net 4or;ing capital! Thus* 1ree cash 1lo4 4ill e>ual

3#
http://www.nasdaq.com/symbol/aapl/financials?query=income-statement#ixzz2Vv1MZyY4http://www.nasdaq.com/symbol/aapl/financials?query=income-statement#ixzz2Vv1MZyY4http://www.nasdaq.com/symbol/aapl/financials?query=income-statement#ixzz2Vv1MZyY4http://www.nasdaq.com/symbol/aapl/financials?query=income-statement#ixzz2Vv1MZyY4


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instance* Apple pioneered the 5)A mar;et =. introducing the e4ton in "@@+!

Later* Apple introduced the eas.$to$use i&ac in "@@8* and updates 1ollo4ing

"@@8! It released a highl. sta=le operating s.stem in "@@@* and updates 1ollo4ing

"@@@! Apple had one o1 its critical points in histor. in "@@@ 4hen it introduced the

i'oo;! This completed their Hproduct matri2* a simpli1ied product mi2 strateg.

1ormulated =. Bo=s! This mo(e allo4ed Apple to ha(e a des;top and a porta=le

computer in =oth the pro1essional and the consumer segments! The matri2 is as

1ollo4s:

In #%%"* Apple hit another important historical point =. launching iTunes! This

mar;ed the =eginning o1 Apple7s ne4 strateg. o1 ma;ing the &ac the hu= 1or the

Hdigital li1est.le! Apple then opened its o4n stores* in spite o1 protests =.

independent Apple retailers (oicing canni=aliation concerns! Then Apple

introduced the i5od* central to the Hdigital li1est.le strateg.! 5hilip 9! Schiller*

05 o1 9orld4ide 5roduct &ar;eting 1or Apple* stated* Hi5od is going to change

the 4a. people listen to music! -e 4as right!

Apple continued their inno(ati(e strea; 4ith ad(ancements in 1lat$panel LC)s 1or

des;tops in #%%# and impro(ed note=oo;s in #%%+! In #%%+* Apple released the

iLi1e pac;age* containing impro(ed (ersions o1 i)0)* i&o(ie* i5hoto* and

iTunes! In re1erence to Apple7s recent ad(ancements* Bo=s said* H9e are going to

do 1or digital creation 4hat &icroso1t did 1or the o11ice suite producti(it.! That is

indeed a =old statement! Time 4ill tell 4hether that happens!

Apple continued its digital li1est.le strateg. =. launching iTunes &usic Store

online in #%%+* o=taining cooperation 1rom HThe 'ig / &usic companies'&G*

E&I* Son. Entertainment* Uni(ersal* 9arner! This allo4ed iTunes &usic Store

3,


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online to o11er o(er #%%*%%% songs at introduction! In #%%+* Apple released the

4orld7s 1astest 5C D&ac G/* 4hich had dual #!%G- 5o4er5C G/ processors!

5roduct di11erentiation is a (ia=le strateg.* especiall. i1 the compan. e2ploits the

conceptual distinctions 1or product di11erentiation! Those that are rele(ant to

Apple are product 1eatures* product mi2* lin;s 4ith other 1irms* and reputation!

Apple esta=lished a reputation as an inno(ator =. o11ering an arra. o1 eas.$to$use

products that co(er a =road range o1 segments! -o4e(er* its lin;s 4ith other 1irms

ha(e =een limited* as 4e 4ill discuss in the ne2t section on strategic alliances!

There is economic (alue in product di11erentiation* especiall. in the case o1

monopolistic competition! The primar. economic (alue o1 product di11erentiation

comes 1rom reducing en(ironmental threats! The cost o1 product di11erentiation

acts as a =arrier to entr.* thus reducing the threat o1 ne4 entrants! ot onl. does a

compan. ha(e to =ear the cost o1 standard =usiness* it also must =ear the costs

associated 4ith o(ercoming the di11erentiation inherent in the incum=ent! Since

companies pursue niche mar;ets* there is a reduced threat o1 ri(alr. among

industr. competitors!

A compan.7s di11erentiated product 4ill appear more attracti(e relati(e to

su=stitutes* thus reducing the threat o1 su=stitutes! I1 suppliers increase their

prices* a compan. 4ith a di11erentiated product can pass that cost to its customers*

thus reducing the threat o1 suppliers! Since a compan. 4ith a di11erentiated

product competes as a >uasi$monopol. in its mar;et segment* there is a reduced

threat o1 =u.ers! 9ith all o1 5orter7s 6i(e 6orces lo4er* a compan. ma. see

economic (alue 1rom a product di11erentiation strateg.!

A compan. attempts to ma;e its strateg. a sustained competiti(e ad(antage! 6or

this to occur* a product di11erentiation strateg. that is economicall. (alua=le must

3/


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also =e rare* di11icult to imitate* and the compan. must ha(e the organiation to

e2ploit this! I1 there are 1e4er 1irms di11erentiating than the num=er re>uired 1or

per1ect competition d.namics* the strateg. is rare! I1 there is no direct* eas.

duplication and there are no eas. su=stitutes* the strateg. is di11icult to imitate!

There are 1our primar. organiing dilemmas 4hen considering product

di11erentiation as a strateg.!

To resol(e these dilemmas* there must =e an appropriate organiation structure! A

U$6orm organiation resol(es the inter$1unctional colla=oration dilemma i1 there

are product de(elopment and product management teams! Com=ining the old 4ith

the ne4 resol(es the connection to the past dilemma! -a(ing a polic. o1

e2perimentation and a tolerance 1or 1ailure resol(es the commitment to mar;et

(ision dilemma! &anagerial 1reedom 4ithin =road decision$ma;ing guidelines

4ill resol(e the institutional control dilemma!

6i(e leadership roles 4ill 1acilitate the inno(ation process: Institutional Leader*

Critic* Entrepreneur* Sponsor* and &entor! The institutional leader creates the

organiational in1rastructure necessar. 1or inno(ation! This role also resol(es

disputes* particularl. among the other leaders! The critic challenges in(estments*

goals* and progress! The entrepreneur manages the inno(ati(e unitDs! The

sponsor procures* ad(ocates* and champions! The mentor coaches* counsels* and

ad(ises!

Apple had issues 4ithin its organiation! In "@@


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compan. that still has opportunit. 4ritten all o(er it! 'ut .ou7d need to recruit

God to get it done! &ichael &urph.* then$editor o1 Cali1ornia Technolog. Stoc;

Letter* stated* HApple desperatel. needs a great da.$to$da. manager* (isionar.*

leader and politician! The onl. person 4ho7s >uali1ied to run this compan. 4as

cruci1ied #*%%% .ears ago!To continue a product di11erentiation strateg.* Apple

must continue its appropriate management o1 inno(ation dilemmas and maintain

the 1i(e leadership roles that 1acilitate the inno(ation process!

&trategic Alliances

Apple has a histor. o1 shunning strategic alliances! On Bune #/* "@8/* 'ill Gates

sent a memo to Bohn Sculle. Dthen$CEO o1 Apple and Bean$Louis Gass[e Dthen$

5roducts 5resident! Gates recommended that Apple license &acintosh

technolog. to +$/ signi1icant manu1acturers* listing companies and contacts such

as ATT* )EC* Te2as Instruments* -e4lett$5ac;ard* Mero2* and &otorola!

DLinma.er* #,/$8 A1ter not recei(ing a response* Gates 4rote another memo on

Bul. #@* naming three other companies and stating* HI 4ant to help in an. 4a. I

can 4ith the licensing! 5lease gi(e me a call! In "@8


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Radius D4ho made &ac monitors in "@@/! -o4e(er* Spindler ni2ed Gate4a. in

"@@/ due to canni=aliation 1ears! Gil Amelio* an a(id supporter o1 licensing* too;

o(er as CEO in "@@3! Under Amelio* Apple licensed to &otorola and I'&! In

"@@3* Apple announced the J,#< million purchase o1 eMT So1t4are* mar;ing

the return o1 Ste(e Bo=s! Amelio suddenl. resigned in "@@uentl. ac>uired

5o4er Computing7s customer data=ase* &ac OS license* and ;e. emplo.ees 1or

J"%% million o1 Apple stoc; and J"% million to co(er de=t and closing costs! The

=usiness 4as 4orth J,%% million!

There is economic (alue in strategic alliances! In the case o1 Apple* there 4as the

opportunit. to manage ris; and share costs 1acilitate tacit collusion * and manage

uncertaint.! It 4ould ha(e =een applica=le to the industries in 4hich Apple

operated! Tacit collusion is a (alid source o1 economic (alue in net4or;

industries* 4hich the computer industr. is! &anaging uncertaint.* managing ris;*

and sharing costs are sources o1 economic (alue in an. industr.! Although Apple

e(entuall. realied the economic (alue o1 strategic alliances* it should ha(e

occurred earlier!

The 1ollo4ing are some comments a=out Apple7s no$licensing polic.!

HI1 Apple had licensed the &ac OS 4hen it 1irst came out* 9indo4 4ouldn7te2ist toda.!Bon (an 'ron;horst* HThe computer 4as ne(er the pro=lem! The

compan.7s strateg. 4as! Apple sa4 itsel1 as a hard4are compan.K in order to

protect our hard4are pro1its* 4e didn7t license our operating s.stem! 9e had the

most =eauti1ul operating s.stem* =ut to get it .ou had to =u. our hard4are at t4ice

38


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the price! That 4as a mista;e! 9hat 4e should ha(e done 4as calculate an

appropriate price to license the operating s.stem! 9e 4ere also na](e to thin; that

the =est technolog. 4ould pre(ail! It o1ten doesn7t!Ste(e 9onia;* Apple

co1ounder

HI1 4e had licensed earlier* 4e 4ould =e the &icroso1t o1 toda.!Ian 9! )ier.*

Apple E2ecuti(e 05* I am a4are that I am ;no4n as the Great Satan on

licensingI 4as ne(er 1or or against licensing! I just did not see ho4 it 4ould

ma;e sense! 'ut m. approach 4as stupid! 9e 4ere just 1at cats li(ing o11 a

=usiness that had no competition!Bean$Louis Gass[e* 'e CEO and e2$CEO o1

Apple* admitting he made a strategic mista;e

A strategic alliance can =e a sustained competiti(e ad(antage i1 it is rare* di11icult

to imitate* and the compan. has an organiation to e2ploit it! I1 the num=er o1

competing 1irms implementing a similar strategic alliance is relati(el. 1e4* the

strateg. is rare! I1 there are sociall. comple2 relations among partners and there is

no direct duplication* the strateg. is di11icult to imitate! 9hen organiing 1or

strategic alliances* a 1irm must consider 4hether the alliance is non$e>uit. or

e>uit.! A non$e>uit. alliance should ha(e e2plicit contracts and legal sanctions!

An e>uit. alliance should ha(e contracts descri=ing the e>uit. in(estment! There

are some su=stitutes 1or an e>uit. alliance* such as internal de(elopment and

ac>uisitions! -o4e(er* the di11iculties 4ith these dri(e the 1ormation o1 strategic

alliances! It is (ital to remem=er* HCommitment* coordination* and trust are all

important determinants o1 alliance success!

Apple a,oids co'petition

3@


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I1 .ou loo; at the histor. o1 Apple* .oull see that instead o1 rising to competition*

the. o1ten ignore it* or tr. to use legal means* or =undling clout* to erase it!

9hen challenged =. a larger mar;et 1orce* as 4ith the I'& 5C and its clones in

the earl. 8%s* and 4ith 9indo4s +!%* @/ and then T ,!% in the @%s* the. miss

o=(ious mar;eting opportunities* 4a.s to ma;e their products stronger =.

participating in mar;ets that others de(elop! This is an art that &icroso1t has

mastered* theres no reason Apple couldnt ha(e learned the same lessons* =ut the.

didnt!

And 4hen dealing 4ith smaller competitors* Apple routinel. and o1ten

unconsciousl. 1orced them out o1 =usiness =. =undling* or declaring that the. 4ill

=undle a competiti(e o11ering!

9hen the Internet happened* Apple struggled against it instead o1 em=racing it*

pre1erring to in(est in technologies that e(entuall. ended up on the scrap heap! A

4asted lead in content de(elopment* de(elopers going to 9indo4s* a poor Ba(a

implementation on the &ac!

The =ottom line* the strateg. o1 a(oiding competition has =een disastrous 1or

Apple! 'ut the. 4ant to do it again!

he same ol$ strategy

The cloners* &otorola* 5o4er Computing* U&AM* I'& and others* are poised to

ship products that 4ould ta;e Apple out o1 the hard4are =usiness* =ecause the.re

cheaper* 1aster* =igger* more po4er1ul machines than Apples ne4 products! These

are the computers that &ac users 4ant and are* in m. opinion* entitled to!


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E(en though 4e ha(ent seen the license agreements 4ith the cloners* it appears

that Apple has the contractual right to 1or=id them to ship the computers* 1or an.

reason at all! Apple 4ants to ;eep their hard4are =usiness* so the. e2ercise that

right!

I despise companies that use hard=all tactics to put their competitors out o1

=usiness! I admire companies that rise to competition! I happil. =u. ne4 products

4hen I ha(e a choice! I dont li;e to =u. products that Im 1orced to =u.!

s it a ni#e -usiness.

I1 .ou dont ha(e an.one to compare 4ith* i1 .ou arent su=ject to customer choice*

.our product loses direction* .ou 1ocus in4ard* and e(entuall. Das no4 1or

Apple .our interests =ecome out o1 s.nch 4ith the interests o1 .our

customers!

6ocus on that 1or a moment! A compan. 4hose interests are against their

customers! Is that a nice =usiness )oes it ha(e much o1 a 1uture

s it legal.

The customers interest here is clearl. ser(ed =. competition! The usual =ene1its

appl. $$ lo4er prices* more realistic con1igurations* more di(ersit.!

Apples complaint that the cloners 4erent gro4ing the mar;et can =e e2plained =.

Apples licensing polic. that ;ept them 1rom ma;ing 1undamentall. di11erent

products than Apple! 9heres the cheap su=$note=oo; &ac 9heres the handheld

&ac The &ac =uilt into the dash=oard o1 m. car Apple 4ouldnt let the cloners


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ma;e these products! Apple is an economic disaster area! The. 4ant &ac users to

put all their eggs in Apples crum=ling =as;et!

+(C0**(DATI0&:

or Co'pany

Lo4ering the cost o1 products and maintaining the same >ualit. standards!

Can 1orm joint (entures!

no4ledge &anagement!

&ore num=er o1 retail stores 1or eas. access!

Continuous inno(ation to e2pand!

or 0t/ers

)o not compromise on price 1or >ualit.!

Choose the products =ased on indi(idual needs!


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'e uni>ue and di11erent!

Conclusion

I 1eel that Apple must 1ocus on se(eral ;e. aspects to continue to gro4 and

succeed! The. must continue a sta=le commitment to licensing* push 1or

economies o1 scope =et4een media and computers* and =ecome a learning

organiation!

Although it should continue* Apple ma. 4ant to consider other 1orms o1 strategic

alliances! An e>uit. strategic alliance ma. o11er Apple the opportunit. to o=tain

additional competencies! An e11ecti(e 4a. 1or a compan. li;e Apple to

accomplish this 4ould =e in the 1orm o1 a joint (enture!

Apple should continue pushing the ne4 line o1 media$centric products!

&ean4hile* Apple should not lose 1ocus on its computers! &acintosh computers

4ere /@Q o1 Apple7s sales in #%"#! D'urro4sThis (er. inno(ati(e compan.

e2ploits its second$mo(er position! In the 1uture* the. 4ill need to continue

inno(ating to e2pand the =oundaries o1 =oth media and computers!


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Bohn Sculle.* Bohn A! '.rne D"@8


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report on apple inc 2008

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