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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.!
"3
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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
"8
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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
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!
#8
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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 /
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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$1igure anal.st clearl. sho4s* the surge in &ac
sales started around the time Apple transitioned to Intel C5Us! Ironicall.* one
could argue that &ac sales are rising =ecause o1 0ista* =ut not in the 4a.
'achman suggests! 5rior to the release o1 Leopard and the discontinuation o1 'oot
Camp as a separate product* Apple reported huge do4nloads o1 the program that
let &ac users launch 9indo4s 0ista (er.* (er. slo4l.!
+3
http://www.appleinsider.com/articles/08/07/08/apple_may_have_shipped_2_5_million_macs_in_spring_thanks_to_vista.htmlhttp://www.appleinsider.com/articles/08/07/08/apple_may_have_shipped_2_5_million_macs_in_spring_thanks_to_vista.html8/12/2019 Report on Apple Inc 2008
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Apple eats Co'petitors at In,entory Turn 0,er
)espite a 4ea;ening econom. and a need to meet customer demand* Apple has
=een a=le to maintain a 1ast in(entor.turno(er rate! The &ac and i5honema;er is
sitting at 1i(e da.s 4orth o1 in(entor. on an. gi(en da.* =eating )ells se(en da.s
4orth o1 in(entor.* according to data 1rom U'S!
Other 5C ma;ers are ha(ing e(en more trou=le matching Apples in(entor.
e11icienc.! Leno(o* 1or e2ample* is a(eraging "/ da.s o1 in(entor.* and -5 is
sitting at +# da.s! Intel* ho4e(er* is sho4ing a much slo4er in(entor. turno(errate at 8@ da.s* and )$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
0
2012 *icroso
ft ?1$
Dell
?1$
Indust
ry ?1$
&@P
$$
+eturn on
Assets
"!%"
Q
+!,+
Q
""!/3
Q
"@!
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+eturn on
(Buity
"!3+
Q
/!,,
Q
"
Q
#8!/3Q 3
Profit
*argin
"!""
Q
+!++
Q
@!/8
Q
+"!/uarter 2012earnings releases* gross margins
dropped slightl.!Apple attri=utes this decline primaril. to price pressures*
especiall. in the i5od product line! D"st?uarter "%? This 4ill continue to a11ect
per1ormance o(er time! -o4e(er* Apple7s a=ilit. to maintain the momentum it=uilt in the mar;etplace 4ill control the speed 4ith 4hich erosion 4ill occur!
iBuidity and e,erage *easures
Apple historicall. held (er. little long$term de=t! The ta=le =elo4 compares
Apple7s li>uidit. measures to their competitors* their industr.* and the general
mar;et! )uring the period o1 strong 1inancial per1ormance* Apple accumulated
cash! This strengthens Apple7s position should the. choose to access the capital
mar;ets!
200
9
201
0
201
2
*icrosoft
?1$
Dell
?1$
Industry
?1$
&@P
$$
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 $$$3s et
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0perating ()penses
Research and)e(elopment
J+*+8"*%%% J#*,#@*%%% J"*
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Earnings 'e1ore Ta2 J//*uit. EarningsLoss
Unconsolidated
Su=sidiar.
J% J% J% J%
et Income$Cont!
OperationsJ,"*
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t ,alues in $$
Period (nding: Trend 9;9;$1; 9;";$11 9;2009 9;6;$$9
Current Assets
Cash and Cash
E>ui(alentsJ"%*
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Long$Term
In(estmentsJ@#*"##*%%% J//*3"8*%%% J#/*+@"*%%% J"%*/#8*%%%
6i2ed Assets J"/*,/#*%%% J
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Short$Term )e=t
Current 5ortion o1Long$Term )e=t
J% J% J% J%
Other Current
Lia=ilitiesJ/*@/+*%%% J,*%@"*%%% J#*@8,*%%% J#*%/+*%%%
Total Current
Lia=ilitiesJ+8*/,#*%%% J#
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Total Lia=ilities J/
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Total Lia=ilities
E>uit.
J"
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C/anges in
0perating
Acti,ities
Accounts
Recei(a=le
DJ3*@3/*%%% DJ"*
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Acti,ities
Capital
E2penditures
DJ8*#@/*%%% DJ,*#3%*%%% DJ#*%%/*%%% DJ"*",,*%%%
In(estments DJ+8*,#
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E11ect o1
E2change Rate
J% J% J% J%
et Cash 6lo4 J@+"*%%% DJ"*,,3*%%% J/*@@8*%%% DJ3*3"#*%%%
3%
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Period (nding: Trend 9;9;$1; 9;";$119;200
99;6;$$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#ixzz2Vv1MZyY48/12/2019 Report on Apple Inc 2008
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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
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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
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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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