Case 3: Apple. Inc.
YaQiao Li
MGMT-340 Strategy
Professor.R.Ryan Raffety
Friday, November 7, 2014
Case#3: Apple. Inc.
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Table of Contents
I.Introduction …………………...…………………………………………………...………3
1.1 The Computer Industry ……………..……………………………………………………...3
1.2 Apple.Inc ….……………………..…………………………………………………………4
II. Strategic Analysis ……………….……..…………………………………………...……4
2.1 SWOT Analysis ……………………..…………..………………………………………....4
2.2.1 External Analysis- Opportunities and Threats …………………………………...5
2.2.2 Internal Analysis - Strengths and Weaknesses …………………………...……....7
2.2 Evaluation of SWOT Analysis …………..…………………………………………………9
2.2.1 Strengths ...…………………..…………………………………………………...9
2.2.2 Weaknesses ……………………..……………………………………………....10
2.2.3 Opportunities ……………………..……………………………………………..10
2.2.4 Threats ……………………..……………………………………………………10
2.2.5 Possible Changes on Managing SWOT ……………………..………………….10
2.3 Business Level Strategies ……………………..………………………...……………...10
2.4 Functional Level Strategies ……………………..………………...……………………11
2.5 Corporate Level Strategies……………………..…................….…………………………13
III. Solutions and Recommendations ..…………………………………….......………..14
IV. Conclusion ……………………..………………………………………………..……...15
V. Appendices ……………………..……………………………………………………..…15
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I. Introduction
First I will analyze the overall computer industry, as well as the history and growth of
Apple. Second, I will identify the company’s internal strengths and weaknesses, and external
opportunities and threats. After that, I will evaluate the SWOT analysis of Apple. I will also
explore Apple’s business-level strategies, functional-level strategies and corporate-level
strategies. Then, I will conclude by providing recommendations on what Apple can do to to
maintain its competitive advantages and to have a further grow on its business. I provide a
quick reference that includes information corresponding to your specific questions in
Appendix 1.
1.1 The Personal Computer Industry
When Apple first entered the computer industry, IBM was dominating the market with
its mainframe computer business. However, many companies, including IBM, were still in the
process of developing a personal computer. Even though IBM had a huge and very profitable
mainframe computer business, it had failed to develop a personal computer. Besides, most
personal computers at that time looked as if they had been assembled by hobbyists at home
with visible screws and bolts shown on the case. Thus, Apple decided to develop a personal
computer with a clean and unique design. By the end of 1980, the launch of Apple II had made
the company the leader in the embryonic personal computer industry. It had also become a
standard in American classrooms. In 1981, the industry changed again with the development
of IBM PCs. IBM quickly took over the market leader role from Apple. The software business
was also dominated by Microsoft, which licensed its operating system to IBM. At the same
time, independent software developers started to write program for IBM PCs. IBM’s success
also gave birth to its clone manufactures who made “IBM compatible” PCs that also utilized
an Intel microprocessor and Microsoft’s MS-DOS operating system. As of 1985, Microsoft
developed its own GUI, Windows, which quickly became popular with the PC industry. In the
early 1990s, IBM’s sales started to decline, while the Windows operating system and an Intel
microprocessor became the dominant standards found on 90% of all personal computers.
Throughout the 1990s, the PC industry developed rapidly and quickly. In the early 2000s, the
market leaders of the PC industry were Dell, Hewlett Packard, and IBM/Lenovo. In the PC
industry, the four major customer groups were business, education, home, and government.
As the PC industry became highly standardized, technology, innovation and
differentiation were key successful factors for PC businesses. In order to attract new customers
and maintain the current customer base, companies had to continuously innovate the operating
system while developing and adopting new technologies. Consumers were also looking for
faster and lower power consumption PCs. Reducing manufacturing costs was another key
component. In order to make an economic return, many companies started to outsource their
production of components in low cost locations, such as China. Also, protecting the copyright
of computer programs was crucial for a firm to be profitable in the industry. Since developing
a program would cost a significant amount of money, protecting programs from pirates helped
businesses to gain more sales on programs, which increased the economic return.
Unlike many PCs that used a Windows system, Apple was protected from pirates. Due
to the complexity of its operating system, it was hard to develop piracy for Apple computers.
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Apple also outsourced its hardware components from various locations, and manufactured its
products in low cost locations. Those two advantages helped Apple maintaining profitability
even under its continuous innovation. Looking at the retail side, most businesses relied upon
third party retailers or direct sales in the early 2000s, such as the Dell online store. However,
things changed by the opening of Apple’s retail stores. Apple’s retail stores added other key
success factors to the PC industry: customer service and in-store experience. Moreover, the
introduction of the iPod in 2010 was a revolution in the computer industry, which produced
some threats to PC businesses.
1.2 Apple Inc.
Steve Jobs and Steve Wozniak founded Apple in 1976. The business started with
selling primitive personal computers that was designed by Wozniak. After introducing the first
version of Apple PC, the Apple I, the company invited Mike Markkula to join Apple as an
investor. Soon, Apple launched an updated version of its PC, the Apple II. Apple II was a huge
success and it became a standard in American classrooms where it was valued for its intuitive
ease of use. Apple attracted many customers by its easy to use computer to market, industrial
design, and technical elegance. However, due to the conflicts among the top managers and
overestimating the demand, Apple started to lose its profits. As a result, Steve Jobs left the
company in 1985. Sculley took over the managerial role of Apple, and he let the company to
enter the desktop publishing market. Apple then dominated the desktop publishing by several
driving forces. By licensing PostScript, which enabled the visual display and printing of high
quality page layouts loaded with graphics, Apple introduced its LaserWriter printer in 1985.
After a short time, another company also introduced a program called Page Maker for the Mac,
which used Adobe’s PostScript page language for its output. At the same time, that company
introduced a MS-DOS version of Page Maker in 1986. Apple enhanced its desktop publishing
by combine this Page Maker with its own Mac GUI. Soon, Apple became the leader of
desktop publishing segment. Besides, the release of Adobe Illustrator in 1987 and Adobe
Photoshop in 1990 further enhanced the leader role of Apple.
After these golden years of Apple, the sales started to decline in the early 1990s. The
company was in trouble. In 1997, Steve Jobs returned to Apple as CEO. Jobs saved the
company by several strategies, including the transformation from using Motorola
microprocessors to Intel microprocessors, as well as developing its own computer programs.
Also, Apple opened its first retail store in 2001, which helped the company generating more
profits. In 2012, Apple had over 390 Apple stores worldwide. By early 2013, Apple was the
world’s most valuable company with $450 billion in capital. Apple’s success was credited to
the launch of the iPod in 2001, the online iTunes store in 2003, the iPhone in 2007 and the
iPad in 2010. Apple continuously innovated its products and was seen as the industry leader in
PC, smartphone and tablet markets.
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II. Strategic Analysis
2.1 SWOT Analysis
2.2.1 External Analysis- Opportunities and Threats
The external environment of the Personal Computer (PC) industry is analyzed by using
the Porter’s Five Forces model, which is shown in Exhibit.1.
The first force is the risk of new entrants. Back in 1976, the barrier of entry was
moderate to low because the PC market was still in the growing stage. New entrants did not
need a significant amount of money to enter the market. However, as of 2013, the risk of entry
by potential competitors is low for the PC industry because there are several barriers to entry.
The first barrier is the expensive investment costs. Entering the PC market requires a
significant investment of resources, because the PC industry is changing and innovating the
product. New entrants that lack resources may have a hard time keeping up with the industry’s
pace. In addition, the brand awareness and the market share of Apple is another barrier to
entry. Potential entrants will find it is difficult to win the market share because Apple has
differentiated itself with other companies in the PC industry. New entrants will not be able to
copy Apple, as the company keeps innovating. On the other hand, Apple has to make sure the
innovation of its product is fast enough to fulfill the customers’ needs, since the industry is
changing constantly. In terms of the economies of scale, large corporations, such as Apple and
IBM, have a lower cost structure due to the high production output, which puts new small
businesses into a significant cost disadvantage position. Thus, the overall risk of entry is low
for the PC industry.
In 1976, IBM held a large market share in the PC industry, which resulted in little rivalry.
Most companies at that time were still trying to develop better technology and softwares, as well
as finding customers’ interests. Then, as the PC industry developed to the maturity stage, the
rivalry also increased to a significant high point. However, Apple tried to reduce the rivalry by
differentiation and innovation. Since Apple’s product had unique functionalities and a clean
design, the company was able to differentiate itself from its competitors, such as IBM and
Samsung. As a result, many customers established brand loyalty to Apple, which decreased the
intense rivalry from competitors. Moving forward, as long as Apple continuously innovates its
products and meets customers’ expectations, the company can limit the rivalry and maintain
profitability.
In 1976, the bargaining power of buyers was low because consumers did not have many
choices of PCs and the industry was still developing. In present day, the bargaining power of
buyers is moderate in the PC industry because the market is highly competitive and saturated
with products. Consumers can choose various brands when they want to purchase a personal
computer. Since there are a large number of companies operating in the PC industry, the
bargaining power of buyers increases due to the raising number of substitutes. However, the
uniqueness of Apple’s product has made the company establish a group of loyal customers,
which are less sensitive to price. Thus, Apple is able to reduce the power of its buyers. Since
Apple is providing premium product and service, consumers are more willing to pay extra for
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Apple’s products, which also decreases their sensitivity to price. As a result, the bargaining
power of buyers is moderate.
There are several suppliers in the PC industry, including hardware suppliers and software
suppliers. When Apple entered the PC market in 1976, the bargaining power of suppliers was
moderate to high because there were not many companies offering software. The operating
system was mainly dominated by Microsoft, which gave Microsoft a high bargaining power.
This was the same for hardware suppliers; their power was moderate because there were limited
numbers of companies producing hardware for PCs. As the industry kept growing, the
bargaining power of hardware suppliers decreased because the hardware industry started to
become saturated. Thus, hardware suppliers had to compete with price, which decreased their
bargaining power in certain levels. In Apple’s case, all the hardware components had to be of
high quality, which increased the supplier costs. However, since the company was purchasing
raw material in a large amount, Apple could limit the power of suppliers. Furthermore, Apple
used to be in a less favorable position when facing Microsoft because Microsoft was the only
supplier for Apple’s software. Apple’s PCs could not be sold without software, which increased
the bargaining power of Microsoft. Thus, Apple decided to develop its own operating system,
which were the Mac OS X for PCs and iOS for other non-PC products. After the launch of its
own Mac OS system, Apple reduced its dependency on Microsoft. Even though Apple still
depended on Microsoft for its Windows OS software, the bargaining power of Microsoft was
reduced due to the large market share of Apple in the U.S PC market.
Exhibit.1: Porter's Five Forces for Electronic Industry
Before the development of the smartphone and tablet in the 2000s, there were not many
substitutes for PCs. Thus, the threat of substitutes was low in the PC industry. The launch of the
smartphone and tablet became a threat to the PC industry. However, Apple had positioned itself
strongly and effectively against substitutes by launching its iPhone, iPod, and iPad. Since Apple
entered the smartphone and tablet market earlier than most of its competitors, Apple was in a
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favorable position in the market. The uniqueness of Apple’s products also helped the company
gain many loyal customers, which decreased the threat of substitutes from its competitors. While
the threat of substitutes currently appears to be low for Apple, the actual threat is moderate
because of other competitors, such as Microsoft.
The last force is the power of complement providers. The complements for the PC
industry are PC cases, chargers, mouse, etc. In order to control the power of complement
providers, Apple not only sells PC and non-PC devices in its store, but also sells complementary
products, such as mouse and cases. Furthermore, Apple’s products are only capable with the
company’s own charger, which also limits the power of complement providers. Thus, the power
of complements is moderate to low. Overall, Apple’s differentiation strategy has enabled the
company to compete against its existing competitors and potential new entrants, as well as
reduce the power and threat of suppliers, buyers, substitutes and complement providers.
Besides the Porter’s Five Forces, the technology environment also affected the
personal computer industry. Back to the 1990s, technology was not well developed, and there
were no specific technical standards in the PC industry. Companies, such as Apple, were
trying to develop software that was suitable for its PCs, including the Macintosh. At the same
time, Microsoft tried to sell its software to IBM and to pursue Apple licensing its Macintosh to
other computer manufacturers. However, Apple rejected Microsoft's suggestion, and Microsoft
developed a operating system called Windows, which later became a technical standard for the
PC industry. Even though Apple eventually developed its own operating system, the Mac OS,
the industry had adopted the Windows as a standard. Over the last three decades, Microsoft
had a dominant role in the PCs’ operating system market. Also, the Intel microprocessor was
another industry standard for microprocessors following the introduction of the IBM PC in
1981. Eventually, Apple decided to use Intel in 2005.
As the technology continuously developing, the inexpensive portable MP3 players and
the peer-to-peer computer networks influenced many PC firms, including Apple. Apple
developed iPod and iTunes to fulfill this new market need, which also enhanced the sales of its
PCs. Apple’s competitors, such as Microsoft, also entered this market later to gain profit from
this raising market. Then, the development of smartphone and tablet affected the PC industry.
Apple’s success on iPhone and iPod attracted many competitors entering the market. As multifunction devices, smartphone and tablet met most of customers’ needs, such as the access to
Internet and checking emails. The increasing popularity of smartphone and tablet was a threat
to the PC industry because less consumers would willing to purchase a PC if tablets could
fulfill most of their needs. However, as the market leader in portable devices and mobile
devices, Apple could treat this threat as an opportunity. Currently, Apple stands as a leader in
innovation and portable technology. Even though the product life cycles had decrease because
of the continuously development of technology, Apple could maintain profitable by product
innovation.
2.2.2 Internal Analysis - Strengths and Weaknesses
1976 - 1900
From 1976 to 1990, Apple’s competitive advantages were differentiation, consistent
innovation and strong brand image. From the beginning, Steve Jobs knew that he wanted
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Apple’s products to be differentiated from its competitors. The clean and unique design had
been strengths for Apple, which created a strong brand image for the company. Customers
could easily identify Apple’s PCs by its look. Another strengths were product innovation.
Since the company had been established, Apple consistently innovated its PCs. Apple I, the
first version of Apple’s PC, had several limitation, such as no case, keyboard and power
supply. It also required several hours of laborious assembly by hand. In order to make a better
product, Apple launched Apple II in 1977, which was an integrated machine that had a
keyboard, power supply, monitor and the BASIC programming software. However, Apple did
not stop its innovation, the company developed an updated version of Apple II, which includes
an additional disk drive. The disk drive allowed Apple’s PCs to run programs, such as
VisiCals. This feature was not only appeal to students but also to the business segment.
Innovation lead the Apple II became a success of the company.
However, Apple failed to build on these advantages to lead the industry. Innovation
became a potential weakness for Apple as the company rapidly grew. In order to innovate its
products, the company rushed to finish its Apple III, which caused the computer fill with bugs
and crash constantly. Furthermore, the initial development of Lisa and Macintosh was a failure
because Steve Jobs kept pushing the team to finish projects before the deadline. Jobs also had
an unattainable goal for sales. At the same time, several executives leave the company,
including Markkula and Mike Scott. Eventually, Jobs leave Apple in 1985. The conflict among
operations was a weakness of Apple at that time, and was a reason of Apple’s early failure.
1900 - 2013
After Jobs leave Apple in 1985, Sculley took over the role. By the early 1990s, Apple
was the only company to sell machines that utilized a GUI, which lead its differential appeal
become a strengths to the company. However, there were several weaknesses of Apple,
includes its high cost structure. Also, the launch of Windows 3.1 turned Apple into a niche
player. Furthermore, Apple had too many products with lack capability to fully develop each
one. Overestimated demand was still a problem to Apple, which resulted in excess inventory.
Those weaknesses put the company into a less favorable position in the market and caused the
company continuously loss its profit.
In 1998, Steve Jobs returned to Apple. After his return, the company started to grow
and to rebuild its competitive advantages. The building blocks of Apple’s competitive
advantages were shown in Exhibit 2. In 2001, Apple opened its retail store, which provided
premium customer service to its customers. The superior customer services soon became
another strength to Apple, and it allowed the company to charge its products at a premium
price. Apple’s product also had superior quality and features. For instance, the iMac had a
thick shell, which made the product not only look good but also more durable. By having Jobs
in the company, innovation became strength for Apple again because he knew the importance
of utilizing talents. Apple introduced iPod in 2001, iPhone in 2007, and iPad in 2010. It had
been the industry leader on technology and attracted a group of loyal customers by its rapid
innovation. On the other hand, in order to ensure the quality and maintain its innovation,
Apple had a high-cost structure, which became a weakness.
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Looking at Apple’s resources and capability, the company most important resource
was Steve Jobs. Jobs saved Apple and lead the company to tremendous success. He was a
valuable resource and the driving force of Apple, and his unique vision leaded the company
become an industry leader. To Apple, Steve Jobs was a valuable, rare, inimitable, and nonsubstitutable resource. Apple’s integrated system of hardware and software was another
valuable resource. This integrated system combined with Apple’s distinctive design made the
company differentiated with its competitors. Apple’s software development teams, hardware
engineers and Jonny Ive’s design team were other resources of the company. Their knowledge
could be seen as company’s capabilities. The combination of Steve Jobs, the integrated
system, and Apple’s employees was valuable to the company; it was rare, and hard to imitate.
Apple’s capabilities and resources supported the company to maintain its sustainable
competitive advantages.
Exhibit.2: Building Blocks of Competitive Advantages for Apple.Inc since 1990
2.2 Evaluation of SWOT Analysis
2.2.1 Strengths
There were several approaches that Apple used to leverage it strengths. First, Apple’s
strong brand image and loyal customer base were its strengths. In order to attract more
customers and maintain its existing customers, Apple tried to introduce new products every 6
months. By doing so, Apple could also keep its market leader role by this rapid innovation. Its
retail stores also offered in-store experience and premium customer services, which was not
provided by most of Apple’s competitors. The “genius bar” in many stores had technical
experts to help customers fix problems with their Apple products. Apple also used its retail
store to increase its brand awareness by direct contact with customers.
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2.2.2 Weaknesses
Before Jobs returned to Apple, having too many product lines was Apple’s weakness.
Jobs killed slow selling products, as well as cut down the product lines from 60 to 4. Thus,
Apple was able to utilize its assets and resources more efficiently. Another major weakness of
Apple was its high-cost structure, which was mainly caused by its Motorola microprocessor.
This microprocessor lacked the scale of Intel, which increased Apple’s costs. In order to cut
down cost, Apple eventually decided to use Intel microprocessors in 2005. The Intel
microprocessors allowed Apple’s computer to run faster with lower power consumption. In
late 2006, the transition to Intel based architecture was completed and consumers had positive
attitudes toward this change. In this way, Apple closed its pricing differentia. The company
also transformed this weakness into strengths by improving computers’ speed and lowering the
power consumption. Apple also used outsourcing to reduce its production costs. Apple moved
certain process of manufacturing into country with lower labor costs, such as China.
2.2.3 Opportunities
The growth of smartphone and tablet markets was an opportunity to Apple. To pursue
this opportunity, Apple put lots of efforts on innovating and updating its iPhone and iPad.
Being an early mover in those markets, Apple had advantages over its competitors. To
enhance the advantages of iPhone and iPad, Apple introduced the iCloud, which was a cloud
storage, computing, and synchronization service. By having this feature, Apple allowed
customers to store data on remote servers. At the same time, the demand for cloud-based
services was increasing. Since Apple was the first company that developed a successful and
popular cloud service, the company took advantages of this opportunity.
2.2.4 Threats
The rapid change in technology posted threat to Apple. In order to limit threat, Apple
continuously innovated its product and tried to become the industry leader on new
technologies. Then, the pressure from price was another threat. Apple charged its product at a
premium price, which was higher than most of its competitors. However, Apple used its high
quality and premium in store customer service to create more value for customers. Thus,
Apple’s customers would be less sensitive to price. The growing number of competitors in the
tablet and smartphone business was a threat to Apple. To reduce the threat for its competitors,
Apple tried to innovate its products rapidly, as well as to differentiate its products from
competitors.
2.2.5 Possible Changes on Managing SWOT
Above all, Apple did a good job on managing the SWOT. In 2013, Apple was the
world’s most valuable company with over $450 billion in capital. However, Apple could reach
a broader customer base by expanding its distribution network. Currently, Apple mainly sale
its product through its online store and retail stores. Partnership with other retail stores could
expand the distribution channel for Apple, and could bring more potential customers to the
company.
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Also, the company could be benefit by expanding its foreign markets. Even though
Apple already entered the global market, Apple still had space to grow in many countries, such
as China and Korea. Since Microsoft entered those two countries earlier than Apple, many
consumers still prefer using PCs with Windows system. Apple should pay more efforts on
educating its foreign market.
2.3 Business Level Strategies
Apple was pursuing a broad differentiation strategy, which indicated the company
chose to give up a lot on getting cost reductions. Even though Apple had try to make its costs
as low as possible, it was still higher than many competitors. Apple differentiated itself by its
innovation, unique design, premium quality and superior customer service. The company
targeted broad range of customers, from educational market to business market, as well as
consumers with special needs, such as graphic design.
Apples focused a lot on product design to differentiate itself from its competitors. The
unique sample design and the ease-of-use feature attracted many loyal customers to Apple.
Due to their brand loyalty, those consumers were less sensitive to price, which meant Apple
could charge its products at premium prices to cover its high production cost and earn profit.
As of 2012, Apple also opened 390 Apple stores worldwide to provide in store experience and
personalized customer service to its customers. Apple’s retail stores strongly supported its
business strategy by providing additional value to customers, which was the premium
personalized customer service. The genius bar in many stores solved customers’ technical
problems. At the same time, Apple continuously innovated its product. The introduction of
iPod and iTunes not only boost company’s revenue, but also enhanced the sale of Apple’s
computer. By identifying emerging market trends, Apple was able to keep its market leader
role in many markets, including the PC market, the music player market, the smartphone
market, and the tablet market. Besides, having products in various market helped Apple
maintain profitable even if one market fail. For instance, if Apple failed in the music player
industry, the company could still generate revenue from other markets.
2.4 Functional Level Strategies
1990 - 1997
After Sculley took over Apple, he shut down the Lisa line and utilized resources on
improving the Macintosh. Then, Apple entered the new desktop publishing market, which was
a huge success to the business. Since Apple made both hardware and software, the company
had fully control of all aspects of its computers. In 1990 Apple sales reached $5.6 billion, and
its global market share stabilized at 8%. However, Apple rejected to license the Mac operating
system to other computer manufacturers, which later put Apple into a disadvantage position in
the computer industry. This decision became a initial misstep in leading the industry. After
Microsoft developed its Windows system, this system soon became a standard in the PC
industry, which causes the decline of Apple. If Apple opened its operating system to other
computer manufacturers, Apple’s decline might be able to avoid. Apple’s Mac OS system
might become the industry standard, instead of the Windows operating system. Apple failed to
take the first mover advantage when the computer industry lacked a standard in operating
system.
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The fail in licensing Mac OS system and the using of Motorola microprocessors lead
Apple to a “glide path to history”. The closed business model boxed Apple into its niche,
which eventually resulted a high cost structure. Also, the popularity of Windows and the Intel
microprocessor made developers chose to write software for Windows over MS-DOS. In the
early 1990s, Windows operating system and Intel microprocessor became the dominant
standard found on 90% of all personal computers.
In order to save the company, Sculley firstly appointed himself chief technology officer
and the CEO of Apple. Then, he wanted the company to bring out a new low-cost version of
the Macintosh to compete with IBM clones. At the same time, Sculley cut down the price for
the Mac’s and Apple II’s by 30%. In addition, he cut down the workforce by 10% and reduced
salaries of top managers by 15% to lower the costs. Besides, he required the company to bring
out hit products every 6 to 12 months. Sculley wanted to use those strategies bringing Apple
back to its technological leader role in the PC industry. The company also aligned with IBM in
order to compete more efficiently with its competitors, such as Intel, Microsoft and Dell.
However, Sculley’s strategies did not stop the loss of company. After Sculley left Apple,
Spindler took over his role. Spindler eventually decided to license the Mac OS to
manufacturers. However, it was too late for Apple to make this decision because the launch of
Windows 95 brough another hit to the industry. After Spindler, Gilbert Amelio was in charge
of Apple and he chose to bring Apple back to its differentiation strategy. He also purchased
Steve Jobs’ company, NeXt, to develop a system that could possibly run on Apple computer.
None of above stopped the decline of Apple until Steve Jobs came back to Apple.
1997 - 2013
After Steve Jobs served as Apple’s CEO again, he brought Apple back to profitable.
He acquired the NexT software and developed a more successful version of OS based on it.
Jobs also negotiated with Bill Gate and made a deal with Microsoft on producing Office for
Mac until at least 2002. Secondly, Jobs stopped the licensing of Mac OS, and acquired a
leading Mac clone maker, PowerComputing, to develop softwares for Apple. Then Jobs cut
down the product lines from 60 to 4 and stopped selling all slow selling products.
In 1998, Apple launched a new product, the iMac, which attracted many customers by
its eggshell design. It also combined the monitor and central processing unit in translucent teal
and with curved lines. In terms of suppliers and manufacturers, Apple worked with Asian
partners to design sophisticated process that could produce millions of iMacs a year. The
initial sale of iMac was successful, and Apple continuously updated iMac with faster
processors, more memory, and bigger hard drives. Then, Apple introduced its new operating
system OS X, which was faster and more stable than the old Mac OS. Another successful
decision of Jobs was working on its own applications. After Apple developed a series of
applications, such as iMovie and iLife, the company became less dependent on third party
developers.
In 2001, Apple launched its iPod, which was a success to the business. Apple was
successful with the iPod business due to its innovation in technology and design, which
aligned with its business level strategy. Compared to normal MP3, iPod had a distinctive clean
design with large storage. The serial number of the iPod was not on a sticker, and it was
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elegancy etched onto the back of the device. This attention to detail and design elegance
turned the iPod into a fashion accessory. Besides, iPod could hold over 1,000 songs while
most MP3 could only hold few dozen songs each. Those elements resulted in the initial
success of iPod. Timing was another reason of iPod’s success. While the music industry shut
down the peer-to-peer networks to counter piracy over the Internet, consumers needed an
online store to download music. Jobs realized this opportunity, and he persuaded the music
companies to make their music available for legal downloads through the online iTunes store.
Therefore, Apple became the leader in the music and digital player industry. However, the
iPod and the iTunes store only worked with Apple’s computer, which meant customers had to
purchase an Apple computer in order to use iPod. Also, the only portable digital player that the
files could only be stored and played on was an iPod. In this way, the sales of iPod was
enhanced by the iTunes store, while the iPod helped increasing the sales of Apple’s PCs.
From 2003 to 2007, Apple tried to enter new market by expanding its product lines.
After Apple introduced the iPod in 2001, the company launched iPhone in 2007. The key
elements of Apple’s strategy during this period of time were product innovation, and building
complementary relationships between Apple products. Also, Apple started making its devices
to be compatible with Windows, which meant Apple wanted to transform itself from a niche
player to opening to the mass market.
After the launch of iPhone in 2007, Apple redefined what a smart phone had to look
like and do. Beyond the basic features of smart phones, iPhone allowed customers to browse
the web, take pictures and function as an iPod digital music player. At the same time, iPhone
was elegantly designed and used expensive materials including a body of brushed aluminum
and a screen made of tough “gorilla glass”. Those features differentiated iPhone from its
competitors and attracted many customers. Apple sold over 250,000 iPhones in the first two
days the device was on the market. Then, the launch of App store in 2008 enhanced the sales
of iPhone. Apple’s app store was easy to use, to access and allowed customers directly
download applications onto their mobile phones. In 2012, Apple made $80.6 billion in
revenues from iPhone sales, and it became the most profitable product in the company. The
success of iPhone not only changed the mobile industry but also influenced the computer
industry. Apple originally only belonged to the computer industry. However, Apple entered
different markets by its continuously innovation on technology. Apple showed to the computer
industry that a successful computer business should not only limited itself on selling PCs, but
also be able to lead the technology in the consumer electronic industry.
Apple did not stop from the development of iPhone. In 2010, the company introduced
its iPad. The launch of iPod was a revolution of the computer industry. IPod had a touch
screen keyboard, and Wi-Fi and 3G wireless service supports. It ran the same iOS operating
system as the iPhone, which allowed customers to run the same applications. At the same time,
iPad was able to support full-lengths movies on at high resolution. Besides, the design and the
size of iPad was a hit to the computer industry. Unlike PCs or desktops, iPad was light enough
to slip into a bag, and it utilized the same expensive materials as the iPhone. 300,000 iPads
were sold on the first day of availability. The success of iPad drove many competitors to the
market, such as Samsung and Microsoft. IPad changed the old image of how a computer
should look like and what computers could do. The increasing demand for tablet also posted
Case#3: Apple. Inc.
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threats to the PC and desktop market. In conclusion, Steve Jobs functional level strategies save
Apple from its declining, and lead the business to another success.
2.5 Corporate Level Strategies
Since 1990, Apple’s corporate level strategy gave advantages to the company on many
different levels. First, Apple outsources some basic production procedure to third-party
manufacturers, where the labor cost was much lower than the U.S. In this way, Apple was able
to cut down some costs while reaching its high quality standards. At the same time, Apple
controlled all designing part in company’s headquarter. Thus, the company was able to make
sure every Apple product had the company’s core value. Furthermore, the similar design
techniques of all Apple products saved money for the company. Apple did not have to develop
a new system for each product, which significantly lowered the investment and production
costs.
In addition, Apple was the first computer company to have retail stores. By selling
products through both retail and online channels, Apple could have more interaction with its
customers. Since most of Apple products were a revolution to the industry, letting customers to
try the new products in store could reduce concerns of consumers. Besides, Apple had many
other software and programs to enhance the using experience of its products, such as the iTunes
store and the App store. From the iTunes and the App store, customers could directly download
music and apps to its Apple devices. This provided convenience and consistency to customers.
The high quality of Apple products and the one-on-one customer service Apple provided to
customers allowed the company to charge its products at a premium price. Even though the price
was higher than the industry average, consumers were still willing to pay extra for Apple’s
premium quality products and services.
III. Solutions and Recommendations
Apple should continuously innovate its products and maximize its value. The death of
Steve Jobs was a huge loss to the company because he was the visionary and the driving force
of Apple. Thus, Apple should develop a better top management team to lead the company
instead of by only one person. Even if Tim Cook could manage the company well after Steve
Jobs, the company should not fully depend on Cook. A top management team could work
together to forecast the technological trend and to advance the interests of Apple. Therefore,
the influence of losing CEO would not be that significant.
In addition, Apple should also carefully manage its brand reputation and tried to stay
ahead of the industry. After Steve Jobs passed away, the rivalry increased because its
competitors wanted to take advantages on Apple’s restructure. As long as Apple could foresee
the industrial trends and stay innovative, the company could have first mover advantages over
its competitors. The company should also continually invest in developing its hardware and
software to improve the performance of Apple products. The design of Apple products should
also be consistent so that it could avoid the loss in existing customers. The consistent upgrade
unique design could also reduce the threat from new entrants and existing competitors.
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While developing new products to fulfill new market needs, Apple should also
keep updating its existing products, such as its MacBook and iPhone. Increasing speed of
its computers and smartphones would attract more customers from its competitors. Also,
adding more features to its products could excite the existing customers and increased
brand loyalty. It could also increase the product life cycle.
Expanding Apple’s business internationally was another important way to increase
sales and profitability. Apple could pay more efforts on researching customers’ preferences. In
this way, Apple might develop a specific marketing plan for different countries depending on
customers’ cultural background.
IV. Conclusion
Above all, the overall strategies of Apple have allowed the business to maintain its
profitability and its market share. By using broad differentiation strategy, Apple differentiates
itself from its competitors and builds up sustainable competitive advantages over time. The
unique and consistent design of Apple products provides convenience to customers, as well as
helping the company establish a group of loyal customers. Apple’s retail stores also provide
premium customer service to its customers, which create more value for Apple products. The
death of Steve Jobs was a huge loss to Apple, and brought up threat to the business. However,
as long as Apple follows its core value, which is to keep innovation and to change the industry,
the company can keep its leader role in various markets. To expand its business
internationally, Apple can consider providing customized customer service in different
locations to meet various customer needs.
V. Appendices
Appendix.1:
Historically, what were Apple's major
competitive advantages?
From 1976 to 1990, Apple’s competitive
advantages were differentiation, consistent
innovation and strong brand image. From the
beginning, Steve Jobs knew that he wanted
Apple’s products to be differentiated from its
competitors. The clean and unique design had
been strengths for Apple, which created a
strong brand image for the company.
Customers could easily identify Apple’s PCs
by its look. Another strengths were product
innovation. Since the company had been
established, Apple consistently innovated its
PCs. The product innovation was an
advantage of the company and made Apple
become the industry leader.
Why did Apple fail to build on these
Apple failed to build on these advantages to
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Case#3: Apple. Inc.
advantages to lead the industry?
lead the industry for several reasons. Lacked
in operational management caused innovation
became a potential weakness for Apple as the
company rapidly grew. In order to innovate its
products, the company rushed to finish its
Apple III, which caused the computer fill with
bugs and crash constantly. Furthermore, the
initial development of Lisa and Macintosh
was a failure because Steve Jobs kept pushing
the team to finish projects before the deadline.
Jobs also had an unattainable goal for sales.
At the same time, several executives leave the
company, including Markkula and Mike
Scott. Eventually, Jobs leave Apple in 1985.
The conflict among operations was a reason
of Apple’s early failure.
Was Apple's demise inevitable, or could they
have succeeded despite the decision not to
license the OS? Explain your answer.
Apple rejected to license the Mac operating
system to other computer manufacturers,
which later put Apple into a disadvantage
position in the computer industry. This
decision became a initial misstep in leading
the industry. After Microsoft developed its
Windows system, this system soon became a
standard in the PC industry. If Apple opened
its operating system to other computer
manufacturers, Apple’s decline might be able
to avoid. Apple’s Mac OS system might
become the industry standard, instead of the
Windows operating system. Apple fail to take
the first mover advantage when the computer
industry lack a standard in operating system.
How has the structure of the personal
computer market changed over the last 30
years? What are the implications for the
profitability of personal computer
manufacturers?
When Apple first entered the computer
industry, IBM was dominating the market
with its mainframe computer business.
However, many companies, including IBM,
were still in the process of developing a
personal computer. Thus, Apple decided to
develop a personal computer with a clean
and unique design. By the end of 1980, the
launch of Apple II had made the company
the leader in the embryonic personal
computer industry. It had also become a
standard in American classrooms. In 1981,
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the industry changed again with the
development of IBM PCs. The software
business was also dominated by Microsoft,
which licensed its operating system to IBM.
At the same time, independent software
developers started to write program for
IBM PCs. As of 1985, Microsoft developed
its own GUI, Windows, which quickly
became popular with the PC industry. In the
early 1990s, the Windows operating system
and an Intel microprocessor became the
dominant standards found on 90% of all
personal computers. Throughout the 1990s,
the PC industry developed rapidly and
quickly. In the early 2000s, the market
leaders of the PC industry were Dell,
Hewlett Packard, and IBM/Lenovo. In the
PC industry, the four major customer
groups were business, education, home, and
government.
As the PC industry became highly
standardized, technology, innovation and
differentiation were key successful factors
for PC businesses. Consumers were also
looking for faster and lower power
consumption PCs. Reducing manufacturing
costs was another key component. In order
to make an economic return, many
companies started to outsource their
production of components in low cost
locations. Also, protecting the copyright of
computer programs was crucial for a firm to
be profitable in the industry. Apple’s retail
stores added other key success factors to the
PC industry: customer service and in-store
experience. Moreover, the introduction of
the iPod in 2010 was a revolution in the
computer industry, which produced some
threats to PC businesses.
Given the analysis of industry dynamics, what
must a PC firm do to make an economic
return in this industry? Is Apple protected
from these competitive forces in any way?
In order to make an economic return, many
companies started to outsource their
production of components in low cost
locations, such as China. Also, protecting the
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copyright of computer programs was very
crucial for a firm to be profitable in the
industry. Since developing a program would
cost a significant amount of money, protecting
programs from pirates help business to gain
more sales on programs, which increased the
economic return. Apple was protected from
those competitive forces Due to the complex
of its operating system, it was hard to
developing pirate for Apple computers. Also,
Apple outsources its hardware components
from various locations, and Apples products
were also manufactured in low cost locations.
In the early 1990s, Dan Eilers commented that The fail in licensing Mac OS system and the
Apple was on a "glide path to history." What using of Motorola microprocessors lead Apple
underlay this assessment?
to a “glide path to history”. The closed
business model boxed Apple into its niche,
which eventually resulted a high cost
structure. Also, the popularity of Windows
and the Intel microprocessor made developers
chose to write software for Windows over
MS-DOS. In the early 1990s, Windows
operating system and Intel microprocessor
became the dominant standard found on 90%
of all personal computers.
How did the company come to dominate
desktop publishing?
Apple dominated the desktop publishing by
several driving forces. By licensing
PostScript, which enabled the visual display
and printing of high quality page layouts
loaded with graphics, Apple introduced its
LaserWriter printer in 1985. After a short
time, another company also introduced a
program called Page Maker for the Mac,
which used Adobe’s PostScript page language
for its output. At the same time, that company
introduced a MS-DOS version of Page Maker
in 1986. Apple enhanced its desktop
publishing by combine this Page Maker with
its own Mac GUI. Soon, Apple became the
leader of desktop publishing segment.
Besides, the release of Adobe Illustrator in
1987 and Adobe Photoshop in 1990 further
enhanced the leader role of Apple.
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Case#3: Apple. Inc.
Evaluate Apple's strategies from 1990-2013
(focus on Scully and the return of Steve Jobs). After Sculley took over Apple, he shut
down the Lisa line and utilized resources on
How did Scully try to save Apple? How did
improving the Macintosh. Then, Apple
Jobs?
entered the new desktop publishing market,
which was a huge success to the business.
However, Apple rejected to license the Mac
operating system to other computer
manufacturers, which later put Apple into a
disadvantage position in the computer
industry. This decision became a initial
misstep in leading the industry. The closed
business model boxed Apple into its niche,
which eventually resulted a high cost
structure. Also, the popularity of Windows
and the Intel microprocessor made
developers chose to write software for
Windows over MS-DOS. Sculley wanted
the company to bring out a new low-cost
version of the Macintosh to compete with
IBM clones. He also cut down the price for
the Mac’s and Apple II’s by 30%. In
addition, he cut down the workforce by
10% and reduced salaries of top managers
by 15% to lower the costs. He required the
company to bring out hit products every 6
to 12 months. The company also aligned
with IBM in order to compete more
efficiently with its competitors. However,
Sculley’s strategies did not stop the loss of
company.
After Steve Jobs served as Apple’s
CEO again, he brought Apple back to
profitable. He acquired the NexT software
and developed a more successful version of
OS based on it. Jobs also negotiated with
Bill Gate and made a deal with Microsoft
on producing Office for Mac until at least
2002. Secondly, Jobs stopped the licensing
of Mac OS, and acquired a leading Mac
clone maker, PowerComputing, to develop
softwares for Apple. Then Jobs cut down
the product lines from 60 to 4 and stopped
selling all slow selling products. In 1998,
Apple launched a new product, the iMac,
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Case#3: Apple. Inc.
which attracted many customers by its
eggshell design and its strong features.
Apple also introduced its new operating
system OS X, which was faster and more
stable than the old Mac OS. Also, Apple
developed a series of applications, such as
iMovie and iLife, so the company became
less dependent on third party developers.
Jobs lead the team to continuously innovate
its products. Apple then introduced iPod in
2001, iPhone in 2007 and iPad in 2010.
Why was Apple so successful with the iPod
business?
Apple was successful with the iPod
business due to its innovation in technology
and design, which aligned with its business
level strategy. Compared to normal MP3,
iPod had a distinctive clean design with
large storage. The attention to detail and
design elegance turned the iPod into a
fashion accessory. Besides, iPod could hold
over 1,000 songs while most MP3 could
only hold few dozen songs each.
Timing was another reason of iPod’s
success. While the music industry shut
down the peer-to-peer networks to counter
piracy over the Internet, consumers needed
an online store to download music. Thus,
Jobs persuaded the music companies to
make their music available for legal
downloads through the online iTunes store.
Also, the iPod and the iTunes store only
worked with Apple’s computer, which
meant customers had to purchase an Apple
computer in order to use iPod. Besides, the
only portable digital player that the files
could only be stored and played on was an
iPod. In this way, the sales of iPod was
enhanced by the iTunes store, while the
iPod helped increasing the sales of Apple’s
PCs.
What were the main elements of Apples
strategy from 2003 - 2007. What was Apple
From 2003 to 2007, Apple tried to enter new
market by expanding its product lines. After
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Case#3: Apple. Inc.
trying to do here?
How did the iPhone change things?
What does the iPhone and iPad mean for
Apple, and for the computer industry?
Apple introduced the iPod in 2001, the
company launched iPhone in 2007. The key
elements of Apple’s strategy during this
period of time were product innovation, and
building complementary relationships
between Apple products. Also, Apple started
making its devices to be compatible with
Windows, which means Apple wanted to
transform itself from a niche player to the
mass market.
Apple redefined what a smart phone had to
look like and do. Beyond the basic features
of smart phones, iPhone allowed customers
to browse the web, take pictures and
function as an iPod digital music player. At
the same time, iPhone was elegantly
designed and used expensive materials
including a body of brushed aluminum and
a screen made of tough “gorilla glass”.
The success of iPhone not only changed the
mobile industry but also influenced the
computer industry. Apple originally only
belonged to the computer industry. However,
Apple entered different markets by its
continuously innovation on technology. Apple
showed to the computer industry that a
successful computer business should not only
limited itself on selling PCs, but also be able
to lead the technology in the consumer
electronic industry.
The launch of iPod was a revolution of the
computer industry. IPod had a touch screen
keyboard, and Wi-Fi and 3G wireless service
supports. At the same time, iPad was able to
support full-lengths movies on at high
resolution. Besides, the design and the size of
iPad was a hit to the computer industry.
Unlike PCs or desktops, iPad was light
enough to slip into a bag. The success of iPad
drove many competitors to the market, such as
Samsung and Microsoft. IPad changed the old
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image of how a computer should look like and
what computers could do. The increasing
demand for tablet also posted threats to the PC
and desktop market.