Apple Computer: Transformation
towards GUI
Analysis and Revised Strategy
presented by
Walter J. Ferrier, Ph.D.
CEO, Thoroughbred Consulting Group
Apple’s Historical Competitive
Advantage
•
•
•
•
•
•
Unique, Proprietary Software
GUI Interface
Graphics/desktop publishing software
WYSIWYG Screen-Printer Interface
Networking Capabilities
Multimedia Capabilities
Strategic Group Map
Pre-Windows
Premium
Sun
Apple
Price
Compaq
IBM
Low
Clones
Broad
Narrow
Strategic Focus - Differentiation
5-Forces Model of Computer Industry
Potential
(-)
Entrants
• Low Entry Barriers
• Apple No Longer
Protected from Clones
Suppliers (?)
• Apple owns O/S
• Motorola / RISC Processor
• Software Firms want to
write for largest installed
base
(-)
Rivalry
Buyers (-)
• Price
Sensitive
• Mass Merchandisers
• Mail Order
• New Products
Substitutes (-)
• Workstations
• Palm-tops/ PDA’s
• More Marketing
• Price Cutting
• Outsourcing
• IBM Compatible Clones
• Ability to Differentiate
Disappearing
Threats to Apple
• Windows 3.0
– Narrowed the interface “performance gap”
– Cheap clones now almost as good as Mac
• Lack of Application Software
– Largest applications vendor is Microsoft
– Independent vendors want to write for O/S with
largest installed base
Opportunities
• Attack operating system market for Intel
and RISC processors
• Alternative technologies requiring GUIs
–
–
–
–
–
Office machines (copiers, FAX, etc.)
PDAs
Telephone switchboards
Home electronics/appliances
Robotics
Apple Weaknesses
• Level of uniqueness is eroding
• Inability to keep pace with R&D spending
– IBM’s R&D = $6,644 mil
– Apple’s Revenues = $6,309 mil
• Small installed base vs. IBM “compatibles”
• Lack of dominant market share position
• High SG&A to Sales
Weakness
Strategic Group Map
Post-Windows
Premium
Sun
Apple
Price
Compaq
IBM
Clones
Low
Broad
Narrow
Strategic Focus - Differentiation
Weakness
Microprocessor Volume
Millions of Units
100
90
80
70
60
50
40
30
20
10
0
Intel
Motorola
Installed Base
Units Shipped
Weakness
Apple’s Marketing Costs vs. Rivals
SG&A to Sales (%)
40
35
30
25
Apple
IBM
Compaq
Dell
20
15
10
5
0
SG&A (%)
Apple Strengths
• Best GUI O/S
• Brand name loyalty
Revised Mission
• To position Apple as the world leader in
man-machine interfaces though the
development of ergo- and cerebro-nomic
software and interface devices required for
electronic and electromechanical
applications.
Goals
•
•
•
•
20% ROS by 1994
40% Share of O/S Market by 1994
Develop 3 New Interface Devices by 1994
Achieve full interoperability with
– Intel and RISC microprocessors by 1993
– Top 4 Software Vendors by 1993
Revised Strategy
• Milk Mac
• Target O/S Market
– License System 7 – Pursue “open system” Pink
• Interface Devices
–
–
–
–
Copiers
Manufacturing Automation
Medical Equipment
Aerospace
Milk Mac
• No new manufacturing and R&D
investment in existing hardware products
• Outsource next 3 years’ production to
Malaysia:
– Send VP Mfg. and 3 Engineers on “Sourcing
Mission”
Benefit: Decrease COGS from 53% to 33%
Target PC O/S Market
• License System 7
– Motorola-based clone sales
– RISC-based clone sales
• Create new brand: Apple “Core”
Apple Core
• “Open system” O/S (a.k.a. Pink)
–
–
–
–
not processor specific
head-to-head with Windows
increase installed base
increase ISV applications
• Shift 80% of R&D budget to Core
Benefit: Increase ROS from 5% to 20%
(NOTE: O/S production has COGS average 19%
percent of sales vs. 66% in hardware manufacturing.)
Interface Software and Devices
• Form product development alliances with:
–
–
–
–
–
–
–
Canon (copiers)
Sharp/Casio (PDAs)
Northern Telecom (PBXs and cell phones)
Kawasaki (Robotics servers and teach pendants)
Volvo (Automated material carriers)
Honeywell (Avionics and flight control equipment)
GE (Magnetic resonance imaging equipment)
• Devote 20% of R&D budget to new products
Benefit: New interface device products.
Projected Revenues, Costs, and Income
(in $ millions)
7000
6000
5000
Revenue
COGS
R&D
Net Income
4000
3000
2000
1000
0
1991
1992
1993
1994