Apple Case Group 6:Pujit
PrakashVinod
ChandanAjay
Overview• Apple´s competitive advantage• Market structure PC marketMusic playersCell phones• Does Apple have a competitive
advantage in those markets?• Prospects Ipad market• Apple’s future
Situation < 1997Mission Apple • Easy to use computer to market• Industrial design• Technical eleganceScopeCustomers: Loyal (Love the Mac)
Products: • Complete desktop solution• Industrial design• Technical elegance
Vertical integration: • Alliances IBM • 2 joint ventures
Geograpic: From small (garage) Low cost mainstream
Steve Jobs > 1997
Strategy Back to core productTactics • No licensing• From 15 products 4 categories• Website (direct sales)• Pared down inventory• More spending R&D• All-in one computer• Egg shell design
What have been the
sources of Apple’s competitive advantage?
Stable sources of competitive advantage?Year Source competitive
advantage
1970s Easy-to-use computers
1984 Ease-of-use, industrial design, technical elegance
1980s-1990s Superior software
1980s-1990s High investment R&D
1980s-1990s Complete desktop solution, hardware, software, peripherals: plug and play
1980s-1990s Designing products from scratch
Year Source competitive advantage
1990s Low costs
1990s Hit product every 6 to 12 months
2000s Design, plug & play
2000s Successful marketing campaigns
2000s Greenest lineup of notebooks
Product
excelle
nce
Operational
excellence
Product excellence
Analysis of the
structure & profitability of the pc industry?
PC market
Supplier power
Rivalry
Barriers to entry
Buyer power
Substitutes
Low: Memory chips, disk drives, keyboardsHigh: Processors (Intel) & OS (Microsoft)
Low: Easy to make, easy to clone pc’sHigh: difficult to become big
High: Lenova, IBM, HP, Dell, Acer
High: Low price & standardized customers can buy every pc they want. Low switching costs
High & increasing: Smart phones, mini laptops, tablets, old pc’s
Structure PC industry• Diversified and tough competition due
to low barriers of entry and low switching costs
• Knowledgeable customer due to transparency information
• Dominant suppliers of processors and OS• Intel and Microsoft leading to high standardization,
difficult to differentiate
• Many substitutes available
Profitability Players (2009) Gross margin Net income (in millions)
HP 23.6% $ 7,660
Dell 18.0% $ 1,433
Apple 40.0% Not known
Suppliers Gross margin Net income (in millions)
Intel 16.0% $ 4,369
Microsoft 79.0% $ 14,569
The industry is profitable, both when looking at gross margin as well as net income. Apple has a higher gross margin of 40%, due to the higher price they ask for their PCs. However, Apple had a market share of only 4.2% (2009), whereas HP had a market share of about 20%.
Dynamics industry
• The dynamics are favorable for apple
High WTP
Standardized market
Own supplier
Love Apple
Fit with complementary products
Does Apple have a sustainable
competitive advantage in the PC market?
Yes, because Apple offers a differentiated product in a heterogenic market. Besides that Apple has A strong brand name, due to marketing A strong customer relationship High R&D investments A big difference between WTP & Costs
(40% margin)Is this sustainable?Yes, because apart from high R&D investments the other capabilities are inimitable.
Does Apple have a competitive advantage in PC market?
• IBM dropped prices, MAC appeared overpriced by comparison
• Low R&D• Low Cost• Licensing cannibalization own products
Solution • Going back to initial strategy• Cooperation Microsoft – Microsoft Office• Cooperation Intel – CPU on which Windows OS
could be installed
Problems of Apple in the PC industry (1988-2001)
• This shift enlarged the customer group of Apple by being able to make use of Microsoft.
• However Jobs could have made this move earlier, in 1997 instead of 2006.
Did Jobs make his move from Motorola and IBM to Intel at the right time?
What is the structure of the Music player market?
Music player
Supplier power
Rivalry
Barriers to entry
Buyer power
Substitutes
Medium: HynixSamsungToshibaIntelMyaonHigh: dependabilityMutual dependingFlash memory
High: Easy to produce - lowBuild up supply chain – highImage building - high
High: SanDiskSamsungCreative M’soft Zune (2006)
High:Many choicesLow switching costs
HighSmartphones (Spotify, downloads songs to phone)tablets
Does Apple have a
competitive advantage in the music player market?
Apple in the music player marketCompetitive advantage Value Rareness Inimitability AppropriabilityPositional advantage
Customer relationship ++ - - ++
Brand name ++ + + ++Status ++ + + ++
Apple stores (distribution channel)
++ ++ ++ ++
CapabilitiesDesign ++ + - ++
Simple user interface + - -Large storage on the ipod + + + ++
Rapid product development ++ + - ++
Digital hub +++ +++ +++ +++Apple’s iTunes store ++ ++ - -
Nike+ ++ ++ -- +iPod accessories ++ - - ++
Apple does have a competitive advantage in the music player market?
• Just as with the other products, Apple has a strong brand name, that the customers associate with status hard to imitate
• Apple has a strong customer relation, due to the digital hub, iTunes and Apple stores
Apple does have a competitive advantage in the music player market?
• Large storage space rareness, because Apple had contracts with suppliers and bought most of the memory available on the market
• Digital hub an entire network of compatible products of one brand, hard to copy due to resource reasons (time and money)
What is the structure of the cell phone market?
Cell phone
Supplier power
Rivalry
Barriers to entry
Buyer power
Substitutes
High: Powerful distribution carriers (NTT DoCoMo & Vodafone) & powerful network carriers (Verizon & AT&T)
Android OS(Google)
High: Short product life cycleContract with carriersHigh investment
High: Nokia, Motorola, Samsung 60% market shareA lot of competitionBlackberry (RIM), Google
High: Choice based on attractive hardware and user-friendliness
High & increasing: “Normal” phoneLaptopTablet
Does Apple have a
competitive advantage in the cell phone market?
Apple in Cell phone marketYes competitive advantage- Strong brand name- Loyalty customers- Innovative design- High research & development investments- Easy to use OS. (no viruses) - App’s (store)
Can Apple sustain its iPhone success?- Competition is rising- Short product life cycles- Technology is evolving- Substitutes (Ipad)
Conclusion: It will be hard for Apple to sustainit’s success due to high rivalry and high buying power.They will have to keep differentiating themselves.
What are the
prospects of the Ipad?
IPAD 2
SWOT analysis of the IPAD 2
Brand nameCustomer loyalty
“love apple”Deliver extra
Add-onsApp store
Idea and technology is
imitable
Your new laptopWireless
rechargeable
CompetitorsLosing Steve
Jobs
Strenghts
Opportunities
Weaknesses
Threats
Prospects for Ipad 2
• Ipad 3
– Experience your new laptop
–Wireless rechargeable
Apple’s solution to the chronic problem
Chronic problems of the market• Technology is not sustainable• Standardization of the market• Dropped prices of components• Short product life cycle
Apple’s problem• How to continue Apple without Jobs?
Did Jobs solve the market problem? Yes,• By being innovative• Apple differentiates itself from competitors• Jobs maintained high prices• Keeps investing in R&D
Jobs made himself irreplaceable
Apple’s futureDoes Apple have a sustainable advantage today?Yes, because of customer loyalty due to a strong brand name, digital hub.
Alternative strategic options:• Customer intimacy• Product leadership• Operational excellence