Competitive Analysis of Apple Final Exam Case Notes (June 2011) Useful revision websites: http://www.niceessay.

.com/2008/05/apple-strategic-analysis-this-paper-includesswottows-analysis-pest-analysis-and-strategic-environmental-scan/ When you go through the above website, try to put your notes under the following categories that will be asked in the exam. (I have given some examples for some of the topics below on what key areas that you should know within each topic....)

External Analysis - macro (PESTEL) and industry (5 Forces Porter 6 forces diagram) o PESTEL factor affects on Apple:

II. EXTERNAL ENVIRONMENT SCAN A. SOCIETAL ENVIRONMENT 1) Political-Legal Forces Different countries have different legislations and these in some ways restrict the companies or give opportunities to the company. NAFTA, European Union and other regional trade open doors to market in Europe, Asia, Latin America that offer enormous potential. Political uncertainties caused by terrorism activities are directly impacting the overall business of the company. The company relies on access to patent and intellectual property obtained from third parties. The company might unknowingly encounter infringe issues with existing patents of others. Beatles lawsuit against the company may negatively affect the companys reputation. The company has to comply with the environment regulations such as environment safe disposal or recycling. 2) Socio-Cultural Forces The computer and internet usage is growing worldwide and is a good source of opportunities for the computer industry. Customers had become more experienced and computer literate.

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 Education has become a primordial issue for the new generation, which is a key factor for the companys business. 3) Economic In the past year, the industry has been affected by the slow economic and that resulted in low consumer spending. However the current economy shows some sign of improvement, consumer spending and investment might increase as well. Due to weak economic conditions, the U.S. educational is encountering large budget deficits in many states. This factor has a negative impact over Apples sales in the educational segment. Sales of products that include components obtained from foreign suppliers can be adversely affected by currency exchange rate fluctuations and by international trade regulations (tariffs and antidumping penalties). 4) Technology Technology is evolving at a rapid pace today ,and people appreciate more & more advances in their systems and are switching over to new information appliances. Internet availability and usage is growing and leads to good opportunities for the industry. The traditional desktop might become outdated by the entrance of new revolutionary products. Increasing demand for new technology in schools and professionals.

5 Forces, How does How does suppliers? How does How does

Apple increase barriers for new entrants? Apple gain bargaining power away from customers and Apple mitigate (lessen the impact of) threat of substitutes Apple compete among other major players?

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Threat of New Entrants: Medium to High In the PC market any firm that discovers a new technology that is efficient in terms of price & performance is an immediate threat to the industry. However, Established standards, start-up costs and established brands names (Intel, Windows) are difficult to overcome for a new entrant. Threat of substitute products: High The new forms of Information appliance like Digital TV / HDTV Digital settop box & Internet screen phones are gaining increasing popularity this might hamper the growth of the PC industry as a whole. Bargaining power of suppliers: High Since the industry is highly dependent on component suppliers, a powerful supplier could exert pressure on the market, by supplying components at a higher price to increase his profits. Since Apple is working only with few selected suppliers, the company is running at a higher risk than the average. Bargaining power of buyers: Low Due to high number of other suppliers in the industry the customer has the options to take the cheapest and the best. Page 3 of 11

Rivalry among competition: High Competition among the giants is fierce, everyone aiming for a larger market share ,intensive price cuts & changes.

Internal Analysis o What are Apples strengths? o What are Apples key resources, capabilities and competencies? o How does Apple create value from all their above?

Internal analysis The key resources

Recent Apple Products (iPod, iPhone, iPad, Apple TV) Strengths First mover advantage Proprietary technology Established brand name Customers loyalty Cultural, fashion identity iTunes Music Store is a excellent source of revenue, especially with the iPod and the accessibility on Windows platform. Technological expertise - Apple Computer are expert in Developing own software and hardware which are proprietary (i.e. ownership of technological patents) Apples niche audience provides the company with some lagging from the direct price competition of competitors. Pricing strategy also reflects prestige pricing Giving a face-lift to Mac desktop and notebook lines. Using Web technology can be used to improve product awareness and sales. Apple Computers have good brand loyalty. Strong research and development capabilities Strong international presence. It operates 301 retail outlets in 10 countries and has online shops wehre software and hardware products are sold. Highly diversified company in personal computers, computer software, and consumer electronics. (not dependent on only one industry) Strong brands and product lines in Macintosh, iPod, iPhone, iPad Established brand positioning and has a unique reputation of fashionable, upscale consumer electronics products in the consumer electronics industry. Strong customer base that is devoted to the company and its brand. Strong financial position. Stock prices crossed the US$100 mark in 2007. Its website is comprehensive and offers full guided tours of every brand they offer. Weaknesses Dependence on third party provider

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o IBM chips less compatible with Windows OS & Windows compatible softwares (planning to change to Intel chips) Less appeal to corporate customers (ie weak presence in business segment) due to dominance by more established network systems provider such as Windows NT, Sun, Oracle, etc. Weak relationship with Intel and Microsoft. The product life cycle of Apple products are very short and for that reasons revenues are more depend on launch of new products and services as frequently as possible due to also to imitators High demand resulting in slow turn around time on product availability. Apples market share is far behind from major competitor Microsoft. In past the relationship between Steve jobs and employee were not good which result in reputation loss. Facing strong criticism from resellers especially after opening their Apple Stores on unfair labour practices and competition and cheating despite out-of-court settlements. Company brands are expensive compared to competitors. Over user-friendliness has led to image problem of Apple products, some consider it like a toy. Higher research and development costs Higher channel costs compared to major competitors like Dell.

Opportunities Sharp rise in consumer demand because Apples i-series of products is nearing cult status and is not only a technology but a cultural & fashion item. New target market price reduction to attract more customers by unbundling the product, sell the core and charge for accessories on a demand basis High potential in software to be upgradeable to add new features to attract more users 3G and 4G technologies iPhones and iPads may captivate global business demand. Large population (Gen X&Y) which are extremely individualistic and name brand conscious. The ties of apple other companies are weak, Apple can develop good relationship for joint ventures Downloadable music and MP3/4 & movie players are highly marketable. The online sales of computer are increasing with rapid speed. The laptop market growth is high; Apple Computers should focus to develop new models to cater the need of customers. Advancement in technology will allow Apple to come up with new products and create new market segments (such as the recent launch of Cloud computing) Advancement in technologies and shifting production facilities or outsourcing them to low-labour cost countries will help introduce more efficient manufacturing systems and lower overall cost of production. Innovation is the only way of survival in this rapidly changing industry and Apple has the competency to do so.
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Apple has either created new market segments or have stayed ahead of changing customer preferences better than its rivals. While competitors moved away from retailing, Apple stores (forward integration strategy) are examples of frontline sensitivity to changing customer preferences and offering unrivalled services to be more efficient in retailing than its competitors. Diversification into related and unrelated business such as security devices, software, broadband & PC software are some fast growing segments to help sustain differentiation in its product lines to stay competitive. Should practice backward and forward integration to lower cost and increase quality and service. Find ways to sustain cost-leadership strategy on the overall.

Threats New powerful entrant Google with their Android OS. Many similar substitute products (HTC, Samsung, Palm, Asus, Acer, etc) Substitute products are also being very creative, eg: Acers detachable screen of a conventional netbook, is converted to a tablet PC. Like the iPad. Competitive products are mostly Windows-base which has a larger customer base (90% of OS is dominated by Windows) Intense competition giving rise to Intense bargaining power of customers as a result. Companies not seeing Apple as compatible with their software. Apple facing strong competition from Dell, HP, Sony and Toshiba in laptop segment. Downloading free music from other online source without paying cost is common it may impact the iTunes sales. (from free P2P sites and blogs) Apple software, Cell phone and hardware are expensive as compared to other competitors such as Dell. The switching in technology is very fast. Facing strong competition to sustain market share. Advancement in technology may make production facilities obsolete (to counter, should outsource) Strong price war among PC producers. Strong competiton from Dell, HP, IBM, Intel, Windows, Android, HTC, Samsung, etc FOREX volatility may negatively impact international operations as US$ is weakening. Company is facing problems in various countries such as political instability, quality issues in production, bad labour practices of its out-sourced partners, government regulations and tariffs.

Competencies (Resources + Capabilities) iTunes: Synchronisation between iTunes Apple Stores & other Apple devices. (seamless plug & play recognition without needing other software) user interface of consumer gadgets and computing devices (shuffle, touch screen capabilities) Easy-to-use, slim light, long battery life makes devices very mobile.
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User friendliness leads to self-discovery of many other functions instead of resorting to operations manuals.

Goals/Objectives and Stakeholders o Are Apples goals SMART? (Specific, Measureable, Realistic and Timely?) o Was Apple successful in balancing Stakeholders Goals with Business goals?

Mission Apple strives for continuous improvement in our environmental, health and safety management systems and in the environmental quality of our products, processes and services. Apples Guiding Principles Meet or exceed all applicable environmental, health and safety requirements. Where laws and regulations do not provide adequate controls, Apple will adopt their own standards to protect human health and the environment. Support and promote sound scientific principles and fiscally responsible public policy that enhance environmental quality, health and safety. Advocate the adoption of prudent environmental, health and safety principles and practices by their contractors, vendors and suppliers. Communicate environmental, health and safety policies and programs to Apple employees and stakeholders. Design, manage and operate our facilities to maximize safety, promote energy efficiency and protect the environment. Strive to create products that are safe in their intended use, conserve energy and materials and prevent pollution throughout the product life cycle including design, manufacture, use and end-of-life management. Ensure that all employees are aware of their role and responsibility to fulfill and sustain Apples environmental, health and safety management systems and policy. Goals Innovation above everything else. Increase sales in the education segment.

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 Produce user friendly, good appearance products to get customers think Different and think Digital. Developing new digital lifestyle consumer, and professional software application Investing in new products area such as rack-mount servers, RAID storage system and wireless technologies. Provide a high quality sales and after sales support experience. Strategy Trough the design and the development of its own operating system, hardware and many software application and technologies, Apple strives to bring to its customers compelling new products and solution with superior ease-of-use, seamless integration and innovative industrial design. Apple currently focus on: Increasing marketing and advertising investment in order to improve product and brand awareness. Vertical growth strategy: expand the retail segment by opening more retail stores. (CI#2) Market opportunities related to digital music distribution and consumer electronic devices, including iPod. Implement a cost leadership strategy to keep up with the competition and be more affordable for the educational segment. Continue to be the leader in innovation for new technology by implementing a product differentiation strategy. Policies Employee diversity : This policy is a key component and contribute to the success of the company. We respect these differences and threat them as an additional value that we incorporate in the way we treat other and approach our customers. Therefore, Apple apply that each employee is fully responsible for understanding and following this policy.

Performance Measurement o What kind of performance measurements were used by Apple?

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Strategic Options o ????

Competitive Strategies How Apple Got to where they are today:

Broad Market Focus Differentiation Strategy Apple has been and continues to focus on what its competitors are doing in order to keep a competitive strategy. Steve Jobs wanted to create a brand loyal name and to also produce a personalized computer with many features that would allow your life to be easier. Apple needed to keep up with rapid price cuts of its competitors personalized computers that were based on other operating systems. They wanted to focus on the rapid technological advances in both hardware and software that would boost their computers performance and provide its own operating systems. By doing so, the iMac-personalized computer was introduced in 1997 and they were able to create the brand loyalty they were looking for. They want to continue to build the brand loyal name and keep giving the consumer what they want to make their lives easier.

Current Strategy Steve Jobs has recognized that many of its competitors have been providing computers that rely heavily on other operating systems to run their computers. For example, Dell computers rely on windows XP, and many of their software products rely on other partys. What Steve Jobs has managed to do is to incorporate its own operating systems, hardware, and software programs for its entire product line. The software that they have created would allow the user to edit videos, download and play music, edit pictures, etc. with all of their own products and applications. While other competition relied on outside companies introducing their own digital and distribution music product services, subscription services, and free peer-to-peer music services; Apple has created a way to counter the constant changing competitive market. They have done so by effectively integrating all three services that its competitors have to choose from by creating the iPod for hardware, iTunes for software, and iTunes Music Store for the third party distribution services. Apple has been able to eliminate middlemen and save costs that way. Retail success through Apple Stores were largely also due to excellent service by people who were passionate about Apple products (most that were hired were Apple users)

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Competitor Analysis o ??? Strategy in Differing Situations Life Cycle and Technology o ???

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Competitive Strategies How Apple Got to where they are today:

Broad Market Focus Differentiation Strategy Apple has been and continues to focus on what its competitors are doing in order to keep a competitive strategy. Steve Jobs wanted to create a brand loyal name and to also produce a personalized computer with many features that would allow your life to be easier. Apple needed to keep up with rapid price cuts of its competitors personalized computers that were based on other operating systems. They wanted to focus on the rapid technological advances in both hardware and software that would boost their computers performance and provide its own operating systems. By doing so, the iMac-personalized computer was introduced in 1997 and they were able to create the brand loyalty they were looking for. They want to continue to build the brand loyal name and keep giving the consumer what they want to make their lives easier.

Current Strategy Steve Jobs has recognized that many of its competitors have been providing computers that rely heavily on other operating systems to run their computers.

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For example, Dell computers rely on windows XP, and many of their software products rely on other partys. What Steve Jobs has managed to do is to incorporate its own operating systems, hardware, and software programs for its entire product line. The software that they have created would allow the user to edit videos, download and play music, edit pictures, etc. with all of their own products and applications. While other competition relied on outside companies introducing their own digital and distribution music product services, subscription services, and free peer-to-peer music services; Apple has created a way to counter the constant changing competitive market. They have done so by effectively integrating all three services that its competitors have to choose from by creating the iPod for hardware, iTunes for software, and iTunes Music Store for the third party distribution services. Apple has been able to eliminate middlemen and save costs that way. Retail success through Apple Stores were largely also due to excellent service by people who were passionate about Apple products (most that were hired were Apple users)

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