apple analysis section

8/10/2019 Apple Analysis Section

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Apple, Inc.

Formulation Presentation

March, 7 2008


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Executive Summary


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Apple Profile

Products: Desktop

computers, laptops,

digital music players,software

Markets: High-end,

technology-savvy

usersSize: $8.3 billion in

sales in 2004

Industry:

Key Players:

Dell

Hewlett-Packard

Microsoft

Keys to success: Innovation

Quality support services


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Apples Mission & Vision

Mission:

Apple is in the business of

innovating, manufacturing,

and marketing/sellingcomputer hardware and

software solutions, related

peripherals, and

communications equipment.

Vision:

To be a leading

innovator of new

technologies that

change the way people

go about their daily


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Operating Environment

Economic Factors

Intense growthdependent on machines

Demand for product services & support

Social Factors

Wireless communication

Powerful & portable devicesPolitical Factors

Copyrights protection

Technological Factors

Strong rivalries among top competitors

Continuously changing products

Ecological Factors

Pollution

Corporate Social Responsibility

Summary

Product support services

Powerful & portable devices


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Industry Analysis

Porters Five Forces Model


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Porters Five Forces Model

1. Rivalry Among Existing Competitors

Innovation; First to enter the market

2. Substitute Products

Competitors with similar products

3. Powerful Suppliers

Forward Integration

4. Powerful Buyers Backward Integration

5. Threat of Entry

Advanced Knowledge

Capital Requirement


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Competitor Profile: Dell

Dell

Engage in the

design, development,

manufacture,

marketing, sale, and

support of various

computer systemsand services

worldwide.

Sector: Technology

Industry: Personal

ComputersProducts:

Desktops, Mobility

Products, Software

& peripherals


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Competitor Profile: Microsoft

Microsoft

The world's #1

software companyprovides a variety of

products and

services, including

its Windowsoperating systems

and Office software

suite.

Sector: Technology

Industry:

Application SoftwareProducts: Video

game consoles,

servers and storage

software, and digitalmusic players.


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Value Chain Analysis


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Supporting Activities:

General Administration:

Identify new-product market opportunities &environmental threats, public image & corporatecitizenship

Human Resource Management

Recruit, train, motivate, challenge, and promote themost talented employees

Procurement

Good relationship with suppliers,


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Primary Activities:

Technology Development

Research & development leading to product and processinnovations, timeliness of technology developments,

encourage creativity Operations

Product design, productivity of equipment, effectivequality control systems

Marketing and Sales

Identify customer segments, innovate sales &advertising, image of quality, favorable reputation, brandloyalty

Service

Ability to provide replacement parts or tech support,

warranty/guarantee, quality of customer education &training


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Core Competencies & Competitive

Advantage

Procurement First computer software company to negotiate with

RIAA to allow consumers to legally download music

onlineTechnology & Development Main objective is to be the leading innovator of new

technologies that change the way people live their dailylives

Marketing & Sales Identify specific customer segments and needs, develop

an image and reputation of quality, innovativeadvertising


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Strengths Relative to Rivals

iPod & iTunes software revolutionized the music

industry, worked with RIAA to develop deal

PC is a mature industry/productApple foundnew ways to spark demand

Successfully differentiate products

Brand Image and Recognition


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Weaknesses Relative to Rivals

Apples market share is low as prices forwindows-based machines fall

Apple has limited number of suppliers to obtainraw materials

Apple uses third-party music contentpotential tolimit music or limit availability in the future

Promotional activities focus on core groupsmisses the larger audience of PCs for non-graphics based business and home users

Cell phone vs. iPod


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Industry Specific Competitive

Advantages

Development of innovative new

technologies

Dell grew successfully by eliminating themiddle-man and selling direct

Microsoft is #1 software company

HP is currently the #1 PC manufacturer


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Financial Analysis of Apple


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SWOT Summary

Strengths:

Innovation; first to enter the market

Product & Market Development

Weakness:

Customer and Product Services

Opportunities:

Strategic Alliances with leading communication firmsThreats:

Forward integration

Becoming a low- end commodity


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Core Issue of Apple

Apple needs to focus on product

differentiation to avoid becoming a low-

margin commodity, especially in terms ofdigital music and communications.


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Long Term Objective & Strategic

Scenarios


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Long Term Objective

Technological Leadership

Product Development

Quality Support Services


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Future Scenarios for Apple

Best Case

Leader in music capable cell phones

Unsurpassed customer support

Worst Case

Become a low-scale commodity

Fail to integrate quality support services

Most Likely Continue to successfully differentiate out products

Retain strong support and service operations


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Possible Objective Shifts

Worst Case Scenario

Competitive position

Best Case Scenario Productivity

Public responsibility


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Corporate Level Business

Alternatives


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Corporate Level Strategic

Alternatives

Enter communications industry

Establish relationship with cell-phone carrier

Expand customer service capabilities Add brick & mortar locations that focus on

training clinics to use Apple products, service

their product problems, Apple Geek Squad,etc


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Strategic Alliances as Corporate-

Level Alternatives

Establish relationship with cell phone

carrier

Entrenched in professional media creationmarkets, provide fundamental intellectual

property to be used in consumer oriented

software


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Acquisition & Restructuring

Corporate-Level Alternatives

Apple is limited to the number of suppliersit can use to obtain raw materials

Some key components are subject toindustry-wide availability constraints andpricing pressures

Apple needs to find multiple component

suppliers

Possibly acquire suppliers


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Keys to Success

International

Country specific economic, social, political,

technological, and ecological factorsStrategic Alliances

Challenge in negotiating contract terms &

copyright agreementsAcquisition and Restructuring

Finding multiple component suppliers


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Long-Term Objective: Technology

Leadership

Enter communications industry:

Focus on product development and

differentiation in areas of digital music andcommunication

Expand customer service capabilities:

Global brick & mortar locations that focus onquality support services (training and tech

support)


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Generic Competitive Options

Differentiation

Focus Differentiation


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Focus Differentiation:

Pros and Cons

Pros:

Ability to meettargeted segments

needs Ability to adapt to

segments changingneeds or demands

High customer loyaltywithin segment

Cons:

Less opportunities forgrowth

Targeted segmentsdemand has largeimpact on revenue

Non-focus orientedcompetitors can bettercompete in pricing

Relevant Rival: Dell


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i i i i


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Generic Competitive Option:

Focus Differentiation

Grand Strategies:

Growth

Diversification Strategic Alliances

Product Development

Innovation


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Strategic Choice

In order to achieve the long term objective

of technological leadership it is

recommended that Apple establishes astrategic alliance with a leading

communication provider

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