Beruflich Dokumente
Kultur Dokumente
BADM 470-01
Assignment #4
November 24th, 2005
Olivia Lam
Raymond Chow
Samer Dabboussi
Cissy Lei
Executive Summary
Apple is a product-cycle-driven company. If it introduces the appropriate
products, it will gain share in the consumer market, even if that market is flat year
after year. Apple has developed a set of strategies, which will continue to grow its
base of Mac users and Apple consumers over time.
Apple has faced challenges competing in an extremely competitive
market. However the company has overcome the majority of these challenges
by changing strategic focus and entering the high end consumer market. Overall
Apple has pulled itself out of maturity/decline back into the growth stage. An
important element of Apple is its ability to differentiate itself from its competitors
with the combination of introducing new innovative products and implementing
aggressive marketing tactics.
If Apple continues to improve their strategic management, marketing,
human resources, production, and financial position, they will be successful in
catering to their target market.
Company History
On April 1 1976, Steven Wozniak and Steven Jobs had decided to sell the
machine named Apple I, designed by Wozniak. It was not until 1977 when Apple
II was introduce at local computer trade shows that people actually notice it. The
Apple II was an impressive machine that came in a plastic case and includes
color graphics. With the invention of the inexpensive Apple Disk II (floppy drive),
Apple sales has further increased ever since. In 1980, when Apple III was
released, the company has expanded to several thousand employees and began
selling computers abroad.
In 1981, IBM released its first PC. The PC quickly began to dominate the
playing field. Jon later had realized in order for his company to compete in the
market, Apple would have to be a grown-up company and figure he was not the
ideal man for the job. So in 1983, Jobs began to invite John Sculley, then
president of Pepsi-Cola. In April, Sculley became president and CEO of Apple.
On January 22, 1984, Macintosh was introduced and sold well until users
were fed up with the small amount of Ram and lack of hard drive connectivity.
So around the beginning of 1985 was when Jobs and Sculley began to argue.
Jobs believed that Sculley knew nothing about the computer industry and did not
put a lot of effort to learn. While Sculley believed that Jobs was dangerous and
out of control. For this reason, Jobs then switched over to managing the Apple
Macintosh project. In May 1985, Jobs convince Sculley to schedule a meeting
in China, and decided to have a boardroom rebellion while Sculley was gone.
Information leaked to Sculley which lead to an argument between them two.
Later Jobs resigned and Steve Wozniak returned to college,
leaving Sculley as the head of Apple. At the same time Microsofts Bill Gates
introduce the Windows 1.0, which had many similarities to the Mac GUI
(graphical user interface).
It was not until Mac twin inventions of the LaserWriter, the first affordable
PostScript laser printer for the Mac, and PageMaker, one of the first Desktop
Publishing programs ever that made them back in the game. In 1987, the Mac II,
Apple was shipping 50,000 Macs a month. This did not last long until 1990,
where the market was saturated with PC-clones of every conceivable
configuration and Apple was the only company selling Macs. Apple was
experiencing difficulty providing both hardware and software to drive an industry.
In 1991, Apple released its first generation of PowerBooks which was a
success. In the meanwhile, the PDA-Newton were being ready to be released in
August 1993, but was a failure due to the extremely poor hand-writing recognition
(2.1 MB).
with Earthlink as Apples recommended ISP. Jobs also announced that he would
be dropping the interim from his title, becoming permanent CEO of Apple.
In the second half of 2000, Apple experience slower sales as well as the
industry as a whole. One of the major contribution was the high price of the G4
Cube compared to Apples other product. Another factor was the DVD-ROM
drives in their consumer and professional machines instead of CD-RW drives.
This has resulted in missing sales opportunities to customers who wanted to burn
their own CDs. So in January of 2001, Apple announced a new line of
PowerMacs, which included a new SuperDrive which could read and write both
CDs and DVDs. These were all part of Apples new corporate strategy during the
slow time in the Technology industry. They also take advantage of introducing
the personal electronic devices-CD-players, MP3 players, digital cameras, DVDplayers, etc. by building Mac-only applications that added value to those devices.
In May 2001, Steve Jobs announced that Apple would be opening a
number of retail stores across America, selling not only Apple computers, but
various third-party digital lifestyle products such as mp3 players, digital still and
video cameras, and PDAs. In the meantime, major update to the iBook line, a
smaller and lighter design was in progress. In the Fall of 2001 brought new
revisions to the PowerBook G4 and iBook which sold extremely well. In late
October, Apple introduced its first non-computer in several years, the iPod. The
iPod was a small hard-drive based digital music player and represented Apples
first hardware addition to its digital hub strategy.
In 2002, Steve Jobs announced that free iTools would be rolled into a new
subscription-based dotMac service. In January 2003, Apple release iLife, a
bundled software package that included iTunes, iPhoto, iMovie and iDVD, for
$50. Apples financial troubles continued throughout 2002 due to the weak
PowerBook and PowerMac sales. In 2003, Apple however began to recover,
and to build for the future. In the meantime, the iPod was beginning to take off.
In April of 2003, Apple unveiled the iTunes Music Store, which would sell
individual songs through the iTunes application, for 99 cents each. These songs
could only be played only on Macs or iPods. In October 2003, Apple released
iTunes for Windows with the user-friendly Windows version of iTunes which
include both iPod and Music Store. In the first year alone, the iTunes Music
Store sold more than 70 million songs. iPods had moved from expensive to toys
to must-have Christmas presents, and Apple found itself in the position of having
a monopoly for the first time in several decades.
Maturity
Decline
Current Position
Ideal Positioning
Growth
Development
Industry
Growth
Rate
Profits
Other 33.9%
Dell 33.1%
Apple 3.5%
IBM 4.7%
Hp 19.5%
Gateway 5.3%
The above graph tries to explain why innovation is so difficult for the computer industry.
In the early stages, the innovators and technology enthusiasts drive the market. They
2
demand technology. In the later stages, the pragmatists and conservatives dominate
the industry demanding solutions and convenience. Even though the technology market
is initially driven by the innovators and early adopters, they make up only a small
percentage of the market. The market is made up mainly of the pragmatists and
conservatives. 3
The above graph depicts the needs-satisfaction curve of technology. New technology
initially start at the bottom left of the curve, delivering less than what the customers
demands and expects. As a result, consumers demand better technology with more
features that offer more peace of mind regardless of the cost of inconvenience. This
demand causes the sophistication of technology development to reach a point where it
can satisfy the basic needs.4
Computer companies, such as Apple Inc, to maintain their position of their share of the
market, try to create innovative products. This is essential to mass marketing, to bring
prices down and quality up. But this procedure also requires standards, procedures, and
administration. This can actually lead to a decrease in product innovation. Once
process modernization sets in, it puts the entire computer company into an efficiency
mode. It leaves the company little time, energy and inclination to look outside their
narrow ways into whole new approaches.
This is a reason why smaller newer companies can take over: they are faster and are
willing to take risks. Apple was able to grab onto the digital music market because
creating innovative products and taking such a huge risk for producing it. This is
3
4
perhaps the main reason why once computer companies enter the mature stage in the
industry life cycle it is so hard for them to be innovative. To properly fight this trend,
larger corporations should have separate divisions charged with innovation, leaving
them free of the tyranny of the quarterly profits and losses statement. This gives that
particular division the ability to concentrate on bringing in fast return on equity. If a
company is not failing in its new product attempts, then they arent doing something
right. To be innovative, a company must first face defeat. Lack of failure is a sign of
conservative, safe and eventually suicidal behavior.
The Five Forces Impacting Industry
Number of Competitors
Stabilized Prices
Firm Rivalry
(HIGH)
Substitute Products
(MEDIUM)
Product Sensitivity
Demand/Supply
Brand Sensitivity
Power of Buyers
(Low)
Buying Groups
Capital Requirements
Market Condition
Threat of New Entrants
(Low)
Potential Profits
Power of Suppliers
Supplier Concentrations
whether it is gaming or
graphic design, the threat of
substitutes would indeed be
a credible threat. E.g.
Playstation and Xbox
Luckily, the applications
and uses of a computer can
only be offered by the
device itself. The demand
for having a device with
numerous functions can
only be met using a PC and
this prevents any lost sales
by substitute products that
satisfy this function.
Although brand names are
a key sales driver in this
industry, it seems that their
affect on sales is relatively
minor as compared to the
affect of prices. This also
relates to rivalry within the
industry.
There could be possible
buying groups in the
Education market that force
Apple to give purchase
discounts.
Difficult to enter the market
because of the large
financial requirements to
manufacture the products.
The market seems to be in
an equilibrium condition,
that is, the demand for
computer products is
approximately equal to the
supply, and therefore entry
into the industry is not
worth the large capital
requirement.
The monopolistic
competitive nature of the
industry does not generate
profit opportunities for firms
and makes this industry
less attractive for new
entrants.
The power is low due to the
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(LOW)
Vertical Integration
The analysis above clearly indicates that companies are indeed sitting in a
comfortable position in the industry and paying for that comfort with low profits. In order
to generate increased revenue the companies would have to redevelop there strategies
and target other industries where there is low market presence and high opportunity.
Apple saw this opportunity and capitalized on it with the creation of the iPod. The iPod is
a small hand help computer device that stores MPEG 3 files. The iPod ranges from 10
gigabytes to 40 gigabytes in size and can hold anywhere from 2500 songs to 10000
songs. As the iPod emerged in the markets, Apple captured a niche in the emerging
digital music industry. Through its innovation and creativity Apple has broken out of its
box as a boutique computer maker and emerged as a force to be reckoned with in
consumer electronics and music. The iPod success has generated revenues up to $3.5
billion5 through the world wide sales of 4.6 million portable music players6.
This success has moved Apple from a company with a minuscule PC market
share to achieving market shares of 65%, 70% and even 90% in other industries. Being
the first of its kind, the iPod, allowed Apple to diversify from a competitive market into a
new flourishing industry where Apple has become a dominant player, setting the
standard for new entrants (potential rivals). The success of the iPod has put Apple back
on the map and placed them in ideal position within the industry life cycle. With
consumer demand rising and Apple being the dominant supplier, they have capitalized
on large profits by setting premium prices. Looking at Apples future strategic paths, it
seems that Apple is using its resources to diversify and enter into different industries
where the markets are not as saturated as the computer industry. Most companies have
finally understood that success is not merely producing a product that does the job, but
is being able to bring ideas, bits and pieces if you will, from different industries then
putting them together to come up with something new and innovative that ties into
peoples needs or lifestyles.
5
6
Schlender, Brent. How Big Can Apple Get? Fortune. 21 Feb. 2005. Vol. 151 Iss. 4 Pg 66.
Ibid.
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Opportunities
New product development
Expand retail operations
Grow international sales
Wireless products
iPod/ Music downloads
Weaknesses
Professional desktops
Cannibalization of products
Supply of raw materials
Reliance on US/iPod sales
Lawsuits
Threats
Strong competition
US education market
Demand for IT products
Strengths
Professional notebooks
Sales of Apples professional notebooks have been strong in recent times.
The companys sales in this area have been boosted by sales of its 12 and 17inch models. The continued strong sales performance of Apples 15-inch
notebook has also boosted the companys sales in this area. In 2003 sales of
Apples PowerBook increased by 56% to $1,299 million overtaking PowerMac as
the single largest product contributor to total revenues, helping to drive overall
growth for the company.
Financial position
Please refer to the Financial Analysis section of this Report.
Brand
12
Weaknesses
Professional desktops
Apples professional desktops business has experienced sluggish sales in
recent times. Sales of the companys PowerMac products have fallen by around
20% year- on-year to drop to their lowest level for a number of years. If future
unit sales fail to partially or fully recover, it will be difficult for Apple to improve its
overall profitability.
Supply of raw materials
While most of the companys raw materials are available from a number of
sources, other materials tend to be only available through a limited selection of
suppliers, and as such, the company is susceptible to a supply risk for key
components. Also, Apple must contend with price fluctuations to ensure the
continuity of supply, as pricing pressures and industry competition may drive up
the cost of raw materials. Should problems with supply vendors occur, Apples
ability to produce its products in a timely manner may be adversely affected.
Therefore, Apples reliance on a small number of suppliers will not benefit the
company.
Reliance on US sales
The United States represents Apples largest geographic marketplace.
Approximately 51% of the companys net sales in fiscal 2003 came from sales to
customers inside the United States. This focus on the US market makes the
company more vulnerable to adverse localized market conditions that may affect
the revenues and profits generated by the company. Apples reliance on the US
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market possibly means that the company could be hit badly if any economic
downturn affected this particular country.
Lawsuits
Apple is subject to certain legal proceedings. Claims could have a material
adverse effect on its financial condition, liquidity or results of operations.
Unresolved cases include issues such as patent infringement, false advertising
and unfair business practices. These legal issues represent a considerable threat
to Apple, as the companys insurance may not be sufficient to settle some of the
more costly cases that could possibly arise.
Opportunities
New product development
One way in which Apple could stimulate demand in the marketplace is to
develop new products that more closely match customer needs. Apples research
and development spend should enable it to develop new products. For example,
Apple has developed the PowerMac G5, which is the worlds first 64-bit PC. The
company hopes that the release of the product will stimulate demand to boost its
professional desktop revenues and its overall company revenues.
Expand retail operations
Since inception of its retail initiative in 2001, Apple has opened over 65
retail stores in the United States. One of the main goals of the retail initiative is to
bring new customers to the company and expand its installed base through sales
to both first time computer buyers and those switching from other computing
platforms. Additionally, the stores provide a forum in which the company is able
to present entire computing solutions to users in areas such as digital
photography, digital video, music, childrens software, and home computing.
Apple has attempted to locate its stores at high traffic locations in shopping malls
and urban shopping districts. The company could look to open more retail outlets
in order to increase the coverage of its stores in the US. Increased store
coverage may mean Apple could potentially further expand its installed base
through sales to both first time computer buyers and those switching from other
computing platforms.
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Threats
Strong competition
Apple is confronted by aggressive competition in all areas of its business.
The market for the design, manufacture, and sale of personal computers and
related software and peripheral products is highly competitive. This market
continues to be characterized by rapid technological advances in both hardware
and software development, which have substantially increased the capabilities
and applications of these products, and have resulted in the frequent introduction
of new products and significant price, feature, and performance competition.
Over the past several years, price competition in the market for personal
computers has been particularly intense. Apples competitors who sell Windowsbased personal computers have aggressively cut prices and lowered their
product margins to gain or maintain market share in response to weakness in
demand for personal computing products.
Apples results of operations and financial condition have been, and in the
future may continue to be, adversely affected by these and other industry wide
pricing pressures and downward pressures on gross margins. The principal
competitive factors in the market for personal computers include relative
price/performance, product quality and reliability, design innovation, availability of
software, product features, marketing and distribution capability, service and
support, availability of hardware peripherals, and corporate reputation.
15
Old Values
16
New Values
We will strive to offer an exciting environment that stimulates creativity and a high
degree of personal involvement.
We want individuals to participate in the success and the risk associated with
being with a dynamic enterprise
We will strive to provide opportunities and support to increase individual
employability
We will strive to be honest, truthful, and open in all our interactions.
We will encourage and provide incentives for individuals to prepare for long-term
financial needs
We will ensure that you have protection against catastrophic events.
When necessary, we will provide a helpful and respectful bridge into the future.
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Central
Services
Apple
University
Domestic
employment
Multicultural
programs
Business
Partners
HR planning
Compensation
and Benefits
Employee
Relations and
Services
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Role of Technology
Apple thinks that the use technology vital and all employees must have access to it;
therefore, they created technology-based tools to improve employee and management
efficiency. Using technology, Human Resources was able to reducing clerical and
transaction expense.
Change Approach
Employee Help Line. The new service delivery model that is a essential tool for HR is the
Employee Help Center, which deals with daily employee concerns and counseling. The
Help Center consists of a group of 14 people who are trained in Apple policies and
procedures. In addition online Internet support accessible as well. Complicated
questions and situations are forwarded to a group senior HR staff. Lastly, for more
serious matters face-to-face investigation may be required. In the last year, The
Employee Help Line obtained about 165,000 calls.
Shifting HR transactions to the line. Apple HR is uses technology focus for people
management. HR is used the Macintosh desktop technology to transfer all traditional
administration and documentation operate business. By doing this, HR is able use their
time efficiently to help managers develop and apply the skills they need to manage their
people resources. With the use of The Employee Help Line managers are able to
perform this role.
With the use of the internet technology, Apple uses On-line applications handle
manager-employee transactions. These include compensation changes, promotions
and demotions, and performance reviews, to adding someone to the payroll. The only
transaction that HR must get involved in is involuntary termination. In addition, all
policies and procedures are available on-line.
19
Past
20
Since it was hard to prepare entry-level HR people, Apple finds that the best place for
them to learn was on the Employee Help Line. This basic learning approach is the first
step of the HR career.
Measures Used to Evaluate Best Practice
In addition to the traditional metric of HR professionals to employees, HR measures its
effectiveness using HR expense as a percentage of operating expense. Apple HR has
moved from being qualitatively oriented to quantitatively oriented.
450
Human Resource
Employees
17,000
230
Human Resource
Employees
17,000
21
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Production Analysis
Maturity Stage
For companies that are currently in the maturity stage of the industry life cycle, it
is important to improve the product and reduce operating costs. In order for
Apple Inc. to grow and increase market share, they must be more proactive
about technological changes in the market. However, Apple Inc. would not be
able to survive if they continued to produce only computers with its Macintosh
line of computers. So in order to be successful, the company must concentrate
in attempting new products.
Transition
When products mature, the company must work to extend the life cycle by
introducing product variants; new and improved or additional add-ons or
features. Since the computer industry is at the maturity stage, Apple Inc. will
have to sell off their existing products and start again with new products and new
innovations.
They'
ve shifted our conceptions of how a computer should look and feel, and
changed the way we interact with technology and listen to music and connect
with friends. Some innovations are small, like the trash icon or the placement of a
trackpad. Apple makes wildly imaginative products with a consistency few
companies rival. "Idealism is a major part of Apple," says Andy Hertzfeld, an
original Macintosh team member. "The company operates for artistic values
rather than for commercial purposes."7
To consistently improve the products, Apple Inc. is slowly transforming it into a
high-end consumer-electronics and services company a la Sony Apple is
gradually transforming as of 1999 when the company introduced iMovie, a video
editing program for the Mac that brought professional-quality editing to the
masses.8
In September, 2005, there has been announcements that Apple Inc. is thinking of
shifting to using chips from Intel in is systems beginning next year. This will help
regain some of the market share back that was competed from Windows-based
rivals.9 This will definitely be a turning point for Apple Inc. to be back in its
original products
7
23
Not only focusing on production efficiency and successors, Apple Inc. has
decided also to add an additional division instead which gear towards the digital
music market. Since then the iPod then latter the iPod nano, was introduced.
Ever since the trendy device, the iPod was introduced, Apple'
s stocks are soaring
as high as $77 to $100. As of Dec. 6, the stock was trading at around $64. This is
the same Apple that opened the year at $21.28. And it'
s all because of one cool
little music player. Apples new product is not only about being cool as its
number one selling feature. Its unique designs, marketing savvy, and cult figure,
truly integrated, valuable innovation and past mistakes all contribute to this
success. 10 Now competitors like Hewlett Packard and IBM companies are also
trying to come up with some similar music devices as well.
.
Growth Stage
Apple Inc. is currently at the growth stage increasing its production capacity while
retaining quality. They are still currently producing and offering the iPod shuffler
and the iPod. Although the iPod mini which was the first one to be introduce out
of all the devices, is almost reaching close to maturity stage. To ensure that
Apple Inc. maintains the market leader in digital music, improving the current
product is the way to go. When the iPod Nano was introduced, it basically
replaces the best-selling iPod mini, with a brand-new model. It offers a higher
resolution color screen, and a decrease in size of 25 % less wide (half the
thickness), a greater hard drive capacity and is able to hold up to 25,000 photos
you can sync from you Mac or Windows PC via iTunes.
Figure 1. Products offer by Apple Inc.
Before
Apple
Machintosh
PowerBook
Performa
10
After
iMac
Power Macintosh G4
iPod mini
iMac G5
iPod shuffle
iPod nano
http://www.businessweek.com/technology/content/dec2004/tc2004127_7607_tc185.htm
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Marketing Analysis
Background
Apple was and currently is a part of a newer age of marketers focusing on
image and quality. Apple is in a constantly changing industry and faces tough
competition by many names in the industry. It is never easy when you have
Microsoft as a competitor. The most important element of a marketing plan is the
development of a marketing strategy that will successfully penetrate the market.
Most companies these days are using the traditional marketing tactics that
are ineffective for their organizations. Some companies try to benchmark tactics
from other successful companies; unfortunately such tactic rarely works to that
companys target market. Essentially as time progresses, industries are getting
more competitive and businesses are looking for ways to set themselves apart
from the competition. An effective strategic marketing plan can provide a
company with that edge.
Apple tried several marketing tactics such as repositioning their products
and several branding techniques, however with Microsoft in the picture it became
hard to directly compete. Internal conflicts arose as the company was on the
downfall, essentially entering the declining stage of the industry life cycle.
Apple Computers has been in the PC industry for close to 30 years and they
have experienced some major bumps along the way, especially with a player like
Microsoft in the market. Initially marketing tactics for Apple were relatively simple
with the introduction of the Apple II. It was the first personal computer to come in
a plastic case and include color graphics. It was a hot item and people from all
over were lining up to purchase it. However players in the industry soon caught
on, resulting in the PC market being saturated with clones.
Apple Stores
There are over 120 Apple stores in the North America. Apple decided to
install a number of techs, called Genuises. The Genuises are dressed in cool
black uniforms and offer anyone that walks in the store Mac or PC users -technical service and advice. So far, according to a USA Today dispatch, over
100,000 people visit the Genuises every week. And the stores represent nearly
50 percent of Apples retail sales. The stores are setting a burning pace for
revenue growth. Apple stores were on track to generate $1.2 billion in annual
sales, compared to Apples $8.3 billion fiscal revenue. Fascinatingly, Apple
serves only about 2.6% percent of the computing public.
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The intimacy created by using real people to connect with other real
people may not seem to be revolutionary, but when measured against the
widespread forms of disturbing marketing tactics used by traditional marketers, it
is clear how something like the notion of the Geniuses becomes an extraordinary
tool to reach and influence the consumer.
Apple positioning
We believe that Apple had done an excellent job in positioning
themselves. It is rare that you are able to see students that do not own an iPod.
Since the iPod introduction many people switched from using PCs to Macs.
Apple have now positioned themselves as a cool and hip gadget with the iPod, a
must have object. Also apple were successful in positioning themselves with
quality computer that are ad ware, virus, non freeze computers.
Many companies fail to position themselves in the right fashion into their
target market. This is something that tends to be overlooked in many businesses
today. Companies will be able to attract new businesses and customers and
creating the right buzz in to industry. Essentially if a company positions itself the
proper way they can control how they want to be perceived by consumers.
Ultimately this is the organizations goal, and if they can accomplish it their
market presence will be tremendously larger.
In the process of rejuvenation apple has changed numerous corporate
strategies. Currently apple computers are targeted to certain type of customers
instead of targeting the entire PC buyers industry; this was a very smart move by
Apple to set the company away from the Microsoft competition. The company is
now targeting the upper class and high end user. Currently Apples market share
is only 2.6% of the PC marketplace which is significantly lower than the
competition; they have essentially created a market with very few substitutes.
There are essentially no products in the industry that offer the high end user
experience that Apple has established. Therefore the company must continue
pursing with this strategy in order to continue catering to their niche market.
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Competitive Advantage
In a rapidly evolving world, it becomes of great importance to be
distinguished from the competition, and this is why many businesses nowadays
have set off to maximize their competitive advantages over competing
companies. One such company is Apple, whose unique product line and dynamic
hardware have earned them a competitive advantage in the market. Yet, what is
key to the survival and thriving of any business is their market tactics and
strategies. These are so important that many business analysts have repeated
that the marketing tactics and strategies are what give a name to the company.
The success of Apple stems for their foresight for what will attract people
to their product and the consequent execution of that vision. Rather than
marketing their product based on its key features and technology like their
competitor Dell, Apple adopts a new strategy by depicting how their product will
enrich their customers life and become an indispensable part of it. Ultimately,
they try to create a connection with potential consumers which results in an influx
of individuals who buy Apple products and enjoy them.
Apple is renowed in the market for their aggressive advertising strategy.
This makes the company stand out from their competitors who are employing
more conservative marketing approaches. For example, a typical comercial for
Apple products lavshes on the superiority of their product while bashing their
competitors goods. We all remember the ad aired a couple of years ago showing
intel laptops catching fire while getting flattened by steam rollers. Apple has seen
great benefits in their ads despite the fact that they appear controversial to many.
It is precisely these advertisements that have earned Apple many advertisement
awards while also enabling Apple to become a great contributor in the PC
market.
Website
Another way in which Apple established strong brand equity was through
their interactive and informative website. Within the website consumers can find
information on the companys different products. The website is very well
constructed and further divided to different sectors such as ipod, map, iTunes
the website also includes vision mission and corporate strategy as well as the
story of the company. Also the information on their stocks and finance are found
on the website. More than that, the company has found a way to have
consumers start their own blogs.
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Future Plans
We recommend that Apple should continue to expand into new markets as
they have done recently. We can not tell how long the iPod will have this effect
on the market and on Apple Computers. In order to successfully accomplish this
new strategy, they will need to be one step ahead from the competition in the
markets they enter. Apple should be thorough and precise in its study before they
take thei decisions just as they did with the introduction of iPod.
As technology develops more innovative products will be introduced, thus
creating increased competition. Nowadays there are new phone technologies
that have been introduced that have mp3 playing compatibilities and have huge
storing capabilities up to 32 gigs. Apple now needs to respond with a
contingency plan to maintain their customer retention levels. Technology and
competition are probably the two most serious threats that Apple has to consider.
Perhaps offering added incentives to customers or adding new features to the
existing iPod are examples that could help with retention levels. Apple now has
had good improvements on their products with the introduction of the iPod NANO
and new MAC mini.
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Brand Identity
Apple realized the concept of establishing a good brand identity and spent
massive resources to provide end users with quality high end products. Potential
consumers are going to be spending top dollar for these products, therefore the
buying decision is more complex. Consumers are only going to purchase goods
of high quality and from highly reputable and credible companies. As a result
they have built up a solid reputation and a very strong brand name becoming one
of the most high end brands in the business world.
Innovation and quality are related with high price, the high price for the
most part guarantees the customer with quality goods. This is a psychological
approach that Apple has used, and has incorporated it within their business
model. The human psychology says that the higher the price, the better the
product. Cheap Apple products would mean low quality and a desperate need
for cash. Ultimately this would hurt the Apple brand from both a short term and
long term perspective. Apple can not break the association of themselves and
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quality, nor can they consider significantly lowering their product prices. This
would result in entering into direct competition with the likes of Dell; furthermore it
would create a price war with Microsoft.
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Financial Analysis
Since getting itself out of the Maturity/Decline life cycle and back into the Growth life
cycle, Apple Computers has been benefiting from rapid growth, with sales and earnings
that are expanding at a faster rate than firms in other industries.
Apple participates in several highly competitive markets, including personal computers
with its Macintosh line of computers, consumer electronics with its iPod lines of digital
music and distribution of third party music through its new iTunes Music Store. Apple is
widely known for its innovation in personal computing as well as an emerging leader in
the market for distribution of digital music.
Growth of $10,000
Total Returns %
Apple Computers
+/- Industry
+/- S&P 500
2000
-71.1
-54.4
-62.0
2001
47.2
33.7
59.1
2002
-34.6
-9.0
-12.5
2003
49.1
3.2
20.5
2004
201.4
177.5
190.5
YTD
100.5
103.1
96.0
In order to maintain and increase its current hold onto the market, Apple should focus its
spending on delivering timely updates and enhancements to its existing line of personal
computers, displays, operating systems, software applications and portable music
players. In order to remain competitive, we believe that Apple should increase their
investment in research and development in order to maintain and extend its position in
the markets where it now competes. Similar to building a growing portfolio, Apple should
risk some of their capital in ways that will increase and preserve it. In order to do this,
Apple must devise a way to keep the growth theyve already established, take business
from their competitors, showing up where growth is anticipated, invading adjacent
markets and investing in new lines of business.
31
11
Treacy, Paul. Returning to Double Digit Growth. Consulting to Management. Mar 2004. 15.1
Treacy, Paul. Returning to Double Digit Growth. Consulting to Management. Mar 2004. 15.1
13
Treacy, Paul. Returning to Double Digit Growth. Consulting to Management. Mar 2004. 15.1
14
Treacy, Paul. Returning to Double Digit Growth. Consulting to Management. Mar 2004. 15.1
12
32
15
Treacy, Paul. Returning to Double Digit Growth. Consulting to Management. Mar 2004. 15.1
Emgardio, Paul. Et la. Apple: It may be too late to take a bite. Business Week. 21 Mar 2005. Iss. 3925. pg.84
17
Treacy, Paul. Returning to Double Digit Growth. Consulting to Management. Mar 2004. 15.1
18
Datamontior.com
16
33
Conclusion
In conclusion Apple has evolved from its start in the market in the early 70s.
Apple has successfully been able to redevelop its corporate direction to being a
strong competitor and innovator in the computer business. Apple Computers
started facing problems in this fast changing industry and the growing
competition. After Apple has realized that the computer industry was generating
low profit margins, the company diversified its product range to penetrate into the
music electronic and consumer electronic industries, while also redeveloping its
personal computer products in the price driven industry. Apple grew in to the
maturity stage and started heading in to decline stage.
Apple was very successful in turning the situation around with the start of the
iPod revolution which helped change put Apple computers back into the growth
stage. The analysis of different functions: Strategic Management, Marketing,
Human Resources, Production, and Finance shows that Apple has managed
these areas well enough to give it an advantage as compared to its rival
competitors.
19
20
Schlender, Brent. How Big Can Apple Get? Fortune. 21 Feb. 2005. Vol. 151 Iss. 4 Pg 66.
Sloan, Paul. Whats Next for Apple? Business 2.0. Apr 2005 Vol 6. Iss 3. Pg 68.
34
Appendix
Apple Finance at a Glance
Size
09-30-2004
Total Revenue $Mil 12,603
% Industry Revenue 2.92
Industry
Computer Equipment
Apple is in an industry with a relatively large number of competitors, looking at its sales
compared to those of its industry, Apple is one of the smaller players.
Industry Life Cycle
Large Growth Cycle
Apples competitors tend to fall around the small cap growth area in the Industry Life
Cycle. Apple Computer is different from its peers in that it has a large cap bias. Apple
has seen a steady growth over the past three years, with its results over the past year
being particularly impressive. Like its competitors, Apples earnings per share have also
grown at a very high rate over the past three years. In order to maintain this current
growth rate, Apple will have to devise a way to raise additional capital from outside
sources at some point if it wishes to continue their current upward trend.
Apple Valuation
Forward Earnings
Yield
Forward P/E
Price/Cash Flow
Price/Sales
Apple Industry
S&P
500
2.74 5.31
5.35
36.5 18.9
24.1 13.8
4.3 2.1
18.7
14.4
2.9
35
With an estimated forward earnings yield of 2.96%, it indicates that that percent would
be the annual return it would generate if its profits remained fixed and the company paid
out all of its earnings as dividends. In order to generate decent returns for its investors,
Apple will probably only have to realize moderate growth in earnings or a higher
valuation by the market.
Income Statement
Sales $Mil
Operating Income $Mil
Income Tax $Mil
Net Income $Mil
Earnings/Share $
EPS (Cont Ops) $
Dividends/Share $
Total Shares Mil
2000
7,983
522
306
786
2001
5,363
-344
-15
-25
2002
5,742
17
22
65
2003
6,207
-1
24
69
2004
8,279
326
107
276
TTM
12,603
----1,011
1.09
1.09
0.00
650
-0.04
-0.06
0.00
714
0.09
0.09
0.00
722
0.10
0.10
0.00
726
0.36
0.36
0.00
746
1.20
1.20
0.00
830
2002
89
174
-85
2003
289
164
125
$Mil
7,526.0
1,850.0
1,112.0
10,488.0
$Mil
3,123.0
544.0
6,821.0
10,488.0
36
Work Cited
U.S Bureau of Census, Census of Manufacturers, 1997, and industry reports.
Christensen, C.M. The Innovators Dilemma: When New Technologies Cause Great Firms to
Fail 1997
Schlender, Brent. How Big Can Apple Get? Fortune. 21 Feb. 2005. Vol. 151 Iss. 4 Pg 66.
Treacy, Paul. Returning to Double Digit Growth. Consulting to Management. Mar 2004. 15.1
37