Executive Summary

Apple Computers started the movement into the personal computing arena in
1977 but through changes in management and differences of opinion together
with missed opportunities it lost its competitive advantage to companies like
Microsoft, Dell, and Gateway. Apple operates in various lines of the computer
and music industry today and its operations include not only the designing but
also the manufacturing of its computers and software. Apple continues to pursue
the personal computer market but not as intently as in the years before. It has
opted to change directions a little by venturing into the music world through the
marketing of iPod, a digital music player, and iTunes. The opening of 65 new
retail outlets, including one in Japan, has precipitated its move into this new
world.

Apple continues to work on providing innovative products for its customers but
marketing to such as small market has caused some problems. Its market share
has been reduced to below 5% and its operating system differs considerably
from the Wintel operating system used my dominant Microsoft. Costs of
maintaining this difference have increased in comparison to those utilizing the
competitive operating system. Software designers are not as enthused about
writing programs to support Apple's operating system because of limited
potential sales. The advantages that seem to come into Apple's laps are quickly
removed because competitors are able to copy, steal, and share them.
The one advantage that Apple possesses is its operating system but it has failed
to convince the world of its superiority. The operating system in possession has
not encountered the problems that Microsoft and its fellow operating systems
have encountered. Microsoft upgrades have been plagued with virus and other
programming problems, including the ability of hackers breaking into the system
and accessing ones computer from another remote spot.

Apple has not capitalized on these problems. It has gained a few customers but
nothing in the numbers required to turn the company upwards in reclaiming
considerable market share. Apple customers are a devoted group that
understand the superiority that they possess but convincing the other 95% of
the world because a rather large task.

This case study is to begin with a situational analysis that will

encompass the industry structure, competitive situational analysis and
the firm's self-analysis. Through which the external and internal
analysis of the Apple incorporation will be mentioned.
It will cover Porter's five forces and provide insight of the opportunities
and threats that Apple faces. The industry structure will be dismantled

so that market size, distribution channels, strongest and weakest

competitors, and anticipated strategic moves of rivals is captured.
Economies of scale and key success factors will be listed along with
financials so that a direction can be logically surmised. An internal
analysis will also be included so that Apple's mission, vision, and
financial objectives are understood. Products and services will be
dissected, as will its corporate culture, values, and morals. The core
competencies will be noted together with value chain analysis so that
Apple can better define it true advantages for continued successful
operation in the future.
Recommendations will be provided, listing the pros and cons of each,
so that Apple management can consider implementation for
strengthening their position within the computer and digital music
industries.
Finally it will include the past and present strategic options used by the
company as well as our recommended strategies with their anticipated
positive and negative outcomes.
The recommended strategies implementation process will be
encountered in the analysis with the control and evaluation ways for
best strategies outcomes.

1. Threat of New Entrants/Barriers to Entry

2. Bargaining Power of Suppliers
3. Bargaining Power of Buyers
4. Threat of Substitute Products
5. Intensity of Rivalry: Among Competitors

1-Threat of New Entrants

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8.

Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantage Independent of Scale
Government Policy
Expected Retaliation

2- Bargaining Power of Suppliers

1. No Satisfactory Substitutes

2.
3.
4.
5.

Industry Firms not Significant Customer to Supplier Group

Suppliers Goods are Critical to Buyers Success
High Switching Costs Due to Effectiveness of Suppliers Products
Threat of Forward Integration

3- Bargaining Power of Buyers

1.
2.
3.
4.
5.

Purchase large portion of industrys output

Product sales accounts for significant seller annual revenue
Low switching costs
Industry products are undifferentiated or standardized
Threat of backward integration

4-Threat of Substitute Products

1. Switching costs - high/low
2. Price comparison
3. Equal quality/performance

5- Intensity of Rivalry among Competitors

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Numerous or equally balanced competitors

Slow industry growth
High fixed or storage costs
Low differentiation
Low switching costs
High strategic stakes
High exit barriers