Wendellin S.

Contratista BSAC 2- ACA

APPLE IN 2008
(CASE 2)

Strategic Issues and Discussion questions and its corresponding answers:

1. Historically, what were Apple’s major competitive advantages?
 Innovation
 Strong Brand
 Rapid Growth
 Customers Loyalty
2. Why did Apple fail to build on these advantages to lead the industry?
 Their products couldn’t keep up with their competitive advantage of rapid growth.
 They rushed to finish products that weren’t ready to reach the market (ex: Apple III).
 Steve jobs kept pushing employees to finish projects before the deadline causing the
initial development of Lisa and Macintosh to fail.
 Several executives began to leave the company. The conflict of operations was a
reason of Apple’s early failure.
3. Was Apple’s demise inevitable, or could they have succeeded despite the decision not to
license the OS?
Apple rejected to license the Mac operating system to other computer manufacturers,
which later put apple into a disadvantage position in the computer industry. This decision
became an initial misstep in leading the industry. After Microsoft developed its windows
system, their system soon became a standard in the PC industry. If Apple had opened its
operating system to other computer manufacturers Their Mac OS system might have been
the industry standard instead of windows.
4. How has the structure of the personal computer industry changed over the last 20 years?
What are the implications for the profitability of personal computer manufacturers?
 1980, the launch of Apple II had made the company the leader in the embryonic
personal computer industry.
 1981 the industry changed again with the development of IBM PCs. The software
business was also dominated by Microsoft, which licensed its operating system to
IBM. At the same time, independent software developers started to write program
for IBM PC.
 1990s, the PC industry developed rapidly and quickly.
  Early 2000s, the market leaders of the PC industry were Dell, Hewlett Packard, and
IBM/Lenovo.

In the PC industry, the four major customer groups were business, education, home, and
government. Consumers were looking for faster and lower power consumption PCs. Reducing
manufacturing costs was a key component. To make an economic return, many companies
started to outsource their production of components in low cost locations. Also, protecting
the copyright of computer programs was crucial for a company to be profitable in the industry.
5. Given the analysis of industry dynamics, what must a PC firm do to make an economic return
in this industry? Is Apple protected from these competitive forces in any way?
To make an economic return, many companies started to:
 Outsource their production of components in low cost locations, such as China.
 Protecting the copyright of computer programs was very crucial for a firm to be
profitable in the industry.
 Apple was protected from those competitive forces Due to the complex of its
operating system, it was hard to developing pirate for Apple computers.
 Outsources its hardware components from various locations, and Apples products
were also manufactured in low cost locations.
6. In the early 1990s, Dan Eilers commented that Apple was on a “glide path to history”. What
underlay this assessment?
The fail in licensing Mac OS system and the using of Motorola microprocessors lead
Apple to a “glide path to history”. The closed business model pushed Apple into its niche,
which eventually resulted a high cost structure. Also, the popularity of Windows and the Intel
microprocessor made developers chose to write software for Windows over MS-DOS. In the
early 1990s, Windows operating system and Intel microprocessor became the dominant
standard found on 90% of all personal computers.
7. Evaluate Apple’s strategies since 1990 (focus on Scully and the return of Steve Jobs)? How
did Scully try to save Apple? How did Jobs?
Apple’s strategies under John Sculley:
 Shut down the Lisa line and utilized resources on improving the Macintosh.
 Entered the new desktop publishing market, which was a huge success to the
business.
 Rejected to license the Mac operating system to other computer manufacturers,
which later put Apple into a disadvantage position in the computer industry.
  Cut down the price for the Mac’s and Apple II’s by 30%.
 Cut down the workforce by 10% and reduced salaries of top managers by 15% to lower
the costs.
 Required the company to bring out hit products every 6 to 12 months.

Apple’s strategies under Steve Job:

 Brought Apple back to profitable. He acquired the NexT software and developed a
more successful version of OS based on it.
 Negotiated with Bill Gate and made a deal with Microsoft on producing Office for Mac
until at least 2002.
 Stopped the licensing of Mac OS, and acquired a leading Mac clone maker,
PowerComputing, to develop softwares for Apple.
 Cut down the product lines from 60 to 4 and stopped selling all slow selling products.
 Launched a new product, the iMac, which attracted many customers by its eggshell
design and its strong features.
 Introduced its new operating system OS X, which was faster and more stable than the
old Mac OS.
 Developed a series of applications, such as iMovie and iLife, so the company became
less dependent on third party developers.
 Introduced iPod in 2001, iPhone in 2007 and iPad in 2010.
8. The iPod: What was Apple been so successful with the iPod business?
 Innovation in technology and design, which aligned with its business level strategy.
 iPod had a distinctive clean design with large storage.
 iPod could hold over 1,000 songs while most MP3 could only hold few dozen songs
each.
9. What have been the main themes of Apple’s strategies post 2003-2007. What was Apple
trying to do here?
 Apple tried to enter new market by expanding its product lines.
 After Apple introduced the iPod in 2001, the company launched iPhone in 2007.
 The key elements of Apple’s strategy during this period of time were product
innovation and building complementary relationships between Apple products.
 Also, Apple started making its devices to be compatible with Windows, which means
Apple wanted to transform itself from a niche player to the mass market.
10. What explains Apple’s success with the iPhone? How sustainable is this success?
 Apple redefined what a smart phone had to look like and do.
 Allowed customers to browse the web, take pictures and function as an iPod digital
music player.
 iPhone was elegantly designed and used expensive materials including a body of
brushed aluminum and a screen made of tough “gorilla glass”.

With the first iPhone, AT&T, the exclusive US Operator did not provide a subsidy.
Instead, AT&T agreed to an unprecedented revenue sharing agreement with Apple, which
gave Apple control over distribution, pricing and branding.

11. Has Apple finally solved its longstanding problems? Strategically, where might the company
go from here?
Apple has had a longtime problem for their platforms, and that is the web. Initially,
when iPhone came out in 2007, Steve Jobs was promoting an open web. Initially, when iPhone
came out in 2007, Steve Jobs was promoting an open web. But apple already solved these
problems,