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Apple, Inc.

Formulation Presentation
March, 7 2008

Executive Summary

Apple Profile
Products: Desktop
computers, laptops,
digital music players,
software
Markets: High-end,
technology-savvy
users
Size: $8.3 billion in
sales in 2004

Industry:

Key Players:

Dell
Hewlett-Packard
Microsoft

Keys to success:

Innovation
Quality support services

Apples Mission & Vision


Mission:
Apple is in the business of
innovating, manufacturing,
and marketing/selling
computer 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

Operating Environment
Economic Factors
Intense growth dependent on machines
Demand for product services & support
Social Factors
Wireless communication
Powerful & portable devices
Political 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

Industry Analysis
Porters Five Forces Model

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

Competitor Profile: Hewlett Packard


Hewlett-Packard
Company provides
various products,
technologies,
software, solutions,
and services
worldwide.

Sector: Technology
Industry: Diversified
Computer Systems
Products: Servers,
Business Critical
Systems & Software

Competitor Profile: Dell


Dell
Engage in the
design, development,
manufacture,
marketing, sale, and
support of various
computer systems
and services
worldwide.

Sector: Technology
Industry: Personal
Computers
Products:
Desktops, Mobility
Products, Software
& peripherals

Competitor Profile: Microsoft


Microsoft
The world's #1
software company
provides a variety of
products and
services, including
its Windows
operating systems
and Office software
suite.

Sector: Technology
Industry:
Application Software
Products: Video
game consoles,
servers and storage
software, and digital
music players.

Apples Position within the


Industry
Personal Computers
Lack customer &
product service
Competitors dominate
market
Multi-Media Peripherals
Innovative; first to
enter the market

Apple needs to focus


on product
differentiation to avoid
becoming a lowmargin commodity,
especially in terms of
digital music and
communications.

Value Chain Analysis

Value Chain Analysis


Supporting Activities:

General Administration:

Human Resource Management

Identify new-product market opportunities &


environmental threats, public image & corporate
citizenship
Recruit, train, motivate, challenge, and promote the
most talented employees

Procurement

Good relationship with suppliers,

Value Chain Analysis


Primary Activities:
Technology Development
Research & development leading to product and process
innovations, timeliness of technology developments,
encourage creativity
Operations
Product design, productivity of equipment, effective
quality control systems
Marketing and Sales
Identify customer segments, innovate sales &
advertising, image of quality, favorable reputation, brand
loyalty
Service
Ability to provide replacement parts or tech support,
warranty/guarantee, quality of customer education &
training

Core Competencies & Competitive


Advantage
Procurement

First computer software company to negotiate with


RIAA to allow consumers to legally download music
online

Technology & Development

Main objective is to be the leading innovator of new


technologies that change the way people live their daily
lives

Marketing & Sales

Identify specific customer segments and needs, develop


an image and reputation of quality, innovative
advertising

Strengths Relative to Rivals


iPod & iTunes software revolutionized the music
industry, worked with RIAA to develop deal
PC is a mature industry/productApple found
new ways to spark demand
Successfully differentiate products
Brand Image and Recognition

Weaknesses Relative to Rivals


Apples market share is low as prices for
windows-based machines fall
Apple has limited number of suppliers to obtain
raw materials
Apple uses third-party music contentpotential to
limit music or limit availability in the future
Promotional activities focus on core groups
misses the larger audience of PCs for nongraphics based business and home users
Cell phone vs. iPod

Industry Specific Competitive


Advantages
Development of innovative new
technologies
Dell grew successfully by eliminating the
middle-man and selling direct
Microsoft is #1 software company
HP is currently the #1 PC manufacturer

Financial Analysis of Apple

SWOT Summary & Core Issue

SWOT Summary
Strengths:

Innovation; first to enter the market


Product & Market Development

Weakness:

Customer and Product Services

Opportunities:

Strategic Alliances with leading communication firms

Threats:

Forward integration
Becoming a low- end commodity

Core Issue of Apple


Apple needs to focus on product
differentiation to avoid becoming a lowmargin commodity, especially in terms of
digital music and communications.

Long Term Objective & Strategic


Scenarios

Long Term Objective


Technological Leadership
Product Development
Quality Support Services

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

Possible Objective Shifts


Worst Case Scenario

Competitive position

Best Case Scenario


Productivity
Public responsibility

Corporate Level Business


Alternatives

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

International Corporate-Level
Alternatives
Global brick & mortar locations
Nearly 2.4 billion people living in China
and India alone, accounts for 37% of the
global population
Major areas of economic growth are in newmarkets (China & India), and in product &
service expansion

Strategic Alliances as CorporateLevel Alternatives


Establish relationship with cell phone
carrier

Entrenched in professional media creation


markets, provide fundamental intellectual
property to be used in consumer oriented
software

Acquisition & Restructuring


Corporate-Level Alternatives
Apple is limited to the number of suppliers
it can use to obtain raw materials
Some key components are subject to
industry-wide availability constraints and
pricing pressures
Apple needs to find multiple component
suppliers
Possibly acquire suppliers

Keys to Success
International

Country specific economic, social, political,


technological, and ecological factors

Strategic Alliances

Challenge in negotiating contract terms &


copyright agreements

Acquisition and Restructuring

Finding multiple component suppliers

Long-Term Objective: Technology


Leadership
Enter communications industry:

Focus on product development and


differentiation in areas of digital music and
communication

Expand customer service capabilities:

Global brick & mortar locations that focus on


quality support services (training and tech
support)

Generic Competitive Options


Differentiation
Focus Differentiation

Differentiation: Pros and Cons


Cons:

Pros:

Larger market than focus


differentiation
High customer loyalty
Reputation for innovative
products

No cost advantage

Hard to sustain due to


imitation
Could achieve greater
differentiation with
focused marketing

Relevant Rival: Microsoft

Focus Differentiation:
Pros and Cons
Pros:

Cons:

Ability to meet
targeted segments
needs
Ability to adapt to
segments changing
needs or demands
High customer loyalty
within segment

Less opportunities for


growth
Targeted segments
demand has large
impact on revenue
Non-focus oriented
competitors can better
compete in pricing

Relevant Rival: Dell

Generic Competitive Option:


Differentiation
Grand Strategies
Market Development
Product Development
Innovation
Strategic Alliances

Generic Competitive Option:


Focus Differentiation
Grand Strategies:
Growth
Diversification
Strategic Alliances
Product Development
Innovation

Strategic Choice
In order to achieve the long term objective
of technological leadership it is
recommended that Apple establishes a
strategic alliance with a leading
communication provider

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