Beruflich Dokumente
Kultur Dokumente
It is a multimedia, internet
phone and has a multi-touch
screen with virtual keyboard
and buttons.
Vicious Rivalry
› Open Standards: PCs are commodities ,
Manufactures compete on price, pushing down
margins
› Fragmented: No market leader to provide price
stability
› Rapid technology Obsolesce
› Strong buyers with great sophistication
› Summary: very tough industry and not attractive
Fragmented: No market leader to provide price stability
Low barriers to entry
› Technology: One can assemble a PC with a
screw driver
› Standardized components are available
› Plant/ garage: Can be done in a garage
› Distribution: Cheap. Over the Web on a
classified AD.
› Customers: Price sensitive SOHO. Summary:
Barriers to Entry are low-Harder to think of
another Industry where it is lower.
Lots of Potential Substitutes
› PDAs, Smart Phones
› TV Set-top boxes
› Video game Consoles.
› Summary: Existence of Substitutes Push PC
prices further down. Average price of the
substitutes are $300.
Complements have been fueling
demands (only the bright spot)
Complements have been fueling
demands (only the bright spot)
› Customer still pay for PC because of
software functionalities that runs on PCS
› Software, printers, scanners propel the
demand.
› Summary Complements are only the bright
spot in the industry.
Suppliers are appropriating most of
Industries residual profits
› Suppliers of components such as Disk drives
have no power over PC manufacturers.
› Intel/ Microsoft: Together Intel and Microsoft
earned more than 20billion in 2005. Net profit
from PC industry remained at $6 billion with 3% of
sales.
› How can two suppliers earn more that the whole
customer base?
DOMINANT WIN-TEL ARCHITECTURE
BRAND (Intel Inside. Windows)
Sophisticated powerful buyers
Vicious Rivalry
Lowe barriers to entry
Lots of Potential Substitutes
Complements have been fueling
demands (only the bright spot)
Suppliers are appropriating most of
Industries residual profits
PCs and Macs were substitutes. So decline
in price of PCs put pressure on Apple’s
Prices and Margins.
Macs and PCs have different software
complements. Industry was moving toward
PC (Wintel).
Software developers were not interested in
writing codes for a small Mac market.
Who is the largest software vendor for Mac
other than Apple?
› MICROSOFT Win-Win Strategy for them. Even
when Mac Sells, Microsoft becomes wealthier.
Takes 1$billion to make an OS.
AUP for XP was $45-$60. Sold 17 million in
8 weeks , thus breakeven in 8 weeks.
Apple cannot have that speed in sales,
and they are priced higher.
With these economies it was impossible
for Apple to survive. They needed to
change.
Strategy
› High Volume Low price
› JV with IBM to develop a new OS.
Logic
› Create big installed base
› Increase Differentiation
› Create a new standard to compete with Wintel and share
development cost of new OS
Assessment
› IBM could not deliver the higher end performance chips to
compete with Wintel.
› Customers wanted Intel, so Apple had to re-write its OS
top work with Intel.
› First two logic were conflicting
› Apple and IBM could not leapfrog Microsoft and Intel.
Strategy
› Focus on traditional customer base
› Design and marketing to get a price premium.
› Shift to owned retails: Apple Stores.
› Shift to Intel CPUs.
Logic
› Re-affirm your commitment to loyal customers and get big
premiums for your product.
Assessment
› As of 2006 Jobs did not raise Apple Market Share
› Share is declining
› Key to driving traffic for i-Pod and possible spillovers to
Mac
› Opens Apple for potential windows Users.
Imitation
› Apple’s barrier to imitation has been a steady stream
of innovations: Video ipod, ipod nano, mini ipod.
› Successfully fulfilled all major price points.
Switching Costs
› Locks current users with sales from i-tunes.
Cost Leadership
› Has long term contracts with leading suppliers of
flash memory, which reported to give 40% discount
to Apple off list prices.
Hold up
› Apple sells i-pods at premium and gives away songs
at less than a dollar.
› Music companies have pressurized apple to raise
prices.
› But market share of Apple was able to retaliate.