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Apple is engaged in design, development and marketing of personal computers (PCs), servers, communication devices, network solutions, portable digital music players, and related accessories, software and services. The companys portfolio of offerings comprises of Mac computing systems, iPods line of portable digital music and video players, iPhone handsets, iPad portable multimedia and computing devices and servers. The companys software applications include Mac OS, iLife, iWork and internet applications such as Safari and QuickTime among others. The company also offers a variety of related software, services, peripherals and networking solutions. The company provides third-party music, audio books, music videos, short films, and television shows. The company sells its products worldwide through its online stores, retail stores, direct sales force, and third party wholesalers and resellers. The company manages its business primarily on the basis of geographic segments. It operates through five operating segments: the Americas, Europe, Japan, retail and other segments. Apples retail segment includes activities of Apple-owned and operated retail stores in the US and in international markets. At the end of FY2009, the company operated 273 stores in the US and internationally. In each reportable geographic operating segment, Apple provides the same kind of hardware and software products and services. (<www.datamonitor.org>) Apples products can be grouped under different product lines which are as follows: iPhone and related products and services; portables; iPod; desktops; other music related products and services; software, service and others; and peripherals and other hardware. (<www.apple.com>) (O Grady 2009, pp. 117)
Question 1 External Analysis Apples external environment analysis by using Porters Five Forces Model: NEW ENTRANTS
Threat of New Entrants Bargaining power of suppliers Existing rivalry in the industry
CUSTOMER SUPPLIER
Bargaining power of buyers
SUBSTITUTES
(Stahl & Grigsby 1997)
Existing competition
Apples existing rivalry includes Microsoft Windows OS and media player for playing music and video, Competition with Mac OS X (Linux), Alternative sources of computer hardware from companies like Dell, HP, and Lenovo. Latest MP3 players i.e. Creative, Samsung, Philips and so on, Online music stores parallel to iTunes stores Napster (Prasad 2009, pp. 39-41)
Potential entrants
In current market environment Apple facing threat from potential market entrants in segment of Audio & Video streaming with v-cast (Verizon), online services provider on demand similar to iTunes, New players with advanced technology for example The next google
Apples operations mostly affected by suppliers and their bargaining power, for example Suppliers of computers and memory i.e. Motorola, IBM, and Intel, strategic partner/supplier of Mac (Microsoft), suppliers of TV and Movies like Disney, ABX, Fox, Sony etc., different Sources of music like BMG, Sony, Warner, Universal.(<www.apple.com>)
Question 2 Internal Analysis Apples core resources and competencies: 2.1 Core resources and competencies:
Resources acquired as real options can be especially for firms competing in highly uncertain environment. Commonly, capabilities are part of organizational functions such as marketing, manufacturing, finance, and so forth. Apple Inc. is thought to have capability in research and development function. People, work teams, equipment and financial resources are some of the resources that Apple integrates to complete various research and development task. (Ireland, Hoskisson & Hitt 2009, pp. 68-72) Product innovation is a core competence and appears to be distinctive competence for Apple. It has been the leader of the Consumer Electronics industry and has retained different image in PC manufacturing and Music too. The Core competencies accountable behind the achievement are mostly the Distinctive resources and Differentiation strategy. (Ireland, Hoskisson & Hitt 2009, pp. 70-75) Apple has earned a strong reputation for beauty, simplicity and quality over the years, all part of its mission. From award-winning design to meticulously crafted hardware, Apple focuses on entire user experience and is rewarded with strong sales and fierce loyalty as a result. (OGrady 2009, p. 42) Apples underlying philosophy is to design products that are easy-to-use and beautifully designed. Simplicity is a mantra. Most of Apples products are intuitively designed so that you dont need to read a user manual to figure them out. Apple has a punch line of Think Different inspiration and it believes in Value Creation. Apples core resources and competences are: (Afuah 2009, pp. 78-99) Beautiful design User interface Customer support Brand image Innovations Apple has been able to rule a top in market and gain beyond average returns due to its innovation and differentiation of technically advanced products. (<http://www.nzherald.co.nz/apple-inc/news/>)
Technology development
Technological development is the real foundation of Apples competence. The information and novelty in technology in Apples products made them to influence its expertise in iPod, iPhone, iTunes and iWorks suite of products. Providing Products to Co. Product Creation New Product idea Design/Funding
Suppliers
It is really the great benefit for an organization to be independently producing from zero to complete product with application and peripherals. Apple develops all its product with innovative ideas and delivered best product to the end-user via suppliers. (<www.docstoc.com>)
Manufacturing
The different combinations of Apple-made hardware and software became the root for its own invention process. Apple achieved unmatched results with stylish design, and redefined instinctive operation with most of the products. (<www.apple.com>)
Distribution
Apple was using small outlets to deal with its customers. In 1997, Steve Job redesigns the distribution system by removing thousand of small outlets and doing National level expansion. By 2001, the online store contributed nearly 40% of Apples total sales. In 2001, Apple opened its first retail store in Virginia, and now company owns more than 273 stores worldwide. (<www.datamonitor.org>)
Customer Service
Providing excellent customer services is Apples philosophy; the customer faithfulness is a huge achievement for any organization. Such a great relationship with its customers goes to Apples customer service and the types of product portfolio which satisfies the need of todays classy people.
Legal Service
Market climate is changing continuously due to innovation and it is anticipated that the drive to develop product and service offerings will subject Apple to patent and copyright infringement claims.
Strengths
Technical know-how Financial strength Brand loyalty Innovation Product differentiation Product integration Stylish design Retail stores Online sales Easy to use products (plug & play solutions)
Weaknesses
Higher price Low market share Lacking compatibility Cannibalization Product recall Patent infringement (<www.datamonitor.org>) (<www.apple.com>)
Question 3 Strategic Choices Apples Strategic Choices & its implications 3.1 Product Differentiation Generic Choice
Innovation is Apples pride. When reviewing the history of Apple, it is clear that this attitude permeated the company during its peaks of success. Apple had an amazing impact on technology, society, and the world and it continues to innovate to this day. Using the personal computers as foundation, Apple has turned technology into as essential tool of our daily lives. Apple is an innovative specialist. From the Apple | and || to the mouse, GUI and LaserWriter, Apple has a pedigree of developing new technologies and adapting existing technologies for the masses. In late 1985 Apple released the Macintosh Office, featuring and the AppleTalk networking technology in an attempt to make the Mac more attractive to small business. (OGrady 2009, p. 45) (<http://www.macintoshos.com>) (Prasad 2009, pp. 39-41) In 1991 Apple released its first serious notebook computer, the Power Book 100. Two other PowerBooks were launched simultaneously with the PB100. The PowerBook 140 and the 170 and both were entirely designed by Apple. In 1991 QuickTime was the beginning of video playback on computers and has become a standard feature on computers, Personal Digital Assistants (PDAs), and smart phones. Apple released QuickTime 1.0 in December 1991 for System Software 6. After that, The Newton MessagePad, announced in
August 1993, was a completely new product for Apple and represented a brave step into the unfamiliar territory of PDAs. (OGrady 2009, pp. 46-47) (<www.apple.com>) Apple is revolutionary company in many ways, throughout the history; it always comes up with innovative ideas and product differentiation. The iMac and iBook allowed customers to get online within 15 minutes of opening the box and set a new standard for Internet access that is still the envy of the industry (<http://www.everymac.com>). Introducing digital media management like iTunes, iPhoto and iMovie spearheaded the digital media revolution and made it easy to manage all of our digital content. Introduction of digital media playback like iPod, iTunes and iPhone set the standard for listening to music, watching television and movies, and making phone calls too. Apple single handedly rescued the music industry from the perils of peer-to-peer file sharing networks. Apple popularized technology, like FireWire for high-speed data access and Wi-Fi for wireless Internet access, making data move faster and without the clutter of wires. IPhone revolutionized mobile phones and iChat AV made it easy to videoconference with family and colleagues across the globe. (OGrady 2009, pp. xii-xiii) (<www.apple-history.com>) (Linzmayer 2004, pp. 289-295)
iTunes in collaboration with Motorola and Cingular Wireless. Apart from this Apple also worked with AT & T, which gave an opportunity to Apple to improve their iPhones technology. Apple also has strategic ties up with You Tube and Google to provide their iPhone users latest technology search, mapping and video features. These strategic alliances allow Apple to further differentiate their products and add values to their users. (Ireland, Hoskisson & Hitt 2009, pp. 173-177) (<www.datamonitor.org>) (Thakur, Burton & Srivastava 2007, p. 95)
Apple has having low market share at the moment and should consider expanding it in future. Though, with current Microsoft user base, it is going to be difficult. Apple should concentrate on its core competencies to be successful and try to find new emerging markets like India, China etc. Steve Jobs will not be there always with Apple. He has done great stuff for the company; he has left Apple in uncertain situation. What will be Apples future when he leaves company? Apple should not dependable on Steve Jobs and should distribute the responsibilities among the individuals within the company. Apples future strategies should be innovation, lower price and strategic alliance. The reasons behind these are:
Lower Price
Consumer electronics and entertainment industry is nearly reaching a maturity stage in the market with strong rivalry but it is still growing. The reason for this extreme competition is that there are companies in market which are coming up with low cost strategies and low pricing to compete with the existing manufacturers. Companies like Acer and HP acquired Compaq are already competing with notebooks on the basis of cost. Also there are many websites which gives access to downloading and listening to music online, which becomes a high threat for product like iTunes. So Apple must do something to lower their pricing to beat their competitor.
Strategic Alliances
Apple is enjoying their strategic alliances with AT&T, You Tube, and Google, these partnerships allows Apple to differentiate their products and add value to their users. Apple must be proactive in their future strategic alliance and must get right companies to work together to be successful in changing world and time. (Thore 1995, pp. 20-22)
Retail Strategy
Apple is penetrating in different market via online store and retail stores. They must aggressively promote this to the potential customers, as it will save the cost of supply chain management, ultimately results in low cost products that will help Apple to reduce their prices further to compete in the market more efficiently. (http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=106 94905)