c











  

2

 
Apple's encouragement of differentiation between product designs and its promotion of secrecy
around new product launches heightens the Apple mystique. These create the Apple "halo
effect," where a buyer of one Apple product has a high probability of returning to Apple for
other products as well.

Apple's has emphasized its unique retail stores through design for several of its flagship locations
as well as tailoring the retail experience to include product "test drives", classes and workshops
geared teaching users about its products. With relatively light presence in lower-margin, higher-
growth geographic areas, Apple will experience less of its halo effect and reduced product/brand
recognition, lowering sales potential. With China and India estimated to make up about 66% of
PC market growth through 2010, this could be a significant challenge for Apple.



 
Against the Mac:
Apple's position is improving in the worldwide PC market; the Mac still represents a small
fraction of the overall PC market. Apple enjoys a unique advantage of having something of a
niche market without needing to compete directly with Hewlett-Packard Company (HPQ) and
Dell (DELL) and Microsoft (MSFT) operating systems for enterprise endorsement.

Against the iPod:

Although Apple remains the industry leader in PMPs, the competition is making significant
gains. The popularity of flash-based PMPs is problematic for Apple, which has much stronger
market presence in hard-drive based (HDD) players. To combat this, Apple may release a new
flash-based line of players.


 
 


Apple¶s iPod and iTunes are a powerful combination that fosters a network style of increasing
returns. By selling iPods, Apple increases the consumer demand for music from iTunes. By
placing more musical choices on iTunes there is more demand for iPods. Apple is shooting for
the digital living room of the future. For example, Apple just released a ³boom box´ portable
version of the iPod. This comes with a remote control. Apple is clearly trying to develop a
stronger core competency in the entertainment area.






Apple¶s products are trendy and stylish. After Jobs returned in 1997, Apple retained a special
designer called Jonathan Ive to differentiate their computers. Ive¶s design of the iMac included
clear colorful cases that distinguished Apple computers. Apple positions its Macintosh
computers as higher quality and higher price. HP, Dell, and other PC manufacturers are pricing
many systems. Although the Mac Mini is a base model with few features, it comes in a very
small and distinctive package. Apple portrays this computer as ³Small is Beautiful´. (Apple)
Likewise, the iPod Shuffle was Apple¶s first entry of flash-memory-based portable music
players.


 




Apple not only dominates the music player market, its iLife suite provides consumers with easy-
to-use software for music and video composition. With ³podcast´ a household word, Apple¶s
Garage Band application makes the recording of podcasts and music very easy.

Figure (>>): The GarageBand Music and Podcast Application


 

 



Apple breaks its sales into five ³operating segments´. The chart below shows the sales by
segment for each year 2002-2005. On a percentage basis, only the retail segment appears to be
outperforming the others.




16000

14000





12000
Other
10000
Retail
8000 Japan
6000 Europe
4000 America's
2000

0
2002 2003 2004 2005

 



 
Apple pioneered the PDA market by introducing the Newton in 1993. Later, Apple introduced
the easy-to-use iMac in 1998, and updates following 1998. In 2001, Apple hit another important
historical point by launching iTunes. This marked the beginning of Apple¶s new strategy of
making the Mac the hub for the ³digital lifestyle´. Apple then opened its own stores, in spite of
protests by independent. Then Apple introduced the iPod, central to the ³digital lifestyle´
strategy. Philip W. Schiller, VP of Worldwide Product Marketing for Apple, stated, ³iPod is
going to change the way people listen to music.´ He was right.

Apple continued their innovative streak with advancements in flat-panel LCDs for desktops in
2002 and improved notebooks in 2003. In 2003, Apple released the iLife package, containing
improved versions of iDVD, iMovie, iPhoto, and iTunes. Apple continued its digital lifestyle
strategy by launching iTunes Music Store online in 2003, In 2003, Apple released the world¶s
fastest PC (Mac G5).