Table of Contents Overview Executive Summary ............................................................................................................. 1 Apple Inc.

Strategy Facts: Scope, Generic Competitive Strategy, and Value Creation ...... 2 Strategic Analysis 1. Industry Forces and Attractiveness ................................................................................ 32. Competitive Landscape and Strategic Groups ............................................................... 63. Key Resources and Capabilities ...................................................................................... 84. Apple Inc. Value Chain and Strategy Implementation ................................................. 105. Trends and Opportunities5.1. General Environment Analysis ............................................................................ 145.2. Diversification ..................................................................................................... 175.3. New Value Creation Opportunities ..................................................................... 196. Recommendations and Conclusion ............................................................................. 21 Appendices A1: Porter‟s 5 Forces Analysis .......................................................................................... A-1A2: Strategic Group Maps ............................................................................................. A-2.1A3: Key Resources & Capabilities..................................................................................... A-3A4: Value Chain Analysis ............................................................................................... A-4.1A5: General Environment Analysis .................................................................................. A-5 Resources Works Cited ..................................................................................................................... R-1

Executive Summary Apple Inc. (Apple) has managed to create substantial value in the highly competitive personal computer industry, by innovating and forging a path considerably different from those of the largest competitors in the industry, successfully differentiating its products from those of the competition by choosing to focus on quality, design elegance, and superior customer service, while outsourcing actual manufacturing to trusted original equipment manufacturers. Yet, despite the advantages Apple has created for itself, the stiff competition within the industry and other external factors present formidable challenges to the firm. The personal computer/notebook market is becoming increasingly commoditized, leading to intense rivalry among competitors within the industry, driving prices down and creating potentially destructive price wars. Utilizing key resources and capabilities including industry-leading design teams, talented software and hardware engineers, backed by a sizeable research and development budget, which is responsible for a portfolio of thousands of patents, and under the strategically brilliant stewardship of CEO Steve Jobs, Apple has successfully innovated its way to a comfortable market position commanding premium prices. Unfortunately, Apple cannot rest on its laurels. The position is not permanent and Apple must continually find new ways to maintain profits and create value for customers and shareholders. The maturing personal computer market is becoming saturated, leaving fewer new buyers and more replacement buyers. To continue to grow, Apple must also look to new and expanding markets as sources of revenue. After considering Apple‟s strategic war chest; the firm‟s core competencies, key resources, and capabilities and given its current situation within the industry and the compounding factors in the form of trends from the general environment, it is clear Apple stands to create considerable value through continued related diversification. The firm‟s history of category-defining products like the iPod and iPhone provide sufficient evidence that it is well-equipped to continue its path of innovation, by creating a digital lifestyle convergence device that bridges users‟ on-the-go digital lives and their at-home digitals lives. The proposed device will be powerful and feature packed, while leveraging the Apple system of seamless integration to create a compelling user

experience, presented in an elegant package showcasing the firm‟s industry-leading industrial design capabilities, to create the next must-have consumer electronics product. OVERVIEW

Apple Inc. Strategy Facts Scope The focus of this project is the Mac portable personal computer line of Apple in the United States, a part of its Americas division. Apple is a publicly owned Fortune 100 company based in Cupertino, California. The firm operates primarily in the personal computer industry of the wider technology sector. Apple designs, produces, and sells a line of personal computers as well as mobile phones, portable digital media devices, software, and related peripherals and accessories. The firm sells internationally though a mix of direct sales, online and retail stores, wholesalers, and resellers.

Generic Competitive Strategy Apple is pursuing a broad differentiation strategy. Apple differentiates by offering high quality, exceptional design, and personalized service. The scope of their strategy is broad targeting customers ranging from unsophisticated beginner users to specials needs power-users.

Value Creation Apple outsources the basics of production to third-party original equipment manufacturers(OEMs) that can achieve cost savings through vast economies of scale while inhousing elements of design to attract and retain users. Apple excels in the areas of industrial design and user interface and focuses on these areas to deliver a product that is both highly stylish and at once ergonomically natural and useable. Apple‟s people-friendly devices and highly personalized one-on-one customer service create a one-of-a-kind value proposition that commands a higher-than-average price. Apple Inc. Industry Forces and Attractiveness Analysis and Conclusion For the purpose of illustration, the industry analysis of Apple Inc. will focus specifically on the portable personal computer manufacturing and sales and on the United States market, although

HP.many of the firms involved in the industry produce. While is more an estimate than a „law‟ industry leaders like Intel. Considering the threats faced by firms operating in this industry the industry is moderately attractive overall. Those in the middle range including Dell. The desire of companies to buy large numbers of PCs for the lowest bid available also exercises considerable downward pressure on prices offered by these firms . and Lenovo compete for customers offering a range of options for varying prices. The similarity of their products due to industry standard setting also leads to price competition that drives down prices and squeeze margins.The nature of technological development also imposes increased competition on the members of the industry. Many firms within the industry have thrived. . See Appendix A1 for accompanying template. Inc. This perpetual innovation and development puts pressure on computer manufacturers to streamline production and refresh products at a pace largely unseen in business for centuries. but will not completely usurp personal computers in the foreseeable future. As a result of the penetration of computers into everyday life and business the PC is becoming more and more a commodity product. Rivalry Between Competitors While once an industry defined by few large companies and extremely expensive products. but competition is very high. market and sell internationally. the advent of the personal computer (PC) has caused an industry explosion which now includes dozens of manufacturers pursuing many millions of customers in the United States. but they face substantial hurdles in successfully establishing a viable brand. „Moore‟s Law‟ predicts that the number of transistors on a processing chip roughly doubles every eighteen to twenty-four months. Finally the threat of substitutes is credible in some use-cases. Those at the lowest end compete on rock-bottom prices foregoing all but the most basic features. For most users. The technology behind many key components of PCs continues to become more efficient with increased processing power and less energy consumption. have kept this pace for decades. pursuing a niche audience. There are several avenues by which new competitors may enter the market. and business economy is more important that performance specification and other „bells and whistles.‟ The result has led many manufacturers to pursue low-cost and best-cost provider strategies. while suppliers and buyers have moderate influence over the competitors.

Because of this incompatibility in design. which is present in nearly all personal computers. This leads to discounts for bulk purchasing and exclusivity agreements. Intel Corp. wireless standard 802. widely varying needs directly impacts PC makers who must adapt and react by offering broad product lines. . which alleviates some pressure from the dominant suppliers.11n) manufacturers also rely on privately owned standards. Often the technology must be licensed or requires entrance to a paid-membership industry group for use. Buyer Power As in all industries buyers have the final say and exercise considerable influence over manufacturers. which drives up switching costs. Manufacturers are benefited by the wide acceptance and use of PCs which causes high demand for products. the semi-conductor market is dominated by Intel. membership to the industry group PCI-SIG is required. In addition. Despite this power the chip manufacturers hold. and Advanced Micro Devices. for a PC manufacturer to switch suppliers of CPUs they must also switch to a new type of motherboard. (AMD). they are not present in the PC manufacturing business and therefore are reliant on PC manufacturers for a bulk of their business. Within the personal computer industry. central processing units (CPUs) are sourced from a duopoly. Highly compatible closed-systems are routinely used to keep customers within a circle of products provided by single companies. these two companies use proprietary chip designs that require different motherboard socket designs. universal serial bus) and Institute for Electrical and Electronics Engineers (IEEE. for the specifications and use of the PCI-Express/Express Card standard. The variety of buyers with many. Inc. Proprietary systems and brand loyalty are also used to keep customers coming back. with AMD licensing technology from Intel for use in production of their CPUs. The marked distinction between power users seeking the „latest and greatest‟ and average users who need a product hat is „just good enough‟ poses an obstacle to manufacturers who want to tap as many customers as possible. the relative concentration of suppliers for some inputs puts pressure on competitors. Despite having compatible chip technologies. While many industry standards like universal serial bus (USB) and wireless of technology are open and issued by independent or collaborative standards bodies like the USB Implementers Forum (USB-IF. Despite having two options. For instance.Supplier Power Suppliers have considerable leverage over the manufacturers of portable personal computers.

17Billion worldwide. Another mode of entrance is a result of forward vertical integration by OEMs. This trend has increased in popularity over the past decade. These players also dominate and keep costs down with economies of scale. despite the spread it is unlikely that smart phones. a well established phone maker. However. Inc. however there are several hindrances that may prevent successful entrance. into direct competition with well-known industry giants. Despite obstacles there are still possibilities for entrance. bringing companies like Acer. The increasing convergence of mobile devices resulting from the push of „smart-phones‟ and „netbooks‟ is bringing phone makers into the portable personal computer market. including Dell.Threat of Potential Entrants There are many avenues by which a new entrant may enter the portable personal computer market. Formerly an unknown. has fired its first „test shot‟ by planning to release a netbook of its own. will significantly diminish the . Lenovo. HP. Threat of Substitutes The consumer technology sector has grown substantial over the past decade with the advent of alternatives to personal computers growing from PDAs and now feature-rich „smart phones‟ The increase in technology in the average American living room. New entrants may come from newly established „lean‟ organizations which rely primarily on third -party original equipment manufacturers (OEMs) for production. Developing a successful brand among many others is difficult. $8. and Apple among others. by 2005 Acer had revenues of over $1 Billion in the United States. which cannot easily be achieved by a new entrant without substantial capital investment. Currently in the market there are several large. Established OEMs often operating in Asia have already achieved economy of scale and can pass these savings onto new firms that practice „re-branding‟ as a market entrance plan. like the iPhone or Blackberry. well entrenched players that have substantial brand recognition and loyalty.5 Billion in revenues worldwide and oversees brands such as eMachines and Gateway. Today Acer has over $16. These developments result in the spread of consumer „technology dollars‟ away from PCs. Nokia.

2. upper-middle range. Developing complementary products in other categories provides broader sources of revenue by accessing more customers in markets with less intense competition. which erodes firm profitability. These firms compete on the basis of what the computer is designed to be used for. a step many are already taking. for the most part. While considering cost alone there are several groups that generally define the industry competition. offer similar products. Within these competitive groups price typically equates to number of features or capability. Competitive Landscape and Strategic Groups Analysis and Conclusion The portable personal computer industry has many viable and successful competitors who. Recommendations Based on the industry analysis. This diversification of consumers‟ „digital lifestyles‟ presents an opportunity for diversification of PC manufacturers. I recommend: Create a differentiation strategy: The commodity PC market presents a perpetual downward pressure on prices. Extrinsic Dynamics – . Develop close relationships with suppliers: Because there are few suppliers of key components required in PC manufacturing developing close relationships with suppliers is of utmost importance. while firms at the lower end of the price spectrum compete essentially on price-value. maintaining a collaborative and exclusive business relationship will help mitigate the power of suppliers and help to lock in attractive component prices. At the highest-end firm‟s offer specialized products with certain consumer groups in mind. middle range. Rather than searching for the supplier of lowest cost. Consumer electronics diversification: While the PC market has grown increasingly crowded with competitors and customers saturated other areas of consumer electronics continue to grow.importance of PCs in the near future. Firm‟s compete in groups at the low-end. and high-end. Developing and brand image that separates the firm from the competitive rat race will reduce the effect of destructive competition and pad margins.

This paradigm remains true when considering build-quality and support as metrics as well [See Figure A2-2]. Firms have chosen their positions on these competitivedynamics and those not taken do not represent attractive segments to target. likeAlienware and Voodoo PC. Design. such as gaming. Intrinsic Dynamics – Customizability. Gaming Capability. The comparisons of Price to Design and Design to Build Quality show similar relationships. Other firms offering mid-range and low-end computers opt for more inexpensive plastics and materials while paying less attention to internal layout details. . Firms commanding the highest prices offer comprehensive support packages. while firms competing on low price offer basic functional designs(eMachines) to keep costs down. Apple stands alone with its Mac portables They ecosystem they‟ve developed provides seamless integration between their computers. The two extremes of high-price and low-price reveal similar support policies.System/Peripheral Integration is a polarizing metric. Apple offers portable computers constructed of solid aluminum blocks and strong polycarbonate plastics.Price. Voodoo PC use sturdy well-designed computer cases with intelligent and efficient internal cable routing layouts to promote airflow and keep the computer running well. The relationship between customizability and gaming capabilityremains linear [See Figure A2-4]. Support is the final toplevel extrinsic measures by which firms in the industry compete. and Support Comparison of firms operating in the industry on the dimensions of price and design(ranging from functional to elegant) reveals a linear relationship Those firms commanding the highest prices for their products opt for elegant (Apple) or intricate(Alienware) designs. The premium price of their portables allows for the extra expense in providing this service. Quality. Gaming is an importantdriver of computer technology and the degree of customizability in features and specification aswell as appearance is a driving force for manufacturers focusing their brands on gaming. Out-of-the-Box Features.System/Peripheral Integration Those firms that emphasize customizability on the part of the customer tend to offercomputers built for high-performance applications. Apple offers in-store one-on-one support to all customers and further warranty support.

Research user interface possibilities: As a mode of setting Mac computers apart fromother PCs Apple must continue to innovate in user interface focusing on easy-of-use andintuitive menu functions. Key Resources and CapabilitiesAnalysis and Key Insights Apple‟s most important resour ces and capabilities are Steve Jobs. iPhone. and HP offer standardized functions built intoWindows while Alienware and Voodoo PC offer a variety of pack-in games and features. Brands likeDell. relatively large groups emerge. Gateway. I recommend: Focus on differentiated lifestyle branding: Apple has successfully developed adifferentiated lifestyle brand and must continue to build on this foundation whileresisting pressure to move to the middle to directly compete with Dell and HP. Whenconsidering out-of-the-box features some other. Windows based PC manufacturers also makecompatible peripherals. The ability for a user to do more than go online after setting up aMac or Alienware PC is in significant contrast to other competitors [See Figure A2-5]. Vaio. iPods. Expand Apple store locations: Providing more points of direct contact with buyers willenable Apple to provide better service to customers and bring the Apple experience tomore people. STRATEGIC ANALYSIS3. eMachines. Steve Jobs brought Apple back to tremendous success following adecline in relevance and heads the continued creation of billions of dollars of value. While . Applealso ships copies of their iLife suite of programs including iPhoto and iMovie among other usefulprograms with every Mac. and other devices. Recommendations Based on the strategic group map analyses. Design innovation: Put additional emphasis on design development with internalresource allocation to continue to lead the industry in design. the CEO. but they do not have the same level of integration as Apple. and theintegrated system of hardware and software that the firm has developed and successfullymarketed to derive value.

032 per retail square foot per year. inimitable. Apple tops manyretailers in in-store sales. programmers. and nonsubstitutableresource. To Apple Steve Jobs is a valuable. The combination is their key capability that has established asustainable and ongoing competitive advantage and above average performance within theindustry. the resources only represent competitive parities andtemporary advantages. and engineers each represent key resources the ability of the firm to exploit their abilities to create their entire software/hardware ecosystem is the fir m‟s key capability. while Sony Style stores founder in mediocrity. 10 This resource is of incrediblevalue to Apple and a success that is a relative rarity in the industry. beating otherretailers like Tiffany & Co. generating $4. See Appendix A3 for accompanying template. Steve Jobs Apple founder and current CEO Steve Jobs is an incredibly valuable resource to the firm. often definingcategories of products.Apple‟s designers. Past experiments likeGateway stores have failed.666 and Best Buy at only $930. 9 Under his guidance the firm has rebounded and excelled in many markets. Taken each individually. Apple Stores – Retail Locations The introduction of Apple stores has provided the company with an important physicalpresence to act as both a sales location and an advertisement. The stores allow Apple to tightlycontrol the image of the brand and provide excellent customer service. Relationship with OEMs . at $2. rare.His unique vision and approach to business established Apple as an industry leader in thebeginning and he saved the firm from a downward spiral when he returned in the mid-1990s. Matching success andimpact like the Apple store model is difficult for other firms to achieve.

led by Jonathan Ive. T hey‟ve provided Apple with important products. and difficult to imitate. No other firm in the industry has a system l ike Apple‟s and it would cost millions or billions of dollars to imitate. senior vice president of industrial design. likeFoxconn and Hon Hai Precision Industry while focusing on design internally. Ive and the Apple design team hold manyawards. but developers of their caliber are not rare within the industry. While other systems work for PC . and hardware engineers employed byApple. Talented Software Development Teams Apple‟s software developers are carefully selected and talented programmers. The relationshipsbetween Apple and their OEM partners are very close to provide Apple with excellent serviceand high quality products. They‟ve produced industry award winning software and the highly regarded iterations of Macintosh OSX operating system. 11 Thiscombination is valuable to Apple. rare among competitors. This capability comes from a combinationof the design teams. Tailored Hardware/Software Systems One of Apple‟s most important capabilities is their ability to develop and build highly integrative systems with software designed specifically for the hardware it runs on. software development teams.Apple has outsourced all of its manufacturing processes to OEM partners in China. and the firm‟s prioritization of design and outsourced production. not regarding success. The „closedsystem‟ style of Apple is unique in the industry which typically reli es on third-party software(i. Industrial Design Capability Apple‟s incredible industrial design capability is a function of their innovative design teams. nor are they difficult to imitate. Mutually beneficial business relationships are time-consuming anddifficult to develop and maintain is of considerable value to Apple and puts them ahead of other manufacturers who may decide to outsource some production. Microsoft Windows running on a Dell computer). Other firms candevelop staff as talented or hire them away from Apple. with products being shown in permanent collections at various museums.e.

Emphasize the integrated system in advertisements: Apple‟s integrated system holds a significant advantage over other industry systems relying on Microsoft Windows. December 2009 Masi Strategic Analysis – Apple Inc. yetsome customers have not experienced the seamless interoperability of all Appleproducts. I recommend: Continue the expansion of Apple stores: The stores represent an important source of revenue for Apple and serve as an interactive advertisement for the Apple brand. Their success has been unmatched by any other industry player. Recommendations Based on the analysis of firm resources and capabilities. MGT 440. This marketing angle will result in cross selling of more products to new andexisting customers. Page 10 of 21 .manufacturers they cannot achieve the same results as Apple‟s integrated system. Seek exclusivity arrangements with OEM partners: Continue to build relationships withthe closed Asian OEM partners and enter into exclusivity arrangements to lock outcompetitors and gain favorable business deals.

The OEMs that derive profit from high volume with low margins willcontinually seek to reduce the costs of inputs to reduce pressure on their margins. The real evidence of Apple‟s strategy reveals that their commitments are directly in linewith their stated goals and strategy. Apple Inc. and procedures the firm‟s s trategy for itsportable personal computer business is one of broad differentiation targeting a range of customers from sophisticated power users to inexperienced new users and from individualbuyers to bulk purchasers like schools and businesses. The firm differentiates on exceptionaldesign. and outstanding customer service. . ” 12 See Appendix A4 for accompanying template.STRATEGIC ANALYSIS 4.Most of Apple‟s risk center around the firm‟s near absolute dependence on OEMs and foreign factories for manufacturing and assembling their products. Apple‟s goal is to provide customers with the “bestpersonal computing…experience” by offering products with “s uperior ease-of-use. policies. and innovative industrial design” and a “ high-quality sales and post-sales supportexperience. Value Chain and Strategic ImplementationStrategic Implementation Based on analysis of Apple‟s practices. seamlessintegration. consistent quality. some of the firm‟s practices could be seen as risks and potential liabilities threatening future success. Risks to Apple‟s System While Apple has been successful in implementing its strategy in the marketplace. Although Apple gives their OEMpartners guidelines for sourcing materials to be used in production they do not have directcontrol over procurement.

despite some issues. Apple‟s reputation for having sterling customer service and their ability to take quick and decisive action to fix issues may leave customers with even higher regard for the firm. Apple can easilypatch up any holes in perceptions their overall quality.highly padded margins on their products. they can afford to do full replacements of defective devices. Similarly. Apple has also made moves to reduce thenumber of harmful chemicals used in the production of its products.nonsubsidiary firms. More defectiveproducts making it through to endusers will hurt Apple‟s image as a supplier of premium lifestyle products. quality control slips during themanufacturing processes carried out by OEMs can negatively affect Apple. Because Apple is fortunate to have large. Customers who begin to notice reduced quality will not be able to justify thepremium prices that Apple commands for its products.Gradual slipsin quality will adversely affect Apple if the low quality inputs begin to show in the finalproducts. Strong cash position – . This means reduced emissions duringtransportation and results in a savings for the firm.As long as quality control issues remain relatively few and far between. Apple has had tremendous success in implementing a lean manufacturing structure. rather than acting onlyself-interestedly. Risk-Mitigating Factors Despite the inherent risks of establishing a value chain completely reliant on foreign. General AdministrationA greener Apple – Apple redesigned packaging for many of its popular products to bemore lightweight and take up less space in shipment. Because Apple is committed to the equitable treatment of workers in their partners‟ factories and developing mutually beneficial relationships with their suppliers OEMs are morelikely to work cooperatively with Apple regarding pricing and sourcing.

16 ProcurementPositive relationships with suppliers . 14 The benefits system is used to entice. capital purchases. and retainindustry-leading talent to benefit Apple. Human Resources ManagementSelective hiring process – Apple follows selective hiring practices to recruit and hiretalented individuals. Patent filing – Apple believes in the importance of protecting its intellectual capital byfiling patents in the United States and worldwide for its inventions and innovations. 15 This is a commitment to continue to push innovation forward to keep ahead of competition. Applecurrently holds a portfolio of several thousand patents. 13 This enables Apple to finance expansion. in 2009 Apple spent $1.33 Billion on research anddevelopment. Generous employee benefits program – Apple offers a variety of attractive employeebenefits to complement direct wages.Apple maintains a large cash reserves and carries a comparativelysmall amount of long-term debt.and development internally with little reliance on third-party creditors. Technological DevelopmentResearch and development – Apple increased research and development funding bynearly 66% from 2007 to 2009.

capital purchases. 13 This enables Apple to finance expansion. This means reduced emissions duringtransportation and results in a savings for the firm. 17 Apple has alsodeveloped its own Supplier Code of Conduct to govern the actions of its suppliers.and development internally with little reliance on third-party creditors. 18 Thesebeneficial steps foster positive relationships with suppliers. Apple is a member of the Electronic Industry Citizenship Coalition(EICC) and works to ensure fair treatment of workers in OEM factories. General AdministrationA greener Apple – Apple redesigned packaging for many of its popular products to bemore lightweight and take up less space in shipment. Human Resources ManagementSelective hiring process . Apple has also made moves to reduce thenumber of harmful chemicals used in the production of its products. Strong cash position – Apple maintains a large cash reserves and carries a comparativelysmall amount of long-term debt.despite some issues. and decisive action to fix issues may leave customers with even higher regard for the firm.– Apple works closely with its key suppliers tobenefit all parties involved.

14 The benefits system is used to entice. . Technological DevelopmentResearch and development – Apple increased research and development funding bynearly 66% from 2007 to 2009. Generous employee benefits program – Apple offers a variety of attractive employeebenefits to complement direct wages.33 Billion on research anddevelopment. Apple is a member of the Electronic Industry Citizenship Coalition(EICC) and works to ensure fair treatment of workers in OEM factories. Applecurrently holds a portfolio of several thousand patents.– Apple follows selective hiring practices to recruit and hiretalented individuals. Patent filing – Apple believes in the importance of protecting its intellectual capital byfiling patents in the United States and worldwide for its inventions and innovations. in 2009 Apple spent $1. 17 Apple has alsodeveloped its own Supplier Code of Conduct to govern the actions of its suppliers. and retainindustry-leading talent to benefit Apple. 16 ProcurementPositive relationships with suppliers – Apple works closely with its key suppliers tobenefit all parties involved. 15 This is a commitment to continue to push innovation forward to keep ahead of competition.

utilizing industry-leading industrial design teams and engineeringknowhow. Inbound LogisticsAutomated receiving systems – Apple has implemented sophisticated automatedreceiving systems to speed up the receiving process and reduce facility footprint and storagespace requirements. 19 Delegate raw materials acquisition – Apple works with its OEM partners to delegate theraw materials acquisition process but provides some supervision for quality control purposes. Operations Utilize OEM‟s economies of scale – Apple outsources production to third-party OEMpartners to utilize their economies of scale while removing the burden of productionmanagement from the firm.This reduces shipping costs and envi ronmental effect while attracting customers to the firm‟s . Outbound LogisticsEconomical/stylist packaging – In order to save money on shipment and enticecustomers Apple uses eye-catching packaging that takes up less physical space and weighs less.18 Thesebeneficial steps foster positive relationships with suppliers. Internal design – The design and conceptualization of current and future products isdone internally at Apple.

This minimizes inventory buildup in more costly warehouse locationsin the United States.products. Retail locations/Flagship stores – . opting instead to develop the firm‟s image. Apple Stores act asadvertisements for the brand and provide a human point of contact between the firm and its online orders are shipped directly to consumers fromstorage facilities in China. Authorized retailers are held to certain standards to protect Apple‟s brand image. Marketing and Sales “Get a Mac” Ads – Apple uses a series of television advertisements comparing the firm‟s products to competitors using a variety of direct and indirect methods to build a lifestyle brandimage. 20 Apple Stores/Authorized retailers – To control the firm‟s brand image Apple sells through first-party retail establishments and through authorized retailers. The ads are humorous and do not emphasize cost or feature-by-feature comparisons. Direct shipment – Apple.

ServiceApple Genius – Apple stores house the „Apple Genius Bar‟ where customers can talkwith an Apple specialist known as a „genius‟ about problems with their device. Customers can also purchase extended warranties through „Apple Care‟ to protect their product. Free consultation – .Apple stores across the United States serve as livingadvertisements for the company promoting the brand and lifestyle image. Secretive and selective unveilings – By keeping secrets about product releases andholding invitation-only press events for product unveilings. likethe 5 th Avenue New York store are an attraction drawing visitors on novelty hoping to convertthe visits into sales. Apple creates hype and suspensionaround product launches. Flagship stores. 21 Included and extended warranty – Apple offers an included 90 day warranty againstdefects and issues with its products. This human interaction with a first party service provider builds a rapport with customers and offers a starkcontrast to endless phone service calls.

that success can be furthered in new locations within the United States andabroad. whether it is in or out of warranty. Recommendations Based on the value chain digital lifestyle. Unused cashdoes not create value for Apple. .Customers can bring in their device for a free consultation regardingissues problems with no commitment. During the yearly capital budgeting processApple should set aside a sizeable portion of unused cash for investment. During the expansion process Apple must practice extreme caution to avoidover-saturation. Implementing random quality check sampling and „quality audits‟ in OEM facilities will ensure issues are caughtearly and that Apple‟s OEM partners stay honest with their own quality control processes. Apple must always protect its image of quality. Make productive use of unused cash: While having a large cash buffer is important to afirm. the Starbucks effect. while taking full advantage of opportunities arising from new technological trendssurrounding convergence devices and sociocultural preferences concerning the fullyintegrated. to retain the halo surrounding the stores andmaintain their status as a destination 5. The customer thenhas the option to pursue different avenues of resolving the issue without an upfront charge. Trends and Opportunities Although firms worldwide are facing the possibility of restrictive carbon emissionsregulation. I recommend: Implement first-party quality checks in OEM factories: Despite working closely withOEM partners. investing it in the near-term will provide benefits in thefuture to finance expansion and large capital purchases. Apple is uniquely positioned to lead the electronics industry in promoting „green‟ production. idle cash is not being used effectively.Etc. Continue a wise expansion of Apple Stores: Apple‟s retail stores have been massively successful.

various trends within the General Environment pose considerable threats to the ongoing success of the firm. Apple‟s premium pricing position leaves the firm at a disadvantage to less expensive competingproducts. and excellent customer service mayalso be seen as presenting a better value than the competitors with fewer frills at lesser prices. Demographic EnvironmentFlattening of wages -. Consumers seeking to „treat‟ themselves following theeconomic upturn may be attracted to Apple‟s premium portables. known for its quality. Properplanning and action will allow the firm to marginalize these threats while leveraging corecompetencies to take full advantage of emerging opportunities to create value for customersand shareholders. healthcare costsand the CPI.5.The uncertainty leaves consumers weary of big-ticket purchases like computers. viewing them as luxury goods. However. See Appendix A5 for accompanying template. Apple.leveling affluence – Over the past several years the Americanmiddle class has experienced increasing costs across many indicators including. but wages have remained relatively stagnant. . dependable machines. when consumers directly feel the improving economy and spendingincreases Apple will we ll positioned.1. General Environment Analysis Despite Apple‟s considerable resources and capabilities. Economic EnvironmentRecovering economy 22 – While the economy in the United States has shown someimprovement and there are signs of full recovery looming the outlook is not certain currently.

Apple‟s high prices may sendpotential customers into the hands of competitors when they are unable to justify Apple‟s high price tags. Healthcare reform – The push for modernization of the American healthcare system inproposed reform legislation would provide government money for infrastructure development and implementation by care providers. 23 Political/Legal EnvironmentPotential FCC Internet Regulation – The debate ove r „Net Neutrality‟ has entered the political arena. Reducing this innovation may stifle new valuecreation for Apple. 24 New and innovativetechnologies are routinely iterated on by hardware companies who strive to offer the bestmethods of integration in their new products. they‟ve continued to experience growth while other competitors suffered. with bills being drafted in Congress and the FCC waiting in the wings to impose regulation if need be. Technological EnvironmentDevice convergence – . Changing the way the Internet operates may de-incentivize newinnovation which could reduce future value to be derived by Apple. Adaptability of Apple‟s key portables in innovati vehealth-centric ways could provide new sources of revenue. Counter-intuitively Apple‟s perceived value has directly benefited them during the economic downturn.

They are conveniently positioned to become a market leader in convergencedevices by iterating on their current portable devices and mobile devices like the iPod Touchand iPhone. Apple‟s products laptops will be less important in users‟ daily use as their multi -functiondevices meet most of their needs. staying ahead of competitors in lifecycles shifts.The possibility that ordinary personal computers (and portablepersonal computers) will become less relevant through increased device convergence is veryreal. Again. Apple stands currently as a leader in innovation and portabletechnology. Apple‟s lean manufacturing value chain is adapted to rapid turnover and can be leveraged to combat the threat of inventory obsolescence. Shortening product lifecycle – An ever increasing pressure to innovate because of shortening product lifecycles could result in missed opportunities due to market entry times and losses on obsolete inventory.Apple and other manufacturers face a loss of relevance in the new technological landscape. and other ultraportable „connected‟ devices. Sociocultural EnvironmentIncreasing desire for on-the-go devices – The importance of the Internet andconnectivity is driving a demand for access anywhere. that allow users to carry access tothe Internet wherever they go are fast-growing compared to traditional personal computers.Smartphones. driven by consumer preference. Greater concern for the environment . using high-speed wireless technologies. Apple currentlyinvests billions of dollars in research and development which can be leveraged to positionApple at the head of industry innovation. Apple‟s substantial investment in research and development in highly popular devices like the iPhone place Apple at the forefront of thistransition.

– The production and shipment of Apple‟s devices are considerable sources of carbon emissions and pollution. As the economy becomes more developed. which may come under scrutiny asconsumer concern for the environment continue to grow. Apple‟s initiativein implementing „green‟ practices sets them apart from many competitors who will also feel the burden of regulation. increased wagesnationwide will increase the costs of production for Apple and its OEM partners. This proactive step can be used as a marketing tool togarner greater respect from concerned customers Developing Chinese economy – The Chinese economy continues to grow despiteworldwide economic contraction. Apple has already made commitments to „greener‟ manufacturing practices as well as implementing the use of eco -friendly components. and packaging. Strict Carbon emissions regulations will impose a considerable financial burden on the production of Apple‟s products. The increase inquality of life and disposable income to Chinese citizens will provide a larger customer base forApple to tap into. driving up costs and sh rinking margins. Again. I recommend: Emphasize value for consumer dollar: . Recommendations Based on key trends in the general environment discussed above. Potential world-wide climate regulation – It is possible that the Copenhagen talks willresult in real commitments from the international community regarding emissions caps andtaxes.

the world of consumerelectronics technologies is converging on a point of highly portable. bridging the divide between laptops and smartphones. Despite this broad range of diversification. Beginning as a company which produced full-sized desktop computers Apple nowoffers a line of desktops. but can continue to broaden itsscope while creating value in related and unrelated markets including eBooks and medicalequipment. The growing consensus is that a tabletformat device may be the next step.which performs many of the most desired functions. Apple‟s patents dealing with touch screen technology and experience developing the iPhone and iPod Touch will translate perfectly to a larger form.selling music and applications for its devices as well as renting digital video.2. Apple has already entered this market with the highly popular iPhone. both related andunrelated. Internetconnected devices. the firm should advocate for open networks without packet or contentdiscrimination. there are stillopportunities for Apple to further diversify. notebook computers. Convergence devices within the Apple system: Apple is already a leader in thesmartphone market and should shift competencies to new. and service for its products. To protect innovation and future value forApple. Campaign for real network neutrality: The debate over net neutrality is being muddiedby moneyed interests to obscure the issues. easy to use.A growing category in digital tec . Diversification Apple already has a well-positioned diversified strategy. rich media.Apple is known to provide considerable valueregarding quality. satisfaction. integrated devicesand applications 5. Current Diversification Apple has already implemented a successful strategy of diversification. highly functional tablet device. and a mobilephone. innovative. playable acrossmany of its most popular devices. These traits should beexpressed explicitly to convey the value of their products when compared tocompetitors. Apple has also entered the content distribution business. among many other devices. convergencedevices that take advantage of Apples system of simple. mobile digital media players. Related Diversification As discussed in the General Environment Analysis above.

the category is still young and could be redefined. iTunes Store eBook distribution: . movies. Unrelated Diversification In the United States medical equipment and devices are a growth area of the economy.As new healthcare legislation is enacted the importance of modernizing our system will come tothe forefront. This is one of the next logical progressions of the iTunes store which hascome very far from its initial offering of music only. which allows consumers to transport and read books in a digital format. I recommend: Capture convergence device markets: Utilizing research and developmentcommitments and market head starts including the iPhone. particularly a future tablet.Using a combination of new digital medical technologies developed by medicalequipment manufacturers and current technology for connectivity Apple could open itsportable and mobile platforms open for development of unique and efficient medical tools. Recommendations Based on the above.Examples of potential products would include digital thermometers and blood pressure monitors that connect via USB or the Apple proprietary Dock Connector to an Apple device toautomatically log measurements and do real-time analysis based on historical values to identifytrends that may pose health risks. TV shows. or develop a successfulstandalone device it would be wise of them to diversify the iTunes store to include ebookdownloads in addition to music. If Applecould incorporate an e-book reader into a convergence device. as a standard for medical technology platforms. While the Amazon Kindle is currentlythe leading product in this market. Apple‟s high quality portable devices would provide excellent platforms for care providers to utilize in streamlining care.hnology is the „eReader‟ device. In order to gain the most value from this growth areawithout considerable risk or heavy capital investment Apple should work with medical equipment manufacturers and care providers to establish Apple‟s devices. and podcasts among other types of contentalready available. Apple should work to definethe approaching market for convergence devices that bridge the gap between portablecomputers and mobile phone.

Currently there are over 500 million users on CDMA networks worldwide. AT&T and T-Mobile in the United States). CDMA networks (i. while AT&T comes in last. 25 Ma king one small change in the iPhone would allow the phone‟s use on all CDMA networks and open it up to millions of potential users.3.Apple should add affordable eBook options to thevariety of digital media available through the iTunes Store.e. despite desiring aphone of its caliber. New Value CreationInternational New Value Creation Currently the Apple iPhone uses a single cell network radio compatible only with GSMnetworks (i.e.Despite the immense popularity of the iPhone in the United States and worldwide. Introducing a new model of the populariPhone device utilizing an innovative Qualcomm cell phone radio chip that combines GSM andCDMA capabilities for a fully capable smartphone that can be used worldwide on any networkwould expand the number of potential customers Apple could target worldwide. compatible with all Appledevices. While GSM networks are implementedworldwide. 26 If the United States is a model that can be used to interpret CDMA user desire forthe iPhone worldwide. 5. there is a potential for substantial value creation by implementing thedual-band iPhone model. Medical equipment platform: Work closely with established medical devicemanufacturers to create a digital medical device platform designed to become anindustry standard in modernization through state-of-the-art care administrationsystems. Socially Responsible and „Green‟ New Value Creation . whichreceives top marks in customer satisfaction. Verizon and Sprint in the United States) a competing standardare also widespread and used by millions of people. despite the popularity of the iPhone. unwilling to switch cell providers. In the United States it can be assumed that manycurrent iPhone users would re-buy the phone in order to switch to the Verizon network.many customers. cannot use the device.

the home of Apple. a preferred supplier of Apple. and across the country. As the program grows more successful similar initiatives could be rolled out in othercities in California. MGT 440. Electronics recycling isimportant because there are many toxic and environmentally harmful chemicals in electronicsthat can leech into the ground if improperly disposed of. recently announced an initiative to promoteelectronics recycling while raising funds to benef it San Francisco Bay Area public schools‟ lunch programs. In addition to the money forimproved lunch programs provided by Samsung. where children most need help. 28 The programhelps to reduce the amount of electronic waste put into landfills. ‟ which allows customersto recycle old computer systems and peripherals with the purchase of a new Mac 27 and offersincentive to recycle old mp3 player and mobile phones through the program. December 2009 Masi Strategic Analysis – . 29 Apple should join its partner in encouraging education about environmental issues whilepromoting electronics recycling and benefiting local schools.Samsung. Proceeds from the recycling program will be matched by Samsung to help feedhungry children through the free and reduced-price lunch programs and expand meal options. Apple can match contributions with computersfor Bay Area schools to help children learn and become better equipped for the technologicalfuture.Apple has already implemented the „Apple Recycling Program .

talented device engineers. Further. Collaborative recycling benefit with Samsung: Join and enhances Samsung‟s charitable efforts to promote electronics recycling while benefiting children in public schools. I recommend: Dual-band GSM/CDMA iPhone worldwide: Offering a new model of the iPhone using aninnovative dual-band chip will make it compatible with all cell networks worldwide anddramatically increase the potential user base. The publicity associated with the charitable program will foster goodwill and promote Apple‟s image of a socially responsible company. and benefit Apple in the future. Recommendations In summary.likely a tablet. including unmatched industrialdesign teams.Apple Inc.but it will make a direct impact in the lives of young children. introducing children to the firm‟s products is likely to have a positive effect on product sales in the future. 6.The firm should leverage its close OEM partnerships and internal knack for design and usability to develop an innovative device that fits into Apple‟s unique system of seamlessly integrated devices and applications to bridge the gap between consumers . Page 20 of 21 This program will not only benefit the environment by reducing electronic waste andpromoting sustainable practices by educating the public about the importance of conservation. patents and innovation dealing with user interfaceand usability a logical next step for Apple is to develop a market defining convergence device. Recommendations and ConclusionThe Ultimate Convergence Device Given the external environment and sociocultural and technological trends and Apple‟sunique strengths including the firm‟s resources and capabilities .

symptoms. and claims filing. andMac lines to develop an intuitively usable device packed with useful functions leveraging Apple‟s iTunes Store content including the ecosystem of third -party applications developers tounleash the full potential of the platform. yet important initiative Apple should partner with Samsung to further theSan Francisco Bay Area electronics recycling and environmental education program whileworking to directly benefit children of local public schools by improving the school lunchprogram and providing better technology to enhance learning. Finally.‟ personal computersand their mobile phones. Apple‟s internal engineers will use what the firm has learned from its iPhone. Apple should work with medical device companies andcare providers to develop a set of criteria for necessary capabilities for consideration indeveloping the platform. The award winning design team can leverage itstalent to create the next must-have product regarded for its design simplicity and elegancemaking it not only a functional device. and filemeasurements. Modern Medical Device Platform Once developed the Apple convergence device will provide a wide range of functionsand powerful processing capability that can be applied to the field of medical care to enhanceefficiency and modernize the industry. administration. and diagnosis in an easily accessible and fully-portable medical filessystem. but a fashion statement. focusing on build quality anddependability. care giving.and medical administrative system modernized for the twenty-first century. . The device andsoftware it runs will make use of compatible equipment to measure. The system will help to streamline care giving. document.The device will function as an integral part of an overhauled recordkeeping. Apple‟s close wo rk withits preferred OEM partners will make the tablet a reality. byeliminating mountains of paperwork and cumbersome filing systems. Partner with Samsung to Benefit Children and Environmental Education As a smaller. iPod.

Sign up to vote on this title
UsefulNot useful