Question 1 a) Does it make good strategic sense for Apple to be a competitor in the computer, digital music player, and

mobile phone industries? Yes, Apple’s current strategy is to “bring to its customers compelling new products and solutions with superior ease-of-use, seamless integration and innovative industrial design”. Based on this explanation it can be determined that Apple is utilizing a “broad differentiation” strategy to stay competitive in its industry. Basically, Apple provided a specific strategy based on a generic one that was just used as a guide. According to Bowman (Bowman, Cliff), generic strategies should be used as a tool to help form a solution instead of being the solution itself. To be a competitor in the computer, digital music player, and mobile phone industries, Apple must used to be just in the personal computer and software industry and also utilized its strengths and expanded its business to the entertainment industry. Apple introduction starting from digital music players (iPod) and online music service (iTunes) in 2001 and it’s another introduction of mobile phones (iPhone) in 2007.

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Apple has been able to command a premium in the market and gain above average returns from utilizing the similar and compatible of its value chain activities across the products. and mobile phones very similar and compatible or are there very important differences from product to product? Which of the three products lines computers. digital music players. 2|Page .  Competitive advantages. a carry-on PC for memory storing and internet.  More than just a mobile phone.  Instead.  The value chain activities are not much differences from product to product. or mobile phones do you think is most important to Apple s future growth and profitability? Why?  The marketplace trend seems to be destroying all the boundaries of each industry. and an audio device.b) Are the value chain activities that Apple performs in computers.  The most important industries for Apple s future growth and profitability. digital music players.  More than just a digital music player. especially in its mobile phones products.  Taking the role as a digital camera.  More enhanced tool for full-motion videos and data storing.

These products perfectly complemented the products and also provided another successful revenue source for Apple. customization availability. R&D oriented. peripheral synchronization capabilities. • Competence in design – wherein they received awards from the Industrial Designers Society of America. software compatibility. price. When Apple released each of these products they also released “iTunes” and the “App Store”. Strength of Apple like: • Apple develops its own software and creates hardware in house that complements the software perfectly. reputation/image. everything ready device. This helps Apple deliver products that are easier to use and showcase innovative design. • Apple in recent years has taken the above success factor to another level with its introduction of the iPod and iPhone. • The success of the iPod and end users considering it to be a fashion statement has greatly benefited the Apple brand and is transferable to its other product categories. By guarding their secrets it makes it difficult for competitors to copy Apple’s technological advances. as compared to the leaders in the personal computer industry? Competitive strength assessment for the leading rivals in the Apple industry are design and innovation oriented. greater horizontal and vertical integration. market position and breadth of product offering. 3|Page .Question 2 a) What does a competitive strength assessment reveal about Apple. aesthetics makes it more appealing for consumers aside from its functionality • Apple guards the secrets behind its own technology in order to protect their proprietary technology and other innovating capabilities. quality/product performance.

i-works suite of products.b) Use the methodology in Table 4. i-tunes. new leaders. and software vendors less prone to virus attacks Collaborating I-pod and I-tunes Apple’s retail with other combo gives experience. Firm’s capabilities that contribute to competitive advantage aren’t shielded from imitation because imitation of Apple is very fast and inexpensive. Diffusing products New products: Ideation Designing/funding Product Creation across company.i-phone. Among these competitors. Apple s products and services have more restriction than its rivals. brand awareness mac consumers a push. bought more.4 to support your answer. Apple’s operating in a fast-cycle market. Competitive Advantages likes design and innovation oriented . Dell Inc. Plug and Play” solutions to R&D oriented an everything ready device Firm Infrastructure HRM Technology Development PROCUREMENT Inbound Outbound Operations Marketing/Sales Service Logistics Logistics Alliances with Design & Horizontal & Plug and play I-tunes gives a major suppliers Innovation vertical solutions major edge Integration Linkages with Technology Complete bundle Operating system independent Driven of applications more secure. In addition.greater horizontal and vertical Integration. who enjoys the strongest competitive position? Among HP and Acer. Apple has been able to command a premium in the market and gain above average returns owing to its innovation and differentiation of technologically superior products. enjoys the strongest competitive position with Apple. 4|Page . designing from scratch to finish bundled with applications and peripherals. This learning and innovation in its products has led apple to leverage its expertise in the ipod. Over due course of time Apple has been able to perfect the chain of activities in Innovation and design leading to a fit between the activities which is difficult to imitate and hence offers them an edge over competitors.

It is because its most revenue is (63. Futhermore.c) Who is in the weakest overall competitive position? Acer is in the weakest overall competitive position.8%) was relying in the mobile phone industry. Continued problems with the iPhone 3G launch for both the old and new model and criticism “for short batter lif led to a class action law suit against Apple” have possibly created a negative brand image for Apple in relation to its product quality. decreasing gross margins despite falling component prices and Apple’s expectation of “its operating profit margin to fall over the next quarter” will likely tie up more net income that can be used towards future growth opportunities and potential health problems for Apple’s CEO Steve Jobs” present a problem for the potential strength of the future management team. 5|Page . But its mobile phone industry that have very intense competitive. Apple and Nokia are major players to Acer.

In fact. Apple’s greatest competitive advantage is differentiation of their products. They have various versions of almost every product including: Mac computers. software. Apple has managed to create a community of intensely brand loyal customers. Their computers and digital music devices set the standard for innovation and quality. most consumers who decide to go Mac never go back to a PC. iPhones. Apple guarantee’s their customers’ state of the art products that are not available anywhere else. 6|Page . The basis competitive advantage that Apple’s has is a stronger brands value. It’s true because innovation plays a dominant role in the competitive dynamics in fast cycle markets. Apple is well known for being an industry innovator. These consumers who are proud to be a part of the “Apple culture” stand by their purchasing decisions with pride and commitment. product differentiation and industry innovator.d) Has Apple’s strategy resulted in a substantial competitive advantage over its rivals in the computer industry? What is the basis for whatever competitive advantage it has? Yes Apple’s strategy resulted in a substantial competitive advantage over its rivals in the computer industry. In addition. and iPods.

we can see the differences of ratios in Apple.4% and this percentage is the highest compare to 2005 and 2006. For operating profit margin. Inc. So the higher percentage is better than and the trend should be upward. the ratios of debt-to-equity were increase to 0. For inventory turnover ratio.8 % in 2006. It is not a good for Apple Inc.8%. Inc. But in 2007.Question 3 a) What is your assessment of Apple Computer’s financial performance the past three years? (Use the financial ratios in Table 4. the ratio is consistently increased in 2005.9% in 2005 to 40.1 of Chapter 4 as a guide in doing your financial analysis.5% in 2005 and it showed a little increase to 11. is consistently gained the profitability of the current operation.9% while for the 2007 it increase to 24.7% and 18. Apple Inc. The debt-to-equity ratio in year 2005 and 2006 is remaining the same which is 0.9% . has higher creditworthiness and good balance sheet strength. But in 2007 the ratio were increased to 13.) Based on the ratios.4% in 2005 which is decrease a little to 71. the numbers of inventory turnover ratio were decreased to 69.4%. Inc. But in 2007. These ratios measure the return on total investment in the enterprise. But in 2007. ratios showed that profit margin are decrease from 40. The return on total assets (ROA) for Apple. 2006 is 19. for the two year are almost remain the same that is 11.08%.8%.5% in 2006. 2006 and 2007. the gross profit margins were increase to 51. to measure the number of inventory per year because inventory turnover is low. 7|Page .10%. state 84. financial statistics from 2005 until 2007. 12. In their gross profit margin. These ratios show that Apple Inc. This was proving that Apple. The percentage for the both three years is 11.1% which mean the return on stockholders earning on their investment.4%. We take a look for return on stockholders (ROE) equity for 2005 is 17.6 % in 2006.

9%.7% in 2005 and it decreased to 1.For the current ratio. Apple Inc.0%. In 2005 Apple Inc states revenue growth 68. From the analysis in overall financial ratios. to pay current liabilities using assets that can be converted to cash in the near term. R&D as percent of sales of Apple Inc remains the same in 2005 and 2006 which is 4. 8|Page .3%.3% and its decrease consistently in 2006 which is 38.9% which is 1. But in 2007 the percent of R&D sales decrease to 3.0%. Apple computer’s financial performance for the past three years are all remain that have much more differences in the ratio changes.8% but after that in 2007 it increase 0.7% and also decreases for the 2007 to 24. state 2. This current ratio shows that ability of Apple Inc. That means income that a company gains from its business activities are not good.

Business Strategy Thus. PC manufacturers can reduce a threat of buyer power by differentiating their products.Question 4 a) What steps should Apple take to improve its corporate performance and to strengthen its position in its most important markets? There are many steps should Apple take to improve its corporate performance and to strengthen its position in its most important markets. But. Its sleek product design represented by iMac and iBook also acquired many fans and increased brand-loyalty. which buy computers in large volumes. quality and service. buyers have less power when the switching costs and brand-loyalties are high. governments. Hence the bargaining power of suppliers is moderate. therefore. However. Apple has always been able to make more of a profit off of its computers than other distributors. Apple has continued to produce a quality product. It is the suppliers that are in direct competition with each other to obtain exclusive contacts with the manufactures to have them use their products. almost half of their revenues are cut by paying back Microsoft for using their product. For example: Apple’s unique operation system and its computers specifically targeted to publishing and designing industry prevent their buyers from switching to competitors’ products. despite several ways in which manufacturers have 9|Page . Thus. In addition to the quality. and schools. The suppliers. Personal computer buyers are price-sensitive. This quickly turns Apple's small market share into an extremely profitable market share. higher quality customers that are devoted to their company. the computer manufacturers hold a power over the suppliers as opposed to the suppliers holding a power over the manufactures. have the power to bargain on price. Because of the reliance of companies like Dell and HP on Microsoft's Windows operating system.Apple will success if it targets a smaller market of trendy. are often forced to slash prices or merge with larger companies in order to survive. Bargaining Power of Buyers Large businesses. If apple maintain a low market share of the computer industry.

As the PC has become a more commodity-like product. Toshiba. Apple’s used Business Strategy Low-cost production at Dell contributes its positive growth rate. High-tech companies such as PC makers thrive when they provide ever greater amount of advanced technology. Industry Rivalry The five main manufacturers namely IBM. price-competition has become severe in the industry. lower quality computers from customized manufacturers in order to save money. Another important aspect of competitive advantage is globalization. and Sony also have large market shares. Normally. While all companies have seen a slow in sales and a loss of profits. Apple. The effects of intense competition are beginning to be felt as companies exit via selling to other companies or simply exiting the industry altogether. Europe. HP. Dell. this would lean Apple 10 | P a g e . Japanese companies such as Fujitsu. NEC. while all other major firms are experiencing negative growth rates. the profitability and prosperity of the PC industry’s is dependent of the profitability and prosperity of these suppliers. The technology paradox holds in the PC industry. Although PC markets in the US. which creates differentiation to some extent. Hence the threat to industry rivalry can be concluded to be strong. Apple' has seen a greater loss in its computer revenues. Some companies such as IBM and Apple focus more on innovation while others such as Dell focus on distribution channel and service. and Japan have matured and the demand has slowed down. The price of PCs has declined since 1990’s. while the price sharply falls. demand in Asia-Pacific (except for Japan) is expected to grow. Because of this many people are buying cheaper. Cost-cutting is now critical for PC producers to cover the decreasing profit margin. Hence the bargaining power of buyers can be concluded to be strong. Many PC makers in the US now earn around 40% of their revenues in international markets. Regardless of the number of companies present. Compaq are in competition to produce the least-expensive and most efficient machine. the computer industry will continue to expand and remain competitive for a number of years to come.differentiated their products and found ways to increase switching costs. customers still see units as very similar and thus choose primarily on price. they are seen more as high-end items and more expensive luxuries rather than as necessities. Because of the nature of Apple's products. Since the quality of a PC is largely determined by the microprocessor and application system installed.

Apple brand computers because they wanted an Apple machine. high-quality computers. Even though the deficit in computer industry market share remained relatively unchanged. Apple was able to charge a higher price for their high-end. This allowed them to stabilize financially as well as discover a new identity as a company. The company will focus on its core competencies in order to stay successful. Contrary to Apple's computers. This previous failure should be viewed as a warning and disclaimer against any further pushes into the low-cost market. it has introduced an entire generation to the Apple brand. Apple would be foolish to try to take the world of Microsoft and PC distributors head on. However. However. Even though this is deemed as a niche market. with the current Microsoft user base. Apple will look at further expanding on their small but efficient market share. By using the iPod as a gateway. it is going to be increasingly difficult. the iPod has a giant lead over the competition when market share is concerned. Many people that buy Mac computers continue to buy more Mac computers as well as other Apple branded products. Jobs’ foresight allowed Apple to reach new levels of profitability and success. Apple will try to better position itself for a future attempt to capture back the market share that it maintained many years ago. Apple's customers are incredibly dedicated. One Apple product that will never be viewed as a failure is the iPod. Apple will continue to push its trendy image to new customers in order to gain more and more computer customers. hardware. Because of its success. Jobs was able to take this identity and expand on it. he was able to tap into markets and succeed in areas that were previously never explored or considered. Whether the Apple enthusiasts like it or not. By targeting their now niche market.towards developing a lower priced computer that could compete with these personal computer models. After this new identity was established and Steve Jobs was re-established as CEO of the company. By focusing on their current customers and slowly expanding this base. he was able to follow a product differentiation strategy to turn the company around. more expensive models. Due to this increasing amount of dedication to the company. What Apple found was that the sales of the Mac Mini were cannibalizing on the sales on other. The difference in market shares is far too large. and software. With the release of the iPod and iPhone. 11 | P a g e . this strategy has been tested before with the Mac Mini.

not Jobs himself. While he has done great things for the company. he has left Apple in a precarious situation.Steve Jobs will not be around forever. What will Apple do when he leaves? Apple's last response to not having Steve Jobs as their CEO was eventually to rehire him as CEO. The Apple board of directors will meet with Steve Jobs to discuss the future of the company within the next year. However. 12 | P a g e . it is the manner in which Jobs runs the company that allows for such innovative success.

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