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......................15 References........................................17 2 ...........................................................................................................................8 Opportunities........................................................................................................7 Opportunities and Threats within the External Environment................................................11 Strategies...................8 Is Apple in a Strong Competitive Position?..........................................................................11 Apple’s Mission...............................................................................11 Recommendations...............................6 Strength.........................Contents Contents..............5 Strengths and Weaknesses within the Company.................................................................2 Company History and Growth......................................................................................................................................................11 Apple’s Vision..........................................9 Corporate and Business Level Strategies........................................6 Weaknesses................................................8 Threats............................................................................................................................................................................................................................................................................................................................................

one of the mantras of the past decade has been user-centered innovation: Companies should start their innovation process by getting close to users and observe them using existing products to understand their needs. Everyone was anxiously waiting for Apple's interpretation of what a tablet is. one thing you are not gonna find in a MacBook Air is an optical drive." Although a touch arrogant. The iPad. it does not question existing needs. this quote powerfully captures the essence of the event. the day before the product was unveiled. Consumers don't always swallow Apple's notion of what they should love.html At the beginning of Steve Jobs' presentation of the iPad. More than Apple listening to us.hbr. User-centered innovation is perfect to drive incremental innovation. it had some commandments written on it. If you really want one. it would have not came out with a breakthrough system (the iPod + iTunes application + iTunes Store) based on a business model that asks people to pay for music. This was validation of Apple's peculiar innovation process: Insights do not move from users to Apple but the other way around. If it had scrutinized users of early MP3 players downloading music from Napster.org/cs/2010/01/how_apple_innovates_by_telling. On Tuesday. paired by a quote from The Wall Street Journal: "Last time there was this much excitement about a tablet. In 2008. In fact. I disagree with this approach for these kinds of efforts. It has made a proposal about what could fit us and what we could love. is not the first time Apple has taken this approach. but hardly generates breakthroughs. a Web search for "Apple tablet" produced more than 17 million links! On Wednesday. it's us who listen to Apple. With the iPad Apple has not provided an answer to market needs. thanks to its powerful methods. a slide showed an image of God delivering its commandments. In fact.Apple's Secret? It Tells Us What We Should Love by Roberto Verganti http://blogs. he said "No matter how hard you look. It's now up to us to answer whether we agree. hordes of people attended the news conference remotely. While tech experts were busy commenting on the qualities of the iPad. we have built 3 . when Jobs unveiled the MacBook Air. of course. This contradicts the conventional management wisdom about innovation. what struck me was the level of excitement that the event created. but rather reinforces them.

The potential is there. 4 . it would have provided them with what they apparently needed: a powerful console with sophisticated 3D processing that could enable them to better immerse in a virtual world.one. Nintendo. . (My feeling is that its success strongly depends on developers. then the iPad could mark a new era in mobile computing. He has served as an executive advisor. Nintendo did not get close to users when developing the Wii. they take greater risks. Barilla.) My 10 years of research on breakthrough innovations by companies such as Apple. The iPod and the Wii were outside the spectrum of possibilities of what people knew and did. and Intuit. and educator at a variety of firms. They put forward a vision. given that Apple is using the same collaborative innovation strategy devised for the iPhone. If Nintendo had closely observed teenagers in their basements using existing game consoles. people love them even more than products that have been developed by scrutinizing their needs. that these radical proposals are not created by chance. [He showed an external CD-DVD drive] ." Apple is not alone in thumbing its nose at the notion of user-centered innovation. Xerox. And it may even be that the iPad will not succeed. They come from a very precise process and capabilities. Their non-usercentered proposals are not dreams without a foundation. We do not think they will need an optical drive. if only someone could propose it to them. STMicroelectronics. shows. Thanks to this process these companies are serial radical innovators. Samsung. . If they create applications specifically tailored for this device. Instead. According to Shigeru Miyamoto. instead of simply adapting existing applications running on notebooks. of course. In doing that. Nintendo's senior marketing director. Roberto Verganti is professor of the management of innovation at Politecnico di Milano and a member of the board of the European Institute for Advanced Studies in Management. But when they work." This allowed Nintendo to completely redefine the experience of game consoles. coach. however. and Alessi. "We don't use consumer focus groups. We got a lot of feedback from developers in the industry. Sometimes they fail. Ducati. Whirlpool. Firms that create radical innovations make proposals. And they do not simply come from intuition of a visionary guru. Hewlett-Packard. But you know what? We do not think most users will miss the optical drive. But they were not outside what they could dream of and love. which are summarized in my book Design-Driven Innovation. including Ferrari. Nestlè.

Jobs established another computer software company. By this time. Inc. Apple Computer. nonexistent at that time. the iMac and MacBook Pro. 5 . At that time. This helped Apple to produce new designs so quickly for a short amount of time. One year later. it also has G4 portable and desktop versions that are marketed with high focus on design. that was technologically advanced. The selling of few hundred of the boxes led to a persistence that resulted in the manufacturing of Apple I computer box. Steve Jobs (21 years old) and Steve Wozniak (26 years old) founded Apple Computer after dropping out from school. Growth continued at an exponential rate that in 1980 the company went public and sales reached $117 million. Apple successfully launched the iBook and the iMac product lines and continues to push them in the consumers and education markets till now. were introduced.000.300. each apple product has been under equally high demand. During this time. CEO Gilbet Amelio purchased Jobs’ company NEXT software with the hope of creating Apple next generation operating system. Apple had established itself as a player in the corporate world with the Mac Plus and Laser Writer printers. In 1983. They were based on the Intel Core Duo platform. was a turning point for Apple.000 in sales. The team began the work in Jobs’ garage and sold over 200 PCs to computer hobbyists in the area of San Francisco. The company began experimenting with new parts from new suppliers. Microsoft of Bill Gates were pushing Apple to license its product and make the Microsoft platform an industry standard. With the release of the iPod video. the company experienced some failures after the resignation of Wozniak. The move did not work and in 1998 Amelio was thrown out and Jobs was placed back as Apple CEO. Wozniak had an engineer mind and began building boxes that allowed people to make long distance phone calls for free. Jobs hired Pepsi Company’s John Scully as president to fill the gap. the iPad and iPhone. Jobs explained that due to their current product mix consisting of the iPod and Apple TV as well as their Macintosh brand. On January 2006.Company History and Growth In April 1976. At that time. changed its name to simply Apple Inc. But their difference of opinion led to Jobs leaving in 1985. In 1997. which are the first Intel based machines. however. Both were focusing to offer consumers with a smaller user friendly computer. Their initial investment as start-up money was $1. Year 2004. Wozniak began producing Apple II and Jobs hired high school computer fanatics to build circuit boards and design computer software. NEXT. In January 2007. an advertizing strategy was implemented and the Apple logo was born leading to a $1. the iPod classic and ultimately the iPod touch.

6 . it can gather some benefits. Apple launched a product that differentiated it from all other computer products. The iPhone combined Apple first widescreen iPod with the world’s first mobile possessing visual voicemail and an internet communicator capable of running a fully functional version of Apple’s web browser Safari on the iPhone operating system.Apple wasn’t just a computer company anymore. Its closed operating system is not subject to the computer viruses and hacking that affects the Microsoft Windows operating system. 4G). the innovations in the music industry have been linked with Apple’s brand name. such as reducing advertising costs from the recognition perspective. Apple’s graphic and architectural production and design is far superior to any Windows application Brand name: Whenever a company established a popular brand name or image. Strengths and Weaknesses within the Company Strength Product differentiation: From the early 1980s. its major competitor. where branding of products help in keeping customers abreast of the company products. It dealt also with a revolutionized product in which Apple had never previously competed: the Apple iPhone (3G. 3GS. Besides.

then the competitor will have the upper hand in getting product to the consumer first. the company would be vulnerable because of the high priced inventory that it retains. The process of production requires that a company forecast possible sales so that they can order the products and components necessary for being able to manufacture a desired output. This puts the companies with the Windows operating systems at an advantage since Apple could run into a problem procuring a sufficient supply of components.Weaknesses High research and development costs: The market requires that participants continually provide innovations and competitive products and technologies. Apple has to focus on creating more awareness not only of its products but also of its operating system. it makes it difficult to compete on the same playing field. Apple has been working extremely hard to accomplish this and in doing so is spending more money for research and development than its competitors. High selling and administrative costs: Marketing fees for advertising its unique operating system and new equipment again affects the bottom line. If they are not ordered. Order placement puts company at risk: Components and products are ordered before the computers are manufactured. 7 . that controls a considerable amount of market share so they do not have to spend anywhere near as much to promote their operating system. Apple components may not be as abundant from vendors since their market share is smaller and the operating systems are different. negatively affects its profit margin and with competitors cutting prices on their products. The risk is in making incorrect forecasts. It must continue to develop innovative products that balance the expenditures of these group costs. in Windows user’s case. even though they are necessary expenditures. Cancellations of orders usually result in cancellation fees that still affect the companies' financial position. Competitors are able to enjoy the luxury of utilizing operating systems. Thus if something occurs that limits a sale. This huge spending.

All of the downloads were all done on Mac computers.Opportunities and Threats within the External Environment Opportunities Apple pursuit of Music industry: Apple's pursuit of the music industry through its iTunes also provides a good opportunity to increase Apple's bottom line and also increase brand awareness. The launching of the iTunes Music Store resulted in over 2 million downloads in only 16 days. All of these affect gross margin. especially when combined with increased reliance on the Internet and the miniaturization of components that decrease prices since they are smaller and simpler. manufacturing. Apple's opening of its music store worldwide was such a great opportunity Microsoft upgrade cost versus benefit: Microsoft users are finding it less feasible to continually upgrade software packages unless they can truly see a benefit for the money being spent. Price competition has been very intense as the battles for increased market share rise. and sales are all extremely competitively aggressive in Apple's business. The last few Microsoft upgrades have been plagued with glitches that provide another grand opportunity that Apple can use to its advantage as long as it doesn't make the same mistake with its issues of upgrades. Threats Competitive industry: The market for design. 8 . The rapid technological advances made by competitors in the hardware and software segments have increased the number of products offered in shorter time spans. The customers will continue to look for value whenever they spend money.

Also. Is Apple in a Strong Competitive Position? High devotion to research and development keeps the Apple innovation system working at full capacity. Competitors work to convince their customers that their product is superior to its competitors. In the management realm. In the marketing environment. This dominance and need to overcome the world's mental state of thought about Windows operating systems is a major threat to Apple. the use of a multi divisional structure 9 . Apple needs to work on convincing the world that its system is better than Microsoft. More than 90% of the world's computers use the Microsoft operating system. As the technology advances. the less likely the switch to a substitute will occur. than the company has to provide justification for the increase. The more differentiation of product. Substitute Products: Substitute products are readily available so this threat is very high. the more susceptible the companies become to additional piracy. Steve Jobs is their most valuable asset. The market is favorable for the companies that have locked a business or educational facility since substitution will require a change of each computer within the facility and in some cases more than one location. Apple has managed to create a very strong brand image for them. Software Piracy: Software piracy has been a trouble for software and operating systems companies.Microsoft Dominance: Microsoft Windows continues to dominate the market. His commitment and drive has created a strong and vibrant firm that would not be where it is now without him. ensuring Apple access to the latest technology. If prices are high. The piracy issue has grown to global proportions and stopping unlawful copying and distribution of copyrighted software does not seem to have a remedy for prevention in the near future. one that adopts quality and reliability. Apple's operating system differentiation can command higher pricing when it is presented to the creative designer community but not to the individual computer buyer unless they are specifically looking for such enhanced graphic capabilities.

Though the position carries with it a measure of risk. Apple would not be able to innovate without using this strategy. and new gadgets in development. actually creating what would be considered state-of-the-art. Apple always gives to customers. Nonetheless. therefore it is an acceptable risk. and fashionable products. The company spends a great deal of money on research and development. these Apple enthusiasts present the company with a unique competitive advantage as they have significant influence on what the world views as trendy. Apple has managed to create legions of sternly brand loyal consumers. Tight lips keep Apple’s innovations from being pirated by rival firms. Apple relies heavily upon their competitive advantages to survive. Apple does have weaknesses that need addressing. Being the industry innovator is another great advantage for the firm. Innovation is the strongest trait in Apple’s technological environment.keeps the various portions of the company working at what they do best rather than stretching top management too thin. Apple relies too much on Steve Jobs. These consumers who subscribe to the “Apple culture” stand by their purchases with pride and commitment. Whether their motivation is quality or simply buying a computer that is not Windows based. Despite all the strengths of the firm. Another managerial strength is Apple’s commitment to secrecy when it comes to their products. software. As well as being one of their greatest strengths. which is a risky policy. Additionally. Steve Jobs is a weakness for Apple too. Apple computers and digital accessories set the standard for quality and innovation. 10 . The price tag on these products is high but the consumer knows that he is purchasing high quality. They are on the forefront of the computer technology. This could be perceived as a risky company because of the fact that so much is devoted to R&D instead of some other aspect of the infrastructure. reliable. state-of-the-art. In an industry of brutal competition and price wars. The greatest competitive advantage Apple acquires is the differentiation of their products. and cutting edge products that are not available anywhere else.

customers and the global communities where we operate.” Strategies Despite the recent recession. and consumers around the world through its innovative hardware. has turned a substantial profit for the past five years and is consistently one of the top performing firms worldwide. software. creative professionals.” Apple’s Mission “Apple computer is committed to protecting the environment. We recognize that by integrating sound environmental. health and safety of our employees. Apple strives for continuous improvement in our environmental. Apple Inc. Apple is committed to bringing the best personal computing experience to students. personal computers. and applications. we can offer technologically innovative products and services while conserving and enhancing resources for future generations.Corporate and Business Level Strategies Apple has a moderate to high level of diversification with related constrains. All of its businesses are linked and continue to move forward at the same time. Their customers can either order online through apple. All of the products use very similar design techniques and the majority of the applications can be used on multiple devices without changing the format. health and safety management practices into all aspects of our business.com or go to an Apple retail store and buy the same products. Apple must maintain its strategic practices with nominal changes. music devices. In order to maintain its success strip. processes and services. phones. Apple is also one of the few computer base companies that own retail stores. educators. Apple’s Vision “Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980 with the Macintosh. Apple offers home computers. software. and Internet offerings. 11 . health and safety management systems and in the environmental quality of our products.

that strategy is alright. consists of two kinds—desktop and notebook. Apple needs a stronger management strategy and figure out the right way to implement the plan to keep Apple on the road to success. Apple has been successful thus far because they have had Steve Jobs who has built Apple up to what it is today. These two separate product lines each share resources and complement each other. Some of Apples future plans would be to go international and market to their younger generations like they have in the United States. but have not really gone international. They need to make sure that they have more people on their management team with the same passion and drive for the company as Steve Jobs. contacts. so if Apple penetrated their markets like they have done in the United States. a personal computer company (hardware and software). for example. and every product they create is a hit with the younger generation. they only enter a new business if it is based on their core resources or competencies. Currently Apple is one of the most dominant companies in innovation. email) perfectly with the other 12 . iPhone.The vision statement of Apple in the upper level management is to continue innovation. Their strategic plan is not very strong if they are solely relying on innovation. Rather than just have related businesses. The Macintosh. while companies using constrained diversification tend to be more focused. and iPad are all computers. though. inherently. For the time being. which create cost savings for the company because their resources are shared across multiple businesses. however. Apple needs to have a new plan set in place. but does not necessarily have any connection to their other businesses. each business is a focused platform with no unrelated products or product types. Apple’s Macintosh computers synchronize their media and personal data (calendar. Apple is. Apple’s products are mainly seen in Europe and Japan. which allow Apple to share resources between businesses. Each platform. complements the other. Companies based on linked diversification have little coherence to their overall corporate strategy. The Mac. but so far it has not failed them. Constrained diversification allows companies to maximize the effect of their resources because they are shared. but with the recent events and Steve Jobs health issues. too. there are two kinds of diversification: linked and constrained. This creates economies of scale. they could probably increase their market share. such as cancer. If they are using constrained diversification. Apple uses constrained diversification. Apple has not really broken through the international barrier. iPod. Currently Apple is successful because of its CEO Steve Jobs. and their businesses utilize their competencies in developing hardware and software. In Corporate Strategy. Companies using linked diversification enter new businesses when it relates in some way to another business they are already in (linked to it). Many country’s youth like to replicate American youth.

and it is difficult for competitors to match. but Microsoft licensed its operating system to any computer manufacture who wanted it. but none have made serious changes to the basic definition laid out by Apple in 2007. Apple’s goal for their mobile business should not be to take a Microsoft like monopoly of the industry. The iPhone defined what smart phone devices are and what they do. they do not need overwhelming market share.platforms. Through iTunes. The iPhone’s release in 2007 is a perfect example. Rather. so the competition responds to Apple. they can seek high profit margins. 13 . but rather to take a sizable portion. The similarities extend to the software. This creates a complete package for consumers to choose. Because they work so well together. movies and television shows that matches across all of their devices. If they are constantly redefining the industry. owning products from each platform can benefits users by creating an experience where their devices work appropriately. Gaining market share. Strong profit margins allow them to have a high percentage of the industry’s profit share without a corresponding market share. They try to match the iPhone’s features. There is an interesting matching between the emerging mobile market and the personal computer market of the mid 1980s. Competitors have tried to make incremental improvements. too. By constantly defining what these devices are and what they do. Apple dominated the early personal computer market with integrated hardware and software. Microsoft ended up dominating the market. most smart phones use large touch screens and even resemble the iPhone. these platforms reinforce the others and make them more powerful. specifically. differentiation. After its release. however. (for example OVI store by Nokia). Apple’s goal should be to define what these devices are. should not be Apple’s primary goal. Since Apple is deeply about innovation. such as a higher resolution screen or a physical keyboard. Before the iPhone. its excellent web browser and the App Store. Market share today does not guarantee market share tomorrow. users can purchase music. and thus a position of strength. Because Apple has chosen what businesses to enter carefully. no smart phones used touch as a primary means of input. The sum is greater than the parts and this is what we call synergy. The App Store allows users to download applications for their iPhones and iPads wherever they are. Their platform strategy makes each individual business more valuable than it would be as a separate entity. Apple can secure for itself the role of industry innovator. however. and thus do not need overwhelming market share. The platform advantage does not apply just to Apple’s devices.

the iPad’s battery lasts for ten hours of use. By giving away the operating system and taking a majority of the market. They are grabbing significant market share in the smart phone market. With Android OS. Apple is following a similar path as it did with the Mac. however. hardware and software are integrated. The question. up from twenty percent in fourth quarter 2009. and thus make their products more valuable. Apple’s market share in the same period stood at twenty one percent. This is not the proper strategy. then. this is an incredible advantage over competing devices. and it is due to Apple’s own battery and processor technology. By controlling the hardware and software. Google is using Microsoft’s strategy. which is the operating system. Apple enjoys high profit margins on their products not because the hardware is better than what others offer. they can build hardware and software features their competitors cannot access. attract developers to their platform and commoditize their competitor’s main advantage. is whether Apple should follow Google’s strategy and license the iPhone OS to other companies in an attempt to counteract Android’s advantage. are used to make their products more valuable and thus to increase hardware sales. Everything else. thickness and price. In an attempt to grab market share. Google can ensure a place for the company in the mobile market. Apple would have to find a different business model. In first quarter 2010. For example. but primarily because their software is better. Apple’s basic business model is to sell hardware. For its weight. the App Store. because they can guarantee the quality of their devices and create innovations and features exclusive to the platform. the operating system. If Apple were to license the iPhone OS to other manufactures. Apple can guarantee a level of quality their competitors cannot. 14 . Moreover.In the mobile market. this would give away their hardware’s main advantage and thus significantly cut into their sales. Android’s market share grew to twenty eight percent. Controlling the hardware and software together is the best way for Apple to differentiate their products. Google allows any device manufactures to use Android on their smart phones. iTunes. Their integration strategy provides other advantages as well.

Recommendation 2 Apple should consider all work related to its operations in the iPod. Recommendation 3 Apple should continue opening its retail outlets as long as it remains financially successful: Apple has been successful with the opening of many retail stores. It should work with teachers and other academic driven management to have these systems made available for students. Cost of supporting such programs in a niche market sense should be reviewed financially so that R&D costs do not pull the company into an impossible position of making a profit. Advertisement to the younger crowds can utilize pop stars whereas business people can hear advertising messages from influential people.Recommendations Recommendation 1 Apple should continue to support the educational and creative professional markets: Apple is the company with the best systems in place for each of these markets so they should focus on continued support for each in a restrictive manner. Apple should get the iPod and iTunes systems into the schools systems. Promote sales of these products while returning specific sums back to the school for support of other academic programs could benefit word of mouth advertising. It can focus on advertising to the different age groups. iPhone and iPad sectors: Apple must continue to spend R&D dollars in finding new innovative ideas that will continue to lead the competitors. iTunes. It should continue to 15 .

The three recommendations above can help provide direction for Apple but they must reevaluate continuously since the market is moving quicker each day.open these stores as long as the profits continue. Real estate purchases for these stores should be in prime locations only should the need for selling occur in the future. They could still control sales and system operation without the excessive cost outlay. touch. Franchising of stores should also be considered so that costs to Apple would be reduced. 16 . The opening of these stores has brought the product to the people so that they can easily see. and play with the systems with personnel available to provide assistance and information.

org/wiki/Apple_Inc 17 .com/article/how-to-innovate-like-apple/330240 4-http://www.com/homework-help/business/accounting-business-analysisfinancial-reporting/153466 5-http://en.com/Apple-eBook.wikipedia.innovationmain.brainmass.bnet.html 2-http://gigaom.References 1-http://www.com/2009/02/22/is-being-%e2%80%9copen%e2%80%9d-an-absolutein-mobile/ 3-http://www.