3. Apple Profile
Products: Desktop Industry:
computers, laptops, Key Players:
digital music players, Dell
software Hewlett-Packard
Microsoft
Markets: High-end,
technology-savvy Keys to success:
users Innovation
Size: $8.3 billion in Quality support services
sales in 2004
4. Apple’s Mission & Vision
Mission: Apple is in the Vision:
business of innovating, To be a leading
manufacturing, and innovator of new
marketing/selling technologies that
computer hardware and change the way people
software solutions, related go about their daily
peripherals, and
communications
equipment.
8. Porter’s Five Force’s Model
1. Rivalry Among Existing Competitors
Innovation; First to enter the market
2. Substitute Products
Competitors with similar products
3. Powerful Suppliers
Forward Integration
4. Powerful Buyers
Backward Integration
5. Threat of Entry
Advanced Knowledge
Capital Requirement
9. Competitor Profile: Hewlett Packard
Hewlett-Packard Sector: Technology
Company provides Industry:Diversified
various products, Computer Systems
technologies, Products: Servers,
software, solutions, Business Critical
and services Systems & Software
worldwide.
10. Competitor Profile: Dell
Engage in the Sector: Technology
design, development, Industry: Personal
manufacture, Computers
marketing, sale, and Products: Desktops,
support of various Mobility Products,
computer systems Software &
and services peripherals
worldwide.
11. Competitor Profile: Microsoft
The world's #1 Sector: Technology
software company Industry: Application
provides a variety of Software
products and Products: Video
services, including game consoles,
its Windows servers and storage
operating systems software, and digital
and Office software music players.
suite.
12. Apple’s Position within the
Industry
Personal Computers Apple needs to focus
Lack customer & on product
product service differentiation to avoid
Competitors dominate becoming a low-
market margin commodity,
Multi-Media especially in terms of
Peripherals digital music and
Innovative; first to communications.
enter the market
14. Value Chain Analysis
Supporting Activities:
General Administration:
Identify new-product market opportunities &
environmental threats, public image & corporate
citizenship
Human Resource Management
Recruit, train, motivate, challenge, and promote the
most talented employees
Procurement
Good relationship with suppliers,
15. Value Chain Analysis
Primary Activities:
Technology Development
Research & development leading to product and process
innovations, timeliness of technology developments,
encourage creativity
Operations
Product design, productivity of equipment, effective
quality control systems
Marketing and Sales
Identify customer segments, innovate sales &
advertising, image of quality, favorable reputation, brand
loyalty
Service
Ability to provide replacement parts or tech support,
warranty/guarantee, quality of customer education &
training
16. Core Competencies & Competitive
Advantage
Procurement
First computer software company to negotiate with
RIAA to allow consumers to legally download music
online
Technology & Development
Main objective is to be the leading innovator of new
technologies that change the way people live their daily
lives
Marketing & Sales
Identify specific customer segments and needs, develop
an image and reputation of quality, innovative
advertising
17. Strengths Relative to Rivals
iPod & iTunes software revolutionized the music
industry, worked with RIAA to develop deal
Considered the BMW or “cool” computer system
to own
PC is a mature industry/product—Apple found
new ways to spark demand
Successfully differentiate products
Brand Image and Recognition
18. Weaknesses Relative to Rivals
Apple’s market share is low as prices for
windows-based machines fall
Apple has limited number of suppliers to obtain
raw materials
Apple uses third-party music content—potential to
limit music or limit availability in the future
Promotional activities focus on core groups—
misses the larger audience of PC’s for non-
graphics based business and home users
Cell phone vs. iPod
19. Industry Specific Competitive
Advantages
Development of innovative new
technologies
Dell grew successfully by eliminating the
middle-man and selling direct
Microsoft is #1 software company
HP is currently the #1 PC manufacturer
21. Operating Income and Net Income
1,000,000
800,000
600,000
400,000
Dollars (in thousands)
Operating Income
200,000
Net Income
0
2000 2001 2002 2003 2004
-200,000
-400,000
-600,000
Years
22. Asse ts, Liabilitie s, Stockholde r's Equity
9,000,000
8,000,000
7,000,000
6,000,000
Dollars (in thousands)
5,000,000
Total As sets
Total Liabilities
Total Stockholder's Equ
4,000,000
3,000,000
2,000,000
1,000,000
0
2000 2001 2002 2003 2004
Years
23. Net Profit Margin
15
10
5
0
2000 2001 2002 2003 2004
-5
Apple
Percent
Dell
-10
HP
Industry
-15
-20
-25
-30
-35
Years
24. Current Ratio
4
3.5
3
2.5
Apple
Years
Dell
2
HP
Industry
1.5
1
0.5
0
2000 2001 2002 2003 2004
25. Total Debt to Equity
2
1.5
1
0.5
Apple
Dell
HP
Industry
0
2000 2001 2002 2003 2004
-0.5
-1
-1.5
26. Revenues/Total Assets
2.5
2
1.5
Apple
Dell
Year
HP
Industry
1
0.5
0
2000 2001 2002 2003 2004
28. SWOT Summary
Strengths:
Innovation; first to enter the market
Product & Market Development
Weakness:
Customer and Product Services
Opportunities:
Strategic Alliances with leading communication firms
Threats:
Forward integration
Becoming a low- end commodity
29. Core Issue of Apple
Apple needs to focus on product
differentiation to avoid becoming a low-
margin commodity, especially in terms of
digital music and communications.
32. 5-year Expectations
By 2010 most cell phones will have mp3
capability.
High quality customer support services will
be in great demand.
33. Future Scenarios for Apple
Best Case
Leader in music capable cell phones
Unsurpassed customer support
Worst Case
Become a low-scale commodity
Fail to integrate quality support services
Most Likely
Continue to successfully differentiate out products
Retain strong support and service operations
34. Possible Objective Shifts
Worst Case Scenario
Competitive position
Best Case Scenario
Productivity
Public responsibility
36. Corporate Level Strategic
Alternatives
Enter communications industry
Establish relationship with cell-phone carrier
Expand customer service capabilities
Add brick & mortar locations that focus on
training clinics to use Apple products, service
their product problems, Apple “Geek Squad”,
etc…
37. International Corporate-Level
Alternatives
Global brick & mortar locations
Nearly 2.4 billion people living in China
and India alone, accounts for 37% of the
global population
Major areas of economic growth are in
new-markets (China & India), and in
product & service expansion
38. Strategic Alliances as Corporate-
Level Alternatives
Establish relationship with cell phone
carrier
Entrenched in professional media creation
markets, provide fundamental intellectual
property to be used in consumer oriented
software
39. Acquisition & Restructuring
Corporate-Level Alternatives
Apple is limited to the number of suppliers
it can use to obtain raw materials
Some key components are subject to
industry-wide availability constraints and
pricing pressures
Apple needs to find multiple component
suppliers
Possibly acquire suppliers
40. Keys to Success
International
Country specific economic, social, political,
technological, and ecological factors
Strategic Alliances
Challenge in negotiating contract terms &
copyright agreements
Acquisition and Restructuring
Finding multiple component suppliers
41. Long-Term Objective: Technology
Leadership
Enter communications industry:
Focus on product development and
differentiation in areas of digital music and
communication
Expand customer service capabilities:
Global brick & mortar locations that focus on
quality support services (training and tech
support)
43. Business Level
Strategic Alternatives
Strategic Business Units
Multimedia Devices and Software
iPod, iTunes, etc.
Computers
iMac, iBook, etc.
Computer Hardware
Computer Software
Safari, iMovie, etc.
45. Differentiation: Pros and Cons
Pros: Cons:
Larger market than focus No cost advantage
differentiation
Hard to sustain due to
High customer loyalty
imitation
Could achieve greater
Reputation for innovative
differentiation with
products
focused marketing
• Relevant Rival: Microsoft
46. Focus Differentiation:
Pros and Cons
Pros: Cons:
Ability to meet Less opportunities for
targeted segment’s growth
needs Targeted segment’s
Ability to adapt to demand has large
segment’s changing impact on revenue
needs or demands Non-focus oriented
High customer loyalty competitors can better
within segment compete in pricing
• Relevant Rival: Dell
47. Generic Competitive Option:
Differentiation
Grand Strategies
Market Development
Product Development
Innovation
Strategic Alliances
49. Strategic Choice
In order to achieve the long term objective
of technological leadership it is
recommended that Apple establishes a
strategic alliance with a leading
communication provider
