Emmacolburn.weebly.com



Emma ColburnProfessor RaffetyMGMT 340December 1, 2015Apple: CA3Emma ColburnProfessor RaffetyDecember 1, 2015IntroSteve Jobs founded Apple with Steve Wozniak on April Fools Day, 1976. Jobs was only 20 years old, and persuaded Wozniak to form a company selling the primitive personal computer he had created. They sold 200 Apple I’s at $666 each from Jobs’ garage. The computer had many limitations, but it was clear the two electronics enthusiasts were dedicated to making the company work. Almost 50 years later, Apple is the world’s most valuable company with a market capitalization of over $450 billion. They are the leader of the personal computer industry, and successful in other industries including music downloading, cell-phones and tablets. Apple’s business, functional and corporate strategies are crucial to their triumph. It’s important to remember that Apple also struggled along the way, especially during their initial missteps in leading the personal computer industry.First in my case I will complete an external analysis for Apple in the 1970s and 2010s. Second, I will explore Apple’s competitive advantage and various strategies. Lastly I will discuss how new technologies including iPhones and iPads are changing the computer industry. B. AnalysisLate 1970sCreating ValueIn the late 1970s, Apple ‘s demographics included wealthy, tech savvy men and educators looking for relatively easy to use personal computers with basic programming, word processing and spreadsheet capabilities. Their customers were extremely innovative and had no problem spending time assembling computers or fixing bugs. Computers were new and people needed a new form of technology to virtually document information without searching for a hobbyist. Apple first created great value by introducing the Apple II in 1977- a visually appealing personal computer with a microprocessor, keyboard, monitor, basic programming software and disk drive.External Analysis and Implications on ProfitabilityBuyersApple’s business was in the embryonic stage during the late 1970s. The personal computer industry was new, and Apple’s products had limited performance and inferior quality. Many people were unfamiliar with computers, and there was a lack of complementary software for people to install. The Apple I, introduced in 1976, had many issues including a lack of case, keyboard and power supply. The Apple II on the other hand was easier to use with more capabilities but still lacked important features like sufficient memory. Apple had high production costs because of a relatively low sales volume. Steve Jobs and Steve Wozniak originally sold products from Jobs’ garage so they had no retail buyers, only end-users.Their end buyers were schools and tech savvy “geeks” who saw the potential of personal computers. Buyers had very low bargaining power since there were hardly any personal computers to choose from at the time. In turn, Apple raised prices from $666 for the Apple I to $1,200 for the Apple II to increase profits. Buyers were not a threat to them.SuppliersMotorola was Apple’s biggest supplier since they supplied microprocessors. Parts manufacturers and third party developers for software programs were other key suppliers. Apple also purchased raw materials like plastic and aluminum to build their products.Suppliers had high bargaining power since microprocessors and computer parts had few replacements and were vital to Apple’s success. Intel was the only other competitor and Apple made it clear they were sticking with Motorola. Because Motorola was in such a powerful position, they could charge higher prices than if the industry was more fragmented. Suppliers were a big threat to the personal computer industry’s profitability. Threat of EntryBy 1980, Apple was generating over $200 million in sales and was the leader of the personal computer industry. Threat of entry was low and didn’t harm Apple or the industry. Barriers to entry were high because the knowledge required to compete in the personal computer industry was complex and hard to understand. Established companies like Apple were protected from competitors who lacked necessary capabilities. Prices were also high because there was an inability to experience any economies of scale, and demand was fairly low because buyers were still unfamiliar with the computer industry’s expensive products.SubstitutesThere weren’t any substitutes for personal computers at the time since they were a new form of technology. The only substitute for Apple was an IBM computer or one purchased from a hobbyist. The IBM PC, introduced in 1981, was a popular substitute with a 16-bit microprocessor from Intel that used a Windows operating system. Apple saw them as a threat, but since the computer industry still had few close rivals, Apple could continue charging premium prices and earning additional profits. Competitive RivalryCompetitive rivalry was low in the 1970s when there was no close competition and Apple held most of the market share. Demand was going up, but Apple was the only company using a graphical user interface. Apple was the first company to start solving computer design problems, so they had a large market share after introducing the Apple II. Rivalry within the industry “depended on educating customers and opening up distribution channels while perfecting design,” which Apple did. Apple was the top competitor in the embryonic personal computer industry, and competitive rivalry was not a plimentsThe Apple II had a disk drive that allowed consumers to install third party compliment software. Programs including EasyWriter (word processing) and VisiCalc (spreadsheet) were only available on the Apple II and allowed customers to use personal computers for business for the first time. Compliments were limited because it was a new industry and Apple was still becoming established. The industry also wasn’t sure what kind of demand there would be for compliment software. Although there weren’t many, complements still had bargaining power. For instance, in 1985, Microsoft threatened to stop developing crucial applications for the Mac unless Apple granted them a license. Key Success Factors in the IndustryKey success factors in the industry included making personal computers easy to use so they could expand their market segment past hobbyists. The Apple II was popular among professionals and educators in addition to tech savvy men for this reason. Making computers visually appealing so customers weren’t looking at bolts and wires was also important. Compliments allowed customers to expand their capabilities when using a computer, and producing both high-end and low-end products was crucial in attracting different demographics. For instance, the Macintosh was a low-end portable machine that appealed to different market segments than the high-end Lisa line. Initial Missteps in Leading the IndustryApple failed to build on its competitive advantages to lead the industry. Since one executive voted against it, Apple decided against licensing their Mac operating system, meaning Mac clones couldn’t be made. Apple relied on their differentiation appeal (being the only company to sell products using a graphical user interface) to justify their extremely high prices. By 1990 other companies like Microsoft introduced products with a GUI, so Apple’s appeal quickly declined. Apple’s products were imitable, and Motorola lacked the scale of Intel, which led to higher costs. People were more likely to use Microsoft because more software was available and it was easier to adapt to. Apple could’ve succeeded without licensing their operating system if they were inimitable with more compliments. Apple had good quality and customer responsiveness, but wasn’t rare.Strengths and Weaknesses (1976-1990)Apple’s biggest strength was combining Steve Wozniak’s technical skills with Steve Jobs’ entrepreneurial vision and Mike Markkula’s business connections to form a powerful company organized for success. They utilized their capabilities very well.Apple’s biggest weakness was their inability to sell into corporate America. They became “boxed into their niche” with a high cost structure and had trouble expanding beyond that. Steve Jobs also distorted reality a lot of the time. He could talk people into anything, but his deadlines and missions weren’t reasonable. TodayExternal Analysis and Implications on ProfitabilityBuyersAfter the introduction of the iPod and iPhone between 2005 and 2008, Apple became popular among a younger generation of buyers. End users include trendy millennials who want the newest, fastest technology along with adults living in upscale locations with high incomes who desire quality products. Customers are not willing to deal with slow computers, tedious assembly or computer bugs like they were in the 1970s.Outside retailers like Best Buy are powerful buyers. There are many companies in the computer industry, so buyers can choose which to purchase from. Retailers also buy in large quantities even though end users don’t. Buyers like Best Buy purchase from several companies at once, pitting companies within the industry against each other. Although this is a threat, Apple entered retail themselves in 2001 and now directly sells through their own stores. Apple decreased their prices in 2006, although they still charge premium prices today. SuppliersIntel has supplied Apple’s microprocessors since 2005. This change was an important long-term decision since Intel chips are faster with lower power consumption. Apple also buys parts and raw materials like aluminum in bulk. Suppliers still have high bargaining power because microprocessors are a necessary computer part and the industry is still fragmented. Suppliers are a threat since Intel is necessary to Apple’s success. They have high bargaining power and could choose to charge higher prices because of it. Threat of EntryThere is still a low threat of entry. The computer industry is rapidly growing and demand is increasing, but barriers to entry are keeping competitors from entering the industry. Established companies like Apple see economies of scale by mass-producing computers and buying raw materials in bulk, so newer companies are at a disadvantage. Brand loyalty also exists since Apple is the most preferred computer brand and many customers aren’t willing to change to a PC or unknown brand. High customer switching costs are another reason for the low threat of entry. It takes a lot of time and money to purchase a Mac and learn the operating system. In order to switch companies, customers would have to buy a new computer with a new operating system, and reinstall their software and documents. SubstitutesGoogle is one popular substitute for Apple. They entered the desktop and laptop business in 2012 with their introduction of the Chromebook- a discount laptop alternative. The Android operating system is extremely successful, and the Google Drive cloud service offers basically everything iCloud does. Google also has an app store.Microsoft is another cheap substitute. Microsoft computers ran Windows 8 as of 2013, which supported SkyDrive and the Windows app store. PCs are generally cheaper than Macs and there are more options to choose from. Substitutes are a strong competitive force, so Apple should be careful not to raise their prices since they’re already petitive RivalryCompetitive rivalry is higher today than in the 1970s. The computer industry’s competitive structure is fragmented, meaning there are a large number of small or medium sized companies in the industry. Many companies are competing for the same customers, and there are high storage costs to hold computers. Since growth is still high, this is not specifically a threat to Apple because people can still buy PCs without affecting their profitability. Apple was the most valued company in plimentsCompliments for Macs today include third party programs like Adobe Photoshop and Microsoft Office for Mac. Chargers and cases are also necessary items that customers purchase with their computers. Apple even has its own programs including iMovie, iPhoto, Garage Band, Safari and iTunes that are only compatible with Macs for the most part. Only Mac users can download Pages, Numbers and Sheets as alternatives to Word, Excel and PowerPoint. These compliments are critical to Apple’s demand and success rate, and industry profits depend on an adequate supply of them. Compliments have high bargaining power because available software is a big factor in deciding what computer to purchase. Many people choose Macs because of all the useful programs. Key Success Factors in the IndustryDirect selling is a big success factor in the personal computer industry. When Apple entered retail and began selling computers directly in-store and online their sales skyrocketed. Apple also began targeting a younger demographic of consumers through iPods and iPhones knowing there would be a spillover effect on computer sales. Utilizing cloud storage is also important in the industry so customers can store data such as “music, movies, books, documents and applications on remote servers” that they can sync across all their devices. Strengths and Weaknesses (1990-2013)Apple’s biggest weakness since 1990 is its high cost structure and excessive spending on research and development in comparison to its competitors. Apple also relied on its differentiation in the early 1990s (using a Graphical User Interface) to justify high prices, which backfired when other companies began using GUI’s.Focusing on great customer service at the “Genius Bar” is Apple’s biggest strength. The company employs intelligent, friendly employees who can easily help customers fix their devices. Apple also saw the potential in legal music downloads, which was a huge success. Steve Jobs had serious technological know-how, was entrepreneurial, and held a clear vision for Apple. He used his strengths to connect the company and found a great team of designers who worked closely with engineers, manufactures and marketers. Mapping Performance against the Building Blocks of Competitive Advantage since the 1990sApple is very efficient. By late 2012, they had 390 stores worldwide with tons of employees. They mass-produce computers and sell them through a variety of channels including online, in-store and through other retailers. Quality of excellence is important to Apple since they’re a luxury brand. They build computers with aluminum instead of cheap plastics. Macs rarely get viruses and last for years. Apple is an innovative company that produces stylish personal computers with faster processors, more memory and bigger hard drives than its competitors. OS X, introduced in 2001, was also quite innovative. This operating system had superior stability and faster speed, along with the ability to run multiple programs and support multiple users. ITunes was another innovative launch in 2001 that changed the way people could listen to music and purchase individual songs. Customer responsiveness is very high. Customers are loyal to Apple, and after a decade of growth “Apple was the most valuable company in the world measured by market capitalization.” Sales per share foot averaged $6,050 per U.S. store in 2012. Apple has an extremely strong performance and competitive advantage. Sustainability of Apple’s Competitive Advantage since the 1990sCustomers place a high value on Macs. They’re expensive (mostly over $1,000), but people believe the performance, quality, design and customer service is well worth the money, especially since they last for years. The Mac design is rare. Apple computers are sleek, modern and even viewed as a status symbol. Especially because of the Apple symbol on the computer, there is a distinct difference between Macs and other brands. Apple’s products are still not inimitable. Android is similar to the OS X operating system and has been extremely successful. Google Drive does everything if not more than iCloud, and the Google App store offers just as much as Apple’s. Apple needs to find ways to become inimitable. Apple is definitely organized for success. They utilize their resources and capabilities to the best of their ability, and are the most successful company in the industry. Overall they have sustained their competitive advantage, but need to work on becoming less imitable. Sculley’s Strategy for AppleJohn Sculley appointed himself chief technology officer and Apple CEO in 1990. He planned to introduce the Mac Classic in 1990, a cheaper version of the Mac sold for just under $1,000 to compete with rivals. He cut prices for Mac’s and Apple II’s by 30%, which caused a rise in sales but lower gross margins. He also cut costs by reducing the workforce by 10% and cutting salaries of top managers. Sculley decided to introduce new products up to twice a year and entered an alliance with IBM. Apple then adopted IBM’s Power PC microprocessor architecture, established two joint ventures, and started a project to help the companies work well together. Sculley’s strategy helped boost the top line but shrunk the bottom line because of low gross margins and high costs. Sculley finally left Apple in 1994 after trying to save Apple by implementing a focus low cost strategy that didn’t work for the company. Jobs’ Strategy for AppleSteve Jobs permanently became Apple’s CEO in 1998. He visited Bill Gates to strike a deal with Microsoft, who invested $150 million in Apple and continued producing Office for Mac. Jobs ended licensing deals with clone makers, which included spending over $100 million to acquire assets of Power Computing and its license. He stopped selling unpopular products, reducing product lines from 60 to 4. Jobs also pushed the company into online distribution. These fixes gave Apple more time to stabilize and earned a favorable reaction from the stock market, but more had to be done to increase demand. How were Apple’s products positioned in the market over time?Apple always had a focus differentiation strategy. In the 1970s, Apple was a niche company. Their only customers were hobbyists and wealthy, innovative consumers looking for a personal computer. Prices were also high (the Apple II cost $1,200). Apple differentiated itself by selling a computer without any visible wires that was relatively easy to use. There was nothing like this at the time. Apple still uses a focus differentiation strategy today. Macs are still expensive and range from $899- $1,799. Customers now include wealthy millennials and adults looking for fast, quality technology. Apple differentiates itself today by using aluminum rather than plastic and by providing excellent customer service through their “Genius Bar.” Successful differentiation helps Apple charge premium prices. Demand has grown so much over time that costs are actually lowered through economies of scale, which widens their profit margin. Although their business strategy has stayed the same, their target market has changed. How have Apple’s Functional Level Strategies Aligned with their Positioning in the Market Since 1990?Aggressive marketing helps Apple build brand loyalty. Apple has many fun commercials that focus on the superior quality and differentiation of its products while directly appealing wealthy millennials and adults. Apple is also “differentiated by attributes that define product excellence.” They have a large budget for research and development to design the most high-end products for their niche market. Apple also invests in employee training so they can provide superior customer service that’s on par with other focus differentiation companies like Nordstrom. Lastly Macs are so popular that Apple experiences economies of scale by mass-producing them.Primary Roles of Value Creation Functions in Achieving Superior EfficiencyValue Creation FunctionPrimary RolesInfrastructure (leadership)Provide company-wide commitment to efficiencyFacilitate cooperation among functionsProductionWhere appropriate, pursue economies of scale and learning economicsImplement flexible manufacturing systemsMarketingWhere appropriate, adopt aggressive marketing to ride down the experience curveLimit customer defection rates by building brand loyaltyMaterials managementImplement JIT systemsImplement supply-chain coordinationR&DDesign products for ease of manufactureSeek process innovationsInformation systemsUse information systems to automate processesUse information systems to reduce costs of coordinationHuman resourcesInstitute training programs to build skillsImplement self-managing teamsImplement pay for performanceHow has Apple’s Corporate Strategy Created Value since 1990?Since 1990, Apple has pursued related diversification. Their competencies can be applied across numerous industries including personal computer, cell phone, music, tablet, etc. Pursuing these other industries helped them become extremely successful in areas other than computers. They also have superior strategic capabilities allowing them to control bureaucratic costs. Apple also pursued vertical integration through owning iTunes, controlling selling through their own retail stores, and by building products. Apple creates the most value possible to continue holding a large market share in relation to their competitors. How the iPhone and iPad are Changing the Industry, and Their Implications for Apple and its Competitors?The iPad revolutionized the tech industry. It has all the basic features of a computer (Wi-Fi, 3G, touch-screen keyboard, Pages, Sheets and Numbers) without the hassle of lugging around a laptop. This fulfilled Steve Jobs initial concept of what a computer should be. His idea was to “have an incredibly great computer in a book that you can carry around with you and learn how to use in 20 minutes…” This led to many imitations since tablets became so popular. This implies that less people will purchase computers since tablets are smaller, lighter and more portable. IPhones are also extremely popular, made with gorilla glass and allow you to do everything you can on an iPad. By 2012, about 125.04 people owned iPhones. Smartphones make it possible to access the Internet anywhere, not just from a computer. With these devices you can access the internet, read documents and communicate at the touch of your fingertips. The personal computer isn’t a necessity anymore unless you have a demanding job or school career. World Wide iPhone Unit SalesYearWorld Wide iPhone Unit Sales (millions)20071.46200811.63200920.73201039.93201172.32012125.04C. ConclusionIn conclusion, Apple has such a strong competitive advantage because they focus on quality, efficiency, innovation and customer responsiveness. Apple initially failed to build on these advantages to lead the industry because their products were originally too imitable. Apple could have succeeded despite their decision not to license the OS operating system if it was more unique. Both Sculley and Jobs used different strategies to try and save Apple. The structure of the personal computer industry has changed from only appealing to hobbyists in the 1970s to becoming a necessary status symbol for millions of millennials and wealthy adults who desire quality technology today. Apple may be the world’s most valuable company, but customers are starting to value cell-phones and tablets possibly even more than computers. Although the personal computer industry won’t decline any time soon, it’s important for Apple and other companies to reconsider their customers’ needs. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download