Apple 2006 Ellen Suprun Julie O’Halloran Wojciech Jagiello Finbarr Kearney Kingsley Egwim

Introduction External Analysis Internal Analysis Strategy Assessment and Recommendations

Porter’s Five Forces Threat of Entry Buyers Suppliers Substitutes Low High capital investment Commoditized market makes it difficult to differentiate Substantial dominance of Wintel platform and low-cost large-scale players (Dell, Gateway, HP, IBM) Oligopoly market Threat of Entry Buyers Suppliers Substitutes Low PC and new applications High End-users are mostly loyal Imperfect knowledge about price forming High (components suppliers) Most components are commoditized, however Intel, Motorola, IBM become dominant, that increases power of supplier Low No Mac clone available No competing product in the Mac market High PCs are available in multiple configurations, performances and price ranges Other firms offer as good products Rivalry is very high

The Value Chain Leadership Culture Company Infrastructure Support Activities Company Infrastructure Information Systems Materials Management Human Resources Jobs and Wozniak John Sculley Mike Spindler Gilbert Amelio Return of Steve Jobs R&D Production Marketing and Sales Customer Service Apple have always added value through R&D Failed R&D project with IBM Vertical Integration to outsourcing 1998 to reduced costs Premium Pricing Brand Loyalty Retail Outlets Low market share in the corporate market place

Strengths Technology and R&D team Investors Organizational culture Brand Loyalty Marketing Partnerships Page 5 – Microsoft 150million – 1997 Head of IT Failed R&D:

Weaknesses Lack of compatible software 1984 Strategy change inconsistent with the business model – cutting costs Failed investments Leadership – changes and succession planning

Opportunities iCloud New markets- expansion into mobile phones, tablets, BRIC countries Large corporate market segment

Threats Open architecture Economic downturn Competitors Suppliers Legal issues The majority of threats come from other companies including Nokia, Sony, and Google with their respective products. Smart phones are one popular example that stands to compete against the iPhone. The fact that these phones run on the 3G network also puts iPhone behind in the speed race. Although the economy is no longer in its volatile stages, the release of the iPhone is still in a time where people are cautious of spending money.

Apple’s Competitive Strategy Differentiation Strategy Core competencies Innovative Culture Team spirit (people) Marketing Consumer Loyalty Distribution network

Questionable moves Mac Clones Niche market Strategy change & Leadership problem Partnership with IBM

Critical Success Factors Leadership of Steve Jobs Marketing and design Innovation and new product development

The role of vertical integration in strategy Simplicity and quality Complete user experience Capturing values on every step Benefits Higher costs of production and development Not dependent on innovation Dangers Importance of strong leader Apple being relatively fragile Preventing others from innovating

The iPod Phenomenon Launched November 2001 Buy – Listen - Manage Sold 42 million iPods by 2005 75% market share iTunes: a justified loss leader 2005 -39% Apple revenue Complement: The indirect profits it generated through ipods outweighed the loss it made High storage capacity, sleek design and appealing functionality $50 Premium over other mp3 players Leveraged logo in accessories market $90million in iPod related services iTunes: the first legal site for downloading music Loss leader but resulted in sales increasing Captures Value at every step:

2006 to Date Apple Computer-> Apple 2007, iPhone, Apple TV 2010, iPad Ongoing Software Innovation (iCloud)

Recommendations Vision and leadership Learn from mistakes Corporate Social Responsibility Stick to Core competencies Design Innovation and R&D

Any Questions?