Apple, Inc. Formulation Presentation March, Mathew Lugo, Brooks Johnston, Jessica-Anne Stoudemire, Kerri Barringer, & Ben Ponds

Executive Summary Presented by: Kerri Barringer

Apple Profile Products: Desktop computers, laptops, digital music players, software Markets: High-end, technology-savvy users Size: $8.3 billion in sales in 2004 Industry: Key Players: Dell Hewlett-Packard Microsoft Keys to success: Innovation Quality support services

Apple’s Mission & Vision Mission: Apple is in the business of innovating, manufacturing, and marketing/selling computer hardware and software solutions, related peripherals, and communications equipment. Vision: To be a leading innovator of new technologies that change the way people go about their daily

General Sector of the External Environment Presented by: Ben Ponds

Operating Environment Economic Factors Intense growth – dependent on machines Demand for product services & support Social Factors Wireless communication Powerful & portable devices Political Factors Copyrights protection Technological Factors Strong rivalries among top competitors Continuously changing products Ecological Factors Pollution Corporate Social Responsibility Summary Product support services Powerful & portable devices

Industry Analysis Presented by: Matt Lugo

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

Competitor Profile: Hewlett Packard Hewlett-Packard Company provides various products, technologies, software, solutions, and services worldwide. Sector: Technology Industry:Diversified Computer Systems Products: Servers, Business Critical Systems & Software

Competitor Profile: Dell Engage in the design, development, manufacture, marketing, sale, and support of various computer systems and services worldwide. Sector: Technology Industry: Personal Computers Products: Desktops, Mobility Products, Software & peripherals

Competitor Profile: Microsoft The world's #1 software company provides a variety of products and services, including its Windows operating systems and Office software suite. Sector: Technology Industry: Application Software Products: Video game consoles, servers and storage software, and digital music players.

Apple’s Position within the Industry Personal Computers Lack customer & product service Competitors dominate market Multi-Media Peripherals Innovative; first to enter the market Apple needs to focus on product differentiation to avoid becoming a low- margin commodity, especially in terms of digital music and communications.

Value Chain Analysis Presented by: Brooks Johnston

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,

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

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

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

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

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

Financial Analysis of Apple Presented by: Kerri Barringer

SWOT Summary & Core Issue Presented by: Matt Lugo

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

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.

Long Term Objective & Strategic Scenarios Presented by: Ben Ponds

Long Term Objective Technological Leadership Product Development Quality Support Services

5-year Expectations By 2010 most cell phones will have mp3 capability. High quality customer support services will be in great demand.

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

Possible Objective Shifts Worst Case Scenario Competitive position Best Case Scenario Productivity Public responsibility

Corporate Level Business Alternatives Presented by: Brooks Johnston

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…

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

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

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

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

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)

Business Level Strategic Alternatives Presented by: Jessica-Anne Stoudemire

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.

Generic Competitive Options Differentiation Focus Differentiation

Differentiation: Pros and Cons Pros: Larger market than focus differentiation High customer loyalty Reputation for innovative products Cons: No cost advantage Hard to sustain due to imitation Could achieve greater differentiation with focused marketing Relevant Rival: Microsoft

Focus Differentiation: Pros and Cons Pros: Ability to meet targeted segment’s needs Ability to adapt to segment’s changing needs or demands High customer loyalty within segment Cons: Less opportunities for growth Targeted segment’s demand has large impact on revenue Non-focus oriented competitors can better compete in pricing Relevant Rival: Dell

Generic Competitive Option: Differentiation Grand Strategies Market Development Product Development Innovation Strategic Alliances

Generic Competitive Option: Focus Differentiation Grand Strategies: Concentrated Growth Concentric Diversification Strategic Alliances Product Development Innovation

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