Background information – The firm and its operations

Apple was founded at 1976 by Steve Wozniak and Steve Jobs in USA. It operates in the computers business worldwide – manufactures hardware, software and peripherals. In addition, Apple offers digital music services and products (digital music services – iPod music player and iTunes web music store).

Apple is currently the only company in the world that makes both hardware and software with its unique operating system. Its products are characterized by cutting edge technology, user friendliness and uniqueness. While most PC owners “put up” with their machines, Apple’s customers “love their Macs”. Apple has always invested more in R&D than any of its competitors in order to make its products “Insanely great”. Apple has known bad times especially in the 90s and was counted as a “dead horse” by many. In 5 years Apple had 4 CEOs and company strategy changed upon each of them. Current CEO is Steve Jobs, Apple founder, who “came to the rescue” after being away from the company for 12 years. Steve Jobs is the mind behind Apple 1 , Apple 2 and the 1st Macintosh in company’s early years

Figures

It has offices in USA, Europe and Far East.
Holds ~ 4% of world market personal PC.
Apple employs ~17,000 employees all over the world.
Market cap 54.04 billion$ .
Apple is a public company traded in NASDAQ (Apple share – AAPL)
In the last years Apple increased sales and profitability
Company Goals

Apple main goal is to lead the industry in innovation with its award-winning products and spread the digital music revolution. Taken from the mission statement – full text -

“Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning desktop and notebook computers, OS X operating system, and iLife and professional applications. Apple is also spearheading the digital music revolution with its iPod portable music players and iTunes online music store. “

Core Issue – How to maintain the technological leadership?

Apple is known for its technology innovation – Every time that Apple led the market in a product category in the past 2 decades it had a hard time maintaining the leadership position. Soon enough imitators took the lead. Current challenge – how to maintain leadership in the leading product – iPod (2001)

Apple can’t allow history to repeat itself and should strive to maintain its technological edge.

Minor Issue – If you can’t fight them Join them?

Most of Apple’s products are compatible only to Apple’s MACs. iPod is the first product that Apple produced which is compatible to Windows. iTunes music store followed this strategy and now (as of late 2003) the service is available also for Microsoft Windows users.

By allowing its products and services to work on Microsoft OS, MAC with its unique OS will become less relevant than ever. We believe that Apple should face the issue of MAC roadmap – How can Apple strength MAC’s market share? Join forces with Microsoft? Maybe it is time to give it up?

Minor Issue – Mainstream or Premium Products?

Apple’s different CEOs over the years had different views and strategies regarding the market position apple should maintain. In early 90s Apple made an effort to compete in the mainstream market and reduced costs but still did not gained a sufficient market share. When Steve Jobs was back as CEO he overridden some of the attempt to make Apple’s products more mainstream and less unique. We believe that Apple should attend the question of how to sell more of its products without compromise its distinguished high end technology?

Environmental analysis
The Megatrends

The personal computers manufacturing has become a global steadily growing industry by 1999. The computers and the computer parts and components become increasingly standardized, and the manufacturers spent fewer resources on the R&D.

The switch from the “built-to-stock” marketing (building computers to pre-established specifications and accumulating inventory in advance of sales) to the “configure-to-order” model (shipping the basic PC chassis to a distributor, which configures the PC to customer specifications).

The expansion of the world Wide Web with the opportunities it gives and the technologies it demands – like faster and friendlier computers and devices.

Characteristics of Home/Host Markets

The substantial change in the global market – from unsophisticated firs-time customers in 1980s, which put most emphasis on service, support and compatibility, to more experienced ones, demanding new products, progressive technologies and new features.

Home market – Apple computers were mostly suitable for the education and desktop publishing needs because of the ease of exploiting, which made them relatively prevalent in those industries. The private customers preferred the Intel-based and the IBM machines.

Host Markets – Apple enjoyed particular success in Japan, until Fujitsu started the price war, and in a year Japan became one of the least profitable Apple’s markets. Another target for Apple was China, which has been predicted to become the largest market in the world. It was widely believed that the Apple’s configurations would offer the best solution for handling the Chinese characters. 

Culture(s)

The PC industry became world-wide culture, and the computers became an integral part of people’s lives, entering nearly every area of interest and action. The PC buyers fell into 4 categories: education, business, home and government. The expansion of the Internet led to interest in new technologies and brought about the PC sales over the Web. Soon having a computer was not enough and customers turned to new progressive devices, like PDAs, smart phones, Playstations, etc. Being technologically equipped became a norm and even an expectation.

Forces for Localization / Globalization

Mostly the modern economy led the companies to global business and only few tried to stay with the local markets. The competition with the Compaq, Dell and IBM encouraged the Apple to look for new markets.  The Apple’s top managers aimed to Japan and China markets, and also Apple had a branch in Europe. More Apple created a daughter company in Taiwan – Umax Data Systems, which sold Apple’s products in Asia.. The best example of Apple’s global success is the iTunes Music Store project, which enables Mac users to download songs for 99 cents. The technology is easy and friendly to use, and customers from all over the world seem to enjoy it.

Porter’s five forces

Bargaining power of suppliers – most of the industry relies on various suppliers. Apple, as opposed to them, was self sufficient relying mostly on itself.

Threat of new entrants – market is not attractive to newcomers due to: highly established companies (Dell, Compaq, HP) controlling large portions of the market, low margins and an overflowed market.

Availability of substitute products – substitute products are highly available. Due to Apple’s products uniqueness they’re more vulnerable for imitations

Bargaining of power buyers – major business customers in the industry are enabled to acquire bargaining power. However, most of Apple’s customers are private customers.

Rivalry among competing sellers – the PC and technologies is a rapidly developing branch and the entering of new firms is expected always, which strengthens the competition.

Apple’s resources:

Tangible Resources:

Financial- Apple is one of the big companies of PC and multimedia. Since Apple increased at the last four years it’s net incomes to ,335 Milliard, they have ability to gain credit.

Organizational- Apple has many systems f control. Since Apple controlled all aspects of the computer, it could offer customers a complete desktop solution, including hardware, software and peripherals that allowed customers to “play and plug”.

Physical- Apple was founded in California. Apple is a global company with branch all around the world. They develop excellent computers with the best materials in the market.

Technological- Apple invented lots of patents: they developed the first PC, PC with graphical user interface (GUI), a point and click mouse, laser printers, iPod and iTunes. Apple also featured a windowing system, investigated programs such as Aldus (later- Adobe), PageMaker and Microsoft Excel. Apple’s products are user friendliness and uniqueness.

Intangible Resources:

Human- Apple’s corporate located in the heart of Silicon Valley in Cupertino, California, bring together the best and the brightest people in an attractive location. Some of the best schools in the country are within a short drive of Apple’s main campus, including Stanford University, university of California at Barkley, and Santa Clara University. With so many schools nearby, they enjoy plenty of cultural and educational opportunities.

Innovation- Apple invented the PC, the graphical user interface etc. But then, the company had a decade in which it took a nap. Apple had a monopoly on the graphical users interface for almost ten years. Then, the monopoly expired. When Jobs came back he manages an innovation by hiring people who want to make the best products in the world. The key is to have people with passion for excellence. Apple now has scientific skills that allow them to innovate better and advance patents.  

Reputation- In the previous decade Apple lost its reputation. Lots of suppliers thought that Apple is going to die. The feeling was that they couldn’t rely on anything Apple said. Only Jobs hard work rescue Apple from crash. Apple’s reputation grew significantly in 2005, according to the annual reputation Quotient ranking. Apple climbed seven points in this year’s survey, landing as the company with the 27th best reputation in the US.

Strength and weakness:

Strengths:

Apple known in it’s invested at the R&D area. Apple always was at the high end of the scale spending on R&D. Apple hasn’t cut R&D spending. The company spent 4 million on R&D in 2005, which was more than it spent in 2001.
Apple has the best technology in personal computing and a major market share. Everybody knows its high quality and advanced products.
Apple known at its best services to its customers. A poll of 80,000 people conducted by university of Michigan shows that Apple kept its customer satisfaction at the highest level since 1994. As Jobs said: ” I get asked a lot why Apple’s customers are so loyal. It’s not because they belong to the church of Mac! It’s because of the best service and the quality of Apple’s products”.
Apple has a drive for excellence. As Jobs said: “I used to think one great engineer was as valuable as two good engineers. Now I think one great engineer is as good as 50 good engineers”. Apple sees the employees as the most important instrument of the company. They invest money in order to educate their employees and to develop them.             

Weaknesses:

Apple failed to react to the competitive market. Their action was slow and late. Apple’s problem was that they loose the momentum and didn’t penetrate into the public conscious. Every time that Apple had jumped into the lead in product category during the past two decades, it had had difficult in sustaining its leadership position. In addition, their high prices were incompatible to the market prices.
According to Apple history we can see that in 11 years the company had replaced 4 CEOs, that each of them wanted to made a different revolution. That strategy reflects an instable position. In addition each of the CEO did internal changes when times were bad. All of them reduced the headcount. These actions cause the employees and the customers to loose their faith in the organization.
The major weakness of Apple was its incompatible resources. As opposed to other computer companies, Apple developed the PC, its operation system and central programs for the computer users. Apple’s customers could transfer information to the Mac computers only. The Macintosh couldn’t interface with any other computer beside itself. Apple dissenter other technologies.
Alternative Courses of Action:

1)      Increasing returns: Network effect- Apple’s problem was the fact that they haven’t been compatible. They have the Mac, which is very unique product. In order to be compatible Apple should modify the Mac and made it fit to other systems. If Apple’s products will be in a standard that rights for everyone they could sale more accompanying products. The network effect will lead to Positive Feedback effect

Cons: The Mac is very unique and special program. If the Mac will be compatible to Microsoft systems it will be a mainstream product and not a premium one. In addition, it will decrease the value of the product. The Mac won’t be a unique brand anymore.

It is very expensive solution- in order to make this change the company should exchange all their products, which will cost a lot of money and resources.

Pros: This way of action will cause Apple to be leaders in the computer industry. The incomes will grow and the shares as well.

2)      Apple should invest on sales and marketing employees. Apple has excellent engineers. The lack                                of the company is in their marketing strategy. In order to lead in the competitive market they should develop that area.

Cons: This solution will cause the Mac to be a premium product. The Mac will loose its uniqueness. In addition, It is an expensive solution- The company will invest more money on marketing- training and development of all marketing employees, to recruit more salesmen, publication etc.

Pros: This strategy will increase sales, incomes and reputation.

New products have to be fully compatible with the standards (hardware – IBM, HP, SUN Microsystem, Sony standards and software – Microsoft).
To become a leader in traditional MAC commodity and in new areas as mobile communication, PDAS etc.  Apple has to invest more in R&D and invest in education of their employees
To take care of their traditional “MAC customers” and expand into new areas and emerging markets (China, Africa, South America…)
To improve continually the sales network, marketing, services and support of their customers
To be concentrated on the specific segments of communication and personal computer industry, not to compete with the mainstream  – HP, IBM, DELL…
What the future Holds?

Analysts forecast show controversy as to apples future.

we divided analysts data along with our own conclusions to two major possible outcomes:

Apple will endure another set back due to:

Increasing competition (Ipod Imitators) will result in a decrease of  Ipod sales.
A decrease in apple’s leading product sales will be accompanied by a slow down in stock price.
Keeping up with such remarkable growth tendencies will be virtually impossible, slow down in growth will have as moral/ reputation affect as well as a business affect.
Macs will not be able to cover Ipods descent affects, and attempts to appeal to a greater audience, after years of segregation will not pull through

Apples rise is just at its takeoff stages:

Apple’s retail store strategy has bare fruit, successfully contributing to the increase of “New to Mac” customers.
Ipods satisfied customers will lead a “switching” campaign, convincing PC users to switch to Macs.
Apples favorable reputations enforces commitment, great expectations and anticipation for apple’s future products will have a  positive affect on future product developments and sales.
Positive initial results out of recent joint ventures with Motorola (Mobile phones), Disney (ABC on the net), Intel and Microsoft (Boot Camp)

To our perception one of Apple’s major advantages lies in her ability to rehabilitate, recover and comeback with a strive for ingenious product and business innovation. However, we identified three major strategies that must be applied to assure blast off in the years to come.

Razzel Dazzel, Apple must come out with another customer  wowing innovation design
Segregation strategy must be reasoned and redefined. Joint ventures must be inserted to Apple’s business methodology’s.

Organizational stability must be reached, future organizational & strategic modifications must be dealt with velvet gloves.

Implementation

Securing /mobilizing  the resources

Building and developing new teams working on standardizing the Apple’s products, while cooperating with the IBM, HP and other relevant companies.

New strategies and advertising campaigns considering the culture and the traditions of the new market will start in China and Africa..

The time line for the implementation:

The goal is to approach new markets with the new products by the end of the year, because it’s a product with a shirt life cycle, and the competing firms come with their alternatives already. Apple needs to use its temporary advantage in time and popularity to conquer new markets, and to make this advantage permanent .

Overcoming resistance:

Apple’s staff and the management are ready for hard, but interesting work, and they’ll be highly awarded for their efforts. The resistance from customers side is also not expected – China and other Asian countries lack this kind of technologies, and they’re awaiting iPods and other high tech products.

Controlling the implementation:

The team working on new technologies will set the deadlines and project’s milestones and there will be the presentations for the managers of what has been done.

In the new markets there will be Apple’s agents learning about the needs and the preferences of potential customer and understanding the culture and tendencies of target markets and preparing the appropriate strategy.

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