Abstract As Apple surpassed all major competitors and had spectacular success in 2010, it left CEO Steve Jobs wondering if there was anything that could overturn the drive. “Apple Inc. in 2010”, is an evaluation case. This case will be further discussed using the state-and-prove order using the following five elements: 1. Bottom-line evaluation (position statement) 2. Evaluation criteria 3. Proof of the evaluation 4. Qualifications 5. Action plan Position Statement
Apple’s hits have been executed through first mover advantages, technological advances, and innovative strategies. Based on Apple’s current product positions, their success can continue into the next decade; however, it will be much harder for Apple to maintain their innovative momentum considering product substitutes and increasing competitive pressures. Evaluation Criteria Apple can be evaluated in many different ways given the numerous technological markets it has pursued. They can be broken up into the following product categories: computers, mP3s, and smart phones.
Since each of these product categories have their own significant impact on Apple overall, it would be wise to evaluate items such as market shares, gross margins, and unit sales within each group. These can be measured by taking a look at past years, where they stand currently, and projections a few years in the future. By doing so, it will indicate Apple’s strengths as well as weaknesses within the company. Proof of the Evaluation Personal Computers Despite Apple creating the first revolutionary “personal” computing devices, IBM was the one to bring PCs into the mainstream in the 1980s, says Yoffie and Kim (2010).
There were plenty of manufacturers in this industry and the reason for growth was driven by lower prices and expanding capabilities. Apple has never seen more than 4. 2% market share in the worldwide PC industry, whereas competitors in the big four – Hewlett-Packard, Dell, Acer, and Lenovo –had market share’s as high as 20. 3%. The sole advantage Apple has is that they have control over both hardware and software in comparison to competitors who rely on firms such as Intel and Microsoft.
Unfortunately, it doesn’t look like the PCs are very sustainable. Since they have been around since the 1980s, by now PCs are being viewed as old technology. The availability of the technology needed to create PCs is readily accessible which makes the barriers to entry very low. This simply means that it is extremely easy to produce a personal computer and for those customers who need one for the basic functions, this would be the option they would use. In fact, the “white box” computers, which are the generic computers make up 33% of the market.
It is also priced at a very low competitive price which creates high rivalry because due to the phasing out of PCs, for anyone who needs to purchase one they will opt to buy the cheapest computer. Additionally, there are plenty of substitutes in this day and age. Almost all smart phones have the capabilities that computers have plus many more, so what is the need for them? For Apple to maintain even a little bit of market share, an opportunity for this industry would be to focus on the education buyer category.
If schools across the country would use Macs from when children are in elementary schools until high school, they will most likely make a purchase of their own when it comes time for college. Having these products available for consumers while they are young and have them able to grow up with Apple, this will create high brand loyalty. This will most likely influence their purchasing decisions when it comes time to obtain laptops for college or for home use, which is very important since the home consumers represent the biggest segment which account for half of PC shipments worldwide (Yoffie & Kim, 2010). Pods Apple debuted their first of many iPods in 2001. At this time, there were many other portable music players, although Apple’s aesthetically pleasing design and large storage gave them a strong competitive advantage. While other MP3 players held only about an hour of music, the first iPod had the capacity to store up to 1,000 songs. According to Yoffie & Kim, Apple was continuously innovating their iPod for the next five years (2010). Apple allegedly held more than 70% of the MP3 market in the United States by 2010.
With the monumental success of the iPod, Apple expanded in this industry by becoming one of the largest purchasers of flash memory in the world. There was also the development of complementary products lines such as headphones, docking stations, cases, etc. Though Apple was already superior to competitors, nothing gave them a bigger advantage than the creation of Apple’s iTunes store. After its launch in 2003, sales shot up to 733,000 units and continued to explode (Yoffie & Kim, 2010). Customers thoroughly enjoyed the ease of use as well as music selection allowing iTunes to sell 10 billion songs and become world’s largest music catalog.
Given that iPods represent the product category with the most unit sales in 2009, 54,132 units, iPods have very high sustainability. As previously mentioned, Apple is constantly improving each iPod and if they continue to even make the smallest alterations, consumers will be racing out the door to go purchase the newest, “must-have” iPod. iPods themselves are very high quality, durable products but while consumers may have the same iPod for years, there are always the purchases of complementary products that can help drive this industry.
For every $3 spent on an iPod, consumers spend another dollar on iPod extra products (Yoffie & Kim, 2010). iPhone After two and a half years of development, Apple’s anxiously awaited iPhone was released in 2007. At this time there were already fierce competitors such as Samsung and Motorola who dominated the market, making it very risky for Apple to enter. Apple used the product differentiation strategy, offering consumers with a phone that was unlike anything they’d ever seen before. According to Yoffie & Kim, the first model of the iPhone sold over six million units over five quarters (2010).
New models of the iPhone were released in 2008 and 2009, making slight changes to the product and offering them at prestigious prices. Within two years, the iPhone went from zero to 30% of Apple’s total revenue and increased their market share to the third highest in the industry with 14. 4% in 2009. Much like the iPod’s iTunes store, the iPhone also had a store of their own, the App store. This allowed consumers to purchase applications to do just about anything they wanted. This was a huge part of the iPhone’s sales and success.
While operating systems like Andriod and Symbian, which carried Apple’s biggest competing handset vendors, had approximately 30,000 and no apps respectively, Apple completely dominates them both with an astounding 185,000. Despite offering a new model just about every year, the competitive position in the smart phone industry is relatively weak. While Apple has the most apps, a significant amount of them are free which means there isn’t an exuberant amount of money there. Also, people have had complaints about this products including the lack of the QWERTY keyboard, the screen shatters easily, and although improved, the poor battery life.
The biggest problem, which could be turned into an opportunity would be their availability in different networks. Right now, iPhones are only available through AT&T. If Apple could tap into the Verizon network, it could increase sales exponentially just due to the simple fact that people do not want to leave their chosen network. iPad The newest innovation by Jobs, the iPad, was launched in 2010 and was positioned between a smart phone and a personal computer. This product has the ability to read books, watch movies, obtain Internet, read emails, as well as having new “business” type applications.
It sold more than 450,000 units in its first week on the market. The iPad, priced from $499-$829, was the first Apple product to run on its own chip. Even with this high innovative product, it may not be as sustainable as it seems. Being positioned between two already successful products, the use for the iPad almost seems unnecessary. It was thought to replace the Kindle in the e-reader market, however this product is completely different being that a book is its sole purpose and it just does that job better. The iPad ppears to be a larger version of the previously launched iTouch. It does pretty much the same thing except has a bigger screen with a few more apps. The iPad basically just replaced every device that Apple had already previously created all wrapped into one. Consumers might not be rushing out to purchase this new product because of their already existing laptops, smart phones, iPods, and e-readers. With all of these relatively expensive technological devices, depending on when they were purchased, consumers could have easily spent over $1,000.
Why would someone repurchase almost all of those again for an additional $800? Qualifications The following factors are considering in addition to the original evaluation because they each have an important role in the future success of Apple Inc. Steve Jobs It was founder and CEO, Steve Jobs’, mission that has accrued Apple’s extraordinary success. He began wanting to bring easy-to-use products to consumers and continues to do so. Starting with the PC, Jobs has always had Apple being proactive instead of reactive. They are always on to the next best thing with continuous innovation.
He is a very intelligent and forward-thinking individual. A big strength that the company has had from the beginning was the innovative marketing communications plan. Steve Jobs has made strategic partnerships in order to obtain components and maintain distribution, outdoes any other competing brands in advertising, and also sets Apple’s products apart by using the prestigious pricing strategy. One key factor in his role with Apple is his deteriorating health. He endured a liver transplant just last year as well as undergoing treatment for pancreatic cancer.
In order for the future of Apple to continue to prosper, he must make sure that he has hired and thoroughly trained only the best of the best people to carry out his vision from day one. Innovation The first thing people think of when they hear Apple, is most likely “innovation”. Apple products are made famous for their brilliant ideas, sleek product designs, and technological elegance. They continue to have first-mover’s advantage and are never playing catch-up. The desire to always want “what’s hot” creates an enormous demand for Apple products.
Without such, they would be nowhere near where they are today and only be doing mediocre in the marketplace. Extras Apple has gained such high brand loyalty through their very user-friendly, virus-free products and supportive customer services. Anyone who purchases an Apple product is very likely to make repeat purchases because they grow to love them so much. These brand loyal customers would support the future of Apple as a whole. By having their own retail stores, it allowed consumers to not only look at their eye-catching designs, but also experience the software.
Yoffie & Kim say, by 2009 the company estimated that half of all retail Mac sales were “new to Mac” customers (2010). Apple provides their customers with out of this world customer service. Upon entering a store, customers are individually paired with a highly trained employee who will assist them with just about anything they need. They also provide a telephone hotline for any technological support. Additionally, there are plenty of complementary products for consumers to choose from enabling people to feel they can more personalize their product with the case in the color or style they love.
Weaknesses Along with strengths, come weaknesses. While most of Apple’s products were success’, there were a couple failures such as the Mac Mini, which came without a keyboard or mouse, and the iTV which just didn’t do nearly as well as other projects Apple was focusing on. The downside of always producing new technologies is that it will make previous products obsolete. The PCs are headed in a downward spiral but still manage to make up $13. 8M in 2009. It’s uncertain whether the advancement of the iPad which could replace the PC will generate that much revenue.
Also, the licensing the Mac OS cannibalized Apple’s profits in the past because it just enabled Mac users to use Mac software on a cheaper computer. The newer products like iPhone and iPad have the most potential in anchoring Apple’s success given the newest technology, but after listening to critics they may not be up to par to the consumers liking, which is essential. Action Plan As previously mentioned, Steve Jobs needs to be acquiring the best team of the brightest individuals who have the forward-thinking, work ethic, and positive attitude just as he does in order for the vision to be carried on for when a new CEO takes over.
Apple should most definitely keep research and development it’s top priority. This is how they have become the most innovative companies and to maintain that they should increase spending as a percentage of sales. Currently, competitors like Microsoft, Intel, and Nokia are all spending 15%, 16%, and 14% respectively, so Apple needs to be more in line with them. An opportunity lies in where they could target PCs to keep them alive for a few more years. They could focus more on the corporation buying segment and see if they could potentially take out Dell and convert companies and offices to using Macs.
Apple has done well working with the companies they have partnered up with; they should maintain those alliances and perhaps look for new ones to strengthen current products for new modifications. Risk Apple does a good job in keeping their innovation a secret before its release, although other companies might be doing the same thing and come out with their version of what the “next best thing” may be. This would force Apple to fall behind and from then on continue to play catch-up, which is a difficult cycle to break out of.
This is why it is extremely important to make those large investment in research and development. Alternative Apple will just simply not be able to continue its success into the next decade because they cannot keep up with competitors. In this case the only way for them to rebound would be for them to merge to grow in size, acquire other companies, license a product, or if none of the above then change corporate strategy completely. References Yoffie, David B. , & Kim, Renee (2010). Clayton Apple Inc. in 2010. Harvard Business Publishing, Volume 1, 21 pages.