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Case Analysis: Apple Strategy for next decade
 

Case Analysis: Apple Strategy for next decade

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This is a case analysis of the Apple Strategy for the next decade. The recommendations expressed in this document are purely personal.

This is a case analysis of the Apple Strategy for the next decade. The recommendations expressed in this document are purely personal.

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    Case Analysis: Apple Strategy for next decade Case Analysis: Apple Strategy for next decade Document Transcript

    • [Date] AppleIntroduction Apple in the new millenniumIn its 36 years of existence Apple has evolved from By the end of the last century Apple was miredbeing an assembler of Micro Computers to a digital by a low market share and a recent history of lossesconvergence giant and the most cash-rich company on but it had a glint of hope to regain its past glory in theearth with over $100 billion cash reserves. Apple world of technology.currently operates in several industry spaces – Apple continuously defied the traditional - Computers, Portables and Peripherals Porter’s 5-forces model by changing the industry - Media devices itself. Apple blurred the boundaries between different - Media Sales industries while raising the barriers around self to keep - Software and Applications away the competition from its cult followers. In the last 12 years Apple has constantly changed the technology landscape to redefine the market spaces. Apple launched the iPod to create a revolution in the music player industry. It was not just a computer manufacturer anymore. It had entered the music player or media devices industry. Realizing the importance of locking-in its device buyers, Apple next launched the iTunes. For the first time, a renowned company was offering music a la carte at just a dollar! The touch devices were previously seen mostly in movies and science fiction literature, but Apple suddenly put it in the hands of every common man by Fig.1 – Apple Product Range launching the iTouch and iPhone. The Apple magic worked and consumers picketed stores for days before A hallmark of the Apple product family is that launch of subsequent new products. The brand ofeach product is seamlessly integrated with the other Apple had arrived; in USA and in the world.Apple offerings. This effortless interplay of devicesand services has created a strong digital eco-system for Just when portable market was beginning tothe Apple users and Apple has historically strived to become too hot to stay in, Apple created a new nichemaintain it as a closed eco-system. By closing the loop market of its own – Ultra-books. MacBook Airfor the customer experience Apple has moved into a revolutionized the way people perceived laptops withblue ocean which can be harvested while competition unimaginable battery time, ultra-fast booting time andacross segments play catch up with Apple. aesthetics and dimensions unforeseen by competitors! Madhuranath R
    • Just when every company was trying to kill What makes Apple tick?Apple by launching comparable products, Apple justcreated a new market segment – tablet devices. The When we analyze the growth story of AppleiPad was hailed as a new generation device with a size certain strategies stick out like a sore thumb, like –and functionality lesser than that of a laptop but more - Supply Chain excellencethan that of a smart phone. Consumers were charmed. - Changing the rules of the gameA new industry segment was born. - Complete & controlled digital eco-systemPorter’s 5 Forces and the Apple juggernaut 1. Supply Chain Excellence No other technology company achieved the Porter’s 5-forces analysis is applicable to one kind of supply chain mastery that Appleindustry whereas Apple straddles multiple industries. demonstrates. The sourcing capability of Apple isSo, no single 5-forces model would be sufficient to probably the most important contributor to itsanalyze the rivalry of Apple. This is how Apple has bottom-line. The cost effectiveness and consumerbecome a technology juggernaut of this century. satisfaction derived from its unmatched supply chain allow Apple to maintain a competitive advantage in the fickle digital electronics market. 2. Changing the rules of the game The iPod, iPad and iPhone were not the first devices of their kind. Yet, when Apple launched these products the market fell in love with them. So, what did Apple add to these devices to make them hot? Design Innovation. The aesthetic and simplistic designs that Apple introduced through these devices made them widely acceptable. It was not just a techie or a corporate honcho who desired to possess a smartphone anymore. Everyone wanted it! Apple created a desire in consumers to fulfill a need that had not existed till Fig.2 – The Apple Pie then. Apple had changed the rules of the game for The distribution of Apple’s revenues gives a all its competition in each of its product launch.picture of the impact of different industries on Apple Apple became a lifestyle brand; it was not aboutas well as the impact of Apple on different industries. just technology anymore! So, how can the rules ofClearly, we need 6 times 5-forces analysis for Apple. a technology game apply to Apple anymore? Madhuranath R
    • 3. Complete & Controlled Eco-system Apple in the next decade “The consumer does not know what hewants”, said the legendary of Apple founder, The past decade saw the growth of Apple bySteve Jobs. Jobs understood early on that leaps and bounds. At one point it had more cash thanconsumers cannot be made to stay in the fickle the Federal Reserves of USA! It surpassed alltechnology products market. The staying power is technology brands in the world and reached everypossible only when a company produces corner of the world with its magical devices.something which no one else can produce for the Apple has continuously pursued innovation to movecustomer. Since anyone could replicate a into the Broadly Differentiated Strategy segment.technology product, this could never be asustainable strategy for Apple. So, Appledeveloped everything that a consumer needs fromdigital devices and put it together in a seamlessway. The consumer was charmed by the smoothinteraction between Apple devices, the iTunes andthe iStore – a feature no other company provided.The consumer was willing to pay a premium forthis ease of use. He never went away to another. Fig. 4 – Apple’s Strategy But the key questions that arise at this point are – - Sustainability: When will the magic end? Is the Apple story sustainable in the next decade? - Changing the game: Can Apple keep on changing the rules of the game? Or has the competition started doing the same to Apple? Fig. 3 – Apple Digital Eco-system Madhuranath R
    • Sustainability Changing the rules of the game is not the Supply Chain Excellence has been a forte of Apple alone anymore. The Asian tigers arehallmark of Apple’s competitiveness in the market. catching up; and catching up real fast. They are in factBut, how long can this be sustained? China is redefining the rules of the game that Apple created!crumbling under its own weight of economy. Global Samsung, Acer, Lenovo, and many more are creatingpressure is increasing on China to stop maintaining a devices which are a combination of tablet and ultra-lower exchange rate by artificial means. The recent books. Acer, Samsung and Lenovo, between themscandal at the Foxcon regarding human rights launched 25 models of ultra-books, some of which areviolation can have a significant impact on Apple as considered superior to the MacBook Air! Intel itself isFoxcon is the main producer/aggregator of Apple promoting the growth of the ultra-book segment byproducts. The floods in Thailand wiped out large pumping in $300 million worth of funds in SMEs andportions of the memory devices supply; again a dent companies which are invested in the development ofin the Apple supply chain. The externalities are technology and applications for the ultra-books. Intelcatching up with Apple’s supply chain and it is not has bet its next big wave of growth on the sales ofpossible to hedge the same anymore; at least not while processors for this ultra-book segment.maintaining the cost advantages it experiences now! Samsung has created a touch device and a The digital eco-system and convergence smartphone in every possibly conceivable size andachieved by Apple is not yet complete. The digital configuration. This year it moved into the top slot inconsumer is increasingly bombarded with newer and the global smart phone market space. The Galaxycheaper alternatives to Apple products. Samsung, for Note was a device which was between a smartphoneone, has a product in every price point that Apple and the tablet. What Apple did to laptops with iPad,operates in and also in other price points where Apple Samsung is trying to do with the Note.does not operate. Naturally, it has the potential to takeover the market from Apple eventually. The Amazon, a totally unlikely rival of Apple,controlled eco-system that Apple operates now may launched the Kindle Fire. The Android based devicebecome a liability for Apple in the long run. Currently, was sold at a price point at which no iPad was selling.it is intended to increase the switching costs for the Everyone thought Amazon was creating a new marketconsumer while creating the illusion of “whole segment for itself by carving a niche below the iPad.solutions” for ease of use of the customer. But the But the latest news is that Amazon is building KindleAndroid eco-system or the Microsoft eco-system may devices with a configuration exactly on par or bettersoon give Apple a run for its money. With than the new generation iPad. There goes the game changing strategy of Apple to the wind!competition catching up and playing along the samelines as Apple helped define, how long will Apple be Thus, I see sustainability as a key challenge to beable to sustain its eco-system in a water-tight way? overcome by Apple in the coming decade. Madhuranath R
    • which allows Apple to break free of the clutches ofWhat next, Apple? the all-powerful telecom operators in USA. Currently, Apple devices are sold by the service providers to the After the sad demise of Steve Jobs, the customers. Apple will shift the balance of powerresponsibility of managing Apple’s exponential growth with the adoption of this new standard since it can sellhas fallen on the slender shoulders of Tim Cook, the phones to consumers directly from now on andformer COO and a close confidante of Jobs. How he Apple can choose the network provider that theaims to steer Apple in the coming depths of business consumer wants at the time of sale itself. Thus, Applecycles is yet to be seen. However, having followed the will continue to change the rules of the game for itsstory of Apple, I can dare to make a few strategic competition as well as partners.recommendations for Apple’s continued success. Acquisitions & PartnershipsThe game is never over! Google did it with Android and then by Apple can still continue to play the game of acquiring Motorola. Nokia tied up with Microsoft.changing the game. Apple still has some openings in Apple may soon be tempted to target some businessnew markets for launching new products like media segments of the Japanese consumer electronics giantdevices, photography & video devices, projection and Sony which has been struggling to maintain its marketmedia consumption devices. According to a recent shares. Now, it has become a fight for survival at thereport, Apple is supposedly working on a stand-alone legendary Japanese company. Sharp and Panasonic arecamera based on iSight. equally hit by the growth of Samsung and LG. Apple has launched the Apple TV, can it move into the Compared to all technology companies Apple segment of projection systems & home theaters?probably has the highest percentage of spending on This is a move that can significantly help Apple if itR&D. This, combined with innovation, can be the acquires the relevant businesses from Japanese ailingcornerstone of success in the long run for Apple. companies. Economy is at an all-time low, Japan isInitiatives like the establishment of The Apple reeling under recessionary pressures and theUniversity and the One Infinite Loop Apple campus companies have hit record losses and share prices; theare aligned towards the sustainability of innovation. It worst in the last 32 years for Sony or Sharp. Thiscan continue to attract the most talented employees could be the right time for Apple to acquire theirand create the most admired devices and products. businesses, spin the Apple innovation magic and launch the next generation of home theaters. Apple is still changing the rules of game.June 2012 saw the adoption of a new standard in Thus, Apple can actually expand theGSM SIM cards. The new nano-SIM cards are smaller digital eco-system that Apple has already created.and based on the standards established by Apple in its Like I said earlier, Apple is not about technologylatest generation of devices. This is a strategic move anymore, it is all about lifestyle and consumer. Madhuranath R