Apple over the years ( 1976 -201x)In its 36 years of existence Apple has evolved from being an assembler of Micro Computers to a digitalconvergence giant and the most cash-rich company on earth with over $100 billion cash reserves. Apple 2currently operates in several industry spaces - Computers, Portables and Peripherals , Music /Media and Mobile For Internal Use Only
5 Forces Model - Pre-2002 Threat of New Entrants 3 • Entry into PC clone market is easy • Local Consumer base varies For Internal Use OnlyBargaining power ofSuppliers• Very few vendors Rivalry/Existing Bargaining power of would agree for Competitors Consumers software for Apple 1. Major threat from large • Apple products products (including established were expensive Microsoft) manufacturers (IBM, but customers• Only 2 large DELL, HP, Compaq) still bought them. vendors for critical component - CPU (Intel, Motorola) Threat of Substitutes • IBM PC Clones • Differentiators reduced as Technology Innovations are copied / replicated.
5 Forces Model - Post 2002 4Forces /Industry PC Music Mobile PhoneNew Entrants HIGH HIGH HIGH For Internal Use Only • Hardware – HIGH • Short Product Lifecycle • Music – HIGH • High Investment Cost • Initial Contract with Carrier requiredBuyer Power HIGH HIGH HIGH • Switch cost is very low • Choice based on Device Look & Feel and PerformanceSupplier LOW MODERATE HIGH • Many suppliers available • Carriers • Component ManufacturersSubstitutes HIGH HIGH HIGH Laptops, Smart Phones, • Local Regional Based Devices Tablets , PhabletsRivalry HIGH HIGH HIGH Existing competitors • Competition from Android Phones • Competition from China Clones
Activity System Map – Pre 2002 5 For Internal Use Only Brand Value / Innovative Marketing Edge Offerings Superior SimplisticDirectRetail Designs Hire Right People Leadership Outsourced in Sectors Production Extensive Pioneering Research & Market Entry Development Proprietary OS / Software
Activity System Map – Post 2002 iTunes 6Exclusive Apple Stores For Internal Use Only Brand Value / Innovative Marketing Edge Offerings Direct Retail Hire Right People Superior Simplistic Designs APPS stores Extensive Research & Outsourced Development Production Pioneering Market Entry Proprietary OS / Software
What worked / What Didn’t Year Product What Worked What Didnt Work 7 Innovation - 1st Personal Computer 1976 Apple - I Price For Internal Use Only Innovation - Color Graphics, Open 1977 Apple II Architecture, Floppy Product Design Flaws 1980 Apple - III Negative Publicity High Price - $10,000 1983 Lisa Innovation - GUI Limited Softwares Collaboration with Suppliers for PageMaker Slow Performance, Lack of MAC compatible 1984 Macintosh software, Innovation - Laser Printer software Better Horizontal & Vertical Integration Change in Business Strategy diluted the (Hardware as well as Software), Duopoly differentiators (from Differentiation to Cost 1985 - 1990 Approach Leadership ), Federation of Corporate Alliances. Change in Consumer Brand Loyalty. International Expansion backfired. 1994 - 1996 PowerMac Improved Processors with Price Correction Cost Cutting measures (Employee Reduction) Premium Pricing Strategy and Quality Issues. 1997 Failure of Handheld Devices Move to Strong Differentiation Strategy.2002 Onwards Regular Product Upgrades / Launches.