Apple Computers to Apple Inc

A G10 Presentation

Knowledge

Anarchy

Forbidden

Genesis

In the beginning

Computers

Big Blue

And men were taught about computers

there was light

on one sunny day

A few crazy engineers

Think Different

Let’s teach computers about people

Macintosh

The Computer for rest of us

misfits

troublemakers

rebels

Round pegs in square holes

One’s who see things differently

Not fond of rules

No respect for the Status quo

Praise them

Disagree with them

Quote them

disbelieve them

glorify them

Vilify them

The only thing you can’t do

Ignore them

They change things

They push the human race forward

Crazy ones

Genius

the people who are crazy enough

to think that they can

Are the ones who do

Think Different

Where is think different taking Apple today?

Consumer Electronics

a risk worth taking

Another crazy gamble?

Distinctive Capabilities

Software

Hardware

Desktop Publishing

Education

Marketing

User Interface

insanely great

Core Competencies

Where did all the money go?

1. Innovation

10 years

2. Branding

The Cult of The Cool

Microsoft “Where do you want to go today?”

Apple’s Mantra “We know where do you want to go today !!”

ultimate

Simplicity

3. Industrial Design

A dollar in 1992

Worth $0.79 in 2002

What went wrong?

Who killed Apple Computers?

Apple In the PC Industry

PC Industry Evolution

Before 1981 Proprietary

1981 - 1997 Open Structure

Attack of the clones

1997 Rise of the Internet

PC Industry Value Chain

But its really a value network ..

Value in Software

Commoditization

1976 Apple launched

Produced Microcomputers

$0.7 m to $76 m

IBM turns PC into open structure

1984 Macintosh is born

The computer “for the rest of us”

Apple misreads the trend

Macintosh peaks

Apple keeps losing market share

IBM, Dell, Hewlett-Packard, & Others

high priced proprietary system

not compatible with IBM PC

adopted Motorola CPU instead of Intel

focused on education & printing niches

Perception Map during 1998

1998: Defender

2007 Apple Computers becomes Apple Inc.

1998 2007

has built a massive appeal

2007 Category 1998 Presence

How Big is Apple

Market Share ?

Income Statement

Share Price

“Apple should shut down for the sake of its shareholders.” Dell - 1997

A successful turn-around

After slugging it out in the PC Wars

How did it happen?

Consumer Electronics Industry

Cell-phone Portable AV Makers PDA & handhelds Analogue Manufacturers

Trends

1. Convergence

2. Global Supply Chain

3. DRM

4. Short Life Cycles

Consumer Electronics Competitive Landscape

Oldies Sony Samsung Thomson LG Creative Matsushita

Convergence - PC manufacturers Microsoft Dell HP Apple

Convergence - Telecom/Broadband Players Nokia Cisco Motorola Sony Ericsson Samsung

Convergence - PDA Makers RIM Palm HP

Porters 5 Forces Analysis

Threat of Entry Low

Capital Intensive Industry

Economies of scale

Market power is needed

Lower Net Margin

Threat of Suppliers Low

Large Number of suppliers

High Substitutability

Forward Integration is Difficult

Threat of Buyers Moderate to High

High elasticity of demand

Illegal peer to peer file sharing is possible

Big dealers can pressurize to reduce cost

Threat of Substitutes Moderate

Alternative means to acquire music are available

Threat of Rivalry High

Highly competitive market

Both price and feature based competition is there

Various online music sources are available

Small stylish MP3 players are available

Profitability

What made Apple to move to the CE Industry

Losing Internal Culture

Losing customer base

Diversification

1993: Newton (PDA) 1994: Quick Take 1996: Pippin

Could not handle 4 businesses simultaneously

Don’t Diversify when things are not going your way

Revive Old Culture

Enter new markets

Non First mover advantage

But Still….

Digital Players Market

AAPL DELL HPQ MSFT Industry Market Cap: 82.15B 52.87B 107.73B 273.11B 1.85B Employees: 17,787 65,200 156,000 71,000 1.70K Qtrly Rev Growth 23.80% -5.10% 10.70% 6.00% 24.30% (yoy): Revenue (ttm): 20.68B 57.88B 94.08B 46.06B 3.98B Gross Margin 30.35% 17.56% 24.51% 79.43% 30.35% (ttm): EBITDA (ttm): 3.44B 4.43B 10.16B 17.94B 133.86M Oper Margins 14.63% 6.85% 7.62% 36.20% 4.62% (ttm): Net Income (ttm): 2.43B 2.95B 6.52B 11.91B 86.38M EPS (ttm): 2.76 1.284 2.306 1.17 0.82 P/E (ttm): 34.53 18.47 17.45 23.84 33.88 PEG (5 yr 1.42 1.24 1.21 1.38 2.74 expected): P/S (ttm): 3.99 0.91 1.15 6 1.2

SNE MC PHG AAPL Industry Market 52.11B 44.76B 42.52B 82.15B 235.61M Cap: Employees 158,500 334,402 121,732 17,787 11.25K : Qtrly Rev 10.10% 1.60% -0.80% 23.80% 7.20% Growth (yoy): Revenue 67.99B 76.77B 35.85B 20.68B 235.85M (ttm): Gross 23.47% 29.94% 32.82% 30.35% 38.91% Margin (ttm): EBITDA 5.19B 6.31B 2.28B 3.44B 12.35M (ttm): Oper 2.44% 5.04% 4.04% 14.63% 6.99% Margins (ttm): Net 1.07B 1.99B 1.22B 2.43B 5.73M Income (ttm): EPS (ttm): 1.02 0.91 6.05 2.76 0.3 P/E (ttm): 51.02 22.65 6.35 34.53 25.12 PEG (5 yr 2.14 1.22 2.15 1.42 1.36 expected): P/S (ttm): 0.77 0.59 1.19 3.99 1.58

How did they do it?

The first mover ‘who gets it right

Profitability Drivers

Uniqueness

Blue oceans

But not forever

Product Innovation may or may not succeed

But innovation in the business model will succeed almost every time

Opportunities

Growing consumers electronic market

Strategic alliances with peripheral component manufactures and media transmission giants

Opportunity to extend new products to existing loyal customers

High potential music phone market

Threats

Very high level of competition

High product substitution effect

Legal Risks

Imitation

Technology Obsolescence

CSR Risks

Strengths

Innovation

Ease of use

Financial vitality

Brand loyalty

Weakness

Sporadic Innovation

Perfect can be the enemy of good

SWOT Internal Internal Strengths Weakness Matrix External S-O W-O Opportunities External S-T W-T Threats

S-O Strategies

Use Brand Loyalty for Selective Expansion in CE

Come out with more consumer electronics devices

S-T Strategies

Create new markets through Product Innovation

W-O Strategies

Apple’s digital offerings

W-T Strategies

Build socially complex relations among partners

Increase productivity and turn around of high demand products

CE Product Value Chain : 1990s Highly Vertically Integrated

CE Product Value Chain : 2000s Emergence of vertical specialization

Primary success factors

Innovation

Differentiation

System Integration capabilities

Cost Structure

Complimentary success factors

Consumer Branding

Manufacturing and supply chain efficiency

Time to market

Service Provision

Critical success factors

Recruiting talented people

Securing partnerships with value added resellers

Capitalizing on market-specific opportunities

Competitive Advantage

Not in the technology

Not in the patents

Value Transference

Distribution Strategy

Apple’s value creation process

Multiple Products Customised Products Apple I/II/III Mac Segmenting Targeting Focus on iTV Education Value Creation iPhone Music Strategy (iTunes, iPod) Lifestyle Convergence Strategy Adding Video Strategy (iDVD, Value iMovie, IPhoto) Digital Hub Internet Strategy (iTools, iDisk)

what does Ansoff’s matrix say?

what does BCG matrix say?

lessons

Strategies Adopted

Thinking Out-of-the-Box

recommendations

1. at the tipping point

fast in managing change

initiating it understanding it explaining & justifying it planning & organizing it

driving & forcing it timing & pacing it containing it financing it selling it

the law of the few

stickiness

the power of context

2. be adept in change implementation

3. transform technology into cash

major problem

successful choice, bundling, transformation of new technologies

into great new product & marketing strategies

answer lies in

Apple’s competence

re-conceptualize market focus

integrated management process perspective

entered the highly competitive mobile market

where nokia dominates all

encashing value contribution in a mobile

Encashing Value Contribution in a Mobile 1992-97 1997-2002 2002-07 High-end & Entry- Mid-tier Level & smart new–to–market phones phones phones *Basic applications: Operating systems, micro-browsers, firewall, others

looking ahead in media

from punctual integration

to total integration

which means more competitive markets

but, rules of competitive markets say

financial performance of generalists improves with greater market share

while performance of specialists drops off as market share increases

so, adapt or die

to sustain

chalk out relevant success factors

strategic & economic

challenges

1. form strategic alliances

critical to the success of its core business

Critical to development or maintenance of its core competency

which blocks a competitive threat

which creates or maintains strategic choices for Apple

which mitigates a significant risk to its business

2. go on innovating

iPiano iCar iGuitar iPottie

iGod iWatch iPuff iWash

finally

An Apple a day

Keeps Doctor away

Thank you Chintan Jasmer Jyotsna Qasim Shalabh

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Apple Computers to Apple Inc

by Qasim Zaidi on Apr 23, 2007

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Apple Computers to Apple Inc — Presentation Transcript