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Similar to Apple in 2010 - Harvard Case Analysis
Apple in 2010 - Harvard Case Analysis
- 1. Apple Inc. in2010 HBS Case Study Vivek Mehta
- 2. The Company & What Key Happenings Company Happened Offerings & Target Market Strategy Recommendation Marketing & Q&A Business Apple, Inc. Critical Issue In 2010 Industry & & Analysis Competition Alternate 5-Factor Identification Problem & SWOT Statement 2
- 3. Situation Audit –The Company • US-based High Tech Multinational Company Mission Statement: • Designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software • Leads the digital music revolution with its iPods and iTunes online store • Reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad 3
- 4. Situation Audit –Company Offerings PC – Mac Desktop, Portable Retail Stores MP3 Player iPod Peripherals & Accessories SmartPhone iPhone Application SW iLife, iWork Tablet iPad OS Content Provider iOS, Mac OS X iTunes, AppStore 4
- 5. Situation Audit –Key Happenings 5
- 6. Situation Audit –Key Happenings 6
- 7. Situation Audit –Target Market Individuals Governments Home Users DIVERSE NEEDS Computing Communicating Entertainment Creative Educators Professionals Students Enterprises SMB 7
- 8. Situation Audit –Marketing Strategy PRODUCT PRICE Simplify & Beautify ordinary items Premium - Skimming Strategy Superior design High user-experience Complete Solution PLACE PROMOTION Online Publicity Own Retail Store Student Discount Big-box Retailers, Service Providers Value-add Services iTunes - Content App store - 3rd party Apps 8
- 9. Situation Audit –Business Strategy • VISION: Committed to bringing the best user experience to its customers through its innovative hardware, software, peripherals, services, and Internet offerings • Superior and well-integrated digital solutions • Continuous new offerings • Ecosystem for the products • Retail Strategy • Digital Hub Strategy 9
- 10. Situation Audit –Industry Frequent Rapid Intense Large Product Technological Competition Players Introductions Advances Price cuts Rapid Economies Price High Product, Tech Of Scale Sensitive Utility Imitation Customers 10
- 11. Situation Audit –Competitors 11
- 12. The Company & What Key Happenings Company Happened Offerings & Target Market Strategy Recommendation Marketing & Q&A Business Apple, Inc. Critical Issue In 2010 Industry & & Analysis Competition Alternate 5-Factor Identification Problem & SWOT Statement 12
- 13. Porters Five FactorModel PC - MAC MP3 Player - iPOD Mobile - iPHONE LOW LOW LOW Differentiation: Differentiation: Differentiation: Unique Design Unique Design Unique Design Vertical Integration iTunes – Easy Music AppStore – Download on Strong Brand Download, Sync with PC Phone Threat of Accessories Accessories Entry Patents Patents (Potential Competitors) Cost Advantage: Cost Advantage: Cost Advantage: Proprietary Tech Proprietary Tech Proprietary Tech Access to Raw Access to Raw Economies of Scale: R&D, Setup cost high High Market share R&D, Setup cost high LOW LOW LOW Buyer Customer increasing Customers decreasing Customers increasing Power Switching cost high Switching cost high for Switching cost high for for differentiated prd differentiated prd differentiated prd 13
- 14. Porters Five FactorModel PC - MAC MP3 Player - iPOD Mobile - iPHONE HIGH MODERATE HIGH Threat of Few Strong Large Competing firms Large Competing firms Rivalry Competitors (Existing Competitors) Large White-box Players MODERATE MODERATE LOW PDA, Tablets, SmartPhone, Landline - Home, Threat of SmartPhone Radio, CD Players Public, IM Substitute Provide only some Outdated technology Do not provide function of PC portability MODERATE HIGH MODERATE Software, MP Memory, Content MP, Apps Supplier Supplier of Supplier of Component Supplier of Component Power Component Power to Impact Price Power to Impact Price Power to Impact Price ContentProviders control Price and availability 14
- 15. SWOT - Strengths Revolutionary High Quality WellIntegrated Product Differentiated & User PlugNPlay Breadth Product Experience Intuitive Fast High Charismatic High Innovation Customer Visionary Margins Pace Loyalty CEO Strong Brand Financially Innovation Patents Halo Effect Strong Culture 15
- 16. SWOT - Weakness MAC: Low Reliance on iTunes: Low iPhone: Market Suppliers for Limited to Margin Share MP,App,Mem Single SP - ATT iPhone: Innovation Some High Lacking limited to key Product Investment in Features Personnel Failure R&D Inventory Overseas Content Closed Cost Less Market Provider Systems Adv Purchase Presence Relations 16
- 17. SWOT - Opportunities Capitalizeon iPod-iPhone Tablets iTunes Growth Global iPhone Additional Demand Feature for Cons Limitation Cellular N/W Electronics 17
- 18. SWOT - Threats Rapid Highly Free Imitators Technology Competitive Content Changes Markets Availability HW, SW, Global MP3 Dying New Entrants Content Economic Market Google Suppliers Crisis 18
- 19. The Company & What Key Happenings Company Happened Offerings & Target Market Strategy Recommendation Marketing & Q&A Business Apple, Inc. Critical Issue In 2010 Industry & & Analysis Competition Alternate 5-Factor Identification Problem & SWOT Statement 19
- 20. Problem Statement 1. What,historically, have been Apple’s competitive advantages? 2. How sustainable is Apple’s competitive position in PCs? 3. How sustainable is Apple’s competitive position in the MP3 arena? 4. How do you assess Apple’s competitive position in smartphones? 5. What are the prospects for the iPad? 6. Can Apple thrive without Steve Jobs? 20
- 21. Competitive Advantage R&D Superior Complete Rapid Quality Solution Innovation Large Appealing Brand Customer Design Reputation Base 21
- 22. The Company & What Key Happenings Company Happened Offerings & Target Market Strategy Recommendation Marketing & Q&A Business Apple, Inc. Critical Issue In 2010 Industry & & Analysis Competition Alternate 5-Factor Identification Problem & SWOT Statement 22
- 23. Identification of Alternative •Option-I: International Expansion – Emerging Markets, APAC with lot of consumers, provides high growth opportunity – Use Retail Strategy – Apple presence alone can do the trick – iTunes & AppStore – Introduce worldwide content • Option-II: Open up – Introduce iPhone on other reliable carriers – License MacOS & iOS for running on non-Apple Hardware • Option-III: Price Differentiation – Extend product line to provide some products with lower price point • Option-IV: Complete Inhouse Development – Develop MProcessor, Software rather than rely on Intel, Microsoft • Substantial & Incremental Innovation required for all strategies 23
- 24. Critical Issues • PC – Mac – Less Market Share (Market Opp) • MP3 - iPod – iPod Sales declining (Market Opp) • SmartPhone – iPhone – Threat from new entrants with open OS – Google Android (Strength/Weak) – More App Developers willing to work on new OS (Strength/Weak) – Tie-up with single network operator with not reliable services (Mkt Opp) – Feature limitation – Battery Life, Keyboard, Flash technology (Mission) • Tablet – iPad – Usage Model (Mkt Opp) – Threat from new entrants – HP, Dell (Strength/Weak) • Content – Low Margins & Tense Relations • Sustainability – Profitability & Growth (Financial Position) 24
- 25. Financials 100% Gross Margin HP 80% Dell Lenovo 60% Intel 40% Microsoft 20% Nokia RIM 0% Google 2006 2007 2008 2009 Apple 25
- 26. 2006 Android 0% Other Worldwide Linux 3% Mac OS X 0% 18% SmartPhone Microsoft 10% MarketShare (%) Symbian RIM 62% 7% Linux 0% Android 2009 4% 5% Other Mac OS X 1% 14% Symbian 47% Microsoft 9% RIM 20% 26
- 27. 2006 Worldwide PC Hewlett- MarketShare (%) Packard 16% Others Dell 48% 17% Acer Apple Lenovo 6% 2% 7% Toshiba 4% 0% 0% 0% 0% 2009 Hewlett-Packard Others 20% 41% Dell 13% Acer Apple Lenovo 13% 4% 9% Toshiba 27 0% 0% 0%0%
- 28. 2006 Net Sales by Geography (B,%) RoW 7.8 40% US 11.5 60% 2009 RoW US 20.6 22.3 48% 52% 28
- 29. 2006 Asia-Pac Net Sales by 0 0% Japan Retail 3.2 Geography (B,%) 18% 1.2 7% Americas 9.4 Europe 52% (EU,ME,Af) 4.1 23% 2009 Retail 6.7 Asia-Pac 16% 3.1 Americas 7% 19 Japan 44% 2.3 5% Europe (EU,ME,Af) 11.8 28% 29
- 30. 2006 Peripherals & HW Software Net Sales by iPad 0 iPhone 0% 0 1.1 6% 1.2 6% Mac Product (B,%) Music Rel Prod 0% 1.9 7.4 10% 38% iPod 7.7 40% Peripherals & iPad HW 2009 Software 0 1.5 2.4 0% 4% 6% Mac 13.8 iPhone 32% 13 30% iPod Music Rel Prod 8 4 19% 9% 30
- 31. The Company & What Key Happenings Company Happened Offerings & Target Market Strategy Recommendation Marketing & Q&A Business Apple, Inc. Critical Issue In 2010 Industry & & Analysis Competition Alternate 5-Factor Identification Problem & SWOT Statement 31
- 32. Analysis Option-I Option-II Option-III Option-IV Rating Market Price Vertical Expansion Open Up Differentiation Integration Corporate Mission 0.3 5 4 3 4 Market Opportunity 0.3 5 5 4 2 Competitive Strengths & 0.2 4 4 3 4 Weakness Financial Position 0.2 5 4 3 3 TOTAL 1.0 4.8 4.3 3.3 3.2 32
- 33. Recommendation We recommend, Appleshould: • Employ Market Expansion – Emerging markets using Retail store strategy – Worldwide contents on iTunes • Employ Market Penetration – More cellular carriers – License MacOS & iOS to be used on non-Apple products • Continue on R&D to Innovate for Product Development – Feature-rich iPhone & iPad • Continue delivering well-integrated & superior products • Advertise - iPad usages – Hospital, Schools/Universities, Professionals • Put in place Replacement plan for Steve Jobs 33
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- 35. The Company & What Key Happenings Company Happened Offerings & Target Market Strategy Recommendation Marketing & Q&A Business Apple, Inc. Critical Issue In 2010 Industry & & Analysis Competition Alternate 5-Factor Identification Problem & SWOT Statement 35
- 36. What Happened –2012 SmartPhone PC MP3 Player More model with feature More MAC model with More iPod model with additions reduced price points features from iPhone,iPad iPhone on other Carriers - Apple has not increased Sales continue to Verizon its global marketshare decline, Apple still leading iPhone sales skyrocketed HP leads Android OS leads Apple Loss of Steve Jobs Tablet Retail New Head More model with feature More new stores around Largest Technology addition & price points the world company (Rev & Profit) New Entrants – Microsoft Strategy successful Gross Margins increase iPad is huge success Strategy imitated Stock Price High - $700 Apple leads 100B+ in cash/eqvt 36
- 37. What Happened Net Sales by Geography Net Sales by Geography - 2009 Net Sales by Geography - 2012 US US 22.3 61 52% 39% RoW RoW 20.6 95.5 48% 61% 37
- 38. What Happened Overall Company Growth Overall - Company - 2009 160 Overall - Company - 2012 45 40 140 156.5B 35 42.9B 120 121.3B 30 100 33.9B 25 80 20 60 15 40 41.7B 10 20 5 8.2B 0 0 Net Sales Net Income Cash & Cash Net Sales Net Income Cash & Cash Eqvt Eqvt 38
- 39. What Happened Net Sales by Product 90 80.5 2009 51% 80 2012 Net Sales by Product (B) 70 60 50 40 32.4 21% 30 23.1 15% 20 17.1 13.8 13 32% 30% 8 8.5 9.5 19% 5.6 4 5% 10 4.3 6 4% 1.5 2.8 2.4 3.5 9% 4% 2% 6% 2% 0 0 Desktops Portable Mac iPod Music Rel Prod iPhone iPad Peripherals & HWSoftware 39
- 40. What Happened SmartPhone Market Share 2009 Linux Android 0% 4% Other 5% Mac OS X 1% 14% Symbian 47% Microsoft 9% 2012 Microsoft RIM 0 20% Symbian, 7% 0% Other,5% RIM, 6% Mac OS X, 23% Android, 59% Linux 0 0%40
- 41. What Happened 2009 PC Market Share Hewlett- Packard Others 20% 41% Dell 13% 2012 Hewlett- Acer Packard, 15% Apple Lenovo 13% Others, 43% Dell,10% 4% 9% Acer, 11% 0% 0% 0% 0% 2012 0% 0% 0% Linux0% 0% Apple,6% Lenovo, 15% 1% Mac OS Toshiba WinVista 6% 0% 0 0 0 0 6% Windows XP0% 0% 0% 0% 43% Windows 7 43% 41
- 42. What Happened Gross Margins Compared 90% 80% HP 70% Dell 60% Lenovo 50% Intel 40% Microsoft 30% Nokia 20% RIM Google 10% Apple 0% 2006 2007 2008 2009 2010 2011 2012 42
- 43. What Next –Beyond 2012 • Product Innovation – Blow-out NG iPhone – iTunes Radio – Apple TV – Large Screen TV • Opening up of Apple TV for App Developers • Overseas Market Growth Opportunity – Strategic Deals – China Mobile 43
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