26-11-2012, 12:48 PM
A Strategic Analysis of Apple Corporation
1A Strategic Analysis.pdf (Size: 98.76 KB / Downloads: 43)
Executive Summary
Apple Computer's 30-year history is full of highs and lows, which is what we would
expect in a highly innovative company. They evolved throughout the years into an
organization that is very much a representation of its leader, Steven Jobs. Apple made
several hugely successful product introductions over the years. They have also
completely fallen on their face on several occasions. They struggled mightily while Jobs
was not a part of the organization. Apple reached a point where many thought they would
not survive. When asked in late 1997 what Jobs should do as head of Apple, Dell Inc.'s
(DELL) then-CEO Michael S. Dell said at an investor conference: "I'd shut it down and
give the money back to the shareholders." (Burrows, Grover, and Green)
Well, times changed. Less than 10 years later, BusinessWeek ranked Apple as the top
performer in its 2006 BusinessWeek 50. Apple attributes their recent success to robust
sales of iPod music players (32 million in 2005). They are optimistic about the economies
of scope with media giants, such as Disney and Pixar. (BusinessWeek)
Apple rarely introduces a new type of product. Thus, instead of being the pioneer, they
are an expert "second mover" by refining existing products. Portable music players and
notebook computers are examples. Apple increases the appeal of these products by
making them stylish and more functional. They now appear poised to make significant
strides in the home computer market and to creating a total digital lifestyle whereby the
home is a multimedia hub.
History of Apple
Steve Jobs and Steve Wozniak founded Apple on April 1, 1976. The two Steves, Jobs and
Woz (as he is commonly referred to – see woz.org), have personalities that persist
throughout Apple's products, even today. Jobs was the consummate salesperson and
visionary while Woz was the inquisitive technical genius. Woz developed his own
homemade computer and Jobs saw its commercial potential. After selling 50 Apple I
computer kits to Paul Terrell's Byte Shop in Mountain View, CA, Jobs and Woz sought
financing to sell their improved version, the Apple II. (Linzmayer, 7-9)
They found their financier in Mike Markkula, who in turn hired Michael Scott to be
CEO. The company introduced the Apple II on April 17, 1977, at the same time
Commodore released their PET computer. Once the Apple II came with Visicalc, the
progenitor of the modern spreadsheet program, sales increased dramatically. In 1979,
Apple initiated three projects in order to stay ahead of the competition: 1) the Apple III –
their business oriented machine, 2) the Lisa – the planned successor to the Apple III, and
3) Macintosh. (Linzmayer, 14-5)
The PC Industry
We can glean Insight into the history and composition of the PC Industry from its
eponymous title. In the late 1970s, as Wozniak and Jobs were starting Apple computer,
personal computers were an emerging product. The following chart (Reimer) gives an
overall view of the major market players since the mid-1970s.
By 1983, the market share of the Apple II fell to 8% while the PC had 26%. Market share
of Macintosh peaked at slightly more than 10% in the early 1990s and has since tapered
to between 2-3%. The IBM PC and its clones became the standard due to the success of
the open nature of the PC. This allows product developers to offer vastly more products
for the platform.
Some argue that not licensing the Mac OS was a mistake. Bill Gates and Microsoft were
encouraging Apple to license their OS in the early 1980s, because they were developing
software for Apple and had much riding on the success of the company. When Apple did
not license, Microsoft began developing their operating system, Windows. (Linzmayer,
169-75, 245-9)
The Online Music Industry
While Apple clearly dominates the online music industry, the battle for domination is not
over. Although digital music sales are growing rapidly, the Recording Industry
Association of America (RIAA) states that digital sales account for only 4% of all music
sales. (Borland) Analysts at Forrester (Bartiromo) and Gartner (Bruno) validate this.
Apple's sales are between 66% and 75% of downloads and 80% of music players.
(Bruno) Apple is part to a suit alleging monopolistic practices concerning their market
share dominance of players and downloads. (Grundner)
The other players in the download market are (the revised) Napster, Yahoo Music,
Rhapsody, and illegitimate file-sharing services. Portable music players competing with
the iPod include those made by Creative, Samsung, iRiver, and Sony. A major point of
contention between these services and player manufacturers is the control of a variety of
incompatible Digital Rights Management (DRM) schemes.
Personal Computers – A Shift in Strategy
Apple has historically taken a far different path than the traditional Windows and Intel
combination. Microsoft provides the Windows operating system to separate downstream
hardware producers such as Dell. Apple vertically integrated both the operating system
software and hardware completely under Apple. A consumer running Microsoft
Windows can choose from a myriad of systems based on the Intel processor, while a
consumer running Apple's OS X must purchase Apple hardware.
Apple is adjusting this strategy by migrating their microprocessors from IBM and
Motorola PowerPC to Intel. Analysts believe that the Intel-based Macintosh may be able
to run Microsoft Windows applications by the end of 2006. (Burrows)
In addition to switching processors, Apple positioned their computers as an immediate
option for the traditional Microsoft Windows user. With Apple Boot Camp, users may
now use Mac OS X or Windows on an Apple computer. (Sutherland)