APPLE COMPUTER

Team Members

Ravi Yogesh (F10101) Renu Thomas (F10102) Ritambhara Bohra (F10103) Rohit Batta (F10104) Rohith Girish (F10105) Ronald Riju (F10106) Ruby Flavia Rodrigues (F10107) Santiago Vinoth (F10108) Shashi Suman (F10109) Sneha Ramkumar (F10110)

Presentation Outline

Analysis of Apple Strategic Analysis of Apple Key Highlights Recommendations Conclusion

Objectives

Can Apple profit from innovation? Can Apple increase its market share in the PC segment? Would sales of iPod help drive Apples computer sales? Implications for Apples long-term competitive position?

A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of [customers], they would continue to open their wallets. - Steve Jobs, Bloomberg BusinessWeek (Aug 25, 2003)

ANALYSIS OF APPLE
4Cs of Apple Functional, Emotional and Symbolic value

4Cs of Apple

Community (PEST Analysis)

Political

FAVOURABLE

Political

Stability in the host country (U. S.) No risk of military invasion High intellectual property protection Sound framework of anti-trust laws, wage legislation and industrial safety regulations Mandatory employee benefits Strict product labeling requirements

4Cs of Apple
Economical

UNSTABLE
Unfavourable Low Exchange rates (Re. to $) High Labour costs Business Cycle Recession

Favourable Good stability of the dollar Good Infrastructure quality Highly skilled workforce

Social

Analysis - FAVOURABLE Increasing Unemployment

rate young, trendy and highly brand

Demographics

conscious Attitudes tech savvy, fashionable and on the move Culture free culture (no restrictions in thought, freedom or movement)

4Cs of Apple
Technological Analysis
Decreasing

UNFAVOURABLE

Product life cycle for PCs and mobile

phones Enormous spending on R&D Falling technological costs High impact of technology on product offerings

Company
Core

Competency

Innovation (technology and fashion) Integrated approach

4Cs of Apple

Competitors
Outsourced R&D for products to their suppliers Cheaper price Windows-powered, unlike Apple

Customers
Extremely loyal customer base Young, trendy and tech-savvy generation Appeals to people who value innovative products that looked good Did not mind the price-premium

Functional Value

Portability Good looks Innovative product Good after-sales support Exemplary performance

Emotional & Symbolic Value

Apples customers valued Apple as a brand They did not mind the price premium to own an Apple product Owning an Apple product made them feel
Trendy Fashionable,

and Technologically Savvy

STRATEGIC ANALYSIS OF APPLE

Competitive Profile Matrix (CPM) External Factor Evaluation Matrix (EFE) Internal Factor Evaluation Matrix (IFE) SWOT Matrix

CPM Competitive Profile Matrix

Apple Critical Success Factors Market Share Price Financial Position Product Quality Consumer Loyalty Advertising Management Global Expansion Innovation Web Development Weight 0.10 0.10 0.15 0.15 0.15 0.04 0.06 0.06 0.14 0.05 Rating 1 2 3 3 4 2 4 2 4 3 Weighted Score 0.10 0.20 0.45 0.45 0.60 0.08 0.24 0.12 0.56 0.15 Computer Market Rating 3 3 2 2 2 3 3 2 2 2 Weighted Score 0.30 0.30 0.30 0.30 0.30 0.12 0.18 0.12 0.28 0.10 Rating 4 4 3 4 3 3 3 3 2 3 Dell Weighted Score 0.40 0.40 0.45 0.60 0.45 0.12 0.18 0.18 0.28 0.15

Total

1.00

2.95

2.30

3.21

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score

Opportunities
Increase in worms and virus on PCs. Downloadable music and MP3 players are highly marketable. 0.15 0.6 4 3 0.60 0.18

Large population (Gen X & Y) which are extremely individualistic and brand conscious.
Increase in sales of laptops by 20 percent. Increasing sales of computers online by 25 percent. Creating more ties with Microsoft products.

0.15
0.04 0.05 0.10

4
3 3 4

0.60
0.12 0.15 0.40

Threats
Increasing competition with music downloads. Intels future Pentium release. Dell and HP are major competitors. Dell does not invent but provides cheaper computers for its customers. Recessionprice of Apple computers are higher. Companies not seeing Apple as compatible with their software. TOTAL 0.07 0.03 0.10 0.06 0.04 0.15 1.00 2 3 4 3 2 2 0.14 0.09 0.40 0.18 0.08 0.30 3.24

External Summary

Apple has rated three highest opportunities

Apple has rated that the fact of Dell and HP being such huge competitors as their top threat.

Increase in worms and virus on PCs Large population (Gen X & Y) which are extremely individualistic and brand conscious, and Creating more ties with Microsoft products

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Strengths Weight Rating Weighted Score

iTunes Music Store is a good source of revenue, especially with the iPod and the availability on Windows platform.
Apples niche audience provides the company with some insulation from the direct price competition. Revamping desktop and notebook lines. Low debtmore maneuverable. Developing own software and hardware. Good brand loyalty. Web technology can be used to improve product awareness and sales. Weaknesses Dependency on new product launches. Weak presence in business arena. Slow turn around on high demand products. Weak relationship with Intel and Microsoft. Weak presence in markets other than education and publishing. Total

0.15
0.10 0.10 0.06 0.14 0.05 0.10

4
3 3 4 3 3 4

0.60
0.30 0.30 0.24 0.42 0.15 0.40

0.06 0.07 0.03 0.10 0.04 1.00

1 1 2 1 2

0.06 0.07 0.06 0.10 0.08 2.78

Internal Summary

3 Highest strengths of Apple are

iTunes Music Store, especially with the iPod and the availability on Windows platform, Low debtmore maneuverable, Using the Web to improve product awareness and sales

Apple did not rate any of their weaknesses higher than a 2. They should work on being able to direct more attention to those areas and especially concentrate on the two areas of slow turnaround on new product launches and the weak presence in business arena.

SWOT Matrix of Apple

SWOT Matrix
S-O Strategies

Increase awareness through the web of the immunity of Mac products to worms and viruses. (S5, O1) Advertise using individuals that will link Generation X & Y to the iTunes and other related products. (S1, O2, O4, O5, O6)

Using movies and music groups that are geared towards Gen X and Y to promote computers and laptops. (S3, S5, O2, O5, O6)

W-O Strategies Increase ties with Microsoft and Intel and their products.(W1, W2, W4 O2, O3) Promote to business the safety of having a worm and virus free computer by using Mac. (W2, W4, O1, O5, O6)

S-T Strategies

Increase and promote the compatibility to Window operating system. (S5,T1)

Promote the originality of Apple computers and the different style and stable system that is slightly more but worth the price difference in style, stability and speed. (S2, S5, T2, T4, T5)

W-T Strategies Improve relationship with Microsoft and Intel so that companies will see them as compatible. (W1, W2 T1) Increase productivity and turn around of high demand products to compete with Dell and HP (W5, T2)

KEY HIGHLIGHTS
Right & Wrong strategies adopted by Apple Responses of its competitors Initiatives taken by its competitors

Apple II (1977)

First successful PC by Apple, Priced at $1,200 USP - Innovative, integrated computer that was easy to use (not seen as a toy for geeks) and which looked good
Innovation a disk drive - helped third-party developers to write programs and load using FDs Two programs EasyWriter and VisiCalc Lacked the ability to sell into corporate America

IBM PC (1981)

Adopted an open architecture Tied up with MITS Atari for BASIC and MSDOS

Revenue from cross-selling of applications

Ability to sell into corporate America - more sales

Birth of programs Word Perfect and Lotus 12-3

Gave birth to IBM-clone manufacturers

Macintosh (1984)

Innovation GUI, icons, mouse and good looks No hard drives, only one floppy drive and insufficient computer memory Fewer applications were developed Unrealistic sales projections

Golden Years of Apple

Integrated approach hardware & software Two markets education and desktop publishing Price premium gross margins as high as 55% Licensed virtual displays to Microsoft Two negatives that slowed down sales

High Price (vis-a-vis Windows 3.1-enabled IBM PCs), and Poor distribution (could not sell to businesses)

Too many R&D projects some of them unsuccessful

iMac (1998)

Embodied the spirit of Apple Priced aggressively - $1,299 Differentiator - Design of the machine Faster, more memory and bigger hard drives Introduced the iBook ($ 1,599) New OS OS X Worked on its own applications, including Safari iMac G5 in 2004 simple, stunning all-in-one design

iPod (2001)

Innovative, elegant, fashionable and branded Priced at $ 399 consumers willing to pay Windows compatible iPod developed iTunes (2003) download songs for $ 0.99 each Large volume sales in iPod Introduced new, smaller versions iPod Shuffle and iPod Nano

Longer battery life Bigger hard drives Thin and elegant, and Priced aggressively

Other moves by Apple

Used Intel microprocessors

Faster Low power consumption Cut costs (Intel had more volume than IBM) Apple helped current users shift to Intel microprocessors

Moving into Retail (2001)

Stylish design Genius Bar impressive tech support

Spill-over from iPod sales into iMac HALO EFFECT

RECOMMENDATIONS
How to be profitable in the long-run Key Long-term Objectives

Profitability in the long-run

Stick to their core competency

Invest

in R&D software, product design and

OEM Integrated approach

Very good product awareness Improve distribution (improving since iMac and iPod) Focus on opening Apple stores in emerging markets Key focus sell more of their products without slashing prices

Profitability in the long-run

Competitive position
PC

manufacturer to Digital Device manufacturer OEM manufacturer Integrated approach

Focus on B2C segment

Well-defined

target market Potential conflict with IBM in the B2B market Possible targeting of businesses in desktop publishing, advertising, fashion designing and/or media industries

Long-term Objectives
Over the next 4-5years Apple should Increase its product distribution Focus on improving its onshore customer support Increase its market share in the digital devices market, across the various categories

Apple can continue to make profits as long as, to quote Steve Jobs, it keeps putting great products in front of its customers!!

THANK YOU!!!