Apple Case PT - Team 1

Platform Biz.
and Servitization
- Apple, Inc.
SeungSeung-soo Han 2011417057 Ji-hoon Lee 2011417042 JiRyunRyun-koo Lee 2011417036 JungJung-hwan Kim 2011417014 SoSo-Yeon Park 2011417017 YeYe-eun Lee 2011417038
Intro.
Table of Contents
1. About Apple
What is Apple? Current Status History Steve Jobss Goal and its Results How Apple succeeded?
2. Implications of iPod and iTunes

Background in American Music Markets Goal, Branding & Target Dimension Introductory Benefits Products
3. Servitization
Theorical issues of Servitization Why Servitization? Examples
4. Applying Servitization Framework to Apple

Competitors and External Environment in 2003 Servitization Process Framework Level of Servitization for Apple Applying to Servitization Framework
5. Potential Opportunities & Threats

SWOT Table Analysis & Forecasting for Apple
6. Conclusion
PART
01
About Apple
PART 1 : About Apple Apple?
Think Different, Think Online Music
Apple or "the company" designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portable digital music players.
Products (revenue contribution%) iPhone (38.6%) Portables (17.3%) iPod (12.7%) Desktop (9.5%) iPad (7.6%) Music Related Service (7.6%) Software (3.9%) Other Hardware (2.8%)
<Datamonitor>
Year of Foundation No. of Employees Current CEO Revenue (2010)
1977 46,600 Timothy D. Cook $ 65,225M (+52%) 5 consecutive winner of SCM (2007-2010)
Awards
PART 1 : About Apple Stock Information
Current stock price At $404.30

1.50K 1.40K 1.30K 1.20K 1.10K 1.00K 0.90K 0.80K 0.70K
1996
1998
2000
2002
2004
2006
2008
2010
<Yahoo Finance>
PART 1 : About Apple Stock Information
Current stock price At $404.30

iPAD Launch
400 350 300 250 200 150 100 50
iPHONE Launch
iMac Launch
iPOD Launch
Global Recession
1996
1998
2000
2002
2004
2006
2008
2010
PART 1 : About Apple
IT Firm Ranking ordered by Retained Cash

Market Value 1 2 3 4 5 6 7 8 9 10 Apple Microsoft Cisco Google Oracle Siemens IBM Samsung Electronics Intel Amazon $ 3,300 $ 201 $ 83 $ 158 $ 125 $ 85 $ 188 $ 92 $ 102 $ 81 Retained Cash $ 76.2 $ 63.7 $ 38.9 $ 35.0 $ 28.8 $ 13.4 $ 11.7 $ 9.0 $ 7.7 $ 6.3
<The Next Web, in billion $>
PART 1 : About Apple Summarized History (Time Line)

Oct 1985 ; AAPL 2,3275
200 150 100 50
1985
1990
1995
2000
2005
<Opentide,2008>
PART 1 : About Apple Think Different, Think Online Music Goals : Making closed system for Apples own world Steve Jobss Mac in 1980s and iPOD in 2000s has the same goal, but their results are totally opposite.
Mackintosh & Mac OS : Fail iPod & iTunes : Success 1st Closed System : Mac & MacOS Strong Brand High Awareness Low Purchase Interest Low Market Share FAIL
WHY?
2nd Closed System : iPOD & iTUNES Strong Brand
WHY?
High Purchase Interest High Market Share SUCCESS
High Awareness
PART 2 : Implications of iPod & iTunes
PART 2 : Implication of iPOD & iTUNES Environmental Changes of Music Market
Before: Off-line distribution Channel
Record producer
Whole saler
Management company
Record Intermediary Service Agency
Hypermarke t Retailer Internet
LP, CD Player, Tape, Recorder
Consumers
CP
Web sites MP3, PC, Mobile, PDA, DTV
Appearance of Digital Music: Transitions in Production, Distribution and Accommodation Method
Illegal Distribution
PART 2 : Implication of iPOD & iTUNES

Heated competitions of Music Market
YAHOO YAHOO Music Unlimted Service Bagan in 2005, May
SONY
MICROSOFT
SONY CONNECTOR MP3 Player Released
Entered in the late 2005 Fixed Monthly Model Based DRM Solution Developed
Market Penetrator
MOTOROLA Partnership with APPLE US Mobile Press Agencies VERIZON SPRINT SINGULAR WIRELESS Think Different, Think Online Music ERICSSON Partnership with NAPSTER
PART 2 : Implication of iPOD & iTUNES The contraction of the music industry
Since starting decrease from the year of 2000, 19.3% of total sales decre 5.0% had increased in 2004 compared to the 2003
(Unit: 10Mil. KRD) 400 380 382 376 360 346 340 320 320 336 371
Securing stable consumption in rec
-Recovery brought in 2004 by Mobile s and legitimate on-line music service. (Global Entertainment and media outlo Growth of on-line music service - On-line music site : About 300 in wor
2004
- Total download # in 2004 : 157 Million (IFPI: International Federation of Phon Industry)
300
1999
2000
2001
2002
2003
PART 2 : Implication of iPOD & iTUNES Napster?

Napster, created by Shawn Fanning, provided on-line music file sharing services which widely used by peer to peer sharing method and allowed music fans to share MP3
Napste r?
Napsters downfall
Legal Issues -In 2000, A&M records and several other companies sued Napster for contributory and vicarious copyright infringement Reason of the Claims -Napster was liable for contributory and vicarious infringement of the plaintiffs copyright, so users were directly infringing the copyright.
Required new business model of music industry
PART 2 : Implication of iPOD & iTUNES How iPod and iTunes succeeded?
1. Its Goal
2. Target Dimension
Maximizing Profit Line-up products and service -maximizing profit through maximizing sales volume of iPod Having brand loyalty -Locked iPod customers in iTunes service

American Music Market Share
Wal-Mart Best Buy iTunes Amazon Target Coconuts/FYE Borders Circuit City Barns&Noble Bestbuy.com Virgin Megastores
The first quarter of 2007, iTunes had beaten Amazon and posed 3rd rank in the US record market. iTune at then already dominated more than 80% at the digital music market and this numerical values were marvelous indicator since it had also contained physical mediums like CD.
14 % 86 %
Digital Physica l
This chart shows revenue mix of Apple and they are comparable in terms of dominated portion.
Combine hardware with software
- MP3 Player : Sales by purchasing songs via PC -> Experienced PC Users - iTunes : Purchased MP3 saved at the iPod directly
Revenue share by 2/3 between singer and agency
Success of Implication
- HR Management - Evaluation employees and career development - Equipment and maintenance management
PART
03
SERVITIZATION?
PART 3 : Servitization Definition :
In brief, SERVITIZATION is an innovation of manufacturers combining products and services in order to satisfy customer needs.
PART 3 : Servitization Concept
Combination of Products and Services in order to satisfy customers needs Servitizatio n Productizati on
Product
Service
Product Servitization : Service Provision optimized to Product Service Productization : Product Provision optimized to Service Both meaning above are called as
SERVITIZATION
PART 3 : Servitization
Summarized History <Paradigm Shift in Manufacturing Industry> Future : Differentiation through combining Products and Services
Past : Product Differentiation, mainly focused on Strengthening Brand
PART 3 : Servitization Why Servitization? - Background
< Importance of Customer Experience Increasing >

Benefits from Contents Services bound with Product
- Added Services combined with Products - Downloading Contents
Product Quality ITSELF
Asking Proper Service customize d to circumsta nces

- Customer Recognition Service to Time, Price, Occasion
- Functions and Quality - Tech., Price, Design Differentiation
Customers consider the most importantly when they decide to purchase
Why Servitization? - Background <Market Platformized> Businesses are getting platformized, integrating all the values
providing to customers.
Customer Value C Customer Value B Customer Value A
Customer Value D Customer Value E
PLATFORM
Benefits from platform : Grow the category, Attract different targets, Differentiate from other competitors
In order to structure dominating platform, service can be a critical tool. That is why firms are focusing on SERVITAZATION recently.
Low
<Servitization Framework>
Product Service
Basic stage
Level of Servitization Product Service
Product-related Service
Product Service
Install-based Service
Product Service High
Platform Service
<Servitization Process>
Trend Analysis Competitive Positioning Competitor Analysis Service Ideation Packagin g Service Evaluation Execution Planning
Start
Visioning
Environment Analysis
Trend Analysis
Analysis of external environments and service environments that the firm inten Trend Analysis of past, present and future related to the industry Value Chain can be used for the analysis
Trend Analysis Competitive Positioning
Competitor Analysis
Service Ideation Packagin g Service Evaluation Execution Planning
Start
Visioning
Competitor Analysis
Analysis of potential competitors existing in the new industry which the compan
Trend Analysis
Competitiv e Positioning
Service Ideation Packagin g Service Evaluation Execution Planning
Start
Visioning
Competitor Analysis
Competitive Positioning
Finding appropriate position in the industry to enter Three factors are used for positioning : Dependency, Sufficiency, Complexity Dependency : Where to be positioned on which layer In technical Architecture Sufficiency : Which service to be most loved by customers Complexity : How complex the services are (The higher complexity, the higher
Start
Visioning
Service Definition
Visioning
Proclamation of Vision and specific Strategies for the new business Strategies should be broken down to the business unit and its functions
Start
Visioning
Service Definition
Service Ideation
Open innovation for differentiated and creative ideas Collecting Service Ideas by workshops, T.F.T and contests To be screened and be used for idea evaluation
For overcoming limited internal capacities, securing competitive Open supremacy is a key by receiving from the third party. Innovation Competitive Positioning Visioning Packagin Oth g
Customer
Competitor Analysis Market Service Evaluation
ers
Joint Service Definition Venture
Company
Product Innovation Business system Innovation Others
Trend Analysis Competitive Positioning Competitor Analysis Service Ideation Packagin g Service Evaluatio n Execution Planning
Start
Visioning
Service Definition
Service Evaluation
Prioritizing service ideas based on Service Attractiveness and Strategic Fitn Service Attractiveness : Dependency on TA, Key Features, Technology Lead Strategic Fitness : Business Principles, Priority in each category
Start
Visioning
Establishment of Execution
Packaging
Determining target customer group, values, or technology Laying weight on customers experiences
Perceived Quality
Attitude Consumed Effort
Social Context
Intend
Using Service
Experience
Perceived Usefulness
Image, Memory
Perceived Easy of Use
Technology Acceptance Model, Davis(1989). Information as an economic goods, Bates(1998)
Trend Analysis Competitive Positioning Competitor Analysis Service Ideation Packagin g Service Evaluation Executio n Planning
Start
Visioning
Establishment of Execution
Execution Planning
Planning for execution of new services Re-examination about business analysis (from Trend Analysis)
Execution Plan Establishment Stage
1.Business Analysis 1.
-Analysis on market definition & environment -Analysis on competitors and customers -Analysis on themselves and partners -Define vision/ value &-Define service goal and strategy Model -Define service model and main offering -Define value chain/ procedure
2. Define service strategy
-Building development strategy strategy and execution plan 3. Building development strategy developmentand execution plan -Building
4. Building marketing strategy -Building marketing strategy and execution plan 5. Forecasting of Result
-Define KPI and result forecasting
-Define KPI and 6. Report & Evaluation & Adjustmentresult forecasting
Intellectual property rights and differentiation strategy in Fusion period
Level 4 Level 3 Level 2 Level 1
Process Innovati on PI BPR
Product Enhancement
Product Servitization
Service Productization
iPod iTunes
HighPerformance Differentiation
One-Click BM Patent Capitalization / Standard Consistency
Efficien cy
Discussion Embedded
Broad Sense Embedded = SW Fusion
Reference: Industry Forecast Conference
OVI player strategy and meaning from Nokia
Mixture of Wire & wireless service platform
Service platform business material from mobile provider
Visible Outcome
Margin via service sales Enlarge influence of mobile platform market via Sym
Expand domination from device market via OVI-Enab
Examples : Amazon Kindle
$536,854 $66,150 $184,243
Citi group Forecast, Strabase. 200
PART 4:
Applying Servitization Framework to Apple?
PART 4 : Applying Servitization Framework Different, Think Online Music Think
Lets suppose that you are the director of iTunes in 2003
How could iTunes succeed as online music distribution channel despite of higher price than its comp
PART 4 : Applying Servitization Framework Different, Think Online Music Think Competitors in online music market
Players ITUNES Songs in Library 200,000 songs Prices $0.99 per song Etc. Manufacturer
BuyMusic.com
300,000 songs
$0.79 per song
WMA format only allowed streaming Music contents provider Illegal
Listen.com
350,000 songs
$0.99 per song
MusicNet
200,000 songs
$3.95 / month
Napster
unlimited
Free

External Environment
Customers
Want to listen music through digital devices
Providers
Profit Guarantee (Being protected from violence of copyright)
Legal
Napster Downfall (One of the biggest music distribution channel)
Technology
Development of Internet Environment
PART 4 : Applying Servitization Framework Different, Think Online Music Think Catching Customers needs
What does customer really want for listening music?
To listen music whenever or wherever he want!
Customers Experience
With proper device : Stylish and Easy to use Without any guilty or inconvenience

Satisfy Music Content Provider
Apple
Copy right Holder :12
Satisfaction
Supplier Buyer
Satisfaction to Entire Shareholders
Satisfaction Music content Apple Provider :38 :50
PART 4 : Applying Servitization Framework Different, Think Online Music Think Realization?
Past
IMPOSSIBLE, due to technical reasons
Now
POSSIBLE, due to technical advance
Hardware required to fulfill the customers essential needs
SERVITIZATION
through combining with optimized service

<Servitization Process for iPOD and iTUNES>
Strong competitiveness in 1. can manufacture music players 2. efficient cost structure 3. excellence in outsourcing More focusing on platform business over the markets
Technology Customers Needs Providers Needs Legal Issues

Apple
Competitors inin portable m.p. market Competitors online music market
$0.994GB song per 8 hrs 0.2M songs time of playback iTUNES iPOD
vs.
5GB $0.75 per song 20 hrs of playback time over 0.3M songs NO MUSIC NO EXCLUSIVE DEVICE DISTRIBUTION CHANNEL

Software Distribute Manufacture Not Distribute
Apple
Hardware
Rio Creative Labs Samsung
Not Mfg.
BuyMusic.com Listen.com MusicNet

Service Definition & Establishment of Execution Visioning Service Ideation & Evaluation Packaging & Execution
Creativity is just connecting things Steve Jobs
Harmonized needs from customers and contents providers / Ideation and Evaluation by small group of experts
Combining product and service (iPOD + iTUNES) - Digital music player with its own dedicated music store
Combining Products and Services to satisfy customer needs
Product : iPod
Servitization
Service : iTunes
Productization

<Apples Level of Servitization>
Low Product Service
MacKintosh
Level of Servitization Product Service
iPOD & iTUNES

Product Service
iPHONE & iSTORE

Product Service High
Apple TV & iSTORE

TV Phone MP3P Computer Software Music Apps. Broadcasting
PART 4 : Applying Servitization

<Servitization Framework>
Computer Potable Music Player Mobile phone
<Provided by KUBS>
TV
Mar ket
Contents providing service through Platform services iTunes & iPod ProductMaintenance, related Installing Service service Derivate product or services with development time / cost efficiency and attractive performance positioning strength iPod iTunes
Integration
Product- Service- Knowledge System (PSKS)
high effectiveness of productivity and cost/ lock-in effect
knowledge
high dependency on contents s providers/ possibility to be sun its revenue by competitors
weaknes
Competencies in the Supply Chain Supplier
contents production
Marketing, insight about market, brand loyalty Apple
Stable distribution system
Apple
knowhow about using Custom machines
er

<Apples Platform Business>
Telephone Movie Apps.
Music
PLATFORM
Tablet
? ?
PART 4 : Applying Servitization Framework Different, Think Online Music Think <Movie Clip : iPOD Revolution>
<Discovery Channel>
PART
05
Potential Opportunities
PART 5 : Potential Opportunities & Threats SWOT

Cash power Patent lawsuit Absences of Jobs Closed system (product & software)
Knowledge of Platform service
Brand image & Customers loyalty
Powerful Outsourcing ability
Online market expansion
iTV & iTunes U
StrengthWeakne Opportunitss Threat y
DRM free
Specialized Product of competitor
DRM free
Cooperation with Disney & Twitter
iCloud
M&A of competitors
Strong Retaliation
PART 5 : Potential Opportunities & Threats Threats - Collaboration of other competitors
Threats
Nokias 1st MS phone. Nokia gave up their own OS system. Synergy effect by Nokias hardware and MSs software.
PART 5 : Potential Opportunities & Threats Threats - Collaboration of competitors
Treats Google Motorola merger compare to iPhone.
Google has own smart phone model, bu
PART 5 : Potential Opportunities & Threats Threats - Specialized product of competitor
Kindle fire: e-book device of Amazon Focus on divergence Strong with contents of books
Feature - 7 Touch screen, Android OS

PART 5 : Potential Opportunities & Threats Opportunities - iTunes U
iTunes U
E-Learning Service
Read and Watch the lecture of world famo Free service, including special lecture
PART 5 : Potential Opportunities & Threats Opportunities - iCloud
iCloud
Digital hub by connecting all apple devices. Storage and Sync (mail, music, photo, docs, dia
iTunes match : Scan all music in device and uplo (including illegal free music files) Useful system for who use more than 2 products
Announced new service in 2011 WWDC (Apple Worldwide Developers Conference)

PART 5 : Potential Opportunities & Threats Opportunities - Apple TV
Apple TV iCloud
Be connected all Apple device Sharing all contents with Apple TV (movie, music, text, picture etc) Siri Intelligent assistant / voice-to-text se
By using iTunes, you can use various applications as well as other device.
PART 5 : Potential Opportunities & Threats Opportunities & Threats-DRM free
Non-iTunes users iTunes users
No bad effect to Apple! Apple is still No.1!

PART 5 : Potential Opportunities & Threats
Lock in by Apple ! People will fascinated by Apples servitization and live in Apples closed eco system.
Conclusion
Thank you
References
Jacobs & Chase(2010), Operations and Supply Management, The Core,. McGraw Hill Julie Hennessy(2004), Apple Computer,Inc. : Think Different, Think Online Music, Kellogg School of Management Jihee Ryu, Hosun Rhim, Kwangtae Park and Hong-il Kim(2009), A Framework for Servitization of manufacturing company, Korea University Business School (2009), (Product Servitization) , 17 (www.cimerr.net) (2010), , : , ! , !, (2010), : , (2008), : , (2011), Shortcut to Steve Jobs, (2010), : . , (2010), vs : , Datamonitor(2011), Apple Company Analysis, Datamonitor (2009), IT Servitization, Servitizer.com (2010), MS , LG (2011), , PC , SERI (2011), , SERI
References
(2008), , (2010), : , 20 1 , (2009), Kindle e-Book , KT , (2011), WWDC 2011 Apple , KT (2009), , T.S.Baines(2009), The servitization of manufacturing: A review of literature and reflection on future challenges, Emerald Group Publishing Limited Apple Stock Price, http://finance.yahoo.com IT Firm Ranking, http://www.thenextweb.com Flow of Music Industry, IFPI: International Federation of Phonographic Industry , http://logisticsviewpoint.posterous.com/?tag=scm Right to the core, http://www.supplymanagement.com/analysis/case-studies/2010/right-to-the-core/ Apples Secret iPAD advantage Supply Chain, http://www.zdnet.com/blog/perlow/apples-secret-ipad-advantage-the-supply-chain/15813 Gartners Supply chain Top 25, http://www.gartner.com/DisplayDocument?doc_cd=213740#Table_1_ SCM , http://www.newspim.com/view.jsp?newsId=20110623000391 , http://news.chosun.com/site/data/html_dir/2010/02/12/2010021201002.html Images from amazon.com, apple.com

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Platform Biz.

2. Implications of iPod and iTunes

4. Applying Servitization Framework to Apple

5. Potential Opportunities & Threats

PART 1 : About Apple Apple?

Think Different, Think Online Music

Year of Foundation No. of Employees Current CEO Revenue (2010)

PART 1 : About Apple Stock Information

Think Different, Think Online Music

Current stock price At $404.30

PART 1 : About Apple Stock Information

Think Different, Think Online Music

Current stock price At $404.30

PART 1 : About Apple

Think Different, Think Online Music

IT Firm Ranking ordered by Retained Cash

PART 1 : About Apple Summarized History (Time Line)

Think Different, Think Online Music

200 150 100 50

2nd Closed System : iPOD & iTUNES Strong Brand

PART 2 : Implications of iPod & iTunes

PART 2 : Implication of iPOD & iTUNES Environmental Changes of Music Market

Before: Off-line distribution Channel

Hypermarke t Retailer Internet

LP, CD Player, Tape, Recorder

Appearance of Digital Music: Transitions in Production, Distribution and Accommodation Method

Think Different, Think Online Music

PART 2 : Implication of iPOD & iTUNES

YAHOO YAHOO Music Unlimted Service Bagan in 2005, May

SONY CONNECTOR MP3 Player Released

Think Different, Think Online Music

Securing stable consumption in rec

PART 2 : Implication of iPOD & iTUNES Napster?

Think Different, Think Online Music

PART 2 : Implication of iPOD & iTUNES

Think Different, Think Online Music

Required new business model of music industry

PART 2 : Implication of iPOD & iTUNES

Think Different, Think Online Music

PART 2 : Implication of iPOD & iTUNES

Think Different, Think Online Music

PART 2 : Implication of iPOD & iTUNES

Think Different, Think Online Music

PART 2 : Implication of iPOD & iTUNES

Combine hardware with software

PART 3 : Servitization Definition :

Think Different, Think Online Music

PART 3 : Servitization Concept

Think Different, Think Online Music

Think Different, Think Online Music

Past : Product Differentiation, mainly focused on Strengthening Brand

PART 3 : Servitization Why Servitization? - Background

Think Different, Think Online Music

< Importance of Customer Experience Increasing >

Product Quality ITSELF

Asking Proper Service customize d to circumsta nces

- Functions and Quality - Tech., Price, Design Differentiation

Customers consider the most importantly when they decide to purchase

Think Different, Think Online Music

Customer Value D Customer Value E

Think Different, Think Online Music

Think Different, Think Online Music