Apple Inc. Case PDF

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October 19th, 2020 BADM 449 Case Assignment #5: Apple Inc.

Part 1—The PC Industry The PC Industry in 2014 was dominated by Lenovo, Hewlett-Packard (HP), and Dell who held 51.1% of worldwide shipments in 2014 of PC Manufacturers (see exhibit 3b below). Each company utilized a unique strategy to set themselves apart from one another. For example, HP outsourced most of its production to Asia where it sold its products for cheaper costs. Meanwhile, Lenovo possessed a dominant position in China which was a fast-emerging market for PCs. Lastly, Dell combination of direct sales and built-to-order manufacturing. Each of these companies at some point faced decline and hardships either with leadership difficulties, poor margins and cost controls, or acquisition of products that do not promote growth. Similarly, Apple’s Macs struggled to maintain a competitive position in the market because of its high costs and premium price differentiation strategy in 1997 only to near bankruptcy. In 1997, Steve Jobs turned Apple around through his “digital hub strategy” as discussed further in Part 2. The difficulty for the PC industry came when alternative technologies emerged in the early 2000s ranging from Sony’s PlayStation 3 or Google’s Chromebooks. With the emergence of new technologies, the PC industry required adjustments and a new strategy: all of which Jobs was ready. While many insiders worried about what the future would look like for their PC companies, Jobs viewed the impact of digital devices as part of an “integrated strategy to deliver breakthrough user experiences.” In analyzing the PC industry, it is clear that the threat of substitutes is high. While a consumer may value what a PC provides, it is up to the brand’s individuality and strategy to ensure that it stands apart. In the industry, this can be highlighted as either product elegance, brand image, speed, and quickness, or size of the computer. For example, the case mentions that PC buyers fall into five categories: home, small and medium-sized businesses, corporate education, and government. Each consumer of a PC values a different type of electronic and their demands vary by the evolving technologies; thus, PC companies have to be swift in adjusting to the market which also allows for a high amount of potential threat of new entrants into the market. When examining the power of suppliers, we can also conclude that their bargaining

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power is high. Suppliers such as Intel, Microsoft, XP, and OS are key parts of the PC’s success. Finally, buyers in the industry hold a high power as well: they are ultimately the individuals to who PC makers have to appeal most greatly to. As a result, for a firm in the PC industry to create a competitive advantage, they must be dynamic and ready to create a strategy that appeals most to their end-users as Apple had under Jobs guidance in 1997.

Part 2—Favorable Dynamics for Apple As mentioned above in Part 1, competition in the PC industry was increasing with the emergence of alternative technologies in the early 2000s. The result? Sales decreasing within the industry. In need of adjusting their strategy to stay competitive in the PC Industry, Apple’s development of the “digital hub strategy” convinced consumers to become entranced with technology that the Mac would serve as the control center of their lives. To accomplish this, Jobs adjusted the Mac device itself: the new OS platform was introduced, intel chips allowed for lighter devices, the addition of applications, and a changed distribution strategy. Mac’s would now be sold interactively at Apple stores where consumers would be able to walk in, interact with the devices, and try each out. The store came to be known as the “Nordstrom of technology.” Despite the crossroads the PC industry was facing, the dynamics for Apple was favorable. Jobs’ strategy to expand the company’s portfolio (iPad, iPhone, iPod) and interactive focus account for its success. Leadership wise, he instilled a belief into his employees by creating a culture of confidentiality and professionalism. In terms of his consumer base, the brand in the direction where industrial design, simplicity, and product elegance. Overall, his 2

mission to become a cultural force was seen in the results of PC sales after he took over the business going from 3,290-unit sales in 2004 to 18,906-unit sales in 2014 (see Exhibit 1c). Apple focused its product catalogs and brought back vibrancy to their brand image. Consumers in the 10 years, as seen below, were brought into stores and saw how their “digital hub” lives can turn more colorful with their purchase of a Macintosh. Without Jobs’s leadership and the “digital hub strategy, Apple would not have been able to achieve this much growth and success among its competitors.

Part 3—The Sustainability of Apple’s Competitive Position in PC’s In the PC industry, we have seen how dynamic consumers’ preferences can be. To stay up to date with trends, it is important for Apple to still maintain its investments in R&D and to watch the market demand closely. Ultimately, the “digital hub” strategy can still be applied today: 19 years later since its announcement in 2001. To stay sustainable, however, it is important needs to keep innovating and adjusting its strategy depending on the market demand. One way they have already done this is through their creation of the iPhone and moving into the phone industry. Moving beyond the iPhone, their creation of the iPad also opened doors for them in terms of adjusting themselves in the marketplace with new alternative technologies. With a focused product line and expanding into different industries intelligently, I believe they are setting up a competitive advantage for themselves in the PC Industry. Every product Apple creates is marketing its other products: thus, brand loyalty is increasing. Even if Apple does not

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have the greatest PC, consumers know from the company’s reputation that it will be a strong product. One recommendation I would give Apple to stay sustainable is to continue moving into different industries. For example, the Apple iPhone and Apple Watch can track consumers’ health by looking at how much sleep they are receiving and by the number of steps they are taking. They can further ask themselves: what can we do to create a product that appeals to health-conscious consumers? Creating products that allow the company to move into different industries requires creativity and careful strategies. Thus, the more can market their other products and develop new ones (keeping loyal consumers interested in the brand), they will be able to continue their competitive position in the PC industry as well. Part 4—Apple’s Decision to Introduce the Apple Watch On September 24, 2014, Tim Cook (Jobs’ predecessor) announced the launch of the Apple Watch. After Jobs’ death on October 5th, 2011, loyal Apple consumers were waiting for Apple’s next big move. Without Jobs there to lead, would Apple be able to stay competitive with its products? Who would be able to lead the company’s innovation and expansion? Cook’s launching of the Apple Watch (and Apple Pay on the same day) was necessary for the company to stay competitive. With a large amount of pressure from investors and consumers, Cook did what the company was best at doing: expanding into different industries. Knowing the excitement consumers had for Apple’s next big launch, Cook’s investment into the smartwatch industry was extremely important for company morale and brand-making. Moreover, while Apple had not initially done well with unit sales compared to competitors, the brand has taken the Apple Watch far. Today, among consumers it has a reputation for elegance, luxury, and speed. Since Apple was so famous for the iPhone, consumers coming into retail stores had more initiative to purchase an Apple Watch that would be connected to their iPhone. While Jobs’ was not leading the company anymore, his “digital hub strategy” legacy lived on. Moreover, Apple’s brand image and loyal customer base continues even to today. The more the brand and marketing of the iPhone or iPad continue, the company has room to expand its products into different industries as they did with the Apple Watch.

Part 5—Apple’s Core Competencies

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1. Innovation: One of Apple’s core competencies is innovation. Apple is famously known for expanding its product base to different products such as health and fitness, acquisition of beats, Apple Watch, iPhone, Airpods/Apple Music, and Apple Credit Card. The company is famously known for its creative products. This core competency allows them to sustain a competitive advantage because of their emphasis on creating new products and expanding into different industries. 2. Superior Marketing: Another core competency of Apple is Superior Marketing. For example, their creative marketing campaigns, apple store design, and innovative product design. For example, Apple’s “Think Different” advertisements as well as subtle celebrity endorsements help the company reach its target audience of younger generations. Additionally, the company’s unique, interactive store designs allow for consumers to test out products without having to purchase the items: serving as the “Nordstrom of technology.” Lastly, the products themselves have elegance and luxury associated with them based on their marketing techniques that keep a user wanting to come back to purchase more. 3. Ecosystem of Complementary Products: Apple’s integration of products across mobile devices (iPhone 12 Series, iPhone X Series) that allow for updates. Moreover, the iPad & Mac have different devices iPad Air, iPad Mini, iMac, Macbook Air. To continue, some of their other similar products include App Store, Apple TV, Apple Music, Apple Pay, and iCloud. By having different products, Apple is can to keep consumers interested in their products and waiting for more.

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