A PPLE CASE STUDY Dinesh Chandrasekar

Apple over the years ( 1976 -201x)

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In its 36 years of existence Apple has evolved from being an assembler of Micro Computers to a digital convergence giant and the most cash-rich company on earth with over $100 billion cash reserves. Apple currently operates in several industry spaces

- Computers, Portables and Peripherals , Music /Media and Mobile

5 Forces Model - Pre-2002

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Bargaining power of Suppliers • Very few vendors

would agree for software for Apple products (including Microsoft)

• Only 2 large vendors for critical component - CPU (Intel, Motorola)

Threat of New Entrants • Entry into PC clone market is easy • Local Consumer base varies

Rivalry/Existing Competitors 1. Major threat from large

established manufacturers (IBM, DELL, HP, Compaq)

Bargaining power of Consumers • Apple products

were expensive but customers still bought them.

Threat of Substitutes • IBM PC Clones • Differentiators reduced as Technology

Innovations are copied / replicated.

5 Forces Model - Post 2002

Forces /Industry PC Music Mobile Phone

New Entrants HIGH

HIGH • Hardware – HIGH • Music – HIGH

HIGH • Short Product Lifecycle • High Investment Cost • Initial Contract with Carrier

required

Buyer Power HIGH HIGH • Switch cost is very low

HIGH • Choice based on Device Look &

Feel and Performance

Supplier LOW MODERATE • Many suppliers available

HIGH • Carriers • Component Manufacturers

Substitutes HIGH Laptops, Smart Phones, Tablets , Phablets

HIGH

HIGH • Local Regional Based Devices

Rivalry HIGH Existing competitors

HIGH HIGH • Competition from Android Phones • Competition from China Clones

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Activity System Map – Pre 2002

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Brand Value / Marketing Edge

Innovative Offerings

Pioneering Market Entry

Proprietary OS / Software

Hire Right People

Superior Simplistic Designs

Direct Retail

Leadership in Sectors

Extensive Research &

Development

Outsourced Production

Activity System Map – Post 2002

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Brand Value / Marketing Edge

Innovative Offerings

Pioneering Market Entry

Exclusive Apple Stores

Proprietary OS / Software

iTunes

Hire Right People

Superior Simplistic Designs

Direct Retail

APPS stores

Extensive Research &

Development Outsourced Production

What worked / What Didn’t

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Year Product What Worked What Didn't Work

1976 Apple - I Innovation - 1st Personal Computer Price

1977 Apple II Innovation - Color Graphics, Open Architecture, Floppy

1980 Apple - III Product Design Flaws Negative Publicity

1983 Lisa Innovation - GUI High Price - $10,000 Limited Softwares

1984 Macintosh Collaboration with Suppliers for PageMaker software, Innovation - Laser Printer

Slow Performance, Lack of MAC compatible software

1985 - 1990

Better Horizontal & Vertical Integration (Hardware as well as Software), Duopoly Approach

Change in Business Strategy diluted the differentiators (from Differentiation to Cost Leadership ), Federation of Corporate Alliances.

1994 - 1996 PowerMac Improved Processors with Price Correction

Change in Consumer Brand Loyalty. International Expansion backfired. Cost Cutting measures (Employee Reduction)

1997 Premium Pricing Strategy and Quality Issues. Failure of Handheld Devices

2002 Onwards Move to Strong Differentiation Strategy. Regular Product Upgrades / Launches.