apple computers to apple inc

A G10 Presentation

Lust

Knowledge

Hope

Anarchy

Forbidden

Genesis

In the beginning

Men

Computers

Big Blue

And men were taught aboutcomputers

there was light

on one sunny day

A few crazy engineers

Think Different

Let’s teach computers aboutpeople

Macintosh

The Computer for rest of us

Crazy

misfits

troublemakers

rebels

Round pegs in square holes

One’s who see thingsdifferently

Not fond of rules

No respect for the Status quo

Praise them

Disagree with them

Quote them

disbelieve them

glorify them

Vilify them

The only thing you can’t do

Ignore them

They change things

They push the human raceforward

Crazy ones

Genius

the people who are crazyenough

to think that they can

Are the ones who do

Think Different

Where is think different takingApple today?

Consumer Electronics

a risk worth taking

Another crazy gamble?

Distinctive Capabilities

Software

Hardware

Desktop Publishing

Education

Marketing

User Interface

insanely great

Core Competencies

27%

0.6%

Where did all the money go?

1. Innovation

10 years

1300

2. Branding

The Cultof

The Cool

Microsoft“Where do you want to go

today?”

Apple’s Mantra“We know where do you want

to go today !!”

ultimate

Simplicity

3. Industrial Design

But

Smart

Small

A dollar in 1992

Worth $0.79 in 2002

What went wrong?

Who killed Apple Computers?

Apple

In the PC Industry

PC Industry Evolution

Before 1981

Proprietary

1981 - 1997

Open Structure

Attack of the clones

1997

Rise of the Internet

PC Industry Value Chain

But its really a value network ..

Value in Software

Commoditization

1976

Apple launched

Produced Microcomputers

$0.7 m to $76 m

IBM turns PC intoopen structure

1984

Macintosh is born

The computer“for the rest of us”

Apple misreads the trend

Macintosh peaks

Apple keeps losingmarket share

IBM, Dell,Hewlett-Packard, & Others

high priced proprietary system

not compatible with IBM PC

adopted Motorola CPUinstead of Intel

focused on education &printing niches

Perception Map during 1998

1998: Defender

2007

Apple Computers becomes AppleInc.

1998 2007

has built a massive appeal

Presence

Ca

teg

ory

1998

2007

How Big is Apple

Market Share ?

Income Statement

Share Price

“Apple should shut down for thesake of its shareholders.”

Dell - 1997

A successful turn-around

After slugging it out in the PCWars

How did it happen?

Consumer ElectronicsIndustry

Portable AV

AnalogueManufacturers

Cell-phoneMakers

PDA &handhelds

Trends

1. Convergence

2. Global Supply Chain

3. DRM

4. Short Life Cycles

Consumer ElectronicsCompetitive Landscape

Oldies

SonySamsungThomson

LGCreative

Matsushita

Convergence - PCmanufacturers

MicrosoftDellHP

Apple

Convergence -Telecom/Broadband Players

NokiaCisco

MotorolaSony Ericsson

Samsung

Convergence - PDA Makers

RIMPalmHP

Porters 5 Forces Analysis

Threat of Entry

Low

Capital Intensive Industry

Economies of scale

Market power is needed

Lower Net Margin

Threat of Suppliers

Low

Large Number of suppliers

High Substitutability

Forward Integration is Difficult

Threat of Buyers

Moderate to High

High elasticity of demand

Illegal peer to peer file sharing ispossible

Big dealers can pressurize toreduce cost

Threat of Substitutes

Moderate

Alternative means to acquiremusic are available

Threat of Rivalry

High

Highly competitive market

Both price and feature basedcompetition is there

Various online music sources areavailable

Small stylish MP3 players areavailable

Profitability

7%

What made Apple to move to theCE Industry

1990s

Losing Internal Culture

Losing customer base

Diversification

1993: Newton (PDA)1994: Quick Take

1996: Pippin

Could not handle 4 businessessimultaneously

Don’t Diversify when things arenot going your way

1997

Revive Old Culture

Enter new markets

Non First mover advantage

But Still….

Digital Players Market

1.261.150.913.99P/S (ttm):

2.741.381.211.241.42PEG (5 yrexpected):

33.8823.8417.4518.4734.53P/E (ttm):

0.821.172.3061.2842.76EPS (ttm):

86.38M11.91B6.52B2.95B 2.43BNet Income (ttm):

4.62%36.20%7.62%6.85%14.63%Oper Margins(ttm):

133.86M17.94B10.16B4.43B3.44BEBITDA (ttm):

30.35%79.43%24.51%17.56%30.35%Gross Margin(ttm):

3.98B46.06B94.08B57.88B20.68BRevenue (ttm):

24.30%6.00%10.70%-5.10%23.80%Qtrly Rev Growth(yoy):

1.70K71,000156,00065,20017,787Employees:

1.85B273.11B107.73B52.87B82.15BMarket Cap:

IndustryMSFTHPQDELLAAPL

1.583.991.190.590.77P/S (ttm):

1.361.422.151.222.14PEG (5 yrexpected):

25.1234.536.3522.6551.02P/E (ttm):

0.32.766.050.911.02EPS (ttm):

5.73M 2.43B1.22B1.99B1.07BNetIncome(ttm):

6.99%14.63%4.04%5.04%2.44%OperMargins(ttm):

12.35M3.44B2.28B6.31B5.19BEBITDA(ttm):

38.91%30.35%32.82%29.94%23.47%GrossMargin(ttm):

235.85M20.68B35.85B76.77B67.99BRevenue(ttm):

7.20%23.80%-0.80%1.60%10.10%Qtrly RevGrowth(yoy):

11.25K17,787121,732334,402158,500Employees:

235.61M82.15B42.52B44.76B52.11BMarketCap:

IndustryAAPLPHGMCSNE

How did they do it?

The first mover ‘who gets itright

Profitability Drivers

Uniqueness

Blue oceans

But not forever

Product Innovation may ormay not succeed

But innovation in the businessmodel will succeed almost every

time

Opportunities

Growing consumers electronicmarket

Strategic alliances with peripheralcomponent manufactures and

media transmission giants

Opportunity to extend newproducts to existing loyal

customers

High potential music phonemarket

Threats

Very high level of competition

High product substitution effect

Legal Risks

Imitation

Technology Obsolescence

CSR Risks

Strengths

Innovation

Ease of use

Financial vitality

Brand loyalty

Weakness

Sporadic Innovation

Perfect can be the enemy ofgood

Icon

iCon

W-TS-TExternalThreats

W-OS-OExternalOpportunities

InternalWeakness

InternalStrengths

SWOT

Matrix

S-O Strategies

Use Brand Loyalty forSelective Expansion in CE

Come out with moreconsumer electronics devices

S-T Strategies

Create new markets throughProduct Innovation

W-O Strategies

Apple’s digital offerings

W-T Strategies

Build socially complexrelations among partners

Increase productivity and turnaround of high demand

products

CE Product Value Chain : 1990s

Highly Vertically Integrated

CE Product Value Chain : 2000s

Emergence of vertical specialization

Primary success factors

Innovation

Differentiation

System Integration capabilities

Cost Structure

Complimentary successfactors

Consumer Branding

Manufacturing and supply chainefficiency

Time to market

Service Provision

Critical success factors

Recruiting talented people

Securing partnerships withvalue added resellers

Capitalizing on market-specificopportunities

Competitive Advantage

Not in the technology

Not in the patents

Value Transference

Distribution Strategy

Apple’s value creation process

Multiple ProductsCustomised Products

Segmenting

Targeting

Focus on

Education

Adding

Value

Music Strategy(iTunes, iPod)

Video Strategy (iDVD,iMovie, IPhoto)

Internet Strategy(iTools, iDisk)

LifestyleStrategy

DigitalHub

iPhone

iTVValue

Creation

Co

nverg

en

ce

Apple I/II/IIIMac

what does Ansoff’s matrix say?

what does BCG matrix say?

lessons

Strategies Adopted

Thinking Out-of-the-Box

recommendations

1. at the tipping point

fast in managing change

initiating itunderstanding it

explaining & justifying itplanning & organizing it

driving & forcing ittiming & pacing it

containing itfinancing it

selling it

the law of the few

stickiness

the power of context

2. be adept in changeimplementation

3. transform technology into cash

major problem

successful choice,bundling,

transformationof new technologies

intogreat new product

&marketing strategies

answer lies in

Apple’s competence

re-conceptualize market focus

integrated management processperspective

entered the highly competitivemobile market

where nokia dominates all

encashing value contribution in amobile

1992-97 1997-2002 2002-07

Encashing Value Contribution in a Mobile

*Basic applications: Operating systems, micro-browsers, firewall, others

Entry-Level

phones

Mid-tier& smartphones

High-end &

new–to–marketphones

1992-97 1997-2002 2002-07

*Basic applications: Operating systems, micro-browsers, firewall, others

Entry-Level

phones

Mid-tier& smartphones

High-end &

new–to–marketphones

looking ahead in media

from punctual integration

to total integration

which meansmore competitive markets

but, rules of competitive markets say

financial performance of generalistsimproves with greater market share

while performance of specialistsdrops off as market share increases

so,adapt or die

to sustain

chalk outrelevant success factors

strategic&

economic

challenges

1. form strategic alliances

critical to the success of its corebusiness

Critical to development ormaintenance of its core

competency

which blocks a competitive threat

which creates or maintainsstrategic choices for Apple

which mitigates a significant risk toits business

2. go on innovating

iPiano

iGuitariCar

iPottie

iPuff

iWatch

iWash

iGod

finally

An Apple a day

Keeps Doctor away

Thank you

ChintanJasmerJyotsnaQasim

Shalabh