apple case pt_team 1

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Platform Biz. and Servitization- Apple, Inc.

SeungSeung--soosoo Han 2011417057Han 2011417057JiJi--hoonhoon Lee 2011417042Lee 2011417042

RyunRyun--kookoo Lee 2011417036Lee 2011417036JungJung--hwanhwan Kim 2011417014Kim 2011417014

SoSo--YeonYeon Park 2011417017Park 2011417017YeYe--euneun Lee 2011417038Lee 2011417038



Intro.



Table of C ont ents

1. About Apple

2 . Im plicat i ons of iP od and iT unes

3. Serv i t izat i on

4. Applyi ng Serv i t izat i on Fr amew ork to Apple

5 . P ot ent ial Opportuni t ies & Thr eats

6. C oncl usi on

What is Apple? · Current Status · History · Steve Jobs¶s Goal and its Results

· How Apple succeeded?

Background in American Music Markets · Goal, Branding & Target Dimension

· Introductory Benefits · Products

Theorical issues of Servitization · Why Servitization? · Examples

Competitors and External Environment in 2003 · Servitization Process Framework

· Level of Servitization for Apple · Applying to Servitization Framework

SWOT Table · Analysis & Forecasting for Apple



PART 01

About Apple



PART 1 : About Apple Think Different, Think Online Music

Apple?

Apple or "the company" designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portabledigital music players.

Year of Foundation 1977

No. of Employees 46,600

Current CEO Timothy D. Cook

Revenue (2010)$ 65,225M

(+52%)

Awards5 consecutive winner of

SCM(2007-2010)

Products

(revenuecontribution%)

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>




Stock Information

Current stock price

At $404.30

1998 2000

1.40K

1.30K

1.20K

1.10K

1.00K

0.90K

0.80K

0.70K

2002 2004 2006 2008 20101996

1.50K

<Yahoo Finance>




Stock Information

Current stock price

At $404.30

iPODLaunchiMac

Launch

iPHONELaunch

GlobalRecession

iPADLaunch

1998 2000

400

350

300

250

200

150

100

50

2002 2004 2006 2008 20101996




IT Firm Ranking ordered by Retained Cash

<The Next Web, in billion $>

Market Value Retained Cash

1 Apple $ 3,300 $ 76.2

2 Microsoft $ 201 $ 63.7

3 Cisco $ 83 $ 38.9

4 Google $ 158 $ 35.0

5 Oracle $ 125 $ 28.8

6 Siemens $ 85 $ 13.4

7 IBM $ 188 $ 11.7

8 Samsung Electronics $ 92 $ 9.0

9 Intel $ 102 $ 7.7

10 Amazon $ 81 $ 6.3




Summarized History (Time Line)

1985 1990 1995 2000 2005

Oct 1985 ; AAPL 2,3275

200150

100

50

<Opentide,2008>




Steve Jobs¶sGoals : Making ³closed system´ for Apple¶s own world

Mac in 1980s and iPOD in 2000s has the same goal, buttheir results are totally opposite.

1st Closed System: Mac & MacOS

2nd Closed System: iPOD & iTUNES

StrongBrand

StrongBrand

HighAwareness

HighAwareness

LowPurchaseInterest

HighPurchaseInterest

LowMarketShare

HighMarketShare

FAIL

SUCCESS

WHY?

WHY?iPod & iTunes : Success

Mackintosh & Mac OS : Fail



PART 2 : Implications of iPod & iTunes



PART 2 : Implication of iPOD & iTUNES

Think Different, Think Online Music

Environmental Changes of Music Market

Managementcompany

HypermarketRetailer Internet

Whole

saler

Consumers

Illegal Distribution

RecordIntermediaryService Agency

Web sitesCP MP3, PC, Mobile,PDA, DTV

LP, CD Player, Tape,Recorder

Recordproducer

Before: Off-linedistribution Channel

Appearance of Digital Music: Transitions inProduction, Distribution and AccommodationMethod





MOT

OROLA

Partnership with APPLE

SONY

µSONY CONNECTOR¶MP3 Player Released

YAHOO

µYAHOO Music Unlimted¶Service Bagan

in 2005, May

US Mobile Press Agencies

VERIZONSPRINT

SINGULAR WIRELESS

ERICSSON

Partnership withNAPSTER

MICROSOFT

Entered in the late 2005

Fixed Monthly ModelBased DRM Solution

Developed

MarketPenetrator

Heated competitions of Music Market



PART 2 : Implication of iPOD & iTUNESThink Different, Think Online Music

The contraction of the music industry

Securing stable consumption in r

380

360

340

320

300

400

382

1999 2000 2001 2002 2003 2004

376 371

346

320336

(Unit: 10Mil. KRD)

Growth of on-line music service

-Recovery brought in 2004 by Mobiland legitimate on-line music service(Global Entertainment and media ou

- Total download # in 2004 : 157 Milli

- On-line music site : About 300 in w

(IFPI: International Federation of PhIndustry)

Since starting decrease from the year of 2000, 19.3% of total sales dec

5.0% had increased in 2004 compared to the 2003





Napster?

Napster, created by Shawn Fanning, provided on-line music file sharingservices which widely used by peer to peer sharing method and allowedmusic fans to share MP3




Napster·s downfall

Legal Issues

Reason of the Claims

-In 2000, A&M records and several other companiessued Napster for contributory and vicarious copyrighinfringement

-Napster was liable for contributory and

vicarious infringement of the plaintiff¶s

copyright, so users were directly infringing the

copyright.Requir ed new business model of music industry

Napster?





1. It¶s G oal

Maximizing Profit

-maximizing profit throughmaximizing sales volume of iPod

How iPod and iTunes succeeded?

Having brand loyalty

-Locked iPod customers in iTunes service

2 . Targ et Di mensi on

Line-up products and service




American Music Market Share

Wal-Mart

Best Buy

iTunes

Amazon

Target

Coconuts/FYE

Borders

Circuit City

Barns&Noble

Bestbuy.com

Virgin Megastores

Digital

Physical

The first quarter of 2007, iTunes had beaten Amazon andposed 3rd rank in the US record market. iTune at then alreadydominated more than 80% at the digital music market and thisnumerical values were marvelous indicator since it had alsocontained physical mediums like CD.

14%

86

%




This chart shows revenue mix of Apple and

they are comparable in terms of dominated portion.





Revenue share by 2/3

between singer and agency

Combine hardware with software

- HR Management

- Evaluation employees and

career development

- Equipment and maintenance

management

- MP3 Player : Sales by purchasing

songs via PC

-> Experienced PC Users

- iTunes : Purchased MP3 savedat the iPod directly Success of

Implication



PART 03

SERVITIZATION?



PART 3 : Servitization Think Different, Think Online Music

Definition :

In brief, SERVITIZATION is an innovation of manufacturers combining products

and services in order to satisfy customer needs.




Product Servitization : Service Provisionoptimized to Product

Service Productization : ProductProvision optimized to Service

Combination of Products and Servicesin order to satisfy customer¶s needs

Product Service

Servitization

Productization

SERVITIZATION

Concept

Both meaning above are called as«




<Paradigm Shift in Manufacturing Industry>Future : Differentiation through combining

Products and Services

Past : Product Differentiation, mainly

focused on Strengthening Brand

Summarized History




Customers consider the most importantly when they

decide to purchase«

Why Servitization? - Background

< Importance of Customer ExperienceIncreasing >

- Added Services combinedwith Products

- Downloading Contents

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

ProductQualityITSELF

Benefits

fromContentsServicesboundwith

Product

Asking

Proper Servicecustomize

d tocircumsta

nces

- Customer RecognitionService to Time, Price,Occasion




Why Servitization? - Background<Market Platformized>

Businesses are getting platformized, integrating all the valuesproviding to customers.

PLATFORM

Customer

ValueD

Customer Value

E

Customer Value

C

Customer Value

A

Customer Value

B

Benefits from platform :Grow the category, Attractdifferent targets,Differentiate from other

In order to structuredominating platform, service

can be a critical tool. That iswhy firms are focusing on




<Servitization Framework>

L

o w

H i g h

L e v e l o f S e r v i t i z a t

i o n

ProductService

Product

Product

Product

Service

Service

Service

Basic stage

Product-related Service

Install-based Service

Platform Service



Environment Analysis


Start

Trend Analysis

Competitor Analysis

CompetitivePositioning

Visioning

ServiceIdeation

ServiceEvaluation

Packaging

<Servitization Process>

ExecutionPlanning

T r end Analy si s

Analysis of external environments and service environments that the firm int

Trend Analysis of past, present and future related to the industry

Value Chain can be used for the analysis





C om pet i tor Analy si s

Analysis of potential competitors existing in the new industry which the comp

Start

Trend Analysis

Competitor Analysis


Visioning

ServiceIdeation

ServiceEvaluation

Packaging

ExecutionPlanning






C om pet i t i v e P osi t i oni ng

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 Architectu

· Sufficiency : Which service to be most loved by customers

· Complexity : How complex the services are (The higher complexity, the high

Start

Trend Analysis

Competitor Analysis

Competitive

PositioningVisioning

ServiceIdeation

ServiceEvaluation

Packaging

ExecutionPlanning





V i si oni ng

Proclamation of Vision and specific Strategies for the new business

Strategies should be broken down to the business unit and its functions

Start

Trend Analysis

Competitor Analysis


Visioning

ServiceIdeation

ServiceEvaluation

Packaging

Service Definition

ExecutionPlanning





Serv ice Id eat i on

Open innovation for differentiated and creative ideas

To be screened and be used for idea evaluation

Collecting Service Ideas by workshops, T.F.T and contests

Start

Trend Analysis

Competitor Analysis


Visioning

ServiceIdeation

ServiceEvaluation

Packaging

Service Definition

ExecutionPlanning





Competitor Analysis


Visioning

ServiceEvaluation

Packaging

Service Definition

OpenInnovation

Market

Others

Company

Customer

JointVenture

OthersProduct

Innovation

Businesssystem

Innovation

For overcoming limited internal capacities, securing competitivesupremacy is a key by receiving from the third party.




Serv ice E v al u at i on

Prioritizing service ideas based on Service Attractiveness and Strategic Fit

Service Attractiveness : Dependency on TA, Key Features, Technology Lea

Strategic Fitness : Business Principles, Priority in each category

Start

Trend Analysis

Competitor Analysis


Visioning

ServiceIdeation

ServiceEvaluatio

n

Packaging

Service Definition

ExecutionPlanning





Pac k ag i ng

Determining target customer group, values, or technology

Laying weight on customer¶s experiences

Start

Trend Analysis

Competitor Analysis


Visioning

ServiceIdeation

ServiceEvaluation

Packaging

ExecutionPlanning

Establishment of Execution





SocialContext

Attitude

PerceivedQuality

Image,Memory

ConsumedEffort

PerceivedUsefulness

PerceivedEasy of Use

Technology Acceptance Model, Davis(1989). Informationas an economic goods, Bates(1998)

IntendUsing

Service Experience




Exec ut i on Planni ng

Planning for execution of new services

Re-examination about business analysis (from Trend Analysis)

Establishment of Execution

Start

Trend Analysis

Competitor Analysis


Visioning

ServiceIdeation

ServiceEvaluation

Packaging

Execution

Planning





-Define KPI and result forecasting6. Report & Evaluation & Adjustment

5. Forecasting of Result -Define KPI and result forecasting

4. Building marketing strategy-Building marketing strategy and execution plan

1.

-Building development strategy and execution plan3. Building development strategy-Building development strategy and execution plan

2. Define service strategy & Model

-Define vision/ value-Define service goal and strategy-Define service model and main offering-Define value chain/ procedure

1.Business Analysis -Analysis on market definition & environment-Analysis on competitors and customers-Analysis on themselves and partners

Execution Plan Establishment

Stage




Efficiency

High-Performance

Differentiation

Capitalization/ Standard

Consistency

ProcessInnovati

on

ProductEnhancement

ProductServitization

ServiceProductization

Level 1

Level 2Level 3

Level 4

PIBPR

iPodiTunes

One-ClickBM Patent

Intellectual property rights and differentiationstrategy in Fusion period

erence: Industry Forecast Conference

Broad Sense Embedded = SW FusionDiscussion Embedded




OVI player strategy and meaningfrom Nokia

Mixture of Wire & wireless service platform

Serviceplatformbusiness

material frommobile

provider

V i sible O ut c omeMargin via service sales

Expand domination from device market via OVI-En

Enlarge influence of mobile platform market via Sy




Examples :Amazon Kindle

$66,150$184,243$536,854

Citi group Forecast, Strabase. 2



PART 4:Applying ServitizationFramework to Apple?



Let¶s suppose that you are the director of iTunes in 2003

How could iTunes succeed as online musicdistribution channel


despite of higher price than its com

PART 4 : Applying ServitizationFramework



Competitors in online music market

ITUNES 200,000 songs $0.99 per song

BuyMusic.com 300,000 songs $0.79 per song

Listen.com 350,000 songs $0.99 per song

MusicNet 200,000 songs $3.95 / month

Napster unlimited Free

Manufacturer

WMA format

only allowedstreaming

Music contentsprovider

Illegal

Players Songs in Library Prices Etc.

Think Different, Think Online MusicPART 4 : Applying ServitizationFramework



Technology

Legal

Providers

Customers

Development of Internet Environment

Napster Downfall

(One of the biggest music distribution channel)

Profit Guarantee(Being protected from violence of copyright)

Want to listen music through digital devices

External Environment




What does customer really want for listening music?

To listen music whenever or wherever he want!

Customers¶ Experience

Without any guilty or inconvenience

Catching Customers¶ needs

With proper device : Stylish and Easy to use




Copy rightHolder

:12

Copy rightHolder

:12

Apple:38

Apple:38

Music contentProvider

:50

Music contentProvider

:50

SatisfactionSatisfaction

AppleApple

Buyer Buyer Supplier Supplier

Satisfaction to

Entire Shareholder

Satisfy Music ContentProvider

Satisfaction




Realization?

PastIMPOSSIBLE,

due to technicalreasons

NowPOSSIBLE,

due to technicaladvance

Hardware required to fulfill the customers¶ essential needs

through combining with optimized service

SERVITIZATION




<Servitization Process for iPOD and iTUNES>

Technology

Customers¶ Needs

Providers¶ Needs

Legal Issues

More focusing on platform businessover the markets

Strong competitiveness in

1. can manufacture music players

2. efficient cost structure3. excellence in outsourcing





$0.99 per song

0.2M songs

iPOD

$0.99 per song

0.2M songs

iPOD

Apple

$0.75 per song

over 0.3M songs

NO EXCLUSIVE DEVICE

$0.75 per song

over 0.3M songs

NO EXCLUSIVE DEVICE

vs.

Competitors in portable m.p. market

5GB

20 hrs of playback time

NO MUSIC

DISTRIBUTION CHANNEL

5GB


NO MUSIC

DISTRIBUTION CHANNEL

Competitors in online music market

4GB


iTUNES

4GB


iTUNES

Apple





H a r d w a r e

Software

Distribute Not Distribute

N o t M f g .

M a n u

f a c t u r e

Apple

RioCreative Labs

Samsung

BuyMusic.comListen.comMusicNet

-





Service Definition & Establishment of Execution

Visioning Creativity is just connecting things Steve Jobs

Service Ideation& Evaluation

Harmonized needs from customers and contents providers/ Ideation and Evaluation by small group of experts

Packaging& Execution

Combining product and service (iPOD + iTUNES)- Digital music player with its own dedicated music store




Combining Products and Services tosatisfy customer needs

Product : iPodService :

iTunes

Servitization

Productization




L o w

H i g h

L e v e l o f S e r v i t i z a

t i o n

ProductService

MacKintosh

Apple TV & iSTORE

Product

Product

Product

Service

Service

Service

SoftwareComputer MP3PPhone Music Apps.

iPOD & iTUNES

iPHONE & iSTORE

TV Broadcasting

<Apple¶s Level of Servitization>




PART 4 : Applying Servitization Think Different, Think Online Music



Maintenance,Installing Service

Contents providing service through iTunes & iPod

Computer PotableMusicPlayer

Mobilephone

TV

PlatformservicesProduct-related

service

contents production

Marketing,insight about

market, brand

loyalty

Stable distribution

system

knowhow about using

machines

Apple AppleSupplier

Custom

er

Mar

ket

Integration

iPod iTunes

knowledge

high effectiveness of productivity

and cost/ lock-in effect

strength

high dependency on contenproviders/ possibility to be s

its revenue by competitor

weakness

oduct- Service- Knowledge

System(PSK S)

Competenciesin the Supply Chain

Derivate product or services with development time/ cost efficiency and attractive performance positioning

<Servitization Framework>

PART 4 : Applying ServitizationFrameworkThink Different, Think Online Music

<Provided by KUBS>

PART 4 A l i S i i i F k



<Apple¶s Platform Business>

PLATFORM

Apps.

Tablet

Telephone

Music

Movie

?

?

?

PLATFORMPLATFORM


PART 4 A l i S iti ti F k



PART 05

Potential Opportuniti



PART 5 : Potential Opportunities & Threats


SWOT

DRM free

Brand image& Customer¶s

loyaltyClosed system

(product & software)

M&Aof

competitors

iTV&

iTunes U

PowerfulOutsourcing

ability

Absences of Jobs

StrongRetaliationiCloud

Knowledgeof Platform service

SpecializedProduct of

competitor

Online marketexpansion

Cash

power

Patent

lawsuit

DRM free

Cooperationwith

Disney & Twitter

StrengthWeaknessOpportunit

yThreat



Threats - Collaboration of other competitors

Thr eats

Nokia¶s 1st MS phone.

Nokia gave up their own OS system.

Synergy effect by Nokia¶s hardware and MS¶s software.



O &



Threats - Collaboration of competitors

Treats

Google ± Motorola merger

Google has own smart phone model,

compare to iPhone.



PART 5 P t ti l O t iti & Th t



Threats - Specialized product of competitor

K indle fire: e-book device of Amazo

Focus on divergence

Strong with contents of books

Feature - 7´ Touch screen, Android






Opportunities - iTunes U

iT unes U

E-Learning Service

Read and Watch the lecture of world fa

Free service, including special lecture






Opportunities - iCloud

iCl oud

Digital hub by connecting all apple devices.

Storage and Sync (mail, music, photo, docs, di

iTunes match : Scan all music in device and u

(including illegal free music files)

Useful system for who use more than 2 produc

Announced new service in 2011 WWDC (Apple WorldwideDevelopers Conference)






Opportunities - Apple TV

Apple T V ±iCl oud

Be connected all Apple device

Sharing all contents with Apple TV

(movie, music, text, picture etc)

Siri ± Intelligent assistant / voice-to-text

By using iTunes, you can use various applications as well as other device.






Opportunities & Threats-DRM free

Non-iTunesusers

iTunes users

No bad effect to Apple! Apple is still No.1!






Lock ± in by Apple !

People will fascinated by Apple¶sservitization and live in Apple¶s

closed eco system.




C oncl usi on



Thank you

References



References Think Different, Think Online Music

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 ManagementJihee Ryu, Hosun Rhim, K wangtae Park and Hong-il K im(2009), A Framework for Servitization

of manufacturing company, K orea 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



References Think Different, Think Online Music

(2008), ,

(2010), : - , 20 1

,(2009), Kindle e-Book, KT

,(2011), WWDC 2011Apple, KT

(2009), ,

T.S.Baines(2009), The servitization of manufacturing: A review of literature and reflection on

future challenges, Emerald Group Publishing Limited

µApple Stock Price¶, http://finance.yahoo.comµIT Firm Ranking¶, http://www.thenextweb.com

µFlow of Music Industry¶, IFPI: International Federation of Phonographic Industry

, http://logisticsviewpoint.posterous.com/?tag=scmRight to the core, http://www.supplymanagement.com/analysis/case-studies/2010/right-to-the-core/Apple¶s Secret iPAD advantage ± Supply Chain,http://www.zdnet.com/blog/perlow/apples-secret-ipad-advantage-the-supply-chain/15813Gartner¶s 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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