The Value Chain

Apple 2006Ellen SuprunJulie OHalloranWojciech JagielloFinbarr KearneyKingsley EgwimIntroductionExternal AnalysisInternal AnalysisStrategy Assessment and Recommendations

3Threat of EntryBuyersSuppliersSubstitutes

Low High capital investment Commoditized market makes it difficult to differentiate Substantial dominance of Wintel platform and low-cost large-scale players (Dell, Gateway, HP, IBM)Oligopoly market

High PCs are available in multiple configurations, performances and price rangesOther firms offer as good productsRivalry is very high

LowPC and new applications High End-users are mostly loyalImperfect knowledge about price formingHigh (components suppliers) Most components are commoditized, however Intel, Motorola, IBM become dominant, that increases power of supplierPorters Five ForcesLow No Mac clone available No competing product in the Mac market

4Information SystemsMaterials ManagementHuman ResourcesR&D Production Marketing and Sales Customer ServiceThe Value ChainSupport ActivitiesApple have always added value through R&DFailed R&D project with IBMVertical Integration to outsourcing 1998 to reduced costsPremium PricingBrand LoyaltyRetail OutletsLow market share in the corporate market place Company InfrastructureLeadershipCultureJobs and WozniakJohn Sculley Mike SpindlerGilbert AmelioReturn of Steve JobsStrengthsTechnology and R&D teamInvestorsOrganizational cultureBrand LoyaltyMarketingPartnerships

Page 5 Microsoft 150million 1997Head of ITFailed R&D: 6Weaknesses

Lack of compatible software 1984Strategy change inconsistent with the business model cutting costsFailed investmentsLeadership changes and succession planning

Opportunities

iCloudNew markets- expansion into mobile phones, tablets, BRIC countriesLarge corporate market segment

Threats

Open architectureEconomic downturnCompetitorsSuppliersLegal issues

The majority of threats come from other companies including Nokia, Sony, and Google with their respective products. Smart phones are one popular example that stands to compete against the iPhone. The fact that these phones run on the 3G network also puts iPhone behind in the speed race. Although the economy is no longer in its volatile stages, the release of the iPhone is still in a time where people are cautious of spending money.

9Apples Competitive StrategyDifferentiation StrategyCore competencies Innovative CultureTeam spirit (people)MarketingConsumer LoyaltyDistribution network

Questionable moves

Mac ClonesNiche marketStrategy change & Leadership problemPartnership with IBM

Critical Success FactorsLeadership of Steve Jobs Marketing and designInnovation and new product development12The role of vertical integration in strategyDangersSimplicity andqualityNot dependent on innovationPreventing others from innovatingHigher costs of production and developmentBenefitsApple beingrelatively fragileImportance ofstrong leaderCapturing values on every stepComplete user experience

The iPod PhenomenonLaunched November 2001Buy Listen - ManageSold 42 million iPods by 2005 75% market shareiTunes: a justified loss leader2005 -39% Apple revenue

Complement: The indirect profits it generated through ipods outweighed the loss it made

High storage capacity, sleek design and appealing functionality

$50 Premium over other mp3 playersLeveraged logo in accessories market$90million in iPod related servicesiTunes: the first legal site for downloading musicLoss leader but resulted in sales increasing

Captures Value at every step:

142006 to DateApple Computer-> Apple2007, iPhone, Apple TV2010, iPadOngoing Software Innovation (iCloud)

RecommendationsVision and leadershipLearn from mistakesCorporate Social ResponsibilityStick to Core competenciesDesignInnovation and R&D

Any Questions?