apple computers to apple inc
DESCRIPTION
A presentation for the strategy class at IIML-NC.TRANSCRIPT
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