APPLE INC.

IN 2012
Q1. What historically, have been Apple's competitive advantages?
Solution:
A firm achieves competitive advantage when it has one or more core competencies which is a
combination of unique resources and capabilities .Apple's success factors can be attributed to its
unique Resources and capabilities of --
Leadership and Talented Employees
Even after Steve Job's death, who was the iconic leader of the company, Apples executive
management team, that was handpicked and groomed by Steve Jobs are embedded with
Think Different philosophy. Tim Cook, the current CEO, took over day-to-day CEO duties
from Steve Jobs since his first medical leave of absence back in 2006. Apple under the
leadership of Tim Cook, has done extremely well. Apple recruits the best talents available
and Apple has one of the best design in current scenario.
Cash

As of April 13, 2014 Apple has about $159 billion in cash. This gives the company strategic
advantage as Apple can pay in cash upfront to its suppliers and lock out crucial supply parts
from the suppliers years in advance. Having huge cash resources protects Apple in fighting
legal battles against it and also aggressively pursue legal actions on any firm that steals
Apple's intellectual property.

Brand

Apple is the world's valuable brand valued at $148 billion in 2014. Apple brand stands for
innovation and design and has a cult like following.

Culture of Innovation

Apple's culture of innovation is not just limited to products development, but also to its
business model, innovative marketing and captivating communications. It not only boosts
sales, but enhances the brand value too. This culture of innovation gives Apple a strategic
advantage.

Technology with Integrated Value Chain

Apple puts consumer experience more than the technical prowess of the product. Apple is
the only vertically integrated company and thus can manage all aspects of the consumer
experience. By controlling the whole value chain, Apple is in position to extract all the value
from it, and also provide an outstanding value in all aspects of consumer experience. This
gives Apple a strategic advantage.


Q2. Analyze the personal computer industry. Are the dynamics favourable or problematic for Apple?
Solution:
The PC market is extremely fast-changing, as it is currently penetrating into other aspects of peoples
lives, such as multimedia. Until 2010, there was a 15% annual increase in number of PCs worldwide.
However, recently the market has slowed down by 10%, particularly. This is in great contrast to the
international PC market, as the annual PC growth rate has increased, with emerging markets such as
Asia dominating. When Apple first started making PCs, the profit margins were extremely high.
However, recently these profit margins have decreased dramatically, recently being less than 5% in
2007. Thus, this industry is highly competitive, containing other well-known PC manufacturers such
as Dell, Hewlett-Packard, Acer, and Lenovo.
The majority of the buyers are home buyers and small/medium businesses; home buyers buy 42%of
PCs globally, and small/medium businesses buy 32% of PCs globally. Other smaller buyers include
large corporations, education, and government. Finally, Independent Software Vendors, or
ISVs,control the PC market as well. The amount of software that a certain PC could run was directly
related to how much people valued said PC. The quality of the software also contributed. Because
these ISVs write the majority of PC applications, the value of the PC is directly dependent on its
compatibility with these programs
All of these factors in the current dynamics of the industry may be problematic for Apple. There still
are positive current developments, such as synergies with other multimedia such as the iPod, the
ability to run Windows on Macs, as well as the slight current shift of the home buyers valuing style.
However, the combination of a stagnant domestic PC market as well as an emerging global PC
market will hurt Apple in the long run. Research predicts that emerging markets will have bought
566 million new PCs, while mature markets such as the United States will have added only 150
million new PCs. This is because Price will be the key driver, as well as the PC market growth rate
of 31% in these emerging markets compared to 3% in the US
This factor alone hurts Apple because of its previous inability to tap into the global market.
Q3. How sustainable is Apple's competitive position in PCs?
Solution:
Looking back on how the PC industry developed, Apple was the original innovator, but they became
over shadowed by IBM and Microsoft who would sell their rights to manufactures who could make a
cheaper and almost comparable device to Apple. As we have seen in the past few years, Apple has
been able to cash in on developing new technologies before anyone else has. Jobs idea of creating a
digital hub allows him to monopolize the consumers experience because all devices such as the iPod
and iPad, which are highly sought after, can only be used if you purchase add on through Apples
store. Apple also has made their PCs more compatible with other PCs by working with Microsoft
and providing the capability to use applications such as Microsoft Office, which is the most widely
used creation software. They also cooperated with Intel which allowed them to make their
computers faster and more energy efficient. I believe that Apples competitive position issue
stainable as long as they continue to come up with products that are cutting edge and customers are
forced to buy them first from Apple if they want to get their hands on the latest and greatest
technologies.


Q4. How do you assess Apple's competitive position in smartphones?
Solution:
In 2007, Apple entered the highly competitive mobile phone market with iPhone. IPhone was a
product extension of iPod. The iPhone primarily differentiated itself from other mobile phones by its
user interface which was the industry-first multi-touch screen. From Ansoffs Product/Market
Matrix , iPhone targeted both existing Apple customers and also new customers by diversification to
mobile phone market.
Apple's first movers advantage was short-lived as their competitors like Nokia and Samsung
introduced their own version of iPhone-look-feel phones within few months. In 2008, Apple
launched App Store. The word apps, short for applications that run on iPhones was introduced
by Apple during the launch of App Store. The App Store allowed third party developers to create
application to run on iOS which consumers can download onto their iPhones. This was the beginning
of Apple's mobile platform. While competitors were busy making feature-level comparisons to their
products, Apple consolidated its iPhone platform and laid the foundations of a new growth engine
that revolutionized mobile phone industry.
Apple makes 30% commission on all apps revenue. As more 'apps' are available for people to
download, Apple's mobile platform gets dominant which in turn sells more iPhones. From Ansoffs
Product/Market Matrix , success of App stores along with iTunes consolidated the existing iPhone
market and also developed new market as iPhone customers were introduced to other Apple
products like iPods and Mac computers.
With the problems that were created for Apple with the availability of free listening on sites like
Pandora and Spotify, Apple had to figure out how to get customers to still use iTunes. With the
invention of the iPhone in 2007, there were able to not only partly address that issue, but also
introduce a product into the industry that was completely different and could offer capabilities that
no other phone could. Even with all this to offer there were some draw backs. The first iPhone
model was limited to a single network that did not always have the best service, bad battery life, and
did not support flash technology. They were able to capture over 14% of the smart phone market
and introduced the Apple App Store which would bring in even more revenue and benefits to
customers which would convince them to buy the iPhone. Overall people still continue to purchase
the iPhone and there seems to be a sort of following for Apple created products, so I do not think
that Apple will have a problem with maintaining a position in the smart phone market.
Q5. What are Apple's long-term prospects for the iPad?
Solution:
After iPhone, the next major product launch from Apple was the iPad, a tablet computer. Apple
introduced iPad in 2010, positioning it between the laptops and smart phones as a companion
product in Apple's product line up. Apple leveraged the iPhone and iPod designs, and integrated
iTunes store and the App store in iPad. iPad was a diversification towards the e-reader market as
iPad presented opportunities to the publication and content industry. During the iPad launch Apple
also announced ibook store which is an extension of its Apps store targeting media publishers. The
ibook store launch was accompanied by Apple's partnership announcement with five large book
publishers: Penguin Group, Harper Collins, Hachette Book Group, Simon & Schuster and McGraw-
Hill. This laid the foundation of a e-reader platform with iPad.
In January, 2012 Apple consolidated the iPad+iBook platform further by releasing the iBook2, and
iBooks author which lets anyone author and create digital books on iPad. The ipad+ibook platform
has potential to revolutionize educational sector by giving teachers and any other authors the ability
to create their own interactive books.
The popularity of iPhone and iPad has penetrated the corporate business market segment which
Apple had no presence before the introduction of iPhone. iPad is likely to become another big
platform for Apple. With iPad, Apple has created a completely new market, just like they did first
with the iPod and then with iPhone. Success of the iPad does not appear to be slowing and should
continue in coming years. Besides these products, Apples biggest competitive advantage is its digital
content service business based on iTunes and Apps Store, which no other competitor can replicate in
the short-term. Apple remains promising because of is strong brand combined with the halo effect
of iPod, iPhone and iPad products have on its other businesses.
Q6. Analyze the launch of iphone 6 & 6 plus and suggest future strategy to Tim Cook, CEO of Apple
Inc. on how to sustain the competitive advantage till 2020?
Solution:
It is harder and harder to beat Apple with its deep integration between apps, OS and devices. It is
reported that iCloud will be offered for free initially, and at some point users will be charged $25
annually for subscription of the service. Thats another way to get another recurring revenue stream
just like MobileMe service. So strategies Apple will follow in future--

1. Price your products to customer segments.
Often lost in the anticipation of Apple's launch events are the subtle changes the company
makes to its product portfolio. When Apple launched its most recent iPhone 6, 6 plus and
iWatch, it reduced the price of it of previous version. During its launch of the new iPad, it
reduced the price of the iPad 2 . In both cases, Apple established a market for additional
customer segments and with iphone 6 plus Apple entered in new segment.
This strategy allows Apple to capture high margins with early adopters and drive penetration
among a broader, more price conscious audience at a later date. Not every company has
product launches that allow it to adopt this strategy, but there are always opportunities to
evolve and re-price a successful product to address the needs of a new and different customer
segment.
2. Keep your eye to the future.
Success and growth elicit expectations. As Apple continues to launch innovative products, the
expectations rise. Each Apple event seems to be met with more anticipation than the last, and
technology pundits spend months leading up to the events with conjecture about Apple's "next
big thing."
To its credit, Apple has never stopped innovating which shows in a recent launch of iwatch and
iphone 6 plus with new payment gateway. iPad sales for Apple's fiscal first quarter increased
111% over the year-ago quarter, and the company still maintains 74% market share in tablets.
Amazon, Blackberry, Samsung, and others have all launched tablets over the past year each
with features that they believed provided an advantage over the Apple. But Apple's continuous
innovation and forward focus have allowed it to stay ahead of competitors. There's a lesson
there for any business that thinks it can ride the coattails of a single successful product for the
long term.
3. Listen to your customers.
With the advent of social media, customers have a variety of avenues available to them to
express their opinions on a particular company or product. But even if your company isn't a
common topic of bloggers, there are more old-fashioned ways to listen to your customers.
What's unique about Apple's two most recent product launches, the iPhone 4s and iPad, is the
remarkably minor changes the company made to create an abundance of demand.
The new iPad, for example, is not all that dissimilar from the iPad 2. A new screen, 4G, faster
processor, and better camera top the list of major developments, but there hasn't been a total
redesign of the product. But the new iPad addresses some of the major concerns customers
have expressed since the initial launch of the iPad in 2010. By directing product development
to the voice of the consumer, Apple was able to benefit from the most successful tablet launch
in its history. Listening to your customer is something a firm of any size can do.
There are few companies that compete with the size of Apple, and fewer still that have been as
successful as Apple over its most recent stretch. But the formula that has defined Apple's
success is not restricted to the economy's behemoths. The key tenants to Apple's growth can be
applied to a business of any size
Apples horizontal integration strategy across devices and channels and vertical integration strategy
from chip design to software and retail is creating a truly sustainable competitive advantage that is
hard to replicate. For that reason alone, its valuation skyrocketed. This is a brilliant example of
classic business strategy theory at work.
Every single Apple products complement (compete) and complete each other. Get an iPod, and you
can download content via iTunes and access them though iCloud and use that to move content to
iPad or other devices. The sort of control over the entire user experience or process, from hardware
to software, strengthens customer loyalty and provide lock-in. You cannot leave Apple once youre
in.