Introduction
Apple Computer’s 30-year history is full of highs and lows, which is what we would expect in a highly innovative company. They evolved throughout the years into an organization that is very much a representation of its leader, Steven Jobs. Apple made several hugely successful product introductions over the years. They have also completely fallen on their face on several occasions. They struggled mightily while Jobs was not a part of the organization. Apple reached a point where many thought they would not survive. When asked in late 1997 what Jobs should do as head of Apple, Dell Inc.'s (DELL) then-CEO Michael S. Dell said at an investor conference: "I'd shut it down and give the money back to the shareholders.” (Burrows, Grover, and Green).
Well, times changed. Less than 10 years later, Business Week ranked Apple as the top performer in its 2008 Business Week 50. Apple attributes their recent success to robust sales of iPod music players (62 million in 2008). They are optimistic about the economies of scope with media giants, such as Disney and Pixar.
Apple rarely introduces a new type of product. Thus, instead of being the pioneer, they are an expert “second mover” by refining existing products. Portable music players and notebook computers are examples. Apple increases the appeal of these products by making them stylish and more functional. They now appear poised to make significant strides in the home computer market and to creating a total digital lifestyle whereby the home is a multimedia hub.
Review of Literature
Steve Jobs and Steve Wozniak founded Apple on April 1, 1976. The two Steves, Jobs and Woz (as he is commonly referred to – see woz.org), have personalities that persist throughout Apple’s products, even today. Jobs was the consummate salesperson and visionary while Woz was the inquisitive technical genius. Woz developed his own homemade computer and Jobs saw its commercial potential. After selling 50 Apple I computer kits to Paul Terrell’s Byte Shop in Mountain View, CA, Jobs and Woz sought financing to sell their improved version, the Apple II.
They found their financier in Mike Markkula, who in turn hired Michael Scott to be CEO. The company introduced the Apple II on April 17, 1977, at the same time Commodore released their PET computer. Once the Apple II came with Visicalc, the progenitor of the modern spreadsheet program, sales increased dramatically. In 1979, Apple initiated three projects in order to stay ahead of the competition: 1) the Apple III – their business oriented machine, 2) the Lisa – the planned successor to the Apple III, and 3) Macintosh.
In 1980, the company released the Apple III to the public and was a commercial flop. It was too expensive and had several design flaws that made for less-than-stellar quality. One design flaw was a lack of cooling fans, which allowed chips to overheat. In late 1980, Apple went public, making the two Steves and Markkula wealthy – to the tune of nine figures. By 1981, the Apple III was not selling well and Scott infamously fired 40 people on Feb 25 (“Black Wednesday”). Scott’s direct management style conflicted with the culture Jobs and Markkula preferred, and Scott resigned in July. Markkula stepped into his position as CEO. In August 1981, IBM released their PC. Unimpressed and unafraid, Apple welcomed IBM to
the PC market with a slightly smug full-page ad in the Wall Street Journal. It would not be long before IBM’s PC dominated the market.
The Xerox Alto was the inspiration for Apple’s Lisa. Apple employees were able to examine the Alto in exchange for allowing Xerox to invest in Apple before Apple’s initial public offering (IPO). Apple released the Lisa in January 1983 and was notable for being the first computer sold to the public that utilized a Graphic User Interface (GUI). Unfortunately, the Lisa was not compatible with existing computers, and therefore came bundled “with everything and a list price to match.” At $9,995 (over $21,000 in 2005 dollars), the Lisa missed its target market by a wide margin.
Jobs attempted to control the Lisa project. Scott, unimpressed with the performance of Jobs on the Apple III project, had Jobs head up the dog-and-pony show for the pending IPO. Jobs, looking for a project to lead, inserted himself into the Macintosh development team. Using his considerable influence, Jobs was able to procure the resources to produce a computer that was faster than Lisa, used a GUI, had a mouse, and sold for ¼th of Lisa’s price. Apple introduced the
Macintosh with great fanfare during the 1984 Super Bowl. The Orwellian-themed commercial (directed by Ridley Scott, of ‘Alien’ fame) portrayed IBM as Big Brother and embodied Macintosh and Apple as freedom-seeking individuals breaking away from this oppressive regime.The commercial was largely successful and sales for the Mac started strong. However, Mac sales later faded. John Sculley left PepsiCo to join Apple in April 1983. He was famous for engineering the “Pepsi Challenge”, in which blinded testers tasted both Coke and Pepsi to unveil the ‘truth’ of the taste of Pepsi. In response to lagging Mac sales, Sculley contrived the ‘Test Drive a Macintosh’ campaign. In this promotion, prospective users could take home a Macintosh with only a refundable deposit on their credit card. While lauded by the public and the advertising industry, this campaign was a
burden on dealers and significantly impeded the availability of Macs to serious buyers. In 1985, Apple tried to have lightening strike twice with their ‘Lemmings’ commercial during the Super Bowl. In what was becoming Apple’s typical patronizing fashion, this commercial insulted current PC users by portraying them as witless lemmings, unthinkingly doing harm to themselves. Although Jobs attempted to overthrow Sculley, the board backed Sculley. Jobs left Apple to form NeXT computer. After Jobs left in 1985, sales of the Mac “exploded when Apple’s LaserWriter met Aldus PageMaker.” Apple dominated the desktop publishing market for years to come. Under Sculley, Apple grew from $600 million in annual sales to $8 billion in annual sales by 1993. Apple introduced Mac Portables in 1989 and the first PowerBooks in 1991. By 1992, PC competition ate into Apple’s margins and earnings were falling. Sculley was under pressure to have Apple produce another breakout product. He focused his energy on the Newton – Apple’s introduction of the Personal Digital Assistant (PDA). Despite Sculley generating substantial demand for Newton, it did not live up to the hype due to it being severely underdeveloped. Sculley resigned in 1993 and Michael Spindler replaced him.
Spindler spent most of his time and energies on regaining profitability, with the end goal of finding a buyer for Apple. Over the next several years, Spindler shopped Apple to Sun Microsystems, Eastman Kodak, AT&T, and IBM. Meanwhile, Apple was unable to meet the growing demand for its products due to supplier problems and faulty demand predictions. To add insult to injury, Microsoft released Windows 95 with great fanfare in 1995. After significant quarterly losses in 1996, the board replaced Spindler with Dr. Gil Amelio, CEO of National Semiconductor. Dr. Amelio tried to bring Apple back to basics, simplifying the product lines and restructuring the company. One of Apple’s most pressing issues at the time was releasing their next generation operating system (code named “Copland”) to
compete with Windows 95. Amelio and his technology officers found that Copland was so behind schedule that they looked outside the company to purchase a new OS. Ultimately, and somewhat ironically, they decided to purchase NeXT computer from Jobs. Naturally, Apple welcomed Jobs back into the fold. The board became increasingly impatient with Amelio due to sales not rebounding quickly enough. Apple bought out Amelio’s contract after just 1 ½ years on the job. Jobs eventually claimed the CEO position. Then, he cleaned house by revamping the board of directors and even replacing Mike Markkula (who had been with the company since the beginning). Jobs simultaneously put an end to the fledgling clone licensing agreements (which created a few Mac clones) and entered into cross-licensing agreements with Microsoft. On May 6, 1998, Apple introduced the new iMac, a product so secret that most Apple employees had never heard of it. The new iMac was a runaway success with its translucent case, all-in-one architecture, and ease of use. It brought Apple to a new market of users – those who had never owned a computer before. Jobs further simplified the product lines into four quadrants along two axes: Desktop and Portable on one, Professional and Consumer on the other. Apple completed the matrix with the introduction of the consumer-based iBook in 1999.
The year 2001 was an important year for consumers of Apple products. Apple opened their first 25 retail stores (totaling 163 stores in 4 countries as of May 2006). In September 2001, Apple introduced the new iMac featuring a screen on a swivel.The new iPods (portable music players) were a tremendous success. Apple sold so many that Apple’s dependence on Mac sales was significantly less. This was no small feat considering that the 2001 iMac became Apple’s best-selling product “by a long shot”. Apple offered iTunes (a free application) to help their consumers organize music on iPods and Macs.
In 2003, Apple expanded iTunes by 1) opening the iTunes music store to allow Mac users to purchase music online and 2) expanding iTunes to Windows users. Sales of iPods skyrocketed and currently provide the bulk of product sales to Apple. In 2005, Apple announced that it would start using Intel-based chips to run Macintosh computers. In April 2006, Apple announced Boot Camp, which allows users of Intel-based Macs to boot either Mac or Windows OS. This functionality allows users who may need both OSs to own just one machine to run both, albeit not simultaneously.
Vision Statement
"Man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them."
Explanation of vision
Apple lives this vision through the technologies it develops for consumers and corporations. It strives to make its customers masters of the products they have bought. Apple doesn't simply make a statement. It lives it by ensuring that its employees understand the vision and strive to reach it. It has put systems in place to enable smooth customer interaction. It has put objectives in place to continuously move forward; implemented strategies to fulfil these objectives; and ensured that the right marketing, financial and operational structures are in place to apply the strategies.
Mission Statement
“Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and internet offerings”
The PC Industry
We can glean Insight into the history and composition of the PC Industry from its eponymous title. In the late 1970s, as Wozniak and Jobs were starting Apple computer, personal computers were an emerging product. The following chart (Reimer) gives an overall view of the major market players since the mid-1970s.
PC Share of Market 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Year 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 S h a re o f M a rk et IBM SOM Apple II SOM Mac SOM Amiga SOM C64 SOM TRS 80 SOM
By 1983, the market share of the Apple II fell to 8% while the PC had 26%. Market share of Macintosh peaked at slightly more than 10% in the early 1990s and has since tapered to between 2-3%. The IBM PC and its clones became the standard due to the success of the open nature of the PC. This allows product developers to offer vastly more products for the platform.
Some argue that not licensing the Mac OS was a mistake. Bill Gates and Microsoft were encouraging Apple to license their OS in the early 1980s, because they were developing software for Apple and had much riding on the success of the company.
When Apple did not license, Microsoft began developing their operating system, Windows.
The Online Music Industry
While Apple clearly dominates the online music industry, the battle for domination is not over. Although digital music sales are growing rapidly, the Recording Industry Association of America (RIAA) states that digital sales account for only 4% of all music sales. (Borland) Analysts at Forrester (Bartiromo) and Gartner (Bruno) validate this. Apple’s sales are between 66% and 75% of downloads and 80% of music players. (Bruno) Apple is part to a suit alleging monopolistic practices concerning their market share dominance of players and downloads. The other players in the download market are (the revised) Napster, Yahoo Music, Rhapsody, and illegitimate file-sharing services. Portable music players competing with the iPod include those made by Creative, Samsung, iRiver, and Sony. A major point of contention between these services and player manufacturers is the control of a variety of incompatible Digital Rights Management (DRM) schemes.
The Future of Apple
Personal Computers – A Shift in Strategy
Apple has historically taken a far different path than the traditional Windows and Intel combination. Microsoft provides the Windows operating system to separate downstream hardware producers such as Dell. Apple vertically integrated both the operating system software and hardware completely under Apple. A consumer running Microsoft Windows can choose from a myriad of systems based on the Intel processor, while a consumer running Apple’s OS X must purchase Apple hardware.
Apple is adjusting this strategy by migrating their microprocessors from IBM and Motorola PowerPC to Intel. Analysts believe that the Intel-based Macintosh may be able to run Microsoft Windows applications by the end of 2006. (Burrows)
In addition to switching processors, Apple positioned their computers as an immediate option for the traditional Microsoft Windows user. With Apple Boot Camp, users may now use Mac OS X or Windows on an Apple computer. (Sutherland).By allowing users to run Windows on an Intel Mac, Apple reduced the switching costs for traditional PC users. Apple may steal away customers that are willing to pay a premium for a system that runs both Windows and Mac OS X. Apple continues to retain a strategic option to license its technology to clone makers such as Dell. Past attempts at licensing Apple technology (to IBM, Gateway, and others) failed on accord of Apple’s rigid demands. Many technology leaders (such as a 1985 letter by Bill Gates to Apple CEO John Sculley) criticized Apple for keeping a closed architecture. Apple cofounder Steve Wozniak criticizes this strategy, “We had the most beautiful operating system, but to get it you had to buy our hardware at twice the price. That was a mistake.”Whether Apple would be willing to pursue this reversal of vertical integration is unclear. Although such a move would cannibalize a portion of Apple’s own hardware sales, it would also provide royalty-based revenue that could approach $1 billion annually. (Burrows) Jobs traditionally sided against licensing Apple technology. He referred to Mac clone producers as “leeches” and he personally killed Power Computing (a Mac clone producer) by terminating their license in 1997.
Apple’s iPod and iTunes are a powerful combination that fosters a network style of increasing returns. (Barney, 124) By selling iPods, Apple increases the consumer demand for music from iTunes. By placing more musical choices on iTunes (including less popular songs that appeal to niche audiences), there is more demand for iPods. Apple had 70% of the legal music download market in early 2005. (Yoffie)
Apple is shooting for the digital living room of the future. For example, Apple just released a “boom box” portable version of the iPod. This iPod (the iPod Hi-Fi) comes with a remote control. Instead of forming a strategic alliance, Apple engineered the iPod Hi-Fi and designed it with high-fidelity features. (Burrows) Apple is clearly trying to develop a stronger core competency in the entertainment area.
Strategic Alliances and Entertainment
Jobs had the early strategic vision to complement computing with movie entertainment. After founding NeXT, he personally acquired a majority interest in the young movie company Pixar in February 1986. Jobs went on to invest ¼ of his personal wealth into Pixar.
In 1995, Pixar solidified its position within animated movies with the debut of Toy Story. Grossing $358 million worldwide, it became the 3rd-largest grossing
animated movie in history. After this success, Jobs took Pixar public and negotiated far better terms with Disney. Later successes included Toy Story 2, Monsters Inc., and Finding Nemo. The alliance between Pixar and Disney has tremendous potential for economies of scope. As CEO of Apple and Disney’s largest shareholder, Jobs is the strategic link between Disney, Apple, and Pixar. Opportunities include combining the animated movie expertise of Disney and Pixar, as well as sharing the content of Disney’s ABC or ESPN networks over Apple’s digital offerings. (Burrows, Grover, and Green)
A current example of the fusion between Disney, Jobs, Apple, and technology is video on the iPod. Disney’s Desperate Housewives was one of the first television programs available for purchase and download to the newer video-enabled iPod. There are concerns about whether these synergies will come to fruition. There are fears that the personality and style of Jobs may conflict with Disney, and that Disney CEO Iger could be “Amelioed” -- driven out of office by Jobs in a manner similar to how Jobs drove Amelio out of the CEO post at Apple. (Burrows, Grover, and Green).
External Aanalysis
Technological Environment
Brand Awareness – Style at a Premium
Apple’s products are trendy and stylish. After Jobs returned in 1997, Apple retained designer Jonathan Ive to differentiate their computers from the typical beige box. Ive’s design of the iMac included clear colorful cases that distinguished Apple computers. Apple’s iPod (with the trademark white ear buds and simple track wheel) commands a 15%-20% premium over other MP3 players.
Apple and Pixar limit the number of computer products and movies that they sell. Product differentiation with focused quality and style also extend to the Jobs Pixar – “Pixar's executives focus on making sure there are no ‘B teams,’ that every movie gets the best efforts of Pixar's brainy staff of animators, storytellers, and technologists.” (Burrows, Grover, and Green)
Apple positions its Macintosh computers as higher quality and higher price. HP, Dell, and other PC manufacturers are pricing many systems under the $1,000 threshold. “Apple is struggling to meet demand for its new MacBook Pro laptop despite a $1,900 price tag that is nearly twice that of garden-variety rivals.” Apple has only recently entered the low-end (below $500) consumer market with the Mac Mini. Although the Mac Mini is a base model with few features, it comes encased in a very small and distinctive package. Apple portrays this computer as “Small is Beautiful”. (Apple) Likewise, the iPod Shuffle was Apple’s first entry into the lower-end ($100 range) of flash-memory-based portable music players.
Interoperability
Although Apple competes directly with Microsoft for operating systems, the release of iTunes for Windows in 2002 was a key strategic move. This decision expanded the potential customer base to nearly all personal computer owners, even though Apple only has 2%-3% of all personal computer sales. Conversely, Apple depends on Microsoft for a version of Microsoft Office. As the most widely used office suite of applications, Macintosh users rely on Office to correspond with companies that standardized on Windows. This is from a strategic alliance between Apple and Microsoft after Jobs returned in 1997. Apple’s iTunes service has a technological hook (asset specificity) to Apple’s iPod. Although versions of iTunes exist for both Apple and Microsoft operating systems, the iTune’s AAC file format prevents other portable music players (such as iRiver or Samsung) from playing purchased songs.
Technology and the Digital Lifestyle
Apple not only dominates the music player market, its iLife suite provides consumers with easy-to-use software for music and video composition. With “podcast” a household word, Apple’s Garage Band application makes the recording of podcasts and music very easy.
Regulatory Environment
While introducing new technologies, there is a persistent threat of legal action by competitors. For example, Apple sued Microsoft in 1988 (settled in 1997 for an undisclosed amount) for perceived similarities between Microsoft Windows and Macintosh audiovisual works.Microsoft has generally been the focus for government antitrust charges (such as U.S. v. Microsoft) (US DOJ, 2006). Both federal and state governments assert that Microsoft’s dominance blocked fair
competition within the software industry. This is an advantage for Apple, because its operating systems are a viable substitute for Windows. Furthermore, Microsoft’s continued support for Office for Macintosh reduces the perceived level of market monopoly and abuse. Manufacturers will continue to trespass on Apple’s intellectual property. For example, the company tex9 released an open source music program called xtunes that was very similar to iTunes. In 2002, Apple took legal action against tex9, who then altered the programme and renamed it sumi. Legal threats can surface from somewhat unusual sources. Apple Corps Ltd. is the London-based company that owns the rights to the music of the Beatles. Paul McCartney and Ringo Starr recently sued Apple over the use of the Apple logo in iTunes, claiming that it violated Apple’s agreement not to produce music under an apple-based logo.
Research and development is a key component to Apple’s sustained competitive advantage. Apple is currently taking legal action against several popular technical web sites for releasing proprietary product research. Sites such as appleinsider.com have allegedly posted verbatim content from documents protected by employee non-disclosure agreements. (McCullagh) Release of critical insider information could give Apple’s competitors a jump in producing rival products.
Industry Analysis Using Porter’s Five Forces Model
Apple operates in two primary industries:
• Computing - Hardware and Software
• Delivery of Entertainment and Media
Apple has always been under intense competition within the computer, software, and entertainment industries. “Looking to 2005...Every time that Apple had jumped into the lead in a product category during the past two decades, it had had difficulty in sustaining its leadership position.” We use Porter’s Five Forces Model to understand why Apple’s industries are so competitive.
Figure : Porter’s Five Forces Model
Threat of New Entrants Bargaini ng power of Supplier Threat of Substitutes Bargaining power of Buyers Level of Threat in an Industry
Figure : Summary of Industry Threats (Computer Equipment and Entertainment Distribution) Type and Severity of Threat Organization Examples Entry – High Threat
Verizon Streaming audio and video with V CAST.
Amazon On demand online services to purchase music (similar to iTunes).
Google They make everything. The “Next
Google”
New entrants with disruptive technology.
Rivalry – High
Threat
Microsoft Windows Operating System, Windows Media Player for playing music and video.
Linux Competition to Mac OS X Operating System. Napster,
Rhapsody
Online music sources – alternatives to iTunes Music Store.
Dell, HP, Lenovo
Alternate sources for computer hardware. iRiver,
Samsung, Creative
Small, stylish MP3 Players. DreamWorks Animated movies.
YouTube.com Online video.
Substitutes –
Moderate Threat
XM, Sirius Satellite Radio for music.
XBox, PS2 Entertainment Media, Media and Music. Various Internet Streaming Radio and Podcasts. Music CDs,
DVD-Audio and
SuperAudio CD
Alternative means to acquire music.
Broadcast, Cable,
Satellite, NetFlix, TiVo, Theatres Suppliers – High Threat Motorola, IBM, Intel, Samsung
Suppliers of Processors and computer memory. Microsoft Strategic Alliance / Supplier of Office for Mac. The Big Five -
BMG, EMI, Sony,
Universal, and Warner
Sources of music. Will they raise prices and break the dollar per song model? Some in the record industry resent Apple’s distribution model. “Apple reaps billions from selling its hit music player, but there are sparse profits from the songs being sold over the Net.” (Burrows, Grover, and Green)
Disney, ABC, NBC, CBS, Fox, Pixar, Sony
Suppliers of Television and Movies. Will they sign exclusive contracts with other online services? Note that this threat is reduced for Disney / Pixar.
Buyers – Moderate Threat Consumers and Illegal peer-to-peer file sharing
Consumers share music using peer-to-peer networks without paying for music.
Distributors Apple retailers may pressure for lower prices or better terms. For example, the release of the Apple Store in 2001 “infuriated longtime independent Apple retailers that didn’t appreciate Cupertino cannibalizing their sales.” (Linzmayer, 300)
Consumer Attitudes and Behaviors
Consumers or businesses may reduce spending on personal computers or non-essential (potentially high elasticity of demand) music players if they fear economic downturns.
Consumer Refresh Cycles
Consumers and businesses may continue to use previous-model iPods and Macs rather than upgrade to current iPods, iMacs, or OS
The total industry threat for the industry space that Apple occupies (computer equipment and distribution of entertainment) is a high threat industry. Apple must continue to pursue product differentiation (i.e. the style and ease-of-use of an iPod) and economies of scope (i.e. offering ABC television shows on iTunes) to maintain their sustained competitive advantage in this industry.
Which External Threats are Most Significant
• Computer Hardware and Software: Open Source software such as the Linux Operating System and Open Office applications threaten both Apple and Microsoft. The low (often, free) cost of the software may allow it to overtake Apple and Microsoft, especially in developing markets such as China.
• Music Products: Major online retailers such as Amazon are considering entry into the online music market. With a wide internet presence and a household name, Amazon could present a formidable challenge to Apple. If the major record labels (Universal, Sony BMG, EMI, and Warner) negotiate better terms with new competitors to iTunes, Apple may be unable to provide some of the music content that they currently offer. The major music labels dislike Apple’s dollar per song pricing. They would prefer to earn higher profits with “variable pricing”. (Wingfield) With variable pricing, the most popular songs would be greater than $1, and less popular songs would be less than $1. Although the labels recently renewed their contracts with Apple, there may be provisions that allow future changes in the pricing model. (Wingfield and Smith)
• Suppliers: The recent shift to Intel processors could present a significant threat to Apple. With only two companies (Intel and AMD) producing
Intel-compatible processors, there is a strong potential for tacit collusion and oligopoly power between these suppliers. Apple purchasing must now directly compete with HP, Lenovo, and Dell. If shortages or exclusive agreements materialize, Apple could face problems with obtaining raw materials. Apple should consider additional sources such as Advanced Micro Devices (AMD).
Figure: CPU Market Share
Additional External Threats
Security
Apple software, like all large software products, has security vulnerabilities that hackers may exploit. A significant exploitation in the future could damage many businesses and households using Apple computers. This would affect future
customer purchasing decisions. Apple enjoys a competitive advantage, because their OS X is mature and stable due to its basis on BSD Unix. In fact, “computer security folks back at FBI HQ use Macs running OS X”. However, the increased use of Apple computers is prompting hackers to target the platform. In February 2006, there was documentation of the first known Apple OS X worm. By using iChat instant messaging, it spreads to other users and deletes files from their Mac computers. If Mac OS X becomes as wide of a target as Windows, Apple’s perceived differentiation as the more secure platform may disappear.
Vertical Integration of Competitors
Sony is an example of a competitor with a unique position against Apple. Sony Music supplies Apple with many of the songs for iTunes. Sony also creates a version of the Walkman portable music player that is a direct competitor to the iPod.
Sony is attempting to vertically integrate forward directly to the music buyer. Sony integrated their music system (Mora) into the Sony Walkman. Sony is exclusively distributing certain songs on Mora. (Hall) Mora currently targets Japanese consumers. If Sony can gain additional momentum (such as collaborating with other record labels), their service could present a formidable challenge to iTunes in additional markets.
Value Chain Analysis
To determine where Apple developed distinctive capabilities, Porter’s generic value chain model provides a systematic framework for identifying Apple’s utilization of resources. Primary activities for Apple include Technology and Product Design, Production, Sales and Marketing, Customer Service, and Legal Services.
Technology and Product Design
This component represents the true core (no pun intended) of Apple’s capability. From being the first platform to run an electronic spreadsheet (VisiCalc on the Apple II Plus) to the first to establish a “digital lifestyle” hub (the Macintosh product lines), Apple’s history is rich with cutting-edge technology development. Apple drives to be the best, no simply the first. The Apple operating system is universally regarded as more stable and reliable than Windows, while the desktop publishing software bundles (iMovie, iPhoto, iTunes, etc.) are the most comprehensive available to end users. Ives best summarizes the entrepreneurial culture within Apple by saying that “it’s very easy to be different, but very difficult to be better.”
Production
Because Apple had long refused to license its operating system to external entities, the bundled packages of Apple-developed hardware and software became the cornerstone of Apple’s production process. Apple achieved unparalleled performance via 64-bit architecture, integrated distinctive styling with the multi-colored translucent iMac cases, and redefined intuitive operation with the iPod.
While every product introduction has not been a success (Lisa, Newton, etc.), Apple treats component production as a natural extension of the design process.
Sales and Marketing
We could simply title this section “Steve Jobs”. Since his return as CEO in 1997, Jobs personally unveils all new product introductions, reviews corresponding marketing campaigns, and approves new product development guidelines. In a departure from their turbulent history, Jobs “entered into patent cross-licensing and technology agreements with Microsoft.” (Linzmayer, 290) After years of unimpressive market share growth and cannibalization of a loyal consumer base, the door to the expansive PC market was now more accessible to Apple than ever before. Apple continued to command a market premium for producing a “better mousetrap” throughout its history.
Customer Service
How has Apple retained substantial cash reserves during the explosive growth and dominance of PCs worldwide? Apple created a virtual love affair with their customer base by delivering technically superior products (iPods vs. other MP3 players, Macs vs. PCs, etc.), and aggressively pursuing hardware and software updates. Apple integrated their primary activities so well that it is transparent to the consumer where one activity begins and the other ends. A perfect example of this is Apple’s willingness to develop software to run Windows XP on its new Intel-based iMac and then post it online free to iMac users. (Wingfield) In such an environment, customer service merely becomes the realization of receiving a little more than expected.Although Apple employs many resources and capabilities to support their primary activities (human resources, supply procurement, etc.), the most strategically relevant would be Legal Services.
Legal Services
In a market climate of constant change and innovation, it is inevitable that the drive to expand product and service offerings will subject Apple to patent and copyright infringement claims. The dispute over the Apple logo on its iTunes Music Store, for example, continues despite a previously reached settlement with Beatles’ Apple Corps Ltd. in 1991. (Dow Jones Newswires) While such litigation as Microsoft’s Windows infringement on Mac OS patents has been highly publicized, use of legal guidance to drive acquisition versus internal development strategies for such products as GarageBand and iMusic have proven highly valuable. Intellectual property is sacred to Apple. There was a recent attempt to uncover the identities of internal “sources who leaked confidential information about an unreleased product to online media outlets in 2008.’’
SWOT Analysis
Although participation in such activities may add value, they may not be a source of competitive advantage. Ultimately, the value, rarity, inimitability, and/or organization (VRIO) of an activity or resource determine its sustainability as a source of competitive advantage. Within this context, we can identify a firm’s strengths, weaknesses, opportunities, and threats (SWOT).
Strengths
Technical savvy – Product lines are easy to use and stable. Recent integration with Microsoft products lines and Intel processors demonstrate ability and willingness to adapt to a diverse customer base. (Mossberg) Such innovation, however, would not be sustainable without a learning environment tolerant of mistakes. While the pure technical expertise alone is not a valuable or rare resource, it becomes very costly to imitate when it exists within the socially complex, entrepreneurial culture of Apple.
Financial vitality – Cash reserves remained robust and stable despite stagnant market share growth in the computer hardware and software arenas. Apple exploited this by resisting market pressures to reduce costs, tightly integrating product packages, and forming strategic alliances (i.e. securing the backing of all major music distributors in the support of iTunes).
Brand loyalty – The only way that Apple could maintain the financial vitality described above is via a fanatical, almost cult-like, affair with its customer base. Such brand loyalty is extremely costly and time-consuming to imitate.
Steve Jobs – As discussed earlier, Jobs proved to be a vital component to Apple’s success. During his absence (1985-1996), Apple experienced the
most turbulent (financial and innovative) timeline in its history. Immediately upon his return, he replaced most of the Board of Directors, pruned and focused the new product ideas, and delivered seven consecutive quarters of positive earnings to shareholders. As such, Jobs is certainly a valuable, rare, and hard to imitate resource that Apple fully exploits.
Weaknesses
Market share – Apple has historically been strongest in the US geographical and educational vertical markets. With the educational market facing tightening budget constraints and the US approaching a PC saturation point, Apple may need to burn cash more quickly and succumb to market cost pressures on its products without a strategic innovation, integration, or divesture.
Steve Jobs – For virtually the same reasons Jobs is a strength, he is simultaneously a weakness. The aggressive drive to bring innovative visions to life was noticeably absent and painfully felt (especially by shareholders) during his departure. The apparent absence of succession planning coupled with a lust for the limelight positioned Jobs as Apple’s single consciousness in the eyes of consumers and shareholders.
Opportunities
Consumer electronics – With the startling success of the iPod and iTunes, Apple entered the consumer electronics market. By expanding the iTunes concept to downloadable mobile phone features and movies (podcasts), the door is now open to develop new and potentially profitable strategic alliances with peripheral component manufacturers (speaker, home stereo, etc.) and media transmission giants (Disney, TBS, Verizon, etc.).
PC hardware and software market growth – With cross-licensing of operating system platforms in place, Apple entered the high-volume business environment traditionally dominated by Windows-based PCs. The introduction of Intel-based processors prompted businesses to replace PCs with iMacs. They did this to gain a level of stability and reliability in their business applications that PCs failed to provide. An example is Japan’s Aozora Bank Ltd., who is replacing 2,300 PCs with iMacs. (Wingfield) Apple must establish themselves as a credible player in business desktop applications to overcome the “desktop publishing” stereotype.
Threats
Legal risks – In a market that literally changes at the speed of thought, patent and copyright infringement risks remain high. As long as operating systems and support software packages continue to converge and remain relatively easy to imitate, present and future lawsuits are inevitable. The Apple records claim against iTunes remains unresolved.
Competition – This threat occurs primarily on two fronts: PC
hardware/software and consumer electronics. For the same reasons discussed in the opportunities section, the threat of imitability (cloning, pirating, etc.) increases. As relative newcomers to the consumer electronics arena, will Apple retain a competitive advantage as they diversify their offerings (speakers, home entertainment systems, etc.).
Influx of Apple’s Mac Challenges Mis to Cope
In the heart of large companies, data center managers are wearingly warding off a second band of corporate renegades. The renegades are trying to break down mainframe walls and build new applications replete with icons and pretty pictures. After finally coming to terms with the IBM microcomputer revolution, MIS departments are now being asked to assimilate a second microcomputer standard, the Macintosh from Apple Computer Inc. of Cupertino, Calif.When the machine was introduced in the mid-1980s, most managers viewed it as a small business system or a home computer.Despite the tag, Macintoshes have wormed their way into many large corporations. Conglomerates, such as E.I. du Pont de Nemours & Co., Northern Telecom Inc., General Electric Co., Martin Marietta Corp. and Electronic Data Systems Corp., have all blessed the Macintosh.
John Wardley, a senior analyst at International Data Corp., a market research firm in Framingham, Mass., said, "Macintoshes were initially purchased to address a specific niche. For example, a corporate advertising department may have used the microcomputer to produce graphic presentations."Once other department saw the machine's output, interest spread. Right now, Macintosh usage is rapidly growing in many large corporations," he said.
Use of the computer has progressed well beyond the test phase and a few corporations have installed thousands of Macintoshes. "Right now, our users are purchasing more Macintoshes than IBM microcomputers," said Michael Pearson, the director of technical operations at the New York Daily News in New York.
What is driving Macintosh acceptance?
Supporters agree that it is the product's easy to use graphic interface. "Once a user sits down and works with a Macintosh, they never go back to an IBM Personal Computer," proclaimed Price Collins, a programming manager at General Electric Co. in Bridgeport, Conn.The ease of use features translate into substantial savings for many corporations. "We spend much less time training Macintosh users than we do training IBM microcomputer users," noted Pearson at the New York Daily News.
Studies comparing Macintosh and IBM microcomputer training costs found that it takes twice as long for an IBM user to learn how to operate his machine and three times longer for the user to understand how to opeate a second application. A survey commissioned by Apple found the average cost of training an IBM user was $765 compared to $294 for a Macintosh user.The Macintosh's graphics capabilities also offer many middle managers their own strategic weapons in the battle for upper management's attention.
"An employee will use a Macintosh to generate slides and charts for an important presentation," GE's Collins explained. "The output is far superior to anything generated on an IBM microcomputer, so other managers immediately want to produce the same quality output. Quickly, use of Macintoshes spreads through the company."
Removing Barriers for Users
Analysts reported that another reason for acceptance was aggressive Apple actions. "Apple removed barriers that corporations erected to keep Macintoshes out of
users' hands," said Richard Kollmeyer, the director of marketing and technical services at The Support Group Inc., a Wellesley, Mass., microcomputer reseller. "One of the initial concerns was the inability to run MS-DOS software on a Macintosh. Quickly, Apple delivered hardware so users could run those applications."
To date, Macintoshes have been relegated to personal productivity tools in most companies. "Most users purchase a Macintosh to more efficiently do their own work," noted Michael Masterson, a microcomputer systems specialist at Arthur Young & Co. in San Jose, Calif.
Users are primarily working with traditional microcomputer applications, such as spreadsheet and word processing. However, there are nuances in the types of applications employed by IBM PC and Macintosh users.
Application Preferences
In a survey of 1,216 large companies (each having more than 500 employees), Dataquest Corp., a market research firm in San Jose, Calif., reported that word processing was the Macintosh's most widely used application--named by 54% of respondents. Graphics applications followed with 46%, and spreadsheets placed third with 38%.On the IBM Personal Computer, the response was as follows: 65% used spreadsheets; 57%, word processing; and 35%, database management systems. Few of the companies that dominate the IBM microcomputer software market have had much success plying Macintosh wares. For example, Lotus Development Corp. of Cambridge, Mass., and Ashton-Tate of Torrance, CAlif., have had little success in the market. The most notable exception, Microsoft Corp., Redmond, Wash., offers the three bestselling applications: Excel, a spreadsheet;
Word, a word processing package; and Works, an integrated spreadsheet, word processing and database application.
AppleInsider reports on a research note from BMO analyst Keith Bachman that could have been written for Crazy Apple Rumors—if they hadn't gone ghost-site on us. It turns out the success of the Mac in recent years isn't because of Mac OS X, or Intel CPUs, or the iPod Halo Effect; rather, it's because Microsoft sucks. "Thus far, user satisfaction ratings for Vista have been weak, and startup times for Vista have been known to be much slower than the Mac OS X," Bachman says. "Thus, more than 50% of recent customers buying Macs in Apple retail stores are first-time buyers."
While it's great that the six-figure analyst projects 2.4 to 2.5 million Macs sold for the quarter just ended, his rationale is, well, crazy. Setting aside the image of some grandma dropping $2,600 for a MacBook Air with SSD, there's nothing "recent" about half of Mac buyers in Apple Stores being new to the platform. It's been that way since before Vista was released.
Further, as the chart by the four-figure analyst clearly shows, the surge in Mac sales started around the time Apple transitioned to Intel CPUs. Ironically, one could argue that Mac sales are rising because of Vista, but not in the way Bachman suggests. Prior to the release of Leopard and the discontinuation of Boot Camp as a separate product, Apple reported huge downloads of the program that let Mac users launch Windows Vista very, very slowly.
Bachman further expects Mac sales to jump around 25 percent in 2009, or about twice the expected growth of PCs. Apple could end up with as much as four percent worldwide market share if that happens. In the near term, Bachman, like just about every other analyst and Apple nerd on a message board, is expecting the company to get a boost from the iPhone. If so, it hasn't happened yet.
Since the unveiling of the iPhone 3G at WWDC, AAPL is actually down about 5 percent, which is pretty good compared to some competitors in the smartphone market. Sure, zombie PALM is stumbling along, down 20 percent, but RIMM is down nearly 10 percent. This is after the company reported record profits during the last quarter and a couple of million new subscribers. While the problems of Apple's competitors can be partially blamed on fear of the iPhone 3G, the real issue is the troubled economy. Bachman, and others, are rating AAPL as "outperform" with a value in excess of $200. Maybe, but you can only go so high in a down market, no matter how bad Vista boot times are.
Apple profit makes huge rise due to iPod success
In the first quarter of 2007, more than five million iPod music players were sold. Apple's quarterly income has increased six-fold largely due to the success of the device. The firm's net income raised by a massive 530% to $290m compared to €46 over the same period in 2008. Revenues rose 70% to $3.24bn after good growth in all product categories. A number of approximately 5.3 million iPods were sold over the period, which is an increase of 550% in the same period in 2008.
Sales of PCs also rose to over a million (43% rise) following the success of the new Mac mini and new PowerBook notebook computers. Steve Jobs was delighted with the figures for the first quarter. "Apple is firing on all cylinders and we have some incredible new products in the pipeline for the coming year," he said. 40% of the sales made were over seas, which showed the popularity of the iPod in Europe and Asia. However, Apple said it expected earnings per share to be lower in the third quarter, at $28 per share as against $34 per share over the latest period and also expects revenues to remain largely flat at $3.25bn.
Apple Beats Competitors at Inventory Turn Over
Despite a weakening economy and a need to meet customer demand, Apple has been able to maintain a fast inventory turnover rate. The Mac and iPhone maker is sitting at five days worth of inventory on any given day, beating Dell's seven days worth of inventory, according to data from UBS.
Other PC makers are having even more trouble matching Apple's inventory efficiency. Lenovo, for example, is averaging 15 days of inventory, and HP is sitting at 32 days. Intel, however, is showing a much slower inventory turnover rate at 89 days, and D-Link is sitting on a staggering 131 days worth of inventory.
Apple's quick turnover rate may have been due in part to preparing for its just announced iMac, Mac mini and Mac Pro updates. The company released new desktop computer models on March 3, and keeping inventory low helped assure that there would be fewer of the previous model machines sitting on store shelves. While maintaining a higher inventory level can help a company cope with sudden increases in demand, it can also show a company's inability to adequately gauge market interest in their products. For now, it looks like Apple is managing inventory better than its competition.
IPod: The Marketing of an Idea Project
Apple’s iPod has taken the world by storm. Nearly ubiquitous, it has changed not only the way people listen to music, but it has transformed its parent company Apple into an entertainment giant. In order to understand how this change came about, we’ll take a look at Apple’s ongoing efforts to make iPod synonymous with hip. We’ll also discuss exactly what customers are buying when they buy an iPod, and we will take a deep look at several aspects of Apple’s marketing of this exciting new product, from the iPod itself, Apple’s strategic planning, possible research findings that supported their approach, segmentation strategies that may have been employed and why, as well as pricing strategy across these segments. Last we’ll discuss communications, promotion and advertising, as well as an interesting shift in retailing that the iPod has enabled. Throughout, we’ll tie back to the Apple brand to dig deep into the notion that iPod’s stunning success stems from it being specifically not an MP3 player. Like Magritte’s surrealist painting of a pipe with the caption Ceci n’est pas une pipe (This is not a pipe), the iPod is not merely an MP3 player. It is a symbol which encompasses many grand ideas; ideas that involve world change, and how cool we all can be if we are part of that change.
Apple’s careful and deliberate exploitation of this concept, comprising an entire marketing ecosystem which nurtures that idea will be the subject of this paper. On January 9th, 2007, Steve Jobs, renowned CEO of Apple, announced that the company which he founded would no longer be known as Apple Computer, Inc. Its new name would just be Apple, Inc.1 This seemingly trivial change represents a fundamental shift with deep implications that were the result of many changes Apple had engineered over the past six or seven years; transitioning itself from a computer company slugging it out for a meager share of an increasingly competitive hardware and software market, to a business that promoted an entirely new concept: the digital lifestyle. Before we dig down into what this radical shift entailed, both for the company and the world, let’s take a quick look at the history of Apple, a company already firmly rooted in several notions that allowed this transition to make sense. Apple made a name for itself by being instrumental in ushering in the home PC revolution. For millions of its aficionados, Apple was single-handedly responsible for this revolution by virtue of the fact that it created radical new features such as windows-type graphical user interfaces, pull-down menus and simplified computer control via the mouse. The history of the PC revolution is a history of war between Apple, a number of losers that no one remembers any more, and archrival Microsoft with its dubious counterclaims of having pioneered the concept of Windows. Frustrating to anyone who owned a Mac back in the 1980’s is the knowledge that Apple did indeed pioneer the windows metaphor as a distinct feature of its operating system. This was at a time when Microsoft users were still struggling with text-based DOS commands, and yet the commercial success of Microsoft has served to rewrite history to some degree. Battles ensued over the years, but no matter whose side you were on, by the late 90’s it was clear that Apple was not gaining any ground whatsoever as a
computer and software manufacturer. In fact due to many external events, Apple’s position was in clear threat.
First, huge numbers of consumers, particularly the business community, clearly preferred Microsoft. Apple’s market share was tiny compared to the Redmond behemoth2 however Apple users were an ardent group of graphic designers, college students, and members of the urban hip known as The Digerati. This was a group of consumers who saw themselves as different from the mainstream; definitely cooler, and part of a community of like-minded people. They knew they paid more for to breathe this rarified air, but they didn’t seem to mind. In these segments, Apple’s market share was relatively solid, even if it was comparatively small. Even so, by the end of 2000, with a downturn in the worldwide demand for PCs, Apple posted a $200 million loss3, and analysts were not optimistic about Apple’s future. Undeterred, in January 2001, Jobs opened the annual Macworld conference in New York City with his usual brand of enthusiastic vision. He announced that personal computing, far from tailing off into irrelevance, was about to leap ahead into a new Golden Age. To support his vision he introduced several new Apple products that were intended to align the Mac with this new “digital lifestyle”4.
Though the conference attendees may have nodded knowingly, few understood what he was talking about, for at this point habits which would later be hallmarks of the digital lifestyle—listening to music online, creating digital movies and sharing photos through networks of computers—were not widely practiced, except perhaps by the most innovative of consumers. Any such habits were still in their domain, as MP3 technology, and MP3 players specifically, were still quite new, and no one yet knew exactly what to do with them. Launched in 1998, MP3 players were initially seen as an alternative to portable CD players. They only held a couple hours worth of music, and there were still technical glitches such as
transfer times and clumsy user interfaces that cast these new gadgets firmly into the realm of the geek.
Interestingly this is not too different from the situation that existed when Apple first entered the PC market; the concepts and technology existed, but they weren’t popular. Apple’s stroke of strategic genius was to create a way to simplify and popularize them through cool and innovative design. This approach became foundational to their business strategy as well as their corporate culture, and it can still be seen today, irrespective of the fact that so much has changed. In this regard, this company’s guiding principles have remained remarkably consistent. In 1998 as today, Apple’s strategy has been to release cool new products frequently5, accepting and capitalizing on the fact that computer products enjoy a short product life cycle. Apple popularizes difficult technology by making it fun and intuitive, and characteristically they wrap it all up in a super-hip package that makes consumers of their products feel as if they belong to an exclusive community. The company’s commitment in 2006 differs from their commitment in 2000 only insofar as the addition of the words “portable digital music”:
The Company is committed to bringing the best personal computing and portable digital music experience to students, educators, creative professionals, businesses, government agencies, and consumers through its innovative hardware, software, peripherals, services, and Internet offerings.6 Many have criticized this approach, particularly the more conservative elements within the business community whose view is summed up by Business Week who wrote when iPod was first introduced that “a few might pay a premium for good design, but it isn’t a good business strategy.”7 Those same people may today wish they had at least bought a few shares of stock as a hedge against possible shortsightedness, but more to the point, this type of thinking seems to miss exactly what it is that Apple has always sold.
Consider that last year, Norway, Denmark and Sweden challenged Apple in court over this limitation of their product, a case which Apple’s competitors are following with great interest14. Whole industries want a piece of Apple’s pie, most notably mobile phone manufacturers. Nokia has announced that it is setting up a rival to iTunes in its purchase of the American digital music service Loudeye. Songs downloaded from the new Nokia subscription service will play on any digital music player, including iPod. Not coincidentally, handsets are one of the explosive new growth areas for portable digital music.
Apple continues to mitigate these risks by keeping it hard to substitute, and this gets to the heart of the matter, that iPod symbolizes more than just another MP3 player. If Apple wins all the chips, then iPod’s halo effect will help Apple outmaneuver such threats, and future product offerings such as iPhone, which are being developed now in response to the competitive onslaught, will gain a critical head start. As it stands there is simply no substitute for an iPod. This is reinforced consistently across the technology, advertising, promotion, and accessory ecosystem. In this sense, buyers have strengthened Apple’s competitive position because at sales of over 100 million units, and 70% of the market15, iPod is the industry standard for MP3 players. In a mesmerizing feat of mental acuity, Apple helps consumers judge the efforts of its competition against a standard they themselves invented. In order to be part of the phenomena, buyers have shown that they will pay a premium, and that for the most part, there are no ready substitutes. This causes a significant problem for competitors when the global conversation about MP3 players invariably leads to all things iPod. Any competing product will certainly be judged against the gold standard of iPod, and because of Apple’s early entry and subsequent early lead, MP3 players from today through forever won’t be strictly judged by their technical merits, but rather on their value as a style accessory.
Thanks to iPod, any potential entrant has to now offer an augmented product that delivers an entire package of benefits far and above the simple core attributes most tech companies specialize in. We can reasonably infer that Apple did plenty of primary and secondary research about the types of people who would be interested in iPod, and crafted their message accordingly. Undoubtedly they owned mountains of data from their over twenty years being at the epicenter of the PC revolution as well as their relevance birthing its child, the Web revolution. Using laddering in interviews perhaps revealed that this new breed of high tech consumer had desires far and above the technical. Accordingly, they positioned the product’s physical attributes in a way that was secondary to its contribution toward bettering the consumer’s world. A tool for building high self-esteem, impressing your friends, and being part of a semi-exclusive club, that by the way happens to be beautifully designed and technically superior to the competition. What’s not to love? Of course, they charge for this love, but they knew from the beginning where they were going, and they didn’t get there by accident. Looking at the Christmas retail season of 2001, three months after iPod's release, we see a story that practically draws for us a perceptual map whose axes are price and technical capability. From that we can backwards-engineer possible research findings, conclusions, and recommendations.
The leading device at the time was Sonicblue RioVolt MP3 CD Player, which retailed for less than $100. Creative's Nomad Jukebox was selling its recently introduced 6GB hard drive for about $250, and e.Digital Corp. was touting its walloping 10GB palm-size Treo 10 for $ 249 Treo. Against these contenders, iPod’s $399 price tag for a mere 5 GB of storage doesn’t seem to make sense16. Also, at this time, iPod was only compatible with Macs, which amused Bill Gates, and continued to do so even as late as 2005 when USA today quoted him as saying: I think you can draw parallels here with the computer — here, too, Apple was once
extremely strong with its Macintosh and graphic user interface, like with the iPod today, and then lost its position.17 It is our contention that the initial release of iTunes 1.0, which as noted was practically laughed at, was a Trojan Horse that delivered quite a bit of business intelligence to Apple.
We know that they released it about one year before iPod was released, so there’s no doubt that the entire iPod strategy and product development were well into their final phases. To go back to that time is to recall that Apple faced numerous legal issues relating to copyright infringement. Releasing iTunes before there was a correlating MP3 player gave Apple a window to negotiate Digital rights Management agreements without the success of iPod hanging over their head. In other words, the lack of a product didn’t cause the alarm bells to go off among key stakeholders in the distribution chain, whose future position was in grave threat, and who would have certainly put the brakes on if they had seen what was coming down the tracks. Finally, iTunes usage in that first year may have served as the final checkpoint, validating Apple’s contention that a successful MP3 player—one that would truly leverage the potential of the technology—would need to find a way around the clunky process of buying and ripping CDs. Building these findings into a psychographic profile and consistently speaking to that profile as an individual would comprise the remainder of the marketing effort, in all its facets, but how many psychographics were there?
What factors did Apple take into account when deciding whether there were viable segments out there? It is clear today that Apple is marketing different products to different groups of people: the flagship iPod video which is expensive, the Nano which is midrange and a shuffle which is inexpensive and small. This segmentation strategy appears to make sense, since the market is heterogeneous, the segments are identifiable and they are divisible. But, did releasing different products risk dividing the total market, or did it create new opportunities for sales? Greg
Joswiak, Apple’s VP of hardware marketing in 2005 noted in reference to the Nano that "This is a different product and it will take the iPod to a different market, one which couldn't afford the price of the normal iPod 18." That it was a good move was lauded by Merrill Lynch’s analysts at the time when they concluded, “The iPod shuffle is likely to outsell all Apple's other iPod models combined, and may be in short supply until next quarter” 19. Extreme iPod published a report at about the same time that suggested that the strongest demand for the iPod shuffle was likely to come from new users. "Existing iPod owners may prefer the larger capacity and display of existing iPods, which makes for good market segmentation on Apple's part. New-to-iPod users tell us the price points and ease of use are attractive."20 By the following year, iPod had moved into its sixth generation, with a line that featured the iPod video player, an iPod Nano with a color screen, and the iPod shuffle. Also being upgraded right alongside the product was its life-giving infrastructure iTunes, now able to offer and organize different types of media. We believe that in the beginning Apple’s segmentation strategy focused on narrow markets and a unique niche because in 2001 it was early adopters who might be interested in MP3 players. However iPod also created a whole industry, which must now be characterized as having a broad scope, simply because of its ubiquitous presence. It may be a unique niche—it certainly was at the time— because they intentionally did not go for cost leadership.
An Apple for your enterprise?
Macs have made their way out of the art department and into the offices of accountants, salespeople, manufacturing planners and top executives. “We’re seeing more requests outside of creative services to switch to Macs from PCs,” notes David Plavin, operations manager for Mac systems engineering at the U.S. it
division of Public Group SA, a global advertising conglomerate. For it managers across all industries — even those with a well established and stalwart Windows user base — the question is no longer whether you’ll need to
de-sign and support a Mac computing strategy. the only question is how quickly. You may already be a little late to the game. According to Forrester, business adoption of Macs tripled last year. What’s more, this will surely accelerate as companies hire more Gen Y workers. Coming through the door in those backpacks are a slew of consumer technologies and wireless personal productivity tools — think iPhone. Some users are finding that switching to Macs can even save money — lots of it. Auto Warehousing Co. (AWC) in tacoma, Wash., is pulling the plug on all Windows-based PCs and powering up Macs to execute virtually all of its revenue-generating operations.
In september, 2008, Apple Inc.’s Mac Os X market share passed the 8% mark for the first time, according to data collected by net Applications.
Apple’s operating system ran on 8.2% of the computers that accessed the 40,000 sites monitored for clients by Net Applications. The Mac’s share of the operating system market was up over August’s by nearly four-tenths of a percentage point, the biggest one-month gain since May. In the last two years, Mac OS X’s share has increased by 3 percentage points, a gain of 58%. Microsoft Corp.’s Windows, meanwhile, continued to slip in market share last month.
Overall, Windows accounted for 90.3% of the operating systems powering the machines that accessed Net Applications’ metric network, a drop of 0.4 percentage points from August, when the operating system fell by nearly the same amount from July. That month was the last time that Windows maintained or grew its
share. Since the beginning of this year, Windows has lost 1.5 percentage points in market share.
As the largest full-service auto processing company in North America, AWC has 23 sites across the U.S. and Canada and handles 5.5 million cars a year. Switching to Macs will save the company $1.82 million over three years, according to Cio Dale Frantz. that’s what it would have cost to upgrade software licenses if the company had stayed on PCs. in contrast, the total cost of switching to Macs was $335,000. “this is more of a strategic choice for the future,” says Frantz. “By investing in the Apple platform, we pick up additional functionality that we don’t have today,” he says. Frantz also says Macs are ready for business prime time. “on the whole,” he adds, “what we’re finding is this stuff just works. We’re at a point where we can deploy it companywide.” For all the details, see AWC Switches to Mac and The Mac Switch Revisited. other key factors driving Mac adoption include the rise of Web based computing via software-as-eservice applications, which for the most part are platform-agnostic. the rise of virtualization, as well as Apple inc’s shift toward standardized PC components, has also cleared the way for greater corporate Mac use. Indeed, experts say the Mac fits much better than it ever has before in the enterprise, and the trend toward cloud computing is reducing the importance of the client platform to access both internal and external resources.
