APPLE COMPUTERS

“TAKE A BYTE OUT OF AN APPLE”

Steve Jobs and Steve Wozniak, a pair of 20 something college dropouts, founded apple
computers on April Fool’s Day, 1976.Working out of the job s family’s garage in Los Altos,
California, they built a computer circuit board that they name

The APPLE-I. within several months they had made 200 sales and taken on a new partner A.C
“Mike” Markkula,Jr.,a freshly ,minted millionaire who had retired from Intel at the age of
33.Markkula was instrumental in attracting venture capital.Wozniak was the technical genius and
Jobs was visionary who sought “to change the world through technology”.

Advantages of APPLE in its competencies are as follows:

1. Jobs made APPLE’s mission “to bring an easy to use computer to every man, woman
and child”. In April 1978, the company launched the APPLE-II, “A relatively simple
machine that people could use straight out of the box”.
2. APPLE’s competitive position change fundamentally in 1981 when IBM entered the PC
market. The IBM PC, which used Microsoft’s DOS operating system and a
microprocessor from Intel, seemed bland and gray in comparison with the graphics-and
sound-enhanced APPLE-II.
3. APLLE relied on proprietary designs that only APPLE could produce.
4. In 1984 APPLE introduced the Macintosh, marking a breakthrough in ease of use,
industrial design, and technical elegance. Apple’s combination of superior software
like Aldus (later adobe), PageMaker and Microsoft excel and peripherals such as laser
printers gave the Macintosh to a global brand.
5. By 1990, APPLE controlled the only significant alternatives both in hardware and
software to the compatible standard of IBM. It developed its own proprietary operating
system which it bundled with the MAC. Apple typically designed its product from
scratch, using chips, disk drives and monitors. By the early 1990s WINTEL had replaced
 IBM-compatible as the dominant standard. The new “Wintel” regime, like its  
predecessor, was an arena where technical invention was divided amongst vertically
disintegrated firms. This market structure, one of divided technical leadership, is a
structure in which a number of firms possess the capability to supply interoperable
components.
6. In 1991, APPLE and IBM formed a joint venture named TALIGENT, with a
revolutionary new operating system and again formed a joint venture named KALEIDA,
which created multimedia applications. During this time, Apple also formed alliances
with its biggest competitor, Intel. The many joint ventures included creating new system
operation software and multimedia. APPLE’S expertise in user-friendly software would
give it an edge as PERSONAL COMPUTERS converged with consumer electronics.

In December 1996 Amelia which was from engineering background announced that APPLE
would acquire NEXT software which leads Microsoft in a few technical areas as a new and
advanced operating system .he planned to push apple into higher-margins segments such as
servers, internet access devices.

OVER THE YEARS APPLE APPLIED MANY STRATEGIES TO ITS STRUCTURE SO AS

TO BE ABLE TO MAKE A GRIP ON THE MARKET AND TO BE IN THE PROFIT
MAKING ZONE,SOME FAILED AND SOME DID EXCEPTIONALLY WELL,THEY CAN
BE STUDIED AS:

A
STAR: Within the BCG matrix, the iPhone 3G would be considered a star. Stars are products
that are very profitable and their anticipated market growth rate is strong. These products also
tend to give the company a lot of attention and boost the company’s revenue. The success of the
iPhone 3G was a huge contributing factor in generating high revenue for Apple in 2008. Within
its first full quarter, 6.9 million iPhone 3Gs were sold, causing Apples earnings to increase by
38%. The iPhone 3G quickly snagged 27% of the market share for smart phones in the U.S., and
this number is expected to grow.

CASH COW: Apple’s main cash cow product is the iPod. Products that are cash cows typically
generate large amounts of cash and dominate large shares of slow-growth markets. Ever since
2004, iPods have maintained a laudable 70% share in the MP3 player market. Despite the fact
that the iPod has been around for a few years now, the product continues to be very successful.
In the third quarter of 2008, Apple sold 11,011,000 iPods. However, the research has shown that
market growth for this product has slowed, which means that Apple should probably start to
consider being more proactive in expanding oversea.The hype over the iPhone 3G is beginning
to fade, and in no time at all, this product will become a cash cow. In order to respond to this
diminishing enthusiasm over Apple’s star product, Apple should come out with a new product to
grab the attention of Apple consumers.

QUESTION MARK: Apple’s question mark products are the Mac laptops. Question
marks are SBUs that have a weak presence in a growing market. Due to the spread of mobile
Internet services and the decreasing prices of laptops, the market for laptops has started to grow
rapidly. However, Apple laptops only dominate 6.6% of the U.S. laptop market . Apple’s low
share of the laptop market has been attributed to the high prices Apple charges. Apple’s least
expensive laptop sells for $1,099, as opposed to window’s least expensive laptops, which sell for
less than $500.

DOG: Apple’s dog product is the Mac desktop. Dogs are SBUS with a low market share
in a market that has a low growth rate. As the trend for mobile internet service devices is on the
rise, the market for desktops has started to decline . In addition, Mac desktops hold only 8.5% in
the desktop market share, trailing behind both HP, holding 25.3% of market-share, and Dell,
holding 31.9% of the market share .
 B. PORTER’S 5 FORCES MODEL

EXISTING RIVALRY:
 Windows OS and media player for playing music and video ( Microsoft)

 Competition to Mac OS X (Linux)

 Alternate sources of computer hardware (Dell, HP, Lenovo)

 Small stylish MP3 players (Creative, Samsung, Sony)

 Online music stores similar to iTunes stores (Napster)

THREAT OF NEW ENTRANTS :
 Streaming audio and video with v-cast (Verizon)

 On demand online services (similar to iTunes)

 New entrants with disruptive technology (The “next Google”)

BARGAINING POWER OF SUPPLIERS:

 Suppliers of processors and computer memory (Motorola, IBM, Intel)

 Strategic alliance/supplier of Mac (Microsoft)

 Supplier of TV and movies (Disney, ABC, Fox, Sony)

 Sources of music (BMG, Sony, Warner, Universal)

BARGAINING POWER OF CUSTOMERS:

 Customers share music using peer-to-peer networks without paying for music (Ares,

Limewire)

 Retailers may pressure for lower prices or better terms (Distributors)

 Consumers/Businesses may reduce spending on computers if they fear economic

downturns (Consumer Attitudes & Behaviors)

 Consumer Refresh Cycles

THREAT FROM SUBSTITUTES:

 Satellite radio for music (XM, Sirius)
  Entertainment media, media and music (XBOX, PS2)

 Alternative means to acquire music (Music CDs, DVDs)

 Alternative sources for videos (Cable, Broadcast, Theatres)

C .SWOT ANALYSIS
INTERNAL AUDIT:
Strengths
• iTunes Music Store is a good source of revenue, especially with the iPod and the
availability on Windows platform.

• Developing own software and hardware.

• Apple’s niche audience provides the company with some insulation from the direct
price competition.

• Revamping desktop and notebook lines.

• Web technology can be used to improve product awareness and sales.

• Low debt—more maneuverable.

Good brand loyalty

Weaknesses
• Weak relationship with Intel and Microsoft.

• Weak presence in business arena.

 • Dependency on new product launches.

• Weak presence in markets other than education and publishing.

• Slow turn around on high demand products.

EXTERNAL AUDIT:
Opportunities
• Increase in worms and viruses on PCs.

• Weak ties with Microsoft products.

• Downloadable music and MP3 players are highly marketable.

• Increase sales of computers online by 25 percent.

• Increase sales of laptops by 20 percent.

Threats
• Dell and HP are major competitors.

• Increasing competition with music downloads.

• Dell does not invent but provides computers at a more cost effective rate for customers.

• Recession—price of Apple computers are higher.

• Intel’s future Pentium release

D.ANSOFF’S MATRIX
EXISTING NEW
E M MARKET PRODUCT
Xi PENETRATION DEVELOPMENT
S
A
Ti
• In 1984 Apple • In the year 1976,
Ng R announced the Apple came APPLE-I
Macintosh
computer.
K

N T MARKET DIVERSIFICATION
DEVELOPMENT
E
 iMacs, MacBooks,
• ,Apple plans to iPods, and the
W open a store in iPhone, software
China . program, iTunes
• Apple hopes
that the benefits
of establishing
a larger
presence
abroad will be
two fold.
 PRODUCT

E.G.E. MATRIX
LOW MEDIUM HIGH

BUSINESS H
Build Invest to build Protect position
selectively

M
STRENGT Limited Selectively Build selectively
H
expansion or manage for
Harvest earnings
L
Divest Manage for Protect and
earnings refocus

MARKET ATTRACTIVENESS

BUILD SELECTIVELY- Apple Inc was founded on April 1, 1976. However, it did not truly
begin to gain attention until in 1984 when Apple announced the Macintosh computer.

SELECTIVELY MANAGE FOR EARNINGS- Apple Inc. continued to release new models
focusing on being more portable than other computers and trying to give their computers a
unique style. Even with all the breakthroughs Apple was making, it was not able to become a
dominant force in the computer world and was more successful in certain niche market
segments.

DIVEST-In 1997, Apple Inc. was hemorrhaging money, losing hundreds of millions of dollars,
but it had regained one of its former founders, Steve Jobs.
BUILD SELECTIVELY- In 1998, Apple released the iMac, which gained a profit in every
quarter of the year, and turned Apple Inc. downward spiral around. As time went on the iMac
gained more and more market share..
INVEST TO BUILD-In 2001, Apple released the iPod, which helped revolutionize the portable
music market. Alongside the release of the iPod, Apple unveiled iTunes, a digital music player
and store, which also quickly revolutionized the digital distribution of music.

PROTECT POSITION-To establish a larger presence overseas, Apple plans to open a store in
China and Australia by the end of 2008.

 Apple promises deliver more to their consumers by creating inventive and high quality
products that can be personalized.
 The new line of iPod Nanos come in 9 different colors and now Mac laptops are being
sold in a variety of colors and patterns. In addition, you can decide how much memory
you want on your iPod, iPhone, Mac desktop, or Mac laptop.
 On the computers, you can even decide which programs you do or do not wish to have
installed on your product. In addition, all of Apple’s products meant to appeal to the
creative side of individuals.
 The iPod, the iPhone, the Mac desktops, and the Mac laptops all have iTunes, holding
hundreds, if not thousands, of an individual’s favorite songs. These devices can also hold
your favorite pictures as well. The Mac desktops and laptops all come with programs
 such as iPhoto, which is a program where one can change the hues and textures of
pictures.
 Apple created iTunes because they recognized the need that this technologically savvy
generation has for access to the latest music trends and speedy downloads. Recognizing
the need that this generation has for mobile internet access, Apple has begun to
incorporate internet access into products such as the iPhone and the iPod Touch. Apple
also recognizes the need this generation has for individuality and self expression. Apple
knows that if they get generation Y . To become loyal to their company, their purchasing
habits will continue into adulthood.

THE GRAND STRATEGY

Apple Computer
g

THE TURMOIL
When Steve jobs retook the helm of apple in 1997.Apple was facing a series of long standing
problem with its Mac business.

The various problems facing by apple at that time was dealing with its Macintosh model.

Its pc market share was steadily eroding or decreasing and was under 3 %. Despite of long hard
work, there was no expected result coming through. There were many flaws in its Mac model.
 1. One issue was Apple operating system was not at all compatible with the available
software.
2. Apple did not encourage actively the third programmers rather they preferred to develop
their own software.
E.g. - Mac was not compatible with Microsoft office which was used by vast majority at that
time. While early Macintosh operating systems have advantage but later all advantages
disappeared.

3. Mac also failed due to its hardware incompatibility as Mac did not used USB as the result
it was incompatible with large variety of camera, scanner, printers.

Within several years, Steve Jobs brought drastic changes

(a) By shifting or porting from Mac OS to Intel architecture and the switch from IBM power
PC to Intel processors.

(b) It also helped to remove technical barriers.

Now, Mac can also able to run windows and most of the windows programs

(c) Jobs also managed to secure the deal with Microsoft as to develop Mac version of the
popular Microsoft office software.

(d) Apple also increased its compatibility to peripherals by adopting the USB standard.

The changes by Jobs made the Macintosh line competitive again in the PC market and able to
fixed most of the long standing problems with Macintosh brand.

In the year 1998 Job introduced a new technology in the company APPLE of iMAC -“the
internet age computer for the rest of us” but it lacked floppy disk drive but incorporated a
low end CPU.
  APPLE launched the I-Pod, a portable digital music player based on the MP3
compression standard in November 2001. APPLE launched OS X a new and advanced
operating system

Five years later, it offered a full line of MP3 players- from i-Pod shuffle which randomly played
240 songs ,to the I-Pod NANO which stored up to 1000 songs ,to the video I-Pod whose 60
gigabyte version could hold up to 15000 songs,25000 photos or 150 hrs video.

It became “An Icon of the Digital Age”.

a- The economist of the I-Pod were stellar by consumer electronic standard with gross
margins that ranged from 20% to 30%
b- Initially, the I-Pod could “sync” only with Macs. But in August 2002, despite reported
reluctance on Jobs part, Apple introduced an I-Pod for windows.
c- One key element, of the I-Pod system was the I-tunes music stores , an online service that
Apple launched in April 2003.

I-Tunes software can be used to transfer music to the device from computer using certain
version of Apple Macintosh and Microsoft Windows OS. Introduction of I-Tunes had a
galvanic impact on I-Pod sales. Before the advent of I-Tunes Apple sold an average of
113000 I-Pods per quarter, and at the end of the December it shot up to 733,000 units.

d- By the end of the year 2005, Apple sold 42 million I-Pods and claim 75% of the US
market.

In 2005, a new version TIGER including improved interoperability with windows and an
advanced search function called SPOTLIGHT.

In 2006, introduction of INTEL MAC with Intel core duo chips was updated as iMac.In the same
year the top PC vendors-DELL, HEWLETT-PACKARD AND LENEVO accounted for more
than 40% of all pc shipments. Below these top tiers there were also some well known brands like
Acer, Fujitsu, and Toshiba.By 2006 dell offered a full time of desktops, notebooks, workstation
and servers which became backbone for the computers. Throughout the 1990s, thousands of
manufacturers, ranging from Compaq and Dell built PCs around standard building blocks from
Microsoft and Intel. Advanced game devices (such as Microsoft X Box 360 and Sony
playstation2) and web surf were the part of this year.There was two categories of suppliers to the
PERSONAL COMPUTERS industry:

1) Those supplying products (such as memory chips, disk drives and keyboards) that had many
sources chassis‘, RAM, peripherals etc. Products in this category are available from a wide
variety of sources at highly competitive prices

2) Those supplying products (like microprocessors and most notably CPUs and operating
systems)

The value of an operating system corresponded directly to the quantity and quality of application
software that was available on that platform. The quality of application software of VisiCalc, the
first electronic spreadsheet software was a hit among business users. Thousands of
manufacturers built PCs around hardware and software components mainly supplied by
Microsoft and Intel.

RECOMMENDATIONS

It is important that Apple continue to be an innovator in the production of their products. It is one
of the main things that made them the company they are today, so continuing to produce new and
exciting products is very important for the continuing advancement of the company. Another
marketing objective is to continue focusing on their main target market, generation Y, in order to
keep them happy and hopefully persuade them to become brand loyal. Since Apples product is a
good, it is important to be able to compete with the other products in the respective markets. This
is why Apple uses both price and non-price competition.
The different strategy that Apple can fallow are :-

Strategy 1-

Open six computer retail stores (not just peripheral and accessories). Apple currently has stores
opened throughout the United States with only peripheral and accessories for their
computers.This will increase product accessibility for those who wish to view items other than
just accessories and increase awareness of the originality of Apple’s products.

Strategy2-

Contract music spokesperson to attract the upcoming generation who are attending high school
and college. (a)-This will invoke a sense of style and linking apple with a distinctive and
memorable top 10 hit. This will stay in the customer’s awareness and influence future purchase
decisions. Contracting one music spokesperson estimated $6 million.

Strategy 3-

Add more features to current products for greater Wintel compatibility. Features such as iTune
software compatible with windows based computers, Office programs loadable from PC
installation disk (This would require a software agreement with Microsoft). In late October 2003
Apple released an iTune software package that is PC ready.

CONCLUSION
Overall, Apple Inc. is an extremely interesting company to study. The fact that they were almost
out of business and the managed to come back and be an impressive industry innovator sets it
apart from a lot of companies. Apple’s products continually show how dedicated they are to the
consumer and the constant innovation shows just how far ahead of their competitors they are.
Even if the numbers do not always show it, Apple is one of the most remarkable consumer
electronics companies in the world and they are sure to release more products that impress the
people in the future.The aspect that makes Apple special is that while they offer their long list of
products in different electronics outlets across the country, they also have their very own stores.
This was not on accident. Apple came up with this strategy back in 1996 as a shot in the arm for
sales revenue .While Dell has to compete with every computer on the shelf, a customer that
walks into any Apple store will only be seeing Apple products .Apple has definitely experienced
a recent run of success, but that has not made them lazy. Their goal is to be the number one
technology provider in the world as well as continue to provide state-of-the-art products for its
customers .They continue to strive for this goal by coming up with effective advertising
campaigns, personal selling, and direct marketing. Advertising is any paid form of non personal
communication about an organization, good, service, or idea by an identified sponsor .The type
of advertising that they use is known as competitive institutional. These are advertisements that
promote the advantages of one product class over another and are used in markets where
different product classes compete for the same buyers.