Apple Computing Inc. - Strategic Path

Apple Computing Inc. - Strategic Path

Executive Summary

Strategic intent

Apple develops and sells innovative products at a profit and creates a customer experience that change the way people work, think, communicate and learn. Market opportunities are seized by redefining existing market concepts.

Customer knowledge and assessment provides Apple with the learning and understanding to create desire for its products and provide value-added experiences to the users of its products. Knowing how customers think, what they want and how they make decisions provides the information to provide the customer with a value for money experience. The Apple brand must create a desire to own and reward the user with more than just the basic tangible product functionality. Good customer and product support enhances the value perception and experience for the user.

This customer focus enables Apple to create innovative products in early markets. Apple builds on its core-competency to integrate open standards or reinvent into a fit for purpose product with necessary proprietary protection. Research and development allows Apple to be innovative and not just imitate successful business solutions.

Good software solutions and ingenious peripheral interface products comes from an environment and a culture where management has created the necessary space for creativity to develop and succeed whilst maintaining a sense of urgency to deliver. By attending to some of these basic principles Apple has ensured its place as a strong competitor in the market.

Current Conditions Analysis

Current strategy

Apple's current strategy in the PC market revolves around a business of software manufacturing that drives the hardware and retail categories. The official focus is on growth by concentric diversification into portable / mobility and wireless communications, the digital lifestyle and music, iPod, iPod mini and iTunes Music Store (Evans, 2004).

Being second or third to market in the portable music industry has given Apple the opportunity to do competitive innovation "searching for loose bricks" (Hamel & Prahalad, 1989, p70). Apple could redefine the rules and successfully market the advantages of its own product offers if compared to the first to market player's products. Apple has a focus on innovation and niche products that will appeal to selected users. An example of this was the provision of leading software to capture a niche markets like iMovie for digital video hobbyists.

Strategic alliances are needed for growth. The Motorola /Rokr iTunes phone and the move to promote iPod units in major car brands will build business and brand (Xanadb 2005). The strategic Long term move to use Intel Corp.'s processors in Macintosh units could open the platform for more software developers to provide Mac software.

Apple has an intense focus on smart marketing techniques and media manipulation. The market success of its iPod products is used to boost brand in order to sell more Apple PC units. The Apple stores further enhances brand and grow volume sales for hit products.

Past strategy

Apple has historically and is still building its business on hit products. Apple manages to balance the risk involved with some of its ambitious products with the good returns of success. Its strategy to constantly reinvent has rewarded with imaginative product concepts in the past.

Apple has never allowed its operating systems to be licensed to PC vendors. This may have cost Apple dearly in the past as it did not allow others to add value to the system and forced apple down to a very low market share over time. If Apple applies this same principle in its new business ventures, history can repeat itself with a large share of revenue leaching away over time.

Industry analysis:

The computer industry is dominated by a few large companies with consumers buying products below Apple's price points. Computer sales are predicted to grow 12.9 percent this year (IDC, 2005).

Cheap high-speed wireless on-line streaming audio connections in personal digital assistant (PDA)/ mobile phone combinations may in the future compete with devices like the iPods. This will eliminate the need for high memory capacity in devices. World wide wireless broadband prices has more than halved in the last year (Pricescan, 2005).

New entrants to the MP3 player and PC markets must all face the barriers to entry to manufacture highly specialised technological products. Microsoft and Sony is only two players that want their share of the portable entertainment market.

Technological development, miniaturisation and Moore's law is acting as enablers to physically produce better products in both the PC and portable music industry. The growth rate of the Chinese market will have an influence on the future of operating systems and their licensing.

Competitive positioning

Apple's main competitors is Dell, Hewlet Packard and Microsoft (Hoover's 2005).

Industry figures supplied by IDC (2005) places Dell Inc. with a top PC market share of 19.3%. Dell has been aggressive and outperformed most competitors on price and is now providing upscaled PC models for niche markets.

Hewlet Packard (HP) has a 15.6% PC and 3.6% portable music market share (IDC 2005). Hp announced that its withdrawal from the portable music market. IDC (2005) places PC market shares for Lenovo at 7.6 %, Acer at 4.4% and Fujitsu Siemens at 3.7%. Apple is growing its 2.5% PC market at a record 33.0% (IDC 2005). The Ipod market accounts for 38% of Apple's revenue. Rio has a 2.8% portable music market share and has just announced their retirement from this market (Richards, 2005). This leaves Apple with over 90% of this market to compete with smaller players like Iomega and Sandisk.

Strengths

The Apple has a high media profile and a brand that stands for cool and cutting-edge products. Apple has captured people's imagination and the market with the iPod. The product is not only the market leader but also the market favourite. Apple has grasped the importance of well-funded good-quality marketing.

Apple's management image has captured people's imagination. Management has succeeded to guide extreme focus to achieve the correct product at the correct