Apple Inc. Case Study

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APPLE INC.2008

Shu Yao

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Executive Summary

The purpose of this essay is based on analysis the history and problems for Apple, to conclude recommendation for the company long term interest. According to the article, the problem for Apple are the suppliers and buyers have too much bargaining power, Apple has only 2.6% in market share in the year of 2007 which is not a competitive position. My recommendations are: build specific products that are lesser price but high quality for Asian market or extend their current product line to include some product with lower price point to expand the market share, continue and intensify the research and innovation, stylish and useful the products for general home user.

Problem Statement

The problem for Apple Inc are the suppliers and buyers have too much bargaining power. Supplier to PC industry fell into two categories: many suppliers produce memory chips, keyboards, disk drive, only few suppliers produces microprocessor and OS. Microsoft and intel-leaders of software will adjust pricing and quality to make their products more attractive therefore have high supplier power.

The bargaining power of buyers switching cost are low, this situation places the buyer power in a strong position. Also, increasing of substitute product makes buyer have more bargaining power.

Another important problem for Apple is they has only 2.6% in market share in the year of 2007 which is not a competitive position.

Summary of Facts

Since Apple is not completely independent, the suppliers have control over price of major supplies making Apple vulnerable.

Apple product have high brand awareness and Customer loyalty. Since Apple have control of all aspects of its computer and allowed customer “plug and play”.

the operating system of Apple continues to be strength for the company since its closed operation system, and not subject to the computer viruses and hacking as it affects the Microsoft windows operating system.

From the year of 1999-2005, the average selling price for a PC declined by a compound annual rate of 8% per year, the price of key components dropped even faster, by annual rate of 30% per year

Analysis of Facts

The PC was relatively simple device. A PC is generally composed from four widely available types of component: a microprocessor, a mother board, memory storage, and peripherals.

Supplier to PC industry fell into two categories, those that made products with many sources, such as memory chips, disk drive, and keyboards; and those that made products that had just few sources such as microprocessor and operating system. Products in the first category are widely available and have high competitive prices. Products in the second category which supplied mostly by two firms: Intel and Microsoft.

Since Apple is not completely independent producer, they rely on Motorola and Intel for processor chips, therefore, if these companies increase the price on the chips, or run short, Apple must either absorb the cost of the processor chips, or pass it along to consumers. Either of those two scenarios can make Apple even more vulnerable.

However, for the bargaining power of buyers, even though Apple has low market share, it has control over all aspects of their computer, it could offer customers a complete package, including hardware, software, and peripherals that allowed customer “plug and play.” By contrast, user of IBM—compatible PCs often struggled to add hardware or software. Thus, one analyst noted,” the majority of IBM compatible user ‘put up’ with their machines, but Apple’s customer ‘love’ their Macs.”