Apple has evolved over 36 years from assembling computers to becoming a technology giant spanning computers, media devices, software and applications. Through products like the iPod, iPhone and iPad, Apple has entered new industries and created new market segments, continuously changing the technology landscape. While competitors try to copy Apple, it sustains success through supply chain excellence, innovative design, and a seamless digital ecosystem. In the next decade, Apple will need to keep innovating and changing industry rules to address challenges from growing competition and a maturing market. Potential strategies include expanding into new areas like cameras and home theaters through continued R&D and possible acquisitions.

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Apple
Introduction Apple in the new millennium
In its 36 years of existence Apple has evolved from By the end of the last century Apple was mired
being an assembler of Micro Computers to a digital by a low market share and a recent history of losses
convergence giant and the most cash-rich company on but it had a glint of hope to regain its past glory in the
earth with over $100 billion cash reserves. Apple world of technology.
currently operates in several industry spaces –
Apple continuously defied the traditional
- Computers, Portables and Peripherals
Porter’s 5-forces model by changing the industry
- Media devices
itself. Apple blurred the boundaries between different
- Media Sales industries while raising the barriers around self to keep
- Software and Applications away the competition from its cult followers. In the
last 12 years Apple has constantly changed the
technology landscape to redefine the market spaces.
Apple launched the iPod to create a
revolution in the music player industry. It was not just
a computer manufacturer anymore. It had entered the
music player or media devices industry. Realizing the
importance of locking-in its device buyers, Apple next
launched the iTunes. For the first time, a renowned
company was offering music a la carte at just a dollar!
The touch devices were previously seen mostly
in movies and science fiction literature, but Apple
suddenly put it in the hands of every common man by
Fig.1 – Apple Product Range launching the iTouch and iPhone. The Apple magic
worked and consumers picketed stores for days before
A hallmark of the Apple product family is that launch of subsequent new products. The brand of
each product is seamlessly integrated with the other Apple had arrived; in USA and in the world.
Apple offerings. This effortless interplay of devices
and services has created a strong digital eco-system for Just when portable market was beginning to
the Apple users and Apple has historically strived to become too hot to stay in, Apple created a new niche
maintain it as a closed eco-system. By closing the loop market of its own – Ultra-books. MacBook Air
for the customer experience Apple has moved into a revolutionized the way people perceived laptops with
blue ocean which can be harvested while competition unimaginable battery time, ultra-fast booting time and
across segments play catch up with Apple. aesthetics and dimensions unforeseen by competitors!
Madhuranath R

2. Just when every company was trying to kill What makes Apple tick?
Apple by launching comparable products, Apple just
created a new market segment – tablet devices. The When we analyze the growth story of Apple
iPad was hailed as a new generation device with a size certain strategies stick out like a sore thumb, like –
and functionality lesser than that of a laptop but more - Supply Chain excellence
than that of a smart phone. Consumers were charmed. - Changing the rules of the game
A new industry segment was born. - Complete & controlled digital eco-system
Porter’s 5 Forces and the Apple juggernaut 1. Supply Chain Excellence
No other technology company achieved the
Porter’s 5-forces analysis is applicable to one
kind of supply chain mastery that Apple
industry whereas Apple straddles multiple industries.
demonstrates. The sourcing capability of Apple is
So, no single 5-forces model would be sufficient to probably the most important contributor to its
analyze the rivalry of Apple. This is how Apple has bottom-line. The cost effectiveness and consumer
become a technology juggernaut of this century.
satisfaction derived from its unmatched supply
chain allow Apple to maintain a competitive
advantage in the fickle digital electronics market.
2. Changing the rules of the game
The iPod, iPad and iPhone were not the first
devices of their kind. Yet, when Apple launched
these products the market fell in love with them.
So, what did Apple add to these devices to make
them hot? Design Innovation. The aesthetic and
simplistic designs that Apple introduced through
these devices made them widely acceptable. It was
not just a techie or a corporate honcho who
desired to possess a smartphone anymore.
Everyone wanted it! Apple created a desire in
consumers to fulfill a need that had not existed till
Fig.2 – The Apple Pie
then. Apple had changed the rules of the game for
The distribution of Apple’s revenues gives a all its competition in each of its product launch.
picture of the impact of different industries on Apple Apple became a lifestyle brand; it was not about
as well as the impact of Apple on different industries. just technology anymore! So, how can the rules of
Clearly, we need 6 times 5-forces analysis for Apple. a technology game apply to Apple anymore?
Madhuranath R

3. 3. Complete & Controlled Eco-system Apple in the next decade
“The consumer does not know what he
wants”, said the legendary of Apple founder, The past decade saw the growth of Apple by
Steve Jobs. Jobs understood early on that leaps and bounds. At one point it had more cash than
consumers cannot be made to stay in the fickle the Federal Reserves of USA! It surpassed all
technology products market. The staying power is technology brands in the world and reached every
possible only when a company produces corner of the world with its magical devices.
something which no one else can produce for the
Apple has continuously pursued innovation to move
customer. Since anyone could replicate a
into the Broadly Differentiated Strategy segment.
technology product, this could never be a
sustainable strategy for Apple. So, Apple
developed everything that a consumer needs from
digital devices and put it together in a seamless
way. The consumer was charmed by the smooth
interaction between Apple devices, the iTunes and
the iStore – a feature no other company provided.
The consumer was willing to pay a premium for
this ease of use. He never went away to another.
Fig. 4 – Apple’s Strategy
But the key questions that arise at this point are –
- Sustainability: When will the magic end? Is
the Apple story sustainable in the next decade?
- Changing the game: Can Apple keep on
changing the rules of the game? Or has the
competition started doing the same to Apple?
Fig. 3 – Apple Digital Eco-system
Madhuranath R

4. Sustainability
Changing the rules of the game is not the
Supply Chain Excellence has been a forte of Apple alone anymore. The Asian tigers are
hallmark of Apple’s competitiveness in the market. catching up; and catching up real fast. They are in fact
But, how long can this be sustained? China is redefining the rules of the game that Apple created!
crumbling under its own weight of economy. Global Samsung, Acer, Lenovo, and many more are creating
pressure is increasing on China to stop maintaining a devices which are a combination of tablet and ultra-
lower exchange rate by artificial means. The recent books. Acer, Samsung and Lenovo, between them
scandal at the Foxcon regarding human rights launched 25 models of ultra-books, some of which are
violation can have a significant impact on Apple as considered superior to the MacBook Air! Intel itself is
Foxcon is the main producer/aggregator of Apple promoting the growth of the ultra-book segment by
products. The floods in Thailand wiped out large pumping in $300 million worth of funds in SMEs and
portions of the memory devices supply; again a dent companies which are invested in the development of
in the Apple supply chain. The externalities are technology and applications for the ultra-books. Intel
catching up with Apple’s supply chain and it is not has bet its next big wave of growth on the sales of
possible to hedge the same anymore; at least not while processors for this ultra-book segment.
maintaining the cost advantages it experiences now!
Samsung has created a touch device and a
The digital eco-system and convergence smartphone in every possibly conceivable size and
achieved by Apple is not yet complete. The digital configuration. This year it moved into the top slot in
consumer is increasingly bombarded with newer and the global smart phone market space. The Galaxy
cheaper alternatives to Apple products. Samsung, for Note was a device which was between a smartphone
one, has a product in every price point that Apple and the tablet. What Apple did to laptops with iPad,
operates in and also in other price points where Apple Samsung is trying to do with the Note.
does not operate. Naturally, it has the potential to take
over the market from Apple eventually. The Amazon, a totally unlikely rival of Apple,
controlled eco-system that Apple operates now may launched the Kindle Fire. The Android based device
become a liability for Apple in the long run. Currently, was sold at a price point at which no iPad was selling.
it is intended to increase the switching costs for the Everyone thought Amazon was creating a new market
consumer while creating the illusion of “whole segment for itself by carving a niche below the iPad.
solutions” for ease of use of the customer. But the But the latest news is that Amazon is building Kindle
Android eco-system or the Microsoft eco-system may devices with a configuration exactly on par or better
soon give Apple a run for its money. With than the new generation iPad. There goes the game
changing strategy of Apple to the wind!
competition catching up and playing along the same
lines as Apple helped define, how long will Apple be Thus, I see sustainability as a key challenge to be
able to sustain its eco-system in a water-tight way? overcome by Apple in the coming decade.
Madhuranath R

5. which allows Apple to break free of the clutches of
What next, Apple? the all-powerful telecom operators in USA. Currently,
Apple devices are sold by the service providers to the
After the sad demise of Steve Jobs, the customers. Apple will shift the balance of power
responsibility of managing Apple’s exponential growth with the adoption of this new standard since it can sell
has fallen on the slender shoulders of Tim Cook, the phones to consumers directly from now on and
former COO and a close confidante of Jobs. How he Apple can choose the network provider that the
aims to steer Apple in the coming depths of business consumer wants at the time of sale itself. Thus, Apple
cycles is yet to be seen. However, having followed the will continue to change the rules of the game for its
story of Apple, I can dare to make a few strategic competition as well as partners.
recommendations for Apple’s continued success.
Acquisitions & Partnerships
The game is never over!
Google did it with Android and then by
Apple can still continue to play the game of acquiring Motorola. Nokia tied up with Microsoft.
changing the game. Apple still has some openings in Apple may soon be tempted to target some business
new markets for launching new products like media segments of the Japanese consumer electronics giant
devices, photography & video devices, projection and Sony which has been struggling to maintain its market
media consumption devices. According to a recent shares. Now, it has become a fight for survival at the
report, Apple is supposedly working on a stand-alone legendary Japanese company. Sharp and Panasonic are
camera based on iSight. equally hit by the growth of Samsung and LG. Apple
has launched the Apple TV, can it move into the
Compared to all technology companies Apple segment of projection systems & home theaters?
probably has the highest percentage of spending on This is a move that can significantly help Apple if it
R&D. This, combined with innovation, can be the acquires the relevant businesses from Japanese ailing
cornerstone of success in the long run for Apple. companies. Economy is at an all-time low, Japan is
Initiatives like the establishment of The Apple reeling under recessionary pressures and the
University and the One Infinite Loop Apple campus companies have hit record losses and share prices; the
are aligned towards the sustainability of innovation. It worst in the last 32 years for Sony or Sharp. This
can continue to attract the most talented employees could be the right time for Apple to acquire their
and create the most admired devices and products. businesses, spin the Apple innovation magic and
launch the next generation of home theaters.
Apple is still changing the rules of game.
June 2012 saw the adoption of a new standard in Thus, Apple can actually expand the
GSM SIM cards. The new nano-SIM cards are smaller digital eco-system that Apple has already created.
and based on the standards established by Apple in its Like I said earlier, Apple is not about technology
latest generation of devices. This is a strategic move anymore, it is all about lifestyle and consumer.
Madhuranath R