Apple Case Group 6 presented an overview of Apple's competitive advantages and market position in personal computers, music players, and cell phones. They analyzed the structure and profitability of the PC industry, determining that Apple has a sustainable competitive advantage in PCs due to differentiated products. They also found Apple has advantages in music players due to brand, customer relationships, and controlling memory supply chains. While Apple has succeeded in cell phones, competition is high and sustainability may be difficult without continued differentiation. The prospects for the iPad 2 are positive if it can deliver as a new laptop and wireless charging, but it faces threats from imitators. Apple's solution to market problems has been continued innovation under Steve Jobs' leadership.

1. Apple Case Group 6:
Pujit
Prakash
Vinod
Chandan
Ajay

2. Overview
• Apple´s competitive advantage
• Market structure
PC market
Music players
Cell phones
• Does Apple have a competitive
advantage in those markets?
• Prospects Ipad market
• Apple’s future

3. Situation < 1997
Mission Apple
• Easy to use computer to market
• Industrial design
• Technical elegance
Scope
Customers: Loyal (Love the Mac)
Products:
• Complete desktop solution
• Industrial design
• Technical elegance
Vertical integration:
• Alliances IBM
• 2 joint ventures
Geograpic: From small (garage)  Low cost mainstream

4. Steve Jobs > 1997
Strategy Back to core product
Tactics
• No licensing
• From 15 products  4 categories
• Website (direct sales)
• Pared down inventory
• More spending R&D
• All-in one computer
• Egg shell design

5. What have been the
sources of Apple’s
competitive
advantage?

6. Stable sources of competitive advantage?
Year Source competitive
advantage Year Source
competitive
1970s Easy-to-use computers
advantage
1990s Low costs
1984 Ease-of-use, industrial
design, technical
elegance 1990s Hit product every
1980s-1990s Superior software 6 to 12 months
2000s Design, plug &
1980s-1990s High investment R&D play
1980s-1990s Complete desktop 2000s Successful
solution, hardware, marketing
software, peripherals: campaigns
plug and play 2000s Greenest lineup
1980s-1990s Designing products of notebooks
from scratch

7. Analysis of the
structure &
profitability of the
pc industry?

8. PC market Barriers to
entry
Low: Easy to make, easy to clone pc’s
High: difficult to become big
Supplier Buyer
Rivalry
power power
Low: Memory High: High: Low price
chips, disk Lenova, IBM, HP, Del & standardized
drives, l, Acer  customers
keyboards Substitutes can buy every
High: pc they want.
Processors Low switching
(Intel) & OS High & increasing: costs
(Microsoft) Smart phones, mini
laptops, tablets, old
pc’s

9. Structure PC industry
• Diversified and tough competition due to
low barriers of entry and low switching
costs
• Knowledgeable customer due to
transparency information
• Dominant suppliers of processors and OS
• Intel and Microsoft leading to high
standardization, difficult to differentiate
• Many substitutes available

10. Profitability
Players (2009) Gross margin Net income (in millions)
HP 23.6% $ 7,660
Dell 18.0% $ 1,433
Apple 40.0% Not known
Suppliers Gross margin Net income (in millions)
Intel 16.0% $ 4,369
Microsoft 79.0% $ 14,569
The industry is profitable, both when looking at gross margin as
well as net income. Apple has a higher gross margin of 40%, due
to the higher price they ask for their PCs. However, Apple had a
market share of only 4.2% (2009), whereas HP had a market
share of about 20%.

11. Dynamics industry
• The dynamics are favorable for apple
Standardized market
Own supplier
High
Love Apple WTP
Fit with complementary
products

12. Does Apple have a
sustainable
competitive
advantage in the
PC market?

13. Does Apple have a competitive advantage in
PC market?
Yes, because Apple offers a differentiated
product in a heterogenic market. Besides
that Apple has
 A strong brand name, due to marketing
 A strong customer relationship
 High R&D investments
 A big difference between WTP & Costs
(40% margin)
Is this sustainable?
Yes, because apart from high R&D
investments the other capabilities are
inimitable.

14. Problems of Apple in the PC industry
(1988-2001)
• IBM dropped prices, MAC appeared
overpriced by comparison
• Low R&D
• Low Cost
• Licensing  cannibalization own products
Solution 
• Going back to initial strategy
• Cooperation Microsoft – Microsoft Office
• Cooperation Intel – CPU on which
Windows OS could be installed

15. Did Jobs make his move from Motorola
and IBM to Intel at the right time?
• This shift enlarged the customer group of
Apple by being able to make use of
Microsoft.
• However Jobs could have made this
move earlier, in 1997 instead of 2006.

16. What is the structure of
the Music player market?

17. Music player Barriers to
entry
High: Easy to produce - low
Build up supply chain – high
Image building - high
Supplier Buyer
Rivalry
power power
Medium: Hynix High: SanDisk High:
Samsung Samsung Many choices
Toshiba Creative M’soft Zune (2006) Low switching costs
Intel
Myaon Substitutes
High:
dependability High
Mutual Smartphones (Spotify, downloads
depending songs to phone)
Flash memory tablets

18. Does Apple have a
competitive
advantage in the
music player market?

19. Apple in the music player market
Competitive advantage Value Rareness Inimitability Appropriability
Positional advantage
Customer relationship ++ - - ++
Brand name ++ + + ++
Status ++ + + ++
Apple stores (distribution ++ ++ ++ ++
channel)
Capabilities
Design ++ + - ++
Simple user interface + - -
Large storage on the ipod + + + ++
Rapid product development ++ + - ++
Digital hub +++ +++ +++ +++
Apple’s iTunes store ++ ++ - -
Nike+ ++ ++ -- +
iPod accessories ++ - - ++

20. Apple does have a competitive advantage
in the music player market?
• Just as with the other products, Apple
has a strong brand name, that the
customers associate with status  hard
to imitate
• Apple has a strong customer
relation, due to the digital hub, iTunes
and Apple stores

21. Apple does have a competitive advantage
in the music player market?
• Large storage space 
rareness, because Apple had
contracts with suppliers and bought
most of the memory available on the
market
• Digital hub  an entire network of
compatible products of one
brand, hard to copy due to resource
reasons (time and money)

22. What is the structure
of the cell phone
market?

23. Cell phone Barriers to
entry
High: Short product life cycle
Contract with carriers
High investment
Supplier Buyer
Rivalry
power power
High: Powerful High: High: Choice
distribution Nokia, Motorola, Samsung based on
carriers (NTT 60% market share attractive
DoCoMo & A lot of competition hardware and
Vodafone) & Blackberry (RIM), Google user-friendliness
powerful Substitutes
network carriers
(Verizon & AT&T) High & increasing:
“Normal” phone
Android Laptop
OS(Google) Tablet

24. Does Apple have a
competitive
advantage in
the cell phone
market?

25. Apple in Cell phone market
Yes competitive advantage
- Strong brand name
- Loyalty customers
- Innovative design
- High research & development investments
- Easy to use OS. (no viruses)
- App’s (store)
Can Apple sustain its iPhone success?
- Competition is rising
- Short product life cycles
- Technology is evolving
- Substitutes (Ipad)
Conclusion: It will be hard for Apple to sustain
it’s success due to high rivalry and high buying power.
They will have to keep differentiating themselves.

26. What are the
prospects of the
Ipad?
IPAD 2

27. SWOT analysis of the IPAD 2
Strenghts Weaknesses
Brand name
Customer loyalty
“love apple” Idea and
technology is
Deliver extra imitable
Add-ons
App store
Opportunities Threats
Your new laptop Competitors
Wireless Losing Steve
rechargeable Jobs

28. Prospects for Ipad 2
• Ipad 3
– Experience your new laptop
– Wireless rechargeable

29. Apple’s solution to the chronic problem
Chronic problems of the market
• Technology is not sustainable
• Standardization of the market
• Dropped prices of components
• Short product life cycle
Apple’s problem
• How to continue Apple without Jobs?
Did Jobs solve the market problem? Yes,
• By being innovative
• Apple differentiates itself from competitors
• Jobs maintained high prices
• Keeps investing in R&D
Jobs made himself irreplaceable

30. Apple’s future
Does Apple have a sustainable advantage
today?
Yes, because of customer loyalty due to a
strong brand name, digital hub.
Alternative strategic options:
• Customer intimacy
• Product leadership
• Operational excellence