APPLE Inc

APPLE Inc – An Overview

 Apple Inc (previously Apple Computer, Inc) is an American multinational corporation that
designs and markets consumer electronics, computer software, and personal computers.
 The company's best-known hardware products include the Macintosh line of computers, the
iPod, the iPhone and the iPad.
 Apple software includes the Mac OS X operating system; the iTunes media browser; the iLife
suite of multimedia and creativity software; the iWork suite of productivity software and its iOS
Mobile Operating System.
 As of August 2010, the company operates 301 retail stores in ten countries, and an online store
where hardware and software products are sold.
 Apple Computer Inc renamed itself as Apple Inc inorder to mark its foray into the consumer
electronics market in addition to its traditional focus on personal computers.

APPLE Inc – Evolution Timeline

1976-1984 – The early years

 Co-founded by Steve Jobs and Steve Wozniak, Apple’s mission was to bring an easy-to use
computer to the market.
 Apple computers courtesy of their unique proprietary design, technical excellence and ease of
use sparked a computing revolution and quickly became the industry leader during these years
esp with the release of Macintosh.

1985-1993 - The Sculley years

 With Apple’s net income falling due to stiff competition from IBM-compatible PC’s, John Sculley
who took over as CEO from Jobs in 1985, made some significant strategic business decisions.
 Sculley’s strategy was to make Apple a leader in desktop publishing as well as in education. He
also aggressively tried to bring Apple into the corporate world.
 Although Apple offered a more complete desktop solution and enjoyed better brand loyalty
than its competitors, Apple’s market share continued to plummet during the late 1980’s.
 Inorder to overcome this setback, Sculley revamped Apple’s strategy by making it a low-cost
producer of computers with mass-market appeal. Mac Classic was introduced on this objective.
 Sculley also forged collaboration with Apple’s rivals (esp IBM) on mutually beneficial terms.
 Sculley also aimed to drive down costs by shifting much of its manufacturing to subcontractors.
1993-1997 – The Spindler and Amelio years

 Despite Sculley’s measures, Apple could not sustain its profitability. As a result, in 1993 Michael
Spindler took over as the CEO from Sculley. He inturn introduced measures to revive Apple.
 Spindler again brought back the focus on core markets: education and desktop publishing.
 He introduced the idea of creating Mac clones and killed the plan to put Mac OS on Intel chips.
 International growth became a key objective of his agenda. He also moved to slash costs,
reduced the workforce and the spending on R&D.
 Yet, despite Spindler’s best efforts, Apple continued to lose momentum. . As a result, in 1996
Gilbert Amelio took over as the CEO from Spindler.
 Amelio’s strategy made Apple to return to its premium-price differentiation strategy. Inturn he
pushed Apple into high-margin segments such as servers, Internet access devices and PDA’s.
 Amelio infact led Apple through three reorganizations and several deep payroll cuts. Yet,
despite his best efforts, Apple’s market share continued to decline between 1996-1997.

1997-2007 – Steve Jobs and the Apple turnaround

 Steve Jobs, turned out to be Apple’s savior when he again took charge of the company in 1997.
 He introduced a string of measures which marked a sharp turnaround in Apple’s fortunes.
 Firstly, he recognized that the Mac clones were cannibalizing Apple’s sales. As a result he
brought the Macintosh licensing program to an abrupt end.
 Secondly, he consolidated and trimmed Apple’s product range by reducing the number of lines
from 15 to 3.
 Thirdly, he collaborated with Microsoft and reaffirmed their commitment to develop core
products such as Microsoft Office for the Mac.
 Under Jobs, Apple continued its restructuring efforts. It outsources manufacturing of Mac
products to Taiwanese contract assemblers and revamped its distribution system, eliminating
relationships with thousands of smaller outlets and expanding its presence in national chains.
 Apple also pared down its inventory significantly and increased its spending on its R & D.
 Jobs also set about to reenergize Apple’s image by promoting the company and its products as a
hip alternative to other computer brands.
 For Jobs, Apple was not just technology company but rather a cultural force.
 The successful outcome of these above measures inturn marked an upswing in the fortunes of
Apple as its market share increased considerably during this period.
2007-present – Macintosh & Mobile consumer electronics era

 Macintosh - During the period between 2007-08, the Macintosh computers remained a pivotal
business for Apple. In 2008 alone, the Mac sales accounted for 43% of Apple’s total revenue.
 Some of the key features in the Macintosh like interoperability with other machines, ease of
use, security and support for standard interfaces made the Mac score over its competitors.
 By embracing Intel microprocessors in its Macintosh products, Apple made significant strides
towards enlarging its installed base.
 Apple also recognized that Office products was critical to its market viability and thereby
collaborated with Microsoft to ensure Office suite is available on its Macintosh machines.
 iPod – classified as “the icon of the Digital age” was a path breaking product introduced by
Apple in 2001. The iPod product line represents a excellent combination of state of the art R & D
together with increasing operational efficiency (i.e decrease in expenditure owing to the usage
of flash drives) and better customer satisfaction.
 iTunes – represents the first legal site that allowed music downloads on a pay-per-song basis. By
mid 2008, this store claimed 70% of the worldwide digital music market. The advent of iTunes
had a significant impact on the sales of the iPods although its direct impact on Apple’s
profitability was far less impressive.
 Apple TV – is a device which enables users to stream movies and TV shows to a television set
after downloading the content from iTunes via PC. High pricing and limited functionality kept the
sales of this device low. A much improved model called “Apple TV take two” was released in
early 2008.
 iPhone – is a multifunction communication device nicknamed “the Internet in your pocket” was
launched by Apple in mid 2007. Although by mid 2008, Apple managed to sell 6 million iPhones,
its worldwide mobile handset market share was still less than 1%. However, issues with
unauthorized resellers selling iPhones in gray markets and its usage on unsanctioned networks
plagued its sales significantly.
 iPhone3G - is the revamped version of the iPhone. Some of its key features include faster
network service, a new pricing model and a new platform for adding third-party applications to
the device. However, there was some key drawbacks in terms of the low storage capacity and
poor battery life. Falling component costs and design improvements helped to reduce the
iPhone’s cost structure while lower consumer pricing and wider international distribution
helped to fuel sales. Irrespective of the above points, Apple still has not been able to tap the
largest mobile market in the world – China due to failed negotiations with the local carrier.
 iPad - In early 2010, Apple introduced their much-anticipated media tablet, the iPad running a
modified version of iOS. In April 2010, the iPad was launched in the US and sold more than
300,000 units on that day and reaching 500,000 by the end of the 1st week.
 iPhone4 - In June 2010, Apple released the fourth generation iPhone, which introduced video
calling, multitasking, and a new uninsulated stainless steel design, which acts as the phone's
antenna. However, the phone suffered from reception issues owing to the new stainless steel
design.
APPLE Inc – Strategy (Key Differentiators)

 Apple is known for incorporating its philosophy of comprehensive aesthetic design in its
products most of which was proprietary. This feature infact provided Apple with a distinct
competitive advantage over the IBM compatible PC’s which could be easily cloned.
 Apple practiced horizontal and vertical integration to a greater extent than any other company.
By virtue of this, Apple controlled all aspects of its computer and could inturn provide its
customer with a more complete desktop solution than its competitors. As a result Apple
customers ‘love’ their Macs while IBM customers ‘put up’ with their IBM PC’s.
 In the earlier years, Apple invested more heavily in R & D than its competitors. This inturn
enabled Apple to focus and invent path breaking products.
 Apple tries to distinguish itself from its competitors by creating machines which are cutting edge
and provide a tightly integrated user experience.
 Apple markets its Mac products highlighting certain features which differentiates it from other
PC’s. Some of the distinct features include attractive design, ease of use, foolproof security, high
quality bundled software, interoperability with other devices and support for standard
interfaces like USB port which cannot be matched up by its competitors.
 By embracing Intel microprocessors and also incorporating Office Suite in the Macintosh
product, Apple gained more acceptability among the worldwide PC community.
 The Apple retail experience definitely benefitted the sales of the Apple Mac as it rode on the
‘halo effect’ created by the iPod which drew customers to the Apple retail store.
 Apple’s strategy with regard to iPod is related to its maintaining of relationship with its key
suppliers (i.e flash drive manufacturers). This supplier oriented collaboration inturn helps Apple
to reduce its operational expenditure.
 With reference to the iTunes Music store, firstly the content is far superior to any other
competitor. Secondly, the emphasis here is more on the value for money (wherein each song
download costs only 99 cents) generated for the customer albeit Apple only makes a dime from
this deal. Thirdly, Apple was also the first company to to employ the DRM (Digital Rights
Management) system called Fairplay to protect iTunes songs against piracy. This inturn helped
to safeguard the interests of the various music labels. This also represents a case of customer
focus.
 Apple with the advent of the iPhone has redefined the smartphone market completely given the
host of features it offers. The real value add however comes with the support for downloading
third party appilications from Apple’s App store to the device. This feature represents a unique
offering from Apple and is not matched by any of its competitors.
 Apple with the advent of the iPad has come up with another path breaking invention which is
unique in its own respect. Apple almost enjoys a complete monopoly in the market with regard
to the iPad as there is no other similar product from its competitors which can match up to the
iPad.