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A G10 Presentation

Lust
Knowledge
Hope
Anarchy
Forbidden
Genesis
In the beginning
Men
Computers
Big Blue
And men were taught about
computers
there was light
on one sunny day
A few crazy engineers
Think Different
Let’s teach computers about
people
Macintosh
The Computer for rest of us
Crazy
misfits
troublemakers
rebels
Round pegs in square holes
One’s who see things
differently
Not fond of rules
No respect for the Status quo
Praise them
Disagree with them
Quote them
disbelieve them
glorify them
Vilify them
The only thing you can’t do
Ignore them
They change things
They push the human race
forward
Crazy ones
Genius
the people who are crazy
enough
to think that they can
Are the ones who do
Think Different
Where is think different taking
Apple today?
Consumer Electronics
a risk worth taking
Another crazy gamble?
Distinctive Capabilities
Software
Hardware
Desktop Publishing
Education
Marketing
User Interface
insanely great
Core Competencies
27%
0.6%
Where did all the money go?
1. Innovation
10 years
1300
2. Branding
The Cult
of
The Cool
Microsoft
“Where do you want to go
today?”
Apple’s Mantra
“We know where do you want
to go today !!”
ultimate
Simplicity
3. Industrial Design
But
Smart
Small
A dollar in 1992
Worth $0.79 in 2002
What went wrong?
Who killed Apple Computers?
Apple
In the PC Industry
PC Industry Evolution
Before 1981

Proprietary
1981 - 1997

Open Structure
Attack of the clones
1997

Rise of the Internet


PC Industry Value Chain
But its really a value network ..
Value in Software
Commoditization
1976

Apple launched
Produced Microcomputers
$0.7 m to $76 m
IBM turns PC into
open structure
1984

Macintosh is born
The computer
“for the rest of us”
Apple misreads the trend
Macintosh peaks
Apple keeps losing
market share
IBM, Dell,
Hewlett-Packard, & Others
high priced proprietary system
not compatible with IBM PC
adopted Motorola CPU
instead of Intel
focused on education &
printing niches
Perception Map during 1998
1998: Defender
2007
Apple Computers becomes Apple
Inc.
1998 2007
has built a massive appeal
2007
Category

1998

Presence
How Big is Apple
Market Share ?
Income Statement
Share Price
“Apple should shut down for the
sake of its shareholders.”

Dell - 1997
A successful turn-around
After slugging it out in the PC
Wars
How did it happen?
Consumer Electronics
Industry
Cell-phone
Makers Portable AV

PDA &
handhelds

Analogue
Manufacturers
Trends
1. Convergence
2. Global Supply Chain
3. DRM
4. Short Life Cycles
Consumer Electronics
Competitive Landscape
Oldies

Sony
Samsung
Thomson
LG
Creative
Matsushita
Convergence - PC
manufacturers

Microsoft
Dell
HP
Apple
Convergence -
Telecom/Broadband Players

Nokia
Cisco
Motorola
Sony Ericsson
Samsung
Convergence - PDA Makers

RIM
Palm
HP
Porters 5 Forces Analysis
Threat of Entry

Low
Capital Intensive Industry
Economies of scale
Market power is needed
Lower Net Margin
Threat of Suppliers

Low
Large Number of suppliers
High Substitutability
Forward Integration is Difficult
Threat of Buyers

Moderate to High
High elasticity of demand
Illegal peer to peer file sharing is
possible
Big dealers can pressurize to
reduce cost
Threat of Substitutes

Moderate
Alternative means to acquire
music are available
Threat of Rivalry

High
Highly competitive market
Both price and feature based
competition is there
Various online music sources are
available
Small stylish MP3 players are
available
Profitability
7%
What made Apple to move to the
CE Industry
1990s
Losing Internal Culture
Losing customer base
Diversification
1993: Newton (PDA)
1994: Quick Take
1996: Pippin
Could not handle 4 businesses
simultaneously
Don’t Diversify when things are
not going your way
1997
Revive Old Culture
Enter new markets
Non First mover advantage
But Still….
Digital Players Market
AAPL DELL HPQ MSFT Industry
Market Cap: 82.15B 52.87B 107.73B 273.11B 1.85B
Employees: 17,787 65,200 156,000 71,000 1.70K
Qtrly Rev Growth 23.80% -5.10% 10.70% 6.00% 24.30%
(yoy):
Revenue (ttm): 20.68B 57.88B 94.08B 46.06B 3.98B

Gross Margin 30.35% 17.56% 24.51% 79.43% 30.35%


(ttm):
EBITDA (ttm): 3.44B 4.43B 10.16B 17.94B 133.86M
Oper Margins 14.63% 6.85% 7.62% 36.20% 4.62%
(ttm):
Net Income (ttm): 2.43B 2.95B 6.52B 11.91B 86.38M
EPS (ttm): 2.76 1.284 2.306 1.17 0.82
P/E (ttm): 34.53 18.47 17.45 23.84 33.88
PEG (5 yr 1.42 1.24 1.21 1.38 2.74
expected):
P/S (ttm): 3.99 0.91 1.15 6 1.2
SNE MC PHG AAPL Industry
Market 52.11B 44.76B 42.52B 82.15B 235.61M
Cap:
Employees 158,500 334,402 121,732 17,787 11.25K
:
Qtrly Rev 10.10% 1.60% -0.80% 23.80% 7.20%
Growth
(yoy):
Revenue 67.99B 76.77B 35.85B 20.68B 235.85M
(ttm):
Gross 23.47% 29.94% 32.82% 30.35% 38.91%
Margin
(ttm):
EBITDA 5.19B 6.31B 2.28B 3.44B 12.35M
(ttm):
Oper 2.44% 5.04% 4.04% 14.63% 6.99%
Margins
(ttm):
Net 1.07B 1.99B 1.22B 2.43B 5.73M
Income
(ttm):
EPS (ttm): 1.02 0.91 6.05 2.76 0.3
P/E (ttm): 51.02 22.65 6.35 34.53 25.12
PEG (5 yr 2.14 1.22 2.15 1.42 1.36
expected):
P/S (ttm): 0.77 0.59 1.19 3.99 1.58
How did they do it?
The first mover ‘who gets it
right
Profitability Drivers
Uniqueness
Blue oceans
But not forever
Product Innovation may or
may not succeed
But innovation in the business
model will succeed almost every
time
Opportunities
Growing consumers electronic
market
Strategic alliances with peripheral
component manufactures and
media transmission giants
Opportunity to extend new
products to existing loyal
customers
High potential music phone
market
Threats
Very high level of competition
High product substitution effect
Legal Risks
Imitation
Technology Obsolescence
CSR Risks
Strengths
Innovation
Ease of use
Financial vitality
Brand loyalty
Weakness
Sporadic Innovation
Perfect can be the enemy of
good
Icon
iCon
SWOT Internal Internal
Matrix Strengths Weakness

External S-O W-O


Opportunities

External S-T W-T


Threats
S-O Strategies
Use Brand Loyalty for
Selective Expansion in CE
Come out with more
consumer electronics devices
S-T Strategies
Create new markets through
Product Innovation
W-O Strategies
Apple’s digital offerings
W-T Strategies
Build socially complex
relations among partners
Increase productivity and turn
around of high demand
products
CE Product Value Chain : 1990s
Highly Vertically Integrated
CE Product Value Chain : 2000s

Emergence of vertical specialization


Primary success factors
Innovation
Differentiation
System Integration capabilities
Cost Structure
Complimentary success
factors
Consumer Branding
Manufacturing and supply chain
efficiency
Time to market
Service Provision
Critical success factors
Recruiting talented people
Securing partnerships with
value added resellers
Capitalizing on market-specific
opportunities
Competitive Advantage
Not in the technology
Not in the patents
Value Transference
Distribution Strategy
Apple’s value creation process
Multiple Products
Apple I/II/III Customised Products
Mac Segmenting

Targeting

Focus on
iTV Education
Value
iPhone Creation

Music Strategy
(iTunes, iPod)
Lifestyle
Convergence

Strategy Adding
Video Strategy (iDVD,
Value
iMovie, IPhoto)
Digital
Internet Strategy Hub
(iTools, iDisk)
what does Ansoff’s matrix say?
what does BCG matrix say?
lessons
Strategies Adopted
Thinking Out-of-the-Box
recommendations
1. at the tipping point
fast in managing change
initiating it
understanding it
explaining & justifying it
planning & organizing it
driving & forcing it
timing & pacing it
containing it
financing it
selling it
the law of the few
stickiness
the power of context
2. be adept in change
implementation
3. transform technology into cash
major problem
successful choice,
bundling,
transformation
of new technologies
into
great new product
&
marketing strategies
answer lies in
Apple’s competence
re-conceptualize market focus
integrated management process
perspective
entered the highly competitive
mobile market
where nokia dominates all
encashing value contribution in a
mobile
Encashing Value Contribution in a Mobile

1992-97 1997-2002 2002-07


Entry- Mid-tier High-end &
Level & smart new–to–market
phones phones phones
*Basic applications: Operating systems, micro-browsers, firewall, others
looking ahead in media
from punctual integration
to total integration
which means
more competitive markets
but, rules of competitive markets say
financial performance of generalists
improves with greater market share
while performance of specialists
drops off as market share increases
so,
adapt or die
to sustain
chalk out
relevant success factors
strategic
&
economic
challenges
1. form strategic alliances
critical to the success of its core
business
Critical to development or
maintenance of its core
competency
which blocks a competitive threat
which creates or maintains
strategic choices for Apple
which mitigates a significant risk to
its business
2. go on innovating
iPiano

iCar
iGuitar

iPottie
iGod iWatch

iPuff
iWash
finally
An Apple a day
Keeps Doctor away
Thank you

Chintan
Jasmer
Jyotsna
Qasim
Shalabh

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