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Apple Inc.

2. Analyze the personal computer industry. Are the dynamics favourable or problematic for Apple?
The personal computer market is in spite of declining sales in Western Europe still a growing market, especially in emerging markets like China. Lower average selling prices lead to falling profit margins and high innovation pressure as well as low differentiation in products makes it difficult to satisfy customers expectations. Furthermore many consumers more often prefer alternative technologies like tablet pcs or smartphones. Tim Cook, new CEO at Apple, even previews that the tablet pc market will be soon bigger than the personal computer market.1 Thus Apple as inventor of the tablet pc segment holds a strong position2 hardly affected by price dumping because of selling at a premium price. Selling at a premium price and focusing on the upper segment in China Apple is also not in direct competition with Lenovo which has a stronger brand and better distribution net in China and wants to exploit the middle and lower price segment.3 Increasing its MacBook sales Apple became the fifth largest pc vendor in Western Europe. 4 Moreover Apple tries to reach its customer by a quite successful use and experience based retail strategy. Pursuing the Digital Hub strategy which should consumers help to control and integrate all devices in a digitial lifestyle Apples unique strength lay in offering hardware as well as software. But competition remains difficult because of the success of Windows 7 developed by Microsoft.

3. How sustainable is Apples competitive position in smartphones?

The smartphone market is quite a lucrative, fast growing market but also highly competitive. Unlike the iPad success Apples iPhone does not have such a strong competitive advance. Developed by Google the Android operating system is fast catching up. 5 Beside that Samsung recently sold more smartphones than Apple 6 and other manufactures like Sony Ericsson are planning to focus more on smartphones.7 But Apple still has its advantage by Apple App store which follows the success of iTunes. Also helpful are Apples high general popularity and the loyalty of the consumers. But Apple has to take care. Rumors about environmental pollution, bad working conditions at Apple suppliers, lacks in data security, bad evaluate price/performance ratio or incompatibility could damage their image. Furthermore the CEO change just happened and the disappointment about iPhone 4, and not 5, is still not forgotten. Indeed not everybody is willing to pay the price demanded by Apple8 but by subsidizing the iPhone 3 Apple tries to 9 reach new groups of buyers.

5. Give an overview of 5 selected Apple Key Performance Indicators over the last five years and benchmark them with relevant competition.
Compared to the more or less unchanging gross margin between 23.6% and 26.4% of HP and the high but declining gross margin of Microsoft Apple could record a steadily increasing margin from 28% to 40% over the last five years. Hence Apples profitability was slightly beyond the average among its competitors in 2009. The R&D/Sales of before mentioned competitors decreased from 2002 to 2009.While the ratio of HP declined from 6% to 2.5% the one of Microsoft even decreased by 7% down to 15%. The effectiveness and efficiency of R&D expenditures at Apple grew continuously which is shown by the decrease of R&D/Sales from 8% to only 3%. The average was 9.1% in 2009. While HP and Apple could decrease SG&A/Sales Microsoft and Dell had to struggle with unchanging or increasing SG&A/Sales in 2002 to 2009. With a ratio of 10% Apple is below the average of 15.2% in 2009. It indicates that the company was controlling its overhead expenses better than most of its competitors. Apples return on sales enormously grew by 18% up to 19% in 2002 to2009. Other competitors like Nokia have to struggle with declining ROS. The return on sales of Nokia felt from 11% to 2%. Dell recorded a decrease from 6.4% to 2.7% and Microsoft fluctuated between 19% and 25%. Thus Apples operational efficiency was most successful in 2002 to 2009. While the market capitalization for HP almost doubled and it felt for Microsoft from 259 down to 212. Compared to fluctuating, but either falling or staying unchanged market capitalization Apple could record an astonishing increase from 5,146 to 189,917.
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http://www.manager-magazin.de/unternehmen/it/0,2828,792913,00.html (accessed 30 October 2011) http://www.zeit.de/2011/43/Apple-Branche (accessed 30 October 2011) 3 http://www.manager-magazin.de/unternehmen/it/0,2828,793671,00.html (accessed 30 October 2011) 4 http://www.gartner.com/it/page.jsp?id=1686114 (accessed 30 October 2011) 5 http://www.zeit.de/digital/2011-01/consumer-electronics-show-ces (accessed 30 October 2011) 6 http://www.ftd.de/it-medien/it-telekommunikation/:starkes-handygeschaeft-samsung-ueberholt-apple-als-groesster-smartphonehersteller/60122006.html (accessed 30 October 2011) 7 http://www.japanmarkt.de/index.php/unternehmen/elektronik/sony-will-handys-allein-herstellen/ (accessed 30 October 2011) 8 http://www.wiwo.de/technik-wissen/nicht-das-beste-image-459106/ (accessed 30 October 2011) 9 http://www.tagesschau.de/wirtschaft/iphoneviers100.html (accessed 30 October 2011)