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Analysis of an unsuccessful

competitive strategy based


1. The Apple
Story

2. The Failure
Insights

3. The Take-
Aways 2
Apple has never been
just another consumer
From the
very
beginning
Apple
thought
differently..
.

4
They sustained an
environment that supports
Macintosh and
They introduced the
reinvented the way the world
used computers forever with it’s
They substantially

changed the
music business
model

iPod,
by introducing the
itunes & the store
...
They made
innovation a reason
By
(re)inven and
ting crossing
technolo borders ...
gies
not follow markets,
Apple does it

creates them.
Like no one else Apple
stands for imagination,
innovation and design.
... and thus they made
millions of customers 12
And in the
battle ...

13
14
By creating, capturing and
sustaining value it became the
most admired company in the
world in 2008, 2009 and 2010 ...

15
Fortune Magazine
But Apple's
successes over its
33-year history
don't make
up the
whole
story.
Their path to success has
alwasy been bumpy.
Apple has made serious
product missteps & survived
spectacular failures ...
One started as a secret
reinvent
project to

personal
computing ...

But ended up as the


biggest failure in
Apple‘s history.
“… the most
important - and
costly ($ 1 billion)
- new product
launch in the
company's
history. In some
ways it is the
biggest risk we
have ever taken.”
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The Apple Newton.

aka as Message Pa
2. The Failure
Insights

• Product Facts
• Five Forces
• Value Chain
• Willingness to Pay

22
Newton Key Facts

• With the Newton Apple


introduced the name PDA
(Personal Digital Assistant)

• It was one of the first PDAs


on the market.
$
69 • Able to send e-mails and
faxes
9
• Applications that helped
organize daily schedules
and contact information.

• 1993 - 1998
Newton Specifications
• Newton OS • Handwriting
• Data transfer - Calligrapher
with various • Fax, E-mail and
platforms PIM (Personal
- Mac OS Information
- Linux Manager)
- MS Win.
Operati Smart
ng Functio
System n

CPU and
Connectivit
Hardwar
y
e
• Mac Serial Port
• ARM 610
• PCMCIA Card (20MHz)
• Wireless • 4MB ROM
802.11b
• 0.41Kg, HXWXD
& Bluetooth
(18.4X11.4X1.9)
• Serial modem
Newton Specification (OMP : Original
The PDA Market
Bargaining
Power of
customers

Rivalry
Bargaining among
Threat of
Power of competito Substitutes
Suppliers
rs

Threat of
new
entrants
25
Bargaining power of
buyers is high ...
• Large number of
competitors
(i.e. HP, Palm, etc)
Buyers can base their
decisions on price
• Informed buyers
– PDA buyers knowledgeable
about technology and
competing products
• Low switching costs
• Low market size
Bargaining power of
suppliers is high ...
• Highly customised
components
– High switching costs
– Unique inventories (i.e.
Operating system)

• Threat of forward integration


– Contract manufacturers could
start producing their own
PDA’s

27
Barriers to entry are
high ...
• Proprietary product
differences protected by
patents and copyright laws

• Costly to overcome
advertising programs of
existing PDA manufacturers

• High capital requirements –


Complex technical processes

• Proprietary learning curve


Threats of substitution
are high…

• Buyer propensity to
substitute
– Unsatisfied customers
can always go back to
earlier alternatives
• Low switching costs
– Customers can easily
switch to other brands
• Substitutes are
comparable in price and
performance
Rivalry among
competitors is intense…
• High concentration of competitors
with the technological expertise
– Sharp, Casio, HP
• Slow market growth & low
switching costs
– Manufacturers will be vying for
market share
• Large R&D investment
– High exit barrier
– Heavy investments will need to be
recouped resulting in extreme
competition and forcing price wars
Conclusion 5 Forces

1. hsajJKA
2. SAHJKhdjks
3. sajlHJK
4. SNAJKsajk
Apple‘s Value Chain
Firm Infrastructure

Human Resources

Techology Development

Procurement

Outbou
Inbound Marketi
Operati nd
Logistic ng & Service
ons Logistic
s Sales
s

32
Inbound Logistics

• Developing alliances with key suppliers to


mitigate potential adverse effect on Apple.

• Working closely with suppliers on product


introduction plans, strategic inventories and
coordinated product introductions.
– Motorola – PowerPC
– IBM – Hardware platforms
– GE – AppleLink
Operations

• Innovation
– 1983 – Among the first commercially available mice
– 1984 – Successful introduction of a GUI PC
• Design
– Good physical design essential to generate relationship with
customer
– Good design extends to
packaging
– Human touch
Marketing and Sales

• Creative innovative advertising


– Simple, elegant and minimalist ads
– “1984” ad positions Apple as a counterculture brand
– “Think Different” campaign
• Strong media presence
– TV, print media, online media
• Design
– Elegant, intuitive, engaging
– Products and packaging

Ad 1984
Service

• AppleLink
– Online service for users, dealers and developers
– First online service to use easy-to-use graphics,
windows and icons
• America Online
Procurement

• Ecosystem of suppliers
– Key components purchased from single suppliers
• Timely delivery
• Relationships help drive planning
– Components purchased from multiple sources
– Software applications developed
by an array of software vendors
Technology Development

• Ability to compete based on the


successful introduction of new
products and technologies
– Apple II
– Macintosh  First PC to feature a GUI
– PowerBook  Set the standard layout for
notebooks
– Software applications  Desktop publishing
Human Resources

• Culture of Innovation
– Incubator for the best designers and engineers
– Artistic values as important as commercial ones

• Culture of Entrepreneurship
– Empowering employees

• Strong and visionary CEO


– Steve Jobs
Conclusion Value Chain

1. hsajJKA
2. SAHJKhdjks
3. sajlHJK
4. SNAJKsajk
If Apple was capable of
delivering value to their
customers ...

... why did the Newton fail


so miserably?
Newton Failures:
Operations

• Innovation
– Technology innovation for the sake of innovation

• Impractical Design
– Too big to carry around
– No attractive styling
Newton Failures:
Marketing and Sales

• Poor communication strategy


– “What is Newton?” never answered
– No clear positioning strategy
• Pricing
– $1000!!!
– No entry level model
• Delivering products the market
does not understand
– Promising features they could
not deliver
Newton Failures:
Technology Development

• Not in tune with available


technologies
– Handwriting technology – Ahead of time, but
impossible to implement
• Money poured into R&D without
results
– Industry Est. $1 billion
Handwriting was main focus to
sell the product, but it did not
seem to work out that well ...

...which ended up in negative


press and bad product reputation
from the beginning.
Simpsons and the Newto
Newton Failures:
Human Resources

• Internal power struggles


– Factions competing for product direction
• Long development time
– High burnout rates
• Developer commits suicide
– Company/Department
Restructuring
Apple Newton’s WTP
reduced over its lifecycle

WT
P
Price
$699.99
WT
P
Cos Cos
t t

• Software bugs and high price reduced Apple Newton’s WTP


over its lifecycle
• Decrease in WTP reduced Value Wedge for Apple Newton
Why was WTP lacking?
INTERNAL MISTAKES EXTERNAL DRIVERS

Poor Market
Communicati Immaturity/F
on amiliarity
+ +
Software
Competition
Performance

+ +
Negative
Impractical
Press
Design
Coverage 51
3. The Take-
Aways

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1. Brilliant ideas are
worth nothing without
excellent
implementation.

53
2. Really understand
your customer needs.
Don’t innovate
for the sake of
innovation.

54
3. Getting carried away by
past success.

Don’t fall into


the trap of
believing in
your own
hype.
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4. Introducing a new
product category needs
communication
focused on
information &
education.

56
5. Press is crual.
You got only
one shot.

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6. Deliver what
you promise.
Customers
are merciless.

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7. Even brilliant
ideas fail when
environment
is not ready.

59
Back up

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