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1. Historically, what were Apple’s major sources of competitive advantage?

Apple is a personal computer leader with excellent Research and development department
which expanded business to phones, laptops and music players. Company was constantly
leading in innovations. Because of that, Apple was stronger than competitors in attracting
customers to its products. Apple spends much on research and development so that their
products can complement each other. No matter how aggressively Dell, HP, Lenovo and others
advertised and imitated, they could not harm Apple. Apple has a great business strategy of
designing and developing its own operating system, software applications and hardware, and
bringing those innovative industrial designed products and easy-to-use solutions to their
customers. Personal computers (Macintosh), electronics (iPod), music distribution (iTunes) are
very competitive markets, but Apple is among top players at all of them, no matter of
aggressing pricing.

SWOT Analysis
Apple’s Strengths: Steve Jobs’ leadership, iPod, global presence, unconventional business ideas
that upgraded standards of a product, creativity, brand equity, clear product differentiation,
great “base” of devoted users/customers, unique selling proposition, strong integrated supply
chain, open-minded approach when developing industry innovations, think differently approach,
premium quality, user-friendly and plug-and-play products, premium pricing, high demand
manufacturing incorporated with lowering production costs, strategic management, developed
Research and development department, and rapid growing market.

Apple’s weaknesses: dependence on Steve Jobs and his “vision, poor product range,
technological products tend to have short lifecycle, supply risk for key components, company’s
market share in international markets are below the US numbers, and high prices.

Apple’s opportunities: international growth and expansion, new ways of electronic devices
usage, customized features, on line sale, and partnership with other companies.

Apple’s threats: competitors-since there are companies with enough capital to enter the market
no matter how high capital requirements and high cost of brand development are, lawsuits,
threat of not being able to indulge more diverse customers base, threat of not being able to
keep up with rapid changes in technology (both hardware and software) and entertainment
industry, threat of low returns on assets and investments which could have negative impact on
Apple’s Research and development department.
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2. Analyse the structure of the PC industry over the last 15 years (1990-).
How have the dynamics of the PC industry changed?

PC industry is constantly changing. More than ever, PC industry is present in every day’s
activities and is linked with everything we know and do. We could say that people became
addicted to PC industry. The price of a PC changed, which made PC available to everybody.
Since mid-1970’s, PC industry went through many changes. Major shifts were in the size of a
market and price of a PC unit. Eventhough Apple launched the first usable PC, PC buyers were
not that much interested in any other brand than IBM. Main concerns of those days were
quality, compatibility, reliability and service. In 1980s, PCs were perceived as commodities, and
surprisely, instead of selling more, IBM started to lose its market share. By the early 1990,
“IBM-compatible” standard was replaced by Wintel. During the 1990s, Microsoft and Intel were
companies to follow and copy. Nearly 900 million PCs were in use around the globe by 2005,
with 30% of PC users in US, 20% in Asia/Pacific and 7% in Latin America and Japan. 33% of
PCs were shipped to EMEA.
Since mid1980s, annual PC unit growth was 15%. Such a high percentage of growth continued
through years until 2000. In 2001, numbers dropped and unit sales went down by 4%. This
was the worst year in PC industry. In 2003, revenue growth occurred, mostly through Asian
markets. From 19995 since 2005, the price of a PC declined for about 8% annually.
At first, PC was a simple device. The first PC was a desktop machine and by 2006, there were
laptops, notebooks, sub-notebooks, powerful workstations and servers. PC sale price in 2006,
was up to $3000. When PC components became standardized, companies cut on R&D spending
(Dell spent only 1% of sales) which is opposite of early days when companies spent 5% of
sales on R&D. Companies rather dealt with design, prototypes and testing.
By the early 21st century, contract manufacturers of brand-name companies entered the
market. They were based mainly in China and Taiwan, countries with low labor rates (3%
versus 30% in US). Many PC manufacturers decided to cut costs so they switched to build-to-
order approach, to save in product returns and inventory costs.
In 2005, 46% of PC buyers were in business category, 38% were home users while 8% were in
government and education category. Price issue was important to all categories. In the 1980s,
most buyers were also business managers bust mostly concerned about service support and
compatibility. They were buying well-known brands through full-service sealers. In early 1990s,
customers became more PC-knowledgeably-friendly and they buy directly from vendors and
distributors. The number of web-based retailers started to raise and 1/3 of all PCs were bought
through “white box” channel-local entrepreneurs.
Eventhough Microsoft dominated the PC operating system market, in 1990s Microsoft started to
challenge Apple’s technical supremacy in introducing Windows 3. Once again, Apple kicked
hard, on December 31st, 2005, the iPod was launched. IPod resulted in highest earnings and
revenue totals in history which was a spectacular success. Once again, Steve Jobs found a
magic formula to dominate market but this time, personal music player market.
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3. Evaluate Apple’s strategies since 1990. How many can you identify? How do
they differ?

Apple advanced PC devices. Company’s biggest competitor was IBM because majority of PCs
run on Microsoft operating system making it difficult for Apple to differentiate. However, IBM
strategy was easy to copy. Competition and technological change are the biggest issues of
concern and Apple handled them well. Company’s products and services are simple, yet
innovative and well designed-therefore, attractive to global market. Also, Apple was able to
design and develop operating systems, hardware, software and services internally. iPod was the
biggest Apple’s success which proved that they know what the market wants and needs.
Strategic management had issues to consider in the past as well as challenges to deal with in
the last 15 years so we could say that strategic management was crucial in Apple case.

Apple believes in delivering a high quality sales and after-sales support. To ensure such
experience, Apple opened its own retail stores. Product range is low but without any
compromise in quality. Marketing strategy helped retain the uniqueness which made premium
pricing great strategy for Apple. Apple launched innovative products (from Mac to iPod) which is
extremely important in PC industry because of its characteristics of highly competitive industry.
Premium quality of Apple products is the main reason for uplifting customer loyalty despite
premium prices. Apple controls the entire process, from manufacturing to marketing and retail
stores provided direct insight into customer satisfactions and their expectations of how Apple
products can help solve current consumer issues/problems.

Five Forces Analysis: Porter’s model

The bargaining power of Apple’s buyer and competition are extremely strong forces affecting
business because of low switching costs, high buyer info and moderate number of individuals
who buy Apple’s products. Customers are “switching” among brands easily and their individual
purchase is just a small drop in the ocean of company’s revenues. On the other hand, the
influence of suppliers is weak, because Apple doesn’t have to worry about supply chain because
they are global and they can find suppliers from all around the world. Substitutes are not such a
big thing for Apple. Substitutes are available but their brand name is not that much “in” and
substitutes’ performance is mostly at lower level because of limited usage of that substitute.
Since Apple is well-known for convenience and advanced functions, substitutes have a weak
force on company. There are companies with enough capital to enter the market no matter how
high capital requirements and high cost of brand development are, therefore, there is a
moderate force of the threat of new entrants, especially in music/player service business.
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There were 4 different types of leadership in Apple: Sculley era (1985-1993), Spindler era
(1993-1995), Amelio era (1996-1997) and Steve Jobs era (since 1997). Sculley knew how Apple
could change the world by its vision. He compiled innovation, creativity and discipline. In that
time, company practiced horizontal and vertical integration, greater than in any other PC
company, except of IBM. Still Apple products were more versatile than IBM’s. In 1991, there
was a first decision to cut cost, in order to remain competitive.
Spindler’s core markets were education and desktop publishing. He was a visionary who set up
a key objective for Apple – international growth.
Amelio cut Apples’ losses by canceling the repeatedly delay of MacOS’s research and
development. He was on charge of 3 reorganizations and several deep payroll cuts, but Apple
continued to lose money.
Steve Jobs shaken things up. He brought the Macintosh licensing program to an end, launched
iMac, closed down 2 divisions: Newton productions and portable PC for education. In 1997,
Apple website started selling products direct to consumers. Jobs had control of everything, from
product development to business strategy, thus he was a center of decision making. He was a
true example of charismatic leadership.