Apple Inc. Case Study - 1

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1. Analyze the personal computer industry. Are the dynamics favorable or problematic for Apple? -------------------------------------------------
The personal computer industry is at a crossroads. At the outset, consumers desire to own and operate computers. On the other hand, the preferred personal “computers” may no longer take the form of a desktop or laptop. Indeed, a portion of the personal computer industry has already shifted their preference from a desktop or a laptop to a tablet or iPad. There are several likely reasons for this change, including cost, convenience, and mobility. -------------------------------------------------

At the outset, Microsoft and Intel products have dominated the personal computer industry, and since the 2000’s the personal computer market has exploded with growth. Indeed, almost one billion people had a personal computer by 2010. However, the significant expansion of growth resulted in increased competition. This competition drove down prices and provided consumers with more options. Between 1999 and 2005, the average selling prices for personal computers decreased by 8% per year. Portable personal computers like laptops and netbooks evolved to give consumers a more mobile and less expensive alternative to desktops. In 2009 the average selling price for a laptop was around $544, and the average selling price for a netbook was $400. Laptops and netbooks are expected to represent 70% of the personal computer industry by 2012. -------------------------------------------------

Unfortunately, the increase in competition and decrease in prices has led personal computer manufacturers to cut their own costs in order to stay competitive. Between 1999 and 2005, key personal computer parts fell in price by 30% per year. This steep decrease in price resulted in personal computer manufacturer profit margin falling by 5% annually during that same period. As a result of the reduced revenue, industry leaders like Dell limited their personal computer research and development budget to around 1% of revenue. Thus, although the increased competition generated lower prices and more options for consumers, we feel as if these benefits have come with a cost. The downside to the increasingly competitive personal computer industry has led to a reduced emphasis on research and development, possibly stifling innovation. Although the market is likely competitive enough that young companies looking to break into the market will invest in new and innovative technology, we believe that the personal computer industry will not adapt quickly to innovations since research and development budgets are carefully scrutinized. -------------------------------------------------

The personal computer industry may be wise to divert research and development dollars from the laptop arena and instead to the tablet or mobile phone departments. Today’s multitasking workforce seems to covet high-tech gadgets like the iPhone and iPad. Instead of lugging around a large, sometimes heavy laptop, consumers now prefer the convenience of a lightweight tablet. In addition, tablets provide consumers with instant or significantly reduced times to turn on, load software, and other features that can take laptops minutes to perform. Additionally, many consumers have access to laptops and desktops at work, and so are unlikely to need laptops for many functions beyond checking email, browsing the internet, playing games, drafting letters and so forth. These functions are available on tablets, and, for instance, may provide greater convenience to consumers looking to access their email quickly. Moreover, consumers may be able to acquire tablets at a lower price than laptops or desktops, and tablet users may not need to purchase costly antivirus software. -------------------------------------------------

As technology evolves so does consumer demand. Customers...
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