Apple Inc. Strategy

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Apple Inc., 2008

What were Apple’s competitive advantages?
During the end 70’s and beginning of the 80’s, Apple’s competitive advantages assured high profitability to the firm. Apple II and Macintosh were premium (priced) products that were very easy-to-use computers with appealing design and technical elegance. Despite the slow processor speed and the lack of compatible software, the combination of superior software and peripherals, giving “unmatched capabilities in desktop publishing”, allowed Apple to reach 8% of the world market and more than 50% of the education market in the US by the mid 80’s. Also one other factor important for the high success of Apple in its early days is the fact that the operating system (OS) was a closed system, being therefore very difficult to clone. After some ups and downs during the 90’s decade, the strategy of Apple continued to base on differentiation. They offer high-quality, an exceptional design, the ease of use of their products, security, high-quality bundled software and in-store personalized service. At the same time, the incorporation of some standard interfaces (like USB ports) made Apple computers less closed systems, allowing the Mac customer to use non Mac peripherals with his OS. In terms of technical features, the total Mac sales increased about 40% from 2006 to 2007 thanks to Intel’s dual-core technology for Apple’s laptops. This specification allowed Apple to build laptops that were faster and less-power consuming, and at the same time could also easily run Windows and other third-party OS. One of the main problems of Apple, the lack of Macintosh software, was now solved. As it was mentioned above, one of Apple’s recent competitive advantages is the in-store personalized service. This, of course, is directly related to the introduction of stores, important not only because those stores are sales locations, but also because it allows Apple to control the image of the brand and provide an excellent customer service. The success of Apple stores is also due to the “halo effect” of iPod and iPhone that attracted many people to the stores. The iTunes Music and App online store, together with the iPod and iPhone products, are also one of the main reasons for the increasing of sales of Mac computers.

Analyze the dynamics of the PC industry. Are these dynamics favorable or problematic for Apple? In our days computers are in most people everyday life and business and therefore computers are becoming even more a commoditized product. It is estimated that 1 billion of PCs are in use around the world! The PC industry has its origins in the mid-70s and it was dominated by IBM during its first decade of existence. By the early 90’s Wintels (Windows OS with Intel processors) replaced IBM computers as the industry standard. The market in those years already suffered some (fast) changes, as there were thousands of manufacturers (HP, Dell, Acer, Apple, and clone makers) building computers. In terms of buyers, also some several changes were observed: the US was no longer the main customer of this industry. The main share of the average 15% growth of PCs goes to the emerging markets, to countries like India and China. At the same time, revenue growth didn’t grow, mainly due to the decreasing of prices of these products. The main suppliers in this industry are the component manufacturers, the OS software programmers and the Application software developers. In what component manufacturers is concerned, the industry is dominated by two players, Intel and AMD, to produce microprocessors. These microprocessors are totally different in terms requirements and motherboard design, so if a PC manufacturer would think on changing the microprocessors of its products, it would also have to support high switching costs. The OS software programmers are resumed to one player, Microsoft Windows (about 90% of world computers run through Window platform). The Application software developers are...
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