Apple's encouragement of differentiation between product designs and its promotion of secrecy around new product launches heightens the Apple mystique. These create the Apple "halo effect," where a buyer of one Apple product has a high probability of returning to Apple for other products as well.
Apple's has emphasized its unique retail stores through design for several of its flagship locations as well as tailoring the retail experience to include product "test drives", classes and workshops geared teaching users about its products. With relatively light presence in lower-margin, higher-growth geographic areas, Apple will experience less of its halo effect and reduced product/brand recognition, lowering sales potential. With China and India estimated to make up about 66% of PC market growth through 2010, this could be a significant challenge for Apple.
Against the Mac:
Apple's position is improving in the worldwide PC market; the Mac still represents a small fraction of the overall PC market. Apple enjoys a unique advantage of having something of a niche market without needing to compete directly with Hewlett-Packard Company (HPQ) and Dell (DELL) and Microsoft (MSFT) operating systems for enterprise endorsement.
Against the iPod:
Although Apple remains the industry leader in PMPs, the competition is making significant gains. The popularity of flash-based PMPs is problematic for Apple, which has much stronger market presence in hard-drive based (HDD) players. To combat this, Apple may release a new flash-based line of players.
Apple in the Living Room
Apple’s iPod and iTunes are a powerful combination that fosters a network style of increasing returns. By selling iPods, Apple increases the consumer demand for music from iTunes. By placing more musical choices on iTunes there is more demand for iPods. Apple is shooting for the digital living room of...