Final Exam Question Strategy Competit

Strategy and Competition
Final Exam: 50%
Students are required to read the “Apple Inc. in 2010” case study and answer FIVE (5) of the following questions. They are required to submit their answers within the stipulated time frame.
1- What, historically, have been Apple’s competitive advantages?
Apple’s competitive advantages are its innovation, strong brand and rapid growth.
In the Sculley years, Sculley pushed the Mac into new markets, most notably in desktop publishing and education. Apple’s desktop market was driven by its superior software and peripherals. In education, Apple grabbed half the market. Apple’s worldwide market share recovered and stabilized at around 8%. By 1990, Apple had $1 billion in cash and was the most profitable company in the world. Macintosh’s loyal customers allowed apple to sell its products at a premium price. That shows apple’s competitive advantages included customers loyalty.
Spindler killed the plan to put the Mac OS on Intel chips and announced that Apple would license a handful of companies to make Mac clones. He tried to slash costs, cut
Apple’s workforce, and pushed for international growth.
Amelio proclaimed that Apple would return to its premium-price differentiation strategy.
Apple’s failure to produce a new OS keep it ahead of Microsoft Windows 95.
Steve Jobs acquired NeXT Software and develops OS based on it. Jobs abruptly halted the Macintosh licensing program. Other restructuring efforts involved hiring Taiwanese contract assemblers to manufacture Mac products and revamping Apple’s distribution system from smaller outlets to national chains. Apple launched a website to set up direct sales for the first time. Internally, Jobs focused on reinvigorating the innovation. Apple increased its spending on R&D. Job’s first real coup was IMac in 1998 posted $309 million profit, reversing $1 billion loss.
In terms of General external environment, it is difficult to substitute Apple products with other products because of its innovation, creativity, and the technology know-how of easy to use. Apple has strong customers/buyers in the market. Apple has strong suppliers who would give them good deal. Apple has specific complementors such as its own printers and software – iPhoto, some are free, upgradable and downloadable online. The rivalry in
Personal Computer Industry is only Dell because it invests 1% of revenue to R&D. It is hard to compete with Apple Computer and Apple products because for personal computers, Apple can function both Mac OS and Windows. SamSung has become
Apple’s rival in terms of mobile phones, laptops, notepads, and touch panels. The entry to the market is not easy, otherwise it could be beaten out easily by strong market players in the market or easily taken out by acquisition.

The internal analysis tool – Apple has a strong brand name so, it has value. It is rare to be like Apple. It is easy to imitate like Apple. However, there are copyright laws and all so it cannot be all exactly identical. It will be costly to imitate. The organization is a solid organization formed by Steve Jobs so it is hard to fall apart. That’s why, Apple can have a sustained advantage if there is R&D and innovation keep on going. The economic implications are above normal.

2- Analyze the Personal Computer industry. Are the dynamics favorable or problematic for
Apple?
It was Apple which pioneered first usable personal computing devices. It was IBM that brought PCs into mainstream in the 1980’s. Growth was driven by lower prices and expanding capabilities. Revenue growth failed to keep pace with volume growth. New
PC Products emerged as well. More expensive laptop computers gained traction. Portable
PCs represented 57% of worldwide PC shipments and were expected to reach 70% by
2012. Desktop costs $544, lower price led to higher sales volume. A new subcategory, net book arisen sold for around $400.
The dynamics have led Apple to produce Apple Desktop, Macbook Air, Macbook Pro.
Even in Macbook Air and Macbook Pro, there are certain 13”, 15”17”, 19”. To compete with netbook, it has produced ipad, and use peripherals such as small keyboard and mouse along to function as a small notepad. Apple may produce smaller size that can compete with netbook in the future.
Dynamics are favorable for Apple because it has led apple to expand its own market. It has led Apple from mature industry structure to emerging industry structure. Apple was in mature industry structure, which is slowing growth in demand, technology standard exists, increasing international competition, industry wide profits declining, and industry exit is beginning. Steve Jobs has refined current products, improved service, and process innovation. Hence, it has become emerging industry structure. In emerging industry structure, new industry based on break through technology or product –ipod, iphone, and ipad, no product standard has been reached, no dominant firm has emerged yet. The only rivals that come to Apple are Dell because it has put 1% of Revenue to its own R&D.
New customers come from non-consumption not from competitors. However, SamSung has become Apple’s strong competitors. Opportunities are first-mover advantages. It is by improving technology, locking-up assets, and creating switching-up costs. Those who can design or create or someone who is the first to be very innovative will attract most consumers. However, that of course has to be of a strong brand like Dell, Apple, HewlettPackard, Acer or Lenovo, not just a random new brand from China could attract most customers due to warranty issues and long lives usage. Dell was the only top four PC vendor to lose its worldwide market share. Acer bought Gateway and became third

largest PC vendor in the world. Acer bought Packard-Bell and has become a strong presence in Europe. Lenovo’s greatest strength was its own dominant position in China, where it commanded a third of the market.

3- How sustainable is Apple’s competitive position in PCs?
Although Apple’s company remained committed to the education market, new PC products focused on home consumers’ lifestyle. Due to several technological innovations and a new retail strategy, Apple became the fourth largest PC vendor in the U.S. market with an 8% share by the end of 2009. The company’s greatest strength lay in premiumpriced PC category; 91% of PCs priced $1000 and above in the U.S. market and were sold by Apple.
However, that of course has to be of a strong brand like Dell, Apple, Hewlett-Packard,
Acer or Lenovo, not just a random new brand from China could attract most customers due to warranty issues and long lives usage. Dell was the only top four PC vendor to lose its worldwide market share. Acer bought Gateway and became third largest PC vendor in the world. Acer bought Packard-Bell and has become a strong presence in Europe.
Lenovo’s greatest strength was its own dominant position in China, where it commanded a third of the market.
Apple has innovative designs that are rare. Due to copyrights, it cannot copy identically.
Apple products are valuable – quality given and quality received are equal. It is costly to imitate. The materials used in Apple are slightly different from that of normal PC. Apple has advantage that Apple PC can run both Windows and Mac OS X, based on UNIX, or
Leopard. Apple PC has a variety of Applications such as in iLife (iPhoto, iTunes, iWeb).
Apple has developed its own web browser safari. What customers attract Apple is due to
Apple’s eye-catching Macintosh designs, and variety of software’s and applications available for Apple products. It is a technology world, Apple should continuously put an effort on R&D and maintain their current status, now it is at its own peak to continue its above normal status. In terms of competitive implications, apple has a strong brand, it can be temporary advantage since technology change is changing dynamically. Some
Windows user prefer still Windows like Dell and Asus has produced special computers for gamers which are faster speed and faster to download, faster streaming than normal apple computers.
4- How sustainable is Apple’s competitive position in MP3 Players?
The iPod was initially one of many portable digital music players based on the mp3 standard. The advantages of iPod to normal MP3 players are its sleek design, simple user interface, and large storage. By 2010, Apple reportedly held more than 70% of the MP3

market in the United States. The biggest component for iPod Nano was its flash memory.
Apple subsequently became one of the largest purchasers of flash memory in the world.
Within the iPod Product line, the touch was the first iPod that had built-in WiFi, a 3.5 inch screen, and a multi-touch graphical interface. Popular handheld gameplayers such as the Nintendo DS and Sony PSP suddenly found themselves competing with the touch.
Rivals in the MP3 player market are SanDisk, Creative and SamSung; each had a market share below 10%. Microsoft also introduced Zune line of music players in 2006. Most iPods ASPs generally ran $50 to $100 higher than the competition. At the hardware level, most players were roughly comparable to iPod Models. Yet Competitors found themselves a major disadvantage with the emergence of Apple’s iTunes store. Apple’s iTunes store is the store where the songs are sold and be downloaded online which is cheaper than purchase the CD. Online music stores such as Amazon.com, Napster, and
Walmart.com offered individual song downloads at competitive or discounted prices to iTunes. To put more pressure on Apple, some of these stores to sell DRM-free music for more than a year before signing the new agreement with Apple. Songs of the artists can be downloaded from social networking services such as myspace and facebook. There are internet radio sites such as Pandora, Last.Fm, Spotify.
Jobs had two responses to these threats. In 2009, he bought Lala.com, a music streaming service. The deal had raised speculations that Apple could be exploring alternative model to store and play digital music, bypassing downloads on media player altogether. In June
2007, he introduced the iPhone.
In the MP3 market, the iPods are valuable. It is not rare. The hardware qualities of the rivals are about the same. The apple’s only advantage is they have itunes store. It is only temporary advantage or parity because there are many other cheaper song selling sites, free music streaming sites, social networking sites and radios. The economic implications are normal for MP3 market.

5- How sustainable is Apple’s competitive position in Smartphone?
Before 2007, Nokia, Motorola and Samsung dominated 60% of the smartphone’s market share. Starting in the mid-1990’s, the industry’s preference shifted towards the feature phones that offered more attractive hardware designs and user-friendly interfaces, which was pioneered by Nokia, the world’s largest mobile phone manufacturer. Multi-media functions, such as high-end camera, Internet Browser, PDA Device, and media player.
With the first iphone, AT&T, the exclusive US Operator did not provide a subsidy.
Instead, AT&T agreed to an unprecedented revenue sharing agreement with Apple, which gave Apple control over distribution, pricing and branding.

According to one analysis, bill of materials for the latest 16GB iPhone model was just under $180. The first iPhone with half of that storage capacity cost around $220 to build.
Lower prices and wider international distribution (94 countries) fueled sales. The key factor behind the iPhone sensation was the extension of the iPhone’s ecosystem with the launch of Apple App Store in 2008. Apple’s app store was the first outlet that made it easy to distribute, access, and download applications directly onto the mobile phone.
Customers downloaded apps onto their iPhones over the network or download them to their PC. Many apps were free; even paid apps usually started from 99 cents. More than
185,000 applications were offered from health to business to game categories.
Apple’s competitors fell into two large categories based on their models: Research in motion (RIM), Palm, and Nokia, took a similar approach to Apple by controlling both hardware and software. RIM’s blackberry provides best email experiences with 550 carriers in 175 countries. In 2010, RIM and Apple were the most profitable smartphone companies in the world. However, the peak of RIM has fallen in the later years when
SamgSung and HTC market has arisen in 2013 and 2014. Palm, on the other hand, was struggling to survive. Nokia’s market share has fallen when its OS shifted from Symbian to Ovi. Nokia’s market share was not strong in US initially. It was only in India and
China. However, Iphone, SamSung and HTC has taken over in place of it.
Manufacturers such as HTC, Samsung Electronics, LG Electronics and Motorola used
Google’s free Android OS or Microsoft. By 2010, there were about 50 Android-based smartphone models in the market and Android had gained 4% market share. Android market place, Google’s competitive App store was gaining momentum.
Apple’s Limitations to use on AT&T network in the US was a limiting factor. Other complaints included lack of physical keyboard for high volume email users, relatively weak and irreplaceable iPhone battery, inability to add memory – the iphone did not support flash technology.
In terms of smart phones, Apple has a temporary to sustained advantage. One of the reason is its uniqueness and designs. The second is it has improved its battery life in iPhone 5S which lasts longer than 1 day without charging – a user can play music or take camera the whole day long. Third, iPhone has a strong app store which can download many free and low-priced applications. Fourth, it is rare. It is costly to imitate like iPhone. However, SamSung and HTC has become its rivals in the Eastern Asia Market.
Huawei and China Brand has taken over developing countries. However, iPhone users still prefer iPhone on top of other phones.

6- What are the prospects for the iPad?