How has Apple performed in the PC industry? What is your evaluation of its performance in the PC business? The IBM PC was leading the way in the 80s positioning itself as the first mover with Apple Macintosh being the follower. Apple relied heavily on segmentation to strengthen its position. The segmentation they followed was consumer based namely education and Macintosh loyalists. The main differentiation Apple relied on heavily was their “plug and play” setup which their customers valued as well as the superior software that was offered. The fact that consumers were willing to pay a high premium for the Mac experience suggests that the competition was lacking in qualities which mattered to people and those being the convenience of the Plug and Play feature. IBM being a threat was able to compete on a price basis and which resulted in creating complementers such as new applications to strengthen its position and recapture sales from Macintosh. We again see evidence of Mac’s lack of vision and leadership under Sculley by them deciding to follow the first movers and release a low cost Mac Classic. When Jobs came along in 1997 he realized that content, being software, is the main complementer to the PC industry. Microsoft office being a prominent technology has become a standard across enterprises. Jobs realized that the current switching costs for users would be very high when lacking access to office and moved to form a strategic alliance with Microsoft to extend support with Office for Mac. His second move was to focus strictly on 4 main segments, desktops for consumers and for professionals, and portables for consumers and for professionals. Clearly the main weakness that Jobs had to worry about was the lack of innovation but before he could innovate the main concern is to survive in what was mostly a PC dominated industry. To do that, Jobs took what he knew and adjusted it to adapt to the current environment; the traditional Plug and Play was extended to accommodate windows based peripherals and emphasis was placed on design as differentiation. Jobs also made a significant effort by changing the image of Mac and specifically through fashion magazines and positioning Mac as the new hip thing. Being in a hyper competitive industry creates the disadvantage of having to sustain competitive advantage Jobs shifted Apple’s position in the PC industry from follower to first mover through the “digital hub” strategy. Using Porters five forces would better show the overall performance of Apple in the PC industry Porter’s 5 forces
| Their relation to Apple PC market
| Apple’s response
| Competitive Rivalry
| Mature Market: Market is controlled by key players all with Wintel productsPrice based: due to lack of innovation
| Apple invested a 12% in R&D to develop its differentiation qualities building on their Plug and Play concept Apple also invested a lot in Marketing to change its image and brand
| Threat of Substitutes
| Evolving industry: Highly dynamic market with new features driven by digitized content (pictures, MP3, video, etc.) None PC products: Historically PC’s were the 1 stop shop for games, DVD’s , video chat, internet. Mobilization spawned a new breed of mobile devices.
| Instead of competing directly with substitutes Mac positioned itself as the “digital hub” with its new heterogeneously friendly plug and play feature able to accept and consolidate a wide variety of devices and peripherals
| Threat of new entrants
| Economies of Scale: large players leverage economies of scale to compete on priceHigh Cost of Entry: Producing PC’s while doable (White Box producers) lack the support factor large companies can offer.
| Apple forties its position with differentiation through innovation, R&D and marketing
| Bargaining Power (supplier)
| Processors: only Intel and AMD make chips (High bargaining power)Components: Hyper competitiveness created many players and dropped prices (Low bargaining...
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