One of apple’s main competitive advantages is the fact that they own and manufacture all parts of their computers including hardware, software, and peripherals. Everything about an apple computer is specific to apple and this gives them various revenue streams. Apple also has very strong brand loyalty, being another competitive advantage. There was a quote from an analyst describing how most of IBM customers “put up” with their machine while apple customers “love” their Macs.
Because Apple has been able to come up with a product that customers are truly happy with, they have also been able to sell their products at a higher price and customers have been willing to pay the extra money because they know they are getting a superior product. This large amount of brand loyalty has also allowed Apple to penetrate other markets as well. They enjoyed amazing success in the music business with the introduction of the iPod and iTunes and shared the same success in the wireless phone industry with the introduction of the iPhone. 2.
Analyze the dynamics of the PC industry. Are these dynamics favorable or problematic for Apple? The PC industry experienced vast growth ever since the introduction of a PC. Apple was a first mover into this industry and pioneered the first usable computer, however they did not have the brand name and reputation to sustain growth at the time. IBM was the company that did have that brand name and reputation and really brought PCs into the mainstream. This was problematic for Apple because IBM was able to attract customers that consisted of 70% of the Fortune 1000 in the early 80’s.
However, IBM’s dominance diminished towards the end of the 80s when they did not make a deal with Microsoft. This left room for new competitors to compete for the large chunk of market share left behind by IBM which favored Apple. 3. Has Steve Jobs finally solved Apple’s long-standing problems with respect to the Macintosh business? For the most part, Steve Jobs has solved Apple’s long-standing problems for Mac’s. One of the main problems that existed was that Apple’s business was too much of a closed system.
Apple was not compatible with other PC’s or other products whatsoever and this was a main concern for many potential customers. Steve Job’s came up with a solution to this problem in August of 1997 when he announced a $150 million deal with Microsoft to develop core products such as Microsoft Office for Macs. This allowed for more compatibility while still keeping an Apple specific product. He also began implementing standard interfaces into his products such as the USB port, which made Macs more compatible to popular devices such as digital cameras.
Another problem Apple faced was that it had too broad of a product range which made it harder to focus on optimizing the performance of these products. This is why Apple reduced its product range from 15 products to 3. He also decided to start outsourcing the manufacturing of Mac products, which allowed Apple to focus on core competencies of the business. Jobs also changed the image of Apple by promoting it as a new, hip alternative to PC’s and stressing advantages Macs have over PCs such as the lack of viruses. Another problem customers had with Macs was the user interface.
Jobs recognized this and as a solution to this problem he began a complete overhaul of OS in 2001 to deliver a better user interface for Mac users. Job’s also decided to finally abandon the long use of PowerPC chips and switch to Intel Microprocessors in 2005. 4. The iPod-iTunes business has been a spectacular success. Has jobs found a new formula to create sustainable competitive advantage for Apple? A product may achieve commercial success by being both rare and valuable but in order for that product to have a sustainable competitive advantage it must also be durable and inimitable.
The development of the iPod and iTunes has been extremely successful for Apple because the iPod was a rare and valuable new way of playing music that was compatible with the popular media program iTunes. It was hard to imitate the iPod because of certain patents on the easy-to-use design that could not be copied. Apple also introduced an exclusive digital rights management system called FairPlay which allowed them to coax music executives into supporting the initial iTunes venture and also helped with iPod sales because competing MP3 players could not play FairPlay protected songs.
Although the iPod was so successful, Jobs realized at a certain point that the iPod would eventually be phased out by smartphones. To respond to this predicted market trend, Apple came out with the iPhone, which was made up of already popular and familiar patented designs on the iPod and iTouch to come out with a product that combined a phone, internet browser, and music player all into one device. This device, like the iPod, also was extremely compatible to the extremely popular media player iTunes.
Apple also came out with the iPad, which is more or less a medium between the iPhone and a computer in size and processing ability. The development of the iPad and iPhone has helped Apple maintain a sustainable competitive advantage because they have used existing designs from the iPod that cannot be copied or imitated because of patents and implemented them into their new technologies. 5. How would you assess Apple’s initial strategy for the iPhone? Why did Apple change so quickly to a different strategy? Originally, Apple had a goal of completely “reinventing” the phone.
They signed a 5 year exclusive deal with AT&T that gave them almost complete control over the development and branding of the iPhone. Originally, the iPhone was offered for $399 or $499 and did not have a discounted price for a contract commitment. At the time, phones that costed over $300 accounted for only 5% of total sales. The iPhone also relied its’ data service on the slow Edge network and Jobs initially decided against using the faster 3G network because it was more taxing on the battery life of the phone.
A year after the iPhone came out, and sales did not come close to reaching projections, the iPhone was “reinvented”. Steve Jobs and Apple were wrong about certain customer priorities while trying to develop their dominant design. Jobs wrongly predicted customers would value a longer battery over a faster internet and when he realized he was wrong, Apple quickly switched to the 3G network only a year after coming out with the iPhone.
Apple also realized customers were not used to paying anywhere close to original prices for a phone so they completely re-designed the pricing model and the iPhone 3G was about $200 cheaper then the original iPhone was the service plan started at $10 a month more. Jobs also realized that certain aspects of the phone such as email and GPS did not match up with other smartphones and the iPhone lacked the ability to display certain Microsoft Office documents. Apple therefore made the iPhone 3G more compatible to Microsoft documents and enable platforms such as Microsoft Exchange email.