Case 3: Apple Inc.
Apple Computer is an innovative company evolving on the multimedia and high technology market. It is present on hardware and software markets, as well as in the on-line services market. Its highly diversified offer makes Apple Computers a company that is very hard to manage. Steve Jobs and Steve Wozniak created the company in 1976. They wanted to “change the world through technology” by creating the personal computer (PC). The launch of Apple II in 1978 was the beginning of Apple’s leadership on the PC industry. Nevertheless, Apple had to face quickly with face competitors, who imposed their standards on the market. First IMB first, and then Windows and Intel, posing posed the problem of non-compatibility with Apple compatibility. Apple was successively headed by a number of leaders who performed very well. Lots of performing leaders followed one another at the head of Apple Computer, such as Steve Jobs, Sculley, Spindler or Amelio, and each of them had a different vision on of what the Apple computer strategy of Apple should be. After many years of irregular results, Steve Jobs came back to Apple Computer as CEO and his strategy had immediate positive effects on company results and market positioning.
II. Generic and Complementary Strategies
Apple without a doubt uses a focused differentiation strategy. They are able to command premium prices by strategically marketing their products and adding features and functionality that customers highly value, such as the “plug and play” ability of many devices when connected to Apple products. The iPod’s average selling price in the height of its success was $50-$100 higher than the products competing with it. When the iPod nano was released, it grossed margins of around 40% - unheard of in the industry. When Apple released the iPhone, it was estimated that Apple generated over 50% of the cellphone industry’s total profits from the less than 4% unit market share the iPhone gained. The iPad collected a 25% gross margin while competitors such as Amazon’s Kindle were only able to collect 15% gross margins. Apple’s reputation for innovation and design have established it as a focused differentiator, but this strategy has remained so sustainable for them because of the secrecy with which the company and its employees guard Apple’s research.
Over its history, Apple has implemented a number of complementary strategies. In its earlier years, Apple partook in two joint venture projects with its main rival, IBM. One of these joint ventures sought to create a new PC operating system and the other was intended to develop multimedia applications. At the same time, Apple formed a strategic alliance with Novell and Intel aimed at redesigning the Mac to run on Intel chips. When Spindler replaced Scully as CEO in 1993, he broke apart the alliance with Novell and Intel and instead began licensing companies to make Mac clones. Shortly after, when Amelio took charge of the company in 1996, he pledged a return to Apple’s “premium price differentiation strategy” by discontinuing the licensing agreements and instead acquiring NeXT Software. These attempts did not fare well for the company, and it was close to bankruptcy when Steve Jobs took over at the end of 1997. Jobs absolutely refused to license to other companies and insisted on tightening Apple’s focus of products. Jobs re-structured Apple’s distribution chain by vertically forward. Apple set up it own chain of retail stores which allowed customers to have the hands on “Apple experience” and greatly influenced sales for the better. When Apple initially released the iPhone, they did so according to an alliance with AT&T, giving the company exclusive rights to sell the iPhone. This was short-lived, however, because Apple discovered that it was losing revenues to the grey market from people “unlocking” phones to be used on other carriers’ networks.
III. Nature of Competition within the Industry
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