Competitive Strategy Assessment 2
Case Study Apple Inc., 2008
This Business Report primarily addresses 3 questions asked on the Apple Inc. case study circa mid 2008.
What effects have the changes of structure and dynamics in the PC industry had on Apple Inc’s competitive position?
What competitive advantages did Apple possess and what were the strategies employed by Apple?
What is your evaluation of Steve Job as a leader? Has he finally solved the long standing problems with respect to the Macintosh business?
Information is primarily obtained from the case study and from publicly available news reports and articles.
1. What effects have changing of structure and dynamics in the PC industry on Apple Inc’s competitive position 1) in the mid-1980s and 2) mid-2008?
The “Porter’s five forces” (Porter, 2008) is useful for analyzing and expressing the effect of changes in the PC industry on Apple from the mid-1980s to 2008.
IBM’s entry (New Entrant) into the PC market in 1981 using the Microsoft DOS operating system and the microprocessor from Intel (Substitutes) fundamentally altered the PC competitive landscape.
The PC industry became less vertically integrated (Machosky, 2006). The relatively “open” system resulted in a proliferation of computer applications to be written and heralded the emergence of the IBM-compatible clones (more New Entrant) and the rise of contract manufacturers and strategic outsourcing.
Because of their quasi-monopolies, Microsoft (OS) and Intel (microprocessors) were able to control commodities and to manipulate pricing, and consequently, to wield tremendous influence (increasing power of Supplier).
Buyers on the other hand voted with their wallet in droves (increasing bargaining power of Buyer) for IBM PC which worked more for less. Thus Apple lost its market leadership and could only garner around 8% of market share in 1986 (a far cry from its early years) and a net income of US$154 million.
The intervening years
The intervening years between the mid-1980s and 2008 saw tremendous changes in the PC industry in general and particularly Apple. Kindly refer Appendix A for details.
Apple by 2008 had responded to changes in the PC industry by diversifying into consumer electronics years earlier. Its net sales for 2007 was more than 12 times of 1986 (US$24 billion) and its net income was more than 22 times of 1986 (US$3.5 billion).
On the PC front, Mac now uses Intel microprocessors which are able to work on multiple OS, allowing it to freely run Window-based applications. It has also made strategic trade-offs (Porter, 2001) in its pricing strategy to reach a wider consumer base rather than sticking to the premium segment.
While Apple has been able to reposition its Mac offering, Mac ceased to be Apple’s lead offering. The iconic iPod became the next standard bearer after Apple took a strategic decision to diversify into consumer electrics. Though they were not the first, the iPod leapfrogged the competition (Makides, 1997) by delivering what Apple does best i.e. a superior user experience and exceptional design.
The successful introductions of iTunes, Video iPod & iTunes and later iPhones further seal the iconic status of Apple. By now, Apple had created a new market space (Kim, 1999) by introducing a much sought-after music/video player that download music and video seamlessly and legally. Making responsibility “cool” again, this model provided record labels to monetize their music over the internet.
2. What competitive advantages do Apple possessed and strategies employed by Apple to compete?
In the years following its inception in 1976, Apple built a number of competitive advantages. Right from the start, Steve’s mantra “changing the world through technology” clearly resonates with the brave new world as much as it drives the...
References: Brandenburger, Adam M., 1996, Journal of economics and management Strategy, Value based business strategy
Yoffie, David B, Slind, Michael., 2008, Harvard Business School, Case Study, Apple Inc.,2008
Eisenmann, Thomas, Oct 2006, HBR, Strategies for two sided market
Ghemawat, Pankaj, 2006, Strategy and the business landscape, Creating competitive advantage, Upper Saddle River.
Machosky, Michael., February 13, 2006, "Vertical Integration", Pittsburgh Tribune Review.
Montgomery, Cynthia A, Jan 2005, HBR, Putting Leadership back into strategy
W Chan Kim, Jan/Feb 1999, HBR, Creating New Market Space
W Chan Kim, Renee Mauborgne, 2005, Blue Ocean Strategy
Dubinsky, A.J., Yammarino, F.J., F.J & Jolson, M.A. 1995, Personal Characteristics and dimensions of transformational leadership. (Quoted from the book Leadership by Dubrin, Dalglish and Miller)
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