Apple Computer, 2005 case

Contents [hide] 1 Basic Information of Apple Computer, 2005  2 Case Summary of Apple Computer, 2005 3 Case Analysis of Apple Computer, 2005 4 External Link of Apple Computer, 2005 5 Relevent File Cabinet of Apple Computer, 2005 6 Article Purchase Link of Apple Computer, 2005

Basic Information of Apple Computer, 2005 

Author: David B. Yoffie, Barbara J. MacK
Publisher: HBR
Case Number: 9-705-469
Publication Date: Jan 6, 2005
Course Category: Strategy

Case Summary of Apple Computer, 2005

In 2004, Apple reported its highest quarterly revenue in a decade mostly due to its Macintosh business even though the iPod dominated media coverage about the company.
Core Macintosh Business
• Apple’s overall market share in PCs worldwide was 2-3%
• Latest products appealed to core business niche consumers- graphic design and print publishing markets
• Did not meet goal of producing world’s fastest computer
1. iMac G5- entire computer mounted in 2” thick chassis w/ integrated monitor
2. Apple Cinema Display LCD monitors- superior brightness and viewing angles
3. iBook laptop- upgraded to include latest wireless networking
4. Mac OS X operating system- improved compatibility with Windows
5. Mac Mini- first attack on price sensitive segment in almost a decade
• Apple grew 26% year over year in units- faster than the industry as a whole
• 1.2 billion revenue through retail stores (1994) – expand internationally

iPod
• 2001 launch of iPod-initially only worked on Mac
• Made for Windows in 2002- shift in strategy since it was the first product not tethered to Mac
• 2004 introduced several new features (photo-ready, color, TV viewing capabilities) expanded the product line, flashy marketing campaign (U2 endorsement), first low-end iPod (Shuffle)
• Attracted enthusiastic, loyal following, despite 15-205 premium over other MP3 players
• U2 iPod – cooperative relationship with some artists
iTunes
• April 2003, launched iTunes Music store: online music store for Mac users: $0.99 a song
• Oct 2003, launched Windows version: coolest invention of 2003, middle ground. Within 3 days, PC owners downloaded one million copies of the software and 1mill songs
• 2003 online music store for Mac users- offered over 400,000 songs from various artists due to deals with 5 major record labels. Launched Windows version later that year
• iTunes not very profitable- Apple only collected $0.10 for every song downloaded
• The only music application that would work with the iPod (gross profit of $175 on $499 devise) and had proprietary Apple format that wouldn’t work with other players
• Accounted for 70% of the legal download market
• By August 2004, had 66% of market share in MP3 players
• Over 100 iPod substitutes expected in 2005: Dell, Sony, virgin, Samsung, etc Microsoft aggressively promoting alternative song format to AAC, not locked into single store
Retail Stores
• Recorded their first operating profit in 2004
• Launched first European market store with plans to open more in UK and Japan(2 existing locations) in 2005
• 1.2 billion revenue through retail stores (1994) – expand internationally
Phases of Apple (from 2002 & 2005 articles)
3. Evaluate Apple’s strategies at different phases of its life.
Sculley – 1985 – 1993
• The only alternative to PC
• Extremely loyal users paid a premium but there was a concern Apple could only market to this shrinking group
• Attempted a shift to the mainstream with reduced price and alliances
o Differentiator attempt to shift to cost competitive strategy but fails
• Market share shrinks, Sculley steps down
Spindler – 1993 – 1995
• Started w/ a Focus strategy – school segments
• Considered broadening but cancelled the idea
• CEO had a Tech / Operations focus – PowerPC introduced in 1994
• New PowerPC technologically ahead briefly but soon is overpriced compared to comparable Wintel machines
• Spent $600 million on Taligent, Kaleida – abandoned these, companies parted ways
• Tried to shift to cost strategy to bring prices down- failed again
Amelio – 1996 – 1997
• Return to premium differentiation strategy
• Cut perks / payroll - attempted to minimize costs
• Attempted diversification with products: Set top boxes, Newton – failed, abandoned these products
• Acquired NeXT – Jobs returns
Jobs – 1997 – Present
• Continue differentiation strategy
• Partnerships with Microsoft
• iMac – hit product
• Still unclear if they are selling to a niche or the masses?
• Focus on 1.) Existing customers, 2.) New users, 3.) Windows switchers
• 3 simultaneous strategies for 3 groups.
• + Diversification – see Apple 2005 successful products (iPod, iTunes, new OS)