Apple Computer, Inc.: Maintaining the music Business While Introducing iPhone and Apple TV

Case Report On Apple Computer, Inc.: Maintaining the music Business While Introducing iPhone and Apple TV

Submitted by Group 9  Nitish Manchanda Akarsh Sasanapuri Utkarsh Aar!a" $anika Minocha 'aibha 'aibha ustai Mohit Gupta

(129) (142) (1#1) (1%&) (1%9) (1*+)

ITRO!"CTIO Accordin to App"e ,omputers Annua" eport. /0he ,ompany is committed to brinin the best persona" computin. portab"e diita" music and mobi"e communication eperience to students. educators. creatie proessiona"s. businesses. oernment aencies. and consumers throuh its innoatie hard!are. sot!are. periphera"s. serices. and 3nternet oerins/ 0he companys current Mission Statement reads5  /App"e desins Macs. the best persona" computers in the !or"d. a"on !ith 6S 7. i8ie. iork and proessiona" sot!are App"e "eads the diita" music reo"ution !ith its i:ods and i0unes on"ine store App"e has reinented the mobi"e phone !ith its reo"utionary i:hone and App store. and is deinin the uture o mobi"e media and computin deices !ith i:ad/ 3n reconition o current market trends. Stee ;obs has c"aimed that he !ants to transorm the company by makin the Mac the hub o the consumers< diita" "iesty"e =espite App"e ,omputers recent successes. the company is acin an eer-chanin competitie enironment on mu"tip"e ronts 1 hat are the key strateic cha""enes acin App"e ,omputer> 2 hat are some o the dimensions a"on !hich company success can be measured> + hat critica" eterna" and interna" enironmenta" actors hae strateic imp"ications or App"es uture> 4 ?o! does App"es stratey stand up aainst industry ria"ry> # hat recommendations can be made to enhance the eectieness o the companys stratey or to chane its strateic approach or better resu"ts>

AA#$%I% &e' %trategic Challenges

,ompetition and the pace o( technological change  are the most critica" issues current"y acin App"e ,omputer 3ts strateic moes into mobi"e communication deices and portab"e entertainment do!n"oadin p"aces the company in sti competitie conditions rom eery an"e Ne! competitors. "o!-priced ria"s. and potentia" substitute  products a"" threaten to reduce the perceied a"ue o App"e products and the success o  its stratey App"e is a"so cha""ened to maintain its core competencies - marketin. innoation. re"ationship bui"din. and brand manaement - as it manaes a broader rane o products and naiates more markets 3ts customer base is no! more dierse. and ne! sets o competitors hae a !ider ariety o strenths and strateies 0he techno"oy and entertainment industries are constant"y and rapid"y chanin 3t is uncertain !hether  App"e !i"" be ab"e to sustain its brands reputation or innoatie desin. continua""y re"ease techno"oica" breakthrouhs. and "aunch ne! products that !i"" /hit the consumer 

mark@ 3n addition. the companys suite o products is no "oner based on its interna""y dee"oped hard!are and sot!are. but depends upon the abi"ity to secure media content. !hich has its o!n competitie orces. dimensions o entertainment a"ue. and proprietary issues ith App"es success and ro!th. ba"ancin stakeho"der demands has become increasin"y diicu"t Manain the sometimes-con"ictin epectations o customers. inestors. supp"iers. partners. "ea"oernmenta" entities. and other stakeho"ders puts an increasin amount o pressure on App"es manaement team And the companys dependence on ;obs charisma. ision. and pub"ic communication and re"ationship bui"din ski""s puts App"e at risk !ithout a re"iab"e succession p"an and a poo" o eBua""yta"ented brand champions App"e
A ba"anced use o inancia" and strateic contro"s !i"" he"p ensure that App"e ,omputer both beneits rom eedback on past perormance and communicates the important driers o uture perormance 0he o""o!in criteria proide a set o measures to eectie"y determine the companys success  Perspective

Cinancia"

Criteria    

,ustomer 

  

3nterna" Dusiness :rocesses

    

8earnin and Gro!th

   

eenues by product and reion ,ash "o! - amounts and sources  Net income =ebt Market share Gro!th ,ustomer satisaction ,ost manaement or pricin "eibi"ity Marins 3nentory contro" :roduct Bua"ity Adertisinmarketin eectieness  Ne! product introductions 0echno"oica" breakthrouhs esearch and dee"opment inestments 0rainin and cross-oraniEation sharin prorams

%WOT Anal'sis

6ne o the most important staes o the strateic manaement process is the situation ana"ysis. !hich ino"es an in-depth assessment o orces in the eterna" and interna" enironments that can impact the success o the companys stratey oer time

3nterna""y. an ana"ysis o the irm enironment ocuses on the resources and capabi"ities !ithin the company !hich strateies can be based upon An interna" assessment identiies core competencies !hich !i"" support the imp"ementation o chosen strateies and company shortcomins !hich miht interere !ith strateic p"ans App"es core competencies inc"ude marketin (inc"udin the abi"ity to dee"op appea"in desins). innoation (enab"ed by research and dee"opment). a""iance bui"din (based on epansie re"ationships bui"t by ;obs throuhout the eterna" enironment). and brand manaement Siniicant strenths and !eaknesses uncoered by the interna" enironmenta" ana"ysis are summariEed be"o! %trengths i:od - "arest market share (F&) o the diita" music market (nearest competitor on"y *) due to irst moer adantaes in portab"e diita" music industry ,ontro" oer supp"ier and distributors :roduct sa"es Strateic a""iances - marketin partnerships Marketin competence - reputation or brand dee"opment !hich ains customers throuh !e""-p"anned and careu""y eecuted marketin strateies Htensie content access based on a"uab"e partnerships in the recordin industry Suite o products or rane o app"ications - i:hoto. iMoie. i0unes. iMac ,ustomer re"ationships - responsieness to customer eedback  :ositie brand imae. inc"udes counter-cu"tura" appea" Stron inancia" perormance - stron sa"es. cash "o!s. and net income. "o! debt. contro""ed inentory Wea*nesses ?istorica""y incompatib"e sot!are - computer and diita" music ormat - users !ant compatibi"ity :roit per son is "o! 1 share o mobi"e phone market Unpopu"ar App"e 0' eatures eak supp"ier re"ationships I ND, cance""ed contract !ith App"e oer pricin issues

Hterna" to the company. App"es most pressin cha""enes emanate rom the industry and competitor enironments A mu"titude o eistin and ne! competitors is  poised to batt"e or market share and reBuires continuous attention rom the companys "eaders A c"ose "ook at App"es competition reea"s that the company is conronted by aressie opposition in a"" areas o its business 0he markets or consumer e"ectronics.  persona" computers. re"ated sot!are and periphera" products. diita" music deices and re"ated serices. and mobi"e communication deices are intense"y competitie 0hey are characteriEed by rapid techno"oica" adancements. !hich hae substantia""y increased the capabi"ities and use o :,s. diita" e"ectronics. and mobi"e communication deices As a resu"t. a ariety o ne! products !ith competitie price. eature. and perormance characteristics are bein introduced into the marketp"ace And oer the past seera" years. price competition in App"es main product markets has been particu"ar"y Eea"ous

3t is common or competitors se""in personal computers based on other  operatin systems to aressie"y cut prices and accept "o!er product marins to ain or  maintain market share 0his puts continuous do!n!ard pressure on App"es marins 6ther than price. key competitie actors in the computin market inc"ude product eatures. re"atie priceperormance. product Bua"ity and re"iabi"ity. desin innoation. aai"abi"ity o sot!are and periphera"s. marketin and distribution capabi"ity. serice and support. and corporate reputation As the industry and its customers become more re"iant on 3nternet connectiity. a"ternatie (een substitute) deices are becomin increasin"y sma""er. simp"er. and "ess epensie than traditiona" :,s 0hese deices compete or  market share !ith App"es desktop and "aptop computin products 0he company
desin approaches and techno"oies. and rapid adoption o techno"oica" and product adancements by competitors  Ne! entrants a"so pose ormidab"e opposition to App"e in the mobi"e phone market 0he notab"e acceptance and ains made by 3Ms D"ackberry demonstrate the  potentia" o ne! entrants to increase ria"ry =ue to the success o the i:hone and the D"ackberry. other producers !i"" undoubted"y attempt to imitate their appea"in eatures and unctiona" app"ications in order to create customer a"ue and compete eectie"y !ith their o!n smart phones 3n addition. App"es ec"usie use o ,inu"arA0K0 does not preent the phone serice proider rom enterin potentia""y harmu" areements !ith the companys competitors. such as its threatenin re"ationship !ith ria" :a"m Cina""y. the market that Apple TV is enterin (!ith mobi"e media. set-top bo. and ideo do!n"oad industry sements) introduces een more manaement comp"eities and promises reater competitie cha""enes than App"e ,omputer has eperienced in the  past Ci"m distribution has eceedin"y more p"atorms or reachin the audience. and mu"tip"e competitie sements hae a"ready emered to oer access to content throuh mai". do!n"oadin. renta". subscription. set-top bo systems. and manuacturin-ondemand serices :o!eru" partnerships. !ith substantia" resources to pursue Loint eorts. hae a"ready been estab"ished (such as the Loint enture bet!een ie o the top moie studios. Moie"ink. !hich is no! operatin as a D"ockbuster subsidiary) 3n addition. studio eecuties are much more aressie about protectin content rihts. and un"ess areements beneit their distribution obLecties and maimiEe the a"ue o their  re"eases. attemptin to secure content contracts or App"e 0' !i"" meet "imited success 3n act. App"es dominance and re"atie po!er in the music industry (as !e"" as ;obs reputation or contro") may bui"d resistance amon i"m producers !ho are accustomed to maintainin their o!n "ee"s o contro" oer content ND,s decision to contract !ith AmaEon-0i'o demonstrates the industrys independence o thouht and potentia" obstac"es to App"es strateic approach Hen ne! entrants. such as 'udu. pose substantia" hurd"es to competitors by oerin !hat appears to be the /cure-a""/ or the ideo-on-demand market. de"ierin immediacy. aordabi"ity. broad access and se"ection. and direct de"iery to the ie!in deice 0he companys abi"ity to successu""y app"y its i:odi0unes mode" to this competitie ie"d is sti"" uncertain Dut in a"" certainty. this industry is not structured as simp"y as the music industry. and re"ationships !ith key content proiders are abso"ute"y essentia" to ainin a competitie ede 0he tab"e be"o! summariEes important opportunities and threats eistin in App"es eterna" enironment Opportunities etai" stores - brand eposure 3nternationa" ro!th and epansion 3mproe compatibi"ity 8icensin brand name !ith accessory manuacturers eb techno"oy and marketin ,onsumer demand or /custom/ eatures

Hpand product "ine to inc"ude media and sot!are Threats Stron competitors or i0unes market share - a"-Mart number one on"ine music retai"er in US 'ery "are competitors !ith ood reputations and etensie resources 3nabi"ity to p"ease more dierse customer base 0echno"oy and entertainment industries are constant"y and rapid"y chanin ,o""aborations bet!een competitors and content proiders Got'oice (eb-based ree subscription serice records oicemai" messaes in M:+ ormat and sends to e-mai" accounts or discretionary reie!) ria"s i:hone
%TRAT-$ App"e ,omputer
toether 0he companys strateic a""iances hae proided an eectie aenue or ainin siEeab"e market share A"so. ai"iations !ith other stron brand names sere to increase App"es marketin eposure and bui"d consumer conidence App"es stratey a"so ino"es the pursuit o opportunities to create demand or its  products in the "oba" market 3n todays business enironment. it is common to epand into internationa" markets !hen domestic markets mature and commodity pricin tactics ini"trate the industry 0he impact o do!n!ard pressure on prices can be minimiEed !hen a"ternatie markets are discoered Cor hih-tech products "ike the i:hone. immediate success can be ound in many dierent cu"tures and societies Additiona""y. operatin and se""in beyond the home market can enhance the companys abi"ity to compete !ith maLor ria"s and brin kno!"ede into the oraniEation to epand its poo" o innoatie ideas

R-COMM-!ATIO% 0he App"e brand. the companys innoatie capabi"ities. the Bua"ity o its marketin stratey. and continued success in bui"din strateic partnerships are "ike"y to determine the outcome o the company
 businesses or techno"oies. or Loint dee"opment proLects (such as its 'isua" 'oicemai" proLect) Hnhancement o eistin products in a"" areas (computer hard!are and  periphera"s. consumer e"ectronics products. mobi"e communication deices. systems sot!are. app"ications sot!are. net!orkin and communications sot!are and so"utions. and 3nternet serices and so"utions) !i"" maimiEe the a"ue and the "ie o products ?o!eer. App"e needs to kno! !hen to enae in p"anned obso"escence to take adantae o the companys market "eader status 0he company needs to constant"y assess i it is moin a!ay rom interna" strenths or etendin its reach too ar beyond its kno!n and manaeab"e markets App"e a"so needs to deine and reach the customer base more broad"y and more deep"y Hnhancin security. Bua"ity. and imae !i"" increase App"es appea" to more consumer roups Hpandin the companys distribution net!ork to eectie"y reach more o its tareted customers and proide them !ith a hih-Bua"ity sa"es and post-sa"es support eperience !i"" sere to increase market penetration Dui"din unbreakab"e customer bonds (especia""y throuh its one-on-one prorams and retai" /membership/ cu"ture) !i"" secure "on-term customer "oya"ty and perpetuate its deoted base o  customers 0he success o App"es retai" stores presents the company !ith a uniBue opportunity to /kno!/ its customers needs and epectations and proides a orum or  "oatin ideas and eneratin attention 3n terms o the "oba" sector. App"e has beun to estab"ish itse" as a !or"d!ide  p"ayer As the company epands its reach into dierent parts o the !or"d beyond its current "ocations. maLor eorts shou"d be made to study the preerences o customers in those reions to make sure that serice oerins and marketin eorts are attuned to and tareted to address speciic needs in those areas Cirms that partner !ith App"e and proide access to ne! roups o customers are ery important in the companys Buest to broaden its market beyond the current insta""ed user base 3t is a"so important to pay attention to the needs and obLecties o strateic a""ies. especia""y the interests o content proiders 0o reo"utioniEe the 3nternet ideo and the smart phone industries (as the company did in the music do!n"oad industry). ood media content and uniBue carrier serices are essentia" and depend on stron re"ationships !ith key media and phone serice partners A "imited number o aai"ab"e moie do!n"oads !ou"d siniicant"y diminish the success o App"e 0'. and standardiEed carrier serice !ou"d make it diicu"t to dierentiate the i:hone rom its competitors Seekin !ays that the po!er o App"es market share and brand name can beneit its  partners and protect their business interests !i"" demonstrate that re"ationship terms can oer mutua" a"ue or a"" parties and beneit the industry as a !ho"e 0he company !ants to estab"ish partners !ho are as motiated and enaed in App"es success as interna" stakeho"ders

3n addition. App"es product "ine can achiee siniicant beneits rom uniBue. comp"ementary products and co-brandin opportunities. particu"ar"y i they can he"p oercome resistance to App"es proprietary techno"oy in the mainstream market Some ina" suestions to improe strateic success inc"ude5 •

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'ii"ant manaement o costs - to maintain pricin "eibi"ity and improe competitie position re"atie to "o!-priced competitors 3t shou"d ocus on maintainin stron supp"ier re"ationship 8eerae App"es F& share in the music market to strenthen the  perormance o other app"ications =ee"op the top manaement team and a succession stratey to reduce oerdependence on one indiidua" to adance the interests o the company