What, historically, have been Apple’s competitive advantages?
From the beginning, customer loyalty has been one of Apple’s competitive advantages. Apple owners were much more attached to their Apple computers than PC users. Early on Apple pushed into the publishing and education markets. They were able to grab half the market for education. Their computers were easy to use, had sharp designs, and high quality. Apple also used a plug and play system with all its own peripherals as a major advantage. But with their own hardware and software, Apple’s computers were very slow and came with very few compatible programs.
After Steve Jobs came back to the company, he instilled strong teams and leadership. He put the focus back on innovation by increasing R&D. He also establish Apple’s original strategy of premium products and customer service. He then introduces a website to set up direct sales with customers.
Jobs partnered with Microsoft and added USB connectors to become more compatible with other applications and software systems. This eliminated a huge disadvantage Apple previously had. Apple products are also harder to duplicate and substitute because of it’s own proprietary design. Industry foresight has been a huge competitive advantage of Apple. Their innovation has shaped the consumer electronics industry. It has also kept competitors on their toes. Apple sets the standards for the industry. With their customer loyalty, Apple has become a strong brand name. They have product differentiation with the ease of use and design.
Vertical and horizontal Integration is another big competitive advantage. Apple has always designed and developed its own operating systems, hardware, application software, and services. They also provide many complementary products, which helps them control entire user experience. This became more prominent with their Digital Hub strategy and the onset of iTunes and Apple App stores. All of this factor into the Apple Customer Experience, which ultimately helps add value to their brand name and customer loyalty.
Analyze the personal computer industry. Are the dynamics favorable or problematic for Apple?
The PC industry is fast changing and highly competitive. The majority of PC buyers are home buyers and small/medium businesses. Other buyers include large corporations, education, and government. Business owners look for service per price, while home buyers value a cost-effective machine. Home buyer’s expectations have shifted over the years to mobility and wireless capabilities. But all buyers are price conscious. The amount of quality software that a PC could run has been directly related to how much buyers valued that PC. Even though Apple put out the first usable personal computer, IBM quickly brought PCs into the mainstream market. The PC industry is driven by lower prices and expanding capabilities. Volume growth cannot keep up with the revenue growth. With the onset of smartphones and tablets, the PC market is slowing down significantly.
What’s problematic about this is that the PC domestic market is becoming stagnant. There won’t be as many consumers for competitors to compete for. Since price is historically the key driver of the PC industry, that is the opposite of Apple’s premium product strategy. That being said, Apple can use these to its advantage. Apple’s products can differentiate more and stand out from the crowd. Now that their PCs are much more compatible, it gives Apple a better chance at making its own market, especially overseas.
How sustainable is Apple’s competitive position in PCs, MP3 players and smartphones?
With Apple’s product differentiation, they have became the 5th largest PC vendor in the US market by the end of 2009. This does not seem very high, but with it’s premium product strategy, its gross margin has beat out the top two PC manufactures, HP and Dell (See Exhibit 1). Outside of PCs, the iPod set the bar with its simplicity, design, and large storage. The ASP generally ran 50-100 dollars higher than competitors. The iTunes store, which is also available to PC owners, is the main reason Apple has beaten its competitors in the MP3 market. But Apple has strong competition with free online streaming sites, social networking sites, and the other online sites that sell cheaper music. The MP3 is becoming less popular with the onset of smart phones because they provide all in one deal solution.
Apple took a huge risk jumping into the phone industry. RIM’s blackberry is the major competitor. Palm struggled to keep up and is quickly falling behind. Apple needs to provide the iPhone through other phone operators, not just AT&T. The Apple App store is a huge advantage. It gave third parties an easy way to distribute apps. It is also easy for consumers to access and download apps directly to their phone. There are a lot of new entrants to this category. Google has their Android market that is competing with the App Store. But Apple is still the key player with more than 185,000 apps being offered. If they want to keep it this way they need to enhance the poor battery life and fix the flash compatibility. To keep up their market share in each category, Apple will need to continuously put an effort on R&D and continue innovating because the technology industry is fast changing. Any advantage Apple gains by product differentiation is short lived as competitors have copied them immediately. But they can beat them with innovation.
What are the prospects for the iPad?
The iPad has very high prospects. The iPad could become a sign for future computer gadgets coming into the personal computer market. It can set the bar for the competitors. It has the capability to cannibalize the market share of some product categories like notebooks, e-readers, iPods, and PCs. Again, the iPad does not have flash player compatibility or a USB port, which is the main concern for consumers. This market is just getting started. Many competitors intend to launch their own tablets to beat out Apple. If Apple does it right, they can come out on top.
What is Apple’s Strategy? Assess Steve Jobs with respect to this strategy.
Apple’s strategy includes rapid decision-making and growth, premium product, customer service, managed innovation, horizontal and vertical integration, strong leadership, self enforcing and self sustaining culture, innovative products, innovative marketing, and communications to the customer. This all helps boost sales and enhances the brand value.
This is mainly all because of Steve Jobs. This was his personality, essentially. Anytime Steve was not ahead of Apple it did not succeed. IF they want to keep this up they’ll need to stay focused and not stray. It can become a sustainable strategic advantage because the first to be innovative will attract the most consumers. But if Apple does it wrong then it will attract competitors to do it better.