Apple In 2006

Apple's Synergy in the Computer

and MP3 Player Industry

Apple Computer in 2006

Introduction

Apple's Strategy

Apple is known for its innovative and high-quality products. Apple's CEO, Steve Jobs, has brought a lot to the company. According to the case, "His leadership style, which epitomized the spirit and standards upon which Apple was founded, blended with the business discipline that was lacking in the younger Jobs" (Thompson). The overall theme of Apple is a combination of high quality and innovation. Apple's activities in the PC and MP3 industry match up because both of these themes are present in its products. The iPod is extremely innovative so much that it is the standard for MP3 players. Apple's PCs are known for their high quality and innovative software and design. Both industries are important to Apple's success. The iPod is the leader in the MP3 player industry with estimates of having nearly 84 percent of hard-drive player market share and 46 percent of the market share in flash based players.

Apple's business plan is to regain market share in the education market. Apple computers were predominantly used in schools until the Windows platform was created in the 90s. Ever since then Apple has been competing with Wintel companies like Dell. Also, Steve Jobs knew that a few major things needed to happen: new product development, aggressive pricing, and more extensive and clever advertising He also "recognized that in order to grow significantly, Apple would need to convert existing Wintel users into Apple users" (Rosenbloom). Conversion is one of Apple's main business plans and to combat this, Apple has opened nearly 170 retail stores nationwide since 2001 (Apple). Apple's strategies are working because there is still great demand for iPods and now the new iPhone. Needless to say that Steve Jobs has been the driving force behind so much of Apple's success in the MP3 industry. He reached a deal with the "music industry's five major recording labels" to use on iTunes (Thompson). Jobs was looking way into the future when ideas were formed for the iPod. Apple has only been moderately successful in the PC industry because they refused to license its technology to others which led to a lot of missed opportunities. Steve Jobs deserves an A minus for his strategic leadership and execution because when Apple was going from one CEO to the next, Jobs was able to pick up the pieces and make something great out of Apple again.

Competition

The personal computer industry has five main competitors: Dell, Hewlett-Packard, Gateway, Lenovo/IBM, and then Apple in last place. The economic segments of the industry are intended for professional, educational, and at home use. The characteristics of this industry are innovative, high-quality, and competitively priced products. The competition leader, Dell, had 30 percent market share in 2005 with Hewlett-Packard trailing behind with 20 percent. Dell's direct distribution method has allowed it to cut costs and become the industry's leader. Porter's strongest force is rivalry among current sellers in the industry. The weakest force is supplier bargaining power since the component parts in the computers can be easily substituted with other parts from other manufacturers. Synergy is found between Apple PCs and MPS players due to the projected halo effect of iPod consumers switching to Apple computers. Since Apple holds most of the MP3 market share, it is using this to boost the share of PCs. The PC industry is not as attractive for Apple as it is for its competitors. Apple is playing catch-up to everyone else right now in the PC market. The PC market, as a whole, is a very attractive industry for mainly the key competitors that are already in the industry.

Competitive Position in Computer Industry

As shown in Figure 1, Apple and Dell show a comparable strength rating of Dell with 47 and Apple with 45. Hewlett-Packard has an unweighted overall strength rating of 37 and Gateway trails behind with 32. Dell enjoys the strongest competitive position and Gateway shows the weakest position. Apple has a competitive advantage over the other three companies because consumers convert from Wintel computers to Apple after using