Apple Case Analysis

APPLE CASE ANALYSIS

DUAN RAN JASMINE STRA4702A

Founded by Steve Jobs and Stephen Wozniak in 1976, Apple Inc. not only revolutionized the personal computer industry, but also achieved several spectacular accomplishments regarding mobile phone industry, music industry and even the tablet industry.

  The company began as “Apple Computer”, best known for its Macintosh personal computers in the 1980s and 1990s. Later in 1997, with the return of Steve Jobs, the founder and CEO, the world witnessed a remarkable turnaround of Apple and finally peaked after the release of iPhone in 2007.In this analysis, we would first examine some unique figures of Mackintosh and the PC industry. Secondly, we would analyze how sustainable Apple’s advantages are, followed by some specific suggestions regarding different products’ prospects.

PC Industry analysis

  In April 1978, when Apple II was launched in the market, it instantly sparked a computing revolution that drove the PC industry to 1 billion dollars in annual sales in less than three years and thus became one of the industry leaders. Thanks to its unique advantages such as sleek design, ease-to-use function and good brand reputation, the Apple II immediately became one of the most profitable products in the PC industry. Therefore, in order to understand how competitive Apple is, first we need to look into the PC industry.

  The bargain power of supplier is quite strong given that Intel and Microsoft are the two most dominate suppliers in the PC industry. For one thing, Intel’s microprocessor chips are used in approximately 80% of personal computers, for another, Microsoft command roughly 90% of the operating system market, giving it substantial bargaining power. Although the price for microprocessors has stabilized in recent years and the corporation between Apple and its suppliers goes quite well, it is still a concern that Microsoft and Intel own a stronger bargain power over its buyers given that the “Wintel” controls the majority of the PC supplier market.

  The bargain power of buyer is relatively low in this market since Apple has developed a very high brand loyalty among its customers, especially in some countries like China, a large number of the youngsters tend to symbolize Apple as a fashionable commodity-like items. Besides, given that a large proportion of its customers are enterprises which purchase bulk volume of PCs to their employees and the cost to switch to another PC suppliers is relatively high, the threat from buyer’s power is quite limited.

  The competition in PC industry is very intense and fierce. Generally, there are four major manufacturers competing against Apple in the PC industry, which are HP, Dell, Lenovo and Acer. All of these manufacturers are in competition to produce the least expensive and most efficient machine. Take HP as an example, in 2002, HP outsourced most of its production to Asia and dramatically lowered its costs. This in turn has driven the industry to embrace any cost-cutting measures in an effort to increase their shrinking profit margin. Apart from the cost leadership strategy, the horizontal integration caused by the relatively large minimum efficient scale(MES) is also very drastic, foe instance, the acquisition of Gateway in 2007 made Acer become the third-largest PC vendor in the world. This contributes to a fiercer competition among these five giants.

  The threat from new entrants is very weak due to the presence of strong dominators and massive capital requirement. In PC industry, the minimum efficient scale (MES) is relatively large for each companies in order to reach the economies of scale, therefore fewer potential companies can enter this industry. Another reason is that PC companies have to invest heavily on the R&D stage, customer services and marketing department, which will impose a huge financial burden on the start-ups, and thus improve the industry thresholds.

  Last but not least, the threat from substitutes is relatively weak. The most probable substitute products are ultralight laptops and ultramobile PCs. However, since PC is playing an important role in enterprises’ daily operations, the consumer market is still very promising and stable for PC. It is estimated that by 2015, 2 billion PCs are used worldwide.

Moving beyond the PC

  When it comes to the the question regarding how sustainable are Apple’s competitive advantages are, it is essential for us to explore the investments Apple made on its both tangible assets such as unique products, retail store locations and intangible assets like brand values