As computer comprises Of hardware and software, Apple is really affected by technology innovation forces around it. Rapid innovation on hardware by component producers (e. G. Intel, MAD) and software by competitors (e. G. Microsoft) as well as complementary products from partner gives no choice for Apple except responsively catching the new hardware technology and also continuously innovating to sustain differentiation. Starting from 1976, Apple created personal computer as a proprietary system. Apple created the hardware by assembling components, create operating system (e. G.
Macro) and develop applications. That time, as Apple intros both hardware and software, Apple can create personal computer that deliver great personal experience compare to its competitors. That time, Apple computer main competitor is IBM personal computer. Previously IBM followed proprietary system as well. In 1 981, IBM changed into open structure. This move changed the environment of competition. This move brought many new entrants such as Compact and HP to produce IBM PC Compatible. This also brought in Intel as new entrant as producer of processor and Microsoft as producer of operating system.
Rapid innovation both from Intel created strong technological forces for Apple. As Intel released faster processor every quarter (figure 4), Apple, which that time sourced its processor from Motorola, had to respond with comparable or faster processor. Failing to respond this in time would create competitive disadvantage for Apple since competitors would adopt it and gain better technology. Microsoft which dominates operating system producer for Intel based personal computer is also the main competitor for Apple.
The rapid innovation by Microsoft which releases new version of Windows every 2 years (figure 5) creates pressure for Apple to upgrade Macro as well. This is not easy task for Apple since Microsoft Windows selling is very high so it can cover its cost meanwhile Apple Macro market share is a little. Figure 4. Intel desktop CPU Roadman Figure 5 Microsoft Windows roadman In addition, the open system adopted by Microsoft and Intel and the network size of Windows attracts many Independent Software Vendors (ISP) breed in order to create application for Winter platform.
The rapid innovation of Windows operating system and the increasing number of applications for Winter platform make Windows Intel platform more valuable and thus create additional pressure for Apple especially high switching cost for consumer to switch to Apple. Economic forces Monopolistic competition characterizes computer industry. A lot of existing competitors in the industry (e. G. IBM, Dell, HP, Compact, Ben Q, Sass, Gate Way, Leno, and Acre) and low entry barrier allow new entrant to enter the industry easily and thus increasing more competition.
Supplier bargaining position is strong due to small number of processor suppliers (e. G. Intel, MAD, and Cyril). Customer bargaining position is also strong due to low searching cost and low switching cost. Both of these characteristics constrain companies in the industry to get only low operating margin (figure 6). Apple is also affected by this economic force where Apple has to choose between low prices to boost market share or premium price but lower market share.
Figure 6 Comparison of operating margin Figure 7 Comparison of market share in SIS Developed countries are characterized by high purchasing power consumer meanwhile some developing countries and undeveloped countries are characterized by low purchasing power. This difference in purchasing power need to be considered for adapting entry marketing strategy on different entries Politic forces Joining China to creates opportunity as well as threat for Apple. Lower investment barrier and market barrier gives opportunities for Apple to take advantage of low cost labor as well as getting potential market.
On the other side, similar opportunities are also available to competitors. When competitors move its plant into China and become more efficient, Apple has to respond or will get cost inefficiency disadvantage over competitors. Social forces Dynamic change Of life-style Different and dynamic change of needs and lifestyle push Apple to continuously innovate to adapt with it. Lifestyle and need of consumers are continuously changing. The motives of consumers on purchasing computer can be segmented into the following: ;k Entertainment.
Costumers in this segment need better graphics and better sound thus this segment needs computer to have faster processing power, graphical purchasing power and good sound system device. * Travel/mobility. Customer in this segment need smaller, lighter computer as well as longer time of battery life. Everyday computer. Customer in this segment need computer for day to day activities such as office system. This segment need more reliable computer to accomplish its task. * Interconnectivity. This segment needs computer with faster and reliable communication device. * Server.
This segment needs computer with high processing power, available and reliable for running continuously non-stop. * Status. This segment needs computer with great brand and brand new design. Dynamic change of demands Market demand is continuously changing. Data from 1 995 to 2003 (figure 8) shows that there is trend of decreasing PC demand on developing countries such as US, Japan, Singapore whereas the trend of increasing demand moves to emerging countries such as China, Malaysia and Korea. This moving Of demand has to be responded by Apple in order to better manage its resources and manage its marketing strategy.
Denying this dynamics Will produce resource inefficiency, cost competitive disadvantage and ineffective of marketing strategy. Figure 8 Hardware production and share of total global production Environmental issues force Apple to be friendlier with nature. Apple has been criticized by some environmental organizations for not being a leader in removing toxic chemicals from its new products, and for not aggressively or properly recycling its old products. Due to social pressure in environmental issues Apple has to adapt its process to be friendlier with nature.
Micro Environment of apple company. Micro environment is near environment. This environment is actually the direct surrounding of the firm that determines firm position in competition. This environment can be explained using Porter five forces (figure 9). Based on Porter, firm position is characterized by rivalry, threat from product substitution, threat from new entrant, bargaining power of supplier and bargaining power of consumers. A large number of competitors especially from Winter (Windows Intel) family create a ‘red ocean’ for Apple.
Winter platform is not produced by single firm rather than combination of firms. These competitors offer similar product to apple with only little different in features, brand and design. Several Apple competitors are MM, HP, Compact, Dell, Leno, Gateway, Acre, Fajitas, Sony, SEC, Toshiba, etc. Strong bargaining power of suppliers creates high cost of computer components. As there is only small number of processor suppliers (e. G. Intel, MAD, Cyril, and IBM) and only small of them has capability and willingness to provide the best for Apple, the bargaining power of supplier is high to the
Apple. This condition made the price of processor component is high. At the other side, the great number of competitors with similar product specification and the birth of Internet are also strengthening the bargaining power of final consumers. This limits the ability for Apple set price too high. Low threats of substitute product also characterize the industry. Besides Winter personal computer, there are no pure substitutions for Apple personal PC Since Winter personal computer is the same kind of product with Apple, it is considered as rivalry instead of product substitution.
Analysis of the interaction of environment components Interaction of macro elements The interaction of Politic, Economic, Social and Technology forces create a turbulent and complex environment (figure 11). Rapid change of technology, dynamic of social lifestyle and needs, and the monopolistic economic environment influence Apple has to keep in pace with new technology, innovate to be different with competitors, and adapt its product to customer need and demand. This rapid adaptation of products made the product life- cycle obsolete faster and it increase the number of obsolete inventory.
In edition, the joining China into WTFO also influences Apple to be efficient since many of its competitors relocate its plant to China and benefit cost and labor efficiency. Figure 10 Interaction of macro elements Interaction of micro elements The interaction between 5 competitive forces, create environment for Apple very competitive and hard to survive. Low entry barrier, rapid innovation of supplier and changing demand of consumer create the product life-cycle shorten. A lot of competitors with very similar product specification let product easy to imitate and alter PC become near to commodity product.
Thus this leads to low market share industry. In addition, strong power of suppliers, a lot of competitors and strong power of consumers create the industry as low margin industry. Figure 1 1. Interaction of micro elements Analysis of how environmental change (future) will influence the strategy The environmental change trend in current and past can depict the future. The rapid increasing of technological innovation, changing customer need, competition due to low entry barrier lead to the more and saturated and fragmentation of market.
Thus, it made environment situation in the future more turbulent and complex for Apple. Thus, this made Apple strategy have to be adapted continuously as a response of the dynamics of environment. Strategy has to be reshaped based on internal and external environmental analysis. As environment change, so do strategy. Since the return of Steve Jobs as Apple CEO, Apple response to the environmental change shows improvement to the company revenue. Apple selling on Macro shows increasing trend which represent the successfulness of Apple strategy (Figure 13). Figure 12.
Mac unit sales Apple response to the environmental change As environmental change dynamically, Apple responded by adapting its equines model and strategy in order to struggle for survive. Since Apple was keep losing market share in personal computer industry, Apple has been tried to create new business model to create new source of income. Through its research and development, Apple decided to enter digital media sector, by creating innovative design pod and tunes. As a result, pod and tunes are successful due to its innovative design, easy to use and large storage.
Apples business model for the pod generates money in many different levels. Money is being made both on the hardware, software and on the accessories. When Apple introduced the pod it was not a new product. The amp players had existed for some time without being a big success, but customer preferences were changing rapidly. Apple quickly saw a new market and created an inferior music player with a great design. Apples most decisive move was to create a web shop with hundreds of thousands of licensed songs.
Soon Apple was making big money both on the pod and the music – a dream scenario for most companies. Songs bought at the Apple music store can only be played on pods but this has not affected the sales so far. Apples raging on the pod Mini is on average about 35% and $0. 25 on each sold song. At the end of 2004 Apple has sold 10 million pods and 250 million songs. With this innovative approach, as he did previously with home computers, Jobs has developed a new market: that of legal digital music, which in 2005 reported $1. Billion in sales to the record companies, as compared to 400 million from the previous year.
Apple improves design to create differentiation and offer with premium price (figure 13). To gather back its market share in personal computer and mobile computer, Apple conducts differentiation strategy. Apple creates very extinctive and innovative design that simplifies the size of computer, increase the artistic look of its products. Figure 13 Apple perception map Apple also reduces product category to ease consumers.
Currently Apple no longer creates too many product variations in order to ease consumer choosing products. Apple also transforms its marketing channel by using exclusive delivery channel. In order to manage its brand as high class and high quality product, Apple chose to transform its retail channel into exclusive store. The openings of Apple Stores are in order to extend the reach of the external distribution Handel. To respond with dynamic of innovation and create competitive advantage, Apple leaves IBM and does alliance with Intel as a response of rapid innovation of processor.
After IBM cannot afford Apple to provide processor that is faster to Intel, Apple has no other source that capable providing high- speed processor. Apple moves and does alliance with Intel, as both of the company can create mutual benefit to compete MAD for Intel and MS Windows for Apple. Apple currently uses Intel processor for its new computer and laptops for the next five years. This strategy gives benefit to Apple as it is allowing Microsoft Windows to run above it in turn it reduces the risk, cost and barrier for customer to switch from Microsoft to Apple platform.
The Mac Mini is expected to be the first Apple computer to use Intel chips, with the entire product line switching by the end of 2007. Apple’s move to Intel is thought to have come about because of Vim’s reluctance to expand the number and range of Power chips it makes. Furthermore IBM has yet to produce a version of the GO chip that would be suitable for use in Apple laptops. IBM has the contract to make Power hips for Microsoft’s imminent Oxbow 360 console, Sony forthcoming Plantation 3 and Nineteen’s future game-playing machine.