University of San Carlos School of Business and Economics Masters in Business Administration

CASE ANALYSIS APPLE INC. !!" MBA 2308 Marketing Management

Su#mitted to$ Dr Marites Khanser

Su#mitted #y$ Jose Reymond Aguilar Emmanuel Armodia Jofred en Bermoy !oude"i# $astrana

Date August %& 20%3 P%IN& %' (IE)

As Marketing 'tudents& (e see A))le as a to) te#hnology #om)any making non $* )rodu#t lines+

S&A&EMEN& %' &*E P+%BLEM ,ith the )restige gained -y A))le for making the Ma#intosh $ersonal *om)uters& #an they still -e the e.#e)tion in the highly #om)etiti"e and fast mo"ing /0 #onsuma-les like ta-lets and other gadgets1 S&A&EMEN& %' %B,EC&I(ES A))le li"es this "ision through the te#hnologies it de"elo)s for #onsumers and #or)orations+ /t stri"es to make its #ustomers masters of the )rodu#ts they ha"e -ought+ A))le doesn2t sim)ly make a statement+ /t li"es it -y ensuring that its em)loyees understand the o-3e#ti"e and stri"e to rea#h it+ /t has )ut systems in )la#e to ena-le smooth #ustomer intera#tion+ /t has )ut o-3e#ti"es in )la#e to #ontinuously mo"e for(ard4 ensured that the right marketing& finan#ial and o)erational stru#tures are in )la#e to a))ly the strategies and im)lemented strategies to fulfill these o-3e#ti"es5 0o inno"ate )rodu#ts (hi#h are nothing less than e.#ellent inorder to -e the dominant highte#h -rand to #onsumers all o"er the (orld+ 0o -e a-le to -ring the -est )ersonal #om)uting e.)erien#e to students& edu#ators& #reati"e )rofessionals and #onsumers around the (orld through its inno"ati"e hard(are& soft(are and /nternet offerings+ 0o -e the #reator of #hange in this (orld& as su#h A))le should -e a-o"e systems and stru#tures& and not su-ordinate to others+ 0o #reate inno"ati"e )rodu#ts ahead of the #om)etition through differentiation+ 0o ha"e the a-ility to offer -uyers something attra#ti"ely different from #om)etitors su#h as their a))li#ations& Ma#'tore& the #reati"e o)erating systems on their #om)uters& as o))ose to $*2s that are (ired mainly for -usiness and (ord )ro#essing features+ 0o -uild long lasting relationshi) (ith the -uyers (ho are (illing to )ay for& and stri"e for )rodu#t su)eriority+ 0o #ontinue de"elo) ne( models to #ater the need of #ustomers -y its strong Resear#h

and De"elo)ment De)artment+ 0o ha"e -rand loyalty and e.)and their sales to #ustomers (ho ha"e not yet o(n any A))le2s )rodu#ts+ 0o gi"e )rodu#ts and ser"i#es that is ahead of the trends& #reating ergonomi# ele#troni#s that satisfy many )eo)le6s tastes+ 0o make as mu#h )rofit as )ossi-le& maintain a high re)utation and in#rease market share+ A+EAS %' C%NSI-E+A&I%N 1. Strong brand image 0he A))le -rand is (ell re#ogni ed amongst most #onsumers+ A))le also en3oys a high le"el of -rand a(areness and -rand re#ognition for its )rodu#ts in all its markets+ 0he #om)any2s -rand "alue& as )er the /nter-rand rankings& has im)ro"ed from 37 in 2008& 39 in 200: to 2; in 2008+ 0he -rand "alue of the #om)any im)ro"ed to <%3&:2; million in 2008 from <%%&03: million in 200:+ A))le le"erages its -rand image to differentiate its )rodu#t offering and dri"e sales+ 0he #om)any2s strong -rand ena-les it to #ommand a )remium )ri#ing for its )rodu#ts su#h as iMa#& i$od and i$hone& gi"ing it an edge o"er regional as (ell as other glo-al #om)etitors su#h as 'ony+ 2. Research and Development A))le has a strong fo#us on resear#h and de"elo)ment as #ontinual in"estment in Resear#h and De"elo)ment is #riti#al to the de"elo)ment and enhan#ement of inno"ati"e )rodu#ts and te#hnologies+ /n addition to e"ol"ing its )ersonal #om)uters and related solutions& the #om)any #ontinues to #a)itali e on the #on"ergen#e of the )ersonal #om)uter& digital #onsumer ele#troni#s and mo-ile #ommuni#ations -y #reating and refining inno"ations& su#h as the i$od& i$hone& i0unes 'tore& and A))le 0=+ 0he #om)any2s resear#h and de"elo)ment e.)enditures (ere <%+% -illion& <:82 million& and <:%2 million in 2008& 200:& and 2008& res)e#ti"ely+ 0he #om)any2s R>D s)ending is fo#used on further de"elo)ing its e.isting Ma# line of )ersonal #om)uters& its o)erating system& a))li#ation soft(are& i$hone and i$ods4 de"elo)ing ne( digital lifestyle

#onsumer and )rofessional soft(are a))li#ations4 and in"esting in ne( )rodu#t areas and te#hnologies+

3. Product recalls 0he #om)any2s )rodu#ts and ser"i#es e.)erien#e ?uality )ro-lems from time to time+ A))le sells highly #om)le. hard(are and soft(are )rodu#ts and ser"i#es that #an #ontain defe#ts in design and manufa#ture+ Defe#ts may also o##ur in #om)onents and )rodu#ts the #om)any )ur#hases from third )arties+ 0here #an -e no assuran#e the #om)any (ill -e a-le to dete#t and fi. all defe#ts in the hard(are& soft(are and ser"i#es it sells+ @or instan#e& in 'e)tem-er 2008& A))le announ#ed Altra#om)a#t A'B Ada)ter E.#hange $rogram+ Ander #ertain #onditions& the ne( ultra#om)a#t A))le A'B )o(er ada)ter2s metal )rongs -roke off and remained in a )o(er outlet& #reating the risk of ele#tri# sho#k+ 0herefore& the #om)any de#ided to e.#hange e"ery ultra#om)a#t )o(er ada)ter for a ne( redesigned ada)ter& free of #harge+ $rodu#t defe#ts #ould result in harm to re)utation and signifi#ant (arranty and other e.)enses+ 4. Smartphones Demand for smart)hones among the mo-ile users is likely to gro( ra)idly o"er the ne.t fe( years+ /n#reasing demand for $* fun#tionalities to su))ort the data ser"i#es along (ith the "oi#e are e.)e#ted to dri"e the smart)hone markets+ A##ording to industry fore#ast& (orld(ide smart)hone sales to endBusers totaled 38+9 million units in the third ?uarter of 2008& an %%+9C in#rease from the same )eriod in 200:+ A))le has laun#hed the i$hone& (hi#h is a multimedia and /nternetBena-led mo-ile )hone #atering to the re?uired fun#tionalities+ i$hone is a #om-ination of mo-ile )hone& a (ides#reen i$od& and the internet fun#tionalities and a))li#ations that su))ort email& (e-ro(sing& and ma)s on a mo-ile )hone+ /t has additional features su#h as multi tou#h dis)lay and related soft(are+ 5. Retail stores 0he #om)any o)ened a total of 2;: retail stores& in#luding 209 stores in the A' and a total of ;2 'tores internationally+ 0he #om)any has ty)i#ally lo#ated its stores at highB

traffi# lo#ations in ?uality sho))ing malls and ur-an sho))ing distri#ts+ A goal of the #om)any2s retail -usiness is to e.)and its installed -ase through sales to #ustomers not o(ning the #om)any2s )rodu#ts+ 0he stores are designed to sim)lify and enhan#e the )resentation and marketing of the #om)any2s )rodu#ts and related solutions+ 0o that end& retail store #onfigurations ha"e e"ol"ed into "arious si es in order to a##ommodate marketBs)e#ifi# demands+ 0he stores em)loy e.)erien#ed and kno(ledgea-le )ersonnel (ho )ro"ide )rodu#t ad"i#e& ser"i#e& and training+ 0he stores offer a (ide sele#tion of thirdB)arty hard(are& soft(are& and "arious other a##essory )rodu#ts and )eri)herals sele#ted to #om)lement the #om)any2s o(n )rodu#ts+ By o)erating its o(n stores and lo#ating them in desira-le high traffi# lo#ations& the #om)any is -etter )ositioned to #ontrol the #ustomer -uying e.)erien#e and attra#t ne( #ustomers+ 6. Intense competition A))le o)erates in the highly #om)etiti"e and ra)idly e"ol"ing te#hnology industry+ 0he #om)any fa#es intense #om)etition in #onsumer ele#troni#s& )ersonal #om)uters and related soft(are& and )eri)heral )rodu#ts+ Ra)id te#hnologi#al ad"an#es in -oth hard(are and soft(are& in#reasing the #a)a-ilities and use of )ersonal #om)uters and digital ele#troni# de"i#es& #hara#teri e these markets+ Ra)id #hanges in the te#hnology ha"e resulted in the fre?uent introdu#tion of ne( )rodu#ts (ith #om)etiti"e )ri#es& features& and )erforman#e #hara#teristi#s+ 'ome of the #om)etitors of the #om)any in#lude Mi#rosoft *or)oration& Dell& De(lettB$a#kard& @u3itsu& 'amsung Ele#troni#s& 'ony& and 0oshi-a& among others+ @urther& a#?uisition of Eate(ay -y A#er has #reated a large )layer in the $* market+ 0he #om)any is #urrently fo#used on market o))ortunities related to mo-ile #ommuni#ation de"i#es in#luding the i$hone+ 0he mo-ile #ommuni#ations industry is highly #om)etiti"e (ith se"eral large& (ellBfunded& and e.)erien#ed #om)etitors+ Mo-ile )hone maker Fokia laun#hed a soft(are and media store that aims to #om)ete (ith A))le online market)la#e+ /ntense #om)etition among the $* )rodu#ers has resulted in the )ri#e erosion threatening to erode the market share of the #om)any+ . !lobal "conomic #onditions

An#ertainty in #urrent glo-al e#onomi# #onditions )oses a risk to A))le as #onsumers and -usinesses (ould )ost)one s)ending in res)onse to tighter #redit& negati"e finan#ial ne(s andGor de#lines in in#ome or asset "alues+ E#onomi# slo(do(n in any ma3or geogra)hi# segment of the #om)any (ould affe#t its finan#ial )erforman#e+ @or instan#e& e#onomi# slo(do(n in the A' (ould de#rease the demand for A))le2s )rodu#ts and ser"i#es+ An#ertain glo-al e#onomi# #onditions #ould ha"e a material negati"e effe#t on the demand for the #om)any2s )rodu#ts and ser"i#es+ .. #orporate Social Responsibilities A))le is #ommitted to ensuring that (orking #onditions in their su))ly #hain are safe& (orkers are treated (ith res)e#t and dignity& and manufa#turing )ro#esses are en"ironmentally res)onsi-le+ A))le re)orts en"ironmental im)a#t #om)rehensi"ely+ By fo#using on their )rodu#ts5 (hat ha))ens (hen they design them& (hat ha))ens (hen they make them& and (hat ha))ens (hen you take them home and use them+ Designing green )rodu#ts in#ludes #onsidering the en"ironmental im)a#t of the materials used to make them+ Be#ause A))le designs smaller& thinner& lighter )rodu#ts& they do more (ith less material+ Effi#ient )a#kaging design hel)s redu#e the emissions )rodu#ed during trans)ortation+ 0he )a#kaging for the %3Bin#h Ma#Book $ro& for e.am)le& is ;% )er#ent smaller than the )re"iousBgeneration Ma#Book+ 0he ma3ority of greenhouse gas emissions A))le a##ounts for are )rodu#ed (hen you )lug in their )rodu#ts and start using them+ 0hat2s (hy they design all their )rodu#ts to -e as energy effi#ient as )ossi-le+ A))le2s a))roa#h to re#y#ling -egins in the design stage& (here they #reate #om)a#t& effi#ient )rodu#ts that re?uire less material to )rodu#e+ $. Principles o% &usiness #onduct A))le2s su##ess is -ased on #reating inno"ati"e& highB?uality )rodu#ts and ser"i#e sand on demonstrating integrity in e"ery -usiness intera#tion+ A))le2s )rin#i)les of -usiness #ondu#t define the (ay they do -usiness (orld(ide+ 0hese )rin#i)les are5 H Donesty B Demonstrate honesty and high ethi#al standards in all -usiness dealings+ H Res)e#t B0reat #ustomers& su))liers& em)loyees& and others (ith res)e#t and #ourtesy+ H *onfidentiality+ $rote#t the #onfidentiality of A))le2s information and their information of our #ustomers& su))liers& and em)loyees+

H *om)lian#e+ Ensure that -usiness de#isions #om)ly (ith all a))li#a-le la(s and regulations+

/. !ood 'anagement 0he attitudes and -eha"iors of managers to(ard their )eo)le are of )rimary im)ortan#e+ Em)loyees should -e a-le to trust the moti"es and integrity of their su)er"isors+ /t is the res)onsi-ility of management to #reate a )rodu#ti"e en"ironment (here A))le =alues flourish+ 0eam(ork is essential to A))le6s su##ess& for the 3o- is too -ig to -e done -y one )erson+ /ndi"iduals are en#ouraged to intera#t (ith all le"els of management& sharing ideas and suggestions to im)ro"e A))le6s effe#ti"eness and ?uality of life+

1(. 0uality E1cellence A))le #are a-out (hat they do+ 0hey -uild into A))le )rodu#ts a le"el of ?uality& )erforman#e& and "alue that (ill earn the res)e#t and loyalty of their #ustomers+ At A))le& ?uality management is #riti#al to their #ontinued su##ess+

Mar2et Strate3y 4 &he 5Ps

Porters 'ive 'orces

Primary Products Porters 'ive 'orces PC 6 Mac Lo; Differentiation5 Ani?ue Design& =erti#al /ntegration& 'trong Brand MP7 Player 6 iPod Lo; Differentiation5 Ani?ue Design& i0unes B Easy Musi#& Do(nload& 'yn#h (ith $*& A##essories& $atents *ost Ad"antage5 $ro)rietary 0e#h& A##ess to Ra( E#onomies of '#ale5 Digh Market 'hare Lo; *ustomers de#reasing& '(it#hing #ost high for differentiated )rodu#t Moderate !arge *om)eting @irms Moderate 'mart)hone& Radio& *D $layers& Iutdated te#hnology *i3h Mo#ile 6 iPhone Lo; Differentiation5 Ani?ue Design& A))'toreBDo(nload on $hone& $hone A##essories& $atents *ost Ad"antage5 $ro)rietary 0e#h& A##ess to Ra( R>D5 'etu) #ost is high Lo; *ustomer in#reasing& '(it#hing #ost high for differentiated )rodu#t *i3h !arge *om)eting @irms Lo; !andline B home& $u-li#& /M& Do not )ro"ide )orta-ility Moderate

&hreat of Entry 8Potential Com9etitors:

*ustomer Ad"antage5 $ro)rietary 0e#h R>D5 'etu) #ost is high Lo; *ustomer in#reasing& '(it#hing #ost high for differentiated )rodu#t *i3h @e( 'trong *om)etitors& !arge (hiteB-o. )layers Moderate $DA& 0a-lets& 'mart)hones& $ro"ide only some fun#tion of $* Moderate

Buyer Po;er

&hreat of +ivalry

&hreat of Su#stitute

Su99lier

'oft(are& M$& 'u))lier of #om)onent& $o(er to im)a#t )ri#e

Memory& *ontent& 'u))lier of *om)onent& $o(er to im)a#t )ri#e& *ontent )ro"iders& *ontrol )ri#e and a"aila-ility

M$& A))s& 'u))lier of *om)onent& $o(er to im)a#t )ri#e

&he S)%& Analysis

&he Com9etitive Advanta3es of A99le Inc.

AL&E+NA&I(E C%U+SE %' AC&I%N %+ /nternational E.)ansion 2+ JI)en u)KL

3+ $ri#e Differentiation ;+ *om)lete /nBhouse De"elo)ment

9+ *olla-orate (ith more te#hnology related industries and #om)anies 8+ 'u-stantial > /n#remental /nno"ation

-ISCUSSI%N %N &*E AL&E+NA&I(E C%U+SE %' AC&I%N <. International E19ansion A))le /n#+ has a "ast o))ortunity (hen e.)anding internationally+ /n this (ay& the #om)any #an fight a "ery intense #om)etition in the market+ Emerging Markets& es)e#ially Asia $a#ifi# Regions or A$A* (ith lot of #onsumers& )ro"ides high gro(th o))ortunity for A))le /n#+ Also& the JAse Retail 'trategyL is also ad"antageous to A))le #onsidering their "ital and strong )resen#e alone in the market and in the te#hnology+ 0his strategy #an do the tri#k& for e.am)le their "ery inno"ati"e and one of their #om)etiti"e ad"antage i0unes > A))'tore (here they #ould introdu#e to the (orld(ide #ontent& thus hel)ing them out to s)read their )otential target markets internationally+ . =%9en 4 u9>?

Ine thing to #onsider is that A))le should a"oid& if not remo"e& the #on#e)t of J)ro)rietaryBnessL+ /nstead they should su))ort o)en sour#e de"elo)ment to attra#t more de"elo)ers around the (orld to (rite a))li#ations for A))le )rodu#ts+ /n this (ay& their inno"ati"e ideas (ill not -e limited only to the dire#t (orkers G em)loyees in the organi ation+ Ine good thing a-out o)ening it u) to the de"elo)ers from the four #orners of the (orld is that there (ill -e more ideas #oming from different inno"ati"e minded )eo)le+ 0he a))li#ations (ritten for A))le )rodu#ts (ill -e a#?uired and e"entually )atented -y the organi ation any(ay& so there is no (orry a-out -eing used sin#e it is a (inB(in situation -et(een the de"elo)ers and A))le /n#+ as a #om)any+ Also& one thing they might lo"e to #onsider is to introdu#e i$hone on other relia-le #arriers& not only limited to one )ro"ider+ @urthermore& they #an also li#ense Ma#I' > iI' for running on nonBA))le Dard(are+ 7. Price -ifferentiation A))le should e.tend )rodu#t line to )ro"ide some )rodu#ts (ith lo(er )ri#e )oint+ 0he #om)any should fo#us more on the -uying )o(er of the international market+ @or e.am)le& it #an go medium )ri#ing e.#lusi"e for the )ri#e sensiti"e Asian markets+ Another (ould -e medium to high )ri#ing for Euro)ean& Ameri#an and other similar markets+ @o#using on the )ur#hase )o(er of the market they are )lanning to )enetrate is a smart ste)+ 5. Com9lete In6house -evelo9ment /n the #urrent status ?uo of A))le /n#+& they are mostly reliant of the resour#es de"elo)ed e.ternally+ Ine thing they should #onsider is to de"elo) Mi#ro $ro#essors& )latforms& and other soft(are that they #an #all their o(n& de"elo)ed internally rather than rely on /ntel and Mi#rosoft+ Ine ad"antage for de"elo)ing their o(n )latforms is to a"oid #ost of su))ort from other e.ternally de"elo)ed )rodu#ts+ ,hen they ha"e their o(n lo#ally inBhouse )rodu#ed )latforms& they (ill -e less de)endent on other #om)anies2 out)uts+ Do(e"er& this doesn2t mean that they (ill )art (ays (ith the e.isting )artners+ @. Colla#orate ;ith more technolo3y related industries and com9anies 0hey #an still strengthen their relationshi) (ith the $* industry giants like /ntel and Mi#rosoft and enter into 3oint "entures (ith others like 'amsung and Motorola& to -ring out ne( JhitsL+ 0hese #om)anies may -e #onsidered its stiff #om)etitors -ut in some #ases&

)artnering (ith a ri"al (ill )rodu#e a great out#ome together that is -enefi#ial to -oth )arties& rather than "enturing on their o(n+ A. Su#stantial B Incremental Innovation /nno"ation and thinking differently ha"e al(ays -een a key fa#tor that #ontri-uted greatly to A))le /n#+ su##ess+ A))le /n#+ has al(ays -een the first one to #reate te#hni#ally elegant )rodu#ts and others ha"e follo(ed it+ A))le /n#+ has al(ays sho(n that they are the $rime Mo"ers of the market+ /n this line& A))le /n#+ should therefore #ontinue to inno"ate ne( )rodu#ts in order for them to stay at )a#e and ahead of #om)etition+ /nno"ation has -een their forte and (hat made them A))le /n#+ as it is today+ @o#us on (hat they #an do and #an offer to the #ostumers (ill and fore"er make them a great )layer of the market in terms of te#hnology ad"an#ements+

C%NCLUSI%N 0he key situation is& (hether A))le #an #ontinue its mar#h to dominate the $* /ndustry and inno"ate te#hnology in the fa#e of fier#e #om)etition from the -ig #om)anies+ /ts )rodu#ts ha"e marked a -reakthrough in ease of use& design and te#hni#al elegan#e+ But it is fa#ing #om)etition in its e"ery )rodu#t from the te#hB(orld e.)erts+ A))le /n#+& )resen#e in the Anited 'tates and some )arts of Euro)e is "ery strong+ But it has not really -roken the /nternational -arrier and taken any other #ountries -y storm like the Asian Market+ /n many #ountries like /ndia and *hina& there is a huge )o)ulation of younger generation& (hose in#lination to(ards inno"ati"e and te#hni#ally so)histi#ated )rodu#ts is ra)idly in#reasing+ 'o if A))le )enetrates into those markets& it #ould )ro-a-ly in#rease its market share and sustain its #om)etiti"e ad"antage+ /ts #om)etitors like D$& !eno"o& Dell& Fokia& et#+ ha"e a strong )resen#e in the A' as (ell as in international market+ 'o A))le2s )lan should -e to go international& to gro( and sustain its domination in the #om)etiti"e industry+