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The Consumer Products Industry
The Consumer Products Industry
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Executive Summary
Computer Hardware Industry Computers & Media Are Converging To thrive, companies must diversify their product lines and continually innovate to remain competitive Apple Apple is making a comeback The iPod is a runaway success
Consumer Products
A Broad Topic
Apparel/Accessories Appliance & Tool Audio & Video Equip. Auto & Truck Parts Footwear Furniture & Fixtures Jewelry & Silverware Photography Recreational Products Textiles - Non Apparel Tires
Beverages (Alcoholic) Beverages (Non-Alcoholic) Crops Fish/Livestock Food Processing Office Supplies Personal & Household Products Tobacco
Computer Hardware Computer Peripherals Computer Services Computer Storage Devices Software & Programming
The Players
Housing 41%
Transportation 17%
Source: Dept. of Commerce
$8,000
$6,000
$100 $80
$4,000
$60
$2,000
$40 $20 $0
$0
19 89
19 93
19 87
91
19 95
19 97
19 99
01
19
20
20
03
GDP
Other 36%
H-P 16%
IBM 5%
Apple 88%
Source: www.macobserver.com/article/2004/11/03.2.shtml
19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04
Source: www.hoovers.com
19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04
Source: www.hoovers.com
$5,000
$3,000
$1,000
-$3,000
-$5,000
19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04
-$1,000
Source: www.hoovers.com
Apples Background
"So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So then we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.'" --Apple Computer Inc. founder Steve Jobs on attempts to get Atari and H-P
interested in his and Steve Wozniak's personal computer.
Apples Background
1976 The Beginning 1985 -1997 The Missteps 1997 - Present The Rebound
Steve Wozniak creates Apple I Steve Jobs sees potential and insists they sell it together -- Apple is born Apple I is sold without monitor or keyboard (mini mac concept not new)
The GUI wars and the decision not to license the Mac OS Leadership issues Supplier issues Left in the dust because of incompatibility Failed products (Performa, Lisa, Newton)
Steve Jobs the CEO, take 2 A succession of hits iMac iBook iPod iPod Mini Revolutionizes the Music Industry with iTunes
PowerMac
70s
Apple Disk II
80s
Mac II
90s
New iMac Performas Powerbooks iMac & iBook
2000 - 2005
Source: www.apple-history.com
Auto Integration
Income
Apples products are normal goods When income rises, demand for their products increases
As Income of consumers rises, demand for Apples premium products increases. Quantity
Price
Substitutes Computers made by other manufacturers Complements Software Peripherals Internet service
Apple faces negative pressure on their demand curve when competitors reduce prices
Apple must continue to innovate in computers and addons to counter pricing pressure
Quantity
Taste
Industry leader in design and quality Brand image Cool factor Must have gadgets
Price
Quantity
Expectations
Consumers expect the coolest products from Apple Consumers expect to pay premiums for these products
Price
Quantity
Number of Buyers
Apple historically has catered to a niche market It now wishes to attract the mass consumer market
Price
Apple must continue to offer products that will attract new buyers to the Apple brand
Quantity
Quality
= = =
Decreased Sales & Decreased Profits Negative effects on Operating Results and Financial Condition Lots of headaches and potential negative effects on Operating Results and Financial Condition
Inventory
Third Parties
Stiff Competition
Computers Digital Music Players Music Download Services
+ Economic
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Environment
Apple Revenues
1997 Sales (millions) Macintosh Net Sales iPod Other Music Products Other Services & Products Total Units (thousands) Macintosh Net Sales iPod Avg Sales Price Macintosh Net Sales iPod Gross Margin 1998 1999 2000 2001 2002 2003 2004 4,923 1,306 278 1,772 8,279 $ 5,671 $ 4,862 $ 5,082 $ 6,885 $ 4,403 $ 4,534 $ 4,491 $ 143 345 4 36 1,410 1,079 1,052 1,098 960 1,061 1,335 $ 7,081 $ 5,941 $ 6,134 $ 7,983 $ 5,363 $ 5,742 $ 6,207 $
2,874 -
2,763 -
3,448 -
4,558 -
3,087 -
3,101 381
3,012 939
3,290 4,416
$ 1,973 $ 1,760 $ 1,474 $ 1,511 $ 1,426 $ 1,462 $ 1,491 $ 1,496 n/a n/a n/a n/a n/a $ 375 $ 367 $ 296 19% 25% 28% 27% 23% 28% 28% 27%
Apple Revenues
$9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Other Music Products Other Services & Products Macintosh Net Sales iPod
Apple Revenues
$12,000 $10,000
$8,000
$6,000
$4,000
$2,000
$0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Durable Goods
$2,000
$2,000
$0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$0
GDP (billions)
$8,000
$6,000
Durable Goods
Computers & Peripherals
$4,000
$3,000
$0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$0
$8,000
$800
Durable Goods
Computers & Peripherals
$6,000
$600
$4,000
$400
$2,000
$200
$0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$0
$8,000
$80
$6,000
$60
$4,000
$40
$2,000
$20
$0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$0
It took us three years to build the NeXT computer. If we'd given customers what they said they wanted, we'd have built a computer they'd have been happy with a year after we spoke to them - not something they'd want now. Steve Jobs
Computer
Media
&