BANZON / CHAN / LULU / MIRANDA / PANGANIBAN / SALAZAR

BA 190 - STRATEGIC MANAGEMENTUNIVERSITY OF THE PHILIPPINES

PROF. MITA ANGELA M. DIMALANTA

APPLE

INTRODUCTIONFOUNDERS: Steve Jobs, Steve Wozniak and Mike Markkula (est. 1976)

CEO: Tim Cook

INDUSTRY: Computer hardware and software; Consumer electronic; Digital distribution

PRODUCTS: iPhone, iPad, Mac, iPod, Apple TV, Apple Watch, OS X, iOS, iLife, iWork

SERVICES: Apple Store, Mac AppStore, iOS AppStore, iTunes Store, iBook, iCloud

NUMBER OF STORES WORLDWIDE: 463 stores

REVENUE: $ 233.72 B

ENTERPRISE VALUE: $ 724.7731 B

July 1, 1976 Apple I

April 1, 1977 Apple II

December 1, 1981 Apple III

August 11, 1988 OneScanner

October 21, 1991 Powerbook 140

July 21, 1999 iBook

October 23, 2001 iPod Classic

July 17, 2002 iPod Second Generation

April 23, 2003 iPod Third Generation

July 19, 2004 iPod Fourth Generation

September 1, 2005 iPod Shuffle

October 12, 2005 iPod Fifth Generation

March 21, 2007 Apple TV First Generation

June 29, 2007 iPhone 1

September 5, 2007 iPod Touch First Generation

September 6, 2007 iPod Sixth Generation

January 2008 Macbook Air

July 11, 2009 iPhone 3G

April 30, 2010 iPad

June 24, 2010 iPhone 4

March 2, 2011 iPad 2

October 14, 2011 iPhone 4s

October 24, 2011 MacBook Pro

March 5, 2012

September 5, 2012 iPhone 5

October 5, 2012 iPad 3

November 5, 2012 iPad Mini

November 5, 2012 iPad 4

November 5, 2012 iMac

February 5, 2013 MacBook Pro Retina

September 20, 2013 iPhone 5s

September 20, 2013 iPhone 5c

THE IBM PC AND ITS AFTERMATH

• IBM had a huge and very profitable mainframe computer business, but failed to develop a personal computer, despite two attempts.

• “Open architecture”• Microsoft had been in the industry from its inception, writing a version

of BASIC software programming language for MITS Atari in 1977, the 1st PC produced.

• Introduced in 1981, IBM PC was an instant success. Over the next 2 years, IBM would sell over 500,000 PCs, seizing market leadership from Apple. IBM had what Apple lacked, an ability to sell into corporate America.

THE BIRTH OF THE MACINTOSHBy 1980 two other important projects were underway at Apple: Lisa and Macintosh.

Funded out of Xerox’s successful copier business, PARC was set up to do advanced research on

office technology.

Jobs was astounded by what he saw at PARC, and decided on the spot that these innovations had

to be incorporated into Apple’s machines.

• “reality distortion field”

• “Do you want to sell sugar water for the rest of your life, or do you want to change the world?“

In 1984, Macintosh captured attention for its stylish design, and utilization of a GUI, icons, and a

mouse, which made the machine easy to use and were not found on any other personal computer

at that time.

In early 1985, Apple posted its first loss.

In late 1985 an embittered Jobs resigned from Apple, sold all of his stock, and left to start another

computer company, named NeXT.

SCULLEY’S APPLEFixed shortcomings of original Mac - changed it to Mac Plus

Created relationships with Adobe for better graphics in Mac computers

Proposed to license Mac operating system to other computer manufacturers, allowing them to make Mac Clones

APPLE IN DECLINEDue to the decline in market, Apple became a Niche player instead

Sculley’s Strategic Plan:

1. Appointed himself Chief Technological Officer and CEO

2. Committed to bring out a low cost version of Macintosh to compete with IBM clones

3. Cut costs - reduced workforce, cut salaries of top management, used subcontractors were instead of manufacturing its own

4. Brought out hit products every 6 to 12 months

5. Entered into an alliance with IBM

APPLE UNDER MICHAEL SPINDLER & GILBERT AMELIO

After Sculley stepped down, Michael Spindler took over• Licensed Mac OS to other companies, allowing them to make Mac

clones• Not able to predict demand for products & overestimated demand

in 1995• Board could not take it

After Spindler stepped down, Gilbert Amelio took over,• Apple purchased NeXT - which was owned by Steve Jobs• Hired Steve Jobs as a consultant for Apple but he was busy with his

other company, Pixar• Apple incurred more losses and Board asked Amelio to step down

STEVE JOBSTHE SECOND COMING OF

STEVE JOBS:- Appointed interim CEO in 1998- Made a deal with Microsoft

- Microsoft agreed to invest $150M in Apple- Continued to produce Office for the Mac

- Ended licensing deals with Mac clone makers- bought leading Mac clone maker for $100M

- Stopped selling slow-selling products (Apple Newton handheld computers)

- Reduced number of products lines from 60 to 4- Pursued online distribution

These remedies brought a favorable reaction from the stock market, but was not enough to generate growth.

NEW MARKET OFFERINGS

iMac- Released in May 1998- Differentiator: design of machine itself (combined monitor and CPU)- Team of designers: led by Jonathan Ive

- made plastic shell look exciting rather than cheap, visited a candy factory

- worked with Asian partners to come up with a sophisticated process capable of producing millions of iMacs a year

- redesigned internal electronics, so they looked good through the thick shell

- 100,000 units were ordered even before iMac was available, at $1,299 each

NEW MARKET OFFERINGS

iBook- Released in 1999- Same design theme as the iMac- Priced at $1,599 each

1999Revenue: $6.1BProfit: $420M

2000Revenue: almost $8BProfit: $611M

NEW MARKET OFFERINGS

OS X- First version of Apple’s new operating system- Introduced in 2001- Capable of running multiple programs at once- Supports multiple users- Connects easily to other devices- Easier for developers to write applications for- Well-designed and intuitively appealing interface- OS X Mountain Lion was introduced in 2012 at $19.99

NEW MARKET OFFERINGS

Apple had to offer applications to entice Mac usersto upgrade to OS X- Deal with Microsoft (Office for Mac)

- which didn’t convince others to write programs for OS X- Adobe refused to write video-editing program for Mac in 1998

Jobs: Apple to start working on its own applications- Final Cut Pro (professionals) & iMovie (consumers)- iLife

- iMovie, iPhoto, Garage Band, iTunes- Safari

NEW MARKET OFFERINGS

Titanium Powerbook G4 Notebooks- Released in 2001- Ultralight and fast notebooks- Clean post-industrial look

iMac G5 Computer- Released in 2004- Simple, stunning all-in-one design

Ultrathin MacBook Air- Released in 2008- Weighs 3 pounds- 0.76 of an inch thick at its widest point

NEW MARKET OFFERINGS

Early 2000s- Apple had relatively low market share

- Falling behind Dell, Hewlett Packard & IBM/Lenovo

*Weak demand and low market share led to another loss for Apple in 2001.

*Some started doubting the capability of Steve Jobs in managing Apple.

Market Share: 3% - 2004, rose in 2005 8.5% - 2008

*Growth in 2005-2008 mainly driven by the popularity of the iPod and the iPhone.

INTEL INSIDE, WINDOWS ON THE DESKTOP

- In 2005, Apple announced that they would be using Intel microprocessors, because PowerPC chip failed to keep up with Intel chips.

- faster and had lower power consumption

- Risks: old applications and OS X must be rewritten to run on Intel processors

- In Spring 2006, Apple produced Intel-compatible versions of OS X, but many other applications hadn’t been rewritten for Intel chips

- To make the transition easier:- Rosetta - enabled users to run old applications on Intel-based Macs- Boot Camp - enabled Mac owners to run Windows XP on their Macs

- In late 2006, Apple announced that its transition to Intel-based architecture was complete

Moving into retail

“We spent a lot of time designingthe store, and it deserves to be built perfectly.”

• personal attention paid to customer by smiling sales staff,

• a “genius bar” where technical experts helped customers fix problems with their Apple products

• wide-open interior space

iPod and iTunes• “Commercial value of music is being widely devalued

by mass copying and piracy.” - Phonographic Industry in 2003

• Music industry was desperate for a legal alternative to illegal downloading.

• Macs did not have a CD burner, or software to manage their digital music collections.

• iTunes program: to help Mac users manage their growing digital music collections

• iPod: portable MP3 player to take music with them

• Licensed software from PortalPlayer• Apple cut a deal with Toshiba• Apple focused on designing the user

interface, the exterior styling, and the synchronization software to make it work with the Mac

• Priced at $399• Consumers’ high willingness to

pay for iPod’s high storage capacity

• Developed a version of iPod that is compatible with Windows

Jobs: “Digital distribution is going to happen, and the best way to protect your interests is to support a legal online music distribution business.”• iTunes files would be downloaded for $0.99 each.• Apple launched online iTunes store in April 2003. • Customers were downloading over 4 million songs per week,

which represented a run rate of over 200 million a year by the end of 2004.

• iTunes store had a song catalog of 20 million, and Apple was seeing 15,000 downloads a minute, by the end of 2012.

• Apple announced that 25 billion songs had been downloaded from iTunes, in February 2013.

• Apple was not making much money from iTunes downloads, probably only $0.10 a song.

• Good margins of sales of the iPod- and sales of the iPod ballooned after the launch of the iTunes online store.

• Downloads from iTunes accounted for 64% of the entire U.S. digital music market and 29% of all music sold in the U.S. (including both digital and physical formats), in mid 2012.

The iPhone and the App Store

Timeline of the iPhone Evolution

“This changes everything”• The first iPhone introduced in 2007• Designed by team led by Jonny Ive,

iPhone was differentiated from established smart phone offerings by revolutionary touch screen

Pricing strategy• Priced between $599 and $499

depending on the model, iPhone was positioned at the high end of the smart phone market

• Uses a price skimming strategy

Reaching targets• Steve Jobs announced the goal was to

try and grab 1% of the total global market for wireless phones in the first full year that the iPhone was on the market.

“The first phone to beat the iPhone”

Third party applications

iPhone 4 and iPhone 5

Competition in the Smart Phone Market

The Android Evolution

Windows Phone

Operating systems

THE IPAD

- Released in 2001- Revolutionary tablet computer- Touch screen keyboard- WiFi ready- 3G wireless service support- Same iOS as found on iPhone- Elegant design (aluminum case & Gorilla glass)- Powerful enough to download and watch full-length movies on HD- Light enough

“STYLUS ISN'T MY STYLE”

- 2002 - Microsoft’s table computers “stylus”- Jobs: “stylus” is a “failure”- He wanted a glass touch screen- 2010 - iPad was a success (300,000 units sold in the first day)- 2013 - iPad 4 was released (with retina display and better features)

THE IMITATION GAME

- Tablets using Google’s Android OS- Galaxy Tablet (Samsung)- Amazon.com - Kindle Fire Tablet- Microsoft - Surface Tablet - Windows

HEADS IN THE ICLOUD

2011- Cloud storage- Computing- Synchronization device- Allowed customers to store data

- Music- Movies- Books- Documents- Remote Servers*Most comprehensive offering yet

- 20 million users n 1 week- 2012 - 250 million subscribers- It is for free but with small annual subscription for music storage and

synchronization services

STRATEGIC ISSUES

STRATEGIC ISSUES

- 2013- Lost its visionary- Motivate?- Tim Cook (COO); Johnny Ive (Design Op)- Google - Google Drive and Google Chrome- Microsoft - 90% of the world’s 1.5 billion PCs- How to match Tham?- Continued growth when you’re no. 1?

REFERENCES

 Apple. (2016). The Apple Timeline. Retrieved November 16, 2016, from The History of Apple, In One Place: http://www.theappletimeline.com Hill, C. W., Jones, G. R., & Schilling, M. A. (2013). Strategic Management: An Integrated Approach (11th ed.). Stamford, USA: Cengage Learning. Linzmayer, O. W. (2006, March 30). 30 pivotal moments in Apple's history. Retrieved November 16, 2016, from Macworld: http://www.macworld.com/article/1050112/macs/30moments.html