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Presentation #1 – Discussion Questions (each question must be an.docx
- 1. Presentation #1 – Discussion Questions (each question must be answered in at least two paragraphs each) 1. With the inventions of the iPhone, iPod, iPad, AppleTV, and now the Apple Watch, where can Apple go from here? In what ways can they increase market share? 2. Although Samsung is a direct competitor, Apple uses Samsung-manufactured parts in its iPhones. Could Apple benefit from partnering with other competitors, like Facebook? 3. The Cult of Apple has allowed Apple to become one of the most valuable brands in the last two decades, what other intangible resources have allowed Apple to surpass the veteran technology giants? Presentation #2 – Discussion Questions (each question must be answered in at least two paragraphs each) 1. Currently, there is a controversy surrounding Apple. FBI and Courts wants Apple to unlock a terror accused’s iPhone to gather evidence and also to thwart possible future attacks. So far Apple has declined to do so citing privacy reasons and fear of setting wrong precedence. Which side of the argument do you come in? How does Apple’s position impact its Triple Bottom Line strategy? 2. Patent infringement can be killer blow to a company’s competitive position. Apple has been both victim and aggressor in several lawsuits. How much of an impact (if any) has patent infringement had on Apple’s competitive advantage? 3. How would Apple’s recent move away from radical innovation to incremental innovation affect its future competitive advantage?
- 2. Apple (in 2013): How to Sustain a Competitive Advantage? History of Apple Apple SWOT 2013 Performance Apple’s greater economic value creation due to superior product differentiation. Superior quality and user friendly features. 78% of the iPhone owners cannot imagine owning a different phone. Brand appeal. 59% confessed to blind loyalty to Apple’s product, Another anecdotal evidence is the long lines in front of Apple stores to get its latest products.
- 3. Performance Apple’s integrated ecosystem, end-to-end strategy gives it a competitive advantage. Performance Between 2011 and 2012 gross value for Apple increased by 200% due to higher perceived value by customers as well as efficient supply chain. Apple Revenue And Compounded Growth ratio (CAGR) 2002- 2009 Apple’s Revenue in Billions U.S Dollars
- 4. Triple Bottom Line Triple Bottom Line Measurement Index Economic Measures: Economic variables measures bottom line and flow of money Personal income Cost of underemployment Establishment churn Job growth Revenue by sector contributing to gross state product Environmental Measures Environmental variables represent measurements of natural resources and reflect potential influences to its viability. It incorporate air and water quality, energy consumption, natural resources, solid and toxic waste, and land use/land cover. Fossil fuel consumption. Selected priority pollutants.
- 5. Social Measures Social variables deals with social dimensions of a community or region. Measurements of education. Equity and access to social resources. Health and well-being, quality of life, and social capital. Unemployment rate Female labor force participation rate Apple on TBL Apple on TBL Examples of Apple’s TBL Engagement
- 6. Training of 2.3 million of workers about their rights and 92% of compliance regarding the norm of 60 working hours per week maximum. Apple Supplier EHS Academy : Training of best practices in terms of environment, safety & health. Clean Water Program: To help suppliers to process water and recycling it. Apple’s flawed TBL Strategy Apple hasn’t adopted TBL thinking. Its practice shows it is all about profits. Apple has no CSR leadership team. Apple does not release sustainability report. Apple lack stakeholder engagement strategy. Apple does not have a holistic approach to sustainability. Foxconn Foxconn is the 10th largest employer in the world in the world Foxconn manufactures; PC’s, game consoles, and network gear for many top companies Foxconn and Apple’s partnership started in early 2000s and by 2004 most of Apple’s products were being manufactured by Foxconn.
- 7. In 2010 Foxconn was pushed into the public spotlight Ten Foxconn employees committed suicide and many more attempted. Employees cited poor working conditions, excruciating hours, minimal pay, skipped meals, restricted bathroom breaks, and no/lack of training. In response to the suicides Foxconn put up “suicide net” to deter further actions Foxconn “THE CRISIS” An audit of Foxconn Technology Group revealed “serious and pressing” violations of Chinese labor laws. Employees were given the ultimatum by their Foxconn supervisors to either obey the rules and work grueling hours or to leave their employment positions Competitors - Apple’s largest competitor
- 8. Competitors - Apple’s largest competitor Competitors Apple has managed to merge both consumer surplus as well as product surplus for greater ROI. Through its product differentiation and marketing, Apple has been successful in creating economic value in the minds of its customers, and customers are willing to pay a premium price for its products, hence the steep profits when compared to Google. Competitors Founded in 1994 by Jeff Bezos 1995 Annual Sales $20,000 1998 Launched Music and Video Service 2007 Amazon Kindle launched 2012 Sales $61 Billion, 51,300 employees Mostly an online retailer but has pushed into Apple’s market with the Kindle Fire
- 9. Amazon is also rumored to be looking into its own line of smartphones Apple Practical Example #1 “Brand” “Sure, other brands are cheaper. But nothing beats going to the Apple store and having them fix it on the spot.” Apple Customer Apple uses a premium pricing strategy in a market where competitors sell handsets for half the price. Their strategy leaves them vulnerable to (Refer to slide 2): Pricing competition from competitors who can sell similar technology,--Samsung for example—at lower prices to consumers. This point is made worse by – Patent Infringement. In the case of competitor Samsung, the technology is identical because Samsung manufactures components for the iphone and then infringes on Apple's technology by incorporating the design into their reduced price handsets. So with cheaper identical substitutes, How does Apple maintain lead market position using premium pricing? The answer is the brand. Everything from the inviting retail locations, hands on service, extensive warranty coverage, carefully curated peripherals (software and hardware), user friendly interfaces and design all provide the competitive edge over cheaper identical competitors. It is all built into the brand.
- 10. Apple Practical Example #2 “Network Effect” “I have to buy the next Iphone. If I get another brand it may not work with my TV, or stereo, car radio, or the scale in my bathroom” - Apple Customer Apple leverages the Network Effect to maintain a competitive advantage. The large market share incentivises other related related technology into a symbiosis with the brand products : Critical Mass. Apple’s mass market share is a weapon against competitors. Companies that make other products (anything from televisions to thermometers) can leverage Apple's market share to bolster their sales. This requires integration with Apple devices. So if your company makes bathroom scales , then you are almost guaranteed more sales if that bathroom scale connects to the Iphone. Product Synergy. Apple products work best when paired with other apple products. You own an Iphone? It syncs much simpler with a Mac than with a PC. Controlling a large share of the cellphone market gave Apple a larger share of the computer market because Iphone owners switched to Macs. In so many words, the network effect gives Apple a leverage over its competitors because the ubiquity of their products forces integration into daily consumer life.
- 11. References Rothaermel, F. (April 22, 2013). Apple (in 2013) How to Sustain a Competitive Advantage?. Strategic Management Edition 2. http://www.cnet.com/news/riots-suicides-and-other-issues-in- foxconns-iphone-factories/ www.ibrc.indiana.edu/ibr/2011/spring/article http://marketrealist.com/2014/02/ecosystem/ www.cnet.com http://blogs.wsj.com/digits/2015/01/29/samsung-vs-apple-who- was-no-1/ http://appjeed.com/samsung-galaxy-s5-vs-iphone-5s/ http://www.prnewswire.com/news-releases/virnetx-wins-6256- million-patent-infringement-verdict-against-apple-in-east-texas- 300214979.html http://fortune.com/2016/02/26/apple-samsung-patent-appeal/ https://www.statista.com/search/ http://www.apple.com/supplier-responsibility/ http://www.strategicmanagementinsight.com/swot- analyses/apple-swot-analysis.html www.calvin.edu Apple, Inc. Sustaining Competitive Advantage
- 12. Company Background Steve Jobs and Steve Wozniak founded Apple Computer, Inc. in 1976. The first personal computer, the Apple II, was launched in 1978 and the company became a publically traded company later that year. In little over 10 years, Apple grew into a $2 billion company with over 4,000 employees. Jobs was fixated on design and style, allowing the Macintosh the advantage of unique industrial design and ease of use. However, the product struggled against IBM’s personal computers with open software programs. A power struggle erupted between Steve Jobs and John Sculley over differing visions causing Apple’s reputation to greatly suffer. Jobs was publicly fired from the company. Jobs returned as CEO in 1997, reinvented Apple’s product line, and began enjoying profits again for the first time in 5 years. The company was rebranded as “cool” and “hip”. Innovation has kept Apple on the cutting edge; “Innovation distinguishes between a leader and a follower” (Jobs, pg 546). The inventions of the iPod, iPhone, iPad, and Apple TV have created a technical revolution, making Apple a self-proclaimed mobile-devices and computer company. Competitive Advantage Innovation & Differentiation Apple began marketing itself as the rebel against cloned products, manufactured by its competitors. Innovation is embedded throughout the culture of the company and is displayed through the creation of their products. Over time, Apple has created a category within the consumer electronics segment. Complementary Products/Services Apple has created products to address any technological need a
- 13. consumer has from the initial product the personal computer (Mac), portable digital music player (iPod) to something as simple as a watch (Apple Watch). Along with the innovative products, Apple has created its own digital services (iTunes, Apple Music, and Apple Pay) to complement. Competitive Advantage (continued…) Brand Loyalty Loyal Apple product users are referred as the “Cult of Apple.” This cult owns over 1 billion active devices with iOS software (Apple). As of the summer 2015, Apple commanded more than half of the US smartphone market with nearly 100 million iPhones in use (Kline, 2015). As many as 42% of iPhone owners own another Apple device (VertoAnalytics). Low R&D Expenditures in Comparison to Competitors Apple benefits from the advantage of a high tolerance for failure. The company encourages its employees to take risks to find the next big success. Over time, Apple has spent billions less than its competitors while sustaining a competitive market share in each product’s sub-segment. Apple US Market Shares Market Share (US) PC Industry Tablet IndustrySmartphone Industry 0.10340000000000001 0.24 0.39100000000000001
- 14. Performance By June 2008 iTunes had exceeded 5 billion downloads. IPhone 3G was launched later in 2008 and had 6 million in first year sales. Apples stock prices rose 15% when the iPad was introduced. Apple products all had a competitive advantage over competitors resulting in 82% sales growth from 2008-2012. Apple TV was expected to have a major market impact in 2012 but didn’t reach that goal because of hardware and regulatory issues. Apple faced lawsuit in 2012 relating to its eBook business model and collusion. From 2008 to 2012 Apple experienced a lot of innovations in the company. The growth rate was outstanding. Apple constantly captured more market share every year by releasing top of the line devices such as the iphone, ipad and apple t.v.. The iphone 4 was released in 2010 and captured 17.4 percent of the smartphone market. This shows that Apple had a device that was not only cool ,but they had a competitive advantage over any rival companies. The iphone was a great platform to show the power of Apple. Every year since the iphone release, the device was improved and had new technology that forced the competitors to think outside of the box. Other innovations such as the ipad and apple tv forced many competitors to try and imitate the products. Despite the various efforts Apple was still successful because of the amount of market share and its appeal to the younger more hip consumer. 6 Accounting Profitability Increasing Net Income from 2008 to 2012 Valued at 650 Billion Dollars in 2012 Value of 350 Billion Dollars in 2013
- 15. Only 2% of revenue spent on R&D in 2011 Apple lost nearly half its value in 2013. This is partly because of the emergence of Samsung as a primary competitor, but another reason for the decline is that Apple made no major innovative advancements in 2013, which is something they had be known for doing every year since Steve Jobs returned. 7 Shareholder Performance Most valuable publicly traded company of all time in 2012 ($623 Billion). Stock prices tumbled nearly 30% throughout 2013. Steep decrease in profitability coincides with increasing competency of competitors. Despite this, Apple is still more valuable than its competitors, despite losing market share Competition Samsung Samsung was started in 1938 by Byung-Chull Lee as a small export business focusing on fish, vegetables, and fruit. Today, the company sells products worldwide and is known for its innovative and consumer-driven products. By 2012, it had become the smartphone leader globally. Its Galaxy S devices pose the biggest threat competitively to Apple’s mobile devices. Samsung has partnered with Google, combining expertise in manufacturing, hardware, software, and user experience. The company manufactures its own devices, enabling heavily discounted prices. Apple even uses Samsung to manufacture
- 16. part of its iPhone products! Samsung held 28 percent of the smartphone market share in 2012 while Apple held 20.5 percent. Compared to Apple between 2008 and 2012, Samsung has greater financials. Sales and earnings per share are larger, however net income is significantly lower. Samsung invests a larger percentage of its profit in research and development than Apple, explaining its lower net income. However, the comparison isn’t apples to apples in that Samsung has a much larger business with more products. Competition Microsoft Microsoft was founded in 1975 by Bill Gates and Paul Allen with a vision to put a computer in everyone’s home. It dominated the market in the early 1990s and 2000s with its Windows Operating System. The reveal of the Windows phone in 2010 introduced Microsoft into the smartphone market. In 2011, the company entered into an agreement with Nokia. Nokia agreed to use the Windows phone as its primary smartphone, competing with Samsung and Apple. Microsoft’s Surface rivals the iPad and its own retail stores compete with Apple’s retail stores. The company’s financials are a bit weaker than Apple’s. While sales were up in 2008, they paled in comparison in 2012. Microsoft’s earnings per share and net income are also significantly less. Conclusion Even with the ups and downs over the last 40 years, Apple
- 17. continues to hold a strong position in the technology market, despite vast direct and indirect competition. Innovation, differentiation, and brand loyalty are the competitive advantages that have strengthened its reputation and will continue to grow its customer base. The company has all of the financial potential to continue to innovate and improve technology for many years to come. References "Q1 '16 Earnings Supplemental Material”. (2016, January 26). Apple. Retrieved February 28, 2016, from https://www.apple.com/pr/pdf/q1fy16supplementalmaterial.pdf Kline, D. B. “How Big Is Apple's U.S. iPhone User Base?” (2015, July 28). The Motley Fool. Retrieved February 27, 2016, from http://www.fool.com/investing/general/2015/07/28/how- big-is-apples-us-iphone-user-base.aspx “Apple Device Owners Are More Loyal to Their Platform Than Android Users”. (2014, July). Verto Analytics. Retrieved February 27, 2016, from http://www.vertoanalytics.com/2014/07/apple-device-owners- loyal-platform-android-users/ Elmer-DeWitt, P. (2016, February 11). About Apple's 40% Share of the U.S. Smartphone Market. Retrieved February 27, 2016, from Fortune: http://fortune.com/2016/02/11/apple- iphone-ios-share/ Keane, J. (2016, February 16). Apple gains notebook market share in 2015, but can't top HP and Lenovo. Retrieved February 27, 2016, from Digital Trends: http://www.digitaltrends.com/computing/apple-2015-notebook- market-share/ Protalinski, E. (2016, February 01). IDC: Tablet shipments decline 10.1% in 2015, leaders Apple and Samsung both lose market share. Retrieved February 27, 2016, from Venture Beat: http://venturebeat.com/2016/02/01/idc-tablet-shipments-decline-