Discussion Questions Assignment
jusleag1510
presentation_1.pptxApple, Inc. Sustaining Competitive Advantage
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 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
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.
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Accounting Profitability
Increasing Net Income from 2008 to 2012
Valued at 650 Billion Dollars in 2012
Value of 350 Billion Dollars in 2013
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.
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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 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 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-10-1-in-2015-leaders-apple-and-samsung-both-lose-market-share/
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