What, historically, have been Apple’s competitive advantages
Apple has used the following competitive advantage strategies: Apple uses its ability to design and develop its own operating system, hardware, application software and services to differentiate its brand from competitors. The Apple Inc. Company, with 2009 net sales of $42. 9 million, primarily competes in the PC, MP3 player, Portables, IPod, Handset, Peripherals, Software and service markets. Apple stands out for “typically designing its products from scratch, using unique chips, disk drives, and monitors.
”1 In the MP3 player market, they differentiated their product early on by providing what competitors could not – storage of up to 1,000 songs vs. only an hour of music. Through technological advances by 2010 they held more than 70% of the MP3 market in the US. Overall, their product’s appeal has a lot to do with the company’s stated goal of providing customers with products that have superior ease of use, seamless integration and innovative design. Quality is also an Apple brand trademark that provides the company with an excellent reputation and is a differentiation advantage when compared to their competitors.
Incorporating all these strategies have allowed Apple to gain certain competitive advantages and benefit from a strong brand, a loyal customer base, innovative and quality products as well as exposure to fast-growing markets. 2. How sustainable is Apple’s competitive position in PC’s? Apple needs to revisit their competitive advantage strategy in the PC market. Sales of Apple’s computers – the Macintosh (Mac) – made up approximately 32. 3% of the companies net sales in 2009. That year, the company shipped over 12. 3 million units of desktop and laptop computers.
Portables units sold about two times as fast as desktops. In 2009. total Mac net sales were $13. 8 billion dollars with a gross margin of 40%. In addition, Apple’s PC R&D/Sales percentage was 3%. Apples worldwide market share of the PC market is 4. 2%. This position is last behind the clone PC market share of HP, Dell, Acer, Lenovo and Toshiba at 5. 4%. Net sales per unit sold deteriorated in 2009 to its lowest level (trending data only went back to 2004. ) Although I expect that portables will benefit from increasedsales, the overall trend of decreased net sales will most likely continue. The competitor (Microsoft) launching of Windows 7, invigorated clone PC sales. “Microsoft shipped over 60 million units of the new OS in its first quarter of sales in the fall of 2009, generating almost $7 billion in revenue. ” 2 My risk assessment as to Apple’s competitive position in the PC market is that it is at high risk. This assessment reflects my concern that Apple’s mindset to “create/design from scratch” all proprietary PC components may not be the best approach.
Even a simple printer cable for the Mac is proprietary. “By 2010, the PC market will be approaching its market potential, with an estimated market demand for that year of 325 million units. This could change as the result of unusually large price declines, radically new computer technology, or other unpredictable developments. ” 3 Opening up the company’s architecture to vendors (open architecture like the clone PC) and focusing in on the operating system like Microsoft could bring Apple the added boost it needs to compete with the clone PC in markets worldwide.
Another factor contributing to my high risk assessment is the concern over the health of the company’s founder and CEO, Steve Jobs. Consequently, Apple should examine and update their strategy if they are to succeed in this changing PC market. 3. How sustainable is Apple’s competitive position in MP3 players? Apple’s competitive position in the MP3 players market is at a medium risk given the following: Sales of the iPod made up approximately 18. 86% of the companies net sales in 2009. They sold over 54. 1 million units of iPods.
Although 2009 net sales per unit sold dropped to its lowest level in six years to $149/per unit from a high of $296/per unit, Apple’s iPod net sales totaled $8. 0 billion dollars. In 2010, Apple reportedly held more than 70% of the MP3 marketplace in the United States. Furthermore, analysts believe that the iPod’s “halo effect” benefited Apple’s Mac business. “For every $3 dollars spent on an iPod, according to one analyst, consumers spent another $1 on iPod add-on products. ” 4 Apple earned an estimated 5% of the retail price on such items. Competitors in the MP3 market include SanDisk,
Creative, and Samsung. Each had a market share below 10%. With the launch of iTunes, iPod sales shot up by an explosive rate. With the opening of App store in about 18 months, four billion applications had been downloaded by iPhone and iPod touch by users worldwide contributing to the $1 billion dollars in app sales for Apple. If cost-cutting efforts are implemented, they can offset the trend and anticipated decline in unit selling prices for iPods. However, Apples iPod’s competitive position is at medium risk as iPod units are declining largely due to Apples Inc. large market share coupled with the market saturation in this area. Apple could face a decline in demand for the iPod as it holds such a large MP3 market share in a mainly mature market. This could mean Apple will face declining unit shipments and price pressures on the iPod. Apple has a differentiating competitive advantage in its application business. The App store is definitely very important to future sales growth. In summary, even though Apple is at a good position in the MP3 player market, they do need to consider strategy if they are to remain the leaders. 4.
If you were Steve Jobs’ Marketing Manager, would you recommend developing another new product for the market or put more money into one of their four primary products. If you recommend an existing product, which one and why? Use marketing mix (5 P’s) in your answer. Product – I would recommend developing another new product for the market. Apple Inc. is good at innovating and should continue to innovate and spend in R&D especially when they have such a strong bottom line cash position. This may open other markets to them as an adjacent-segment strategy or otherwise.
Price – Some of their existing products (i. e. Mac, iPod, etc. ) will be facing ever increasing price pressures from market saturation and other factors. This makes it crucial to have other product offerings to complement the pipe line. Promotion – Apple Inc. should do a break-even analysis in terms of which products to continue to heavily promote. They should consider including innovative technological advances in their product offerings and promote those products. Place (distribution) – Broadening Apple’s distribution channel would bring in a larger customer base.
Allowing superstores (Wal-Mart, Cosco), electronic retailers (Best Buy, Circuit City) and Web-based retailers to distribute Apple products would definitely increase sales. A different approach needs to be taken to reach a wider audience as convenience sometimes sells product. People – Similar to the iPod Business App stores, Apple could have Mac Business Centers to offer services and peripheral equipment and supplies. These centers could offer friendly, professional and competent service to continue delivering quality and customer satisfaction. Endnotes