Apple

Question 1

Strengths

Answer 1

• innovative capabilities
• proprietary design
• brand recognition
• highly profitable, financial strength
• eco-system of products (interlinked products)
• –> cross-sell
• efficient supply chain
• economies of scale
• –> more bargaining power
• ease of use of products
• stores

Question 2

weaknesses

Answer 2

• may be perceived as over priced
• closed system
• ->all developed internally, people couldn’t make compatible products
• ->IBM became industry standards (everyone made products/programs compatible)
• –>forced Apple to become a niche
• –> at first, Jobs didn’t even want iPod to be available to Microsoft users
• ->Jobs didn’t want 3rd party developers to add apps to App store
• HomePod speaker
• -> virtual assistant, Siri, wasn’t as good as Amazon echo or google home
• respectful of privacy
• –> but not keeping data means Siri underperformed

Question 3

business-level strategy

Answer 3

• *diversification
• closed system, proprietary designs sold at premium prices
• at one point, this wasn’t effective, began to license products (essentially wanted to pursue cost leadership)

Question 4

Corporate-level strategy

Answer 4

3 main divisions

• hardware
• wearables, home accessories
• services
• these divisions work together, Apple tries to make things work together
• Apple bundles products
• Apple can do joint marketing
• diversified to wearables because phones began to become saturated, wanted to take advantage of Apple’s ecosystem, tap into existing customer base
• hardware is what makes the most money for Apple (most revenue), wearables is the smallest
• horizontal diversification (within divisions)
• -> ex. PCs, iPhones, iPads
• uses value-added diversification
• ->services add to existing products
• synergy
• ->cross-selling = same target consumer base
• economies of scope
• ->knowledge, R &D, HR, joint marketing/distribution
• backward integration –> also a kind of diversification
• ->bought Intel’s cellular modem business, bought microprocessor companies
• -> cost savings, and to control critical component
• forward integration
• ->Apple Store–> much higher sales, control of customer experience, more upselling

-geographic diversification

Question 5

describe the wearables, accessories, and home devices division

Answer 5

product markets:

• headphones/”hearables” (airpods)
• smart watches (apple watch)
• smart speaker (homepod)
• airpods and apple watch in strong position and both growing
• 9.4% of contribution to total Apple revenue

Question 6

describe the hardware division

Answer 6

• different industries since competition and suppliers are different (different configuration of 5 forces)
• PCs are core business (started with this)
• ->started to diversify because prices were dropping in PC, and there was an industry standard, but mostly because PC industry matured
• –> there was an innovation plateau
• iPhones, started to serve as substitutes for PC
• majority of Apple revenue comes from here

-also iPads

Question 7

Apple’s synergies

Answer 7

• Apple care with hardware + wearables
• all services work with hardware
• airpods complement iPhone, iPhones give base to upsell
• digital hub strategy
• apple store
• –> success of iPod, brought people into store/changed image of Apple, could increase sales of PCs

Question 8

describe Apple’s multipoint competition

Answer 8

Amazon
-competes in smart speaker, cloud services, Apple TV and Music

Google
-phones, speaker

Samsung
-phones, tablets

Question 9

what are the benefits of corporate diversification/corp advantage

Answer 9

• less risk, can afford to cut costs
• can bundle products
• ex. apple Music vs. Spotify

Question 10

describe the problem and potential solution to this case

Answer 10

• hardware is plateauing
• ->should Apple switch to focusing on growth in services?
• if services first, want to make them not tied to hardware
• –> device agnostic, but this goes against closed system
• 5G tech could help hardware
• could they really differentiate services?
• -> ie. Apple Music, TV (would need exclusive contracts)