Apple Inc. An Assessment and Term Paper

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Table 2: Distribution of Revenue by Product Area

Source: (Apple Investor Relations, 2008) (Prudential Equity Group LLC, 2006)

Planning

The cornerstone of Apple's planning processes is the continual development of products and services that compliment the product and services ecosystem shown in Figure 1 (Apple Investor Relations, 2008) (Prudential Equity Group LLC, 2006).

Figure 1: Apple Product and Services Ecosystem

Source: (Apple Investor Relations, 2008) (Prudential Equity Group LLC, 2006)

For Apple, their future planning revolves around the following opportunities the company needs to capitalize on. First, the broader development of digitization of video across iPod and iTunes needs to be a catalyst of future growth for the company. Second, the development of Apple TV platforms including the development of an Apple Personal Video Recorder (PVR) is critical. Apple TV needs to also have an HDTV equivalent and the ability to receive, not just play back recorded content. Third, there is significant expansion in the area of video-capable mobile devices. Approximately 80% of all Apple iPod units sold in calendar Q407 are capable of playing video, expanding the installed base of video-enabled devices to nearly 50 million units in 2007, increasing from 19 million through all of calendar 2006. Fourth, the company has significant potential to completely re-define their content provider and partnership strategies by concentrating on populating iTunes with fresh musical and video content. The existing laptop business is 50% of iTunes revenue and shows potential through 2010 through the existing product roadmap (Prudential Equity Group LLC, 2006) and through SEC filings (Apple Investor Relations, 2008). The laptop product line is analyzed in the Market Assessment section of this paper, showing the competitive advantages Apple has in this aspect of their business, in addition to the challenges of competing with market leaders in each specific segment.

Market Assessment

The most urgent requirement the company has today is to capitalize on the extensive installed base of video-compatible iPods. Figure 2 compares Video-capable iPods and iPhones unit shipments and forecast (Apple Investor Relations, 2008).

Figure 2: Market Assessment of Video-Capable iPods

Figure 2 graphically illustrates how critical it is for Apple to capitalize on the expanding installed base of iPods and iPhones capable of receiving and displaying video content. Apple needs to create a much greater breadth of video content to capitalize on this emerging installed base and capture this catalyst of growth for portable MP3 players.

In addition, Apple needs to concentrate their efforts staying competitive on their iPhone and iMac platforms. Table 3, Apple iPhone Competitive Analysis illustrates the unique differentiators of Apple with their iPhone and iPod Touch.

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Their use of the Mac OS X significantly reduces the royalties they have to pay relative to their competitors, who must pay royalties on the operating systems they use.

Table 3: Apple iPhone Competitive Analysis

Source: (Apple Investor Relations, 2008) (Prudential Equity Group LLC, 2006)

The competition within the laptop business is not as rapidly changing as the area of iPod, iPhone and iPod Touch, as personal MP3 players capable of also playing video content is the most rapidly growing market Apple competes in today. Apple's supply chain is a major competitive advantage for their laptop and personal computer products however. The supply chain partnerships and extensive levels of collaboration that Apple has with their suppliers make it possible for them to rapidly gain new components, often having them customized specifically for their laptops and systems. In addition, Apple has greater supply chain visibility relative to competitors in the laptop business, further giving them a significant competitive advantage.

Table 4: Apple iPhone Competitive Analysis

Source: (Apple Investor Relations, 2008) (Prudential Equity Group LLC, 2006)

Apple's Marketing Strategy

Apples' strongest segments are state & local government, schools and universities, small and medium businesses, and after several major attempts to move into enterprise computing have led the company to focus on graphic design and higher end animation, including their contributions to film making with collaborations with Pixar. The majority of the customers however are consumers who are purchasing Apple iPods, accessories and music, videos, television shows and other forms of digital entertainment from Apples' iTunes online store. Underscoring all these segments however are those brand loyal customers who have only used Apple personal computer products and insist that, in either a personal or professional context, it will be the only system they will use. This "cult of Apple" as it has been called by industry analysts, is on the one hand the company's greatest strength in terms of recurring revenue. Yet on the other, the "cult of Apple" has at times led the product strategy to become insular and less focused on innovation that will capture new converts. Steve Jobs' return to Apple in 1997 began an entirely new approach to delivering innovative products to capture greater market share in previously untapped markets, including digital music players, the company had not competed in before. As a result of this graphics expertise the company also has grown significantly in the Scientific/Engineering marketplace as well.

Figure 3 is derived from multiple sources to illustrate the core values of.....

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