Apple: Personal Computer and Business Model Essay

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Business Analysis Part II

Kareem Osman

MGT/521

December 27.2011
Sergio Perez

Global Business Environment Analysis of Apple

The volatility and evolution of computer industry

Starting from 1976, Apple computer created the personal computer (PC). After IBM transformed the PC from proprietary systems into open structure, PC has been dominated by Wintel (Windows + Intel) structure. Apple insists in adopting proprietary and niche market strategies made them keep losing market share till less than 3% in 2001. However, its strategy with ignoring the market trends makes it lose the market after years

Before 1981: Proprietary Systems.

Every PC producer had to develop self own hardware and software. It was proprietary. Most buyers were technical people. There were 2 main streams in the market: Apple style machine and IBM style machine. During this period, Apple was the leader. Its strong developing ability made the Apple II became a family commodity. However, Apple didn’t use patent or trade secret to protect its products. Many computer companies re-engineered Apple II and made cheaper similar products to compete in the market. For example, Acer copied Apple II and developed the Little Professor Series.

1997- : Internet PC

After internet booming, the PC industry has changed. PCs connect together. Before that, most PCs are work independently, especially in the household market. But it has changed. Internet connects every computer around the world. Network has become a necessary part in PC industry. Apple already lost their PC market. It tried to develop new iMac to win the market back. However, Apple kept using the same strategy with fancy styles and user- friendly interface. They still don’t focus on Powerful CPU and compatible software. As most PC users in the market are makes IBM keeps dominating this shrinking market. Apple’s niche strategy success with unique selling points in “ease of use”, “industrial design”, “tech elegance”, and “powerful application in graphic processing”. However, Apple kept losing market share because they focused in relatively low growth industries with many substitute competitors. People can buy an IBM style PC with similar functions and cheaper price from Compaq, HP, Dell, and many other providers. Apple focused on the wrong market with many substitute competitors. Its unique selling points are not hard to copy. Its loosing market is destined.

Apple response to the environmental change

As environmental change dynamically, Apple responded by adapting its business model and strategy in order to struggle for survive. Since Apple was keep losing market share in personal computer industry, Apple has been tried to create new business model to create new source of income. Through its research and development, Apple decided to enter digital media sector, by creating innovative design iPod and iTunes. As a result, iPod and iTunes are successful due to its innovative design, easy to use and large storage

Apples business model for the iPod generates money in many different levels. Money is being made both on the hardware, software and on the accessories. When Apple introduced the iPod it was not a new product. The mp3 players had existed for some time without being a big success, but customer preferences were changing rapidly. Apple quickly saw a new market and created an inferior music player with a great design. Apples most decisive move was to create a web shop with hundreds of thousands of licensed songs. Soon Apple was making big money both on the iPod and the music – a dream scenario for most companies. Songs bought at the Apple music store can only be played on iPods but this has not affected the sales so far. Apples margins on the iPod Mini is on average about 35% and $0.25 on each sold song. At the end of 2004 Apple has sold 10 million iPods
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