1.
Apple did better in its iPod business than it did in its PC business. Explain why. Justify
your answer through the application of industry analysis and other strategy concepts
discussed in this course.
In the early years, Apple focused on manufacturing low cost computers, working together with
IBM, cooperating with Novell and Intel to create a new operating system that run on Intel
platform. However, these projects had not achieved success until Steve Jobs became the CEO
and refocused the original strategy for Apple. Jobs was able to create a competitive advantage for
the company through restructuring and innovating software, hardware, marketing, digital asset
management, retail strategy, and product differentiation. With these advantages, Apple was saved
from bankruptcy and has gained a positive reputation, more customers, and large profit margin.
The struggle of Apple incorporate in the PC industry was mostly due to the company’s inability
to utilize Porter’s Five Forces. Porter’s Five Forces analysis is a powerful tool for understanding
a company competitive position in the industry. The first three CEOs of Apple (Scully, Spindler,
and Amelio) failed to address these forces and led the company to the edge of bankruptcy, which
largely contribute to the reason why Apple’s PC industry suffer more than its iPod business.
Intensity of Competition
The present of several large PC manufacturers such as IBM, Dell, Hp, Acer, etc. substantially
increases the intensity of competition. Additionally, when the Windows operating system
combined with an Intel processor, it created a new standard known as “Wintel” which dominated
the PC industry.
This trend turned every personal computer into a commodity, and the
competition turned into a battle of lower prices, which greatly severe the profit of all companies.
Power of Buyer
There are five categories of buyers, include Home, Small and Medium-sized business, Corporate,
Education, and Government. The power of these customers increases as they become more
knowledgeable and price sensitive to the PC product. The appearance of netbooks also ignited
price sensitive customer’s interest in these lightweight devices.
Power of Supplier
The supplier power was significant, especially the supplier of Microprocessors and Operating
system. Products in these categories were supplied chiefly by two firms: Intel and Microsoft. As
the two largest companies in their market, Microsoft and Intel were able to dominate other new
entrants and freely control the product prices.
Threat of New Entrant
Large amount of customer shifted from full-service dealers with powerful brands, such as HP
and Apple, to the “White box” channel, which featured generic machines assembled by local
entrepreneurs. The emerging of “white box” channel greatly lowered the barrier to entry, allowed
more competitors to enter and compete in the market. Additionally, the recent success of the iPad
also draws consumers away from the PC industry.
