202 apple has realised that in order differentiation

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202 Apple has realised that in order differentiation to provide a competitive advantage it has to lead to superior profitability, which is also depends on the cost structure of Apple. 7.5 Advantages and disadvantages of the Differentiation strategy The strategy was able to safeguard Apple against competitors as it was able to create a strong brand loyalty. Steve Jobs pointed that out by saying that Apple has the world’s greatest customers. Another advantage is that this loyalty creates a substantial barrier to entry and especially in the case of Apple, where switching costs are considerably high. The main threat for Apple in pursuing such a strategy is the entrance of competitors being able to imitate the products and at the same time have a lower cost structure. Analysts rate the threat of imitation in the PC sector for Apple as relatively low despite the tangible nature of competitive advantage, as Dell and Compaq a few years ago designed PCs which were fancy coloured, as an answer to Apple’s iMacs which was then sold in five shiny colours, but only six months after their introduction they had to be discontinued as a result of slow sales. In the past years technological factors have drawn players with different strategies closer together intensifying competition. So former pursuer of cost leadership strategies such as Dell and HP/Compaq are trying to gain market share on the expense of Apple, differentiating their product portfolio to create products which can compete with Apple’s iMacs and Power Macs. 202 Yoffie D. B. and Wang Y. (2003)
Apple Computer Inc. DIT | Strategic Management | Iliev, Lindinger, Poettler 140 7.6 Investment strategy 203 The second determinant of where Apple is heading in the future on a business level is its investment strategy. As the name already suggests, the investment strategy defines and allocates resources needed to create distinctive competencies. The choice is dependent on the strength of Apple’s position in the industry and the stage of the industry life cycle. To analyse Apple’s position in the industry you need to consider the market share in its key market segments. In the education sector Apple has a 28% market share in portable devices (iBook) and an overall market share of 12.4%, in the creative professionals sector Apple’s market share exceeds 65%. In the consumer and the small business segments it captures only insignificant market shares. 204 To sum it up, Apple has a relatively strong competitive position within the industry. Apple’s position has again implications for the investment strategy. As stated before, the PC industry is in its shake out stage reaching maturity, meaning that demand is only increasing slowly with 2001 being the second year of a decline in worldwide PC sales after 1985. As a strong competitor and a differentiation specialist Apple investments are oriented towards the development of a sophisticated customer service, marketing, and broader differentiation. Apple therefore entered as part of the

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