Premium Prices for Apple Personal Computers - Term Paper Example

?Introduction and Key Issues The case study under review is regarding Apple Inc. and discusses about the history of Apple and also highlights the overall situation in industry in which Apple operates. Case study outlines as to how Apple has been successful in charging premium prices for its Personal Computers i.e. Macintosh. Case has further discussed about the overall manufacturing as well as components involved in the development of Mac besides discussing about the recent products launched by Apple. Case outlines that how Apple has been able to generate higher and more revenue from its non-PC segment by producing products such as Ipods, Iphones and IPADs. Though Apple may be thriving on its success in different segments specially its non-PC segment however, it is confronting with certain issues which can critically affect its operations in the future. Since late 1990s, the overall share of Apple in personal computers market is consistently below 5% which is far below than Apple’s traditional competitors. It seems that the buyers of Apple are too much focused on its non-PC products and consumers are willing to buy those products. The competitive products against Apple Mac are reasonably priced therefore consumers tend to prefer them over Mac due to price related variables. Further, technology is changing fast in the area where Apple is operating and historically firms tend to lose if they don’t keep up with the changes in technology. Whether Apple will be able to keep pace with this technology is something which everybody likes to explore. Situation Analysis External Analysis Apple’s competition is of international nature in its Mac segment of personal computers wherein it sells its PCs either through its own flagship stores, electronic retailors as well as through its website. The overall range of personal computers of Apple includes desktops, laptops as well as smaller mini notebooks. There can be different factors which may at play and can directly affects the way Apple operates in the industry. It is critical to note that Generation Y is becoming technology oriented with ownership of at least one PC is considered as essential because PC is now a days being used not only for entertainment purposes but for improving the productivity as well as to have access to information. What however, has changed over the period of time is the fact that consumers tend to favor those manufacturers which conserve the environment in their overall manufacturing process. The reusability of the material as well as its ability of not harming the environment is what is making the difference. It is also critical to note that the overall revenue of the industry is on rise since last decade except a slight dip during 2009. It may therefore can be safely assumed that industry is growing and there is relatively better potential for the existing players to expand with little bit of more innovation and creativity. A Porter Five Forces Analysis of Personal Computer Industry would suggest that buyers have higher bargaining power because of low switching cost. Suppliers also tend to have higher bargaining power due to technological sophistication as well as expertise they held in terms of providing the required hardware and software components to manufacture a personal computer. Providers such as Intel tend to have monopoly over certain critical components required to manufacture a PC and therefore tend to have more bargaining power. The overall threat of new substitutes is relatively low because industry is dominated by large players and the overall capital expenditure required is relatively high. Threats of substitutes can be significant especially in the wake of latest changes in the technology allowing smaller and compact tablet PCs to emerge as alternatives. Apple’s own IPAD is considered as a gadget which can actually kill personal computers therefore going forward there can be significant threats of substitutes. As a result of the technological developments and new market dynamics, the overall rivalry has intensified wherein non-traditional players have also became significant competitors too. The presence of alternatives and relatively cheaper models also make price related competition more intense and hence existing firms tend to face challenges in terms of maintain their profitability targets. Internal Analysis Resources are considered as important as resources provide organizations necessary competitive advantage over their competitors. The operating system of Apple can be one such resource because it is unique and not reproduced by any other manufacturer. Apple therefore can thrive on this unique ability to develop and successfully market a unique operating system through its systems. Another important resource is Apple’s overall brand image and its recognizability as its logo critically distinguishes it from its competitors. Even the non-users of Apple’s products can actually identify Apple’s logo and associate it with the overall brand image of the firm. A sleek and aesthetic design of Apple Mac is also one of the reasons as to why youngsters are especially attracted towards the products. The overall design and development of the PCs serve as one of the key attracting factors for new buyers. It is also because of this reason that many consumers still believe that Apple Mac is more durable and reliable than any other brand in the market. Another important and probably the critical strength of Apple lie in its technological sophistication and engineering. Over the period of time, Apple has been able to roll out models which have been state of the art and were clearly distinguished from the competition. A key weakness of Apple is reliance on research and development due to which it has to consistently divert huge amount of funds. Due to limited number of consumers using Apple PCs, the overall revenue potential therefore may seem to be limited in nature. Apple’s overall financial position is relatively mixed in nature with increase in revenue however, its asset utilization is becoming unfavorable. Low leverage indicates that overall debt profile of the firm is stable and as such Apple is less leveraged as compared to its competitors. Low debt levels may reduce the overall level of risk for Apple. Strategic Alternatives Considering the above discussion, it is critical that Apple must exercise certain strategic options in order to continue to remain one of the key players in the personal computer market. Considering the overall price sensitivity of consumers, economic depression and availability of other cheaper alternatives require that Apple either reduce its prices so that its PCs become attractive to mass market or consider developing smaller notebooks. Further, users should be given more options in terms of software usability of Apple’s operating system as well as other software. Since most of PCs are run on Window Operating System and there is a range of software options available for Windows users, Apple has to ensure that it collaborates with developers to introduce better software products for its personal computers. Recommendations Probably the most viable option for Apple is to introduce low end notebooks which can attract mass market especially young consumers. Since Apple is famous for its stylish designs, therefore introduction of low end notebooks will help Apple to capture young market. It will also Apple to further make its way into markets like China and India where it is gaining more brand recognition due to its other products. Low priced editions of its notebooks therefore can be sold in developing markets whereas consumers in developed market can be targeted too in this segment of the market. Notebooks with reduced processing powers as well as PCs having low storage capacities can really allow Apple to enter into low priced Personal Computers Market. Read More