Apple Computers - Case Study Example

? Apple Computers is one of the most innovative companies in the world. The firm since its inception has been at the frontline of the industry in terms of product innovation. The generic strategy that the company used is product development. The firm at the beginning of the 21st century introduced a product that changed the company forever. The introduction of the iPod in 2001 led a transformation of turning Apple from a computer company into a consumer electronics company. The sales of the iPod skyrocketed after the firm created the iTunes division in 2003 which enabled customers to purchased single songs legally by downloading from the online iTunes store. By 2004 the firm held a 70% market share in the digital music industry. The success of the iPod helped build the brand value of the company. The popularity of the brand helped the company revive its computer business. In 2005 the firm held a market share of 4% in the computer business which was a tremendous feat considering the firm had less than a one percent share a few years earlier. The transformation of Apple helped the firm visualize opportunities in other markets such as the cellular industry. In 2007 Apple released a product that changed the cellular industry. The iPhone was the first smartphone. Steve Job’s leadership was critical to the success of the company. He pushed his engineers and staff to provide innovative ideas. He also had the foresight of getting rid of unprofitable business segments and divisions. The firm had great leadership which motivated the employees to achieve their potential. The COO of the company, Tim Cook, was also instrumental in the success of the company. Apple Computers adapted well to market changes. The firm realized that the success of the company relied on the ability of the firm to look beyond the computer sector for sales. During the 21st century the generic strategy of the company evolved and the firm started utilizing a diversification strategy. “Diversification growth makes sense when good opportunities can be found outside the present businesses” (Kotler, 2003, pg. 101). The three main business segments Apple penetrated are the computer industry, cellular products, and music media players. The computer industry in 2009 was consolidated with five vendors accounting for 78.5% of the U.S. shipments and 60.3% of the sales worldwide (Marino & Gamble, 2010). The recession of 2008-2009 slowed down the growth in sales and negatively impacted the prices of computers. By the second quarter of 2010 industry sales rose once again experiencing a growth of over 20%. A tendency among computer users was replacing desktop computers with laptops and notebooks. As of 2010 Apple despite the fact that a growing number of its sales came from non-computer products considered the computer division its core business. The Mac product line differentiated itself from the competition due its superb quality, superior operating system and graphic interface. The market share of the company jumped from 4% in 2005 to 8% by 2009. The firm benefited from a halo effect of users of iPod and iPhone wanting a computer product from the same brand. The computer product offering of the company included the Mac Pro, iMac, and Mac Mini. The notebook offering of Apple was composed of the MacBook Pro, MacBook, and the MacBook Air. The most recent innovation to the Apple line of computer products was the MacBook Air. This notebook targeted customers that seek durability and portability. The computer was designed to have a height of 0.76 inches when closed and it weighted only three pounds. All Apple desktop and notebook products were priced at a premium. This strategy helped boost the profitability of the company. Due to the fact that Apple no longer depended solely on computer sales the strategy worked better than in the past. In order to boost the demand for its computer products the company implemented a 10% or more discount on all its computer products in June of 2009. The law of supply and demand states that a decrease in price will increase the demand for a product (Investopedia, 2012). Apple in 2010 held the number one position in the personal medial player industry with a market share of 73%. The iPod had become so popular that the name became the generic name used by everyone when referring to music media players. The iPod Touch was the best selling media player in 2010. It had wi-fi capabilities which allowed the users to play videos, access the internet, view photos, listen to AM-FM radio, and play downloaded music. None of the competitors in the industry in 2010 had a market share above 5%. The four iPod models Apple offered to its customers in 2010 were the iPod Shuffle, iPod Nano, iPod Classic, and the iPod Touch. The primary reason for the success of the iPod was the introduction of the iTunes store in 2003. In 2010 more that 50 million customers visited the iTunes store. The iTunes stores offered downloadable music, videos, movies, and television shows. Since 2003 the iTunes stores has 10 billion downloads. iTunes in addition became the world’s most popular online movie store with customers renting over 50,000 movies each day. The iPhone was released to the general public on June 29, 2007. The smartphone was a success since day one of its introduction. The company sold over 270,000 units of the iPhone in the first 30 hours of its release. Some of the features of the iPhone included a multi-touch screen, virtual keyboard, a camera, portable media player similar to the iPod, text messaging, and visual voice mail, internet capability, and Wi-Fi connectivity. The iPhone was named invention of the year in 2007 by Time magazine. In 2008 the company signed an exclusivity contract with AT&T to sell its iPhone 3G model. The phone was available for sale in 70 countries. The phone allowed its users to access the internet at twice the speed of its predecessor iPhone model. It also featured an integrated GPS system. The next generation iPhone was the iPhone 3GS which was released on June 19, 2009. This version of the iPhone had the same features as the previous model, but it could also launch applications and render web pages twice as fast. It also had a 3 MB camera, voice control, video recording, and 32 GB of flash memory. Based on the timeline of the article the most recent version of the iPhone was the iPhone 4 which was launched on June 24, 2010. The company sold the iPhone 4 phone with a 2-year contract with AT&T at $199 for the 16GB model and $299 for its 32 GB model. In 2010 the sales of iPhones accounted for $5.33 billion of the $15.7 billion in revenues the company generated in the third quarter of 2010. The total sales of Apple in 2009 were $36.54 billion. The sales of the company grew by 162% in comparison with 2005 and by 12.5% in comparison with the previous year. The hefty increase in sales in comparison with 2005 is associated with the release of the iPhone in 2007. The net income of the firm in 2009 was $5.7 billion. The net income of the company has been growing steadily since 2005. The graphic below shows the movement in net income of the company between 2005 and 2009. In comparison with 2005 the net income of the firm grew by 329%. The net margin of Apple in 2009 was 15.61%. The net margin is a measure of absolute profitability. The return on assets of the firm in 2009 was 10.59%. The return on assets metric measures how effective the firm has been at generating income from its assets (Garrison & Noreen, 2003). References Garrison, R., Noreen, E. (2003). Managerial Accounting (10th ed.). Boston: McGraw-Hill Irwin. Investopedia.com (2012). Economics Basics: Supply and Demand. Retrieved October 29, 2012 from http://www.investopedia.com/university/economics/economics3.asp#axzz2AjCQwrpJ Kotler, P. (2003). Marketing Management (11th ed.). New Jersey: Prentice Hall. Marino, L., Gamble, J. (2010). Apple Inc. in 2010. Read More