Transcript Session-7 - Mark-Mortensen
Session #7 Strategic Management
Dr. Mark H. Mortensen Session 211 and 212 M-W PA 407
© Copyright 2011 Mortensen Consulting Group LLC
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You Will be Prepared for Today Iff You:
Studied for the quiz Have read the Apple case study
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Quiz: Chapters 1-3
Fall 2010 (c) Copyright 2010 Mortensen Consulting Group LLC
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Something BIG is happening this week. . .
Fall 2010 (c) Copyright 2010 Mortensen Consulting Group LLC
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Apple Case Study
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Apple Case Study: Outline
Case Study Background – The nature of competitive advantages over time in highly competitive, innovative industries.
What should Apple do?
Define the Central Issues Define the firm’s goals Identify the constraints Identify the alternatives Select the best alternative Develop an implementation plan
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Apple: Case Study Background(1): Apple History
Competitive advantages in the 1980s made Apple the most profitable PC company in the world (What were they?) But “on a glide path to history” (What? Why?) Four successive CEOs (Sculley, Spindler, Amelio and Jobs) sought to reposition Apple in the PC Industry and to create a sustainable competitive advantage.
(What did they try? What succeeded? What did they decide not to do?)
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Competitive advantages in the 1980s that made Apple the most profitable PC company in the world Ease of use Dominance in creative industries (design, desktop publishing), as well as education Buyer loyalty Proprietary operating system Strong branding Excellent industrial design
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Why was Apple “on a glide path to history”
Low market share, increasing competition and change in the market to a commodities point of view for PCs put Apple’s differentiation strategy at risk.
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CEOs’ Strategies
Sculley – low-cost producer; “hit products” every 6-12 months; Mac Classic vs. IBM clones; Powerbook laptop; Newton PDA; Taligent with IBM for new OS; PowerPC chips from IBM Spindler (1993-1996) Taligent; layoffs – reinvigorate core markets; killed Intel chip; licensed Mac OS to clone makers; killed Amelio (1996-1997) – servers & other high-margin devices; cancelled nextgen Mac OS; ended licensing program; bought NeXT (Jobs) Jobs – iMac; outsourced manufacturing; direct sales via website; image; industrial design
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Apple: Case Study Background(2): The Mac Business in the 21
st
Century
Technology & Innovation Cutting edge experience High-end Differentiated from Wintel machines Intel Chipset Overhauled Mac OS X in 2001 (UNIX) Proprietary Apple-developed applications Distribution & Sales Retail stores
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Apple: Case Study Background(3): The Evolving PC Industry
The dynamics of the PC industry have radically changed in the last 20 years.
Buyers Rivalry among suppliers Barriers to entry Complements to the PC industry Supplier vs. Manufacturers balance of power Substitutes
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Apple: Case Study Background(4): Apple Beyond Macintosh
iPod iTunes Apple TV iPhone iPad
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Questions for Apple Case Study
Has Steve Jobs finally solved Apple’s long-standing problems b.
a.
With respect to the Macintosh business?
With respect to its broader strategic position?
Going forward, what should Steve Jobs do?
(c) Copyright 2008 Mortensen Consulting Group LLC
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Doing a Case Study -1
Read the case thoroughly. Read the case thoroughly. Read the case thoroughly.
The first time to get an overview of the industry, the company, the people and the situation.
Read the case again more slowly, making notes as you go.
Define the central issue. Many cases will involve several issues or problems.
Identify the most important problems and separate them from the more trivial issues After identifying what appears to be a major underlying issue, examine the related problems.
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Apple SWOT(1): PC Business
Strengths
Fanatically loyal customers who pay for yearly OS updates Domination of niche markets Industrial design expertise “Cool factor” Apple-owned software applications FLASH technology procurement agreements Mobile Me & Apple Care New Intel architecture Hub for Apple iPod, iPhone, etc.
Opportunities
Transition from desktop to
laptop Netbook replacement
Digital hub strategy Move to solid state disk technology Cloud computing SaaS
Weaknesses Higher prices Low market share of the PC business Low penetration of business computing High cost of designing, manufacturing, and supporting proprietary computer architecture and OS Many fewer software and peripheral developers provide products for Macintosh than for PCs mean lower value for the “solution” Threats
Price decline Freeware OSs (LINUX) Microsoft juggernaut Jobs’ health
Succession Plan Macintosh: MacBook (Air, Pro), Mac Mini, iMac, Mac Pro xServe, Airport, Time Capsule, Mobile ME, Apple Care.
Fall 2008
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Apple SWOT(2): Consumer Electronics Business
Strengths FLASH technology procurement agreements Integration with Macintosh, but works also with Wintel Device/iTunes integration Mobile ME Excellent user experience Industrial design – “cool factor” Agreements with record labels Open computing environment Opportunities
Video market explosion Increasing complexity – features and maintenance Proliferation of important files (image, video, audio) by consumers SaaS models and acceptability Weaknesses
Higher prices Few video agreements with owners DRM hassles iPhone is more an entertainment appliance than a SmartPhone for business Dependent upon constant product innovation to succeed, not structural attributes
Threats Myriad competitors (including Microsoft) innovating as fast as they can Open source software (LINUX, Android) coming out Video DRM complexity Jobs rumored sickness iPod, iPhone, iPad, Apple TV, Apple Care, Mobile Me 17
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Doing a Case Study - 2
Define the firm’s goals (only if applicable)
Inconsistencies between a firm’s goals and its performance may further highlight the problems discovered in step 2 Identifying the firm’s goals will provide a guide for the remaining analysis.
Identify the constraints to the problem (only if applicable)
The constraints may limit the solutions available to the firm Typical constraints include limited finances, lack of additional production capacity, personnel limitations, strong competitors, relationships with suppliers and customers, and so on.
Constraints have to be considered when suggesting a solution.
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Apple’s Goals
Observation:
When you go to the www.apple.com
web site, you get information about their products. You have to search – hard – for corporate information!
Apple's mission statement
Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone. FAQs at http://www.apple.com/investor/ Product, Product, Product.
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Apple’s Constraints
Microsoft Office is the entrenched standard application, although cheap competitors are nipping at its heels, as well as OpenDocs-based free software The Wintel hardware architecture is well entrenched – getting others to build hardware to a new open standard to run OS-X would be very difficult Features to support large business use by IT shops would be very expensive, and time consuming, to implement for Apple. Fall 2008
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Doing a Case Study - 3
Identify all the relevant alternatives
The list should include all the relevant alternatives that could solve the problem(s) that were identified Use your creativity in coming up with alternative solutions Even when solutions are suggested in the case, you may be able to suggest better solutions
Select the best alternative
Evaluate each alternative in light of the available information Resist the temptation to jump to this step early in the analysis You will also need to explain the logic you used to choose one alternative and reject the others.
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2.
3.
Alternatives – PC Business
Get out
of the hardware business, keep the software business, licensing the hardware to others
Keep to the niche
with the proprietary software, manage to profitability and expand tactically with the PC as the hub of the home entertainment system as laptops move to silicon storage as hardware running Windows expand iTunes into application downloads for PC users
Attempt to Change the Game
Further bundling software and hardware support, offering a “total package” for computing, building on the Apple Care program – playing to the people tired of complexity and hassle iPad as a multimedia terminal Build on the Mobile Me offering to offer expanded backup and recovery, SaaS, and cloud computing capability for heavy graphics users. Thus, MACINTOSH/Mobile Me > iPOD/iTunes
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Alternatives – Consumer Electronics Business
Continue with the current consumer-focused strategy, constantly innovating new products (where does Apple TV fit?) Expand into video distribution with Apple TV and iTunes, building the catalog as done with iTunes Expand into gaming segment with Apple-produced and third party games, built on an Apple TV base and incorporating MMPGs via cloud computing infrastructure Expand into the business realm with: Corporate offerings based on iTunes and Mobile Me technology as a platform SaaS with major players such as SAP, Oracle, and Salesforce.com
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Doing a Case Study - 4
Develop an implementation plan
Plan for effective implementation of your decision. Lack of an implementation plan, even for a very good decisions can lead to disaster for a firm and for you Don’t overlook this step. It is important as a future manager to be able to explain how to implement the decision.
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Reminder for Next Session
Read Chapter 4
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