Apple, White Paper, What's next for Apple?, 2014 and beyond

1. What’s next – 2014 and Beyond?
Apple White Paper
By Rahul Sarkar

2. Page 2 by Rahul Sarkar
Contents
Introduction/Problem ..................................................................................................................3
Current Status ...............................................................................................................................4
Strategic Analysis – Porter’s Five Forces..................................................................................6
Strategic Analysis – grid model.................................................................................................7
Potential Strategy Alternatives ..................................................................................................8
Recommended Alternatives .......................................................................................................9
References....................................................................................................................................10

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Section 1
Introduction/Problem
Apple will become the world's
first trillion-dollar company when
its shares top $1,000 each, Wall
Street analysts have predicted.[8]
From its inception in 1974, the
company has seen lots of ups and
down till date. Steve Jobs, one of
the founders had turned this
company completely and made it
one of the most profitable and
most admired enterprises in the
world. With over $110 billion in
cash, the company is bigger than
USA govt cash pile. Apple, Inc as
it is fondly known now is a design
and sells consumer electronics,
computer software, & personal
computers. They have redefined
consumer preference and are now
categorized as Lifestyle Products
rather simple electronics gadgets.
All this didn’t happen overnight.
After the infamous ouster of Steve
Jobs from the board in 80’s, Apple
had a very rough time and once
even were contemplating to file
for bankruptcy. But after a
decade or so, Steve Jobs came
back and made some strategic
decisions which defined the
company. From outsourcing
SCM to cutting down on
products, he did take various
steps to ensure that Apple is
back to the position for what it
is known for. It was also then
when Steve Jobs reiterated the
policy of focusing on designs
and innovation.
Apple envisioned the
changing trends in technology
and was the pioneer of
creating an ecosystem which
would its customers in
experience their products
phenomenally. But while
Apple has achieved
phenomenal success till now,
what’s next. They have had a
wonderful run from 2000s till
2011 but after the sudden
death of Steve Jobs, will Apple
be able to maintain their
staggering growth, come up
with new products redefining
the future? This paper will try
to recommend solutions for
the problem What’s next for
Apple?
Changing society by giving the consumer what they don’t know they want.
- Steve Jobs
Fig 1: Apple’s many competitive fronts as of 2011 (Source: New York Times)

4. Page 4 by Rahul Sarkar
Section 2
Current Status
As of September 24, 2011, the company had
60,400 permanent full-time employees and
2,900 temporary full-time employees
worldwide; its worldwide annual revenue in
2010 totaled $65 billion, growing to $108
billion in 2011.[wiki] As of July 2012, Apple
has 364 retail stores in thirteen countries, and
an online store. What Apple did was to create
an ecosystem where technology converged. It
integrated ipod, iphone, ipad and macbook so
that users had very less difficulty in using
each of them. It was a ecosystem in itself and
unlike other competitors, Apple owned all the
elements of the ecosystem. There was no
competition in the ecosystem internally.
Apple had numerous competitors for each of
its product in the market. Giants like Sony,
Samsung, Microsoft, Nokia, Blackberry, Acer,
HP etc are all trying to get a pie of Apple
share. While individually they may have been
able to do it but as a ecosystem it has been
really difficult. Only two other ecosystems
exist apart from Apple in this space viz:
Microsoft Ecosystem and Google ecosystem.
While Microsoft played on connectivity
supremacy between PC and mobile – OS
related, Google is primarily playing on
internet connectivity. Another striking
difference is both Microsoft and Google
ecosystem relies on multiple vendors which in
themselves eat up each other share. Perhaps
Microsoft joined this ecosystem race late to
give any competition. Apple has already
mastered the act of ecosystem management
and building on customer experience. If we
look at the generic strategic model of target
market, we realize that apple is no more
playing in niche market. Instead apple is
available for all BUT differentiated from their
competitors, that’s why they have been able to
charge premium price and also switching cost
from apple to non-apple product is expensive.
Fig 2: Product competition-Apple, Microsoft & Google (Source: By Shane Shaw – columnist Gizmodo.com)

5. Page 5 by Rahul Sarkar
Section 2
Creating this ecosystem has taken time
probably a decade and had equal help from
apple’s exquisite software offering. While they
have been taken decisions on hardware every
now and then, they have been also focusing on
itunes and iOS as the agents for integrating the
hardware. They have also been able to put
innovation in the software designs, something
which competitors have lacked till now.
Android, BlackberryOS or Microsoft have been
playing catch up and still not been able to
overtake apple in terms of design innovations.
But the question is how long? "The risk is the
sustainability of what they have been doing,"
said ISI Group analyst Brian Marshall. "They
have put up a huge number and the question
is can they continue to penetrate with their
current existing product portfolio at these
price levels?" The fear is that the number of
people who can afford an iPad or an iPhone is
dwindling. And finally whether it makes sense
to be a single vendor in all its product
categories. The competition has become
immense in all areas and timing is paramount.
Fig 3: Apple
Strategy
beyond ipad
(Source:
Gadget Lab)
Fig 4: Evolving
ecosystem (Source:
harborresearch.com)

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Section 3
Strategic Analysis – Porter’s Five Forces [5]
In order to understand the strategic direction that Apple need to take going forward, it is
essential to understand the competitive intensity of the industry using Porter’s 5 forces model for
Smartphone, music player, lifestyle industry.
 Competition: How strong is the rivalry posed by the present competition? - HIGH
1. The number of firms in the industry, there are many firms in the industry with different
products.
2. All firms have economies of scale, that is they have relatively high fixed costs and low
variable costs, the more they produce the lower their per unit costs become. This results in
more intense rivalry between firms as they compete to gain market share;
3. Customers have majorly low switching costs, this intensifies competition as firms compete
to retain their current customers and steal customers from other firms;
4. Low levels of product differentiation between firms leads to increased competition.
5. High exit barriers and hence companies stay even if they don’t want
 Barriers to entry: What is the threat posed by new players entering the market? – HIGH
1. high capital costs of setting up a business in this industry
2. Industry requires highly specialized equipment,
3. Extensive scale and branding of existing competitors
4. Government regulations are predominant in this industry
5. Individual firms have economies of scale which results in lower cost and threat to new
entrants
 Substitutes: What is the threat posed by substitute products and services? – LOW
1. The switching costs between the Windows operating system and Apple operating system
might be prohibitive because computer programs and accessories are built to work with one
operating system or the other;
2. Buyer propensity to substitute is low because it is time consuming.
3. Perceived level of product differentiation is low except for Apple.
 Supplier bargaining power: How much bargaining power do suppliers have? - HIGH
1. The number of possible suppliers and the strength of competition between suppliers is
pretty high
2. Suppliers produce homogenous products
3. The importance of sales volume is high
 Customer bargaining power: How much bargaining power do customers have? - HIGH
1. The volume of goods or services purchased is not in bulk
2. The number of customers are high
3. Brand name strength is high
4. Products differentiation is low except for Apple.

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Section 4
Strategic Analysis – grid model
Market/Applications of Hardware and Software products
 Business continuity plan is needed. Recent virus plus delays in Apple OS delivery have cost
loss of sales and shaken confidence in service offerings.
 Since Apple also stores customer related data, it is imperative that have a very high secured
facility else they will be tangled in legal disputes
 SCM and manufacturing should be planned properly and diligently. Recent issues with
Chinese child labour and flood in Thailand have both delayed their products and created a
bad image of apple resulting in lost sales
Differentiation
 Apple to continuously innovate and protect its IPR in order to be step ahead in the increased
competitive environment.
 Apple should now move to look for other products in lifestyle which are essential for
consumer while maintaining the synergy with existing products.
 Apple’s competitors have started replicating and following the differentiation strategy.
Companies like Samsung, LG are catching up in mobile while Sony is becoming a threat in
ecosystem space by getting more products near to the customer like TV, play-station, home
theatres etc. Apple needs to move beyond creating handhelds to other stand alone products.
Fig 5: The evolution of Apple’s Business (Source: Jay Yarrow/Kamelia Angelova – businessinsider.com)

8. Page 8 by Rahul Sarkar
Section 5
Potential Strategy Alternatives
ALTERNATIVE 1: As Tim Cook, the CEO said
“Apple is not going to change”, it becomes
quite obvious that they will play with and
enhance the ecosystem. They have already
started strategically buying companies and
patents to fulfill their goal. With this in mind
we expect Apple to take the business enterprise
industry by storm. This isn’t quite an
innovation in itself on Apple’s part, but a result
of their products, their applications and the
platform. “Apple is the first and only vendor
that really supports the enterprise platform,”
says Brian Fino, founder and managing
director of Fino Consulting. He further said
“With iOS 5′s over-the-air upgrades, users will
have untethered management of devices.”[1]
ALTERNATIVE 2: With Siri, Apple has
already started moving towards voice based
commands. No more swiping your finger or
entering a pass-code to unlock the gadget. The
next wave of iOS devices could use voice
identification to switch out of its lock-screen.
Apple’s solution would identify users by the
sound of their voice. By tracking the voice of
each user, the system could be dynamically
tailored to their interests and unique needs.
Multiple users could share the device, but
specific content or contacts would remain
unique to each individual user. Tailor made
solution for each user will enhance the
experience to an altogether different level plus
this can be used across all apple products.[1]
Fig 6: TAIC business model depicting ecosystems (Source: Juhani Risku’s prediction in abstrationshift.wordpress.com)

9. Page 9 by Rahul Sarkar
Section 6
Recommended Alternatives
With so many great alternatives, following are the most recommended to Apple Strategy.
RECOMMENDED 1: By the end of 2014, we
may see iOS and OSX converge into a unified
operating system. This has been doing rounds
for quite some time and even suits to Apple’s
creating an ecosystem with its products. “Users
want to be able to pick up any iPhone, iPad or
Mac and have content move seamlessly
between them and be optimized for the user
and the device currently being used,” said
Peter Misek, an analyst with Jefferies. Devices
running iOS and OSX currently use different
processors. Once all Apple computing devices
run the ARM processor, it will be easier for
them to support the same operating system.
Users could easily share information and files
between devices .We’ve already seen how OSX
Lion has adopted features from iOS, like
natural scrolling and LaunchPad, which
resembles the iPad’s home screen. [1]
RECOMMENDED 2: Apple’s long time dream
is set to come back again in an improved
version. With internet speed as never before,
we will see more of Apple TV. Infact this will
be perfect addition to their ecosystem.
Longtime Apple watcher Walt Mossberg says
“rumors are rife that Apple is working on re-
inventing another common device: the TV. The
secretive company won’t say a word about
that, but nobody should be surprised if it
happens.” A patent for “An Enhanced TV
Widget Paradigm” suggests Apple will ditch
conventional static widgets in favor of content-
aware widgets that provide information or
activities that complement what you’re
watching. Apple may use this technology on a
smart TV with iOS integration probably a 55-
inch OLED TV. [1]

10. Page 10 by Rahul Sarkar
Section 7
References
1. http://www.wired.com/gadgetlab/2011/08/apple-roadmap/
2. http://www.nytimes.com/interactive/2011/10/07/technology/apples-many-competitive-
fronts.html
3. http://www.scribd.com/doc/71947382/SCM-Report-on-Apple-By-Harish
4. http://timesofindia.indiatimes.com/tech/news/hardware/Apple-in-2012-A-SWOT-
analysis/articleshow/11599618.cms
5. http://www.tomspencer.com.au/2008/08/17/porters-five-forces-model-analysis-
framework/#section1
6. http://whitepapertemplate.org/
7. http://en.wikipedia.org/wiki/Apple_Inc.
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0.0XKPwykt3fI&pbx=1&bav=on.2,or.r_gc.r_pw.r_cp.r_qf.,cf.osb&fp=200213315a02c66b&
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