Strategic Group Map Pre-Windows Price Premium Low Strategic Focus - Differentiation BroadNarrow Apple IBM Sun Clones Compaq
5-Forces Model of Computer Industry Suppliers Apple owns O/S Motorola / RISC Processor Software Firms want to write for largest installed base Buyers Price Sensitive Mass Merchandisers Mail Order Substitutes Workstations Palm-tops/ PDA’s Potential Entrants Low Entry Barriers Apple No Longer Protected from Clones Rivalry New Products More Marketing Price Cutting Outsourcing IBM Compatible Clones Ability to Differentiate Disappearing (?) (-)
Threats to Apple Windows 3.0 –Narrowed the interface “performance gap” –Cheap clones now almost as good as Mac Lack of Application Software –Largest applications vendor is Microsoft –Independent vendors want to write for O/S with largest installed base
Opportunities Attack operating system market for Intel and RISC processors Alternative technologies requiring GUIs –Office machines (copiers, FAX, etc.) –PDAs –Telephone switchboards –Home electronics/appliances –Robotics
Apple Weaknesses Level of uniqueness is eroding Inability to keep pace with R&D spending –IBM’s R&D = $6,644 mil –Apple’s Revenues = $6,309 mil Small installed base vs. IBM “compatibles” Lack of dominant market share position High SG&A to Sales
Strategic Group Map Post-Windows Price Premium Low Strategic Focus - Differentiation BroadNarrow Apple IBM Sun Clones Compaq Weakness
Microprocessor Volume Millions of Units Weakness
Apple’s Marketing Costs vs. Rivals SG&A to Sales (%) Weakness
Apple Strengths Best GUI O/S Brand name loyalty
Revised Mission To position Apple as the world leader in man-machine interfaces though the development of ergo- and cerebro-nomic software and interface devices required for electronic and electromechanical applications.
Goals 20% ROS by 1994 40% Share of O/S Market by 1994 Develop 3 New Interface Devices by 1994 Achieve full interoperability with –Intel and RISC microprocessors by 1993 –Top 4 Software Vendors by 1993
Milk Mac No new manufacturing and R&D investment in existing hardware products Outsource next 3 years’ production to Malaysia: –Send VP Mfg. and 3 Engineers on “Sourcing Mission” Benefit: Decrease COGS from 53% to 33%
Target PC O/S Market License System 7 –Motorola-based clone sales –RISC-based clone sales Create new brand: Apple “Core”
Apple Core “Open system” O/S (a.k.a. Pink) –not processor specific –head-to-head with Windows –increase installed base –increase ISV applications Shift 80% of R&D budget to Core Benefit: Increase ROS from 5% to 20% (NOTE: O/S production has COGS average 19% percent of sales vs. 66% in hardware manufacturing.)
Interface Software and Devices Form product development alliances with: –Canon (copiers) –Sharp/Casio (PDAs) –Northern Telecom (PBXs and cell phones) –Kawasaki (Robotics servers and teach pendants) –Volvo (Automated material carriers) –Honeywell (Avionics and flight control equipment) –GE (Magnetic resonance imaging equipment) Devote 20% of R&D budget to new products Benefit: New interface device products.
Projected Revenues, Costs, and Income (in $ millions)