iPhone Blue Ocean Strategy INDE 599 11-3-09

Overview Industry Pre-Launch 5 Forces Analysis 4 Actions Framework Strategy Canvas 6 Paths Risk Assessment Post Launch Success

History of Industry 2002-20032 2007 Very successful iPod sales No desire from Apple to create a PDA Steve Jobs believes that cell phones will eventually carry the PDA information Americans carried cell phones, Blackberries, & MP3 players 2007 Cell providers marketing to kids & teens Boost in consumers wanting smart-phones3 Motorola losing 2% of market share 1 month after iPhone launch3 Google reveals cell phone software4

Apple SWOT Analysis Strength Weakness Opportunity Threat iPod 16% company revenue Favorable perception of brand Ability to capture & retain customers Launch of iTunes for music Weakness Existing “convergence device”-Palm Treo Need to create a new OS for the phone Accused of having a niche market Fault screens & batteries in early iPods Opportunity 3G phones gaining popularity Wi-Fi phones coming soon Price of storage plummeting Fast & efficient cell phone processors Threat Success of rival music stores Data networks sluggish Success of Palm Treo Wireless carriers that dictated hardware devices Highly competitiveness IT industry

5-forces Analysis on Cell Phone Industry Threat of new entrants? Apple would be the new entrant Google, Microsoft could choose to produce cell phones, eventually. Other cell phone companies may re-design their products to compete, later Bargaining power of buyers? Minimal—Other devices, Palm Treo, Blackberry do not integrate all technologies efficiently Threat of substitutes? Minimal. Palm Treo is only other existing convergence device. Blackberry does not have all of the same functionality, such as MP3s Bargaining power of suppliers? Minimal. Suppliers will want to get involved with new project, beneficial to their sales. Rivalry? Medium. iPhone can revolutionize the cell industry. Immediately, there will be little competition, but there will be competition from all cell phone producers once it is released. (Motorola, LG, Sanyo, Palm, Blackberry, etc)

4 Actions Framework Reduce Eliminate Create Raise Carrying separate devices: phone, MP3, PDA Requirement to always hook up to PC Difficult user interface-make touch screen Eliminate Difficulty in text messaging-use keyboard instead Create Device to download music directly Hold more songs Simple user interface, no user manual required Sleek design Raise User interface & improve navigation Hold more music Applications-games, money management, news, etc. Wireless internet on phone

Strategy Canvas Relative Scale 2-Highest Rating 0-Lowest Rating

Areas to Change the Rules “6 Paths” Framework Alternative Industries Incorporate smart-phone technology iPod-MP3, email, applications Strategic Groups within Industries Trade up from typical cell for smart phone technology Improved user interface from Blackberry Chain of buyers Increase iTunes users Market to AT&T only Complementary Offerings Incorporate iPod and & iPod touch capabilities Differentiation Touch features, compared to Blackberry Integrated applications “Cool factor” Look across Time Revolutionary user interface Touch screen, keyboard, directly connect to App Store, linkage to Mac/PC

Risks Assessment First time Apple makes a cell phone Aligning to a single cell carrier Ability to successfully integrate software Problems with battery life Impacts to iPod sales High price of product Data networks sluggish 4 1 6 3 2 7 5

Product Impact Post-Launch Product Impacts1 Cell phone carriers realize that phones can win customers & bring in revenue Upset the carrier-manufacturer balance of power Opportunities for application developers Sales March 20096 17 million iPhones sold 25,000 applications sold on App Store 800 million total downloads from App Store October 2009-Apple Profit increases 47%5 Apple sold 7.1 million iPhones in single quarter

References The Untold Story: How the iPhone Blew up the wireless industry: http://www.wired.com/gadgets/wireless/magazine/16-02/ff_iphone?currentPage=2 Steve Jobs: No Tablet, No PDA, No Cell Phone, Lots Of iPods: http://www.macobserver.com/article/2003/06/05.9.shtml Mobile Phone Industry Already changing due to iPhone: http://arstechnica.com/apple/news/2007/08/report-mobile-phone-industry-already-changing-due-to-iphone.ars Google Unveils Cell phone software & alliance: http://news.cnet.com/google-unveils-cell-phone-software-and-alliance/ Apple Profit Surges on iPhone Sales: http://online.wsj.com/article/SB10001424052748704500604574483631612633824.html iPhone Sales hit 17 Million: http://www.pcworld.com/businesscenter/article/161725/iphone_sales_hit_17_million.html