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Examine the evolution of the PC industry’s structure from its emergence in the 1980s to that existing today. What has changed and why? As a result, is the industry today more or less attractive for incumbents? Why?
Nowadays, people tend to take computers along with high-technology products for granted. However, the period of the PC industry’s evolution is rather small and unapparent, but it has changed dramatically since its emergence in the 1980s. The rapid development of cutting-edge technologies and overall interest of customers in the benefits they may provide contributed vastly towards the extensive ubiquity of computers and similar products. It is hard to imagine a person who does not use the derivatives of this industry in his or her work or leisure time. Moreover, high-technology has imperceptibly become a significant part in most critical infrastructures. Almost every sphere of a human being’s life is under control of computers.
Such a quick and progressive evolution has occurred in a considerably small amount of time, especially in comparison with the development of other industries. The PC industry has not only introduced some crucial changes in a certain sphere, but also changed the overall perception of technologies, along with the people’s approach towards new domains of human knowledge.
Since the PC industry has become irreplaceable and highly significant in terms of its omnipresence, it is essentially a competitive sphere. Nevertheless, the industry is rather inaccessible for newly emergent companies for they are at a considerable disadvantage as compared to the leading companies. Furthermore, such newcomers need to introduce a catching and innovative product in order to remain in the industry. However, it is rare or totally not the case in terms of emergent companies since they do not possess the same vast opportunities to research new tendencies and trends of this sphere.
When observing the evolution of the PC industry, it becomes apparent that initially the companies’ goal was to introduce a user friendly computer of a significantly lesser size. In this context, Apple essentially contributed towards the overall development of the industry when released the Apple II. Consequently, it caused a computing revolution which resulted in $1 billion revenues within the PC industry. Nevertheless, IBM entered the market in 1981 and changed the situation vastly while undermining the leading position of Apple. The main difference between competitors lied within their diverse approach towards their product. On the one part, Apple rejected the idea of licensing its hardware to third parties and kept relying exceptionally on its own proprietary designs and inventions. On the other part, IBM decided to choose a distinct approach. IBM PCs were relatively open source for others to study and implement the similar findings within the scope of own inventions. Thanks to this openness, these computers were rather quickly transformed into a standard for the entire industry. Moreover, the market share of IBM PCs was increased to a considerable degree. The sequent technological response from Apple represented a substantial breakthrough in terms of design and ease of use. Nevertheless, the Macintosh, which was introduced in 1984, had crucial disadvantages despite the benefits it offered. The market of the software which was compatible with Apple’s computers was tangibly narrow. This factor along with the considerably weak processor which resulted in slow speed, in terms of operating, affected the development of the company negatively. Gradually, Apple merged into a crisis; consequently, one of the company’s founders, Steve Jobs, was dismissed. In this context, it is worth noting that the IBM PC was operated by Microsoft’s DOS and used an Intel microprocessor. Gradually, such combination of an Intel processor and sequent Windows OS became a sustainable standard for PC’s production. As it was stated before, the revolutionary approach towards its strategy made IBM a leading company which made PCs a widely-distributed product, despite the fact that Apple was a pioneer within the industry.
In order to examine the PC industry, it is essential to conduct the five forces analysis. The assessment of various factors that significantly influence this sphere gives a deep insight into the roots and nature of the industry. These five forces are listed as follows.
There are four top PC vendors which are Hewlett-Packard (HP), Dell, Lenovo and Acer. The abovementioned companies represent more than a half of shipments around the world; particularly, this amount represented 53,6%, in 2011. In general, the leadership within the industry has shifted several times during its overall development. As for now, HP is a dominant company, although the position brought significant changes in its management. Nonetheless, it still holds a leading position in terms of product shipment. The primary reason was the scope of the decision to outsource its production, mostly to Asia, in order to lower costs to a considerable degree. The second position in terms of market domination is held by Dell. The reason of such popularity among corporate consumers is its distinct combination of direct sales and build-to-order manufacturing. However, as for now, the company mainly focuses on development of consumer-friendly products, while reentering retail distribution and expanding internationally. One of the reasons for Lenovo’s success can be explained in terms of its location in China. Since the Chinese PC market grows at a considerably fast rate, Lenovo holds a dominant position within the country while contributing towards the expansion of these borders. Meanwhile, Acer’s success is predominantly caused by its diverse acquisitions around the world, along with its previous leadership in producing netbooks.
PC buyers can be divided into five groups. On the whole, these categories can be distinguished in home, small and medium-sized business, corporate, education and government, as well. The most significant group is home consumers, whereas the PC shipments represent approximately half of the whole amount of orders around the world. Meanwhile, business consumers try to balance price with service and support in terms of using computers, education buyers are mainly focused on software availability. In this context, home consumers tend to value design, along with mobility and wireless connectivity. However, each category of PC buyers predominantly assesses the price of the product in the first place.
In terms of the PC industry, suppliers form two essential groups. The first group concerns making products with many sources such as memory chips, disk drivers, keyboards and other. The wide availability of these products contributed towards shaping their highly competitive price. The second group mainly consists of those making products with just a few sources, particularly operating systems and microprocessors supplied by Microsoft and Intel accordingly.
With the development of high-technology, various electronic products, such as mobile phones, tablets, game consoles and others, have emerged in the market. It is highly crucial that these products contain a wide range of functions imported from PCs.
Newly emergent companies face considerable challenges when trying to enter the market, due to a high level of competitiveness within the industry. Therefore, in order to remain in the industry at a long date, such companies need to introduce a unique and innovative product or technology. Since they do not possess the diverse opportunities in terms of vast production expenditures or ability to research new trends in this sphere, it is apparent that newcomers hardly constitute a threat to the leading companies of the industry.
Meanwhile, the sphere of cutting-edge technologies is a rapidly growing one, it is hard to name the PC industry as an attractive one, especially for newcomers. The level of competition within this industry is substantially high. Moreover, the dominating firms leave no chance for smaller companies in terms of competing since they possess diverse and almost unlimited resources as compared to these smaller companies. Nevertheless, the industry is favorable to those who can offer unique products that comprise the technological breakthrough. In this case, a chance of further sustainable development within the industry emerges. Furthermore, companies tend to compete in the industry of software while avoiding the hardware one with sustainable and long-term leaders.
In the late 1980s and early 1990s Apple Computer distinguished itself as one of the most profitable companies in the personal computer industry. Which resources and capabilities enabled Apple to be so successful during this period? Then, why did Apple have such a difficult time sustaining its success in the 1990s and early 2000s? Most importantly, did the actions taken by Steve Jobs on his return and thereafter solve Apple’s problems with respect to the Macintosh business? Explain why or why not.
Besides being a pioneer in the production of PC, Apple distinguished itself as one of the most profitable companies in the personal computer industry due to its distinctive approach towards production. When offering its customers to buy a computer, the company provided the full package. Therefore, Apple was solely relying on its own sources. Consumers were provided with a whole desktop solution, along with the necessary hardware, software and peripherals. Another significant and catchy distinctive feature of the Apple product line was the unique design. The company focused on making each product stand out even in small details, such as chips, disk drivers and monitors, and contributed towards sustaining the image of a unique and prominent company within the industry.
A distinctive strategy in terms of conducting business made Apple one of the unique companies, but also contributed towards its further precarious position. Although following the initial strategy of avoiding the inclusion of third parties was essential for Apple, it turned out to be one of the weakest spots since the newly emergent rivals did not share the same policy in terms of production. Therefore, it has led to substantial difficulties in sustaining the initial success of the company.
However, the company faced a wide range of challenges, when its rivals auspiciously entered the market. Since IBM was promoting another approach towards production which involved the participation of third parties, its emergence was accompanied with a considerable success. Consequently, the combination of microprocessor by Intel and operating system by Microsoft become a widely-spread standard within the industry. Inevitably, this caused substantial losses for Apple; its net income fell 62% and resulted in Steve Jobs’ dismissal.
During the years of John Sculley’s management, Apple entered new markets of education and desktop publishing. Thanks to these initiatives, the market share of the company recovered and stabilized. Although Apple had a tangible amount of loyal customers, the company’s products ended up overpriced to a considerable degree, especially when compared to other companies’ PCs. Nevertheless, Apple vastly contributed towards research and development in comparison with diverse IBM-clones manufacturers. However, Sculley focused on lowering the costs in order to gain the benevolence of the majority and enter the mass-market, as well. Another strategy implemented by Sculley was rather unexpected since he chose to cooperate with the Apple’s foremost competitor, IBM. The domain for cooperation was within the attempt to create a new operating system for PC, along with one concentrated on the multimedia applications. Sculley also undertook another cooperative project with Intel and Novell in order to adjust Mac OS with the purpose of improving its processing speed by making it work with Intel chips.
John Sculley’s management was rather audacious; therefore, it resulted in a significant stabilization of company’s precarious position. Aiming at new markets can be rather effective, since it opens new opportunities for the firm, some of which can be rather profitable. It may also be helpful considering diverse projects with other companies within the industry. Cooperation can cause the emergence of new products, technologies or standards that can become universal in the future, thus, leaving the rest of rivals far behind.
Nevertheless, the development of these revolutionary initiatives was suppressed at once by the company’s new director, Michael Spindler. Moreover, it was announced that Apple would issue a license for other companies to produce Mac clones. In order to lower the expenditures of the company, Spindler initiated massive layoffs. During the years of his management, the trade boundaries were considerably extended; thus, 45% of sales came from outside the United States of America in 1992. Nonetheless, the vast majority still preferred Intel-based computers, while even Apple’s most loyal customers considered shifting their preference in favor of the rival companies. Furthermore, Apple experienced substantial losses since the consequences of cooperation with IBM were devastating. Both companies refused to proceed with the initial plan, even after having lost more than 500$ million.
Implementing the strategy of massive layoffs can help in stabilizing the overall precarious position of the company, but it should be taken as the ultimate measure. Moreover, when there is a substantial stagnation in terms of trade, it is essential to consider other markets, rather than domestic one. Thus, the extending of these boundaries can solve the problem of overproduction.
The sequent CEO of the company, Gilbert Amelio, announced the return to its initial strategy, involving the premium-price differentiation of its products. The company faced severe difficulties in terms of sales slump along with failure to introduce new and effective operating system. In 1996, NeXT Software was acquired leading to the return of Steve Jobs to the company. Apple’s position became highly precarious; therefore, Jobs once again headed the company in 1997, targeting to stabilize and maintain the overall situation. After his return, Steve Jobs focused on various activities for solving the critical problems of Apple. In order to attract investments, he made a five-year commitment to develop core products of Microsoft for the Macintosh. Microsoft, in its turn, invested $150 million for this cause. Furthermore, Jobs immediately aborted the licensing program which countered the initial positioning of Apple, while representing a substantial leak in terms of its profits. The decision to limit the number of product lines from fifteen to just four was highly significant. In addition, Taiwanese contract assemblers were hired in terms of overall company’s reshaping efforts. During this time, Jobs hired Tim Cook with an impressive list of previously occupied positions. In order to establish direct sales and keep the customers informed, the company launched its website. It was already stated that Apple has always contributed towards research and development; however, the spending on these spheres has increased to a considerable degree.
As it was stated before, considering the cooperation with a rival company may have benefits. It is also crucial to focus exclusively on those product lines that represent the highest demand of the customers. Consequently, it contributes towards avoiding dispersion of resources while making a commitment to what is of paramount significance. In a modern world, outsourcing has also become a solution in terms of cutting the expenditure and saving the financing for research and development.
The overall efforts of Steve Jobs to revive the company were exceptional and startling. His main strategy was not to expand the producing abilities in terms of constantly introducing new digital devices, but to establish a distinctive culture within Apple. An entirely new set of rules has emerged involving each employee. From now on, the company assessed the newly hired workers in a highly thorough manner before allowing them to join the cooperation “behind a closed door”. Thus, a policy of extreme secrecy emerged. Furthermore, Steve Jobs aimed at reshaping the entire image of the company, positioning it as a hip alternative to other computer brands. This broad advertising campaign has resulted in gradually shaping people’s perception of Apple as a unique company which was crucial in terms of the highly competitive market.
Consequently, all the actions implemented by Steve Jobs led not only to a considerable reshaping of Apple, but its salvation, since the obstacles previously faced by the company could have resulted in its inevitable bankruptcy and, therefore, collapse. Jobs contributed essentially towards the further evolution of Apple. However, the company not only remained within the industry, but stabilized its position and even aspired into the future while developing innovative and breakthrough products.
Tim Cook has just appointed you as his consultant. He would like you to assess whether Apple’s diversification into new activities (iPod, iPhone, and iPad) accords the firm a sustainable competitive advantage. Explain why or why not. Then, offer your own recommendations as to how Apple may achieve a more lasting advantage.
While gradually evolving, Apple started producing not only computers, but various devices, as well. The introduction of iPod took place in 2001; iPhone was presented to the audience in 2007, followed then by iPad in 2010. Each of these products was a significant breakthrough not only for Apple, but for the industry on the whole. In addition, it is essential to point out that the real flourishing of Apple began with the introduction of these unique devices.
The sales gradually increased throughout the last decade. Moreover, the products do not lose in popularity due to the constant emergence of new and improved version of the products. Source: Apple’s financial information, calculations of Yoffie and Rossano (2012).
Thus, iPad and iPhone represent the ascending trend; meanwhile; the popularity in terms of iPod sales gradually decreases.
In comparison with iPhone and iPad, the introduction of iPod took place in 2001; consequently, the number of sales was considerably high at first. However, they gradually tend to decrease since the majority of those who were interested in buying the mp3 player have already bought it. In addition, not every consumer considers renovating its device each time the company introduces the new version of the same product. Therefore, taking into consideration these factors, it becomes apparent that the sales remain at a rather high level. Moreover, this pattern can be eligible in terms of two other products since they were introduced not that long ago.
In order to make the abovementioned notion more demonstrative and visual, a graph was created with the help of Microsoft Office Excel.
However, the growing popularity of iPhone, despite its recently emerged new version, proves the necessity of customers in developing this product in the future. Furthermore, in case of iPods the price per unit was shifting towards substantial decreasing. The price of iPhone, on the contrary, gradually increased, although the changes were rather slight.
Source: Apple’s financial information, calculations of Yoffie and Rossano (2012).
In terms of iPad, the overall pattern of successful introduction and further sales emerges. Although the trend is ascending, it does not reach the same indices as iPhone does. This trend is determined by a group of consumers that are interested in buying the device. Since a modern person cannot imagine his or her life without a mobile phone or player, at times, the necessity to buy a tablet arises in small circles of interested clients.
When comparing the most prominent companies within the industry, it becomes obvious that Apple is a dominating one. According to the findings of Yoffie and Rossano (2012), Google is the only crucial rival in terms of distribution of various applications. Graph 6 allows evaluating the companies’ positions regarding the approximate number of available applications for their products.
The introduction of iTunes caused the rise of interest, especially since every innovative device can be connected and at times download the same apps as the other Apple’s device. Therefore, iTunes represent a unique basis for various applications. Since Apple was a pioneer in introducing the breakthrough and innovative products, it contributed towards the prominence and leadership in the industry. Moreover, diverse companies that produce programs or games were highly interested in participating in the emerging market of apps within iTunes. As for now, many consumers tend to choose the products of Apple exactly because of the wide range of available applications.
In order to proceed with the successful development, Apple needs to apply the same strategy of caring about the quality of its products and clients satisfaction. There are no doubts about the necessity to contribute towards the research and development constantly and vastly since the innovations is what guarantees a leading and sustaining position in the industry. Moreover, there is a certain trend of popularity’s decreasing in terms of iPod; thus, it may be useful to limit slightly the amount of production. As for iPhone and iPad, it is essential to proceed with the development of these devices since the demand for them not only remain stable, but also gradually increases.