jeudi 27 novembre 2008
Apple: Bibliography
Start by the first article: http://moteurs-de-recherches-alternatifs.blogspot.com/2008/11/apple-distribution-policies-at-apple.html
7 Bibliography
http://ejschmidt.com/blog/
http://www.nytimes.com/
http://www.ifoapplestore.com/index.php
http://www.businessweek.com
http://www.economist.com/
Apple, Inc., Annual Report, 2007
Yoffie, D., Sind, M. « Apple Inc., 2008 » Harvard Business Review, 2008
Chernev, A. « Apple Retail Stores » Kellogg School of Business Review, 2002
Apple Retail Manifesto, Apple 2001
7 Bibliography
http://ejschmidt.com/blog/
http://www.nytimes.com/
http://www.ifoapplestore.com/index.php
http://www.businessweek.com
http://www.economist.com/
Apple, Inc., Annual Report, 2007
Yoffie, D., Sind, M. « Apple Inc., 2008 » Harvard Business Review, 2008
Chernev, A. « Apple Retail Stores » Kellogg School of Business Review, 2002
Apple Retail Manifesto, Apple 2001
Apple: Conclusions and recommendations
6 Conclusions and recommendations
What advice can be given to a company that multiplied by 3 its revenues in just 3
years (not being a start-up, but an $8 billion multinational) and that from an
“ancillary” activity, like retail, is able to squeeze $5 billion and half a billion of
profit? In order to give an answer I think that we should step back for a moment.
Apple today earns money through electronic devices, but competition in this field is
increasing and hardly they’ll be able to maintain high margins. Apple has already
stepped in the service market: the iTunes, although barely profitable, is a leader and
the App Store (a store for software for handheld devices) is growing quickly. The
development of mobile telecommunications should enable in the near future cheap
mobile data tariffs. Leveraging its devices Apple could evolve in a Content Service
Provider. Already today, through the App Store they can sell music, movies, TV
shows and software to iPod Touch and iPhone users. The war for future distribution
standards is just at the beginning. Apple should be very careful in adopting closed
proprietary standards, because even the most wonderful device, if doesn’t have enough
developers creating innovative applications for it, won’t gain the benefits of network effect
and thus could be relegated as niche product.
Developing a wide network for content distribution could provide a source of profit for an
undetermined time. It is also possible to envision a future where Apple sells its devices at an
highly discounted price, in order to enlarge the user base and make money through the
services sold over its digital content delivery channel, a strategy already successfully adopted
by video game console producers, most notably Sony, with it PlayStation console.
My personal opinion is that Apple should use wisely the market share it’s gaining. The
hardware is not a sustainable business in the long term, and a transition towards services will
be inevitable. The “digital hub” should be the Trojan Horse for new, innovative formats of
content distribution. Apple already lost the desktop war, I hope they learned from their
mistakes.
What advice can be given to a company that multiplied by 3 its revenues in just 3
years (not being a start-up, but an $8 billion multinational) and that from an
“ancillary” activity, like retail, is able to squeeze $5 billion and half a billion of
profit? In order to give an answer I think that we should step back for a moment.
Apple today earns money through electronic devices, but competition in this field is
increasing and hardly they’ll be able to maintain high margins. Apple has already
stepped in the service market: the iTunes, although barely profitable, is a leader and
the App Store (a store for software for handheld devices) is growing quickly. The
development of mobile telecommunications should enable in the near future cheap
mobile data tariffs. Leveraging its devices Apple could evolve in a Content Service
Provider. Already today, through the App Store they can sell music, movies, TV
shows and software to iPod Touch and iPhone users. The war for future distribution
standards is just at the beginning. Apple should be very careful in adopting closed
proprietary standards, because even the most wonderful device, if doesn’t have enough
developers creating innovative applications for it, won’t gain the benefits of network effect
and thus could be relegated as niche product.
Developing a wide network for content distribution could provide a source of profit for an
undetermined time. It is also possible to envision a future where Apple sells its devices at an
highly discounted price, in order to enlarge the user base and make money through the
services sold over its digital content delivery channel, a strategy already successfully adopted
by video game console producers, most notably Sony, with it PlayStation console.
My personal opinion is that Apple should use wisely the market share it’s gaining. The
hardware is not a sustainable business in the long term, and a transition towards services will
be inevitable. The “digital hub” should be the Trojan Horse for new, innovative formats of
content distribution. Apple already lost the desktop war, I hope they learned from their
mistakes.
Apple: Some strategic considerations
5.1 Some strategic considerations
The erosion of its market share from competitors (especially in the key educational
channel) and the fact they’re niche products required a strong respons. Is the retail
the good one? With its top-notch brand and world renowned marketing abilities,
Apple should have good chances of improving on the terrible experience of Gateway
Country Store model. If they succeed they’ll gain fresh outlets to sell its own
products and would also likely to gain additional revenues as a reseller of other
electronic goodies and have more control over marketing and servicing of its
products. Moreover, Apple could boost margins by cutting out middlemen and
convince buyers to choose higher-priced models pushing on the “emotional
shopping” stimulated by these types of stores.
However this is a dangerous field. To have shops in high traffic locations means
huge fixed expenditures for rents and it is hard to say if Apple will be able to keep
alive the big hype they’ve created. Moreover other retailer were not happy with this
decision (some also sued the company, but the court ruled in favor of Apple).
There’s no way to know if the costs deriving from a more bitter relationship with
resellers will be enough to set off the additional expenses. Any increase in sales
could be due to cannibalization, which is probably the biggest threat.
Apple claim that their stores are less than 3% than the total number of resellers in the
USA, thus not constituting a credible competitor in terms of volumes. They thought
that if they’d be able to double their market share to 10% thanks to the store, the
resellers would be the ones to enjoy the biggest share of the additional sales.
5-1 SWOT analysis
Apple thought that since it had a huge brand equity, an excellent supply chain
management and already billion in annual sales (plus $4 billion in cash to invest) to
jump in retail would have been a bet worth to be taken. If we look at the financial
results we can see that were proved right.
The retail activities were profitable in just 3 years. Since the lunch they experienced
a steady growth in turnover close to 50%. Profitability is a record level: with a net
margin well above 10% the Apple Stores are among the most profitable retail
activities in the US. It is interesting to note that the margin of the retail division,
which should be a low margin activity, is not very far from the margin from
computer and devices, which are high margin operations. This means that there a
great level of service embedded in their operations.
The erosion of its market share from competitors (especially in the key educational
channel) and the fact they’re niche products required a strong respons. Is the retail
the good one? With its top-notch brand and world renowned marketing abilities,
Apple should have good chances of improving on the terrible experience of Gateway
Country Store model. If they succeed they’ll gain fresh outlets to sell its own
products and would also likely to gain additional revenues as a reseller of other
electronic goodies and have more control over marketing and servicing of its
products. Moreover, Apple could boost margins by cutting out middlemen and
convince buyers to choose higher-priced models pushing on the “emotional
shopping” stimulated by these types of stores.
However this is a dangerous field. To have shops in high traffic locations means
huge fixed expenditures for rents and it is hard to say if Apple will be able to keep
alive the big hype they’ve created. Moreover other retailer were not happy with this
decision (some also sued the company, but the court ruled in favor of Apple).
There’s no way to know if the costs deriving from a more bitter relationship with
resellers will be enough to set off the additional expenses. Any increase in sales
could be due to cannibalization, which is probably the biggest threat.
Apple claim that their stores are less than 3% than the total number of resellers in the
USA, thus not constituting a credible competitor in terms of volumes. They thought
that if they’d be able to double their market share to 10% thanks to the store, the
resellers would be the ones to enjoy the biggest share of the additional sales.
5-1 SWOT analysismanagement and already billion in annual sales (plus $4 billion in cash to invest) to
jump in retail would have been a bet worth to be taken. If we look at the financial
results we can see that were proved right.
The retail activities were profitable in just 3 years. Since the lunch they experienceda steady growth in turnover close to 50%. Profitability is a record level: with a net
margin well above 10% the Apple Stores are among the most profitable retail
activities in the US. It is interesting to note that the margin of the retail division,
which should be a low margin activity, is not very far from the margin from
computer and devices, which are high margin operations. This means that there a
great level of service embedded in their operations.
Apple: c)Establish gold standard for Apple buying experience
c)Establish gold standard for Apple buying experience
Jobs synthesized “We want to set an example for all our resellers. Maybe they’ll
have better ideas, but if they don’t we want them to take our ideas and adopt them as
their own”. Apple Stores are designed for delivering an high quality buying
experience. Personnel is highly trained and motivated and there’s in every store an
Hot Line with technicians at the headquarters in Cupertino for difficult situations.
Along with the company’s products there’s a wide offer of third-party accessories
and about 300 software packages. It is possible to buy everything is exposed because
the stores have an inventory of about 300 SKU for every item. The stores collaborate
with the resellers for raising the experience levels, and provides data,
recommendations and consults to other dealers.
Jobs synthesized “We want to set an example for all our resellers. Maybe they’ll
have better ideas, but if they don’t we want them to take our ideas and adopt them as
their own”. Apple Stores are designed for delivering an high quality buying
experience. Personnel is highly trained and motivated and there’s in every store an
Hot Line with technicians at the headquarters in Cupertino for difficult situations.
Along with the company’s products there’s a wide offer of third-party accessories
and about 300 software packages. It is possible to buy everything is exposed because
the stores have an inventory of about 300 SKU for every item. The stores collaborate
with the resellers for raising the experience levels, and provides data,
recommendations and consults to other dealers.
Apple: Convey the value
b)Convey the value
In the shops every product is exposed and fully operational and often the same
product is shown operating in different situations (for example imaging, music, etc.).
People walk in and browse through the store, trying the products and experience a
warm environment. The stores match very well with the “hit product” strategy
because they drive a lot of traffic. After Apple has presented in a spectacular show
some new trendy product people want to see it, feel it, and touch it. The stores helps
to convey the value. This has had also a positive impact on the brand because gave
an appropriate frame for the purchasing process of their devices.
In the shops every product is exposed and fully operational and often the same
product is shown operating in different situations (for example imaging, music, etc.).
People walk in and browse through the store, trying the products and experience a
warm environment. The stores match very well with the “hit product” strategy
because they drive a lot of traffic. After Apple has presented in a spectacular show
some new trendy product people want to see it, feel it, and touch it. The stores helps
to convey the value. This has had also a positive impact on the brand because gave
an appropriate frame for the purchasing process of their devices.
Apple: Growth
a)Growth
At the time Apple’s market share was just about 5% and this meant that there was
another 95% that could be converted. This means that there’s room for growth. The
stores were designed specifically to drew in people who normally don’t buy Apple
products. The shop locations were choose according to demographic researches and
placed where there was an high density of Mac user but also many Windows users,
with a profile quite close to these of usual Apple customer. The shop were located in
places with an high level of traffic, where people go for shopping and being
entertained and design for catching attention immediately; with this strategy a causal
Windows customer had the occasion of going in a shop while having a walk and see
by himself what does Apple offer. If only 5 out 100 of those who don’t even
considered buying a Mac could be converted, the company’s market share would
nearly double. The “destination-location” option was dropped because a potential
computer buyer who don’t even consider buying a Mac is unlikely to drive 20
minutes just for visiting an Apple Store.
At the time Apple’s market share was just about 5% and this meant that there was
another 95% that could be converted. This means that there’s room for growth. The
stores were designed specifically to drew in people who normally don’t buy Apple
products. The shop locations were choose according to demographic researches and
placed where there was an high density of Mac user but also many Windows users,
with a profile quite close to these of usual Apple customer. The shop were located in
places with an high level of traffic, where people go for shopping and being
entertained and design for catching attention immediately; with this strategy a causal
Windows customer had the occasion of going in a shop while having a walk and see
by himself what does Apple offer. If only 5 out 100 of those who don’t even
considered buying a Mac could be converted, the company’s market share would
nearly double. The “destination-location” option was dropped because a potential
computer buyer who don’t even consider buying a Mac is unlikely to drive 20
minutes just for visiting an Apple Store.
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