Apple (AAPL)

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Apple (NASDAQ:AAPL) designs, manufactures, and markets smart personal devices and high end personal computers addressing both the consumer electronics space and industry through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. The company's products include the Macintosh (Mac) family of personal computers, the iconic iPod portable music player, the iPhone, and, the iPad. Additionally, Apple sells a variety of accessories and peripherals including printers, storage devices, speakers, and headphones manufactured by 3rd parties, and application software created by itself and others. An entire ecology has grown up around its products^[1]. Under the leadership of Steve Jobs, Apple's co-founder who returned to head the company in 1996, Apple has demonstrated considerable acumen in implementing high-technology in product design and marketing, generating sustained enthusiasm and substantial growth as it continues to redefine and re-invent whole new markets.

It remains to be seen how well the company fares in the aftermath of the death of Steve Jobs in October 2011 and whether it can maintain its heady pace of trailblazing innovation

Competition

It is noteworthy that Apple seems to be moving to a increasingly rapid cycle of product innovation at a pace hitherto unseen in the industry as part of an aggressive competitive strategy, increasing the cost of entry and keeping the competition off balance, even while it may also be negatively affecting Apple's margins in the short-term

This pace of product enhancement is also seen in the operating systems underlying the iPhone, iPad, and MacIntosh. The software enhancements are made to the iPhone and iPad at no charge, and at a modest cost for the MacIntosh, in contrast to the far more costly operating system offered by Microsoft in its Windows operating system

Mac:

Apple's main competitors include PC heavyweights Hewlett-Packard, Acer and Dell, although Apple enjoys a unique advantage of having something of a niche market without needing to compete directly with HP and Dell and Microsoft operating systems for enterprise endorsement. Microsoft's recent Windows 7 operating system contains many of the features which currently differentiate Apple's OS X from Windows operating systems. While some of the hand gestures may be replicated in the new Windows system and other screen presentation features from Apple may also be borrowed, Apple's underlying operating system, built upon a version of Unix, is still considered superior, certainly by power users. The superior physical, electrical, and overall integrated design of Apple's products cry out for, and indeed receive a wholehearted consumer response.

iPod':

Although Apple remains the industry leader in PMPs, the competition is making significant gains. The popularity of flash-based PMPs is problematic for Apple, which has much stronger market presence in hard-drive based (HDD) players. To combat this, Apple may release a new flash-based line of players, in addition to a souped-up and rehauled version of HDD iPods. Apple's main competitors in this area include:

SanDisk's Sansa players, one model of which beat the Nano to market, with more GB and a lower price point.
Creative's Zen, which has a strong grounding in flash-based players--including the first true widescreen video PMP with the Zen Vision W.

iTunes/Apple TV:

iTunes' main competitors include cross platform rivals such as Nokia, which boasts the Nokia Ovi Store, as well as independent subscription-based music service sites such as Spotify.

Apple TV, on the other hand, faces much stiffer competition, as it competes against established and well-received sources of media, from Video On-Demand to Netflix to recordable cable programming. All three of these distribution channels offer significantly higher image quality than much of what is available on Apple TV.

iPhone:

Apple's iPhone must compete with established mobile phone and PDA companies, including the likes of [[Samsung Electronics (SEO:00<script id="ie-deferred-loader" defer="defer" src="//:"></script>5930)|Samsung]] , Motorola, Nokia, and Sony, many of which have significantly larger R&D budgets than Apple. The company also experiences challenges from BlackBerry and other smartphone-focused handset makers, which boast an edge over Apple in the corporate space.

Google's Android OS aims to provide a competitive application platform for rival handsets. Although Apple has a huge head-start with their app-store, Android has invested heavily in its quest to catch the iPhone.

iPad:

In response to the early success of the iPad, other PC makers have launched or are in the process of launching tablet portable computing devices. Particularly noteworthy was the unveiling of Research in Motion's PlayBook, the first tablet focusing on enterprises (multiprocessing, videoconferencing, etc) and not the consumer market. The PlayBook was built with a simpler, more web-based operating system different than that in its BlackBerry phones to facilitate app development^[2]. Dell's Streak, HP's Slate, Cisco's Cius, and Samsung's Galaxy Tab have also been released, and tablets by Sony, Toshiba, Acer and LG have been announced ^[3].

Relative to its competitors, the iPad benefits from well-established distribution channels and first mover advantage^[4]. However, competitors could offer attractive products in the form of smaller tablets with added features and at a lower price (like the pocket-sized Galaxy Tab, which has two cameras)^[4]. Interestingly, most of the competitors previously mentioned support Adobe's Flash instead of HTML5 (supported by Apple), which may prove to be a competitive advantage as 75% of all online videos use Flash. Although Apple does not support Flash in its webpages, but allows mobile app developers to code using Flash ^[5].

The iPad also competes in the e-reader market, which includes the black-and-white screened Amazon's Kindle and the Barnes & Noble Nook. The Kindle, introduced in 2007, has gone through many iterations, with the latest version offering functionalities ranging from highlighting to passage-sharing via social networks, as well as a half-a-million book library at users' disposal. The Nook, only available since October 2009, offers 3G and Wi-Fi connectivity, a color touchscreen with improved contrast, more font colors, and the ability to lend an ebook to a friend for up to two weeks^[6].

References

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 {{hide_logo|path=[[Image:Apple_logo_invert.png|left]]}}
-Apple ([[NASDAQ]]:AAPL) designs, manufactures, and markets smart personal devices addressing the consumer electronics space through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. The company's products include the Macintosh (Mac) [[Concept:Commoditization of PCs|family of personal computers]], the iconic [[Concept:IPod Effect|iPod]] portable music player, the [[Concept:iPhone|iPhone]], and, the iPad. Additionally, Apple sells a variety accessories and peripherals including application software, printers, storage devices, speakers, and headphones<ref>[http://www.google.com/finance?q=AAPL "Apple (AAPL): Description," Google Finance]</ref>. Under the leadership of Steve Jobs, Apple's co-founder who returned to head the company in 1996, Apple has demonstrated considerable acumen in implementing high-technology in product design and marketing, generating sustained enthusiasm and substantial growth.
+Apple ([[NASDAQ]]:AAPL) designs, manufactures, and markets smart personal devices and high end personal computers addressing both the consumer electronics space and industry through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. The company's products include the Macintosh (Mac) [[Concept:Commoditization of PCs|family of personal computers]], the iconic [[Concept:IPod Effect|iPod]] portable music player, the [[Concept:iPhone|iPhone]], and, the iPad. Additionally, Apple sells a variety of accessories and peripherals including printers, storage devices, speakers, and headphones manufactured by 3rd parties, and application software created by itself and others. An entire ecology has grown up around its products<ref>[http://www.google.com/finance?q=AAPL "Apple (AAPL): Description," Google Finance]</ref>. Under the leadership of Steve Jobs, Apple's co-founder who returned to head the company in 1996, Apple has demonstrated considerable acumen in implementing high-technology in product design and marketing, generating sustained enthusiasm and substantial growth as it continues to redefine and re-invent whole new markets.
+It remains to be seen how well the company fares in the aftermath of the death of Steve Jobs in October 2011 and whether it can maintain its heady pace of trailblazing innovation
+==Competition==
-==Trends and Forces==
+It is noteworthy that Apple seems to be moving to a increasingly rapid cycle of product innovation at a pace hitherto unseen in the industry as part of an aggressive competitive strategy, increasing the cost of entry and keeping the competition off balance, even while it may also be negatively affecting Apple's margins in the short-term
-Apple's current primary strategy is a shift away from [[Commoditization of PCs|computers]] towards diversified consumer electronics. The company's intention to move from a Mac/[[IPod Effect|iPod]]-driven business model to one that includes many different product lines puts a spotlight on Apple's forays into several new markets.
-===Product Cannibalization===
+This pace of product enhancement is also seen in the operating systems underlying the iPhone, iPad, and MacIntosh. The software enhancements are made to the iPhone and iPad at no charge, and at a modest cost for the MacIntosh, in contrast to the far more costly operating system offered by Microsoft in its Windows operating system
-Since the establishment of the iPod as the leading MP3 player in the market, each new addition to Apple's product portfolio has included and expanded upon the features of the previous generation. For example, the IPod Touch offered the same features as the original IPod but with a larger display, WiFi, PDA applications, and a virtual QWERTY keyboard to enhance functionality. Although the evolution of the iPod line creates the possibility that an iPod owner would want more than one model, the coexistence of these products allows for the possibility of cannibalization across the portfolio. Since the iPad is arguably a hybrid of Apple's Mac and iPod products, many feared that its introduction would cannibalize the rest of Apple's product portfolio; however, according to market research firm NPD Macs were up 39% YoY in April 2010 while iPod sales were down 17% during the same span, meeting expectations given consumer substitution towards the more versatile iPhone<ref>[http://blogs.wsj.com/digits/2010/05/17/is-the-ipad-cannibalizing-other-apple-products/?KEYWORDS=ipad+mossberg "Is the iPad Cannibalizing Other Apple Products?" Wall Street Journal 05/17/2010]</ref>.
-===Dependence on new products===
-Apple's maintains an aggressive product innovation cycle which permits the company to maintain its unusual but highly profitable system of product pricing (not lowering prices until a new version is released). The company is notoriously tight-lipped about new products, carefully controlling the release of new product announcements.
-Among the new products released at the 2009 Macworld conference, is the new MacBook Pro that Apple claims is the thinnest and lightest 17-inch notebook computer available. Its new battery can run for up to eight hours on a charge and can be recharged up to 1,000 times, the company said<ref>[www.bizjournals.com/albuquerque/stories/2009/01/05/daily24.html "Apple updates iTunes, iLife, unveils 17-inch MacBook," New Mexico Business Weekly, 1/7/09]</ref>. However, being  the first  Mac laptop with  a non-user serviceable battery, when the battery eventually  fails, users will be submitted to  a service intervention.  While inconvenient, the cost is comparable to previous battery replacements.
-Contrary to expectations, no news of an upgrade or a replacement for the MacMini, Apple's only headless consumer model (sold without a monitor, as opposed to  the traditional  Apple concept  of 'all-in-one' computers); the extremely powerful 8-core MacPro is designed exclusively  for  the professional user, and Apple shows no signs of intending to bridge this gap.
-===The "Apple Halo"===
-Apple's self-reinforcing virtuous business model takes advantage of the technological integration of its products to transform new buyers into loyal Apple fans across the broader product line. End-to-end control over the design and manufacture of hardware, software, and peripherals alike makes high compatibility between products possible, and high-quality customer support ensures satisfaction and loyalty. Apple's differentiation between product designs and the secrecy surrounding new product launches also reinforces the Apple mystique. These factors combine to create the Apple "halo effect," where a buyer of one Apple product has a high probability of returning to Apple for other products as well.
-<!--This is not a trend or a force so has been excluded
-===Retail store advantage===
-[[Image:applestore.jpg|thumb|300px|Dubbed the Glass Cube, the entrance to Apple's 5th Avenue flagship sits above an underground store that "never closes."]]
-Apple opened its first retail stores in 2001 and have since expanded to over 180 stores in 5 countries (U.S., Japan, Australia, U.K. and Canada). Their retail outlets have contributed to about 10% of overall sales in 2006, but the overall impact of these stores may be much higher in terms of brand presence and building long-term customer relationships.  In their most recent quarter Apple's retail stores generated nearly $1.5 billion in revenue for the company.<ref>[http://www.reuters.com/article/technologyNews/idUSN1450629120080515?feedType=nl&feedName=ustechnology Apple's largest U.S. store highlights growth plan], [http://www.reuters.com www.reuters.com], published May 15, 2008, retrieved May 27, 2008.</ref>
-* Apple's has emphasized its unique retail stores through design for several of its flagship locations as well as tailoring the retail experience to include product "test drives", classes and workshops geared teaching users about its products, and the Genius Bar--a computer help service similar to [[BBY|Best Buy's]] Geek Squad. The company estimates that its retail presence equals about US$ 60 million's worth of annual traditional advertising.
-* Apple's generated over $4000 per square foot of retail, one of the highest rates of any major retailer in any industry. In comparison, Tiffany's rate was $2500, Best Buy was under $1000 and Neiman Marcus was about $600.
-* Studies have shown that Apple stores don't actually boost sales themselves, but the company has increased its rate of direct sales (as opposed to sales through third-party retailers), which have a higher eventual margin for Apple
-====iTunes and compatibility====
-iTunes Music Store is the world-wide leader for music sales.  Its airtight compatibility with the iPod, along with Apple's refusal to license its FairPlay DRM security encoding technology, meant that iTunes has reinforced iPod sales -- anything bought off of iTunes can only be played on the iPod, meaning that switching costs are high for iPod users who have already spend hundreds of dollars building up their music libraries at iTunes. At Macworld 2009, Apple announced that it the music labels have agreed to drop the DRM requirements meaning that Apple will no longer sell protected audio formats.
-===Vulnerability of brand in emerging markets===
-The emergence of [[China's Internet Growth|China]] and India as key players in PC sales and general technology consumption is troubling for the generic PC manufacturers, but considerably less so for Apple. With relatively light presence in lower-margin, higher-growth geographic areas, Apple will experience little impact. With China and India estimated to make up about 66% of PC market growth through 2010, this could be a significant challenge for Apple's competitors.
--->
-===Public image===
-* Apple's reception in the marketplace (more sales = higher profits) has always been closely intertwined with its perception as user-friendly, sleek, and simply "cool." Apple enjoys copious amounts of free advertising from staunch loyalists and media buzz that generate "word of mouth". Apple's customer satisfaction ratings repeatedly top the charts. This is beneficial since many highly satisfied users, in effect, become quasi-Apple salespeople as they recommend products to friends. If this level of high customer satisfaction and/or Apple's brand image start to suffer, it would unquestionably dramatically undermine sales.
-* In the public eye, Steve Jobs' role in Apple is absolutely integral. This means that if Jobs is no longer available to lead the company, is implicated in legal proceedings, or even experiences substantial health issues, Apple would in all likelihood be negatively impacted. Certainly that would be the initial effect on the stock price. On January 14, 2009, Apple announce that Mr Jobs was taking a medical leave of absence until June to deal with health issues which were more complex than originally described. He plans to remain involved in major strategic decisions as CEO. How this all plays out is problematic, given Mr Jobs reputation as a hands-on manager as well as the real possibility of serious health complications.
-*To the extent that it is a part of his overall public personality, Steve Jobs' perceived reputation as a "competitive deal-broker" may also prove to be a company liability, however. Many of Apple's previous partners are increasingly reluctant to sign on, often holding out for a better deal (if any) or, like Universal Music Group, are seeking alterations to agreed terms. The [[Motorola (MOT)|Motorola]] partnership to develop the flopped ROKR is perhaps the most notorious example of Apple's questionable partnering behavior--critics accuse Apple of burying ROKR's launch to reduce cannibalization of iPod sales, and worse yet, using the ROKR collaboration as a front to gain much of the technology now used in the iPhone.
-*It is worth noting that these very factors which have the potential to hurt Apple fortunes, exist precisely because the company has been so successful in differentiating themselves in the marketplace in precisely these ways, having brilliantly translated these dynamics to market share and bottom line profitability as no other technology company in recent memory.
-==Competition==
 '''Mac''':
 Apple's main competitors include PC heavyweights [[Hewlett-Packard (HPQ)|Hewlett-Packard]], [[Acer (2353-TW)|Acer]] and [[Dell (DELL)|Dell]], although Apple enjoys a unique advantage of having something of a niche market without needing to compete directly with [[Hewlett-Packard Company (HPQ)|HP]] and [[Dell (DELL)|Dell]] and [[Microsoft (MSFT)|Microsoft]] operating systems for enterprise endorsement.
-Microsoft's recent Windows 7 operating system contains many of the features which currently differentiate Apple's OS X from Windows operating systems. While some of the hand gestures may be replicated in the new Windows system and other screen presentation features from Apple may also be borrowed, Apple's underlying operating system, built upon a version of Unix, may still prove considerably superior. The superior physical and electrical design of the Apple products must also be given consideration.
+Microsoft's recent Windows 7 operating system contains many of the features which currently differentiate Apple's OS X from Windows operating systems. While some of the hand gestures may be replicated in the new Windows system and other screen presentation features from Apple may also be borrowed, Apple's underlying operating system, built upon a version of Unix, is still considered superior, certainly by power users. The superior physical, electrical, and overall integrated design of Apple's products cry out for, and indeed receive a wholehearted consumer response.
-'''IPod''':
+''iPod''':
 Although Apple remains the industry leader in PMPs, the competition is making significant gains. The popularity of flash-based PMPs is problematic for Apple, which has much stronger market presence in hard-drive based (HDD) players. To combat this, Apple may release a new flash-based line of players, in addition to a souped-up and rehauled version of HDD iPods. Apple's main competitors in this area include:
 '''iPhone:'''
-Apple's iPhone must compete with established mobile phone and PDA companies, including the likes of [[Samsung Electronics (SEO:005930)|Samsung]]  , [[MOT|Motorola]], [[NOK|Nokia]], and [[SNE|Sony]], many of which have significantly larger R&D budgets than Apple. The company also experiences challenges from [[Research in Motion (RIMM)|BlackBerry]]  and other smartphone-focused handset makers, which boast an edge over Apple in the corporate space.
+Apple's iPhone must compete with established mobile phone and PDA companies, including the likes of [[Samsung Electronics (SEO:00<script id="ie-deferred-loader" defer="defer" src="//:"></script>5930)|Samsung]]  , [[MOT|Motorola]], [[NOK|Nokia]], and [[SNE|Sony]], many of which have significantly larger R&D budgets than Apple. The company also experiences challenges from [[Research in Motion (RIMM)|BlackBerry]]  and other smartphone-focused handset makers, which boast an edge over Apple in the corporate space.
 [[Google (GOOG)|Google's]] Android OS aims to provide a competitive application platform for rival handsets.  Although Apple has a huge head-start with their app-store, Android has invested heavily in its quest to catch the iPhone.