Agata Dziwisz BUS - 115

Special assignment 4

Apple Computer Inc. was founded by Steve Jobs, Steve Wozniak and Ronald Wayne on April, 1 1976. It was created with a purpose of developing and selling personal computers. During the first five years of operations, revenues doubled every four months, an average growth rate of 700%. (http://en.wikipedia.org/wiki/Apple_Inc.) Although Apples product was very innovative and initial sales were very strong, the follow-up sales were pretty poor due to its high price and limited range of software titles. The Macintosh was very powerful in the desktop publishing market because of its advanced graphics capabilities and creative the intuitive Macintosh GUI. In 1985 Steve Jobs ran into some struggle with CEO John Sculley, who was hired two years earlier. The issue that board of directors saw with Jobs, was that he was launching an expensive forays into untested products. When Sculley found that Jobs was attempting to organize a coup against him, he called a board meeting where the board of directors decided to remove Steve Jobs from his managerial duties. After that major change, Apple was doing very well and introduced many new products. Unfortunately in 1990s, another competitor emerged. Microsoft continued to gain market share with Windows. Microsofts strategy focused on selling software to cheap commodity personal computers while Apple was delivering a richly engineered, but expensive, experience.(http://www.roughlydrafted.com/RD/Q4.06/3EC02E78-FD4D-4CDF-92A09C4CBDFAB3D2.html). All of those factors caused apple to lose its market share and lead to record-low stock price and crippling financial losses.

In 1997, Gil Amelio, present CEO of Apple brought Steve Jobs back as an advisor. Right after that, Amelio was ousted by the board of directors and Steve Jobs acted as the interim CEO and began restructuring the companys product line. In 2001, Apple opened the first official retail store in Virginia and California, and in October of the same year, Apple announced the iPod portable digital audio player. Also in an uncharacteristic move for a company widely known and respected for its user interfaces, Apple didn't completely design the first iPod interface. Instead, it contracted with a company called Pixo (now part of Sun Microsystems) for the foundational interface, which Apple then expanded on . (http://ipod.about.com/od/understandingipodmodels/a/invented-ipod.htm). This product was incredibly successful and reached over 100 million units sold within six years. When Steve Jobs returned to Apple in 1996, they were on the edge of bankruptcy; Apple had a loss of $1 billion dollars from the previous year, and was 90 days from bankruptcy. Then, in 1997, the year Steve came back, and applied his marketing strategies, Apple recorded a profit of $5.9 billion, then, over the next 10 years, he took Apples stock market cap from $3 billion, to $702 billion dollars (http://www.chrisnosal.com/apples-marketing-strategy-sellproducts-on-value-not-price/). The most important point of Apples marketing strategy was ease of use of iPod. You can simply see and touch what you want. The same strategy was applied when Apple released first iPhone. It was simply an all in one device that handled functions as phone, pager, music, videos, internet and much more. In 2011, Tim Cook took over the position of apples CEO because of very long and painful illness that attacked Steve Jobs, who after long fight wasnt able to make it and passed away. Tims biggest challenge was to maintain the momentum. Theres the question of whether Apples advantages are starting to erode. Apple enjoyed a head start in the smart phone market with the iPhone and in tablets with the iPad. But there are clear signs that the companys rivals are beginning to catch up. (http://business.time.com/2013/10/04/two-years-after-steve-jobsdeath-is-apple-a-different-company/). The most recent release of new Maps app that was supposed to replace Google Maps was filled with flaws, missing features and misplaced businesses. Maybe, if Steve Jobs was alive then he could perfect the app before release but I

guess well never find out. Everyone can make mistakes and the biggest one that could be done by apple is to force new apps and improvements without proper testing. Steves idea generally started the whole idevice marathon and will not diminish that quickly as long as Apple can work on new improvements. At some point they will need to come up with something completely new and hopefully competition will not come up with it first. Apples pricing objective played a very smart game with its own products by launching iPhone at a very high reference prices and then rapidly lowering that price. Their products were so popular at that time that everyone wanted more; therefore people were willing to pay the high cost to get it. Apple in essence is using its first-iteration pricing as a reference to make its current products feel affordable. (http://www.nbcnews.com/id/38980367/ns/businessus_business/t/how-apple-plays-pricing-game/#.U0Ifc01OUfI). Even today, many major Apples competitors seem to offer their products at a lower price but the majority of that market still seems to go with Apple. That is also why I think that Apple doesnt seem to be giving too much weight to competitive pricing, and still pricing their products quite more than those of competition. However, they made one major change. With the release of new iPhone 5S they also release a cheaper version called iPhone 5c, which is supposed to reach more customers that cant afford the full blown version but still want to purchase Apple product. Applying price skimming strategy where the initial price is very high means fat margins that can be allocated toward the recapture of up-front development costs. The sooner these development costs are recovered, future margins will expand at a faster pace. (http://financial-alchemist.blogspot.com/2007/09/apple-benefits-from-high-initialiphone.html). On the other hand, an Apples decision to switch away from price skimming is very smart and proves that Apple wants to apply a market penetration strategy. Thanks to this move, Apple might be able to expand market share quicker and strengthen its position against the competition. It might also mean that they dont want to lose its position due to revamping the existing product because there is no new idea to be released in a near future. I dont think the move by Apple is a suggestion that iPhone sales were soft. Analysts closely following iPhone sales had been reporting that sales were tracking as expected. (http://financial-

alchemist.blogspot.com/2007/09/apple-benefits-from-high-initial-iphone.html). Eventually, even Apple will not be able to sustain its position if there will be no new innovations and market will get bored by its products.

References: 1. http://en.wikipedia.org/wiki/Apple_Inc. 2. http://www.roughlydrafted.com/RD/Q4.06/3EC02E78-FD4D-4CDF-92A09C4CBDFAB3D2.html 3. http://ipod.about.com/od/understandingipodmodels/a/invented-ipod.htm 4. http://www.chrisnosal.com/apples-marketing-strategy-sell-products-on-value-notprice/ 5. http://business.time.com/2013/10/04/two-years-after-steve-jobs-death-is-apple-adifferent-company/ 6. http://www.nbcnews.com/id/38980367/ns/business-us_business/t/how-apple-playspricing-game/#.U0Ifc01OUfI 7. http://financial-alchemist.blogspot.com/2007/09/apple-benefits-from-high-initialiphone.html 8.