Business -- Apple Computers Strategic Analysis 2005

Business -- Apple Computers Strategic Analysis 2005

Strengths and Opportunities

In 2005, Apple Computers experienced significant sales increases attributable to the earlier rollout of the iPod (Robbins & Judge, 2009). The positive publicity and brand perception associated with that project also spilled over to its entire line of Macintosh computers, further bolstering sales revenue and corporate profits that year. The sales volume of virtually all Apple products increased after the introduction of the iPod, hitting $320 million in June of 2005 (Robbins & Judge, 2009). In general, every successful Apple product has benefited brand recognition and perception and invigorated the sales of other product lines, even those not directly related to it. By the end of 2005, Apple had sold approximately 22 million iPod units and more than half a billion individual song downloads through its music store, iTunes (George & Jones, 2008).

Weaknesses

Generally, there is also a potential downside to the cross-promotional effect of products: namely, to the extent consumers draw conclusions about all company products from its failures. In 2005, Apple suffered from this principle twice, after many iPods were released with batteries that performed poorly and iPod Nanos were released with screens that malfunctioned ((Akin, Dunford, & Palmer, 2006). In addition to replacing the defective units, the company also provided various free accessories, such as battery cases. Apple was also pressed by the music industry to increase prices of music downloads, partly because of the substantial share of music industry profits dependent on that comparatively new medium and partly because, by virtue of the capabilities of its product line, Apple was responsible for more than three-quarters of all illegal domestic music downloads (Akin, Dunford, & Palmer, 2006). Also in 2005, Apple terminated its long-term association with IBM, replacing IBM chips with Intel chips. Irrespective of other benefits, this change of such a long-term relationship was perceived negatively by many customers (George & Jones, 2008).

Threats

The tremendous success of Apple products motivated other major industry players to develop similar products intended for the same market segment and it also resulted in outright infringement of its patents by small-market imitators, particularly in the Orient (Akin, Dunford, & Palmer, 2006). For one example, Motorola introduced its Rokr phone with many of the same capabilities (i.e. screen and camera functions and stereo sound), in conjunction with its own version of the iTunes online store. The increasing availability of free online podcasts capable of being played on most MP3-type devices also eroded Apple's share of the market in 2005 (Akin, Dunford, & Palmer, 2006).