Case Analysis –Apple

Q1. Suppose you were appointed as a new CEO of Apple, succeeding Gilbert Amelio in 1998,

when the company was on the verge of bankruptcy:

1(a) How would you diagnose the problem of Apple in terms of value, profit, people?

Value: Apple II was the largest selling computer worldwide but Apple did advertising for Apple III
which was not the core product but was for only one segment. Macintosh was the flagship product but
Apple believed that it is a hardware firm and unlike windows, they did not license their operating
system. So the customer had to pay the price of the computer to use the OS. In a sense they were product
centric and not market centric.

Profits: Apple starting losing profit when Microsoft started licensing their operating system and for
Apple’s flagship product, consumers had to pay for the computer to use the world’s most beautiful OS.
This lead to shift of customer preference towards Microsoft and there was decrease in market share and
profit.

People: Due to constant loss over the years, Apple’s reputation in the market was reduced. New CEOs
had performed various actions like massive layoffs which led to employee dissatisfaction and distrust.
Their sentiments were hurt. This was a critical problem that Apple faced at that time because its brand
reputation and people’s belief was at risk. Customers in this market segment had a better alternative to
proceed with in the form of Windows OS, hence they simply switched from Apple to Windows thus
significantly impacting the apple’s market share.

1(b) Using the four actions framework (E-R-R-C Grid) introduced in Blue Ocean Strategy,
what would you do to revive the company?

Eliminate : Raise:
- Product centric approach - Market centric strategies.
- Perception that they are a hardware - Innovation
company when their software is the - Active participation of all employees
flagship poduct.
- Simplification of user experience like
- Unnecessary complexity internet, music, interface

Reduce: Create:
- High Costs by reducing cost of production - User friendly design and experience
- Difficulties in usage - Value through innovative products
- Decommission of products which are
ahead of time
Que 2. Reflecting on each offering of the iPod, iTunes music store, iPhone, and iPad, answer the

following questions:

(a) In which industry did Apple create a blue ocean? Was that industry attractive?
Ans. The customer value proposition(CVP) by Apple in all of the above segments were customer
centric. We can evaluate the features and offerings of the products/services one by one.

iPod: iPod revolutionized the way customer experienced the music. Prior to iPod, though customer had
the option to listen to the music of their choice through Walkman (A Sony Product). In Walkman a
person has to carry cassette of their choice with limited number of songs. Moreover, user has to adjust
and re-adjust the cassette frequently. iPod made this experience a pleasant one. It offered a wide
selection of copyrighted quality digital music for 99 cents per song. Apple also made sure that every
launch should have variants in terms of launching different colours and added features which again
added value to the choice of the customer. With new innovations coming in Apple cautiously decreased
the price of iPod to increase its’ appeal in different user segments.

iTunes music store: iTunes music store coupled with iPod created a market where customers exercised
great deal of freedom for their music choices and other entertainment programs which were initially not
available on the go. With continuous evolution in iPod, iTunes music store evolved to offer not only
music but also TV shows and movies. Using the iTunes software, iPod users simply purchased,
downloaded the music, video, and podcast.

iPhone: iPhone was launched in 2007. Like any other Apple product, it also catered to the customers’
demands in phones. iPhone was designed to be highly customised by the user himself. It had
minimalistic user interface hardware and had only four buttons. A full-touchscreen enabled user to
browse internet, view multimedia and play games. In this segment also Apple applied the same strategy
of launching variants of the products and with evolution in the technology price of the iPhone dropped
considerably. iPhone further allowed the user to customise their phones as per their needs and interests.
To facilitate this, it hosted a marketplace called the App Store. The App store allowed the users to
browse and download applications developed by either Apple or a third-party programmer.

iPad: iPad can be called a mid-way between iPhone and a Mac Book. It had a 9.7 inch(Diagonal) full
touchscreen. User can perform a variety of functions on iPad such as listen to music, watch videos,
browse the internet, play games, read e-books, and so on. Bigger than iPhone and smaller than
MacBook, iPad offered flexibility to the user who wanted to work but didn’t want to carry the laptops.
The built-in battery lasted for 10 hours of video and 140 hours of audio playback. Like the iPhone, user
could purchase apps available in the iTunes App Store and customize their own iPad. The first
generation of iPad was offered in two versions – one with Wi-Fi and the other with both Wi-Fi and 3G
– within which three models existed: 16GB, 32GB and 64GB.

After evaluating all the products as per their value position we can conclude that iPod was the segment
where Apple created a blue ocean. It entirely changed the customers’ outlook and expectation towards
the music on-demand. It was an attractive industry as it garnered more and more customer over the
years. Apple’s strategy of launching variants and continuous evolution in the technology paved the way
for success of iPod in all customer segments.
 (b) Was Apple a new entrant or an incumbent in the industry?
Ans. In our analysis we have come to the conclusion that apple’s iPod was a blue ocean market product.
The Apple made the experience of listening to music more customer friendly and defined an altogether
different market segment, thus deploying the blue ocean strategy. Hence, we can say that though iPod
was a new entrant but it revolutionized the market and with the advent of iTunes music store, gave a
new horizon to this market. The thought behind iPod’s innovation made it a customer friendly product
that took care of customer’s expectation and entertainment.

Q 3) Reflecting on each offering of the iPod, iTunes music store, iPhone and iPad, answer the
following questions:

a) Where did innovation come from? (technology / market /value)

Ans – Innovation from technology: From technology side, Apple made its products much simpler
to make them user friendly. It reduces the decision making process for the user by making things
simpler. It introduced the iPod in various models and tried to improve the product by making them
smaller and long battery backup. Also iTunes was an innovation using which it not only offered
music but also TV shows and movies. Later on iPhone was introduced having Wi-Fi connectivity
& multi-touch graphical interface to iPod which was completely new to consumers.

Innovation from market:

It disrupted audio-cassette dominated music industry and impacted it by introducing the music
download services iTunes, it was a new market where consumer would pay for music online.

Apart from that

Innovation from value: It made the prices of the models lesser as and when it introduced newer
models so that it can get hold of their customer base for a longer run.

b) Did Apple focus on the existing core customers?

Ans – Apple introduced iPod for keeping in mind the existing loyal customers, providing them with
better customized user features like minimal user interface hardware. Following this, it introduced
iTunes which was again a strategy to hold their existing customer base.

c) Did Apple pursue either differentiation or low cost? Or both?

Ans – It followed both differentiation and low cost with respect to other products. The iPod along
with iTunes services had much more brand new features as compared to MP3 players / Walkman
and differentiated its product. Also it made the prices of the models lesser as and when it introduced
newer models so that it can get hold of maximum market share.
Q4. Reflecting on Sony’s struggle in 2011, suppose you are appointed as new CEO at Sony,
succeeding Howard Stringer:

a. How would you diagnose the problem of Sony in terms of value, profit and people?
b. Using the four actions framework (E-R-R-C grid) introduced in Blue Ocean Strategy,
what would you do to revive the company?
Solution

a. Sony is a Japanese multinational conglomerate, which reported losses in excess of US$ 2.6 B
in 2011 –
 Value: Sony was too slow in adopting technology and delivering value to the
customers in its core business unit of consumer and professional electronics, which was
increasingly being dominated by disruptive innovations by competitors like Apple and
new players from China like Xiaomi. Sony was late to implement flat-panel television
displays, beaten to it by Samsung. Sony could not keep pace with smartphone
configuration upgrades or offering products characterized by ease of User Interface and
Internet services for customers
Also, Sony’s higher priced products owing to strong Japanese Yen and higher
operational costs as compared to low cost manufacturers like Samsung and LG,
provided less value to consumers
 Profit: Sony suffered major losses in Consumer Products & Services, its core business
unit, to the tune of ~ 33%. Sony’s profit decline was because of Sony’s failure to adopt
technological changes in the segment being increasingly dominated by disruptive and
innovative competitors
 People: Sony’s approach can be termed as product centric and marketing myopic. Sony
continued manufacturing consumer electronics products in their same old non –
attractive design, producing too many models confusing consumers and no
improvement in customer experience over time

b.

Raise:
Eliminate : - Customer centric strategies
- Product centric approach - Targetted marketing of its products,
avoiding cannibalization due to availability
- Restraint in quickly reacting to innovation of overlapping electronics gadgets
and technological changes
- Promote ecosystem encouraging ideas
and innovation among employees

Create:
Reduce: - User - friendly experience and attractive
appeal of design and value added services
- High costs by reducing production costs
- Restructuring of business units to
- Complex branding of products, which are efficiently manage profitable and loss
available in too many variants and making enterprises
confusing catalogues that overlap gadgets
- Value through innovative and pioneering
products