Apple Computer, 2006

Apple Computer was founded by Steve Jobs and Steve Wozniak, their mission was to bring an easy-to-use computer. Their first computer was the Apple II, which was a simple computer that consumers could use straight out of the box. The company’s main competitive advantages are marketing, innovative hardware design, technical elegance and research and development.

The PC industry is an industry that is always evolving and reinventing themselves in order to achieve more market share. In the past 20 years the PC industry has changed a great deal, even though Apple pioneered the first usable personal computer, IBM was the company that brought PCs into the mainstream. In the 1980s, most PC buyers were business managers who were inexperienced first-time buyers. By the 1990s consumers became more knowledgeable and a variety of alternative channels emerged The competitive environment in the PC industry is determined by which company holds the most market share. In the case of Apple, their competitors are all “Wintel” PC manufacturers, therefore Apple offers the alternative to customers who do not want to buy a “Wintel” based computer. In 1006 the top three pc vendors were Dell, Hewlett-Packard and Lenovo, all of which accounted for 40% of all PC shipments. Dell centers their business model on direct-sales and built-to-order manufacturing. This model helped Dell to reduce costs and maintain high margins while undercutting prices. Since Apple’s competitors all function under the same operating system platforms, their main advantage over Apple are their pricing strategies which help them to offer more competitive prices. Apple has to compete more intensely because they are the alternative product; this means they have to attract customers by promoting the benefits that their products offer as opposed to their competitors. Marketing has to be an integral part of Apple’s competitive advantage because the company always positions their products as high quality premium products which are worth the extra money because they will deliver the value. An intense competitive environment is usually created when certain products have the same or similar value.

Apple’s competitors are not dominant in the PC industry because product differentiation among “Wintel” manufacturers is not strong enough to create a dominant product. Every few years there is a new leader in the pc market, first it was IBM which was succeeded by Dell and now Hewlett-Packard which is the largest PC manufacturer is considered to be the leader in the PC industry. In this industry the competition is aggressive among all manufacturers because all want to increase their market share and with the changing technology it is important for manufacturers to develop new features that will attract customers to buy their products. One of the reasons many customers are attracted to Apple is because of their innovative designs, this is attributed to the fact that while most manufacturers cut spending by reducing R&D Apple is committed to their R&D, and in exhibit 1 the cost of R&D can be noticed. Channels of distribution also give a company a competitive advantage; Apple has practice horizontal and vertical integration to a greater extent that any other PC company, with the exception of IBM. Apple designs, build and sell their own products. Their retail stores and online store account for a majority of the company’s revenue, the ability to have different channels of distribution gives the company a competitive advantage.

There are few barriers to entry to the PC market; this means that if an investor has the sufficient capital it is easy to set up a PC company. As a result of this there are many small manufacturers who offer PCs with similar functions, causing the market to be price competitive. PC components have became increasingly standardized, therefore manufacturing a computer is not expensive and it as became a relatively easy process that does not require technological expertise. Also, distribution channels help new companies because through the use of the internet they can set up a web-based retail store to sell their products. The “white box” channel is also a very profitable, this is largest distribution channel, which offers generic PCs that are assembled by local investors. Suppliers in the PC industry hold a lot