Apple Inc. Itunes

Apple Inc.

Gwen Johnson

SJ Lee

Michelle Middleton

Nigel Ngai

Greg Palmeri

Business Capstone

Professor Lee

March 5, 2008

Executive Summary

Apple Inc. is a company that designs, manufactures, and then sells desktop and notebook computers, portable digital music players, and cell phones. It also creates software like the OS X operating system, iLife, iTunes, or QuickTime; and peripherals such as printers or storage devices that go with these products. The biggest challenge Apple is facing is that consumers are reluctant to pay for songs and thus, Apple is losing customers to its competitors who are offering music at a lower price. This can be seen in increased piracy and code hackers.

We came up with two possible solutions to address Apple's challenges. The first is to create a streaming music system. Using the currently existing streaming music program, customers can choose stations from different music categories. With a more personalized system they could choose stations that play music similar to an artist they already like. While the streaming music is playing customers would have the option to buy the song as well. The second option is to open up their music file sharing program with an all encompassing price. Apple stands to benefit significantly in the future from building a closed community with artists and consumers which will enable the company to compete more aggressively with record companies while also building a closed network which minimizes hacker risk.

The second option of the closed community solves the main issues faced by Apple, like the loss of customers to competitors and dealing with illegal downloads from consumers, which is why we found this to be the best option for Apple to pursue. Its overall purpose is to deliver a competitive music package with top security, which adds value and significant competitive advantage to Apple's current processes.

Table of Contents

1. The Strategy of Apple Inc. ……………………………………… 4

2. Strategy Evaluation …………………………………………… 5

2.1 Michael Porter's Five Forces Industry Analysis ………………. 5

Table 1: Porter's Five Forces …………………………………….. 6

2.2 The VRIO Assessment ………………………………………… 8

Table 2: Assessment of the Apple, Inc.'s Internal Capabilities …... 9

3. Strategic Option: Streaming Music……………………………... 10

3.1 Evaluation of the Streaming Music Strategy ………………….. 10

4. Strategic Option: Closed Community…………………………… 12

4.1 Evaluation of the Closed Community Strategy ………………... 12

5. Strategy Selection and Implementation ………………………… 14

5.1 Sequence of Implementation …………………………………... 15

6. Apple's Competitive Advantage ………………………………... 15

1. The Strategy of Apple Inc.

Apple Inc. is a company that designs, manufactures, and then sells desktop and notebook computers (Mac), portable digital music players (iPod), and cell phones (iPhone). It also creates software like the OS X operating system, iLife, iTunes, or QuickTime; and peripherals such as printers or storage devices that go with these products. Apple is in the technology sector, and has expanded from the computer industry into peripherals and the digital entertainment industry because of the wide scope of its products and services . Apple's mission statement is as follows:

Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning