Getting Started.

Overview & Strategic Analysis Guidelines

Dusty 2010 & NEXT School of Business

CANDIDATES BRIEF
You are a Marketing Consultant working for Apple Inc. As a part of the marketing team, you have been asked to analyze the factors that have contributed to the success of the company and in particular of its iPad. You have also been given a particular remit to consider the changing nature of the printing industry and the role of technology in addressing the challenges it faces. Apple Inc is keen to explore the opportunities the iPad creates in this context, and the potential impact that the iPad (as a product that delivers books and newspapers to end users) may have on the traditional value chain model. Finally, the company is seeking insights into how it can maintain its reputation and position in the market as a brand leader and successful innovator.

Background
The instant popularity of the iPad has been nothing short of phenomenal. News papers are falling over themselves to offer subscription to iPad users. iPads have has no single direct rival. iPads could be used to browse the web, as a platform for games, to play movies, listen to the radio / music, send emails etc The feature that attracts the most attention is the ability present books, magazines and newspapers in a highly readable format.

Will the iPad be the savior of the newspaper industry or will it expedite its demise by making the digital content freely available rendering an attempt to charge for it unnecessary and impractical ?

The demise of the printed medium

Predicted for years originating with the rise of internet & e-readers. Technology makes digital formats easy to copy, store & distribute. However the success of Amazon.com indicates that people still prefer to buy their own hard copied of books, DVDs & CDs. Challenges faced by the print industry includes: Having to compete with free newspapers such as Metro & London Evening Standard Environmental concerns over the consumption of wood for paper such as the paper industry is the largest industrial user of water and the 3rd greatest producer of green house gases. A recent survey in US of 353 news papers revealed: 1/3 of all newspaper journalists have lost their jobs since 2006. 70% reported they have had staff cutbacks. Only 15% believed that the online content would provide significant income .

Advertising and the newspaper industry

The number of newspapers have been increasing in the last 10 years with 540 million. Increase was typically in developing countries while in developed it was deceasing. 22% of all newspapers are given free to customers. Around 1.9 billion people read a newspapers everyday this is 34% of the world population. The largest single market for newspapers is India with 107 million papers sold daily.

Online newspapers
To compete in a shrinking & competitive market newspapers mainly in Europe & US offer its content digitally, often for free via PDAs, Blackberrys & mobiles Income generated by advertising for newspapers will continue to fall even with online advertising and will be less in 2013 than it was for print media alone in 2008. Charging for content on internet is highly controversial with readers having free content from other companies such as SKY & BBC. However in the UK the Times and Sunday Times are set to start charging for accessing some of their content via pay walls.

Apple Inc.
Founded in 1977, in California USA, with the strategic focus of providing innovative products and solutions to consumers. Designs manufacture & markets a range of computers mobile communication devices, MP3 players as well as software and computer peripherals. Apple retails their products & software through its websites, as well as selling itunes, and applications from its Apps store.
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Apple has 34,300 employees and 273 retail stored worldwide. The launch of the iPad helped Apple surpass Microsoft its biggest rival in the Wall Street valuation for the 1st time in June 2010.

Apple Innovation
Apple prides itself on its innovation, delivering cutting products. Many of its products including the iPhone & the iPod are regarded as market leaders setting the standards for other products. Feature of Apple products include : Faster Processing speeds Longer battery life Greater memory capacity Smaller physical dimensions Light weight Better connectivity to the internet and mobile networks Greater choice and high degree of customization Continued compatibility with other devices including older versions Smarter operating capabilities

Apple Brand
Commands strong customer loyalty from devoted customers who associate the name with a blend of quality, innovation, reliability and trendy sophistication.

Logo since 1998

The 2010 Top 100 most valuable global brands places 3rd behind Google & IBM with Microsoft being 4th. Revels in its image of being creative 7 different and is associated with a lifestyle that celebrate freedom & originality. Many customers remain faithful to the brand and seek new products as they become available. Although originally created to boost the sale of Macs, the iPod, iPhone & iPad have become profitable in their own right.
Logo from 1976 - 98

The iPod halo effect meant that the customers who bought iPods have gone on to buy computers.

Apple Brand.contd
Apple customers expect innovation, sophistication, elegance and cutting edge technology. This commitment runs through Apples customer services and is evident through their retails stores

San Francisco Store on 5th Avenue, NY

Apple - Risks
PESTEL Risk Competitiveness in tech industry Risks with new products & innovations Supplier / 3rd party risks Intermediary risk Investment risks Risks with network carriers Credit risk Litigation risks

Challenge to the brand

In July 2010, Apple faced a significant PR disaster that risked damaging its seemingly unimpeachable brand image. Apple ignored complaints from customers who purchased the new iPhone 4 it was manufactured with an inferior quality built in antenna. In the aftermath led to a sharp drop in the market value of Apple shares after 10 years. Within 2 days of its launch the iPhone 4 sold 1.7 million units. CEO Steve Jobs announced the new device being the biggest leap forward since the original iPhone of 2007

The iPad
Launched in January 2010, and first available in the US in April 2010 the Apple iPad sold 2 million units by end of May !

Over 11,000 applications have being developed for iPad alone in addition to the 200,000 compatible apps they already had on the iPhones & iTouch
Morgan Stanley have predicted that the sales for 2010 could reach 10 million units

iPad competitors and imitator

Its safe to say that iPad has no real competitors although many similar devices have been produced.

The Dells Streak being a similar albeit much smaller. Kindle

The Chinese iPed for $100 !

iPad and news papers

Rupert Murdoch, CEO of News Corporation who owns The Times, The Sunday Times, The Sun & News of the world newspapers in UK, believes the iPad will be the saviour of the newspapers. News Corporation own some of the biggest and most famous newspapers in the world. When the iPad application for The Times went on sale in June 2010, 5000 copies of a months subscription was sold in three days. The Wall Street Journal, also owned by Murdoch already has 10,000 iPad app subscribers.

Market for books & e books

3.08 bn books sold in 2008 fall of 1.5% However net revenue up by 1% ($40.3bn) Forecasted to fall further (similar trend in developed markets) E Books - $ 113mn up by 7% in US 2008

e-readers
E-books are electronic devices and their prime purpose is to enable the user to read digital books and journals. They are designed to be read easily in day light and there is a deliberate attempt to simulate the format of a paper book. The main competitors for iPad in respect of its e-reading capabilities are Amazons Kindle, Barnes & Nobles Nook and the Sony reader. The Skiff Reader larger, thinner, lighter than the other e-readers is due to be launched in 2010 but has no confirmed release date or price.
Skiff reader

E-books Sony Reader

First launched in 2006, and six different models have been released to date It was the first to allow wireless connection to PC to enable the download of books. It used E-ink which uses technology designed to mimic the display of ordinary ink on paper.

E books - Kindle (Amazon)

Amazon first released kindle in November 2007 in the US and it sold out in 5 hours and the first international version became available in October 2009. By May 2009 35% of the books available in Amazon.com was available via kindle download. CEO of Apple Jobs commented at its launch that Kindle would be a failure as Americans have stopped reading but Kindle has sold 3 million units since. According to Amazons Annual report of 2009 Kindle store has 460,000 books, a 84% increase from the previous year. Download of books increased to 5 million in 2009, a growth of 400% from 2008 Kindle download s represent 66% of the e-paper market

Dusty Alahakoon 2010 | NEXT School of Business | www.next.lk

[email protected]

E-books Nook (Barnes & Noble)

In October 2009, Book chain Barnes & Noble launched their own e-reader, the Nook. In size and format its very similar to the Kindle but differs by being based on the standard ePub software rather than Kindles unique software The Nook also provides wireless and 3G access to the internet. The Nook became available in February 2010 with 1.43 million readers being sold in the first quarter. By March, Nook was out selling Kindle

E-readers compared
In a recent consumer report (The Boston Globe, June 2010) comparing e-readers the Kindle was considered better than the i-Pad The Kindle was also the fastest in refreshing pages. The iPad could not bear in direct comparison since it is much more than a e-reader The Kindle, Sony and the Nook display their content using E-ink reflects light rather than emitting it and looks like traditional print and can be read easily in bright light although difficult in low light. iPad and iPhone rely on LCD (Liquid crystal display) with inbuilt illumination and can be used in low light conditions However its hard to read in bright light conditions as the screens are very reflective and making it impossible to read in certain angels. If you want to settle down and read a book the Kindle or the Nook is the best On the other hand with the iPad you can read books, listen to music, watch movies, compose music etc making it an all round experience.

Possible Analysis (Industry)

POSSIBLE ANALYSIS 1 Macro environmental analysis & Implications Trends in newspaper / print medium KEY AREA TO CONSIDER More emphasis on technological, social, economic factors (PESTEL) Trends in the sector, nature of industry, challenges faced by the sector, online newspapers, future of print / newspaper industry, E reader market etc (charts, graphs, tables) E reader competition, substitutes, nature and overlaps, profiles of key players (porters 5 forces, strategic groups, charts, tables) Customer value attributes, changing customer expectations, core needs and how it is consumed, integration of needs / technologies (charts, graphs) What are the CSF? REFERENCES All

Appendix 7 -13 & 15-17, 21 Chapter 3,4,5, 13, 14, 16 Appendix 14, 18, 20, 22 Chapter 11, 12, 14, 15, 16 Appendix 21, 19 Chapter 13, 16 All

Competitive environment

Customer analysis

Critical success factors

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Possible Analysis (APPLE)

POSSIBLE ANALYSIS 1 2 3 Key historical trends & implications Portfolio Analysis Apple Brand KEY AREA TO CONSIDER Key milestones for APPLE (tables) Current portfolio, performance, competitive advantages, positioning etc Brand analysis, transition, current values, issues, strengths, foot print / blue print, level of stretch, challenges to the brand etc Features, benefits, meeting customer needs, strengths, weaknesses, potential, challenges REFERENCES Chapter 1, 5 Chapter 1, 5, Appendix 10, 11 Chapter 7-9 Chapter 10 Appendix 7, 9

IPAD review

Strategy Review

Key strategies, advantages / disadvantages, how has Chapter 1, 5 the CA innovations worked for them? 8

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Possible Analysis (APPLE)

POSSIBLE ANALYSIS 6 Financial Analysis for APPLE KEY AREA TO CONSIDER Financial statements and ratio analysis. Income and cost analysis, key drivers for costs and income, key financial challenges Who are the key stakeholders, what are their influences on APPLE? What are the risks, what processes they use? Implications on managing corporate reputation, Classification of risks, prioritizing based on impact / probability, risk comparison with Amazon & Sony Crisp SWOT summarizing the full analysis What are the key issues for APPLE / IPOD in the next 5 years? REFERENCES Appendix 1-6 Chapter 5

Stakeholder Analysis

All

Risk Management

Chapter 8

9 10

SWOT Key Issues

All All & chapter 16

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Brief profile of key players

SONY Background Established in 1946 Five segments - electronics (65%), games (12%), pictures (10%), financial services (7%) others (7%) 170k employees Income 2007 8.3Tn, 2008 8.9Tn, 2009 7.7Tn decline in income, loss in 2009 1Tn, assets at 12Tn in 2009 Price competition, new product risks, 3rd party dependability, changes within SONY, reputational damage, exchange rates AMAZON Set up in 1994, 24k employees, sale of books & services online,

Financial highlights

Net sales 2009 - $24bn good growth over 08 & 07, good growth in net income up to $0.9bn in 2009. asset growth from $8.3bn to 13.8bn in 2009. Competition, market development & NPD, talent poaching, intellectual property infringement, fulfilment & reputation, strategic partnerships, 3rd party dependence, legislation & e commerce

Strategic Risks

Brand

Placed at # 94 in 2010, value $ 8.2bn Placed at #15 (from 26th) among top (growth of 30% over 2009) global brands, value $27.5bn (growth of 29%)

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NEXT Steps
30-Oct 31-Oct 1-Nov 2-Nov 3-Nov 4-Nov 5-Nov 6-Nov 7-Nov 8-Nov 9-Nov 10-Nov 11-Nov 12-Nov 13-Nov 14-Nov 15-Nov 16-Nov 17-Nov 18-Nov 19-Nov 20-Nov 21-Nov 22-Nov 23-Nov 24-Nov 25-Nov 26-Nov 27-Nov 28-Nov 29-Nov 30-Nov 1-Dec
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Introduction / Read Analysis - External Analysis - Internal 6 Page Draft 6 Page Final Possible Themes Q&A (full day) Final Preperation Praying Sessions Exam

Its not difficult!

Dusty 2010 & NEXT School of Business