Term Paper: Management Report of Apple, Inc

Pages: 9 (3214 words)  ·  Style: Harvard  ·  Bibliography Sources: 15  ·  Topic: Education - Computers  ·  Buy This Paper

Apple Inc. Information Systems

Overall Business Strategy

Building iTunes based on earlier missteps

Leverage over the music companies

Complexity of the WinTel solution

Simplicity of the Apple solution

Operational

Operational implications iPod and iTunes downloads iPod purchase

DRM handling

Manufacturing Operations: Source of Profit

No Buttons Simplicity -- difficult to implement

ICT and e-Commerce Strategies Employed

ICT Strategies

Server Farm, Internet Connection

Security

E-Commerce Operations

Pre-approval

Log-in

How Apple's it strategies have assured competitive advantage

Apple's success can be demonstrated in its improved market share, improved financial condition, and stellar growth over the past 10 years since Steve Jobs returned and took the helm. An important indicator of Apple's changes is that Jobs dropped "Computer" from the company's name with the introduction of the iPhone this year.

Apple's control over the entire customer experience, including hardware, software and e-commerce aspects, was viewed as a detriment during the time that Apple competed head-on against the WinTel near-monopoly. Now, with the merging of video, audio and other media with the computer, and the opportunities for ubiquitous access with iPods, phones and other accoutrements, Apple's tight control over hardware and software is a competitive advantage.

This paper explores the sources of Apple's competitive advantage, with a particular concentration on Apple's efforts with the iPod and iTunes. The story continues to be written, as the iPhone is now coming to Europe. Apple's it infrastructure, which has largely been built over the past 5 years, is now becoming, in itself, an additional source for competitive advantage.

Introduction

This paper is about the information systems strategies of Apple, Inc., including ICT and e-commerce strategies. The paper will begin with an overall summary of Apple's business strategies of the recent past and the present, and analyse how Apple has changed its tactics in order to correspond to new and evolving strategies.

This paper is written at a crossroads -- one of many -- for Apple. A recent suggestion of Apple's change in strategy has been its name change from "Apple Computer" to "Apple, Inc." No longer content to pursue the classical personal computer market to a multimedia entertainment concern (Engadget 2007).

Erasing "Computer" from Apple's Name

This name change represents a logical conclusion to the changes put in place at Apple since the introduction of I-Tunes, then the ubiquitous iPod more than 5 years ago.

This paper will deal with Apple's overall strategies in order to introduce the day-to-day implications for Apple's changes to its e-strategies and ICT implementation.

Overall Business Strategy

Apple can be said to have lost the PC-Macintosh battle in the mid-1990's. At that time, the Macintosh accounted for than 8% of the overall PC market (Polson 2007), but by 2001 that share had declined to less than 3%. Steve Jobs, who had rejoined Apple in 1996 and took over the CEO position in 1997, embarked on a plan to redefine the market for Apple in a way that took Apple out of head-to-head competition with the "Wintel" (Windows + Intel) competition and would redefine what computers were, and how they would be used. The first moves were to update the Macintosh platform in order to make it more media-friendly, and to differentiate it from the relatively disjointed structure of the existing Wintel offerings.

The second move was to introduce iTunes in 2003. At the time, iTunes looked like yet another music jukebox, albeit with its own DRM (digital rights management system) called "Fairplay," and a novel way to buy music (Borland 2003). At the time, there were competitors in the Wintel universe, including Wal-Mart, Rhapsody, and Microsoft itself. The iTunes system differentiated itself in four key ways:

It had a much broader library than the legal MP3 music download offerings

It had a seamless interface with the computer (first the Mac, then PC, then iPod)

It had a new music player -- the iPod, which proved very attractive to the market, and proceeded to take 80% of the total music download business worldwide.

By offering music downloads for 99 cents (U.S.) per song, and giving most of the proceeds to the music industry, Jobs was able to offer lower-cost music and redefine the business model to focus on player profitability, rather than music download profitability.

Several elements of the iPod/iTunes introduction are important to the later discussion of Apple's ICT and e-commerce strategies:

Building iTunes based on earlier missteps

Apple's new iMac (2000) did not include CD-burning software, nor did it have a jukebox software package similar to the MP3 players available on WinTel computers. Apple at that time had, quite reasonably, bet on DVD playing and recording for home movies. The budding success of MP3 players dictated that Apple responded. By January, 2001, Apple introduced the first version of iTunes -- primarily as a catch-up to the already-existing MP3 player phenomenon (Wilcox 2003).

It was this first -- perhaps passive response -- to competitive moves which later resulted in the expansion of iTunes and the introduction of the iPod. The introduction of both in 2003 cemented the new multimedia direction for Apple.

The iPod and subsequent developments would not have been possible without the defensive introduction of iTunes, and the way in which it was designed:

Apple used no fewer than seven types of innovation. They included networking (a novel agreement among music companies to sell their songs online), business model (songs sold for a buck each online), and branding (how cool are those white ear buds and wires?). Consumers love the ease and feel of the iPod, but it is the simplicity of the iTunes software platform that turned a great MP3 player into a revenue-gushing phenomenon (BusinessWeek 2006).

Leverage over the music companies

At the time, the recorded music industry was dominated by five major record labels. These record labels felt under threat of losing much of their recorded media through 'illegal' downloads by global p2p sites, such as Kazaa and Limewire. Jobs offer of a DRM (digital rights management) software which could protect their copyrights and monetise downloads looked like a saviour for an industry in trouble.

Job's "star quality" and negotiating skills came at a good time for the industry. By locking in most of the libraries of the top recording companies, Jobs assured that the "tipping point (Gladwell 2000)" had been achieved, combining enough music to meet the demands of the marketplace.

Complexity of the WinTel solution

The relative openness of the WinTel solution was also a source of its complexity. Music downloads, whether legal or illegal, proved easy for relatively sophisticated computer users, but did not work well for the broad, untouched market of less-sophisticated customers who simply wanted to choose and listen to music on easy-to-use players. Apple's stem-to-stern solution made all the operations easy and transparent, even for non-computer users.

Simplicity of the Apple solution

Jobs was intimately involved in the design of iTunes and iPod. He insisted on making the products easy for non-computer users, intuitive, and all-of-a-package. This design philosophy has been a hallmark of Apple since the introduction of the Macintosh:

First and foremost, the product was elegantly designed in classic Apple fashion," says David Carey, president of Portelligent. "They did product design from the outside in. (Sherman 2002)"

Key to Apple's strategy was control over the entire process. This would be continued -- as will be explored in This paper -- throughout the marketing and transaction strategies of Apple, including its ICT and e-commerce strategies.

Operational iTunes and iPod are joined in a seamless whole. The iTunes "experience" is free, intuitive, and easy to use for even the novice computer user. As with the design of the iPod, the iTunes interface was developed "from the outside in," which means that the consumer experience was first defined, and the software and user interfaces were designed to support it.

The key elements to iTunes' appeal included a series of capabilities which were missing or impossible with Windows Media Player (WMP) and other products. First, the DRM software, since it was closely controlled by Apple, seldom intruded on the download- or play-environment. The WMP environment, on the other hand, has frequent interactions with the user for both download and for subsequent playing. Part of the reason for this may be a looser control over the hardware and software, and part may be a less consumer-friendly DRM design.

A iTunes' first iteration was heavily criticised for its proprietary nature, but this has resulted in operational simplicities in Apple's subsequent roll-outs of new products:

The M4P strategy allowed Apple to combine DRM and proprietary playback in a way that made it possible to reduce bothersome after-download DRM checks (which still plague the WMP-based MP3 players today (Best 2005).

The iPod is automatically recognised by the iTunes software, and vice versa. Once the iPod is inserted in its docking station, a new icon opens on iTunes, and the handshake and downloads are handled in the background, transparent to the user.

Similarly, the iPod downloads music as well as any software updates. Note that the iPod is… [END OF PREVIEW]

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