Apple has entered the Market for MP3 Players, Smartphones, and Tablets. How Attractive are these Markets Versus the PC Industry?
Most business organizations tend to focus on the areas that provide attractive returns. Initially, Apple was mainly conducting the business of PC manufacturing and sale. The business was not sustainable as the company experienced great losses of up to $1 billion. The company’s stakeholders believed that it was the management’s poor leadership that lead the company to incur losses. In order to rectify the problem, Steve Jobs was proposed the position of a CEO. The solution was not obtained as the subsequent CEO would also face the same fate as that of his predecessor. The company still incurred losses. Steve Jobs was re-appointed as the chief executive officer in 1997. At this stage, the company had lost around 97% of its market share. Jobs was required to provide a framework for the company to regain and recover its income. He adjusted the operations of the company very quickly and concentrated only on four core products from the 15 products produced by the company. Upon the return of Jobs, the company made the first profits of $309 million after many years of losses. He also concentered more on the research and development of products. This was mainly one of the ways in which the company would recover its tarnishing image.
In 2001 Jobs designed The Macintosh and Apple’s “Digital Hub” strategy. He believed that The Macintosh had gained a real advantage due to consumers embracing the digital lifestyles through the use of cameras, portable music players, digital camcorders and mobile phones. This move ensured that the company still dominated in the PC world.
A complete shift beyond the Macintosh happened when the iPod was introduced in 2001, followed by the iPhone in 2007, and finally by the introduction of iPad in 2010. This move to mobile production made the company’s name change from Apple Computers to Apple Inc. The introduction of iPod caused the company to grow in terms of performance and strength. Initially, the early MP3s could only keep the music play for one hour. The introduction of iPod allowed to store up to 1000 songs until 2010 when Apple had really gained momentum in the market share. In the USA, for instance, it had over 70% of the market share for MP3 players, which was never witnessed when the company dealt with PCs. Despite the high prices of the products, people would still purchase them because they had trust in the products. Apple’s main competitors in the sphere of MP3s include Samsung, SanDisk, as well as Creative. However, each company has a market share of less than 10%. Apple’s move to mobile phones and music players was mainly attributed to the attractive returns.
The markets for MP3 players, tablets, and smartphones are more appealing than the PC industry. These markets are attractive mainly because there are conclusive research and development of the music players, smartphones and tablets. The improvements in these spheres motivate to people replace old gadgets with the new ones, unlike in the PC industry, where the product development was so meager that people would see no reason for changing their PCs. This clearly showed that the market would not be very high in sales volume. The robust competition did not require much research and development, as the main issue was how to penetrate the market. The PC market is different from the market for MP3s, smartphones, and tablets, where the individuals are required to update in accordance with the changes in the technology. For instance, the smartphone that was developed in 2000 is not the same as the one produced in 2007.
Porter’s Five Forces
In the market for MP3s, smartphones, and tablets, there is no threat of entrants. It is difficult for a firm without huge financial support to comfortably join the market, unlike in the PC industry. The losses and competition that the companies experienced before venturing into this business also limit the possibility of newcomers. Apple Inc. had a lot of losses and faced stiff competition in the PC industry, which led to its venture into the mobile and MP3 industry. The firm had always believed that the chief executive officers had managerial problems, which was not the case in the news market.
The bargaining power of the customers mainly makes the firms produce offerings that suit their needs. Different consumers have different levels of income. The PC industry did not cater to this fact, as it was mainly concerned with the production and development of PCs for sale. The market for MP3s, smartphones, and tablets is in a position to offer a wide range of price options. For instance, Apple Inc. could produce gadgets with prices ranging from as low as $50-$100. This differentiation made it possible for many people to access their phones.
The intensity of the competition is high in the market for smartphones, which forces the company to conduct aggressive research and development to improve their products. It is easier to adjust smartphones than computers. Thus, Apple was attracted to produce smartphones. As a matter of fact, Apple is a leader in the market share in the United States of America with close to 70%. Apple has a powerful competitive strategy that enables it to enjoy huge profits and retain customers despite highly priced products as compared to competitors.
The market for the MP3s, smartphone and tables are able to provide alternative products, unlike the PC industry, in which there could not be any products or services to substitute the computer. Thus, the attractiveness of the new market is obvious. An individual could use a smartphone for communication as well as an MP3s player, and vice versa.
The limitations of Apple include the fact that the iPhone would be used for one network. This decision was unpopular and to negative implications of iPhone. Indeed, such a decision would drive customers away. Moreover, despite the success of Apple Inc. under Steve Jobs as the CEO, the company had witnessed failures in its two products. First of all, Mac Mini had limited memory. In addition, the company had limited expansion options. Secondly, the other failure was Apple TV, where sales were very low in comparison to other Apple’s products.
As a result, it is clear that a firm should diversify its products depending on the flexibility and demands of the market. If Apple Inc. continued to produce computers, today it would still be struggling to make profits or to recover from the losses. Apple chose a better alternative of entering the most appealing market of smartphones, tablets and MP3 players.
The figure below shows the performance of Apple Inc. under CEO Steve Jobs.
