2020:3 Summer, BUAD6800 (MERGED) Info Technology and E-Business

Assignment Report

The Apple of your I

Group 11

Group Members

Aarthi Thirunavukkarasu (R01494914)

Anitra Viswanathan Murugeswari (R01495160)

Kumaresh Mathivanan (R01495099)

Nirubha Rajsree Easwaramurthy (R01495071)

Shravya Rajamohan (R01495122)

Surendhar Eswaran (R01495073)

Doc Creator: Anitra Viswanathan Murugeswari

Date (INDIA): 13-08-2020

Apple uses “Differentiation strategy” to differentiate their products from those of its
competitors. Apple has been successful by creating different products and services from
competitors that are innovative, high quality and user friendly. By developing products that can
have a distinctive style of sleek and modern sets they set them apart from other competition. This
strategy was implied starting from their initial products like iPods. This process has helped Apple
to target a particular section of the market. Apple has gained the position of a market leader in
electronics as this strategy has put the competition in such a way that it is always Apple Vs Other
brands. There are four aspects to this differentiation strategy.

Product design: Unique product design has always been the core strength of Apple. The new
design, new features and new upgrades are always different from its competitors. These designs
have been the trademark of Apple from its early days. The designers also maintain intense focus on
simplicity and usability. The design team works closely with the hardware and software designers
to optimize the user experience.

Pricing: Apple is known for its affordability to a class of specific people in the market. The
company priced its products in such a way that it meets the quality. Apple focuses on maintaining
optimum profit margin at all times. This brand image of Apple being available to premium
customers has paved the way for differentiation in their pricing. Though similar products are
offering the same features at lower cost customers are willing to pay more and buy Apple products
because they are “Apple”.

Retail outlets: Pricing strategy for Apple extends to the differentiation in the retail electronics
marketplace. Although consumers can purchase laptops, tablets and cell phones from virtually
every electronics supplier, Apple differentiates itself by selling small amounts to big box outlets
and concentrating its marketing resources on its apple shops. Apple maintains a fixed promotional
pricing limit for its third-party distributors to prevent stores such as Walmart and best buy from
undercutting the costs available at the apple stores.

Brand Loyalty: Apple was among the most successful electronics firms in developing brand
loyalty. Loyal Apple customers will wait in line to buy the latest iPhone, download music via
iTunes, watch their favorite Apple TV shows and play games on iPad. Efforts by the company to
build brand loyalty also helped Apple to differentiate itself in its various domains from Microsoft,
Samsung and other rivals.

2. What do you think are the three most important factors in Apple's past success? Justify your
answer.

Apple has done a lot of extremely well to establish its popularity. Apple has proved capable of
successfully producing innovative new products. Out of the three most important factors for
Apple’s past success would be for one asking Steve Jobs to come back and work with Apple. By
doing so, the company has been able to produce products that customers wished for, and has been
 able to maintain the stream of discoveries to this day. It proved its ability to break away from the
computer industry and successfully developed new markets with its iPod, iPhone, and iPad.

The second thing is that they are still really successful at marketing their new goods. They
make them both visually attractive and incredibly functional to make customers want the latest
goods as soon as they are launched. They create new, innovative products and adapt them to the
customer’s needs, so every time a new generation of products emerge, loyal customers must have
them.

Each product is checked hundreds of times by experts until it is eventually accepted for mass
production and launching. iPhone customers can not ever worry of typical issues such as device
crashes, malware attacks or constant irritating pop-ups, as the design and programming of iPhone is
almost perfect. Each product has an upgrade on current existing technologies on the market, taking
into consideration specific issues faced by customers with their goods and working to avoid them
entirely. The great innovation, the quality of the products, the style, the uniqueness, the
individuality offers a sustainable competitive edge which has resulted in it being the number one
brand appreciated in this world.

3. Steve Jobs passed away in October 2011. Until his death, he had been the heart and soul of
Apple’s innovation. Today 123,000 Apple employees continue onward in his absence with
Tim Cook as the new CEO. A huge question for many investors is whether the company can
be successful without Steve Jobs. What do you think? Has Tim Cook been innovative enough
since taking over Apple? Will he be a bold innovator like Steve Jobs? Would you be willing to
invest in Apple with Tim Cook at the helm? Why or Why not?

Apple can be successful without the presence of Steve Jobs. Because it's been 9 years and even
now people continue to buy Apple products like moths to the flame. Apple under Tim Cook did not
invent any game changing product. Instead he leveraged the iPhone’s success to new areas of
growth. The iPhone has become a linchpin for the entire apple ecosystem. Even Though the sales
unit has dropped over the last couple of years, the accessories and service system has been a
compelling system.

Apple’s stock is up about 480% since Cook took in charge in August 2011. Cook has not only
made the impossible possible but also has led Apple into one of its most successful eras. Apple has
become the first publicly traded company to reach a trillion-dollar market cap in the year 2018.
Even after the rough start to the year 2019, Apple recovered its stock by the end of that year.
Apple’s stock was again up by 45% when the iphone11 was unveiled last September adding about
$400 million in market value. The revenue in the year 2019 was six times the revenue in the year
2009.

Apple’s main goal is to expand the iPhone’s availability around the world, during that time the
iPhone was available only at AT&T in the US. From there the iPhone extended its market around
the globe. Cook breaked the tradition and introduced two iPhone 6 models which was a huge
success. Apple made a bigger push into the service industry like iCloud storage, App store sales,
Apple card, Apple news+, Apple Tv+ etc.,
 The growth in the wearable accessories business has become much more interesting. The
wearable accessories include Air pods, Air pods pro, Apple watch etc., Apple watch is the first
medically certified wearable. Apple’s wearable business alone is seven times larger than that of
twitter.

Tim Cook described innovation as one of the key tenets of Apple’s business. He defined
innovation as about making things better, not just changing for change's sake. The three lessons
that Tim Cook taught us about innovation is to innovate incrementally, best ideas come from
feedback and Diversity brings innovative strength. I think investing in Apple with Tim Cook at
the helm is actually a good choice because Tim Cook is a guy for the time of evolution whereas
Steve Jobs is considered as a guy for an age of revolution. Even Though he did not bring
innovation like Jobs did, he made sure that the stocks were up. The stocks of Apple went up to
480% since Cook took the wheel.

4. Microsoft took an early lead in the development of tab- let devices (like the iPad), and it had
the world's leading operating system and applications for more than 20 years. Provide five
reasons why Microsoft has not been able to achieve the same success that Apple has. Most
industry analysts would agree that the abilities of Microsoft's 124,000 employees are as
good. on average. as Apple's.
a) The most successful companies need a vision, and both Apple and Microsoft have one. But
Apple’s was more radical and, as it turns out, more farsighted. Microsoft foresaw a computer on
every person’s desk, a radical idea when mainframes took up entire rooms. But Apple went a
big step further: Its vision was a computer in every pocket. That computer also just happened to
be a phone, the most ubiquitous consumer device in the world. Apple ended up disrupting two
huge markets.
b) Apple build and use their own hardware components while Microsoft uses various third-party
vendors. While iPhones look and feel better than Windows phones but not feature-wise.
Microsoft is focused more on productivity, Apple tapped on a market as it focused on creativity.
Apple’s hardware lasts longer than the Microsoft, although it is considered little expensive than
Microsoft’s products.
c) Microsoft addressed the market from the head down, while Apple goes after the demand from
base up. Microsoft always addressed what their products will do. But Apple always focused on
what their products will enable the customers to do.
d) Microsoft’s lacked a visionary leadership team which should have envisioned that there would
soon come a time when everyone - and not merely business guys – would want to access the
internet, email and just about everything else on their phone. When they did it was a little too
late as the smartphone market had already settled as a two-horse race.
e) Microsoft suffered the “innovator’s dilemma” of overemphasizing its current business lines.
This led to a failure to develop new technologies and profitable businesses. With the decline of
the PC and the rise of the web, mobile devices, and cloud services, the company failed to
anticipate or effectively dominate these alternate—and in many cases superior—means of
getting computing done.
5. Considering your answer to the previous questions, if you had a spare of $5000 in your
portfolio and wanted to buy an equity stock with it, would you buy AAPL (Apple). Why or
Why not?

If I had $5000, I would definitely buy an equity stock from AAPL. Apple is a strong company
to invest in even though they got some tumble after the release of some products. Apple is
coming up with new products that are innovative to gain the interest of the customers. Apple has
released some products that have boosted its value and confirm its position as the most valuable
brand in the market. My investments with Apple will definitely grow in the long run and increase
the value with the possibility of realizing the capital gain over the investment. As mentioned above
in the above question (question 3), a new record was created when the company released iPhone 6
in two models by selling over 10 million new iPhone just in three days after the launch. Tim Cook
is different from Steve Jobs, because Jobs focused mainly on the innovative part of the product
whereas Cook is considered as a guy for evolution.

Apple’s enormous cash hoard has reached downright legendary levels. At the end of June 2020,
Apple had only less than $194 million in cash and investments because it routinely returns to
shareholders through stock buybacks and dividends. The company has increased its dividend by
16% in the fiscal 2018, 5% in the fiscal year 2019 and 6% in the year 2020.

Over the years Apple has literally spent more than hundreds of billions on share buybacks
which in turn helped the stock price to rise to about $400 per share in the month of July. The
biggest point of excitement for Apple shareholders is Apple’s service segment which posted a
revenue of $13.16 billion which is 15% up from the previous year. AAPL has doubled its service
revenue since 2016 and achieved its goal of $50 million in annual service revenue six months
earlier.

The wearables and accessories are another segment which enjoys high-growth division. Here
the revenue is jumping 17% over year to $6.45 billion in the recent quarter. Even in the midst of the
global pandemic, AAPL continues to churn out profits for its investors. Considering all the above-
mentioned cases, Apple is a great company to invest in. Apple has currently planned to invest
about $1 billion in India for manufacturing Apple products. If Apple’s products are manufactured
in India, then those products will be available in Indian market at a lower price when compared to
the price of the products while importing. By doing so Apple will increase its customer base which
in turn increases the market share.