Session #7 Strategic Management

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Oct 30, 2013 (3 years and 11 months ago)

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©
Copyright
2011
Mortensen Consulting Group LLC

Session
#7

Strategic
Management

Dr. Mark H. Mortensen

Session 211 and 212

M
-
W PA 407

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2

You Will be Prepared for Today

Iff You:


Studied for the quiz


Have read the Apple case study

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Quiz: Chapters 1
-
3


3

Fall 2010

(c) Copyright 2010 Mortensen Consulting Group LLC

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Something BIG is happening
this week. . .

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Fall 2010

(c) Copyright 2010 Mortensen Consulting Group LLC

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Apple Case Study

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Apple Case Study: Outline


Case Study Background


The nature of
competitive advantages over time in highly
competitive, innovative industries.


What should Apple do?


Define the Central Issues


Define the firm’s goals


Identify the constraints


Identify the alternatives


Select the best alternative


Develop an implementation plan

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Apple: Case Study Background(1):
Apple History


Competitive advantages in the 1980s made
Apple the most profitable PC company in the
world
(What were they?)


But “on a glide path to history”
(What? Why?)


Four successive CEOs (Sculley, Spindler,
Amelio and Jobs) sought to reposition Apple in
the PC Industry and to create a sustainable
competitive advantage.

(What did they try? What succeeded? What did
they decide not to do?)

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Competitive advantages in the 1980s that made
Apple the most profitable PC company in the world


Ease of use


Dominance in creative industries (design,
desktop publishing), as well as education


Buyer loyalty


Proprietary operating system


Strong branding


Excellent industrial design

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Why was Apple “on a glide path to
history”


Low market share, increasing competition
and change in the market to a
commodities point of view for PCs put
Apple’s differentiation strategy at risk.

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CEOs’ Strategies


Sculley


low
-
cost producer; “hit products” every 6
-
12
months; Mac Classic vs. IBM clones; Powerbook laptop;
Newton PDA; Taligent with IBM for new OS; PowerPC
chips from IBM


Spindler (1993
-
1996)


reinvigorate core markets; killed
Intel chip; licensed Mac OS to clone makers; killed
Taligent; layoffs


Amelio (1996
-
1997)


servers & other high
-
margin
devices; cancelled nextgen Mac OS; ended licensing
program; bought NeXT (Jobs)


Jobs


iMac; outsourced manufacturing; direct sales via
website; image; industrial design

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Apple: Case Study Background(2):

The Mac Business in the 21
st

Century


Technology & Innovation


Cutting edge experience


High
-
end


Differentiated from Wintel machines


Intel Chipset


Overhauled Mac OS X in 2001 (UNIX)


Proprietary Apple
-
developed applications


Distribution & Sales


Retail stores



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Apple: Case Study Background(3):

The Evolving PC Industry


The dynamics of the PC industry have radically
changed in the last 20 years
.


Buyers


Rivalry among suppliers


Barriers to entry


Complements to the PC industry


Supplier vs. Manufacturers balance of power


Substitutes


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Apple: Case Study Background(4):

Apple Beyond Macintosh


iPod


iTunes


Apple TV


iPhone


iPad

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Questions for Apple Case Study


Has Steve Jobs finally solved Apple’s
long
-
standing problems

a.
With respect to the Macintosh business?

b.
With respect to its broader strategic position?


Going forward, what should Steve Jobs
do?

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Doing a Case Study
-
1


Read the case thoroughly. Read the case
thoroughly. Read the case thoroughly.


The first time to get an overview of the industry, the
company, the people and the situation.


Read the case again more slowly, making notes as
you go.


Define the central issue. Many cases will involve
several issues or problems.


Identify the most important problems and separate
them from the more trivial issues


After identifying what appears to be a major
underlying issue, examine the related problems.

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Fall 2008

Apple SWOT(1): PC Business

Strengths

Weaknesses

Opportunities

Threats


Fanatically loyal customers who pay for
yearly OS updates


Domination of niche markets


Industrial design expertise
-

“Cool factor”


Apple
-
owned software applications


FLASH technology procurement
agreements


Mobile Me & Apple Care


New Intel architecture


Hub for Apple iPod, iPhone, etc.


Higher prices


Low market share of the PC business


Low penetration of business computing


High cost of designing, manufacturing,
and supporting proprietary computer
architecture and OS


Many fewer software and peripheral
developers provide products for
Macintosh than for PCs mean lower value
for the “solution”


Transition from desktop to
laptop


Netbook replacement


Digital hub strategy


Move to solid state disk
technology


Cloud computing


SaaS


Price decline


Freeware OSs (LINUX)


Microsoft juggernaut


Jobs’ health


Succession Plan



Macintosh: MacBook (Air, Pro), Mac Mini, iMac, Mac Pro xServe, Airport, Time Capsule, Mobile ME, Apple Care.

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Apple SWOT(2):

Consumer Electronics Business

Strengths

Weaknesses

Opportunities

Threats


FLASH technology procurement
agreements


Integration with Macintosh, but works also
with Wintel


Device/iTunes integration


Mobile ME


Excellent user experience


Industrial design


“cool factor”


Agreements with record labels


Open computing environment


Higher prices


Few video agreements with owners


DRM hassles


iPhone is more an entertainment
appliance than a SmartPhone for
business


Dependent upon constant product
innovation to succeed, not
structural attributes




Video market explosion


Increasing complexity


features and maintenance


Proliferation of important files
(image, video, audio) by
consumers


SaaS models and acceptability


Myriad competitors (including
Microsoft) innovating as fast as
they can


Open source software (LINUX,
Android) coming out


Video DRM complexity


Jobs rumored sickness


iPod, iPhone, iPad, Apple TV, Apple Care, Mobile Me

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Doing a Case Study
-

2


Define the firm’s goals (only if applicable)


Inconsistencies between a firm’s goals and its performance may
further highlight the problems discovered in step 2


Identifying the firm’s goals will provide a guide for the remaining
analysis.


Identify the constraints to the problem (only if applicable)


The constraints may limit the solutions available to the firm


Typical constraints include limited finances, lack of additional
production capacity, personnel limitations, strong competitors,
relationships with suppliers and customers, and so on.


Constraints have to be considered when suggesting a solution.

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Apple’s Goals


Observation:
When you go to the
www.apple.com

web site, you get
information about their products. You have to search


hard


for
corporate information!


Apple's mission statement

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 computers, OS X operating system and iLife
and professional applications. Apple is also spearheading the digital
media revolution with its iPod portable music and video players and
iTunes online store, and has entered the mobile phone market with
its revolutionary iPhone.
FAQs at
http://www.apple.com/investor/

Product, Product, Product.

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Fall 2008

Apple’s Constraints


Microsoft Office is the entrenched standard
application, although cheap competitors are
nipping at its heels, as well as OpenDocs
-
based
free software


The Wintel hardware architecture is well
entrenched


getting others to build hardware to
a new open standard to run OS
-
X would be very
difficult


Features to support large business use by IT
shops would be very expensive, and time
-
consuming, to implement for Apple.

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Doing a Case Study
-

3


Identify all the relevant alternatives


The list should include all the relevant alternatives that could
solve the problem(s) that were identified


Use your creativity in coming up with alternative solutions


Even when solutions are suggested in the case, you may be
able to suggest better solutions


Select the best alternative


Evaluate each alternative in light of the available information


Resist the temptation to jump to this step early in the analysis


You will also need to explain the logic you used to choose one
alternative and reject the others.

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Alternatives


PC Business

1.
Get out

of the hardware business, keep the software
business, licensing the hardware to others

2.
Keep to the niche

with the proprietary software,
manage to profitability and expand tactically


with the PC as the hub of the home entertainment system


as laptops move to silicon storage


as hardware running Windows


expand iTunes into application downloads for PC users

3.
Attempt to Change the Game


Further bundling software and hardware support, offering a
“total package” for computing, building on the Apple Care
program


playing to the people tired of complexity and hassle


iPad

as a multimedia terminal


Build on the Mobile Me offering to offer expanded backup and
recovery, SaaS, and cloud computing capability for heavy
graphics users. Thus, MACINTOSH/Mobile Me
>

iPOD
/iTunes


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Alternatives



Consumer Electronics Business


Continue with the current consumer
-
focused strategy,
constantly innovating new products (where does Apple
TV fit?)


Expand into video distribution with Apple TV and iTunes,
building the catalog as done with iTunes


Expand into gaming segment with Apple
-
produced and
third party games, built on an Apple TV base and
incorporating MMPGs via cloud computing infrastructure


Expand into the business realm with:


Corporate offerings based on iTunes and Mobile Me technology
as a platform


SaaS with major players such as SAP, Oracle, and
Salesforce.com

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Doing a Case Study
-

4


Develop an implementation plan


Plan for effective implementation of your
decision. Lack of an implementation plan,
even for a very good decisions can lead to
disaster for a firm and for you


Don’t overlook this step. It is important as a
future manager to be able to explain how to
implement the decision.

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Reminder for Next Session


Read Chapter 4