This is the third part of the post “PCs and iPad: How did Apple address the competitive landscape” where you can read about Apple’s background, market overview/trends, and competition. In the second part you will read about the analysis of the competitive landscape and the strategic environment which Apple is targeting. In this new post, we will continue the analysis understanding the strategic posture of the company and the gap that the iPad is filling among all the products’ offer around it.
In this post I have also added extra information to explain some points. I have marked it using **.
4. Analysis of Apple-iPad Strategy (II)
The last post ended raising the question of “Can Apple target “Volume” markets and still maintain price, profitability and growth?”. In this post, to answer this question, lets use SPACE to understand the capabilities and appropriate approach that Apple should follow to address the landscape.
*SPACE is a framework which analyses together four main aspects of a company’s scenario focusing in one product/offer to define how to approach the business (aggressive, conservative, defensive or competitive). The axis go from 0 to 6 or from 0 to -6, with the convention of the higher the “grade” in each axis, the better- yes, -1 is better than -6. Looking for the dots in the case of Apple (and the iPad offer), we can say that:
- Apple has 6 in company’s financial strength because of its high revenue and profit numbers
- The industry attractiveness is 4, because of the uncertainty of a completely new product together with the apparent positive trend of the tablets earning market share over other products
- Apple has a significant competitive advantage with -1, because is the first tablet which really reaches the market in big scale becoming the first successful mover
- Talking about the environment stability, it has -2.5 because of the dominance of Apple in the market together with the understanding that this is an immature market and in technology there is always high risk of change and unexpected instability
Once the dots are positioned and linked to the each other, the majority of the area is enclosed in the first quadrant which suggests an aggressive attitude towards growth. That is exactly what Apple did launching the iPad the way it did.
Normally this is a long exercise which should be built on many expert points of view and become a living picture which might change every day. I will post more detail on this framework in future posts.*
Based on SPACE’s factors, Apple is well positioned to capitalize on external opportunities and to innovate and construct new products that solve new consumer’s problems. But how to innovate in difficult financial times where prices-cutting tend to be the easier solution? Innovation can be both a vaccine against market slowdowns and an elixir that rejuvenates growth if analytical and artistic characteristics are integrated within the business [Rigby et. al, 2009]. Apple has both characteristics as well as the knowledge to change markets with the iPhone and iPod proven strategies.
In addition the “Value Innovation Strategic Logic” [Kim and Mauborgne, 1997] states that in order for the innovation to set standards and proactively address competitive landscape, companies must chart fundamentally new market spaces for which there are no direct competitors. It is a different approach than the traditional attempts of beating the competition with price and quality improvements wars.
Based on this, and by mapping Apple-iPad competition by Price vs Technology Affinity in Consumers (Enthusiasts and Pragmatists) one clear market gap appears.
*Enthusiasts are those who need a powerful device to not only consume, but create content such as designers, video editors, professional gamers, musicians, etc. Pragmatists are those who just consume the available content and are not interested in actively create it.*
High Performance Laptops and Desktops –i.e. iMac- are high price computers mainly developed for design, video processing and high memory applications (Technology Enthusiasts Consumers). On the other side, Smartphones are medium-low price developed for mobile and quick applications. Laptops are still being important since they cover the medium-price and medium-high performance activities such as word and spreadsheet processing, and still are portable devices. The gap between laptops and smartphones is currently being addressed by Netbooks and individual entertainment devices –i.e. e-readers and portable video games and DVD players-.
Are Netbooks efficiently addressing this gap? Technology analysts believe they are not since they are designed for a broader set of capabilities which are not the core Technology Pragmatists consumers’ needs. Although Netbooks offer mainstream communication, mobility and entertainment package on a single device, these needs are not addressed efficiently because a Netbook tries do so as a small Laptop which still: takes long to turn on, has too many complicated setting and software (anti virus, Java updates, etc), shorter battery life, etc. Apple-iPad is targeting that gap by developing a unique technological ecosystem (innovative product + problem solution + content controllability) that can solve consumers’ problems aligned with the current technological and social trends with maximum simplicity and minimal knowledge requirements.
In next posts:
- Analysis of Apple-iPad Strategy (part IV)
- Results (part IV)
- Long-term impact and Recommendations (part V)
- Managerial Agenda (part V)
- References (part V)