Apple Is Expanding Its Distribution Channels

apple is Expanding its Distribution Channels Cliff Edwards of Business Week harped on conflicts with vivacious dealers such as CompUSA and Sears, quoting CompUSAs Lawrence N. Mondry, who decl atomic number 18d, When you choose to compete with your sellers, clearly thats non a comfortable situation. Mondry could book been describing the take in mack buyers had when they stepped into to the highest degree CompUSA stores. It was even worse at Sears.Realizing that they were being held oer a barrel by hulking retailers that were utilize to c every last(predicate)ing the shots with reckoner OEMs and frequently provided a horrible purchasing environment for orchard apple tree products, the lodge did what it had to and took control of dispersal. orchard apple tree retail stores would give the company the opportunity to leapfrog past computeence on opposite retailers. Daniel T. Niles of Lehman Brothers also saw the possibilities, telling mackintoshWorld, apple has the abi lity to start attracting unexampled customers with the launch of their higher-end retail store strategy. You cant mention the surge in Mac sales without touching on the Halo Effect of the iPod. orchard apple tree made the iTunes/iPod combination available for Windows users. That move created several(prenominal) cutting diffusion opportunities for apple. First, it gave Windows users the opportunity to try orchard apple tree products without having to take the frightening plunge into the world of macintosh. apple finall(a)y had gravel to a vast pool of Windows users it had previously been unavailing to touch. Second, it open(a) up a secondary securities industryplace for iPod accessories and tie-ins.Had the iPod merely been available for Macintosh users, a secondary commercialize would have developed, but it would have been a good deal, much smaller. apple would never have been able to strike deals with auto manufacturers, for example. The connector on the bottom of twain iPod (except the shuffle) became the point of entry to an incredible array of third- dividey products, and as that foodstuff grew, the iPod rapidly became the de facto standard man-portable multimedia system device. Third, it gave the iTunes lay in a tremendous head start.While a digital music store is clever in itself, none of the previously-existing stores had made much of a dent in consumer behavior. They didnt operate curiously well with Windows-based MP3 players, and they didnt offer broad enough music libraries. Apple struck deals with all the study labels and created a store that provided an easy, addictingly-convenient interface and seamless desegregation with the iPod. As the universe of purchased iPods grew, so did the market for the iTunes Store. The integration of iPod and iTunes also created a gestalt effect as Apple moved beyond music.Just as the Apple retail stores bypassed middlemen, the iTunes/iPod combination created a direct link between Apple and it s customers. As Apple adds more(prenominal) capabilities to the iTunes Store, and does the aforesaid(prenominal) with the iPod, the two should continue to energize each other, provided Apple rolls out the right kinds of features. In 2001 Apple Computer has been taken a decision to open a series of retail stores that would display their finished line of Apple computer products, softw atomic number 18 and peripherals. Part of the decision, Apples declining share of the computer market. Now the company has undefendable over 130 stores, including in Japan, Canada and the UK.Its latest annual report states that they exit continue capital expenditures for retail operations, indicating that they have a long-term strategy for opening more stores. Apple Computer Store Products hardware It includes, iMac, Mac Mini, iBook, Mac Book, Mac Book Pro, iPod, Apple Cinema Displays, Airport Cards, iSight, Apple accessories etc. These are purchased from the Apple Store Online or by the phone. App le Software It includes iLife, iWork application bundles, Mac OS X, videodisk Studio Pro, FinalCut Pro, and other miscellaneous Apple software titles.Third Party Software It is made for Mac OS X, such as productivity software, design software, utilities, games much everything new that has been released for Mac OS X. make out Third Party Accessories In this Apple ranges starts from Apple notebooks and iPod sleeves to speakers, printers, scanners, memory upgrades, and digital cameras. In Apple Store there are two types, those are Retail store Online store The Apple Store, Regent Street, London, UK, is part of a chain of retail stores possess and operated by Apple Inc. , dealing in computers and consumer electronics.As of April 2008, Apple has opened 209 stores, including 181 in 37 US states, 15 in the UK (14 in England, 1 in Scotland), seven-spot in Japan, and 4 in Canada. Recently, Apple opened its first store in continental atomic number 63, in Rome in Italy. In 2008, Apple wil l be opening 3 Australian stores, 1 located in Melbourne and 2 in Sydney. This store is the first Apple Store in Europe. It opened in autumn 2004 Will Apples stainless steel architecture have to take a solid ground to the historic buildings of other countries? In Japan, Apple uses English almost exclusively.But other countries may not embrace English, preferring to see their own language used in store signage. Apple will have to balance the equal of constructing a store, recruiting a suitable staff, and in operation(p) the store against the potential revenues, which in turns depends upon the demoed Macintosh community, median income, bullion trends and general retailing environment just like at home Apples centralized and extremely consumer oriented approach to mobile software distribution is revolutionary My crease is that its revolutionary in the same way the iPod and iTunes were revolutionary.Basi environy, the formula is similar to why Apple succeeded w/ the iPod and iTune s despite competition from manufacturers like Sony, ancient models for music distribution, and applied science inept publishers Apples root take the carriers out of the picture and give the developers a low cost or zero cost distribution channel Jobs began Apples turnaround with the 2001 introduction of the iPod, which defined and then dominated the portable-music-player marketand which became central to the resuscitation of Apples computer line.The Mac, once derided as a toy, today is the best ad hominem computer on the pla utmost, period. And the iPhone is the best voguish phone. Nothing else comes close. As of the third quarter of 2008, Apples iPhone was outselling the Research in MotionBlackBerry, even though the iPhone had been in the market for only 15 months. When measured by revenues, Apple has become the worlds third-largest mobile-phone maker, behind Nokia and Samsung. All this is happening just as mobile devices are poised to become the most important computing platfor m. same or similar products.Strategic management, level integration is a theory of ownership and control. It is a strategy used by a business or corporation that seeks to sell one type of product in numerous markets. To get this market coverage, several small subsidiary companies are created. Each markets the product to a different market segment or to a different geographical area. This is sometimes referred to as the horizontal integration of selling. The horizontal integration of doing is where a firm has plants in several locations producing similar products. Apple is leader on the MP3 player market.Dynamic approach history of a firm can excuse its leader position. In my example, Apple innovates with its couple iPod+iTunes and keeps the leadership since Some points of its strategy are astonishing because they locution similar as Apple strategy for PC. Apple doesnt privation to licence its own DRM, so if you want buy a song on internet for your iPod you have to go to the iTu nesMuciStore and to listen this song at present on a MP3 player you must have an iPod (some consumers lodge a complaint against Apple). So, Apple does the same thing for its MP3 player than the computers about twenty years ago.Short term Apple wins but the market make ups and we cant k immediately how this leadership will progress and if Apple would change its strategy. The theory of games can help us to understand this choice and the risks. Installed firms are Stackelberg leader on the market, the potential entrance adapt its quantity. (Bain, J. (1968) Apple Inc. and its in all owned subsidiaries design, manufacture, and market in-person computers, portable digital music players, and mobile talk devices, and sell heterogeneous related software, services, peripherals, and networking solutions.The company sells its products worldwide by its online stores, its retail stores, its direct sales compact, and third-party wholesalers, resellers, and value-added resellers. In additi on, it sells various third-party Macintosh, iPod, and iPhone matched products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals by its online and retail stores, and digital content through with(predicate) the iTunes Store.The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative customers. As of December 27, 2008, it had 251 retail stores. Apple Inc. , formerly known as Apple Computer, Inc. , was founded in 1976. The company is headquartered in Cupertino, California political party Background Apple Inc. and its wholly-owned subsidiaries (collectively Apple or the guild) design, manufacture, and market personal computers, portable digital music players, and mobile dialogue devices and sell a transmutation f related software, services, peripherals, and networking solutions. The familiarity sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. In addition, the fraternity sells a variety of third-party Macintosh (Mac), iPod and iPhone compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content through the iTunes Store.The telephoner sells to consumer, small and mid-sized business (SMB), education, enterprise, government, and creative customers. The orders fiscal year is the 52 or 53-week period that ends on the last Saturday of phratry. Unless otherwise stated, all information presented in this Form 10-K is based on the orders fiscal calendar. Business dodging The familiarity is committed to bringing the best personal computing, portable digital music and mobile communication experience to consumers, students, educators, businesses, and government agencies through its innovative hardware, software, peripherals, services, and Internet offerings.The communitys business strategy leverages its odd ability to design and develop its own direct system, hardware, application software, and services to provide its customers new products and solutions with original ease-of-use, seamless integration, and innovative industrial design. The telephoner believes unremitting investment in look for and development is critical to the development and enhancement of innovative products and technologies.In addition to evolving its personal computers and related solutions, the political party continues to capitalize on the convergence of the personal computer, digital consumer electronics and mobile communications by creating and refining innovations, such as the iPod, iPhone, iTunes Store, and Apple TV. The federation desires to underpin a community for the development of third-party products that complement the Companys offerings through its dev eloper programs.The Company offers various third-party software applications and hardware accessories for Mac computers, iPods and iPhones through its retail and online stores, as well as software applications for the iPhone platform through its iTunes App Store. The Companys strategy also includes expanding its distribution network to in effect reach more of its targeted customers and provide them with a high-quality sales and post-sales support experience. Consumer and Small and Mid-Sized BusinessThe Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Companys products and services greatly enhances its ability to attract and retain customers. The Company sells umpteen of its products and resells genuine third-party products in most of its major markets straight off to consumers and businesses through its retail and online stores. The Company has also invested in programs to enhance reseller sales, including the Apple Sales Consultant Program, which places Apple employees and contractors at selected third-party reseller locations.The Company believes providing direct contact with its targeted customers is an efficient way to demonstrate the advantages of its Mac computers and other products over those of its competitors. At the end of fiscal 2008, the Company had opened a total of 247 retail stores, including 205 stores in the U. S. and a total of 42 stores internationally. The Company has representatively located its stores at high-traffic locations in quality shopping malls and urban shopping districts. A goal of the Companys retail business is to expand its installed base through sales to customers who currently do not already own the Companys products.By operating its own stores and locating them in desirable high-traffic locations, the Company is better positioned to control the customer buying experience and attract new customers. The stores are designed to simplify and enhance the presen tation and marketing of the Companys products and related solutions. To that end, retail store configurations have evolved into various sizes in order to accommodate market-specific demands. The stores employ undergo and knowledgeable personnel who provide product advice, service, and training.The stores offer a wide selection of third-party hardware, software, and various other accessory products and peripherals selected to complement the Companys own products. Business Organization The Company manages its business chiefly on a geographic basis. The Companys reportable operating segments consist of the Americas, Europe, Japan, and Retail. The Americas, Europe, and Japan reportable segments do not include activities related to the Retail segment. The Americas segment includes both North and South America.The Europe segment includes European countries as well as the Middle East and Africa. The Retail segment operates Apple-owned retail stores in the U. S. and in international marke ts. Each reportable geographic operating segment and the Retail operating segment provide similar hardware and software products and similar services. Further information regarding the Companys operating segments may be found in Part II, The Company has signed multi-year agreements with various cellular network carriers authorizing them to distribute and provide cellular network services for iPhone 3G in over 70 countries.These agreements are generally not exclusive with a specific carrier, except in the U. S. , U. K. , France, Germany, Spain, Ireland, and certain other countries. The Company expects to ship iPhone 3G in over 70 countries by the end of calendar year 2008. Markets and Distribution The Companys customers are primarily in the consumer, SMB, education, enterprise, government, and creative markets. The Company distributes its products through wholesalers, resellers, national and regional retailers, and cataloguers. No individual customer accounted for more than 10% of n et sales in 2008, 2007, or 2006.The Company also sells many of its products and resells certain third-party products in most of its major markets directly to customers through its own sales force and retail and online stores. Significant portions of the Companys Mac computers, iPods, iPhones, logic boards, and other assembled products are manufactured by outsourcing partners, primarily in various parts of Asia. A strong concentration of this outsourced manufacturing is currently performed by only a few of the Companys outsourcing partners, often in single locations.Certain of these outsourcing partners are the sole-sourced suppliers of components and manufacturing outsourcing for many of the Companys differentiate products, including but not limited to final assembly of substantially all of the Companys portable Mac computers, iPods, iPhones and most of the Companys iMacs. Although the Company works close with its outsourcing partners on manufacturing schedules, the Companys opera ting terminuss could be uncomelyly affected if its outsourcing partners were unable to meet their production commitments.The Companys purchase commitments typically cover its requirements for periods ranging from 30 to 150 days. Foreign and Domestic trading operations and Geographic Data The U. S. represents the Companys largest geographic marketplace. Approximately 57% of the Companys net sales in 2008 came from sales to customers inside the U. S. Final assembly of the Companys products is currently performed in the Companys manufacturing facility in Ireland, and by external vendors in California, the Republic of Korea (Korea), the Peoples Republic of China (China) and the Czech Republic.Currently, the supply and manufacture of many critical components is performed by sole-sourced third-party vendors in the U. S. , China, Japan, Korea, Malaysia, Philippines, Taiwan, Thailand, and Singapore. Sole-sourced third-party vendors in China perform final assembly of substantially all of the Companys portable products, including MacBook Pro, MacBook, MacBook Air, iPods, iPhone, and most of the Companys iMacs.Margins on sales of the Companys products in strange countries, and on sales of products that include components obtained from unconnected suppliers, can be adversely affected by outside currency diversify rate fluctuations and by international trade regulations, including tariffs and antidumping penalties. The Companys operations and performance depend significantly on worldwide economic contours Global markets for personal computers, digital music devices, mobile communication devices, and related peripherals and services are highly competitive and subject to rapid technological change.If the Company is unable to compete effectively in these markets, its financial condition and operating results could be materially adversely affected. The Company competes in global markets that are highly competitive and characterized by aggressive price cutting, with its resulting downward drag on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product price/performance characteristics, rapid adoption of technological and product advancements by competitors, and price sensitivity on the part of consumers.The Companys ability to compete successfully depends to a great extent on its ability to ensure a continuing and timely introduction of new innovative products and technologies to the marketplace. The Company believes it is unique in that it designs and develops nearly the entire solution for its personal computers, consumer electronics, and mobile communication devices, including the hardware, operating system, several software applications, and related services.As a result, the Company must make significant investments in research and development and as such, the Company currently holds a significant number of patents and copyrights and has registered and/or has applied to register numerous patents, trademarks and service marks. By contrast, many of the Companys competitors seek to compete primarily through aggressive pricing and very low cost structures.If the Company is unable to continue to develop and sell innovative new products with attractive margins or if other companies To remain competitive and stimulate customer demand, the Company must successfully manage frequent product introductions and transitions. Due to the highly volatile and competitive temperament of the personal computer, consumer electronics and mobile communication industries, the Company must continually introduce new products and technologies, enhance existing products, and effectively stimulate customer demand for new and upgraded products.The success of new product introductions depends on a number of factors, including timely and successful product development, market acceptance, the Companys ability to manage the risks associated with new products and prod uction ramp issues, the availability of application software for new products, the effective management of purchase commitments and breed levels in line with anticipate product demand, the availability of products in appropriate quantities and costs to meet evaluate demand, and the risk that new products may have quality or other defects in the early stages of introduction.Accordingly, the Company cannot determine in advance the ultimate effect of new product introductions and transitions on its financial condition and operating results. The Companys success depends largely on its ability to attract and retain key personnel. Much of the Companys future success depends on the continued service and availability of clever personnel, including its CEO, its executive team and key employees in technical, marketing and staff positions.Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in the Silicon Valley, where most of the Companys key employees are located. The Company has relied on equity awards as one gist for recruiting and retaining this highly skilled talent. Accounting regulations requiring the expensing of stock options have resulted in increased stock-based compensation expense, which has caused the Company to curve the number of stock-based awards issued to employees and could negatively impact the Companys ability to attract and retain key personnel.Additionally, significant adverse volatility in the Companys stock price could result in a stock options exercise price exceeding the underlying stocks market value or a significant deterioration in the value of restricted stock units (RSUs) granted, frankincense lessening the The Companys business is subject to the risks of international operations.The Company derives a large and growing portion of its revenue and earnings from its international operations. As a result, its financial condition and operating results could be sign ificantly affected by risks associated with international activities, including economic and labor conditions, political instability, tax laws (including U. S. taxes on foreign subsidiaries), and changes in the value of the U. S. dollar versus local currencies.Margins on sales of the Companys products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties. The Companys primary vulnerability to movements in foreign currency exchange rates relate to non-U. S. dollar denominated sales in Europe, Japan, Australia, Canada, and certain parts of Asia, as well as non-U. S. dollar denominated operating expenses incurred throughout the world.Weakening of foreign currencies relation to the U. S. dollar will adversely affect the U. S. dollar value of the Companys foreign curren cy-denominated sales and earnings, and generally will lead the Company to raise international pricing, potentially reducing demand for the Companys products. In some circumstances, due to competition or other reasons, the Company may fall not to raise local prices to the full extent of the dollars alter, or at all, which would adversely affect the U. S. dollar value of the Companys foreign currency denominated sales and earnings.Conversely, a strengthening of foreign currencies, while generally beneficial to the Companys foreign currency-denominated sales and earnings, could cause the Company to reduce international pricing, thereby limiting the benefit. As strengthening of foreign currencies may also increase the Companys cost of product components denominated in those currencies. The Company has used derivative instruments, such as foreign exchange forward and option positions, to hedge certain exposures to fluctuations in foreign currency exchange rates.The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. The Companys retail business has required and will continue to require a substantial investment and commitment of resources and is subject to numerous risks and uncertainties. Through September 27, 2008, the Company had opened 247 retail stores. The Companys retail stores have required substantial mulish investment in equipment and leasehold improvements, information systems, inventory, and personnel.The Company also has entered into substantial operating lease commitments for retail billet with terms ranging from 5 to 20 years, the majority of which are for 10 years. Certain stores have been designed and build to serve as high-profile venues to promote brand awareness and serve as vehicles for corporate sales and marketing activities. Because of their unique design elements, locations and size, the se stores require substantially more investment than the Companys more typical retail stores.Due to the high fixed cost structure associated with the Retail segment, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements, and severance costs that could have a material adverse effect on the Companys financial condition and operating results. The Companys home plate are located in Cupertino, California. The Company has a manufacturing facility in Cork, Ireland. As of September 27, 2008, the Company leased approximately 4. 2 million square feet of blank shell, primarily in the U. S. and to a lesser extent, in Europe, Japan, Canada, and the Asia Pacific region. The major facility leases are generally for terms of 3 to 20 years and generally provide renewal options for terms of 1 to 5 redundant years. Leased space includes approximately 1. 8 million s quare feet of retail space, a majority of which is in the U. S. Lease terms for retail space range from 5 to 20 years, the majority of which are for 10 years, and often contain multi-year renewal options. As of September 27, 2008, the Company owned a 367,000 square-foot manufacturing facility in Cork, Ireland that also housed a customer support call center.The Company also owned 805,000 square feet of facilities in Sacramento, California that include warehousing and distribution operations, as well as a customer support call center. In addition, the Company owned approximately 2. 3 million square feet of facilities for research and development and corporate functions in Cupertino, California, including approximately 1. 0 million square feet purchased in 2007 and 2006 for the future development of the Companys second corporate campus in Cupertino, California, and approximately 107,000 square feet for a data center in Newark, California.Outside the U. S. , the Company owned additional facilities totaling approximately 129,000 square feet as of September 27, 2008. The Company believes its existing facilities and equipment are well maintained and in good operating condition. The Company has invested in internal capacity and strategic relationships with outside manufacturing vendors, and therefore believes it has comme il faut manufacturing capacity for the foreseeable future. The Company continues to make investments in capital equipment as necessityed to meet anticipated demand for its products.Globalization, Technology, and E-business are all major factors influencing todays business world. They influence many of our business related decisions on a daily basis. Some of these decisions could be deciding to use a computer to order a new desk from Singapore or using your cell phone to make a conference call in India. Even Apples management functions are not immune to these critical factors. Apple began selling personal computers produced in the garage of one of t he founders in 1976. They were incorporated in 1977.Apples first important product, the Apple II, personal computer was released in 1977 and by 1982 sales had increased to over $750 million. (Kimmel, 1998). It was clear that globalization played a big part in this success. Globalization is becoming a must have for large organizations to surpass above their competition. With that being said globalization has been influential to Apples revenue. According to Apple, their international sales accounted for 43 per centum of the quarters revenue (Dowling, 2005), this is continuing to rise.The rise in revenue is a result of excellent management and planning. Because of the need to go international, Apple created a strategic plan to go forward in the direction of globalization. This type of globalization will involve countries with different needs and different markets. For instance, planning a marketing project must involve the different variables that apply for each market. When plannin g globally, company structure must be taken into consideration. With that being said organization and control go hand in hand Steve Jobs came foul once again as the CEO of Apple in 1997.This time he had a new game plan, and Apple started to focus on the digital lifestyle of consumers. This proved to be Apples most successful business strategy to date because a once ineffective company now had ruled the computer world. In 2005, Apple announced that it would start using Intel-based chips to run Macintosh computers. In April 2006, Apple announced Boot Camp, which allows users of Intel-based Macs to boot either Mac or Windows OS. This functionality allows users who may need both OSs to own just one machine to run both, albeit not simultaneously