Apple has some
major problems with its overall strategy: changing positions, broad focus, and
self-created switching costs. As previously mentioned, the continued change in
leadership has weakened the company; mostly it was weakened by a continuous
change in strategy. The past CEOs kept changing Apple from a high-end product
to a low-cost product. Consumers neither know what to expect from Apple nor how
much to pay for their products. Along a similar vein, Apple’s market
segmentation is too broad – even Jobs described Apple’s target market as essentially
covering everyone. The sales numbers in different segments make it evident that
Apple has not been targeting the same consumers over the past seven years.
Historically, business customers have been the main source of Apple’s revenue,
but now education is becoming the dominant profit-builder. On another note,
IBM’s cloning-tolerant policies created a market where the switching costs
between Apple’s competitors are basically negligible. Apple’s own anti-cloning
policy has made it hard for Apple users to switch to IBM or PC clones, and vice
versa. This is a problem for Apple because it means that it’s hard to gain new
users; they’re basically trying to hold on to their current customers.
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Most importantly, Apple needs a
defined strategy that can create results. They must focus on several specific
target markets instead of using a “shotgun” approach. Their current “three”
segments basically blanket everyone: new users, Wintel users, and current Mac
users. Markets need to be more clearly segmented. At the same time, Apple needs
to maintain position as either a high-priced luxury or a cost-efficient
commodity. With the way the market is moving, it seems advantageous to stick
with the profitable, economical iMac and continue to target the education
sector, the home sector, and the business sector: the sectors that have
continually created revenue for Apple. The government is not a significant
enough source of profit and is a waste of resources (see Exhibit D).