The Consumer Products Industry

Transcription

1 The Consumer Products Industry + `

2 Executive Summary Computer Hardware Industry Computers & Media Are Converging To thrive, companies must diversify their product lines and continually innovate to remain competitive Apple Apple is making a comeback The ipod is a runaway success Can Apple Capitalize & Overcome Their Own Demons?

3 The Consumer Products Industry ` Products Industry

4 Consumer Products A Broad Topic

5 Consumer Products Three Categories Cyclical Goods Non-Cyclical Goods Technology Apparel/Accessories Appliance & Tool Audio & Video Equip. Auto & Truck Parts Footwear Furniture & Fixtures Jewelry & Silverware Photography Recreational Products Textiles - Non Apparel Tires Beverages (Alcoholic) Beverages (Non-Alcoholic) Crops Fish/Livestock Food Processing Office Supplies Personal & Household Products Tobacco Computer Hardware Computer Peripherals Computer Services Computer Storage Devices Software & Programming Area of Focus WIDE VARIETY OF PRODUCTS CROSSING MULTIPLE INDUSTRY SECTORS

6 Computer Hardware Industry The Products The Players Notebooks Desktops PDAs MP3 Players Routers Servers Storage Devices

7 Computer Hardware Industry - Size Computer Hardware Industry 0.19% of Typical Basket of Goods Recreation 6% Medical Care 6% Education & Communication 6% Typical Basket of Goods Apparel 4% Other Goods & Services 4% Housing 41% Source: Dept. of Commerce Transportation 17% Source: Dec 2004 CPI Report from BLS Food & Beverage 16%

8 Computer Hardware Industry - Size Computer Hardware Industry GDP Consumer Products $147.6 Billion in % of GDP Durable Goods Computers & Peripherals Source: Dept. of Commerce

9 Industry Size & Growth GDP $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 $ Total GDP (Billions) Computer HW Industry GDP (Billions Total Computer HW Industry $180 $160 $140 $120 $100 $80 $60 $40 $20 $ Source: Dept. of Commerce

10 Industry Size & Growth % Growth: GDP vs. Revenue 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% GDP Computer HW Industry & Apple Total Computer HW Industry Apple Source: Dept. of Commerce & Apple, Inc.

11 Market Structure - Oligopoly Desktop Market 2002 Notebook Market 2002 Toshiba 4% Apple 3% Dell 27% Toshiba 11% Apple 5% Dell 24% Other 36% IBM 5% Gateway 6% H-P 19% Other 32% IBM 12% H-P 16% Source: U.S. Business Reporter

12 Market Structure Oligopoly or Monopoly? Hard Drive-Based Music Player Market 2004 iriver 2% Creative 3% Rio 3% H-P 4% Apple 88% Source:

13 Production & Cost Issues $100,000 Revenues $90,000 $80,000 Revenue (millions) $70,000 $60,000 $50,000 $40,000 $30,000 IBM H-P Dell Gateway Apple Sony Toshiba $20,000 $10,000 $ Source:

14 Production & Cost Issues $1,000 Revenues per Employee $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 IBM H-P Dell Gateway Apple Sony Toshiba 2004 Revenue (thousands) Source:

15 Production & Cost Issues $9,000 Net Income $7,000 $5,000 $3,000 $1,000 Net Income (millions) $1,000 -$3,000 -$5,000 Source: IBM H-P Dell Gateway Apple Sony Toshiba

16 Economic Factors for the Industry Economic Consumer Income Consumer Confidence Government Spending Non-Economic Brand Image & Brand Loyalty New Technologies/Obsolescence Referral Marketing Natural Disasters, War & Terrorism

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18 Apple s Background "So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So then we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.'" --Apple Computer Inc. founder Steve Jobs on attempts to get Atari and H-P interested in his and Steve Wozniak's personal computer.

19 Apple s Background 1976 The Beginning The Missteps Present The Rebound Steve Wozniak creates Apple I Steve Jobs sees potential and insists they sell it together -- Apple is born Apple I is sold without monitor or keyboard (mini mac concept not new) The GUI wars and the decision not to license the Mac OS Leadership issues Supplier issues Left in the dust because of incompatibility Failed products (Performa, Lisa, Newton) Steve Jobs the CEO, take 2 A succession of hits imac ibook ipod ipod Mini Revolutionizes the Music Industry with itunes

20 Apple s History of Innovation First Apple Computer Apple III Mac Newton PDA PowerMac PowerMac G3 & Powerbook G3 PowerMac G4 Cube itunes Mac & PC 70 s 80 s 90 s Apple Disk II Mac II Powerbooks Performas New imac imac & ibook 5 consecutive quarters of profits. Turnaround is in full swing Source:

21 The ipod s Success Factors PC and MAC Compatible Accessories Design itunes Music Store Auto Integration

22 Apple s Demand Factors - Income Income Apple s products are normal goods When income rises, demand for their products increases Income As Income of consumers rises, demand for Apple s premium products increases. As income of consumers fall, it puts downward pressure on Demand Curve for Apple s premium products. Quantity

23 Apple s Demand Factors Prices of Related Goods Prices of Related Goods Substitutes Computers made by other manufacturers Complements Software Peripherals Internet service Price Apple must continue to innovate in computers and addons to counter pricing pressure Apple faces negative pressure on their demand curve when competitors reduce prices Quantity

24 Apple s Demand Factors Taste Taste Industry leader in design and quality Brand image Cool factor Must have gadgets Price Apple must continue to make the coolest and most stylish products to keep and attract customers Apple faces negative pressure on their demand curve when competitors introduce products that attract consumers away from Apple products Quantity

25 Apple s Demand Factors Expectations Expectations Consumers expect the coolest products from Apple Consumers expect to pay premiums for these products Price Apple must keep new innovations secret to avoid reductions in demand for current products Apple faces negative pressure on their demand curve when consumers decide to not purchase current products because they expect better products in the future Quantity

26 Apple s Demand Factors Number of Buyers Number of Buyers Apple historically has catered to a niche market It now wishes to attract the mass consumer market Price Apple must continue to offer products that will attract new buyers to the Apple brand Apple faces negative pressure on their demand curve when competitors are better able to attract customers (buyers) Quantity

27 Apple s Production & Cost Issues Quality Defects in: Design or Manufacturing = Decreased Sales & Decreased Profits Inventory High or Low Levels of product components = Negative effects on Operating Results and Financial Condition Third Parties High reliability on third parties to manufacture and transport products = Lots of headaches and potential negative effects on Operating Results and Financial Condition

28 Apple s Market Power Top Global Brand (Brandchannel.com) 98 U.S. and 4 International Retail Locations 21 Online stores around the world Innovative Product Design Over 17 Strategic Partnerships

29 Stiff Competition Computers Digital Music Players Music Download Services

30 Strategies and Goals Maintain Digital Music Lead Appeal to Mass Market Leverage Designs of Hardware and Software Continue to Innovate Expand Distribution Network Keep Costs Low and Quality High Invest in New Product Areas and R&D Apple is committed to bringing the best personal computing and music experience to students, educators, creative professionals, businesses and consumers around the world through its innovative hardware, software, peripherals and Internet offerings. Apple Inc., 04 Annual Report

31 + ` Economic Environment

32 Apple Revenues Sales (millions) Macintosh Net Sales $ 5,671 $ 4,862 $ 5,082 $ 6,885 $ 4,403 $ 4,534 $ 4,491 $ 4,923 ipod ,306 Other Music Products Other Services & Products 1,410 1,079 1,052 1, ,061 1,335 1,772 Total $ 7,081 $ 5,941 $ 6,134 $ 7,983 $ 5,363 $ 5,742 $ 6,207 $ 8,279 Units (thousands) Macintosh Net Sales 2,874 2,763 3,448 4,558 3,087 3,101 3,012 3,290 ipod ,416 Avg Sales Price Macintosh Net Sales $ 1,973 $ 1,760 $ 1,474 $ 1,511 $ 1,426 $ 1,462 $ 1,491 $ 1,496 ipod n/a n/a n/a n/a n/a $ 375 $ 367 $ 296 Gross Margin 19% 25% 28% 27% 23% 28% 28% 27% Source: Apple, Inc.

33 Apple Revenues $9,000 $8,000 ipod $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Other Music Products Other Services & Products Macintosh Net Sales $ Source: Apple, Inc.

34 Apple Revenues $12,000 $10,000 Apple Revenues (millions) $8,000 $6,000 $4,000 $2,000 $ Source: Apple, Inc.

35 Apple vs. GDP $12,000 $14,000 $10,000 $12,000 GDP Consumer Products Apple Revenues (millions) $8,000 $6,000 $4,000 $10,000 $8,000 $6,000 $4,000 GDP (billions) Durable Goods Computers & Peripherals $2,000 $2,000 $ $0 Source: Dept. of Commerce & Apple, Inc.

36 Apple vs. Consumer Products $12,000 $9,000 $8,000 $10,000 $7,000 GDP Consumer Products Durable Goods Apple Revenues (millions) $8,000 $6,000 $4,000 $6,000 $5,000 $4,000 $3,000 Consumer Products (billions) Computers & Peripherals $2,000 $2,000 $1,000 $ $0 Source: Dept. of Commerce & Apple, Inc.

37 Apple vs. Durable Goods $12,000 $1,200 $10,000 $1,000 GDP Consumer Products Durable Goods Apple Revenues (millions) $8,000 $6,000 $4,000 $800 $600 $400 Durable Goods (billions) Computers & Peripherals $2,000 $200 $ $0 Source: Dept. of Commerce & Apple, Inc.

38 Apple vs. Computer & Peripherals $12,000 $120 $10,000 $100 GDP Consumer Products Apple Revenues (millions) $8,000 $6,000 $4,000 $80 $60 $40 Computers & Peripherals (billions) Durable Goods Computers & Peripherals $2,000 $20 $ $0 Source: Dept. of Commerce & Apple, Inc.

39 Apple s Focus on R&D R&D $ (millions) % of Net Sales Apple $ % Dell $ % HP $3, % IBM $5, % It took us three years to build the NeXT computer. If we'd given customers what they said they wanted, we'd have built a computer they'd have been happy with a year after we spoke to them - not something they'd want now. Steve Jobs

40 ` Forecasts & Projections

41 Forecasts & Projections Computer The Computer Hardware Industry & Media

42 Recommendations for Apple Continue making must have products Leverage the power of the ipod Stay ahead of the competition Partner with companies that complement the Apple brand Expand retail footprint Keep costs low and quality high Increase market share in the education, business and government sectors

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