Apple Is Expanding Its Distribution Channels

orchard apple tree is Expanding its Distri onlyion Channels slump Edwards of Business Week harped on conflicts with existing sellers such as CompUSA and Sears, quoting CompUSAs Lawrence N. Mondry, who decl ard, When you choose to fence with your sellers, clearly thats not a well-situated situation. Mondry could pee been describing the acquaintance mac buyers had when they stepped into close to CompUSA shop classs. It was even worse at Sears.Realizing that they were being held over a barrel by large retailers that were utilise to withdrawing the shots with electronic computer OEMs and frequently provided a horrible purchasing milieu for orchard apple tree mathematical harvest-homes, the caller-up did what it had to and took control of dispersal. apple retail stores would give the participation the opportunity to leapfrog past dep closing curtainence on opposite retailers. Daniel T. Niles of Lehman Br some others in kindred manner saw the possibilities, telling M acWorld, orchard apple tree has the ability to bugger off attracting impudent nodes with the unveiling of their higher-end retail store system. You stoolt mention the surge in Mac gross gross revenue without touching on the Halo Effect of the iPod. orchard apple tree do the iTunes/iPod combination available for Windows users. That move created some(prenominal) spic-and-span distribution opportunities for orchard apple tree. First, it gave Windows users the opportunity to try apple intersection points without having to take the frightening plunge into the population of Macintosh. orchard apple tree finally had access to a vast pool of Windows users it had antecedently been unable to touch. Second, it undetermined up a secondary market for iPod accessories and tie-ins.Had the iPod and been available for Macintosh users, a secondary market would film developed, but it would affirm been overmuch, much smaller. orchard apple tree would never cause been able to see de als with auto constrainrs, for example. The connector on the bottom of every iPod (except the shuffle) became the point of instauration to an incredible array of third-party products, and as that market grew, the iPod rapidly became the de facto standard movable multimedia device. Third, it gave the iTunes hold on a tremendous head start.While a digital melody store is handy in itself, n unrivalled of the previously-existing stores had do much of a dent in consumer behavior. They didnt operate curiously well with Windows- idea MP3 players, and they didnt offer broad enough medicine libraries. orchard apple tree struck deals with all the major(ip) labels and created a store that provided an easy, addictingly-convenient interface and broadloom integration 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 subject as Apple moved beyond harmony. honorable as the Apple retai l stores bypassed middlemen, the iTunes/iPod combination created a direct association between Apple and its customers. As Apple adds to a greater extent capabilities to the iTunes Store, and does the same with the iPod, the deuce 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 entire line of Apple computer products, softw ar and peripherals. Part of the decision, Apples declining sh be of the computer market. Now the beau monde has loose over 130 stores, including in lacquer, Canada and the UK.Its latest annual report states that they provide continue capital expenditures for retail trading operations, indicating that they boast a long-term strategy for opening more(prenominal) stores. Apple Computer Store Products Hardwargon It allow ins, 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 cry. Apple Software It includes iLife, iWork lotion bundles, Mac OS X, DVD Studio Pro, terminalCut Pro, and other miscellaneous Apple software titles.Third Party Software It is made for Mac OS X, such as productivity software, forge software, utilities, games much every subject new that has been released for Mac OS X. Select Third Party Accessories In this Apple ranges starts from Apple notebooks and iPod sleeves to speakers, printers, s rear endners, 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 open up 209 stores, including 181 in 37 US states, 15 in the UK (14 in England, 1 in Scotland), seven in Japan, and 4 in Canada. Recentl y, Apple opened its maiden store in continental Europe, in Rome in Italy. In 2008, Apple will be opening 3 Australian stores, 1 placed in Melbourne and 2 in Sydney. This store is the set-back Apple Store in Europe. It opened in autumn 2004 get out Apples stainless steel architecture have to take a primer coat to the historic buildings of other countries? In Japan, Apple uses English al some exclusively. only if other countries may not embrace English, preferring to see their hold spoken language utilize in store signage. Apple will have to eternal sleep the exist of constructing a store, recruiting a suitable staff, and run the store against the latent revenues, which in turns depends upon the autobiographyed Macintosh community, median income, currency trends and general retailing purlieujust like at home Apples c formerlyntrate and extremely consumer oriented approach to fluent software distribution is radical My argument is that its revolutionary in the same way the iPod and iTunes were revolutionary.Basically, the verbal expression is similar to why Apple succeeded w/ the iPod and iTunes despite tilt from manufacturers like Sony, ancient models for music distribution, and technology inept publishers Apples consequence take the carriers out of the picture and give the developers a dis clubed cost or zero cost distribution channel Jobs began Apples turnaround with the 2001 invention of the iPod, which defined and then dominated the man- takeout-music-player marketand which became central to the resuscitation of Apples computer line.The Mac, erst derided as a toy, today is the best individual(prenominal) computer on the planet, period. And the iPhone is the best smart phone. Nothing else comes close. As of the third quarter of 2008, Apples iPhone was outselling the look into 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 mob ile-phone maker, behind Nokia and Samsung. All this is occurrence just as mobile devices are poised to become the most important computing platform. same or similar products.Strategic vigilance, flat integration is a theory of deliverership and control. It is a strategy used by a contrast or corporation that try ons 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 distinguishable market discussion section or to a different geographical area. This is sometimes referred to as the horizontal integration of marketing. The horizontal integration of production 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 explain its leader position. In my example, Apple innovates with its couple iPod+iTunes and keeps the leadership since around points of its strategy are astonishing because they look similar as Apple strategy for PC. Apple doesnt extremity to licence its own DRM, so if you want buy a song on internet for your iPod you have to go to the iTunesMuciStore and to listen this song at a time on a MP3 player you mustinessiness 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 age ago.Short term Apple wins but the market increases and we cant know how this leadership will progress and if Apple would change its strategy. The theory of games can help us to understand this option and the jeopardys. Installed firms are Stackelberg leader on the market, the potential entrance adapt its quantity. (Bain, J. (1968) Apple Inc. and its wholly owned subsidiaries radiation pattern, manufacture, and market personal computers, portable digital music players, and mobile communication devices, and sell various relate software, work, peripherals, and earningsing solu tions.The company sells its products universal through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and jimmy-added resellers. In addition, it sells various third-party Macintosh, iPod, and iPhone congruous products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital cognitive content through the iTunes Store.The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative customers. As of celestial latitude 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 participation Background Apple Inc. and its wholly-owned subsidiaries (collectively Apple or the caller-out) design, manufacture, and market personal computers, portable digit al music players, and mobile communication devices and sell a variety f related software, services, peripherals, and networking solutions. The participation 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 high society 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 caller-up sells to consumer, small and mid-sized business (SMB), education, enterprise, government, and creative customers. The phoners fiscal year is the 52 or 53-week period that ends on the last Saturday of family line. Unless otherwise stated, all information presented in this Form 10-K is based on the caller-ups fiscal calendar. Bus iness Strategy The alliance 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 modern hardware, software, peripherals, services, and internet offerings.The partnerships business strategy leverages its unique ability to design and develop its own run(a) system, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and modernistic industrial design. The lodge believes continual enthronisation in research and development is critical to the development and arousement 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 shade inno vations, such as the iPod, iPhone, iTunes Store, and Apple TV. The corporation desires to support a community for the development of third-party products that complement the Companys offerings through its developer 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 trenchantly 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 inner salespersons who can convey the value of the Companys products and services greatly enhances its ability to attract and harbour customers. The Company sells many of its products and resells reliable third-party pr oducts in most of its major markets directly 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 equal 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 outside(a)ly. The Company has typically 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 operate its own stores and locating them in desirab le high-traffic locations, the Company is better positioned to control the customer buying experience and attract new customers. The stores are de write to simplify and enhance the display 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 experienced and knowledgeable personnel who provide product advice, service, and training.The stores offer a wide filling 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 originally 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(prenominal) No rth and South America.The Europe segment includes European countries as well as the Middle East and Africa. The Retail segment ope pass judgment Apple-owned retail stores in the U. S. and in international markets. 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 broadly speaking 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, ent erprise, 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 net 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 significant concentration of this outsourced manufacturing is currently executeed by only a some of the Companys outsourcing partners, very much in single locations.Certain of these outsourcing partners are the sole-sourced suppliers of components and manufacturing outsourcing for many of the Companys strike products, including but not trammel to final ass embly of substantially all of the Companys portable Mac computers, iPods, iPhones and most of the Companys iMacs. Although the Company works virtually with its outsourcing partners on manufacturing schedules, the Companys operating outgrowths could be perversely impact 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 Operations and geographical 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 masss Republic of China (China) and the Czech Republic.Currently, the supply and manufacture of many critical components is perfor med 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 opposed countries, and on sales of products that include components obtained from strange suppliers, can be adversely happen uponed by unusual currency fill in rate fluctuations and by international dish out regulations, including tariffs and antidumping penalties. The Companys operations and performance depend significantly on worldwide economic conditions world-wide markets for personal computers, digital music devices, mobile communication devices, and related peripherals and services are extremely competitive and subject to rapid technological change.If the Company is unable to compete ef fectively 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 determine cutting, with its resulting downward push on gross margins, frequent introduction of new products, short product life cycles, evolving industry standards, continual improvement in product value/performance characteristics, rapid adoption of technological and product advancements by competitors, and price sensitivity on the part of consumers.The Companys ability to compete achievementfully depends heavily on its ability to ensure a go along 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 a pplications, 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 bugger off customer demand, the Company must flourishingly manage frequent product introductions and transitions. Due to the highly volatile and competitive nature 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 upgrade d products.The success of new product introductions depends on a number of factors, including timely and self-made product development, market acceptance, the Companys ability to manage the risks associated with new products and production ramp issues, the availability of application software for new products, the effective prudence of purchase commitments and inventory levels in line with anticipated product demand, the availability of products in appropriate quantities and costs to meet anticipated 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 continue key personnel. Much of the Companys future success depends on the continued service and availability of skilled personnel, including it s 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, oddly in the Silicon Valley, where most of the Companys key employees are located. The Company has relied on equity awards as one means for recruiting and retaining this highly skilled talent. Accounting regulations requiring the expensing of stock options have resulted in increased stock-based fee expense, which has caused the Company to reduce 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 irritability in the Companys stock price could result in a stock options exercise price particular(a) the underlying stocks market value or a significant deterioration in the value of restricted stock units (RSUs) granted, thence lessening the The Companys business is s ubject 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 significantly affected by risks associated with international activities, including economic and labor conditions, political instability, assess laws (including U. S. taxes on outside(prenominal) 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 exposure 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 end-to-end the world.Weakening of foreign currencies relative to the U. S. dollar will adversely affect the U. S. dollar value of the Companys foreign currency-denominated sales and earnings, and in the main will lead the Company to harry international pricing, potentially trim down demand for the Companys products. In some circumstances, due to competition or other reasons, the Company may decide not to raise local prices to the full extent of the dollars strengthening, 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 o f 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 fixed investment in equipment and leasehold improvements, information systems, inventory, and personnel.The Company also has entered into substantial operating lease commitments for retail seat with legal injury ranging from 5 to 20 years, the majority of which are for 10 years. Certain stores have been designed and built to serve as high-profile venues to promote brand sentience and serve as vehicles for corporate sales and marketing activities. Because of their unique design elements, locations and size, these 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 arrest 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 headquarters 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 material feet of space, primarily in the U. S. and to a lesse r 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 special years. Leased space includes approximately 1. 8 million square 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 sq uare 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 superfluous 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 aptitude and strategic relationships with outside manufacturing vendors, and therefore believes it has adequate manufacturing capacity for the foreseeable future. The Company continues to make investments in capital equipment as pack 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 passing(a) 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 the 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 presidencys to excel above their competition. With that being said globalization has been authoritative to Apples revenue. According to Apple, their international sales accounted for 43 percent of the quarters revenue (Dowling, 2005), this is proceed 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 t he direction of globalization. This type of globalization will involve countries with different needs and different markets. For instance, planning a marketing lineation must involve the different variables that apply for each market. When planning globally, company structure must be taken into consideration. With that being said organization and control go hand in hand Steve Jobs came back 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 peak 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 at the same time