CHAPTERCASE 5 Part I The Quest for Competitive Advantage: Apple vs. Microsoft BY THE FALL OF 2018, Apple was the first c

[answerhappygod]

Chaptercase 5 Part I The Quest For Competitive Advantage Apple Vs Microsoft By The Fall Of 2018 Apple Was The First C 1 (144.3 KiB) Viewed 10 times

CHAPTERCASE 5 Part I The Quest for Competitive Advantage: Apple vs. Microsoft BY THE FALL OF 2018, Apple was the first company ever to be valued at more than $1 trillion. However, by the spring of 2019, its market capitalization had fallen by more than 21 percent (approximately $230 billion). From 2009 to 2019, Microsoft's market cap had risen from a low of $145 billion to over $880 billion-an increase of almost 500 percent. How did this happen? To understand the ups and downs of firm performance and competitive advantage, it is helpful to look at a longer time horizon. Apple and Microsoft have been fierce rivals since they were both founded in the mid-1970s. Although Apple has dominated the market in the decade since the intro- duction of the iPhone in 2007, in the early decades of the PC revo lution, Microsoft was the undisputed leader. It set the standard in the world of personal Wahaw/Alamy Stock Photo computers with its Windows operating system, which about 90 percent of all PCs run. Microsoft's business model was to create a large base of users for this operating system and then to make money by selling with it application software such as the ubiquitous Office suite (containing Word, Excel, Power- Point, Outlook, and other software programs). the most valuable tech company globally with $510 billion in market capitalization. In contrast, in 1997, Apple was near bankruptcy and struggling to survive with less than 5 percent market share in the PC market. But in the fall of 2001, when it introduced the iPod, its portable digital music player, Apple's revitalization took off. Eighteen months later, its rise would continue with the opening of its online store, iTunes, which was then quickly followed by the opening of its first brick-and-mortar retail stores; today, these stores earn the highest sales per square foot of any retail outlet, including luxury stores. Apple didn't stop there. In 2007, the company revolution- ized the smartphone market with the introduction of the iPhone. Just three years later, Apple introduced the iPad, reshaping the publishing and media industries. Further, for each of its iPod, iPhone, and iPad lines of business, pple followed up with incremental product innovations extending each product category. By the fall of 2012, Apple had become the most valuable company in the world with $620 billion market capitalization. In 2015, the high-tech com- pany introduced Apple Watch, a wearable computer that is fully integrated with its iOS operating system, running basically all the apps available for the iPhone. Not to be stopped, in 2017, Apple introduced its 10th anniversary iPhone to great fanfare. It had a curved screen and was priced at about $1,000. The sticker price increased to $1,100 when, in September 2018, Apple introduced the iPhone XS Max. In looking for the next big thing, in 2019, Apple entered the entertainment industry with Apple TV, among other new strategic initiatives in mobile payment services and online gaming. The comparison of Microsoft and Apple over time shows that competitive advantage is transitory. Given the rough-and- tumble competition combined with relentless technological progress and innovation, it is hard to gain a competitive advantage in the first place, and it is even harder to sustain it. Microsoft Microsoft replicated this hugely successful business model with its corporate customers. Once servers became ubiquitous in corporations, Microsoft offered IT departments e-mail systems, databases, and other business applications that tightly integrated with Windows. As a result, 80 percent of Microsoft's total revenues were tied either directly or indi- rectly to its Windows franchise. Microsoft's strategy of offer- ing bundled discounted software with its operating system, which became an industry standard, allowed it to create a strong strategic position and to extract high profits for many years. It also allowed Microsoft to overtake IBM in 2000 as Office Mac Part II of this ChapterCase appears in Section 5.3. NOTE: A five-year financial ratio review related to this ChapterCase is available in Connect.