Intel is not
only earlier in the value chain but also, as a product leader, has a
monopolistic standard for CPUs in the PC industry. Dell, however, creates
computers using premium Intel chips and strives to cut other prices to achieve
operational excellence. Examining these standards, Intel is more likely to
succeed in the near future.
above, using data from Exhibit 6 of the packet, shows that both gross margin
and R&D investment of Intel is much larger. Such difference clearly
reflects their fundamental strategies. Intel puts in long-term efforts to
satisfy the high expectation as the industry’s standard CPU producer. Intel has
loyal customers willing to pay for the premium quality of Intel equipped
computers. Intel’s effective product leader strategy shaped its value and
ensures its dominant position, which in turn guarantees high profit.
However, as an
operationally excellent firm, Dell minimizes cost by lower investment in
R&D, but also suffers a lower gross margin. In addition, since it isn’t as
differentiated, it continuously competes with many other operationally
excellent firms producing close substitutes like HP, Lenovo, and Samsung. To
continue to remain in the market, it must maintain the most competitive prices,
which is also bad for profit.
earlier place in the value chain also gives it an edge. Intel’s CPUs are now a
standard for most modern high-level computing devices. This means that most
computer manufacturers rely on Intel for their product’s performance. Since
later players in the value chain such as Dell relies on Intel, it has more
power over price.
later in the value chain. Unlike Intel, it would cost too much time and money
for Dell to produce such a chip of their own, so they have no choice but to buy
Intel’s. Therefore, it must buy Intel’s premium chips at a high cost, factor in
the price of all other parts of the computer, and still be competitive while
directly targeting the public.
conclusion, due to Intel’s successful product leader strategy and unique position
as the industry standard for CPUs early in the computer producing value chain,
it is more likely to be competitive than Dell.
competitive position in the PC industry today is effectively the same as its
position between 1997 and 2010. This period was during the tenure of Steve
Jobs, who revolutionized Apple as a product leader against operationally
excellent competitors. Despite the efforts of others, Apple has still
successfully maintained its position as product leader.
the past, Job’s fundamental strategy was very clear. Besides focusing on the
elegant and simple design that would make Apple stand out, Jobs also increased
spending on R to produce a more focused and enhanced product line. He
also emphasized the cultural aspect of Apple’s computers, such as becoming a
“digital hub” for entertainment or having “the greenest lineup of notebooks.”
This strategy worked to differentiate Apple products from those of other
operationally excellent competitors which minimized the cost to sell large
amounts at a low price.
today, Apple still has a distinguished brand power with a loyal customer base
which pays a premium price for its easy-to-use products. According to its 2017
10-K, Apple’s gross margin amounts to $88,186,000, 38.5% of last year’s net
sales. This huge gross margin indicates that Apple is still successfully
increasing their customer’s willingness to pay.
its competitors strive to deliver devices with superior hardware specifications
with lower costs. For instance, the Surface Pro 4 boasts better computing power
than the MacBook Pro within the same price range. However, most of Window’s
apps are rarely written to consider portability, so it limits the users to a
keyboard and mouse. Thus, many customers still find an advantage to iPads’
advanced product leader software which maximizes portability. As the result,
the net income of Apple in 2017 was the largest in the market with an
impressive $48,351,000, while Microsoft, coming in second, had only garnered $21,204,000:
less than half of Apple.
Microsoft’s venture with the Surface Pro’s innovative design with touchscreens
and removable keyboards may be viewed as a characteristic of a product leader.
The article by Ewan Spence argues that Apple’s computers have not undergone
major design changes and the innovative model threatens Apple. However, the
given article is before the introduction of the new touch bar and trackpad in
the MacBook Pro series. Apple’s additional developments of peripherals and
non-PC product lines with highly MacBook compatible software adds to their
value by making their products easier to use and connect. Apple has continued
to upgrade its products so that customers would be more willing to pay. Thus,
Apple is still widely recognized for its high standards and premium quality.
In conclusion, Apple in
the past and now are both product leaders in the PC industry. Through this
strategy, Apple has been able to continuously gain superior gross margin and
total shareholder equity compared to other industry giants such as Microsoft. As
one of the most valued companies, more investors would likely favor Apple. This
means that Apple would still be able to continue investing in R,
maintaining its status as a product leader