Businessmodel of Apple

Customer Segments

In the 20th century, Apple catered primarily to the home computer market, selling products which, although coming with a premium price tag were still affordable for the mass market.

In the 21st century, however, following Jobs’ re-branding of Apple Computers Inc. to Apple Inc., Apple has focused increasingly on the consumer electronics, with the iPod, the iPhone and the iPad becoming flagship products. They continue to cater to the premium end of this market.

Value Proposition

Central to Apple’s value proposition is design. Apple is famous for meticulously designing products to be as user-friendly and elegant as possible.

Its loyal customer base has proven their willingness time and time again to pay a premium for items designed by Apple, and Apple’s reputation as brilliant designers is integral to their brand image. Their electronics ranges are usually high-performance and users have come to associate Apple with a certain standard of quality.

Channels

Apple sells its products wholesale to electronics retailers the world over. They may also be purchased from apple.com. Another key channel is the 479 Apple Stores that operate in 18 countries.

The iTunes store functions as a channel through which digital content is sold.

Customer Relationships

Since very early in its history, Apple has been noted for having a large core of enthusiasts who exhibit very strong brand loyalty, buying Apple products over and over again. Apple maintains its strong relationship with its customers through offering phone and web-chat based customer service channels, in addition to providing in-person assistance at their various stores worldwide.

Key Activities

Apples key activities are designing and selling their products. They are famously fastidious in all aspects of the hardware and software design of their products, and invest a lot in quality control to ensure products meet the standard their customer base has come to expect.

Aside from design, quality control, branding is a huge part of what Apple does. Apple is extremely conscious of controlling the image it projects and it has painstakingly and consciously cultivated an image of quality, precision, sophistication and class that enables it to justify the higher price tags its products commands relative to its rivals.

Sale of third-party digital content through the iTunes Store channel is another key activity that generates a modest portion Apple’s revenue.

Key Partners

The manufacturing of some key bits of Apple hardware is outsourced to companies such as Foxconn, making them key partners in Apple’s business.

The record companies, film studios and publishers who own the rights to the digital media Apple sells on the iTunes store are also important partners.

Third party developers who create the programs available in the app store are key partners and valuable contributors to Apple’s Macintosh and iPhone ecosystems.

Key Resources

People comprise a key resource for Apple, as they are hugely dependent on top-range hardware designers and software engineers to produce their goods. Over the years Apple has accumulated huge numbers of very talented staff, who remain a valuable asset to the company.

Physical resources, such as the 479 Apple stores around the world are also valuable and important to the business.

Apple’s hugely respected brand is a key resource that enables them to sell their goods for a higher price tag than many of their direct competitors.

Cost Structure

Apple spends a lot on the manufacturing of its goods, but crucially invests heavily in every aspect of the design, quality control and product testing stages as well.

They operate on a premium pricing strategy which means they also must expend substantial resources in marketing and maintaining their brand image.

Revenue Streams

While home computer sales comprised the majority of revenue for most of Apple’s history, in the last decade or so this has changed as Apple has focussed on smaller consumer electronics.

• The sale of iPhones typically generates between 30-50% of the company’s revenues each quarter, and is these days consistently their biggest earner.
• iPads are the second biggest earner, typically generating around 4-9% of Apple’s quarterly income.
• Sale of Macintosh computers is still lucrative, but typically generates less than 5% of Apples income, and this figure has declined a lot in the last few years.
• Sale of other products, including Apple watches and iPods generate around 3-6% of revenue.
• Apple’s internet services, including iTunes, Apple Care and Apple Pay typically also account for 3-6% of revenue.