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On The Flip Side
by Michael Munger




Apple's Problems Are Not Over
June 8th, 1999

Apple is back on the track and we all know that. It is amazing how well the company has been able to handle its situation. Selling computers, good administration, profits, big announcements, innovation on a regular basis... Nevertheless, while our favorite computer maker may be safe with Steve Jobs, do not take anything for granted. Apple has big challenges to face in the near future. Apple's problems are organization, pricing and competition from PC makers.

Organization problems

In business, you have to be able to keep up with the demand if you want to sell. Apple has problems with that. I remember when they canceled people's orders for the popular Power Mac 9600. I remember people complaining when they wanted to get PowerBooks, because they had to wait a few weeks before they could get one. At the end of March, in Montreal, we received significant stocks of flavored iMacs. The problem is the announcement took place in January... and they arrived shortly before the 333MHz revision came up in the news. Then the new ones were here in a flash, while I read that places in the US had to wait for them.

Do you remember the G3 All-in-one? I remember reading a forward message, in which an Apple employee states how they stopped its production because the company could not keep up with the demand. MacAddict (Oct. 98 issue, page 18) reported that the G3 All-in-one represented 21% of the overall unit sales in the third fiscal quarter of 1998. Indeed, it sold like hot cakes, although it was for education customers. How many companies will cancel a product because it is too popular?

If I say that this situation is not acceptable, I am certainly not alone. If Apple does not solve that problem, it will be impossible for the company to gain more market share and to set further growth plans.

An Apple dealer owner told me that Apple 's philosophy is this: they tell people about their new products, take orders, and then produce units according to the orders. While it may seem as if Apple has completely changed its forecasting methods, Apple still uses this system. They still usually makes small estimates and then assembles more units only if the demand is bigger than expected. The problem with this system is the delay between the order and reception of the merchandise. When Apple is unable to satisfy the demand, the delay is longer, which frustrates the customer. If Apple makes estimates and produces according to how it thinks it will sell, there is a risk of overproduction. But this risk does not harm Apple as much as underproduction because Macs sell more than ever right now.

An important part of a company's image is customer satisfaction. It includes getting what you want when you want it. When a potential customer goes to a Mac store, he/she usually has the money NOW, and wants to have the computer NOW. To hear that "you will have to wait for a few weeks to get a Tangerine iMac" makes a bad impression if you are considering the Mac after you gave up that old 486.

Customers tend not to be patient, especially when undecided about which platform to adopt. A person who just wants to get a computer to connect to the Internet and who sees that Apple has problems shipping flavored iMacs everywhere might think that it is not a reliable company.

Pricing

Recently, I read that the price of a computer is what determines whether a customer chooses your product or not. A recent report says that bondi blue iMacs sell more easily than the flavored ones because the price is under 1000$. What is going to happen when they run out of stock? The current iMacs do not sell as well as before, and cheap PC's remain popular. The Pentium III did not score as much as the Celeron processor, because the latter is cheaper.

You get the big picture. Price is important these days and Apple's prices are still a notch higher than PC's. The Mac industry can only wish that Apple would find a way to lower its prices, because the speed and ease of use arguments found their limits. Someone told me in e-mail that Steve Jobs plans to lower the price tag to the PC level one day. Though I am aware of the price/quality issue, I hope it will happen.

Competition from PC makers

This is perhaps the worst of all. Why? Apple has no control over it. When FireWire came out, PC makers said they would use it for their computers and pay royalties to Apple. At the first occasion, they changed their minds and established the future USB 2.0 standard, although it is not ready for release yet.

PC makers will do anything to keep Apple in the margin and protect their markets. They are ready to come up with inferior solutions with incomplete development and choose paths that are more complicated (USB 2.0) rather than adopt Apple's standards, or even refuse to work for the user's benefit.

I hope Apple has a solution for this, although it is a lot to ask.

Your comments are welcomed.

Michael Munger is a French Canadian living in Montreal. He discovered the Mac in 1994 while studying journalism, the profession he loves and practices. He also studied history and communications. In addition to his work at The Mac Observer, he authors the iBasics tutorial column at Low End Mac, and cofounded MacSoldiers in 1998.

You can find more about him at his personal Web site.

You are welcome to send me your comments or you can post them below.

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