A Case Study And Analysis On Apple Inc Marketing Essay

A Case Study And Analysis On Apple Inc Marketing Essay Apple Inc. (previously Apple Computer, Inc) is a multinational corporation that is established on April 1, 1976 in California and incorporated on January 3, 1977.  [i]  The company for 30 years was named as Apple Computer, Inc. but it changed its name to Apple Inc. on January 9, 2007 as it wanted to expand to the consumer electronics market and do not only stay in the computer market.  [ii]   Furthermore, the company for the year 2010 employs 46,600 full time employees and 2800 temporary employees and contractors.  [iii]   Apple designs, manufactures and markets a range of computer software, hardware products and personal computers. Some of its products are the following: Products Hardware Products Application Software Operation System Software Displays Peripheral Products Marketing Tools SWOT Analysis The SWOT analysis is used inside a company in order to discover its strengths, its weaknesses, its opportunities and its threats. The SWOT analysis is a strategic marketing planning tool that is usually used to help each company understand and analyse its strengths and weaknesses, identify the threats of other businesses and the various opportunities in the market share. The SWOT analysis is divided in two sectors. The strengths and the weaknesses refer to the company and its products as internal factors, while the threats and the opportunities refer to the external factors of the company in which it has no control. In SWOT analysis it is usual to list the strengths, the weaknesses, the threats and the opportunities in the same page. This is done by dividing the page into four squares and entering strengths and weaknesses (internal factors) in the top two squares and opportunities and threats (external factors) in the button square. The SWOT analysis should be brief and interesting and should not exceed more than four or five pages. An example of a SWOT analysis is the following 4: (How to write a marketing plan [electronic resource] / John Westwood, Westwood, John, 1947, London ; Philadelphia : Kogan Page, 2006, 3rd ed), (Malcolm McDonald on marketing planning [electronic resource] : understanding marketing plans and strategy / Malcolm McDonald. Publication Info. London ; Philadelphia : Kogan Page, 2008.) STRENGHTS WEAKNESSES OPPORTUNITIES THREATS The number of individual SWOT analysis will defer from company to company. The most common levels that SWOT should be undertaken are the following: For the organisation as a whole For every major Competitor For every major product or service For every major market share The SWOT analysis is used for business planning, strategic planning, competitor evaluation, etc. This tool is very useful for each company to understand and make decisions in all kind of situations. (4, McDonald, Malcolm and Adrian Payne (1996), Marketing Planning for Services, Oxford: Butterworth-Heinemann, pp 77-117) A good example of Apple to explore their strengths, opportunities, weaknesses and threats is to develop a Swot analysis for the company. The Swot analysis for company is showed below: STRENGHTS: Apple is producing innovative, quality and easy to use products. The innovation made Apple such a powerful company. This is obvious if we look its past: 1970-2001-Apple was making changes only to its computers (face-lift), end of 2001-Apple introduced iPod, June 2008- Apple introduced the cinema displays, March 2007- Apple developed Apple TV, June 2007- Apple entered the Mobile Market with iPhone, 2010- Apple introduced iPad. Every year Apple spent around $1.5 billion for the development of new products in order to keep the existing customers satisfied and recruit more new ones. [3] Apple has a very powerful brand loyalty. As it is one of the most profitable and healthy companies in the World, it managed to adopt a large amount of loyal customers. [1] This happened because Apple periodically, provides updates to all its application and operating systems not only for the Mac computers but for Iphone, Ipad etc. With this way Apple keep the customers satisfied and willing to buy its new products. [3] The key success for Apple is its dedicated personnel and more specifically the CEO team. This team includes all the executive team( Steve Jobs, Andrea Jung, Arthur D. Levinson, Millard S. Drexler) and the employees in technical, marketing and staff positions.[2] Steve Jobs, the Chief Executive Officer and Co-founder of Apple Inc. plays a vital role inside the company. During his absence (1985-1996) Apple experienced many financial problems. However, when Steve Jobs came back to the company in 1996, he focused on developing new ideas and in 2001 he introduced iPod which is making a lot of profit to the company. Therefore, Steve Jobs is definitely a strength for Apple.[2] Apple developed a partnership with Intel ® microprocessors in June 2005. This was very useful for Apple because it is addressed in a wider market. Furthermore, as Steve Jobs specified Intel is the strongest processor roadmap. Therefore from then until now, Apple computers is much stronger and more stable.[4] Apple has managed to adopt loyal customers through its stable and reliable products. Therefore, in order to make some profit in the introduction phase of its product, it announces a pre-order technique in order for the innovators to pre-order the product and pre-pay it. With this technique Apple gain a large amount of money and invest them in other areas. WEAKNESSES: Apples hardware and software products and services are very complex and high technology that most of the times contain defects such as bugs. For example, when iPhone 4G came to production, everyone was complaining about the signal when they make a call. Therefore, Apple introduced an update to fix the problem. However, there is no guarantee that Apple is able to detect and fix all the defects in its products and services.[3] This failure results in harming its reputation and sometimes losing customers because they are not satisfied.[3] In the US, Apple has made a contract with a specific carrier for selling and promoting iPhone. If this carrier cannot compete with others in the U.S. market concerning the quality, coverage and pricing or if he cannot promote iPhone correctly into the market so as for the customers to buy it, then this will have a negative impact on the sales and the profit for the company as it will not sell enough units.[3] Furthermore, as Apple decided to make a contract with one carrier, it will lose the loyal customers from other carriers Steve Jobs, is simultaneously a strength and a weakness. During the departure of Steve Jobs from the company, Apple was facing many financial problems because it did not have any innovative products. Therefore, if Steve Jobs leaves again from the company then it might face the same problems. Therefore Steve Jobs is both a strength and a weakness.[2] When Apple announced in June 2005 that is going to leave from IBM and to switch to Intel, some specialists commented that it might lose the loyal IBM customers because the swap would confuse them. Apple has very high prices in its products, so it addresses in a low market- share and not to all customers. OPPORTUNITIES Due to the high competitive market, Apple has to introduce new products, services and technologies and enhance existing products and services so as to simulate new and existing customers to buy the new and upgraded products and services.[3] With the success of iPod and iTunes, Apple entered to the Consumer Electronics market. By introducing iPhone, Apple has expanded to the Mobile Communications market. Therefore, now Apple has the opportunity to expand to further markets like home stereo, TV or even a gaming system like play station.[2] Apple made a contract with Intel to install their processors to Apple computers so as to prompt business to replace Pcs with iMacs. They did this in order for their business applications to become stable and reliable. The first example of replacing their computers with iMac is in Japan. Aozona Bank Ltd replaced their computers with iMacs. Therefore, Apple has to find a way to establish themselves as a major player in business applications.[2] Apple have to create a strategy that will expand its product line to other products that is going to be less expensive. THREATS The biggest threat that all the IT companies face is the high level of competition in the technology markets. The most common feature is the price competition. The competitors reduce their selling prices and sometimes adopt the features of Apple products in order to attract more customers. For example, Apple has only recently entered the Mobile Communications market, so many of its competitors have greater experience and more resources, so they could provide their products in a lower price with little or even no profit at all.for the company. Therefore if Apple stops investing a lot of money to research and development, it will lose its competitive position in the market. Furthermore, in these markets the product Life Cycle of all the products and services is extremely short e.g. for mobiles phone their lifecycle is around 6 months. Therefore, each company has to introduce new products and services. [1,3] In 2005 Apple won a legal case about a blog that pre-introduced new Apple products. With this trial, Apple force Bloggers to name the source of their information because the company suspected that the information had leaked from its employees. [1] Therefore, Apple is always vulnerable to leaks from various employees. This information may conclude to the competitors, so Apple will lose its competiveness.[1] As Apple is an IT company, it relies mostly in economic factors to make profit. Therefore, the economic crisis that exists worldwide is a major threat to all companies but mostly to technological companies. This happens as with the unemployment and the decrease of salaries; most customers consider the market of a technological product unnecessary e.g. an iPhone, so the sales of the company are going down. Customers will download music from another free online program without having to pay anything in iTunes. This will have an impact on iTunes and on the profit of Apple. Our registered business address is PO Box 475, Chichester, PO18 8WX, United Kingdom, http://marketingteacher.com/swot/apple-swot.html A strategic Analysis of Apple Corporation, Imothy Pivovamik, Jeff Shaver, Adam Silver, Richard Sterling, Dave Strubbe (function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "https://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })() Annual Report, United States Security and Exchange Commission, Washigton, D.C.20549 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Njc1MzN8Q2hpbGRJRD0tMXxUeXBlPTM=t=1 http://www.apple.com/investor/ Ansoff Matrix Ansoff Matrix is a well known marketing tool which was first published in Harvard Business Review. Many companies nowadays use it in order to help them decide for the development of their product and the market share. [3,4] The matrix has 2 dimensions. The first one consists of existing and new products while the second consist of existing and new markets. Inside the matrix there are four main categories with suggested grown strategies for each one in order to help the company set the correct direction of their business strategy. The four categories are: Market Penetration in which the company enter into an existing market with existing products or services. Product Development in which the company introduce new products/services into existing customers. Market Development which the company tries to attract new customers with existing products or services Diversification occurs when the company tries to capture new customers with completely new products/services.[3,4] An example of the Ansoff matrix is the following: Ansoff Matrix w500.gif Apple could use each of these four categories in order to manage its existing products and develop new products/ services Market Penetration: In this strategy, Apple could aim on selling the existing products, e.g. Mac Computers to the existing markets. More specifically, Apple: Should try to increase the market share of the existing product. This could be achieved by using the appropriate marketing tools( lower prices, sales promotion, advertising) in order to attract new customers to buy its products.[3,4] For example, more advertisement or reduced prices on Mac Computers could persuade new customers that prefer Windows operations system to change to Macintosh. This is more highly to be achieved in the grown markets because in there the product is at its rising stage. In order to increase its sales and its profit, could persuade existing customers to buy more products. This can be done during an economic grown where customers are willing to spent more money in technological items. [4] For example, Apple could use more advertisement or sales promotion to persuade customers to buy an iPhone for all the members of their family. Or Apple could persuade existing iPod customers to buy also a Mac computer. Should try to ÃŽÂ ±Ãƒ Ã¢â€š ¬ÃƒÅ½Ã‚ ¿ÃƒÅ½Ã‚ ºÃƒ Ã¢â‚¬Å¾ÃƒÅ½Ã‚ ®Ãƒ Ã†â€™ÃƒÅ½Ã‚ µÃƒÅ½Ã‚ ¹ the leadership role in the market by ÃŽÂ ´ÃƒÅ½Ã‚ ¹Ãƒ Ã… ½Ãƒ Ã¢â‚¬ ¡ÃƒÅ½Ã‚ ½ÃƒÅ½Ã‚ ¿ÃƒÅ½Ã‚ ½Ãƒ Ã¢â‚¬Å¾ÃƒÅ½Ã‚ ±Ãƒ Ã¢â‚¬Å¡ all the other competitors. This could be achieved by adopting an appropriate promotional campaign. For example, to drive out any competitors in order to have only its product in the whole market. It will succeed this by adopting a very aggressive promotional campaign. (1,3) Product Development In this strategic option, Apple could create new products for the existing customers. With them, Apple has already a strong relationship, so it knows their need and specifications for creating a new product. Therefore, the company is innovating its products in order to keep satisfied their customers, beat its competitors and keep its leadership role in the market. An example of this strategy is the iPod. The first iPod that Apple introduced was in October 2001. This was the first entertainment tool from Apple for people to use in order to hear all the time their favourite music. However it had a black-white screen and only 5 GB capacity for songs. Therefore, in 2003 Apple introduced an iPod with the maximum of 40 GB capacity. In 2004 it introduced an iPod with a colour screen and 60 GB capacity. Nowadays, Apple has created an iPod that has a 3.5-inch (diagonal) widescreen Multi-Touch display, Wifi and many other features. These changes belong to the product development as Apple innovate its products to attract the existing customers and replace their product with the new.[6] Another example is that Apple every year innovate the iPhone. The first iPhone was released in 2007. The next year Apple introduced iPhone 3G. In 2009 Apple announce the iPhone 3GS and in 2010 it announced the 4G. All these products are aiming to the same market share, the customers who have already bought the first iPhone and want to replace it with the new one.[6] Market Development In the Market Development, Apple could use different marketing strategies in order to sell existing products/services to new markets and increase its profit. It can achieve that, either by expanding to other geographical areas or by looking for users with that will use the product in a different way. A common example is by expanding to foreign markets or to expand from the private sector to the public.[4] Some examples of Apple are the following: Apple did not stayed on selling only to U.S but expanded on all over the world and in 2010 it is earning $24,298 from America sales and $30,929 from worldwide. [5] Another example is that when Apple introduces a new product to the market, it leaves the previous one for some time in the market in order for the customers with low income to buy it. With this technique Apple gain a new market and make a small profit. Another example is that Apple in the beginning was only selling only to customer market but a few years later, it expanded to the area of education. Diversification This strategic option is the risky of all as Apple has to think of new products and introduced them into totally new markets. This option has a very high failure rate as many products fail to come up with the expectations of the customers, so the company has a loss instead of a profit. [4] The most recent example of diversification to Apple is the introduction of iPad in 2010. With this product Apple was aiming in capturing the customers who use the Internet all the time and do not want to carry a notebook or a netbook with them. With iPad Apple did not enter to a completely different market because iPad is like an iPhone with a bigger screen. Therefore, Apple knew how to handle this type of product. Another example is the introduction of iPhone. In 2007 Apple introduced the iPhone, the first mobile phone from Apple. With the specific product, it entered immediately to the mobile market which was totally new to them and in which did not have any previous experience. Apple knew that it should have many competitors and it knew that the product will be either a failure or a success. Therefore, with appropriate marketing and management strategies, iPhone proved to be a success. A much older example is the introduction of iPod. Apple introduced the iPod in 2001. Like in the case of iPhone, Apple was entering here into a whole different area from the computer market. It was entering into the music market and was aiming for existing customers to buy an iPod and for new customers to try one and also try the services of Apple. Finally, Apple has already entered in the markets of Mobile Communications, Computers, TV and Music, therefore it could invest money on creating a gaming console, like Play Station 3, in order to enter to the market of gaming. If it enters this area, it will make a lot of profit because young people spent a lot of money on gaming Market Penetration Usage of appropriate Marketing Tools(advertising, lower prices, etc) Persuade existing customers to buy more products. Product Development Introduction of iPod, the first entertainment tool from Apple Innovation of iPhone each year Market Development Apple expended Worldwide Diversification Introduction of Ipad Introduction of iPhone Introduction of iPod Apple could create a gaming console Our registered business address is PO Box 475, Chichester, PO18 8WX, United Kingdom, http://marketingteacher.com/lesson-store/lesson-ansoff.html 3)Boston House | 214 High Street | Boston Spa | West Yorkshire | LS23 6AD | Tel +44 0844 800 0085 | Fax +44 01937 529236, http://tutor2u.net/business/strategy/ansoff_matrix.htm 4)Marketing in a nutshell, Mike Meldrum, Malcolm McDonald 5) Annual Report, United States Security and Exchange Commission, Washigton, D.C.20549 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Njc1MzN8Q2hpbGRJRD0tMXxUeXBlPTM=t=1 6) http://www.apple.com6] Product Lifecycle(PLC) Another diagnostic tool that is very useful for the companys marketing is Product Life Cycle. With this tool, the company is able to determine different strategies for a product or service. More specifically, the product lifecycle has to do with the life of the product in the market, so it is similar to the humans lifecycle. Humans during their lives pass trough different stages e.g. birth, grown, maturity, decline and death. The same thing happens with product lifecycle. It passes trough introduction, grown, maturity, saturation and the final stage of decline cause of some natural limiting factors.[1] An example of a product lifecycle curve is shown the figure 1. Figure 1 [1] Each product lifecycle has 5 different stages: Introduction: In this stage the company plan and develop the product. In this stage the company does not make any profit because the product is new to the market and the customers are cautious of buying it. Some companies eg Apple, announce their product before it is introduced in order for the early adopters to preorder it and make some money. Generally, this stage is very difficult for each company and has to play with the marketing mix (price, promotion, product, distribution) in order to make some profit.[1] Grown: In this stage the sales are increasing as customers become aware of the product and start to buy it. If the product proves to be a success then more customers will buy it and the company will make more profit.[1] However, not all products reach this stage. This is because in this stage it starts the competition. Therefore, also in this stage the company should develop a smart marketing mix so as to attract more customers. [1,3] Maturity: This stage is the most profitable of all. Sales continue to increase but the cost for the company is decreasing as the advertisements expenditures decline because customers know the product.[3] However, competition is increasing and when the markets are full; the grown of the product begins to decline. [1] Therefore, during this stage, the company should make some radical changes concerning the marketing mix in order not to lose customers. Saturation: This is the stage that the market is full of companies competing for the same product and the sales are decreasing. Producers attempt to differentiate products and brands are the key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and uses a greater variety of media. The rate of sales grown eventually levels out. Generally, there are too many firms competing for too little business at this stage. As a result, price wars may break out and there are casualties or tactical withdrawals among the competitive companies. [2,1] Decline: In the final stage, the product has come to its decline as there is a downturn in the market. This means that the market is full of more innovative products in more attractive prices.[2] The limitations of PLC are that this tool is not the same for all products e.g mobile phones have shorter lifecycle than automobiles. Its product has a unique lifecycle e.g some go from introduction to decline. Therefore is very difficult for the marketing managers to predict in which stage is the product. The most common is that when sales peak and then decline, the managers conclude that the product is in the decline stage. Furthermore, some products do not experience any decline like Coca Cola or Pepsi. These products are in maturity for many years, so the company has only profits from these.[2,3] To sum up the PLC is ideal as a descriptive model as it focuses on the future sales and understanding the dynamics of the market.[1] 1)McDonald, Malcolm and Adrian Payne (1996), Marketing Planning for Services, Oxford: Butterworth-Heinemann, pp 77-117 2)Our registered business address is PO Box 475, Chichester, PO18 8WX, United Kingdom, http://marketingteacher.com/lesson-store/lesson-ansoff.html 3) http://www.netmba.com/marketing/product/lifecycle/ After the developing new products and products portfolio, Apple should use a tool in order to manage these products. The Boston Consulting Group Box (BCG Box) The Boston Matrix is another useful tool for the marketing managers in order to plan the product portfolio of their company. The product portfolio is divided into the products that generate cash and the products that do not. Then the managers will use this model in order to see which one produce cash and make profit to the company and which are not. [2] Therefore, the company can evaluate if its products are healthy The BCG Box uses a form of a two- dimensional matrix. The two axes are the market share, which indicates the strength or limitations of the market and the market growth rate. In order for someone to use the matrix, he should divide it into 4 quadrants, stars(high share/ high market grown), cash cows(high market share/ low market grown), dogs(low market share/ low market grown), question marks(low market share/high market grown), like the matrix in Figure2. Furthermore, he should use circles for each product or product portfolio of the company. The size of the circle indicates the size of the sales or profit for the particular product, product line or business unit.[1,5] In order for Apple to apply the Boston Matrix and manage its products, it should divide its product portfolio into 4 categories deciding which of them are dogs, stars, cash cows and question marks. Figure 2 Stars: Stars are products that are in high growth market with high market share. As Tony Proctor said stars are tomorrows cash earners. This means that stars make a lot of profit for the company but in order for the company to keep these products to this stage, it must spend a high amount of money on them. Therefore, stars are neutral from the point of view of cash generation. [1,2] iPhone is an example of the star products that Apple has in its portfolio. iPhone in its grown it generates a lot of gross profit to the company but it needs also a lot of money in order to change it to cash cow. When it reaches the maturity stage and change to cash cow it has only profit to the company without any expenses for investment. Cash cows: In this stage are the mature products with low growth and high market share, so this area is the most profitable of all as they generate a lot of cash that can be used in improving other areas or in supplying research and development of new products. The company have to invest only a small amount of money to keep them where they are. [1,3] An example of cash cow is the iPod. Despite the fact that Apple does not make considerable changes to the specific product, customers prefer it and buy it. In 2010 Apple sell 8,274 units without making considerable changes. Another example is iTunes. Customers from iTunes can purchase many songs, videos and nowadays even books. Apple all these years made minor changes to iTunes but customers continue to buy from there. Therefore, iTunes is a very profitable programme for Apple without any cost for investment. A case in point is Apple Computers flagship product called the iPod, which occupies a dominant 73% share the portable music player market (Cantrell 2006). Analysts believe it is the impetus for Apples financial rebirth 40% of Apples sales is attributed to the iPod product line (Cantrell 2006) Dogs: These are products with low market share and low market growth. These products are completely profitless for the company and have no future. The best thing each company should do is sold off these products.[1] However, many companies that have dog products have to think carefully before divest them because they might be a portfolio of other products which might be stars. So if the customers that buy with the stars also the dogs, they will stop buying both of them and the company will lose money. Many companies like Apple do not have many dogs products because they are IT companies and they innovate their products very often in order not to lose their position on the market. One example is the iPhone 3Gs when Apple released iPhone 4G.This happens to all of the products of Apple. When it releases a new product, it leaves the previous one for some time in the market with a very low price. This is a dog product. Another example is the iPods shuffle that does not have any screen. These are products with little or no demand on the market because most of the customers buy the iPod with a screen. Therefore, these products make little profit for the company, so they are dogs. Question marks: These are products with low market share but high market grown. These are also unprofitable for the company as they are low market share and the company have to invest a lot of money to grow their market share. Therefore, marketing managers have to think very carefully which ones they should invest in. If they invest in a profitable product then it will become star and afterwards cash cow or else they will become dogs.[1,3] An example of question marks is the Mac Computers. Most people worldwide prefer to buy a computer with a Windows operation system instead of Macintosh, so Apple has to invest a lot of money, as they are very complex products with high technology in order to change them into stars. In General each company have to possess at least one cash cow in order to make profit and invest it to other areas, like stars so as to become a cash cow. If a company has many dog products then the best solution is to either convert them to stars or dispatched them. There is the possibility for a company to have question marks. If that happens, then either it should money to change them to stars and then cash cow or let them become dogs and dispose them. [1] However, despite for all the positive results that Apple could have with BSG matrix, it has many limitations. Firstly, the matrix assumes that every product is independent from the product portfolio of the company. This is not all the times true as many products depend from others and if the company consider a product dog and divest it, then it will create a problem to the other product. Furthermore, The limitations of BCG matrix are that the higher rates of profit do not always related to high rates of market share. Furthermore, it is usually applies to product lines instead of simply a product. Finally, the main problem with these tools is that they are not always accurate.[2] 1) Strategic marketing [electronic resource] : an introduction / Tony Proctor, Proctor, Tony, London ; New York : Routledge, 2000. 2) Our registered business address is PO Box 475, Chichester, PO18 8WX, United Kingdom, http://marketingteacher.com/lesson-store/lesson-ansoff.html 3)Boston House | 214 High Street | Boston Spa | West Yorkshire | LS23 6AD | Tel +44 0844 800 0085 | Fax +44 01937 529236,http://tutor2u.net/business/strategy/ansoff_matrix.htm 4)Marketing in a nutshell, Mike Meldrum, Malcolm McDonald 5) Marketing, David Mercer Swot analysis: Use SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. You can then attempt to exploit your strengths, overcome your weaknesses, grasp your opportunities and defend yourself against threats. This is one of the most impor