Apple_iphone_analysis
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Table of Content
Introduction……………………………………………………………… 2
Apple SWOT analysis…………………………………………………… 7
Apple PESTEL Analysis ………………………………………............. 9
Porter's 5 Forces Analysis……………………………………………… 11
BCG matrix perspective………………………………………………… 12
Ansoff Matrix Perspective ……………………………………………… 15
Extended Marketing mix Analysis………………………………………
Conclusion………………………………………………………………... 17
Recommendation………………………………………………………… 18
Introduction
The phone starts ringing, we're going to pick it up and when we touch it, the ringer volume smartly goes down! Yes! Today a company like HTC could make this kind of cellphone.
Since the launch of the IBM Simon in 1993, smartphone technology has reached levels that until recent times had only been dreamed about. Features such as wireless sharing, HD video recording and mobile internet are now commonplace and today’s average smartphone has more processing power than computers used by NASA to land a man on the moon. All over the world, the smartphone experience is being shared by more and more people every day.
The convergence of mobile telephony, Internet services, and personal computing devices is resulting in the emergence of a “mobile Internet” (Ishii 2004; Funk 2001). The key devices for accessing the mobile Internet -currently dubbed “smartphones” - are powerful new computing devices offering traditional wireless voice service as well as native software applications and, perhaps most importantly, the ability to connect to and run a myriad of Internet-based services including email, geo-location, streaming video, and social networking, while providing a good user experience. The business opportunities presented by this new category have attracted many of the major global information and communications technology (ICT) firms, including firms from the mobile telephony, personal computer, Internet, and personal digital assistant (PDA) industries, into a complex new landscape of competition. For many of these firms, capturing a portion of the total value created by the smartphone industry is believed to be a key to future growth and profits.
The interest is understandable. Today more than 1.3 billion mobile phone handsets are being sold annually, and in 2010 smartphones made up almost 20% of that total (Gartner, 2010; Ahonen, 2010). Sales of smartphones are increasing almost 100% per year, and total global sales volume is expected to surpass that of PCs by 2012 (Gartner, 2010). By collapsing the boundaries between previously distinct devices, smartphones are subsuming sales of mobile phones entirely and, increasingly, netbook and notebook PCs. To complicate the landscape, the smartphone is not the only device at stake, tablets and ebook readers are emerging as key components of the mobile universe. Across all devices, total mobile revenues - including advertising, subscriptions, handsets, applications, and so on - are forecast to surpass $1 trillion by 2014 (Gartner, 2010). Given the rate at which smartphone are penetrating the market and component prices are declining by 2015 there will be, at least, 2 billion smart mobile devices in use globally.
According to the instructions we should make a report with a organizational business plan structure to depict current situations of Apple Inc./ iPhone division, and then analyze strength and weakness of the company. I will start with SWOT and PESTEL analysis. Then we review the most effective force on iPhone production with Porter's 5 forces. Then we will analyze Apple iPhone Growth and market share in depth with BCG matrix. I use mostly 2012 figures to draw an up to date image from Apple iPhone production and market situation. Ansoff matrix will be the next analysis which helps us understand iPhone market penetration and how it reached diversification.
Apple is a big company with several products and services that provide along with products. Each product has its own market. It is possible to use multiple factors and combine related statistics for analyzing a company with different product. But in this case we are required to analyze smartphone industry only. I use recent figures (2010 to 2013) for analyses. For brands comparisons I consider Apple, Samsung, HTC, ZTE, and RIM (BlackBerry).
For set goals and making the report’s objectives we should specify what we want. It is required to indicate strength and weaknesses of smartphone section. In my opinion weaknesses are more important. They could emerge in any areas such as production lines, technological aspects or selling process and cause big failures. Prominent strength and weaknesses will be identified and then will be matched with political, social, technological and environmental factors.
Industry intensity will be assessed using Porter’s 5 forces analysis. This analysis classifies strong and weak points within 5 forces: Threat of new entrants and substitute products, bargaining power of suppliers and customers, and segment rivalry. These forces analyze micro environment. For macro factors we could look into PESTEL analysis.
For market share and growth analysis Growth-share matrix (BCG matrix) will be used. This method indicates a product strength using its sales cash flows. iPhone position will be determined among 4 BCG matrix’s categories: Star, Cash cow, Dog and Question mark.
Apple iPhone as a new product in comparison with existing products within a new or existing market will be analyzed using Ansoff matrix. Result shows that iPhone as a new product in 2007 was magnificent. 270,000 units were sold at that time.
Expanding the concept of the marketing mix is important for companies that want to adapt to new markets. For example, just placing a product in stores is not enough. A manufacturer with retail outlets also needs to think about physical environment and layout. The store should convey the right look and feel, leading consumers to build up positive associations with the brand. Products inside the store should be displayed logically and consistently, in the locations customers would check first if they were looking for specific items. Because of all these factors a complete extended marketing mix (7Ps) will be presented.
Global Smartphone trend
The global smartphone market has been experiencing explosive growth for the last several years. Competition has remained fierce all throughout, but the numbers don't lie. Two technology titans dominate the market, taking a whopping 92% of market share for themselves. These two companies are Google and Apple. Data regarding smartphone sales during Q4 2012 has come out during the last several days, evidencing how much people all over the globe want to get their hands on a smartphone. After a quick look at the information, it becomes evident that the high-end phone market is a one of the most extreme oligopolies of the 21st century. With the release of Blackberry 10 just two days away, investors are starting to ask if there really is any room left for Research In Motion's latest offering.
Smartphones are flying off the shelves. According to Strategy Analytics, global smartphone shipments have increased from 490.5 million during 2011 to 700.1 million during 2012, which is roughly 30% growth year-over-year. If anything, there is room for disruption within the industry: people will keep buying more phones. As the market grows, however, so does Android's market share: Android went from having 48.7% of the market in 2011 to a whopping 70.1% in Q4 2012. Apple's iOS has also grown slightly, capturing 22% of the market share by the end of the same period. How much is there left for everyone else? As of Q4 2012, a meager 7.9%.
The success of the iPhone, Pre, and Blackberry shows the strength of consumer demand for an intelligent, multifunctional device. The appeal of the smartphone will create significant new revenue streams for carriers and developers, who should strive to create new service bundles that build off this mobile platform with converged video, voice, and data applications.
Future Smartphone sales forecast
Smartphone sales blew past the number of PCs sold last year, and they'll be nearly twice PC sales this year, analyst Alex Cocotas of BI Intelligence predicts.
More startling, smartphone sales will exceed 1.5 billion units per year by 2016. This compares to about 350 million PCs and 1.7 billion mobile handsets sold globally last year.
Smartphone sales will be driven by two main factors, BI Intelligence says:
Replacement of nearly 5 billion "dumbphones" with smartphones (smartphones currently make up only 10% of handsets worldwide)
Price declines. The average price of a smartphone will drop from about $315 last year to $200 over the next several years
This will obviously have a huge impact on the mobile Internet economy, which is already exploding from the growth of smartphone penetration in the past few years.
Some other highlights from the report:
Smartphone unit sales will grow at nearly a 30% compound annual growth rate over the next five years
Smartphones will represent about two-thirds of all mobile phone purchases by 2016,
Smartphones will be a $320 billion market by 2016.
These forecasts are much higher than those of other industry analysts, who generally expect smartphone unit sales to hit about 1 billion a year by 2015.
Apple Mission and Vision statement
Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.
Apple vision statement:
Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.
Apple Background
On December 2012 The Economist reported that “Apple became the most valuable company ever (in nominal terms), beating the record that Microsoft hit in December 1999. Apple’s share price peaked at $705 before entering bear territory and falling by 25%, to $510; at the start of 2012 it had been $410.”
Apple Incorporated is an American corporation that designs and manufactures computer hardware, software and other consumer electronics. The company is best known for their Macintosh personal computer line, Mac OS X, extremely loyal user-base, iTunes media application and the iPod personal music player. The company headquarters is in Cupertino, California, CEO and co-founder is Steve Jobs and the company boasts 284 retail locations spanning 10 different countries.
Apple Inc. was founded on April 1, 1976 in a garage by Steve Jobs and Steve Wozniak. The young entrepreneurs brought different strength to their fledgling company: Jobs had a flair for conceptualizing products, while Wozniak had the technical know-how to make them happen.
Apple I was the first product that Apple Inc. produced. It was a personal computer (PC) with a MOS 6502 cpu clocked at 1 MHz and 4Kb memory. In 1977, Apple introduced Apple II which became a very successful device. After that the company began to produce Apple II series. The Apple II was followed by Apple II plus, Apple IIe, Apple IIc, Apple IIGS, Apple IIc Plus and Apple IIe Card.
Apple introduced Macintosh in 1984 that became a very successful computer. It was a first computer featuring a graphical interface and a mouse for navigation. The new computer sold very well, pushing apple's fiscal 1984 sales to an unprecedented 1.5$ billion.
By 1985, however Jobs and Scully began to disagree over the direction they wanted the company to take. After Jobs' attempt to remove Scully failed, Jobs left Apple in May to start his own new business, NeXT Computers.
In December 1996, Apple acquired NeXT, with the plan of using its technology as the basis for a new operating system. After being gone for more than a decade, Jobs returned to the company he had originally cofounded with Wozniak..
In 1998 Apple introduced the new generation of PowerMacs, PowerBooks, and the highly anticipated iMac and iBook, which were less expensive computers aimed at the how-end computer market. After an entire year without showing a profit, the first quarter of 1998 began three years of profitable quarters for Apple.
Apple ventured into the market of legal downloads with the introduction of its iTunes Music Store in 2001. iTunes offers downloads at a specified price without requiring subscription or monthly fees. iTunes offers its users a selection of more than 6 million songs, with new songs continually added.
For music lovers, the iPod is the greatest invention since the Walkman. With up to 160 GB of storage, it allows users to carry up to 40,000 songs or 200 hours of video wherever they go. There are currently four different iPod styles: the iPod shuffle, iPod classic, iPod nano, and iPod touch. Apple earned 5,615 million just from iPod in 2012 .
Brief Chronology:
1976 With $1,300, Steve Jobs and Steve Wozniak found Apple Computer, Inc.
1980 Apple converts to public ownership.
1982 Apple becomes the first personal computer company to reach $1 billion in annual sales.
1985 John Scully assumes the helm after a management shakeup that causes the departure of Jobs and several other Apple executives.
1991 PowerBook line of notebook computers is released.
1994 Power Macintosh line is released.
1996 Acquisition of NeXT brings Steve Jobs back to Apple as a special advisor.
1997 Steve Jobs is named interim chief executive officer.
1998 The all-in-one iMac is released.
2000 Jobs, firmly in command as CEO, oversees a leaner, more tightly focused Apple.
2001 The iPod is released; Apple opens its first retail store in Virginia.
2003 Apple opens its first store in Japan.
2005 The release of a video iPod, the fifth generation of the device, pushes total iPod unit sales to 30 million.
In first-quarter 2007, Apple launched its "revolutionary" product, the iPhone. iPhone combines three concepts popular with customers: a mobile phone, a widescreen iPod, and a internet communication device. The iPhone brags "an entirely new user interface based on a large multi-touch display and pioneering software." which users can control with just their fingers. The iPhone default Internet browser will be Apple's own Safari **, but it is open to other software as well. The iPhone allows for 8 hours of talk time. Apple sold 1million iPhone less than three month after this product was available to customers. Apple expects this trend to continue during 2008 and to reach sales of 10 million iPhones, stealing 1 percent of the mobile phone market share. .
One year following the untimely death of Steve Jobs, the company he co-founded and led for most of his adult life appears to be thriving and lacking any serious obstacles to its break-neck growth in a rapidly changing technology market.
That said, Apple Inc. still has plenty of challenges ahead. Some of those stem simply from the nature of the fast-paced, hyper-competitive consumer technology business the company currently competes in — and largely dominates.
Other challenges may be more unique to Apple and its singular focus on a relatively narrow line of products. And long-term, the company may still feel the loss of a leader who possessed an uncanny ability to see around corners, and bend other strong personalities to his will.
“The guy who could literally pull rabbits out of his hat no longer exists,” said independent technology analyst Roger Kay.
Apple’s had a phenomenally strong year since Jobs’ death from cancer last October, which left the company permanently in the hands of the senior management team he spent years cultivating, led by CEO Tim Cook. It’s also had some stumbles along the way.
Some missteps with features such as Siri — the infamous personal digital assistant first embedded into last year’s iPhone 4S — and the Apple Maps tool in the latest iPhone 5 have caused some level of embarrassment. The company under Jobs’ direction was not free of slip-ups either, and some issues have spanned both periods, such as growing concerns about the treatment of workers in the massive Chinese factories that produce the company’s popular products.
But if proof is in the numbers, investors may find it hard to argue against the crew running Apple now. The company is conservatively projected to report a 44% revenue gain for its just-ended fiscal year — with earnings expected to post a gain of more than 60% from the previous year.
Apple’s stock is up more than 70% from the day Jobs passed away, despite the stated concerns at the time of many investors and analysts about how well the company could keep its pace of innovation without its chief visionary at the helm.
The key challenge for Apple’s management team will be in keeping the company’s strongest profit engines humming. And this will involve the right mix of technological innovation and deal making.
The iPhone is the most crucial element. First launched in 2007, the smartphone accounted for nearly 55% of Apple’s total revenue in the first nine months of the just-ended fiscal year. While the company does not disclosed profitability data on its product lines, analysts believe the iPhone is the major driver of operating profits, with a gross margin of well over 50% on the devices.
Apple can command those high subsidies because of the strong consumer demand for the iPhone. But competitors are pushing hard into the smartphone space. Samsung has already outpaced Apple in global shipments thanks to its use of Google’s Android operating system and its wide line of phones that appeal to a broader array of markets and consumers.
Apple’s old nemesis Microsoft is launching an updated Windows Phone platform this fall, with Nokia and Samsung building devices for the software.
Investors will continue to watch closely for signs that Apple’s current team can not only push forward its existing product line, but add to them with new categories and innovations. Though the iPhone 5 launched a year following his death, a report by Bloomberg BusinessWeek cited unnamed sources as saying that the device received “detailed input” from Jobs prior to his death.
Despite Apple’s strong run of success, it’s narrow product line and strong reliance on the iPhone makes it vulnerable to competitors who may come up with better ideas.
Apple’s future success will likely hinge on its ability to maintain that posture —no matter who’s in charge.
Apple SWOT Analysis:
SWOT is a great indicator of an agency's strategic ineptitude. This involves you creating a two-by-two grid and then populating it with a list of incredibly obvious client strengths and weaknesses, and another list of equally palpable opportunities and threats. Then you stand back and gaze at this list of incredibly humdrum words, such as 'competitors' and 'new product', and attempt to intuit a bold, new, innovative way of doing business.
The table below provides information about current situation of Apple’s smartphone market position, strength and weaknesses and also its possible future situations, threats and opportunities.
Table Apple Inc. Strengths and Weaknesses
Strengths
Weaknesses
Universally accredited and well-known brand which also began kind of revolution in smartphone industry
Apple is a Big name in the technology world. It brings so much responsibility and kind of obligation for company and its product. New iPhone map application problem and customer frustration would be a good example.
Brand loyalty is incredible. People will line up in the freezing cold overnight just to be one of the first to get their hands on the new iPhone!
From the anti-capitalism point of view devices like iPhone counts as luxuries. They think this kind of huge prices could be spend somewhere more vital.
Employ high technologies. This offers unique features for at least two purposes.
One, First degree price discrimination and two, luxury customer satisfactions
Utilize high technology along with high quality hardware component turn Apple iPhone into very costly merchandise. Probably many people cannot afford the price.
Ease of use. Apple utilizes user friendly design elements for both hardware and software parts of iPhone. 3.5 mm audio jack would be a good example! iPhone is equipped with own Apple closed operating system, iOS. And apps which work with iOS can only be downloaded from App Store. Other rivals like Android have more distribution channels.
Former CEO, Steve Jobs’ role in developing iPhone and leading Apple to the market incredibly.
Steve Jobs died on Oct 2011. We can still see his works and ideas in Apple iPhone. His lost can be an excessive damage to the company.
Having strategic agreements with well-known mobile carriers. like T-Mobile and AT&T
Apple summary of PESTEL Analysis
Political factors
The supply and manufacture of many critical components is performed by sole-sourced outsourcing partners in the U.S., Asia and Europe. Outsourcing partners in Asia perform final assembly of substantially all of the company’s hardware products. Manufacturing or logistics in these locations or transit to final destinations may be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, military actions or economic, business, labor, environmental, public health, or Political issues.
War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a material adverse effect on the Company, its suppliers, logistics providers, manufacturing vendors and customers, including channel partners. The Company’s business operations are subject to interruption by natural disasters, fire, power shortages, nuclear power plant accidents, terrorist attacks, and other hostile acts, labor disputes, public health issues, and other events beyond its control.
Economic factors
The global recession is having a serious impact on Apple's retail performance
The follow-on effects from global economic conditions on the Company’s suppliers could affect the Company’s ability to obtain components. Therefore, the Company remains subject to significant risks of supply shortages and price increases. The Company expects to experience decreases in its gross margin percentage in future periods, as compared to levels achieved during 2012, largely due to a higher mix of new and innovative products with flat or reduced pricing that have higher cost structures and deliver greater value to customers and anticipated component cost and other cost increases. Future strengthening of the U.S. dollar could also negatively impact gross margin.
Social factors
The Company’s business requires it to use and store customer, employee, and business partner personally identifiable information (“PII”). This may include names, addresses, phone numbers, email addresses, contact, preferences, tax identification numbers, and payment account information. Although malicious attacks to gain access to PII affect many companies across various industries, the Company may be at a relatively greater risk of being targeted because of its high profile and the amount of PII managed.
Technological factors
Apple R&D expense is increasing year by year. $1.8 billion for 2010, $2.4 billion, and $3.4 billion for 2012 which is a crucial manner in these days competition
Environmental factors
The Company also sells its hardware and software products to enterprise and government customers in each of its geographic segments. The Company’s products are deployed in these markets because of their performance, productivity, ease of use and seamless integration into information technology environments. The Company’s products are compatible with thousands of third-party business applications and services, and its tools enable the development and secure deployment of custom applications as well as remote device administration.
Legal Factors
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas. These U.S. and foreign laws and regulations affect the Company’s activities including, but not limited to, areas of labor, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectual property ownership and infringement, tax, import and export requirements, anti-corruption, foreign exchange controls and cash repatriation restrictions, data privacy requirements, anti-competition, environmental, health, and safety.
Porter’s 5 Forces Analysis
The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.
Six years to the month after Steve Jobs unveiled the first iPhone, the smartphone industry’s go-go years are officially over. Cautious comments from Samsung Electronics on Friday underlined the message conveyed by the latest quarterly results from Apple earlier in the week: even as it scales new heights, the smartphone market is entering a phase in which vaulting growth rates – and high profit margins – will be much harder to come by.
The developing world, is riding a wave of cut-price devices, many of them closer in nature to feature phones than the high-end smartphones that have put Apple and Samsung at the top.
Apple’s shares continued to slip following its announcement of weaker than expected iPhone sales in the final quarter of 2012, with Exxon taking its crown as the world’s most valuable company.
Despite selling 47.8m iPhones – 29 per cent more than in its previous record quarter a year before – Apple failed to live up to Wall Street’s high hopes, leading some analysts to predict the years of super-charged growth that began with the iPod were behind it.
*
BCG Matrix Perspective
The growth share matrix is a framework first developed by the Boston Consulting Group (BCG) in the 1960s to help companies think about the priority (and resources) that they should give to their different businesses. Also known as the Boston matrix, it puts each of a firm's businesses into one of four categories. The categories were all given memorable names—cash cow, star, dog and question mark—which helped to push them into the collective consciousness of managers all over the world.
For creating a Growth-Share we need two measures. One relative market share and two market growth. I used a chart which developed by IDC (International data Corporation) to gather market share informations about Apple iphone and its rivals.
Figure World Smartphone Market Share
According to this chart Apple iPhone share market is 15% of the overall market for 3rd quarter, 2012. And it takes second place after Samsung with 31.3% share market. Black Berry (Research in motion), ZTE, HTC are 4.3%, 4.2% and 4% respectively. For developing the BCG matrix we need relative market share. It means we should compute one brand's share to its largest competitor: (Wikipedia)
Brands
Samsung
Apple
RIM
ZTE
HTC
Market share
31.35%
15%
4.3%
4.2%
4%
Largest competitor
31.35%
31.35%
31.35%
31.35%
31.35%
Relative market share( approximately)
1:1
1:2
1:8
1:8
1:9
For market growth rate current sales figures are used in comparison the same last year.
Figure Smartphone unist sales estimates by OEM (in millions)
For Market growth rate I used the table above and derive the table below:
Smartphone brands
2012 sales*
2011sales
Market growth rate
Apple
148.4
93.1
%59
Samsung
177.4
95.2
%86
Research in motion (Blackberry)
41.4
52.8
-%21.5
HTC
39.2
44.6
-%12.1
ZTE
26.7
14.9
%79.19
* In millions
Figure : BCG Matrix for iPhone and its Competitors
15 % market share in 2012 is a fair figure for Apple iPhone. However Samsung is dominating the market by share of 30% as a result of perseverance in combination with Google’s Android during recent years. According to data and calculation iPhone is categorized in stars segment. It means high market share within a fast-growing industry.
Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead.
Ansoff matrix perspective
In 1957, Igor Ansoff published the Ansoff Matrix in the Harvard Business Review. It was such an excellent illustration of innovation that many entrepreneurs still use it today. The Ansoff Matrix shows four different growth strategies that result by combining existing or new products with existing or new markets: market penetration, market development, product development, and diversification. For existing markets and existing products, you'll want to work on market penetration. How can you do incremental innovation? How about product-line extension? That would work.
Table : Ansoff Matrix
Apple launched iPhone in 2007. People faced a well-built cellphone that had only one button in front of. And equipped with Wi-Fi, GPS and a multiple touchscreen. iPhone market started growing so fast. iPhone were sold 270,000 units at the very beginning of its release. In 2010, apple earned 25.179 million dollars just from selling iPhone and its related product and services. I derive this two very useful and comparative tables from Apple Inc. Form 10-K which helps us to understand iPhone's furious growth over 5 years and its revenue making role.
2012 change 2011 change 2010 iPhone and related product and services
$80,477
71%
$47,057
87%
$25,179
Apple total net sales
$156,508
45%
$108,249
66%
$65,225
iPhone sales out of proportion to Apple total net sales
51.4%
43.47%
38.6%
Table : iPhone net sales for 2010, 2011 and 2012
Table : iPhone net sales by operating segment
Net sales by operating segment
2012
change
2011
change
2010
Americas net sales
$ 57,512
50%
$ 38,315
56%
$ 24,498
Europe net sales
36,323
31%
27,778
49%
18,692
Japan net sales
10,571
94%
5,437
37%
3,981
Asia-Pacific net sales
33,274
47%
22,592
174%
8,256
Retail net sales
18,828
33%
14,127
44%
9,798
table 3 shows iPhone "product development". We can see iPhone sales figure and its changes year by year. This kind of growth is terrific for a new product with no past market experience. As I mentioned earlier Apple sold 1 million iPhones less than three month after its release in 2007.
For market penetration I can refer to table 4 figures. iPhone had some decline between 2011 and 2012. Maybe it was because of Samsung and unexpected success. However, still it is a furious growth for apple in all over the world.
Extended marketing Mix (7Ps)
The extended marketing mix is a combination of elements that make up a campaign to sell a product. It is an expansion on the original marketing mix of product, placement, price, and promotion, adding additional factors that can influence the success of a campaign. Companies preparing to launch new campaigns need to think about how to organize them, given the product, the company’s reputation, and the market. Failing to assemble the right marketing mix can result in a catastrophic introduction to the market.
Product iPhone combines a mobile phone, an iPod, and an Internet communications device in a single handheld product. Based on the Company’s Multi-Touch™ user interface, iPhone features desktop-class email, web browsing, searching, and maps and is compatible with both Mac and Windows-based computers. iPhone automatically syncs content from users’ iTunes libraries, as well as contacts, bookmarks, and email accounts. iPhone allows customers to access the iTunes Store to download audio and video files, as well as a variety of other digital content and applications. In September 2012, the Company launched iPhone 5, its latest version of iPhone. In addition to the Company’s own iPhone accessories, third-party iPhone compatible accessories are available through the Company’s online and retail stores and from third parties.
Unlike other brands, iPhone was not released in many versions. During 6 six years it just has 3G, 3GS, 4, 4s and now iPhone 5. It is a clever strategy somehow. Building few phones with splendid features, instead focusing on quality and fundamental parts. In my opinion Apple should continue this strategy.
Apple provides its own operating system software and applications. I OS is the Apple mobile operating system. The company released the latest version, I OS 6 in September 2010. And Apple App Store which is currently has 400 million accounts with registered credit cards provides more than 650,000 software applications for customers.
Price
Apple produced few versions, as I said above. And iphone is pricey. It was heard that apple intended to release mini iPhone but it did not happen. I think it would be a clever strategy to attract customers who do not want spend that much for their smartphone and also want to experience Apple world. Mini iPhone could be a moderate price phone with apple magic features!
In an industry of low profit margins and cost cutting, Apple takes a different approach to the design of its products. While competitors are doing everything they can to keep costs down, Apple does what it can to make its product different.
Promotion
Smart Advertising, user's training and customer's instructions are apple tools for promoting its iPhone more and more. Apple do regards relationship with its customer. However, it might be effective to offer more discounts and other options like free shipping, accessories gift and so on. It will definitely keep current customers close and attracts more.
Apple heavily promoted the iPhone when it was introduced in July 2007. Customer and investor expectations, due to Apple’s reputation, boosted the stock price. But when customers do not believe that the marketing promises have been delivered, stock price, brand equity, and investor lies in a carefully thought-out plan.
Place
Marketers develop distribution strategies to ensure that their products are available in the proper quantities at the right time and place. I think Apple do this very well. But in some third-world countries Apple does not service like us and Europe. Maybe it is because of low demand but markets are growing so fast and Apple have to concentrate on those place that even has low demand currently.
Apple has revealed “For consumers, who are covered by consumer protection laws or regulations in their country of purchase or, if different, their country of residence, the benefits conferred by Apple's One Year Limited Warranty are in addition to all rights and remedies conveyed by such consumer protection laws and regulations, including but not limited to these additional right” and the country list is very limited. According to consumer laws In Asia pacific only Australia and New Zealand could cover consumer needs
Physical layout in the days when manufacturing dominated the economy, the physical layout of production units such as factories was not very important to the end consumer because they never went inside the factory. However, today consumers typically come into contact with products in retail units - and they expect a high level of presentation in modern shops - e.g. record stores, clothes shops etc. in my opinion Apple doing great in this section. Apple stores in all over the world provide good deal of sales and services to customers. However in some location these retail store does not provide the complete service that a store in us could.
Provision of customer service
Customer service lies at the heart of modern service industries. Customers are likely to be loyal to organizations that serve them well - from the way in which a telephone query is handled, to direct face-to-face interactions. Although the 'have a nice day' approach is a bit corny, it is certainly better than a couldn't care less approach to customer relations. Call center staff and customer interfacing personnel are the front line troops of any organization and therefore need to be thoroughly familiar with good customer relation's practice. .Steve jobs offer 100$ credit for itunes to customers who already purchased iPhone at higher price and they were upset about iPhone price cutting. Which company do this to its customers?!
Processes
associated with customer service are a number of processes involved in making marketing effective in an organization e.g. processes for handling customer complaints, processes for identifying customer needs and requirements, processes for handling order etc. .
Apple 1 year limited warranty and AppleCare Protection Plan benefits are in addition to rights provided by consumer law
Conclusion
In this report, I used marketing tools for analyzing Apple iPhone's market position and growth situation. We all know Apple is a big company with worldwide reputation. People willing to line up for new products and mostly they are satisfied with results. Nevertheless Apple has problems too. Technology is a very competitive market. And day by day companies do more R&D to make products better than others.
We reviewed Apple strength and weaknesses, all the good things like brand loyalty, unique technology especially in iPhone, matchless interface and applications, strategic agreements with big companies like AT&T and Weaknesses like expensiveness, retailers controlling problems, vigorous competitor like Samsung and RIM. Apple is on top from so many points now, no doubt. But with PESTEL summary that I discussed earlier we know there is no certainty in these days market. Brands devour fame and income and willing to do their best.
I reviewed Apple form 10-K deeply. Apple financial statements say everything is ok and growth is more than satisfactory. But in risks section many items were mentioned to remind investor it is a very hard business.
Both Ansoff and BCG matrix are fine for iPhone, Samsung running so fast but Apple still dominates US and aside recession points, figures show Apple knows the business.
Recommendations
Regarding all the analysis is made; there are some suggestions and strategies for Apple which can be useful in educationally scale. iPhone Operating System It is a privilege that apple has its own operating system for iPhone, but regarding open source operating systems like Android, there could be a slip for Apple in these days. iOS has a lot of unique features that distinguish it from other OS’s. Sometimes iPhone users say they can not switch to any other operating system and they love Apple and its iOS. But open source OS are growing so fast. Android is capturing market and sure we should expect others that maybe come tomorrow or a bit later. None-free applications are often pricey in App Store. Even some essential software for backing up and data storing has a price in iOS. Apple should break or eliminate some of these and let the customers enjoy from free or low-price stuff more.
Mini iPhone and China Market An iPhone Mini priced at $330 in China would provide a healthy shot in the arm to Apple's Chinese smartphone sales, according to Morgan Stanley analyst Katy Huberty. A low-priced iPhone would add another 20 percent to the 10 percent Chinese market share currently addressed by the iPhone 5, the analyst said today. Smartphone prices are starting to stabilize in China, which will open up the market for such a phone. But a deal with China Mobile is also key.
Industry Smartphone industry is a highly attractive industry. As it is mentioned before, other company is growing furiously. According to Ansoff matrix we are to face both existing markets and new markets. Non-stop technology cause new demands and new markets, the more technology growth, more demand and bigger markets will rise. Apple should play with prices cautiously with continuing premium price strategy. Technologically Apple is on Top but R&D should rise due to competition.
R&D expense increased $952 million or 39% in 2012 compared to 2011 and $647 million or 36% in 2011 compared to 2010. The growth in R&D expense was driven by an increase in headcount and related expenses to support expanded R&D activities. Although total R&D expense increased 39% and 36% in 2012 and 2011, respectively, it remained fairly consistent as a percentage of net sales.
Statistics shows Apple doing this strategy very well.
The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company’s core business strategy. As such, the Company expects to make further investments in R&D to remain competitive.
Stock markets Both technical analysis and fundamental analysis support a potential target of $340 for Apple stock. A less discussed but more important problem for Apple is its heavy dependence on subsidies from phone carriers. When a consumer buys an iPhone 5 from a carrier for $199 the carrier may be paying Apple over $600 and subsidizing the consumer. Recently there have been negative musings both from AT&T and Verizon about the high level of subsidies for iPhones. The subsidies on Google Android based phones and Microsoft Windows phones are lower.
The foregoing is a negative long-term outcome. For the time being according to our proprietary sentiment indicator, sentiment on Apple has reached the level of negativity that is interpreted as bullish.
We recommended Apple long at $131 and have now taken profits on 90% of the position. The plan is to hold on to the remaining 10% as a long-term core position in the portfolio and trade around it with short-term trades. On Friday, the stock dipped below the upper band of our buy zone for a short-term trade.
Bibliogaphy
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Table of Content
Introduction……………………………………………………………… 2
Apple SWOT analysis…………………………………………………… 7
Apple PESTEL Analysis ………………………………………............. 9
Porter's 5 Forces Analysis……………………………………………… 11
BCG matrix perspective………………………………………………… 12
Ansoff Matrix Perspective ……………………………………………… 15
Extended Marketing mix Analysis………………………………………
Conclusion………………………………………………………………... 17
Recommendation………………………………………………………… 18
Introduction
The phone starts ringing, we're going to pick it up and when we touch it, the ringer volume smartly goes down! Yes! Today a company like HTC could make this kind of cellphone.
Since the launch of the IBM Simon in 1993, smartphone technology has reached levels that until recent times had only been dreamed about. Features such as wireless sharing, HD video recording and mobile internet are now commonplace and today’s average smartphone has more processing power than computers used by NASA to land a man on the moon. All over the world, the smartphone experience is being shared by more and more people every day.
The convergence of mobile telephony, Internet services, and personal computing devices is resulting in the emergence of a “mobile Internet” (Ishii 2004; Funk 2001). The key devices for accessing the mobile Internet -currently dubbed “smartphones” - are powerful new computing devices offering traditional wireless voice service as well as native software applications and, perhaps most importantly, the ability to connect to and run a myriad of Internet-based services including email, geo-location, streaming video, and social networking, while providing a good user experience. The business opportunities presented by this new category have attracted many of the major global information and communications technology (ICT) firms, including firms from the mobile telephony, personal computer, Internet, and personal digital assistant (PDA) industries, into a complex new landscape of competition. For many of these firms, capturing a portion of the total value created by the smartphone industry is believed to be a key to future growth and profits.
The interest is understandable. Today more than 1.3 billion mobile phone handsets are being sold annually, and in 2010 smartphones made up almost 20% of that total (Gartner, 2010; Ahonen, 2010). Sales of smartphones are increasing almost 100% per year, and total global sales volume is expected to surpass that of PCs by 2012 (Gartner, 2010). By collapsing the boundaries between previously distinct devices, smartphones are subsuming sales of mobile phones entirely and, increasingly, netbook and notebook PCs. To complicate the landscape, the smartphone is not the only device at stake, tablets and ebook readers are emerging as key components of the mobile universe. Across all devices, total mobile revenues - including advertising, subscriptions, handsets, applications, and so on - are forecast to surpass $1 trillion by 2014 (Gartner, 2010). Given the rate at which smartphone are penetrating the market and component prices are declining by 2015 there will be, at least, 2 billion smart mobile devices in use globally.
According to the instructions we should make a report with a organizational business plan structure to depict current situations of Apple Inc./ iPhone division, and then analyze strength and weakness of the company. I will start with SWOT and PESTEL analysis. Then we review the most effective force on iPhone production with Porter's 5 forces. Then we will analyze Apple iPhone Growth and market share in depth with BCG matrix. I use mostly 2012 figures to draw an up to date image from Apple iPhone production and market situation. Ansoff matrix will be the next analysis which helps us understand iPhone market penetration and how it reached diversification.
Apple is a big company with several products and services that provide along with products. Each product has its own market. It is possible to use multiple factors and combine related statistics for analyzing a company with different product. But in this case we are required to analyze smartphone industry only. I use recent figures (2010 to 2013) for analyses. For brands comparisons I consider Apple, Samsung, HTC, ZTE, and RIM (BlackBerry).
For set goals and making the report’s objectives we should specify what we want. It is required to indicate strength and weaknesses of smartphone section. In my opinion weaknesses are more important. They could emerge in any areas such as production lines, technological aspects or selling process and cause big failures. Prominent strength and weaknesses will be identified and then will be matched with political, social, technological and environmental factors.
Industry intensity will be assessed using Porter’s 5 forces analysis. This analysis classifies strong and weak points within 5 forces: Threat of new entrants and substitute products, bargaining power of suppliers and customers, and segment rivalry. These forces analyze micro environment. For macro factors we could look into PESTEL analysis.
For market share and growth analysis Growth-share matrix (BCG matrix) will be used. This method indicates a product strength using its sales cash flows. iPhone position will be determined among 4 BCG matrix’s categories: Star, Cash cow, Dog and Question mark.
Apple iPhone as a new product in comparison with existing products within a new or existing market will be analyzed using Ansoff matrix. Result shows that iPhone as a new product in 2007 was magnificent. 270,000 units were sold at that time.
Expanding the concept of the marketing mix is important for companies that want to adapt to new markets. For example, just placing a product in stores is not enough. A manufacturer with retail outlets also needs to think about physical environment and layout. The store should convey the right look and feel, leading consumers to build up positive associations with the brand. Products inside the store should be displayed logically and consistently, in the locations customers would check first if they were looking for specific items. Because of all these factors a complete extended marketing mix (7Ps) will be presented.
Global Smartphone trend
The global smartphone market has been experiencing explosive growth for the last several years. Competition has remained fierce all throughout, but the numbers don't lie. Two technology titans dominate the market, taking a whopping 92% of market share for themselves. These two companies are Google and Apple. Data regarding smartphone sales during Q4 2012 has come out during the last several days, evidencing how much people all over the globe want to get their hands on a smartphone. After a quick look at the information, it becomes evident that the high-end phone market is a one of the most extreme oligopolies of the 21st century. With the release of Blackberry 10 just two days away, investors are starting to ask if there really is any room left for Research In Motion's latest offering.
Smartphones are flying off the shelves. According to Strategy Analytics, global smartphone shipments have increased from 490.5 million during 2011 to 700.1 million during 2012, which is roughly 30% growth year-over-year. If anything, there is room for disruption within the industry: people will keep buying more phones. As the market grows, however, so does Android's market share: Android went from having 48.7% of the market in 2011 to a whopping 70.1% in Q4 2012. Apple's iOS has also grown slightly, capturing 22% of the market share by the end of the same period. How much is there left for everyone else? As of Q4 2012, a meager 7.9%.
The success of the iPhone, Pre, and Blackberry shows the strength of consumer demand for an intelligent, multifunctional device. The appeal of the smartphone will create significant new revenue streams for carriers and developers, who should strive to create new service bundles that build off this mobile platform with converged video, voice, and data applications.
Future Smartphone sales forecast
Smartphone sales blew past the number of PCs sold last year, and they'll be nearly twice PC sales this year, analyst Alex Cocotas of BI Intelligence predicts.
More startling, smartphone sales will exceed 1.5 billion units per year by 2016. This compares to about 350 million PCs and 1.7 billion mobile handsets sold globally last year.
Smartphone sales will be driven by two main factors, BI Intelligence says:
Replacement of nearly 5 billion "dumbphones" with smartphones (smartphones currently make up only 10% of handsets worldwide)
Price declines. The average price of a smartphone will drop from about $315 last year to $200 over the next several years
This will obviously have a huge impact on the mobile Internet economy, which is already exploding from the growth of smartphone penetration in the past few years.
Some other highlights from the report:
Smartphone unit sales will grow at nearly a 30% compound annual growth rate over the next five years
Smartphones will represent about two-thirds of all mobile phone purchases by 2016,
Smartphones will be a $320 billion market by 2016.
These forecasts are much higher than those of other industry analysts, who generally expect smartphone unit sales to hit about 1 billion a year by 2015.
Apple Mission and Vision statement
Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.
Apple vision statement:
Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.
Apple Background
On December 2012 The Economist reported that “Apple became the most valuable company ever (in nominal terms), beating the record that Microsoft hit in December 1999. Apple’s share price peaked at $705 before entering bear territory and falling by 25%, to $510; at the start of 2012 it had been $410.”
Apple Incorporated is an American corporation that designs and manufactures computer hardware, software and other consumer electronics. The company is best known for their Macintosh personal computer line, Mac OS X, extremely loyal user-base, iTunes media application and the iPod personal music player. The company headquarters is in Cupertino, California, CEO and co-founder is Steve Jobs and the company boasts 284 retail locations spanning 10 different countries.
Apple Inc. was founded on April 1, 1976 in a garage by Steve Jobs and Steve Wozniak. The young entrepreneurs brought different strength to their fledgling company: Jobs had a flair for conceptualizing products, while Wozniak had the technical know-how to make them happen.
Apple I was the first product that Apple Inc. produced. It was a personal computer (PC) with a MOS 6502 cpu clocked at 1 MHz and 4Kb memory. In 1977, Apple introduced Apple II which became a very successful device. After that the company began to produce Apple II series. The Apple II was followed by Apple II plus, Apple IIe, Apple IIc, Apple IIGS, Apple IIc Plus and Apple IIe Card.
Apple introduced Macintosh in 1984 that became a very successful computer. It was a first computer featuring a graphical interface and a mouse for navigation. The new computer sold very well, pushing apple's fiscal 1984 sales to an unprecedented 1.5$ billion.
By 1985, however Jobs and Scully began to disagree over the direction they wanted the company to take. After Jobs' attempt to remove Scully failed, Jobs left Apple in May to start his own new business, NeXT Computers.
In December 1996, Apple acquired NeXT, with the plan of using its technology as the basis for a new operating system. After being gone for more than a decade, Jobs returned to the company he had originally cofounded with Wozniak..
In 1998 Apple introduced the new generation of PowerMacs, PowerBooks, and the highly anticipated iMac and iBook, which were less expensive computers aimed at the how-end computer market. After an entire year without showing a profit, the first quarter of 1998 began three years of profitable quarters for Apple.
Apple ventured into the market of legal downloads with the introduction of its iTunes Music Store in 2001. iTunes offers downloads at a specified price without requiring subscription or monthly fees. iTunes offers its users a selection of more than 6 million songs, with new songs continually added.
For music lovers, the iPod is the greatest invention since the Walkman. With up to 160 GB of storage, it allows users to carry up to 40,000 songs or 200 hours of video wherever they go. There are currently four different iPod styles: the iPod shuffle, iPod classic, iPod nano, and iPod touch. Apple earned 5,615 million just from iPod in 2012 .
Brief Chronology:
1976 With $1,300, Steve Jobs and Steve Wozniak found Apple Computer, Inc.
1980 Apple converts to public ownership.
1982 Apple becomes the first personal computer company to reach $1 billion in annual sales.
1985 John Scully assumes the helm after a management shakeup that causes the departure of Jobs and several other Apple executives.
1991 PowerBook line of notebook computers is released.
1994 Power Macintosh line is released.
1996 Acquisition of NeXT brings Steve Jobs back to Apple as a special advisor.
1997 Steve Jobs is named interim chief executive officer.
1998 The all-in-one iMac is released.
2000 Jobs, firmly in command as CEO, oversees a leaner, more tightly focused Apple.
2001 The iPod is released; Apple opens its first retail store in Virginia.
2003 Apple opens its first store in Japan.
2005 The release of a video iPod, the fifth generation of the device, pushes total iPod unit sales to 30 million.
In first-quarter 2007, Apple launched its "revolutionary" product, the iPhone. iPhone combines three concepts popular with customers: a mobile phone, a widescreen iPod, and a internet communication device. The iPhone brags "an entirely new user interface based on a large multi-touch display and pioneering software." which users can control with just their fingers. The iPhone default Internet browser will be Apple's own Safari **, but it is open to other software as well. The iPhone allows for 8 hours of talk time. Apple sold 1million iPhone less than three month after this product was available to customers. Apple expects this trend to continue during 2008 and to reach sales of 10 million iPhones, stealing 1 percent of the mobile phone market share. .
One year following the untimely death of Steve Jobs, the company he co-founded and led for most of his adult life appears to be thriving and lacking any serious obstacles to its break-neck growth in a rapidly changing technology market.
That said, Apple Inc. still has plenty of challenges ahead. Some of those stem simply from the nature of the fast-paced, hyper-competitive consumer technology business the company currently competes in — and largely dominates.
Other challenges may be more unique to Apple and its singular focus on a relatively narrow line of products. And long-term, the company may still feel the loss of a leader who possessed an uncanny ability to see around corners, and bend other strong personalities to his will.
“The guy who could literally pull rabbits out of his hat no longer exists,” said independent technology analyst Roger Kay.
Apple’s had a phenomenally strong year since Jobs’ death from cancer last October, which left the company permanently in the hands of the senior management team he spent years cultivating, led by CEO Tim Cook. It’s also had some stumbles along the way.
Some missteps with features such as Siri — the infamous personal digital assistant first embedded into last year’s iPhone 4S — and the Apple Maps tool in the latest iPhone 5 have caused some level of embarrassment. The company under Jobs’ direction was not free of slip-ups either, and some issues have spanned both periods, such as growing concerns about the treatment of workers in the massive Chinese factories that produce the company’s popular products.
But if proof is in the numbers, investors may find it hard to argue against the crew running Apple now. The company is conservatively projected to report a 44% revenue gain for its just-ended fiscal year — with earnings expected to post a gain of more than 60% from the previous year.
Apple’s stock is up more than 70% from the day Jobs passed away, despite the stated concerns at the time of many investors and analysts about how well the company could keep its pace of innovation without its chief visionary at the helm.
The key challenge for Apple’s management team will be in keeping the company’s strongest profit engines humming. And this will involve the right mix of technological innovation and deal making.
The iPhone is the most crucial element. First launched in 2007, the smartphone accounted for nearly 55% of Apple’s total revenue in the first nine months of the just-ended fiscal year. While the company does not disclosed profitability data on its product lines, analysts believe the iPhone is the major driver of operating profits, with a gross margin of well over 50% on the devices.
Apple can command those high subsidies because of the strong consumer demand for the iPhone. But competitors are pushing hard into the smartphone space. Samsung has already outpaced Apple in global shipments thanks to its use of Google’s Android operating system and its wide line of phones that appeal to a broader array of markets and consumers.
Apple’s old nemesis Microsoft is launching an updated Windows Phone platform this fall, with Nokia and Samsung building devices for the software.
Investors will continue to watch closely for signs that Apple’s current team can not only push forward its existing product line, but add to them with new categories and innovations. Though the iPhone 5 launched a year following his death, a report by Bloomberg BusinessWeek cited unnamed sources as saying that the device received “detailed input” from Jobs prior to his death.
Despite Apple’s strong run of success, it’s narrow product line and strong reliance on the iPhone makes it vulnerable to competitors who may come up with better ideas.
Apple’s future success will likely hinge on its ability to maintain that posture —no matter who’s in charge.
Apple SWOT Analysis:
SWOT is a great indicator of an agency's strategic ineptitude. This involves you creating a two-by-two grid and then populating it with a list of incredibly obvious client strengths and weaknesses, and another list of equally palpable opportunities and threats. Then you stand back and gaze at this list of incredibly humdrum words, such as 'competitors' and 'new product', and attempt to intuit a bold, new, innovative way of doing business.
The table below provides information about current situation of Apple’s smartphone market position, strength and weaknesses and also its possible future situations, threats and opportunities.
Table Apple Inc. Strengths and Weaknesses
Strengths
Weaknesses
Universally accredited and well-known brand which also began kind of revolution in smartphone industry
Apple is a Big name in the technology world. It brings so much responsibility and kind of obligation for company and its product. New iPhone map application problem and customer frustration would be a good example.
Brand loyalty is incredible. People will line up in the freezing cold overnight just to be one of the first to get their hands on the new iPhone!
From the anti-capitalism point of view devices like iPhone counts as luxuries. They think this kind of huge prices could be spend somewhere more vital.
Employ high technologies. This offers unique features for at least two purposes.
One, First degree price discrimination and two, luxury customer satisfactions
Utilize high technology along with high quality hardware component turn Apple iPhone into very costly merchandise. Probably many people cannot afford the price.
Ease of use. Apple utilizes user friendly design elements for both hardware and software parts of iPhone. 3.5 mm audio jack would be a good example! iPhone is equipped with own Apple closed operating system, iOS. And apps which work with iOS can only be downloaded from App Store. Other rivals like Android have more distribution channels.
Former CEO, Steve Jobs’ role in developing iPhone and leading Apple to the market incredibly.
Steve Jobs died on Oct 2011. We can still see his works and ideas in Apple iPhone. His lost can be an excessive damage to the company.
Having strategic agreements with well-known mobile carriers. like T-Mobile and AT&T
Apple summary of PESTEL Analysis
Political factors
The supply and manufacture of many critical components is performed by sole-sourced outsourcing partners in the U.S., Asia and Europe. Outsourcing partners in Asia perform final assembly of substantially all of the company’s hardware products. Manufacturing or logistics in these locations or transit to final destinations may be disrupted for a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, military actions or economic, business, labor, environmental, public health, or Political issues.
War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a material adverse effect on the Company, its suppliers, logistics providers, manufacturing vendors and customers, including channel partners. The Company’s business operations are subject to interruption by natural disasters, fire, power shortages, nuclear power plant accidents, terrorist attacks, and other hostile acts, labor disputes, public health issues, and other events beyond its control.
Economic factors
The global recession is having a serious impact on Apple's retail performance
The follow-on effects from global economic conditions on the Company’s suppliers could affect the Company’s ability to obtain components. Therefore, the Company remains subject to significant risks of supply shortages and price increases. The Company expects to experience decreases in its gross margin percentage in future periods, as compared to levels achieved during 2012, largely due to a higher mix of new and innovative products with flat or reduced pricing that have higher cost structures and deliver greater value to customers and anticipated component cost and other cost increases. Future strengthening of the U.S. dollar could also negatively impact gross margin.
Social factors
The Company’s business requires it to use and store customer, employee, and business partner personally identifiable information (“PII”). This may include names, addresses, phone numbers, email addresses, contact, preferences, tax identification numbers, and payment account information. Although malicious attacks to gain access to PII affect many companies across various industries, the Company may be at a relatively greater risk of being targeted because of its high profile and the amount of PII managed.
Technological factors
Apple R&D expense is increasing year by year. $1.8 billion for 2010, $2.4 billion, and $3.4 billion for 2012 which is a crucial manner in these days competition
Environmental factors
The Company also sells its hardware and software products to enterprise and government customers in each of its geographic segments. The Company’s products are deployed in these markets because of their performance, productivity, ease of use and seamless integration into information technology environments. The Company’s products are compatible with thousands of third-party business applications and services, and its tools enable the development and secure deployment of custom applications as well as remote device administration.
Legal Factors
The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas. These U.S. and foreign laws and regulations affect the Company’s activities including, but not limited to, areas of labor, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectual property ownership and infringement, tax, import and export requirements, anti-corruption, foreign exchange controls and cash repatriation restrictions, data privacy requirements, anti-competition, environmental, health, and safety.
Porter’s 5 Forces Analysis
The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.
Six years to the month after Steve Jobs unveiled the first iPhone, the smartphone industry’s go-go years are officially over. Cautious comments from Samsung Electronics on Friday underlined the message conveyed by the latest quarterly results from Apple earlier in the week: even as it scales new heights, the smartphone market is entering a phase in which vaulting growth rates – and high profit margins – will be much harder to come by.
The developing world, is riding a wave of cut-price devices, many of them closer in nature to feature phones than the high-end smartphones that have put Apple and Samsung at the top.
Apple’s shares continued to slip following its announcement of weaker than expected iPhone sales in the final quarter of 2012, with Exxon taking its crown as the world’s most valuable company.
Despite selling 47.8m iPhones – 29 per cent more than in its previous record quarter a year before – Apple failed to live up to Wall Street’s high hopes, leading some analysts to predict the years of super-charged growth that began with the iPod were behind it.
*
BCG Matrix Perspective
The growth share matrix is a framework first developed by the Boston Consulting Group (BCG) in the 1960s to help companies think about the priority (and resources) that they should give to their different businesses. Also known as the Boston matrix, it puts each of a firm's businesses into one of four categories. The categories were all given memorable names—cash cow, star, dog and question mark—which helped to push them into the collective consciousness of managers all over the world.
For creating a Growth-Share we need two measures. One relative market share and two market growth. I used a chart which developed by IDC (International data Corporation) to gather market share informations about Apple iphone and its rivals.
Figure World Smartphone Market Share
According to this chart Apple iPhone share market is 15% of the overall market for 3rd quarter, 2012. And it takes second place after Samsung with 31.3% share market. Black Berry (Research in motion), ZTE, HTC are 4.3%, 4.2% and 4% respectively. For developing the BCG matrix we need relative market share. It means we should compute one brand's share to its largest competitor: (Wikipedia)
Brands
Samsung
Apple
RIM
ZTE
HTC
Market share
31.35%
15%
4.3%
4.2%
4%
Largest competitor
31.35%
31.35%
31.35%
31.35%
31.35%
Relative market share( approximately)
1:1
1:2
1:8
1:8
1:9
For market growth rate current sales figures are used in comparison the same last year.
Figure Smartphone unist sales estimates by OEM (in millions)
For Market growth rate I used the table above and derive the table below:
Smartphone brands
2012 sales*
2011sales
Market growth rate
Apple
148.4
93.1
%59
Samsung
177.4
95.2
%86
Research in motion (Blackberry)
41.4
52.8
-%21.5
HTC
39.2
44.6
-%12.1
ZTE
26.7
14.9
%79.19
* In millions
Figure : BCG Matrix for iPhone and its Competitors
15 % market share in 2012 is a fair figure for Apple iPhone. However Samsung is dominating the market by share of 30% as a result of perseverance in combination with Google’s Android during recent years. According to data and calculation iPhone is categorized in stars segment. It means high market share within a fast-growing industry.
Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead.
Ansoff matrix perspective
In 1957, Igor Ansoff published the Ansoff Matrix in the Harvard Business Review. It was such an excellent illustration of innovation that many entrepreneurs still use it today. The Ansoff Matrix shows four different growth strategies that result by combining existing or new products with existing or new markets: market penetration, market development, product development, and diversification. For existing markets and existing products, you'll want to work on market penetration. How can you do incremental innovation? How about product-line extension? That would work.
Table : Ansoff Matrix
Apple launched iPhone in 2007. People faced a well-built cellphone that had only one button in front of. And equipped with Wi-Fi, GPS and a multiple touchscreen. iPhone market started growing so fast. iPhone were sold 270,000 units at the very beginning of its release. In 2010, apple earned 25.179 million dollars just from selling iPhone and its related product and services. I derive this two very useful and comparative tables from Apple Inc. Form 10-K which helps us to understand iPhone's furious growth over 5 years and its revenue making role.
2012 change 2011 change 2010 iPhone and related product and services
$80,477
71%
$47,057
87%
$25,179
Apple total net sales
$156,508
45%
$108,249
66%
$65,225
iPhone sales out of proportion to Apple total net sales
51.4%
43.47%
38.6%
Table : iPhone net sales for 2010, 2011 and 2012
Table : iPhone net sales by operating segment
Net sales by operating segment
2012
change
2011
change
2010
Americas net sales
$ 57,512
50%
$ 38,315
56%
$ 24,498
Europe net sales
36,323
31%
27,778
49%
18,692
Japan net sales
10,571
94%
5,437
37%
3,981
Asia-Pacific net sales
33,274
47%
22,592
174%
8,256
Retail net sales
18,828
33%
14,127
44%
9,798
table 3 shows iPhone "product development". We can see iPhone sales figure and its changes year by year. This kind of growth is terrific for a new product with no past market experience. As I mentioned earlier Apple sold 1 million iPhones less than three month after its release in 2007.
For market penetration I can refer to table 4 figures. iPhone had some decline between 2011 and 2012. Maybe it was because of Samsung and unexpected success. However, still it is a furious growth for apple in all over the world.
Extended marketing Mix (7Ps)
The extended marketing mix is a combination of elements that make up a campaign to sell a product. It is an expansion on the original marketing mix of product, placement, price, and promotion, adding additional factors that can influence the success of a campaign. Companies preparing to launch new campaigns need to think about how to organize them, given the product, the company’s reputation, and the market. Failing to assemble the right marketing mix can result in a catastrophic introduction to the market.
Product iPhone combines a mobile phone, an iPod, and an Internet communications device in a single handheld product. Based on the Company’s Multi-Touch™ user interface, iPhone features desktop-class email, web browsing, searching, and maps and is compatible with both Mac and Windows-based computers. iPhone automatically syncs content from users’ iTunes libraries, as well as contacts, bookmarks, and email accounts. iPhone allows customers to access the iTunes Store to download audio and video files, as well as a variety of other digital content and applications. In September 2012, the Company launched iPhone 5, its latest version of iPhone. In addition to the Company’s own iPhone accessories, third-party iPhone compatible accessories are available through the Company’s online and retail stores and from third parties.
Unlike other brands, iPhone was not released in many versions. During 6 six years it just has 3G, 3GS, 4, 4s and now iPhone 5. It is a clever strategy somehow. Building few phones with splendid features, instead focusing on quality and fundamental parts. In my opinion Apple should continue this strategy.
Apple provides its own operating system software and applications. I OS is the Apple mobile operating system. The company released the latest version, I OS 6 in September 2010. And Apple App Store which is currently has 400 million accounts with registered credit cards provides more than 650,000 software applications for customers.
Price
Apple produced few versions, as I said above. And iphone is pricey. It was heard that apple intended to release mini iPhone but it did not happen. I think it would be a clever strategy to attract customers who do not want spend that much for their smartphone and also want to experience Apple world. Mini iPhone could be a moderate price phone with apple magic features!
In an industry of low profit margins and cost cutting, Apple takes a different approach to the design of its products. While competitors are doing everything they can to keep costs down, Apple does what it can to make its product different.
Promotion
Smart Advertising, user's training and customer's instructions are apple tools for promoting its iPhone more and more. Apple do regards relationship with its customer. However, it might be effective to offer more discounts and other options like free shipping, accessories gift and so on. It will definitely keep current customers close and attracts more.
Apple heavily promoted the iPhone when it was introduced in July 2007. Customer and investor expectations, due to Apple’s reputation, boosted the stock price. But when customers do not believe that the marketing promises have been delivered, stock price, brand equity, and investor lies in a carefully thought-out plan.
Place
Marketers develop distribution strategies to ensure that their products are available in the proper quantities at the right time and place. I think Apple do this very well. But in some third-world countries Apple does not service like us and Europe. Maybe it is because of low demand but markets are growing so fast and Apple have to concentrate on those place that even has low demand currently.
Apple has revealed “For consumers, who are covered by consumer protection laws or regulations in their country of purchase or, if different, their country of residence, the benefits conferred by Apple's One Year Limited Warranty are in addition to all rights and remedies conveyed by such consumer protection laws and regulations, including but not limited to these additional right” and the country list is very limited. According to consumer laws In Asia pacific only Australia and New Zealand could cover consumer needs
Physical layout in the days when manufacturing dominated the economy, the physical layout of production units such as factories was not very important to the end consumer because they never went inside the factory. However, today consumers typically come into contact with products in retail units - and they expect a high level of presentation in modern shops - e.g. record stores, clothes shops etc. in my opinion Apple doing great in this section. Apple stores in all over the world provide good deal of sales and services to customers. However in some location these retail store does not provide the complete service that a store in us could.
Provision of customer service
Customer service lies at the heart of modern service industries. Customers are likely to be loyal to organizations that serve them well - from the way in which a telephone query is handled, to direct face-to-face interactions. Although the 'have a nice day' approach is a bit corny, it is certainly better than a couldn't care less approach to customer relations. Call center staff and customer interfacing personnel are the front line troops of any organization and therefore need to be thoroughly familiar with good customer relation's practice. .Steve jobs offer 100$ credit for itunes to customers who already purchased iPhone at higher price and they were upset about iPhone price cutting. Which company do this to its customers?!
Processes
associated with customer service are a number of processes involved in making marketing effective in an organization e.g. processes for handling customer complaints, processes for identifying customer needs and requirements, processes for handling order etc. .
Apple 1 year limited warranty and AppleCare Protection Plan benefits are in addition to rights provided by consumer law
Conclusion
In this report, I used marketing tools for analyzing Apple iPhone's market position and growth situation. We all know Apple is a big company with worldwide reputation. People willing to line up for new products and mostly they are satisfied with results. Nevertheless Apple has problems too. Technology is a very competitive market. And day by day companies do more R&D to make products better than others.
We reviewed Apple strength and weaknesses, all the good things like brand loyalty, unique technology especially in iPhone, matchless interface and applications, strategic agreements with big companies like AT&T and Weaknesses like expensiveness, retailers controlling problems, vigorous competitor like Samsung and RIM. Apple is on top from so many points now, no doubt. But with PESTEL summary that I discussed earlier we know there is no certainty in these days market. Brands devour fame and income and willing to do their best.
I reviewed Apple form 10-K deeply. Apple financial statements say everything is ok and growth is more than satisfactory. But in risks section many items were mentioned to remind investor it is a very hard business.
Both Ansoff and BCG matrix are fine for iPhone, Samsung running so fast but Apple still dominates US and aside recession points, figures show Apple knows the business.
Recommendations
Regarding all the analysis is made; there are some suggestions and strategies for Apple which can be useful in educationally scale. iPhone Operating System It is a privilege that apple has its own operating system for iPhone, but regarding open source operating systems like Android, there could be a slip for Apple in these days. iOS has a lot of unique features that distinguish it from other OS’s. Sometimes iPhone users say they can not switch to any other operating system and they love Apple and its iOS. But open source OS are growing so fast. Android is capturing market and sure we should expect others that maybe come tomorrow or a bit later. None-free applications are often pricey in App Store. Even some essential software for backing up and data storing has a price in iOS. Apple should break or eliminate some of these and let the customers enjoy from free or low-price stuff more.
Mini iPhone and China Market An iPhone Mini priced at $330 in China would provide a healthy shot in the arm to Apple's Chinese smartphone sales, according to Morgan Stanley analyst Katy Huberty. A low-priced iPhone would add another 20 percent to the 10 percent Chinese market share currently addressed by the iPhone 5, the analyst said today. Smartphone prices are starting to stabilize in China, which will open up the market for such a phone. But a deal with China Mobile is also key.
Industry Smartphone industry is a highly attractive industry. As it is mentioned before, other company is growing furiously. According to Ansoff matrix we are to face both existing markets and new markets. Non-stop technology cause new demands and new markets, the more technology growth, more demand and bigger markets will rise. Apple should play with prices cautiously with continuing premium price strategy. Technologically Apple is on Top but R&D should rise due to competition.
R&D expense increased $952 million or 39% in 2012 compared to 2011 and $647 million or 36% in 2011 compared to 2010. The growth in R&D expense was driven by an increase in headcount and related expenses to support expanded R&D activities. Although total R&D expense increased 39% and 36% in 2012 and 2011, respectively, it remained fairly consistent as a percentage of net sales.
Statistics shows Apple doing this strategy very well.
The Company continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company’s core business strategy. As such, the Company expects to make further investments in R&D to remain competitive.
Stock markets Both technical analysis and fundamental analysis support a potential target of $340 for Apple stock. A less discussed but more important problem for Apple is its heavy dependence on subsidies from phone carriers. When a consumer buys an iPhone 5 from a carrier for $199 the carrier may be paying Apple over $600 and subsidizing the consumer. Recently there have been negative musings both from AT&T and Verizon about the high level of subsidies for iPhones. The subsidies on Google Android based phones and Microsoft Windows phones are lower.
The foregoing is a negative long-term outcome. For the time being according to our proprietary sentiment indicator, sentiment on Apple has reached the level of negativity that is interpreted as bullish.
We recommended Apple long at $131 and have now taken profits on 90% of the position. The plan is to hold on to the remaining 10% as a long-term core position in the portfolio and trade around it with short-term trades. On Friday, the stock dipped below the upper band of our buy zone for a short-term trade.
Bibliogaphy
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