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| Wrong kind of Apple |
Apple use many different strategies to implement a successful become a successful company. Apple is a unique company that utilizes many strategies. Apple’s main strategy is to scale all operations from the manufacturing process to retail, to meet global demand. Apple had revenue greater than $46 Billion. The iPhone and iPad have plenty of room left for growth as does the retail market for Apple.
Meeting demand for hundreds of millions of annual units requires flawless execution across the supply chain, distribution and with their manufacturing partners. We've become so accustomed to high tech products that it’s easy to forget what a shortage of a single component can do. When floods struck Thailand last fall, it disrupted disk drive supplies for nearly six months.
One of the current strategies of Apple’s is to rapidly expand in China and developing economies. Apple currently sells its iPhone’s exclusively through China Unicom which is over 190 million subscribers. Apple’s Asia Pacific sales (minus Japan) grew approximately 200% last year and account for 20% of Apple’s total revenue. Apple innovation has been very important for the developed world as well as the developing world. According to the SAF analysis this is one of the main strategies and would help Apple grow as a company.
As important as Apple’s innovation machine has been for the developed world, 2012 success in China and emerging economies will be fed by incremental product improvements. They may be combined with creative cost and/or pricing strategies that subsidize purchasing much like Verizon and AT&T has for U.S. iPhone customers. With rapidly growing middle classes, one might consider market access more important in the developing world than ground-breaking innovation.
Apple competes in the current market by differentiating their product and identifying the different needs of their customers. They do this by investing in Research and Development and Product development. According to the company's annual report, which was filed with the U.S. Securities and Exchange Commission, Apple spent $3.4 billion on research and development during its fiscal year in 2012; this was up by 39% from the previous year. Investing in R&D is very important for Apple as they want continuous growth and a competitive position in the marketplace which is directly related to the development of new and enhanced products that are central to Apple’s core business strategy.
Market Penetration
Over the past years Apple has been successful thanks to their fresh, innovative and imaginative way to do business. The sales of the iPhone have equaled to 47.8 Million from the first quarter of 2013, this is due to the combination of innovative style and design, great strategy and excellent marketing.
Apple and the iPhone can owe its success to its exceptional marketing. The iPhone can be seen as fashion icons and they are seen as ‘fashion accessories’.
Another reason for success is that there are multiple locations to purchase the product from. Customers can purchase the iPhone from the Apple online store as well as the Apple retail store. They can also purchase the iPhone from many different outlets such as supermarkets, electronic stores and other retail outlets. The iPhone is sold at many different outlets and this enables Apple to profit from customers by having their products sold at many different outlets. This allows Apple to have a large market share for their product.
Shoppers sleep outside of the Apple stores to be one of the first to buy an iPhone, Apple is a company that enjoys fanatical brand loyalty and its users are very committed to the brand. This brand success is part of Apple’s well thought out plan to deliver strong products and create an Apple culture. This is part of Apple’s strategy to dominate the market and create a bigger profit for the company.
Market Development
A company follows a market development strategy for a current brand when it expands the potential market through new users or new uses. To improve their market share and develop their product Apple does many things to stay market leaders. Apple has deals with many different network providers to provide cheaper phone offers and contracts. For example if they strike up a deal with operator such as O2, O2 will then be able to sell the iPhone for a monthly fee which Apple also receive a percentage of. They do this so they can stay ahead of their competitors and make more profit for their company and continually grow. They also provide a loyalty scheme, and users who have continually purchased Apples products including the iPhone get discounts.
Apple understands, better perhaps than any company on the planet, the significance of being not only perpetually innovative but with a vast and loyal army of Apple fanatics behind it to regularly take category-busting risks. The amazing run, beginning over a decade ago, of the iMac, MacBook, iPod and iPhone. These landmark products not only were ambitious in their goals and beautifully designed, but they also exhibited multiple features that were so innovative that they forced the competition to spend years catching up and by then, Apple had already moved on to the next breakthrough.
The Apple iPhone is a classic example of that. It took nearly two years for Apple’s competitors to field products that are even close to the very first iPhone; to identify weaknesses in the device and respond. Apple, meanwhile, has used that time to continuously improve the iPhone the result being that the company now dominates the smartphone world to a degree Apple hasn’t enjoyed since the early years of the Macintosh.
Another selling point and key to the iPhone’s success is the vast number of apps available through the Apple App Store. Apple has had 40 Billion downloaded apps which is a massive figure and huge milestone for Apple. There are many different apps available for the iPhone, from guitar tuners to restaurant ratings to burp generators, and everything else.
Product Development
The iPhone is one of Apple’s biggest sellers and they have to keep improving this revolutionary product because the life cycle of the phone is typically very short. Updates for the iPhone are released almost yearly, as is a new version of an iPhone. They have to keep updating their products to stay ahead of their competitors. They offer free updates on their website to update the consumer’s old iPhone to the latest software. They have to carry on updating their products because if they didn’t then their products would go into decline.
The Mobile Phone market is mature and saturated and therefore Apple has to stay ahead of its competition. Apple has many different competitors including; Samsung, HTC, Nokia and Sony. When the iPhone was first released it dominated the smartphone market with its innovative design and graphical prowess but over time it has lost control of the market and allowed Samsung to capitalize and become market leaders. The iPhone has only 29% of the market share while Google/Android has 36.3%. They should carry on investing in the iPhone because it is one of Apple’s cash cows and it is making a substantial amount of money according the Boston Matrix.
The product lifecycle of the iPhone is very different to as compared to an average product. During the Introduction and Maturity stage Apple intensively market the iPhone so they gain maximum sales and make more profit. Their products last longer on the product lifecycle because they invest heavily into their products.
Apple are continually developing their products and investing money into R&D and marketing to further improve their products and better their brand. Apple’s marketing budget for the whole company is an astronomical $1 billion. They do this because it is imperative for Apple to remain market leaders of the market and get rid of their competitors. In their marketing campaigns Apple’s communication is sober, intriguing, simple, clear, minimalist and clever. It has a style of its own whether it is a TV ad, print ad or an online ad.
Apple also donates money to fund AIDS programs in Africa. Apple works alongside GlobalFund and has raised more than $50 million. This is a substantial figure and it is continually growing, and reducing diseases year by year. I think this is a great strategic decision for Apple and the iPhone as this enables them to give back and consumers will see this as the company being generous which in turn would be a very profitable and great tactic.
Diversification
For continuous growth as a company I think Apple would have to diversify into a different market and launch a new product. I think Apple should diversify into the video games market and launch their own video games console, as this would be they would be going into a different market and also they would have a different product. The video games market is estimated to be worth in the region of $25 billion. Today, the video game industry is a juggernaut of development; profit still drives technological advancement which is then used by other industry sectors. Though maturing, the video game industry is still very volatile, with third-party video game developers quickly cropping up, and just as quickly, going out of business. The latest consoles have an average lifespan of 10 years, which would mean that if Apple were to produce a games console, they would not need to design another one. A costly expense of going into a different market would be the Research and Development costs and the marketing costs. This is a market that they have never been in before and is relatively new for them therefore they would have to research the market to make their product better than their competitors.
Apple would have many competitors including the Sony PlayStation, Microsoft XBOX and Nintendo’s Wii Console. They would also have competition in the form of tablets and smartphones as well as online based computer games.
Apple already has experience in the games market as their devices can play popular games such as Angry Birds and Fifa without a problem. This would mean that if Apple were to design a games console it would not be hard for them to shift from the mobile and tablet platform to the games console market.
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| Apple website - Advertising the iPad. So simple, yet so elegant. |
Boston Matrix
A Boston matrix analyses a company’s product portfolio and classes its products into four strategic business units: Stars, Question Marks, Cash Cows and Dogs. For each SBU, there are four more potential strategies to take: build market share, hold market share, harvest (reduce investment) and divest (phase-out).
Star: The iPad is the star because it has a high market share and is rapidly growing in the tablet market. The iPad is in its growth phase of the product life cycle however it is starting to lose its advantage as competitors plan to launch their own tablet devices. To prevent this from happening Apple should invest heavily into marketing the iPad to a larger audience in order to grow sales to maintain their market share. But then again in the future, when sales are consistent, Apple should harvest the product to turn it into a Cash Cow to fund other SBUs.
Question Mark: In a market dominated by Microsoft, Apple would always struggle to dominate in this market. The PC market continues to become lead by Microsoft despite Apple’s attempts with the Mac. Much of Microsoft’s dominance is down to strong business to business marketing and high switching costs for business and consumers. Apple could potentially use three strategies for the Mac:
1) Divest – If they were to divest the Mac it would mean they could devote more time on other more profitable products, however this is very unlikely as the Mac is part of their brand identity.
2) Build – Apple could invest a heavy amount of resources into the Mac however even with Apple’s huge cash flow, it would still be very difficult to beat Microsoft.
3) Hold – Another strategy they could use is to hold it. Apple will probably develop new mac and continue to support existing customers so this is the most likely strategy that Apple would implement.
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| Another one of Apple's successful promotions |
Cash Cow: Apple’s main consistent sources of income are the iPhone and the iPod, both have reached the saturation point of their respected markets and Apple has a share of both these markets.
The iPod is reaching the decline stage of the product lifecycle and Apple is beginning to harvest the product. They are slowly reducing investments in marketing the iPod to increase their profitability; by generating more cash, further investments can be turned into question marks or even stars.
Dog: Apple TV is a device which allows media files in iTunes to be played wireless on TV through an iPhone, iPad or other compatible devices. The device has not been as popular as Apple were expecting it to be however Apple have launched a second and third generation of the product. They have showed they are committed to building sales of Apple TV although it seems they should divest the Apple TV and invest into something more profitable such as the iPad.
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