An Over View And Analysis Of Apple Inc Marketing Essay

An Over View And Analysis Of Apple Inc Marketing Essay

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Introduction:-

On January 3, 1977. (datamonitor, 2006). The first apple computer Apple I is introduced in 1976, which is a failure. Apple II which was launched in1980 became successful which increased their sales drastically. In its first six years of business, Apple's earnings grew explosively from $793,000 to $76,714,000. By 1983; Apple Computer had annual net sales of almost $1 billion and 4,645 employees. In the same year it faced from the entry of IBM into pc market. The first mouse driven computer for apple the Macintosh was introduced in 1984. In the early nineties the market is dumped with cheap personal computer clones. In the same year a new version of windows 3.0 is launched by windows. Apple launched its first PowerPC chip based Power Mac in 1994 which helped the company to compete with the speed of Intel's PC processor. But the company's problems continued to grow; it had a backlog of $1 billon order in the year 1995, which are increased by the launch of Windows 95. The company's performance drastically declined when it lost $68 million in the year 1995-96. The losses further continued in the next year until Steven Jobs its co founder returned as company's interim Chief Executive Officer. Apple made an agreement with Microsoft such that MS Office appeared on Mac PC's. With Steven Jobs as CEO the company concentrated more on its profitable competencies and dissolved its unsuccessful projects. Power school which is one of the leading providers of web based student information system for K-12 schools and school districts is acquired by apple in 2001. In the same year apple also took over Spruce Technologies which will be developing and marketing of DVD authoring products. (Vohr, 1998). The next year apple formed alliance with Ericsson and Sun Microsystems to create a standard format for delivering multimedia content to wireless devices. These included devices like smart phones and PDAs. Apple developed the software as Quick time video, Ericsson's mobile provided the required infrastructure and service required whereas Sun Microsystems provided the distribution of software and hardware. (datamonitor, 2006). During 2002 apple many other companies like Silicon Grail, Prismo Graphics, and few assets of Zayante, Emagic. Nothing Real, which is a privately held company involved in manufacturing of high performance tools designed for digital creation market; apple acquired some of its assets in second half of 2002. In the next year Apple launched an online store for downloading music tracks and albums called iTunes music store. V2, Sanctuary Records Group and Beggars Group which are 3 of the largest European independent Music labels signed licensing agreement with Apple. The same year apple introduced its fourth generation iPod portable music player. Apple started to use Intel microprocessors in its Macintosh computers from June 2005. Apple also made arrangements with leading automobile industries like Audi, Volkswagen, Honda and Acura, such that their car stereos will deliver iPod as well for the cars which will release in 2006. Apple also introduced mobile phone with iTunes in collaboration with Motorola and Cingular Wireless. (Vohr, 1998)

COMPANY OVERVIEW

Apple Inc is one of the leading designer, developer and marketer of personal computers and related software, services, peripherals, and networking solutions.

It is also involved in designing, developing and marketing of digital music players and its related software. The main operations of the company are based in USA, Europe and Japan with its headquarters in California. It is also involved in the distribution of television shows, music videos and even short films. (permalink, 2005). There are four ways through which apple sells its products, online stores and its own retail stores are the primary ways of selling its products and the other ways being direct sales force and third-party wholesalers and resellers. The company divided its business market into five segments: the Americas, Europe, Japan, retail and others.

The America segment includes both north and South America. The Europe segment includes European countries, Middle East countries and Africa. Apple is having its own retail stores in us, Canada, Japan and UK. Majority of its retail stores are located in US which are about 116, and 8 international stores in Canada, Japan and UK. The other market segment consists of Asia-pacific except Japan and Australia.

The company recorded revenues $42,905,000 during the fiscal year ended

September 2009, an increase of 24.3% over 2008 which is 32,479,000 the increase in revenue was mainly due to the increase of iPod sales, which soared by 409%. The company's operating profit was $11,740,000   during fiscal year 2009, as compared to $6,275,000 in 2008. (finance, 2010)

SWOT ANALYSIS

SWOT analysis is very commonly used strategy to identify the positives and negatives of a company. As the name suggests it identifies Strengths, Weakness, Opportunities and threats of a company. Strengths and weakness are concerned with the internal issues of the company where as opportunities and threats are concerned with the external issues of the company. This analysis not only helps in identifying weakness and threats, but also helps in converting weakness into strengths and threats into opportunities. SWOT analysis is easy to evaluate and understand. Apple Computer designs, manufactures and markets personal computers and related software, services, peripherals, and networking solutions. The company's strong operating performance has strengthened its market position and has also increased investor confidence. However, intense competition could affect the company's margins. (Diaz, 2009)

Strengths

Global presence

Brand image

Synergistic portfolio

Strong media content

Weaknesses

Continuous Innovation

Dependency for key components

Opportunities

Wireless products

New digital platform

New market

Threats

Strong competition

Slow Eurozone economy

Lawsuits

Strengths

Global presence

Global Presence is one of the main strengths of apple. The company derives more than 50% of its revenue from outside USA, while USA being its domestic market. It's showing a steady revenue growth on the last five years as it is well placed in both emerging and established markets. A 27% of CAGR is recorded by its revenue during the period of 2001-05.The Company's net profit increased to 42,905,000 for the year 2009 when compared with 24,006,000 for the year 2008. Strong operating performance strengthens the company's market position and also increases investor confidence.

Brand image

Apple is having a very strong brand value among most of its customers. Most of the Apple products are having a high level of brand recognition and brand awareness in every market it operates.

The Apple brand is well regarded amongst most consumers. Apple also enjoys a high level of brand awareness and brand recognition for its products throughout the

Markets in which it operates. The brand image of apple differentiates its products from other sales which ultimately help in improving the sales of the product. Apple uses its strong brand name to build strong barriers to enter into the market. Because of its brand image it is having the command on premium pricing for its products.

Synergistic portfolio

Apple Inc is one of the leading designer, developer and marketer of personal computers and related software, services, peripherals, and networking solutions; which are highly dependent on each other. It is also involved in designing, developing and marketing of digital music players and its related software. The main operations of the company are based in USA, Europe and Japan with its headquarters in California. It is also involved in the distribution of television shows, music videos and even short films. The wide range of products available reduces the dependency of on single product and hence reducing the risk of the business.

Weaknesses

Continuous Innovation

Apple's ability to compete successfully and maintain attractive gross margins is heavily dependent upon its ability to ensure a continuing and timely flow of innovative and competitive products and technology to the marketplace. As a result, the Company incurs higher research and development costs as a percentage of revenue than its competitors who sell Windows-based personal computers. If Apple is unable to continue to develop and sell innovative new products with attractive gross margins, its results of operations may be materially adversely affected by its operating costs structure.

Dependency for key components

One of the main weaknesses for the company is its dependency on key components. The company is having every chance to face risk of supply for its key components.

The company is mainly dependent on IBM which supplies PowerPC G5 processor2. Apple uses this processor in many of its products like Xserve, Power Mac and iMac G5 products. Likewise Freescale is the only supplier of G4 processor. During the year 2004-05 apple faced the problem of delay shipment of various products as there is a manufacturing problems with PowerPC G5 processor which is manufactured by IBM.

Opportunities

Wireless products

With the tremendous use of internet world wide, there is every chance for the wireless connectivity and networking products to have a high demand in upcoming future. Regarding this, Apple has already proved by providing wide variety of products in such applications which says Apple is capable to withstand the current growth .one of the Apples technology which provides its users with a facility to create their own computer network and connect to internet without cables, additional phone lines or hardware is the Apples wireless networking technology. According to IEEE 802.11d, airports with this type of technology can provide high speed wireless communications within a radius of around 150 ft from an airport base station. As long as the use of wireless hi speed internet increases, the company that offers this can always maintain its position in the growth line

New Digital Platform

Transforming Mac platform into a digital hub that brings together iTunes video content to customer's television screens and other portable devices is the one Apple is focusing right now. This adds to the rapid growth of Apples digital content technology. The collaboration of its digital content business with Apples Mac business is also possible which helps the company to withstand it continuous growth.

New Market

Apples market share varies in UK, Japan, Canada and Australia but coming to Spain .Eastern Europe, China and Korea its less when compared. This says that Apple can increase its growth outside US. In 2006 the company has planned to increase both domestic and international retail points of presence and also to widen portfolio of digital content, which helps in increasing its international market share. And also the usage of MP3 players in the US is less than 25% of the usage of digital cameras, which shows this particular area would always contribute to the growth in a less time period.

Threats

Strong Competition

Apple has high competition in all areas of its business. Among them the highly competitive products are its personal computers and related software peripheral products. In the market, as there is rapid technology advancement in both hardware and software development. This lead to the increase in capability and various applications of those products. Finally new products were introduces with high performance, cost effective and new features. As the utilization of personal computer increased over the past several years, the price competition for pc also increased. Apples competitors started to offer their products at a very reasonable price, in order to gain the market share as there is a low demand for their windows based personal computing products. Other industry wide pricing pressures and downward pressures on gross margins have increases pressure on Apple s financial condition.

Slow Eurozone Economy

The slowdown in eurozone economy took place in 2005. The GDP growth for the year 2005 was estimated at 1.3%, as compared with 2.1% in 2004. The unemployment and higher oil prices are added issued. In the short term, corporate spending in France could be adversely affected with political unrest over the new labour law. The increasing house prices also affected the economy. The political uncertainties in Euro zone has reduced spending on information technologies which resulted in adverse effect in its revenues too as Europe market plays a vital role in the company.

Lawsuits:-

Apple is surrounded by many law issues. Apple corps which is started by Beatles in 1968 sued apple computers saying that it violated the 1999 agreement according to which each company should not enter in to others field. According to Apple Corps Apple computers broke the agreement by entering into music field, which is against the law according to their agreement. Apple Corps forced Apple Computers to remove its logo from iTunes music store and pay for the necessary damages. Apart from this Apple faces several other lawsuits related to unfair business practices, false advertising and also related to patent infringements. These allegations will not only affect its financial output but also causes a huge damage for its brand. (Vohr, 1998)

Apple Culture:-

Apple is one of the most popular companies in the world. It produced some of the trend setting products in the history of its market. Apple doesnt have a good reputation for its diplomatic behaviour. Apple is very much known for its secracy. This company isnever into open bloging. As the New York Times recently wrote; "it imposes harsh sanctions on employees who violate rules about information sharing." The dramatic situation when Steve Job returned to work after his liver transplant is an example for the level of their secrecy. A public statement or a blog post could have answered the fears of investors; rather they maintained their strategy of secrecy. But this worked as high levels of interest and curiosity is created around the products that are about to release, which states that the products will speak for themselves rather than the company. iPhone is one of the coolest gadgets apple ever produced but it never revealed its tech details. (wow, 2008). For many years managing the time schedule of their employees has been an important management task. For many employees who work in apple, sixty to seventy hours of work per week is not an unusual thing. The culture of apple started to change in the middle of nineties when apple is facing difficult times. Even though some important people started to leave the company, some groups tried to maintain a better grip on old culture but change is inevitable. Like in any other organization individuals change with change in culture especially in difficult times. During the survival time of apple everything controversial was excused for the sake of the company. The company went on different cultural change when Steve took over charge again. It created a different relationship between its customers, employees and the company. The first change that occurred was the controversial strategy of secrecy. Customers will be briefed about the future technologies where as the field officers were kept apart from the latest developments. This is according to them is to avoid the loss of information. However there are always leaks from Cupertino. The other important change happened in it s culture is that Executives were asked to travel to fields and interact directly with the customers. There has been a huge protest from the executives. "Apple has no enterprise customers; Customers don't know what they want, we have to tell them what to buy." These are the word of one of the Apples senior VPs. This defines the cultural change of apple from early nineties, when they spend large amount of time with focus groups and trying to understand what customer wants. When Steve took charge of the company he focused apple on few things and got them right which worked for the company tremendously. It is not necessary that what worked in product development will also work in sales or product support. During mid nineties when the meeting of field officers and executives became very rare many of the key customers came to a conclusion that the apple executives are not willing to build and maintain good customer relations. One of the strong assumptions with the employees of apple is that the customer is wrong, most of the times he does not know what he wants. Also they don't differentiate much between enterprise customer and normal customer. Just like normal customers apple expects its enterprise customer to collect his goods. On the other side the enterprise customer expects the company loads the goods to the local apple store. The standard protocol in apple to get the work done is to have the correct phone number. This may not be a better option as sometimes direct interaction is needed to explain what is needed, in such case an Apple store will be a better an option and will be certainly easy for the Apple as well. (Diaz, 2009). Apple is one of the hardest companies to deal with the areas of sales and customer services. Unlike many other companies which will fix the problem and will have quite a few enquire. With the kind of brand image the apple having its users often consider themselves as a part of Apple World, even though they find trouble with its support, sales and repair. The company followed inward strategy to produce some great products, but unfortunately it had a negative impact on customer relations. It also created problems for many employees who find it difficult to keep up odds with the top management who decided and declared that they have all the answers while dealing with the customers. As an employees are left powerless to help the customers. Secrecy, lack of power to resolve customer issues, micromanagement and always having to adapt to the Cupertino view of the world are few things that came up with new cultural change.  There are very fewer field people having to be encouraged to go home to their families at night. People decide that anything was acceptable as long as it kept them their jobs.  Not surprisingly that often included flat out lying and being completely unresponsive to requests because the request might require a decision and the decision might put them at risk. This is a far different culture from the original Apple when trust, risk, decisiveness, responsiveness to customers and achievement as a team were key parts of the culture.  The really sad thing is that this is culture that Apple's top sales executive wants. Apple could be an outstanding company for employees, customers, and products.  It, however, would take a massive change in culture and executives to make that happen. (permalink, 2005)

Strategic Position:-

Apple Computer, Inc. is headquartered in Cupertino; California is a leader in the PC field for home, business and education markets. Their products include the Macintosh line of desktop and notebook computers, the Mac operating system, and the iPod digital music player. The manufacturing facilities are located in Sacramento, California and Cork, Ireland. Apple produces their own keyboards and "Mouse" input devices. Apple's operating segments include the Americas, Europe, and Japan. They sell their products through online stores, direct sales force, third-party wholesalers and resellers, and its own retail stores. Apple Computers has experienced both good and bad times since it began its garage operation in 1976. Although it has been a leader in computer technology in the past, it has struggled lately with keeping pace in the rapidly developing computer industry. In this extremely competitive industry, the developing technology and evolving computer applications have contributed to this type of business environment. Over the last two decades, the popularity of personal computers has made the computer market attractive to consumers worldwide. As mentioned before, Apple developed as a major player in the computer industry in its early years. Apple grew to a publicly traded company by 1980. Apple continued to experience early success in the industry being the first computer company to reach one billion dollars in annual sales in 1982. (Guardian, 2008). Apple Computers faces a highly competitive industry with competition including companies such as Dell, Gateway, IBM, Hewlett-Packard, Fujitsu, and NEC. Apple's main strategy in this growing industry focuses on innovation. Steve Jobs, Apple's chief executive officer, said: "We would like to see our market share grow. Our strategy is to innovate. We are the innovator of the industry." Apple's focus is on bringing the best "personal computing experience" to students, educators, creative professionals, and consumers with its innovative hardware and software. (apple, 2010)

Mission Statement:

"It is Apple's mission to help transform the way people work, learn and communicate by providing exceptional computing and innovative customer service. We will pioneer new directions and approaches finding innovative ways to use computing technology to extend the bounds of human potential. Apple will make a difference: our products, services and insights will help people around the world shape the ways business and education will be done in the 21st century." Apple's mission statement details its strategic position to achieve profitability and the competitive advantage. Apple's strategic position is to give users the best computing experience by innovating in hardware, software, and Internet offerings. (apple, 2010)

Porter's 5 Forces

Threat of New Entrants:

There are high entry barriers in the computer hardware/software industry. The two main reasons for the high barrier are based on the high costs to enter the market, the time it will take before companies earn revenue on their investment, and product differentiation. This is due to a complex and expensive development stage, which is needed for severe product testing. As for capital requirements, firms need to invest substantial financial resources before entering this competitive market. In addition, once a firm establishes itself in the industry, it may take a number of years before the company sees any profit.

With such high costs and vast competitors, product differentiation, absolute cost advantages, and economies of scale play a large part in the contestability of the market. Product differentiation promotes brand loyalty by offering different products with different characteristics to the consumer. If Apple consumers are satisfied and loyal to purchasing this brand, new entrants are less likely to enter the market. In addition, for new entrants into this market, production costs will be higher than for the existing companies in the industry. Finally, in order for new entrants to compete on the same level with companies like Apple, Dell, Hewlett-Packard, and IBM, they will need to come up with a relatively high scale of output to compete at the same level of average cost.

Rivalry among Firms:

Apple is confronted by aggressive competition in all areas of business. The market for the design, manufacture, and sale of personal computers and related software is highly competitive. Apple operates in two branches: hardware and software. The most important rivals for Apple in the hardware industry are Hewlett Packard, Dell and IBM. In the software market there is far less competition. The main competitors in this market are Microsoft and Linux.

Bargaining Power of Suppliers:

Apple's "powerchip" is supplied from either Motorola or IBM. IBM originally produced the chip but Motorola holds a license to ensure that Apple does not depend solely on one supplier.

As Apple continues to advance with technology changes and increased customer requirements, it continues with an ongoing need for suppliers. Apple looks for quality, customer focus, cost savings, innovative business solutions, and technology in all of their suppliers.

Bargaining Power of Buyers:

Apple divides its customers into three groups. The first group consists of consumers who are purchasing an Apple computer particularly for the brand name and its unique operating system. The second group is composed of entertainment and media consumers who often work with graphic programs. The third group purchases Apple products solely for their "trendy" design. Apple pays much attention to the design layout of their hardware and software. In addition, Apple now relates to consumers searching for high quality music and media downloading systems as well as advanced audio players.

Threat of Substitute Products:

With numerous competitors in the industry, Apple is threatened with substitutes from companies such as Microsoft, Dell, and even Sony to name a few. For Microsoft, Windows is used as a substitute; Dell Computers are a substitute and Sony products such as the MP3 player may be substituted for the newly rising iPod. In addition, the growth of mobile phones has also been considered a threat to the company's success. They are currently able to execute the same tasks as a computer by downloading music and the transfer of e-mails. (datamonitor, 2006)

FUTURE:-

Saving lives means taking fast and secured decisions. Apple collaborated with Mount Sinai Hospital at Toronto to help the physicians in making crucial decisions about patients with the help of iPhone. The hospital recently established an in-house built iPhone app called Vital Hub which helps the doctors' inn getting remote and secure access to patient's records, vital statistics, test results and medical literature from its enormous data network. This helps the physicians to react or respond more quickly according to the requirements of the patient. "Our goal is to provide the cutting-edge best medicine, best teaching, and best research," says Dr. Thomas Stewart, Chief of Medicine at Mount Sinai. "We need something that's going to allow us to change rapidly. Five years from now, the medical world is going to be very different. With iPhone, we have a platform that allows us to adapt." (Guardian, 2008). "The intuitive iPhone interface enables physicians to focus on patients instead of grappling with technology, iPhone are driving this paradigm shift in health care," says Prateek Dwivedi, Mount Sinai's Chief Information Officer. "We've empowered our clinicians to just do their jobs. It's not about the complexities. It's not about the difficulties. It's about having the right information at the right time." iPhone not only helps doctors and when it is not dealing with patents it helps in administrative tasks.Stewart says. "iPhone allows me to manage my day, to be on the go, to make the 200 phone calls I have to make each day, to connect with the literature, to take care of my patients. It does it all." Stewart notes that healthcare providers in the academic world not only have more patients to see, but the demands of research are great. "I have a vast amount of reading to get through to help me make decisions in the best interest of my patients. Tools such as iPhone help me get better health care to the bedside faster." It is very simple for the Information Technology department to integrate the iPhone with the database of the hospital. They just need to integrate the iPhone server with the hospitals Microsoft Exchange, which gives to physicians about everything they needed. "It's a very simple deployment," Dwivedi says. "We use the iPhone Configuration Utility to put the profiles on. We don't require a lot of backend infrastructure to manage these devices." Because of Mount Sinai's need to protect both confidential hospital information and sensitive patient data, the built-in security capabilities of iPhone are essential. "iPhone allows us to do the two levels of user authentication that we require: using your password and VPN certificates," explains Giancarlo De Lio, the hospital's Manager of Innovation and Prototype Development. "Whenever we implement new technology at the hospital, it has to adhere to our strict security policies," Dwivedi adds. "iPhone is an enterprise-ready device. Out of the box, we have confidence in the encryption and our ability to manage the device remotely." (datamonitor, 2006). With iPhone in the hands of its physicians, Mount Sinai decided to develop its own in-house iPhone app, Vital Hub. The app brings together clinical data, reference materials, and patient information from 66 different applications within the hospital's network - all in one simple mobile interface. Physicians for example no longer have to track down separate lab results or a critical test result from a different department. Using Vital Hub, says Stewart, "We now have access to exactly what we have in our computers here in the hospital. We can get access to our patients' data whenever and wherever we want it. Knowing what's happening with their drugs, radiology, laboratory values, microbiology results - it really enables me to make decisions on the go." (Diaz, 2009). "Whether using Wi-Fi or 3G on iPhone, doctors can access Vital Hub no matter where they are," explains Dwivedi. "They can review a patient chart before they come into the hospital, whether they are at home, in a restaurant, or at an airport." The iPhone development and configuration tools gave Mount Sinai's IT team everything they needed to visualize, build, and distribute the app, says De Lio. "The iPhone SDK made it easy for us to realize what our front end should be like, so that saved us a lot of time. We went the hybrid approach, with native UI elements living on the phone." Once VitalHub was completed, the iPhone Configuration Tool allowed Mount Sinai IT to distribute the app directly to users' phones. Combining Vital Hub with medical apps available on the App Store makes iPhone an even more powerful on-demand reference tool. "With VitalHub, I can see what drugs a patient is on," Stewart says. "Previously, I'd have to call ICU and speak to the bedside nurse." Once Stewart confirms a patient's prescription drugs, he can use other apps on iPhone to quickly discover whether the drugs might interact inappropriately with each other. "The whole concept of everything in one device, and being able to move between applications - it's fantastic." And De Lio adds, "The speed and performance of iPhone and the app is a big benefit for patients because all the information is coming to their caregiver a lot faster." (Diaz, 2009). With the introduction of iPhone into the daily operations of Mount Sinai's the rate at which they are performed increased rapidly. It helps the physician to take well informed and faster decisions which improved the quality in patient care. "We believe iPhone is going to shift the way we practice medicine," Dwivedi says. "This is big stuff, more important than anything," Stewart agrees. "iPhone is the future of health care." "iPhone is the future of health care." Dr. Thomas Stewart, Chief of Medicine, Mount Sinai Hospital. "iPhone is an enterprise-ready device. Out of the box, we have confidence in the encryption and our ability to manage the device remotely."Prated Dwivedi, Chief Information Officer, Mount Sinai Hospital. "iPhone is driving this paradigm shift in health care. We've empowered our clinicians to just do their jobs. It's not about the complexities. It's not about the difficulties. It's about having the right information at the right time." Prateek Dwivedi, Chief Information Officer, Mount Sinai Hospital. (Masi, 2009)