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Apple is a personal electronics manufacturer and marketers. The company competes in personal computers, mp3 players, tablet computers, software and smartphones (Apple.com, 2011). Apple has improved revenues and profits rapidly of late (Apple, 2011). Apple is financially strong with a great balance sheet (MSN Moneycentral, 2011) and strong brand loyalty (Withers, 2008). The company's stock is currently trading at very high multiples because of its multi-year track record of hit product launches, its lack of slowdown during the recession and the company's continued ability to resonate with consumers. Apple's entrant into smartphones is the iPhone. Apple holds 25% share of the market, good for third place behind Android and Blackberry (Blodget, 2011). Apple just introduced its latest model smartphone, the iPhone 4.
The iPhone 4 is the latest incarnation of Apple's iPhone line of smartphones. The smartphone market is divided by operating system, rather than device manufacturer. There are three companies that compete with their own operating system -- Apple, Blackberry (Research in Motion) and Palm. Other firms are device makers that utilize either a Microsoft operating system or Google's Android operating system. Other new entrants such as Nokia and Samsung are also expected to enter with proprietary operating systems (Maisto, 2010). Apple's operating system is proprietary and only used for iPhone and iPod Touch products. All smartphones are essentially feature-rich phones with Internet access, cameras, games and other assorted bells and whistles. Smartphones run programs, often from third parties, called apps (applications) and these enhance the entertainment value and usefulness of the phone. The iPhone pioneered the use of apps, and Apple still earns considerable income from its proprietary App Store, where it sells apps to consumers. The iPhone 4 is the latest incarnation of the iPhone, with updated features and performance compared with previous models.
New Product Development Process
Apple is notoriously secretive about its product development processes (Stone & Vance, 2009). The only thing that is known about the iPhone 4 development process is that Apple began with older versions of the iPhone, and added to them new features in order to create the iPhone 4. Customer feedback is part of the process by which new feature ideas are developed, while other ideas are developed in-house.
A PEST Analysis can help to understand a company's external operating environment, and the key factors within that environment that will impact on the company's performance (NetMBA, 2010). The political/legal environment is not of significance to Apple with respect to the iPhone. There are minor issues with regards to bandwidth auctions that may affect some of Apple's data partners, and this has resulted in AT&T placing limits on downloads at times but this has not proven to be significant to Apple. The economic environment is generally challenging, characterized by a slow economic recovery that should result in relatively sluggish growth in consumer discretionary spending (BEA, 2011). However, Apple's income statement shows that the company has generally proven immune to the economic downturn, as it recorded strong revenue and profit gains all through the recession (MSN Moneycentral, 2011).
The social environment is a very powerful influencer for Apple. Of note are several trends. The first is the large size of the baby boom echo generation, a wired generation with a predilection for consumer electronics and impressionable minds for Apple's brand-centric marketing (Leung, 2005). The second trend is towards increased integration of electronic devices into everyday life (Hanman, 2005). This high level of connectivity requires powerful devices, and this has in turn driven demand not just for Apple products in general but for Smartphone specifically.
The technological environment is the other key environment of importance to Apple. The company's current strong market position relies on its ability to deliver high levels of technological innovation. The pace of innovation in smartphones is very rapid -- new products are being introduced constantly, with new features being added. Industry observers point out that "no mobile device vendor no matter what their market position today will be in a comfort zone four years from now" (Evans, 2008). There have even been suggestions that smartphones will threaten the personal computer business (Cheney, 2010). Surviving and thriving in the smartphone industry will require Apple to maintain its position of technological innovation, particularly as new competitors emerge with proprietary operating systems.
A SWOT analysis can help focus a company on its internal strengths and weaknesses, the opportunities and threats that are in the external environment and point to ways that the company can use its assets to take advantage of opportunities and defend against weaknesses (QuickMBA.com, 2010). Apple has a large number of strengths from which to deal. The company has high brand loyalty, strong earnings, a strong balance sheet, clever marketing, good distribution strategy, strong product innovation and design and a corporate culture that sustains the company's ability to continually deliver superior products and results. The company has few weaknesses -- it is one of the most successful companies in recent years.
There are a number of opportunities that remain for Apple. The company can expand geographically; introduce new products or new lines of business; purchase competitors; or it can diversify away from its core businesses. There are a number of threats in the external environment. In smartphones in particular, Apple faces not only strong existing competitors but new competitors that are also large, strong companies. HP just bought Palm, and both Nokia and Samsung are expected to enter the market. There are also threats that derive from competition among service providers -- if the iPhone loses too much market share, the service provider(s) will not promote the iPhone as heavily, which will result in further market share losses -- this is what has happened to Palm (Carew, 2010).
iPhone 4 Marketing Mix
The iPhone 4 is the latest version of the iPhone smartphone brand. Among the features of the iPhone 4 are: video recording, multitasking, FaceTime video phone calls, a high resolution screen, folders for apps, mp3 player, streaming music, voice control and of course a phone. The iPhone 4 is priced from $199 to $299 depending on the phone's power and the service plan that is purchased alongside the phone (Apple.com, 2011). In many countries outside the U.S., the iPhone can be purchased without a contract, and the price is significantly higher for this.
The iPhone 4 has received extensive promotion. The promotion focuses on a feature-oriented lifestyle approach, while also emphasizing the Apple and iPhone brands. The lifestyle approach relies on creating brand associations with lifestyle traits. The objective is to align the brand with traits that consumers either relate to or aspire to (Michman et al., 2003). The role that lifestyle marketing plays in iPhone promotion is that the consumer associates his or her smartphone with his or her lifestyle -- the phone is both an accoutrement and an integral part of the lifestyle. Thus, the phone's features are promoted with emphasis on how they fit into the consumer's lifestyle. iPhone 4 promotion also focuses on the two brands -- Apple and iPhone. This in part plays to the highly-loyal Apple brand audience and works to build brand loyalty for the iPhone. With a new version of iPhone released basically every year or faster, brand loyalty for the phone is important to generate repeat business.
With respect to placement, Apple utilizes a distribution strategy that is relatively unique in the smartphone industry. It markets its phone largely through its own stores and through licensed dealers. Even in third party stores there is often a dedicated Apple representative. This strategy highlights exclusivity and differentiation. In addition, Apple is known for its policy of scarcity -- it deliberately creates stockouts in its stores during launches to create the illusion of otherworldly demand. Another element of the company's distribution strategy is that it partners with service providers for data plans necessary to use the iPhone's data capabilities. The data plan provider choice is critical because those providers have their own stores and the degree to which the iPhone is promoted in those stores depends in part on the nature of the deal with the data plan provider. Apple partners with AT&T and Verizon, the two leading data providers, in the U.S. market.
There are a number of ways that the iPhone can be segmented. It could be segmented by service provider, but a more effective way of gaining insight into the customer base would be to segment by demographics and/or psychographics. Demographic segmentation would involve age, gender, education level, ethnicity and other criteria such as geography. Because of the heavy lifestyle orientation of both the product and its marketing, the iPhone can also be segmented by psychographics. Some users will be casual, other heavy; some will download many apps, some will only download a few; plus statistics can be gathered with respect to specific features (mp3 player, phone and others).
The popularity of the iPhone means that it spans a number of demographic variables. The product is priced at…[continue]
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