Apple Strategic Marketing Analysis Apple

Apple Strategic Marketing Analysis

Apple (NASDAQ: AAPL) is one of the most profitable companies in the high technology industry, with a market capitalization rate of $360B, and in their most recently fiscal financial quarter, iPhone sales great 142% and iPads sales, by 183% (Apple, Investor Relations, 2011). Apple had one of the best financial quarters in its history, delivering a record $28.5B in revenue and $7.3B in Net Profit. For the quarter, Gross margin increased from 41.7% from 39.1% quarter-over-quarter from a year ago (Apple, Investor Relations, 2011). Most surprising was the increase in International Sales, a region Apple has often struggled to gain a foothold in, which in the latest quarter delivered 62% of total revenues (Apple, Investor Relations, 2011). Apple has long struggled with global expansion due to the unique approach to innovation they rely on-based predominantly on western consumers (Cuneo, 2003). The transition for being a laptop or PC company to being primarily a smartphone, MP3 and tablet PC company has already also occurred, and the latest analysis of the company's sales rates illustrate this (Apple, Investor Relations, 2011). On the latest fiscal quarter, Apple sold 20.3M iPhones globally, which amounted to a 142% increase quarter-over-quarter. The company also reported selling 9.2M iPads globally during the quarter, a 183% increase over the previous year, quarter-over-quarter. Global sales of Macintosh PCs reached 3.9M units, a 14% increase over a year ago, with 7.5M iPods sold during the latest quarter, a 20% decline from a year ago. Apple continues to also redefine the concept of digital rights management-based selling and service systems, with 350,000 applications available in the App Store, 65,000 native iPad apps and 14 million song in the iTunes store (Apple, Investor Relations, 2011). The company reached a milestone this year with 10 billion apps being downloaded from the App Store and 50,000 television episodes being available for downloadable as well. Based on an analysis of their financials and the research completed for this study, the following Apple Revenue Analysis and Forecast by Product (2010 -- 2015) has been devised.

Figure 1:

Apple Revenue Analysis and Forecast by Product (2010 -- 2015)

Sources: (Apple, Investor Relations, 2011) (SEC Filings, AAPL, 2009 -- 2011)

Just 26% of total sales are form the Macintosh today with 38% from the iPhone with the proportion of revenue expected to drastically increase over time for smartphone platform. Also rapidly gaining market share is the iPad, which has the most rapid growth rate of any product family at Apple today (Apple, Investor Relations, 2011). This has major implications for how Apple manages its development community across all devices, with specific focus on the iPad2 and follow-on tablet PCs and systems. In addition, the traditional iPod platform is being scaled back as the benefits this platform provides consumers can be found in all other platforms, often accentuated with other forms of digital content as well, from e-books and published materials to movies, television shows and other forms of video content.

Market Analysis

The future of Apple's profitability is entirely based on the success of their iPhone and iPad investments and the transformation of their business model away from just hardware to digital content ecosystems capable of generating significant gross margin (Snell, 2011). Investment and industry analysts have often shown through analysis that their supply chain is capable of keeping up with a much more aggressive timeline of new product development and launch (Prudential Equity Group LLC, 2006). Apple is scaling its product strategy towards video content as the center of their iTunes ecosystems, and has been monitoring this for nearly six years, as Figure 2 below illustrates. During the Apple iPod product planning cycles, Apple made a conscious decision to embrace the idea of having platforms capable of displaying video so well customers would be willing to pay extra for higher definition movies and shows (Reppel, Szmigin, Gruber, 2006). Now nearly six years later, this strategy is becoming a highly profitable area of their product mix.

Figure 2: Video-Ready Apple Products

Source: (Apple, Investor Relations, 2011)

There is a tendency on the part of many industry and financial analysis to attribute this exceptional growth to a superior hardware platform alone, with nearly a "halo effect' occurring over the iPhone and newly introduced iPad Series (McNeill, 2011). As an analysis of the company's previous experiences in hardware platforms, ranging from the very successful Apple II to the ill-fated Lisa, the one highly reliance predictor of success or failure is the ability to attract developers to write software to make the most use of these systems (Mitchell, 2010).