Marketing Strategies and Business Environments of Apple Inc - Case Study Example

Marketing- Apple Company Table of Contents 1.0 Introduction 2 1.1 Apple Inc. 3 1.2 Apple’s vision 4 1.3 Mission 4 2.0 Situation Analysis 4 2.1 External Analysis: PESTLE analysis 4 2.1.1 Political/legal analysis 5 2.1.2 Economic analysis 6 2.1.3 Social analysis 6 2.1.5 Environmental Analysis 7 2.2 Internal environment 8 2.2.1 Strengths 8 2.2.2 Weaknesses 8 2.2.3 Opportunities 9 2.2.4 Threats 9 3.0 Marketing objectives 10 4.0 Marketing Plan 11 4.1 Market segmentation 11 4.1.1 Geographical segmentation 11 4.1.2 Demographic segmentation 12 4.1.3 Behavioural segmentation 12 4.1.4 Psychological segmentation 13 4.2 Target Market 13 4.3 Positioning and Differentiation 14 4.4 Marketing mix 15 4.4.1 The product 16 4.4.2 Pricing strategies 16 4.4.3 Distribution strategies 16 4.4.4 Promotion 17 4.5 Global and e-business 17 5.0 Marketing Budget 18 6.0 Conclusion 19 7.0 References 20 1.0 Introduction This paper seeks to develop a marketing plan for Apple Inc. new product, iPad2 that will address the needs of a new strategic business unit. Strategic business unit in this case, is defined as a business unit within the overall corporate identity, which is distinguishable from other businesses because it serves a defined external market, where management can conduct strategic planning in relation to products and markets (London, 2011). It incorporates the whole company or it may be a smaller part of the company that has been established to carry out a specific task. In relation to that, this paper will look at Apple Inc.; provide an internal and external analysis of the company, its marketing objectives, marketing plan and the marketing budget for its newly introduced product, iPad2. The paper seeks to assess whether the following learning outcomes have been attained: Integrate marketing decision with organizational strategy Establish a broad base of marketing knowledge and the strategic implications Develop and implement marketing plans for a product of service Reflect an international perspective and the global context of decision making in marketing planning Evaluate the appropriateness of e-business strategies 1.1 Apple Inc. Previously referred to as Apple Computer, Inc. Apple Inc. is a multinational corporation based in America that designs and sells computer software, personal computers and consumer electronics. Some of its famous hardware products include the iPod, the iPhone, the Macintosh line of computers and the iPad. The company software includes the iWork suite of productive software, Mac OS X operating system, Logic studio and Aperture. Apple Inc. was established in 1976, and has grown to be a global leader in the technology and telecommunications industry. Its annual revenues are estimated at $60 billion, which is attributed to the company’s distinctive marketing and advertising campaigns and its well-established brand name (Erick 2009). The company’s recent innovation is the iPad2. 1.2 Apple’s vision Apple has a vision to become a global leader in the consumer electronics industry. It is the CEO’s dream that come 2020, every desk will have Apple computer. 1.3 Mission The company has a mission to continue producing revolutionary and innovative products to its consumers such as iPhone, iPads and iPod. The company also seeks to take part in Corporate Social Responsibility (CSR) activities such as enhancing environmental conservation. 2.0 Situation Analysis 2.1 External Analysis: PESTLE analysis A pestle analysis is simply a framework that classifies environmental influences as political, economical, social, technological, legal and environmental. The analysis scrutinizes the effects of these factors and their relationship with each other on an industry. The application of pestle analysis is useful for business and marketing planning, strategic planning, research reports and product development (David 2010). Pestle analysis also makes certain that, the performance of a company is associated positively with the forces of modifications that are influencing the business environment. Besides, pestle is also efficient when an organization chooses to penetrate its business operations into new states and new markets. 2.1.1 Political/legal analysis Apple designs, develops and sells various products and services lines. The company markets its products to businesses, education, consumer innovative professionals and government customers (Barnett 2008). Apple has diversified in selling numerous products and the way it conducts business. This diversity is what led to its crush during John Scully time. Nations have diverse legislations which in some way may influence the way businesses are carried out. These legislations may restrict or give opportunity to such companies (David, R 2010). The company is faced by various political/legal factors including: The company has to abide by the various set environment laws such as safe disposal or recycling. As a result the company has to establish measures to deal with the same to ensure it keeps in line with legal requirements The company’s overall business is also being affected by political uncertainties as a result of terrorism activities The European union, NAFTA, among other regional trade usually opens doors to market apples product in Asia, Europe, and Latin America as these regional provides enormous potential Beatles lawsuit filed against apple is negatively affecting the company’s reputation The company also depends on access to intellectual property and patent acquired from third parties. As a result, apple might encounter infringe problems with existing patent of others. 2.1.2 Economic analysis Since 2005, the company has opened approximately 100 retail stores. These stores, though potentially beneficial, they are having negative impacts on the resellers business and some may shut down. Taking into account tha apple resellers still account for over 50 percent of its domestic sales, it is facing the risk of cannibalization and may suffer deeply. Other economic factors affecting apple include; the government has ensured a stable macroeconomic environment for the industry. This general stability, stable currencies, low interest rates, and international competitiveness form a basis for the growth of the company. However, the company can be affected adequately by a depressed economy, making it to change its marketing strategies which may at times be unfavorable to its success 2.1.3 Social analysis This encapsulates tastes, demand, and varies in fashion and disposable income. Social cultural trends begin and end with the youth or the teenagers (Kotler & Kevin, 2006). Currently, the purchasing power of the teenagers has increased at a high pace. These people are also seen to be brand conscious as they believe that certain brands will enable them to fit in a certain social grouping. The target generation of the Company is however a major threat, as we know the youths change their tastes and preferences very often. In addition, this group of people depends on their little savings to buy these brands. As a result, the company needs to frequently change its promotional and pricing strategies. Moreover, education has resulted into a primordial matter for the new generation and this is a significant factor for apples business. The increased computer literacy and its application in almost all fields globally is also a good source of opportunity for the company. 2.1.4 Technological analysis Technological innovation is seen as one of the major factors leading to the growth and success of the apple company. Currently, technology is developing at a high pace and individuals appreciate new advances in their systems. Increased demand for more and new technologies in various professions and in schools has increased the company`s opportunities. The constant change in technology in the twenty first century has affected almost all industries and has resulted to a shortened product life cycle. Companies like apple should take into account and keep up to date with the emerging new technological advances. This will ensure that, apple remains competitive in the market at the same time increasing the market share. A company should combine new and existing technologies in order to respond to the increasing technological development. 2.1.5 Environmental Analysis Some businesses may engage in environmental unfriendly practices in order to maximize their profits without considering the welfare of the people. In our case, Apple Inc. has managed to be environmentally friendly and the company does not engage in unethical practices that the consumers have huge offence to. In addition, the company has established measures for recycling to ensure that it abides with environmental regulations thus remaining environmental friendly. The company has been very careful concerning this issue making its brands very popular and successful globally. 2.2 Internal environment 2.2.1 Strengths Apple is considered as one of the most successful companies around the globe. One of the success factors behind Apple Inc. is its strong brand name. The company can make use of this advantage to market its iPad2. Apple also focuses on quality production, a fact that has made the company attain brand loyalty, and thus the company is able to acquire new customers and retain the existing ones. Apple can also benefit from the economies of scale since it has a well-established relationship with its supplies and retailers. Another point of strength is that the company’s iPad2 is simple and can be used with ease and therefore attract more customers to purchase it. Apple has also established continual investment in research and development to facilitate further discovery of its potential markets and the innovation of improved products and technologies. There are also enough financial resources that can be directed to the operation of iPad2. 2.2.2 Weaknesses Apple’s products are highly priced and, therefore cannot suit the target market. There is also the management problem since there is no successor to take over the leadership of the company. For instance, the recent news about the health status of the current company CEO led to a 3 per cent fall in the company’s share prices. This may consequently affect the sale of iPad2. The simplicity and ease of Apples iPad2 may result in image problems since the one of the company’s earlier innovations Macintosh, is regarded by some businesses as a toy. The company acknowledges that a significant proportion of its profits rely on the global economy. Therefore, economic downtowns can have a significant negative impact to the company. Another issue is that fluctuations in the foreign currencies make it difficult for the company to predict iPad2 profits in the foreign markets. 2.2.3 Opportunities Apple is expected to develop a new mobile platform for advertising its newly introduced product, the iPad2. This will enable the company increase its revenues by approximately 20 per cent. The company can also make use of its strong brand name to target other markets and break into other markets that have never been reached. The company can also tighten its relationship with other companies; with an aim of developing joint ventures that will enable the company thrive. Considering the rate of online marketing increase, the company can use this opportunity to make online sale of some of its newly introduced product. . 2.2.4 Threats Apple Inc. faces stiff competition from other companies such as Dell, Sony and Toshiba. Microsoft, which is one of its competitors, has launched Vista, Windows 7 that is currently gaining a larger market share compared to Apple’s newly launched iPad2 (Helft, 2011). In addition, when it comes to pricing, Apple’s iPad2 is considered to be highly priced compared to the prices for the products offered by most of its competitors such as Dell. Moreover, the world of technology is rapidly growing which therefore means that the company has to remain innovative in order to remain effective in the market. This is based on the fact that the global market today is highly driven by innovations and customers prefer innovative products. Customers prefer latest designs. 3.0 Marketing objectives The latest Apples’ innovation is the iPad2, which was recently launched. This is an improvement of the original iPad, with major additions such as front and rear cameras, and a dual core processor. The current model is thinner and lighter, compared to the previous model, and contains more storage and RAM. To realize its vision, Apple Inc. established various marketing objectives that will help the company achieve its major product goal. These include: Increase its overall sales by 20 per cent Increase the company’s revenue by 20 per cent Increase the market share by 15 per cent within the year. Gain a 10 per cent expansion to the departmental stores Attain a 60 per cent increase in its brand awareness Expand the existing markets by 10 per cent in the next quarter 4.0 Marketing Plan 4.1 Market segmentation Market segmentation is a method of subdividing the homogenous and aggregate market into addressable, aspirations and targeted needs buckets. These buckets are in turn analyzed in terms of psychological, demographic, behavioural and geographical constraints. Through the application of market segmentation strategy, a company can drive complete and unified product measures that are deemed harmonious with customer outreach, messaging and channel strategies for marketing and supporting clients (Kotler and Kevin 2006). Apple Inc. recognizes the diverse needs of their customers across the globe. To cater for this, the company will avoid mass marketing strategies and employ target marketing to compete accordingly with other major players and competitors. Ultimately the company sales volume will go up due to increased levels of customers’ loyalty. The following segmentation methods will be used. 4.1.1 Geographical segmentation This involves subdividing the market in terms of region, metropolitan area, city size, and density. Apple Inc. will divide its customers according to their locations. It is vital to acknowledge that the buying power of customers varies according to their locations (David 2010). For instance, those customers in urban areas have a higher purchasing power than those in rural areas. As a result of this, product in these rural areas will be sold at cheaper prices to enable people in these areas enjoy the company’s high quality and new product iPad2. 4.1.2 Demographic segmentation Demographic segmentation considers age, gender, life stage, race, marital status, and residence tenure in subdividing the market. It is certain that in up-and-coming nations, many young citizens are tending to be wealthier than the older generation. This is due to high levels of literacy in these groups of individuals and availability of employment opportunities (Kotler and Kevin 2006). In addition, the apples product is very favorable and mostly preferred by the young generation. As a result, the company can subdivide its market in terms of age targeting the young adults. For instance, in 2010, youths composed the larger percentage of apples customers globally as indicated on the table below. Age Approximate Percentage of Apple products bought in 2010 by different target markets. Adolescence 10 Young adults 55 Middle aged 31 Elderly 04 Total 100   As shown above, it is certain that, apple will target the youths who have technological know-how thus easily using the company’s new product. 4.1.3 Behavioural segmentation The general behaviours of consumers change from one place to another. It is clear that, Apple enjoys great levels of brand loyalty especially in European and American countries where 3G network is highly used. The company has smart products such as iPhones4 having high levels of internet connection. In due course, many consumers have a preference for the new product as it is very fast, smaller and lighter compared to its predecessor. With the ipad2, one can choose which network to use depending on the model, thus preferring high speed internet networks which will as a result lower the costs of internet. 4.1.4 Psychological segmentation This type of segmentation method is very significant in the apple company. The general habits and life styles of the customers are of importance as far as psychological segmentation is concerned. Like all other markets, products from Apple Inc. will increase during holidays when the disposable income is high. During this time, the company will embark on vigorous advertisement campaigns as well as employing more sales persons to cater for the increased demand of their products. Further, Apple will give discounts to its customers as one way of boosting sales volumes during these times. 4.2 Target Market It is certain that, many young people are tending to be wealthier than the older generation. This is due to increased literacy levels in these groups of individuals and availability of employment opportunities. In addition, the apple products are very favorable and mostly preferred by the young generation. In 2010, youths composed the larger percentage of apple`s customers globally. Therefore, it is certain that, apple will target the youths who have technological knowledge thus easily using the companies products such as iPhone mobile devices, iPod, Macintosh Computers, and the new company’s product Ipad2 among other major products. 4.3 Positioning and Differentiation Product positioning and product differentiation are essential processes in every company. With the increased international competition in businesses, potential consumers need a good reason to buy a certain product. Such a reason comes from the company’s positioning and differentiation as they explain what sets the company’s products apart. Without this, customers have no reason to buying a certain product as opposed to that of the competitors (Sharp and Dawes 2001). Product differentiation is the process of differentiating a company’s products from others, to make them more attractive to a certain target market. The process involves differentiating the product from that of it competitors as well as the company’s own product offerings (Sharp and Dawes 2001). Product positioning on the other hand concerns how a company differentiates a certain product. Apple Inc. has positioned itself to the wealthy customers, and innovators. This is based on the fact that, Apples products are expensive thus, not affordable by the poor man. Though lowering prices will increase the company’s sales, it is deemed to hurt the brand as the company would not be able to increase such prices in good times (Keller 2009). Apple Inc. has adopted various product positioning and product differentiation for its new product, Ipad2, in order to make it unique thus attracting the target customers. The product has been differentiated in terms of: quality which is accompanied by price differences differences in design and functional features Sales promotions. This involves such practices as advertising In terms of design and functional features, Ipad2 is smaller, faster, and lighter compared to its predecessor. It weighs 1.33 pounds and measures 7.31 by 9.5 by 0.34 inches. The iPad2 is as well 0.16 inch narrower, 0.16 inch thinner and 0.06 inch shorter compared to the original iPad (Chad 2011). As a result, it is simple to carry with only one hand, and the reduced weight makes the product simpler to hold for long period of time. Other product features includes two cameras on its mobile ios device, its advanced support for HD and HDTVs video, and customers may choose on which network to use as separate models are sold for every network. These features make the product very favourable to the young generation which is the Apples target market. Ipad2 is the latest Apple product to land on the market and it reinforces the company’s position in the minds of potential customers. Its advertising campaigns emphasizes on that, the company is improving people’s life, with the highest newest technology, and leading the world. Through the ads, the company is unique from other high-tech firms for instance, Microsoft. The company retains $499 as entry price and this makes it difficult for its competitors to match. We can thus say that, the company is positioning itself as the number one main concern in the business and emphasizing on the brand's repute of constantly being the best. 4.4 Marketing mix 4.4.1 The product iPad2 appears like a bigger iPhone with a bigger display. It has a smaller display compared to its actual physical dimensions, and has a thick black border around each case. It also contains fewer features compared to a net book or laptop. iPad can be used to read electronic books, write and receive emails, browse the web, and view photos and movies on a screen that is 30 per cent smaller than the size of a laptop screen. The device is touch screen operated and has a virtual keyboard (Helft, 2011) 4.4.2 Pricing strategies Effective marketing and sales program calls for a thorough understanding of the target market and the channels used to sell the products. In addition, the price of the product should match with the quality of the product. The strategy Apple applies is that not all consumers can be regarded as business professionals, but all those who are regarded as business professionals are consumers. Therefore, a product that targets business professionals has a more limited audience than the one targeting consumers. Apple’s new product, iPad2 costs $499; customers will be charged the storage, and connectivity costs (Helft, 2011). 4.4.3 Distribution strategies Apple Inc. distributes its products through wholesalers, resellers, both national and regional retailers and cataloguers, who distribute products from Apple’s competitors. Furthermore, the company sells its products and even resells some of its used products directly to its customers in most of the major markets. The company also distributes its products through online stores. In order to achieve the outlined marketing objectives, Apple has to ensure availability of its product to the targeted customers. The company has therefore invested in certain programs to boost reseller sales. For instance, the company has staffed selected reseller stores with the company’s contractors and employees since the company believes in high quality buying service from knowledgeable marketers who can convey the value and quality of the company’s product to the customers in order to attract and retain the existing customers. The company seeks to attain exclusive direct contact with its customers because it believes this is the only efficient approach that can be applied to demonstrate the advantages of the new product to its target customers. Therefore, the company has increased its distribution centers for iPad 2 so that its products are made available at locations where its customers shop. 4.4.4 Promotion Launching promotional strategies for the company’s new product will meet the needs of its customers. The consumers will also be able to gain a deeper understanding about this product and the values it comes with it. This will in turn help the company boost its market share, sales and revenues. Ample sensitization of products being offered to the customers will be done through marketing campaigns and advertisements. Print press, such as newspapers, as well as media such as TV and radios can be used. The company can place large adverts on the newspapers or radio, to create more awareness about its new product and how the interested customers can purchase it. This way additional 15 per cent of the potential customers will be reached. Billboards will also be erected on major roads and road junction to further create awareness of the new product. 4.5 Global and e-business Electronic business (e-business) refers to businesses that are conducted through the internet, or with the use of internet technologies to enhance the profitability and the productivity of a business. In simple terms, such a business can be described as one that is done through a computer. Most thriving companies employ numerous related but diverse models concomitantly. One of the best strategies Apple can employ to market its iPad2 product is the online surveying service. This offers a survey design expertise that translates customers’ issues and interests into a well-structured survey instrument (Marc 2009). People are incorporated in the service provision, though the process can be managed through electronic means such as exchange of emails. The survey subjects are then electronically contacted and their answers collected electronically. The survey results are then analyzed and delivered back to the clients over the internet. This will improve customer satisfaction. Apple Inc. can also employ other e-business models and strategies such as advertising banner and direct marketing, customer’s services, product sales, content providers and subscription sites among others. Banner and direct marketing is becoming the leading e-business model nowadays (Jim and Rick 1999). Banner advertising is the process of creating visibility on the web. Direct marketing models involve sending complex emails to highly targeted clients. The company can create a database of email addresses by persuading customers to register on a site in the exchange for access or information to a particular offer. 5.0 Marketing Budget Marketing budget will use promotional plans as a basis in calculating the marketing costs of launching the new product. In promoting Ipad2, Apple will use such promotional mediums as print press for instance, newspapers; Television; Radios; campaigns and advertisements; and networking. Networking involves attending networking functions or events where the company products are introduced. The table below shows various costs that Apple will incur in promotions. Promotional medium Costs incurred (in million US dollars) Print press 1.1 Television 2.9 Radio 1.8 Campaigns and advertising 3.2 Networking 1.0 Approximate costs 10.0 As shown above, it is evident that, advertisement and campaigns comprises of the highest costs while networking has the least with total approximate costs of $ten million. In order to realize its goals, the company needs to use efficient marketing strategies which will increase its market shares thus countering the promotion costs. 6.0 Conclusion It is clear that Apple Inc. is a globally respected company in the electronic consumers’ goods. This is due to its strong brand image resulting from high quality and innovative products such as iPod, iPhone, iPad and its new product; Ipad2 among others. Due to its success in the international markets in continents like Europe, Asia and Latin America, the company is expected to grow rapidly in other markets as a result of adequate marketing strategies and the favourable internal and external environments. Apple not only hopes to be the market leader in consumer electronic products but also the leading company in environmental conservation to improve living conditions. 7.0 References Barnett, R 2008, Global Reach: The Power of the Multinational Corporations, Oxford, Oxford University Press Chad, F 2011, Apple Unveils iPad 2 – Faster and Slimmer than its Predecessor. Available at: http://www.shaswatpatel.com/apple-unveils-ipad-2-faster-and-slimmer-than-its-predecessor/ Retrieved 24 March 2011. David, R 2010, Strategic management: concepts and cases, Upper Saddle River, Pearson Prentice-Hall. Erick, F 2009, What’s Apple Stock Really Worth? London: Cambridge university press Helft,, M. 2011, "Jobs Returns to Introduce a New iPad", The New York Times. Available at http://www.nytimes.com/2011/03/03/technology/03apple.html?_r=1&scp=10&sq=iPad%202&st=cse Accessed on March 24, 2011 Jim, C and Rick, B 1999, Selling Online - How to Become a Successful E-Commerce Merchant in Canada, Macmillan Canada, Toronto. Keller, F 2009, Market Positioning & Framing Market Research, London, Oxford University press. Kotler, P and Kevin, L 2006, Marketing Management (12 ed.), New Jersey, Prentice Hall. London South East 2011, Strategic Business Unit Definition [Online]. Available at http://www.lse.co.uk/financeglossary.asp?searchterm=&iarticleid=921&definition=strategic_business_unit Accessed on March 24, 2011 Marc, A 2009, Effects of Globalization to small businesses in Europe. Harvard: Harvard university press Sharp, B and Dawes, J 2001, "What is Differentiation and How Does it Work?," Journal of Marketing Management, 17, 739-59. Read More