Macro-environment Pest analysis
To further analyse the external marketing environment, the macro environment we conduct a PEST analysis. Such external factors usually are beyond the firm's control and sometimes present themselves as threats. PEST is the abbreviation for political, economic, social and technological. (Refer to Appendix B for full PEST analysis)
The Competition
In the PC market Apple face intense competition form the likes of Dell, Toshiba and HP. Whilst in operating system, Microsoft are the biggest rivals. In both these Apple do not have a great hold. However in the Mp3 market, which is more relevant, Apple have dominated the Market since the release of the iPod. With the competition current coming from SanDisk and Samsung.[12]
Its safe to say that although Apple is diversified more than most of its competitors, their differentiation is a biggest strength because they spend so much on R&D, which is what seperates them from their competition.
SWOT Analysis
A summary of Apples SWOT analysis is that Apple are in a very strong position because it has a powerful brand name and is recognised globally, coupled with its huge fan base of consumers gives them many strengths within the market. The fact that they are so popular in the mp3 market gets them a lot of attention within the media. Only Microsoft due to being Apples biggest competitor will get a large amount of media coverage. The iPod itself in terms of ease of use and innovative technology means that it is very difficult to match. Only the Microsoft Zune 8 can compare to the design and usability. Although may have been released to late in order to make real challenge against the iPod.
For Apple to overcome the potential threats, they must continue to be inventive and explore opportunities globally. R + D and product innovation are of the utmost importance. Apple must continue to improve and be innovative to remain market leaders, otherwise other companies may capitalise on any kind of drop in standards. Although one of the largest digital music sellers in the world, iTunes face a bit of competition from Amazon as well as Myspace, Apple have a target on their backs and only takes a company with good resources to challenge them.(for full SWOT analysis refer to Appendix C)
Marketing Objectives
Due to Apples secretive attitude, finding real evidence of real goals is difficult. What we can deduce however is that although iPod sales are starting to slow they still want to maintain high turnover and profit. That’s the major objective of any of its competitors. Also from research over various sources Apple are aiming hoping to:
- Improve brand awareness
- Improve sales with the iPod touch.
- Improve position in the mobile phone market, with the help of the SDK for the i-phone
→Aiming to sell 10 million iphones this year
Improving sales of the iPhone and the touch, as they are the ‘in’ products which everybody wants, would help them gain a enormous amount of revenue and help spread the brand.
Marketing stratergy
I think Apples main stratergy is there appeal to their customers. What you find in general with many of their products more btter looking than the competitions. One thing we can see is Apple building on the popularity of the iPod. It appeals to the Mass market. Now appeal less as a computer company and more of a electronics company and seem more user-friendly.
Apple have a differentiation stratergy. Apple products are known to have a unique appeal, with its sleek designs a userbility. Due to this it gets a lot of attention from consumers and the media. Without much advertising or marketing on their part. They give something new and unique to talk about which everybody gets pulled in to.
With the iPod there not only selling a mp3 player, there selling a social chic. Everybody has one and everybody wants one.
Target Market
Target market
- Apple Ipod focused particularly at those between the age of 12-25, consistent with their advertising. Bright colours and and a man dancing.
- It will appeal to both males and females
- People who have a passion or interest in music and/or literature
The iPod appeals to the mass market, everyone is a potential customer. Young or old. They have music, literature and podcasts all avaiable for the iPod owners. The simplicity and sleek design is what attracts people. Although the latest ones (the touch) are expensive, and may be aimed at higher and older earners.
Marketing mix
The marketing mix consists of four elements: Products, Price, Place and Promotion, better known as the 4p’s. The marketing mix can only be made when the target customer is known, which I have done above.
Evaluation of the Apple Strategies
The overall position of Apple is profitable as sales have increased over the last years. Sales of the iPod have been increasing since it had been released. Although sales for this quarter have been said to be slow.
Source: wikipedia[2]
This has been reflected in their strategies to expand through the introduction of newer more innovative designs and this is why they are market leaders in the mp3 market.
Apple has a lot of few different range ranges of iPod products, like the shuffle, the nano, the video and touch. All of which have different prices. This is a good strategy as it appeals to a wide mass market. The fact that Apple append very little on Advertising on their products compared to many of its firms, is down to the general buzz and interest of their products. There teasing with products entices the media and technology enthusiast tin wanting more. However this may not always be the case, for apple to consider more advertising may be important. The differentiation approach sets Apple apart from its competitors however Microsoft is challenging Apple. They have the money and resources to match. It would be fairly foolish to think that Apple is too strong in the market. They need to continue to invest a lot of money in R+D. With products like the iPhone and the Touch it can be said they are going in the right direction, in achieving innovative, unique designs.
I also think Apple have a huge opportunity in supporting the whole education system. It has the money and resources to do this. Possibly negotiating contracts with schools and universities, for pod casts even computers could put Apple in a challenging position in the computer market. Having agreements with universities, and schools can increase there popularity and awareness.
Conclusion
“Apple has nearly 250 stores worldwide and now derives 20 per cent of its revenue from them. And those numbers are growing. In the quarter to the end of September 2007, for example, Apple reported that its retail stores accounted for $1.25bn of the company's $6.2bn revenues - a 42 per cent increase over 2006.”[14]
Since the release of the iPod, about half of Apple's revenues come from music and iPods. Interest in the iPod and iPhone has made other apples products popular, like the Mac whose sales have increased. Apple has demonstrated how to create real, breathtaking growth by dreaming up products so original and imaginative that they have taken industries by storm. To maintain control in the mp3 player market, they need to maintain their quality and strategic marketing plans if they want to keep ahead. Apple leads the industry in innovation and many other things like design features. Sony, Microsoft, Creative are all right behind Apple. The battle of the MP3 players will surely be an excellent example of competition that breeds better products, with Apple taking the first step with the iPod Touch and iPhone.
The iPod was ground-breaking technology that was absorbed by mainstream culture, and now has become the epitome of portable audio. Companies such as Apple will need to be self-motivated if they are to stay ahead of the game. Differentiation and innovation is the key in maintaining their dominance.
Apple has a high competitive advantage because of its excellent product image. They use simplicity and lustrous designs to appeal to customers. The electronic market gets connected more and more with the entertainment market. With already the market leader in the digital sales market, it would not be surprising to see Apple move in to TV.
Appendices
Appendix A
Source: Corporate Stratergy [8]
→Rivalry
Calling the level competiton in the mp3 industry as intense is an understatement. The this case we have the like of Sony, Samsung and Creative, with many more in the whole market. Apple commands 70 percent of the MP3 player market.[10] However with concerns of the MP3 market being saturated, its puts more pressure on businesses to succeed. With the innovative designs like the iPod touch and the iPhone it shows why apple are leading the market.
→Threat of Substitutes
Countless substitute products are available for the iPod whether they are actually better or even appeal more is a different matter, but the threat is still very high. The more differentiation th less like a switch to a substitute will occur. To date no company have come close to meet the popularity of the Apple products. Reason being the innovative designs and ease of use have convinced most customers to stick with Apple. Higher prices need to be justified by the differentiation of the product. Substitutes such as the Sony NW-(A806), Microsoft Zune 8 and many others, can still attract many customers but with imaginative designs like the iPod Touch leaves many companies playing catch up.
→Threats of new entrants
Although it is possible, its unlikely. Start up costs would be very high so little chance new entrants would enter a very competitive market unless they have a very differentiated and innovative product. Existing firms have established themselves in the market and have created strong brand awareness.
→Bargaining Power of Customers
The bargaining power of customers is high due to the fact it is easy to switch to a substitute where quality or price, even both is better elsewhere. With so many substitutes of similar quality, its down to the business to make their products more appealing. Apple have done this with their strong vision to build innovative, unique products and have made their products easy to use.
→Bargaining Power of suppliers
Suppliers don’t have much power over larger corporations like Apple. With the booming chinese economy, Apple can change suppliers without any major consequences, if they are in disagreement over price and quality. However Apple have built a strong relationship with their suppliers, with strict procedures and this in turn helps Apple achieve it targets.
“Our business environment is competitive and fast-paced. Our suppliers must understand this dynamic and be agile and flexible in responding to changing business conditions.”[11]
Appendix B
Appendix C
Strengths:
- The products itself appeals to both males and females
- All the iPods starting from the very first have a great reputation amongst it customers for its userability.
- Great technology underpinnings that allow the creation of powerful products. Allows them to attract a huge customer base due to their innovation and technology
- Very user focused and always committed to a superb user experience, in all their products
- Limited edition ranges, increases product life cycle. Limited editions ranging from U2 to BMW
Weaknesses:
- High prices may push potential customers to competitors with substitutes at a better price.
- Technology is changing at a faster rate than ever. For Apple to remain profitable, they must invest huge amount of money in their R&D to remain competitive.
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Questions over reliability of the iPod [2]
Oppurtunities:
- iPod was is revolutionary technology that has become part of mainstream culture, Apple can capitalize on that
- To develop themselves in to other markets due to the reputation they earned from the iPod.
- New designs may be available to boost sales and extend the product life cycle e.g. the iPod touch.
-
iPods have also gained popularity for use in education. Apple offers more information on educational uses for iPods on their website. [13]
Threats:
- Very high level of competition, a lot of substitutes, possibly offering cheaper prices i.e. iRiver
- Cheap fakes being made of the iPod and the iPod shuffle
- Concerns of market being extremely saturated.
-
Competition, with the like of Amazon in digital sales [7]
Appendix D
Sources: Wikipedia [2] and Apple Inc. Model database
References:
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Apple Reports First Quarter Results(January 2008), [Accessed date: 14th March 2008]-
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Tim Conneally, (February 2008) Nearly 3% of America became iPod converts over the holiday, [Accessed date: 14th March 2008]-
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Betsy Morris, (March 2008 ) What makes Apple golden, [Accessed date: 9th March 2008] -
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Q/A with apple employees and analysts(January 2008): Reading the runes for Apple [Accessed date: 5th March 2008]-
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Jefferson Graham, (March 2008), Amazon takes on Apple with copy-protection-free music [Accessed date: 20th March 2008]-
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Corporate strategy [Accessed date: 25th March 2008] -
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[Accessed date: 25th March 2008]-
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Leander Kahney, (March 2008)How Apple Got Everything Right By Doing Everything Wrong [Accessed date: 27th March 2008]-
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Apple and Procurement [Accessed date: 29th March 2008]-
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Jeremy Horwitz(August 2006) iPod maintains 75.6% share of U.S. MP3 player market [Accessed date: 31st March 2008]
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iTunes U and mobile learning[Accessed date: 2nd April 2008]
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John Naughton(March 2008) Core values that turned Apple into the best store in town [Accessed date: 4th April 2008]
Bibliography
David Jobber (5th Edition), Principles of Marketing
