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This report aims to present the marketing analysis of Apple iPad. The company sold 1 million
units in 1 month and in last one year they have sold nearly 19 million units which made it a
huge success. There are 5 business models which have been used to present a detailed
recommendations. The product no doubt is getting support of Apple¶s brand image but the
iPad has changed the way to consumer media. They have started a new consumer segment
and provided a platform for media industry to develop and publish news and magazine
content complimented with advertisement of brand at the same time. iPad is well received by
L¶Oreal, South Part Hotel, GE where they are using innovative apps to fulfil their customised
requirement. The product has is operating under premium pricing and hybrid distribution
strategy and gained 80% market share in since 2010. Though the rivalry is getting tougher but
Apple iPad has used his innovative and expensive marketing strategy to reach out to young
and now adult consumers. The product is also had µhalo effect¶ on iPhone resulting in greater
sales. The company have also used eco-friendly raw material and packaging to take care of
the environment as part of their green strategy initiative. (Apple Reports, 2010; Apple
Executive Summary ................................ ................................ ................................ .............. 2m
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Apple Inc. is based in USA and been the pioneer in the development & marketing of
innovative products by using innovative business methods. The company was formed in 1977
and they have developed Mac Computers to start with followed by iPod, iPhone 4 and now
the recently launched iPad in the tablet PC section. Not only in hardware but the company
has gained a competitive edge in the software industry with the development of Mac iOS, OS
X operating system which is the backbone of their hardware products along with the famous
iTunes which is used to transfer data in Apple iPhone, iPad or iPod. (Apple Annual Reports,
2010)
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In a recent lawsuit against Samsung, Apple has given details of their sales. The company has
sold 19 Million iPads in 1 yr and 108 ml iPhones & 60 million iPod Touch. (MacNN Staff,
2011) So this gives a good idea how wanted the products are although they have lot of
practical issues like problem with internet, no wide screen or no multitasking, the next section
X m
This section will make efforts to analyse the present market situation of Apple iPad using
recommended business models like 4P, SWOT, PEST, Porters 5 P model, Ansoff Matrix
followed by discussion on the basis of the secondary research conducted on the product.
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The product market mix consists of 4P¶s (Product, Price, Place & Promotion) and it
helps the marketing managers to get maximum response from the buyers by blending the
4 P¶s. (Kotler, 2010) As discussed during lecture hours 7P is applied on Services and 4P
and size of 9.5 x 7.4 x 0.5 inches. It has Wi-Fi and Bluetooth (limited to keyboard &
to change location to Brazil. The company started taking orders for iPad from 12th Mar 2010
and there was a gap between Wi-Fi & Wi-fi + 3G versions. The company made strict policy
to buy contract from AT &T with 2 contract options (unlimited data plan and 250MB per
month). There are various components which are taken from different companies shown in
figure 1 which reflects the management of strategic supply chain and integration of suppliers
m The company started selling iPad at $499 onwards and it was $638 (£399) in
UK. The company is very sensitive and adopted the same pricing strategy as they had done
for iPhone. Their best fit strategy is focused on price insensitive consumers who want to use
the latest product and ready to pay expensive prices. Thus products are sold using skimming
and versioning pricing strategy. Even the company decided to reduce the price by $100 when
the sales were low, none the less the company made good profits by launching the products
after 1-2 months interval. The company sold nearly 1 million units in one month and 19
million in one year (MacAnn reporters, 2011) Although the product costs around $260
according to a report from iSuppli but it doesn't include the taxes or R &D costs. (Raphael,
Xm The company started selling the iPad only from their retail outlets and then
Apple Stores but soon they also joined hands with AT & T, Amazon, Wal-Mart outlets as
show in Figure 2. They started selling in Europe (UK, Spain, Switzerland) by May 28 2010
and in the south east Asia like HK, Singapore during July 23 2010. Israel denied the selling
as they were concerned about the Wi-Fi issues. It is available at stores in India and require 3G
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2m Faster thinner and Lighter were the most keywords that were reflected in the adverts.
Similar to their old marketing campaign for Newton the company is using keywords like
Magical to entice the viewers. (Re, 2010) The company has used the famous song There
Goes my Love from The Blue Van whcih was also aired at the Academy Award in
Hollywood. The adverts are designed to sell iPads on the basis of functional attributes and the
users are shown to use the various features which can be used by the consumers like email,
2m The iPad¶s marketing is helping to sell iPhones as well. Users who have iPad but not
iPhone have decided to buy iPhone as their next Smartphone according to a survey. Also
Apple is marketing that the users can reduce the cost of their investment as they can use the
same apps for their iPad and iPhone. The company is also targeting old users and quite
successful in that with the help of their easy life adverts, nearly 15% of iPad users are above
56 yrs and above. (keizer, 2010)The company also organise special events like
@ mm m mto announce the launching of iPad. (Apple Annual reports,
2010)
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This section will study the PESTEL forces which are affecting iPad, due to short product life
cycle (6 to 12 months) the managers need to know the factors which are and which can affect
their strategy so it is important that every company should make contingency plans before
V m The Company has adopted monopolistic development behaviour and the
operating system works only with special programs developed specifically for them.
This has also started a new era of Apple apps which is an innovative business idea and
have created a new niche target market. Apple iPad have been used in the political
arena and they have been used by the USA President Mr Obama during June 2010
campaigns and they are planned to use iPad apps to interact with the voters like
updates on local events, election news, sharing of videos and even Call Congress
which connect to the local congress representative. This also helped Apple to give
upper hand with other competitors especially Android features. (Mukherji, 2010)
The company has started their marketing operations in politically stable countries to
start with like USA, Europe and now in India , China. The company is enforcing
customers to buy contracts if they want at good price and in UK the prices are quite
high and similarly in Asia as well as seen in Figure 4. Because of Apple has higher
bargaining power so they can take monopolistic actions although this is another threat
for iPad. This pricing strategy is also been condemned by the customers as there is
sudden decrease in prices after they are launched as happened with iPhone and now
m
iPad is built on iOS operating system and is challenged by Android
from Google along with other companies like Samsung, LG, Toshiba. The company
already has over 140k apps which is the highest in the tablet category. Microsoft and
Google ar still fighting to get their share but now iPad is most wanted product
although report says that people are quite less aware of the main features. The
drastically affected the sales during April 2010 and it is estimated that the sales will
be over 60 million by 2011. (NAT Reports, 2010) In other new reports, Android 3.0
is rather unstable and the tablet makers like HTC, Asustek Computers are forced to
delay the production after the bad review of Motorola Xoom with only 100k sales
(Marshal, 2011) Apple on the other had being proactive and gave upfront cash for the
Japan which limited their capability to supply. iPad has provided new platform in the
health care industry where the data from electrocardiograph (ECG) will sent directly
to the iPad using the new app called Airstrip Cardiology and AirStrip Cardiology is
development & research and this is just the starting. (Mearian, 2011)
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m Apple is facing tough controversy for exploiting the consumers
with their excessive pricing strategy in the tough economic conditions. The loyal
customers mostly don¶t get exclusive treatment and still have to face the tough pricing
decisions of the company. The price of iPad started at $499 but in developing
countries like India its $544. This is a premium product and du e to increasing
purchasing power the company is targeting the high end users but the company is still
facing tough challenge of low 3G service in the country which has drastically
mm iPad is changing the way people have thought about the product, with the
help of over 19 million iPad users the company is providing new opportunity for
making changes in the life of the people around it. The users are in touch using social
media sites is just a start but the product is well suited for the consuming media and
there are many opportunities for the brands where features like iP adverts give high
appeal visual & imagery presence for the users with the help of sound, touch and
motion. The users can interact with the banners which are on the side of the editorial.
This is a good strategy which is attract lot of publishers than even before. The CEO
have been using the iPad for corporate presentations Companies like Lexus have
created a virtual tour of the car which reflects the level of portability which is brought
by Apple. The application is widespread even in hospitality industry where hotel like
The Plaza Part South Hotel is using the iPads for their rooms and they can order the
drinks or food at their convenience or can request wakeup calls or look at the city
guides & even airlines schedules. Another company like L'Oreal is using it to show
the application and usage (after and before affects) which is helping the brands and
the consumers easy access & enhancement of brand building. (Young, 2011) So
Apple has provided a new platform apart from web where the marketers can get
Ö m Fujitsu is claiming that they have launched and used the name iPad before
Apple similar to iPhone controversy with Cisco. Also feature like ebook reading by
Amazon Kindle faced lawsuit as they are not paying the author for reading his book.
Still no issues have been noticed with iPad but time will tell if they will face legal
m
m m Apple has taken great care and done full environmental
impact analysis (as in figure 4.1) and have used environment management methods
during the design and develop life cycle including the material to be used for
manufacturing and significant efforts were done to reduce the energy consumption of
iPad by 80%. iPad is made of recyclable glass and Aluminium and the packaging
material is recyclable & the packing is efficiently done so more iPad's can go in one
container. The company is not using Arsenic, PVC, Mercury as the company has
started following Environmental friendly European directive and restrict the use of
harmful chemicals. The company has also stared recycling programs at majority of
the places where Apple iPad is sold. (Apple Environment Report, 2010)
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This section will evaluate the industry factors which shape the strategy of Apple. Presently
Apple due to its strong position can govern the tablet market but still there are many factors
which have needs to be analysed before iPad can become a true market leader.
2m ! m m Apple has high power over consumers as they have partnered
with big brands and therefore using monopolistic price policies. Their product is
standard and can't be customised by others. The company is taking products from so
many other companies and assembling it which has helped them to decide the prices
and high brand image is helping them to cash the price of advertising from the
consumers. The company has changed the product and launched iPad 2 from March 2,
2011 but still there are lot of buyers who haven't used iPad first generation yet. (Apple
2m ! mm" mThe buyers have no control over iPad and they are at the mercy of
the company. The buyers want to get products as soon as possible but mostly the
company says 3-4 weeks for iPad to reach the consumers. Due to strong ties with the
network providers the buyers have to take the products under contract otherwise they
have to pay huge money to get the iPad alone. The price is $499 in US but its $ 544 in
Asia but the buyers can¶t do anything due to low power over the supplier. The
products in this category is quite high and so the switching cost is also quite high.
(Shin, 2010)m
Figure 5. iPad 5 forces Model (Kotler, 2010; Apple Annual Reports, 2010;Shin, 2011)
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The Company has maintained a good brand image and its
difficult to imitate their strategy due to high financial demand. Apple is deciding the
price of the product and consumers are ready to pay & place pre-orders by online
which shows that Apple has high bargaining power. They are also earning good profit
and utilizing China for assembling the iPad. The switching cost is high and the
compared to their rival $1.9 billion still Nokia is taking time to launch their products.
The initial investment is quite high and building the infrastructure is not everyone¶s
cup of tea, apart from R &D division they also need stores worldwide which is time
consuming and require lot of money. (Apple Annual Reports, 2010; Pringle, 2010)
2m mm$ The threat is moderate but according to the Garter reports the
Tablet market will significantly affect the sale of laptop and PC (10.5 % only) and the
tablets is expected growth of 100% amounting the figure to reach 54 million in 2011
alone. Apple had 80% market share last year and it is expected that LG, Motorola,
RIM, HP etc. will affect the sales of Apple sales. The company has stopped the
production of iPad and now iPad 2 is in place. But time will tell who will be the
2m ë m % m The rivalry is quite high in the Tablet industry and IT giants
like Google, LG, Samsung, Toshiba, Acer and other local brands are entering the
market and what to have their share of consumer markets. Although the growth of
Apple is 61% and it is expected that they be the dominant player but still the
competition is quite high especially due to high inflation in the countries and the
products are quite expensive for normal users. Another challenge is the compulsion to
use only Apple apps from Apple stores in a consumer world where everyone is getting
use to freeware or low price preference due to software piracy. (Shin, 2011; Kotler,
2010)m
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This section will focus on the strength of the iPad which is helping them to gain
competitive advantage along with the weakness which needs to be taken care of by Apple
to gain better market share. The concluding section focuses on new threats which will
affect the sales of the product but there are many opportunities which Apple is still
mm
2m The company has excellent brand awareness which is helping the iPad's to sell
quickly like in just 1 year the company sold 19 ml iPads. The brand is getting
leverage from iPods, iPhones and other Mac loyal customers who want to try new
Apple products. The company has used innovative marketing skills to sell iPads with
2m The product has good battery life and when its locked it can stay for longer periods.
The product is small and easy to handle, its light and portable & has changed the
Document manipulations unlike Smart phones with multi-touch features. This light
weight device is making the Book Publishing easy like Amazon's Kindle as the
company is managing the publishing value chain & presented a new way to consume
2m The iPad software developers can embed the advertising content in the applications
and it has provided a new market for software developers. Over 30000 iPhone apps
can be installed on Apple iPad which give lot of choices for the users. The product
has the first mover advantage and has made a strong presence. (Apple Annual Reports
2010)
2m The product is eco-friendly and the company has studied environmental impacts while
&
mm
2m The product is facing lot of limitations which makes it difficult to sell in markets like
India or China where 3G is still in the developing phase. The iPad is not having any
camera and there is no multitasking, so two applications can't run in the product so the
users can't download the music if they are working. The internet is only for data usage
and no VOIP service like Skype can be used. Like in iPhone there is no USB port and
incompatible Flash support makes it difficult to open Flash sites. The maximum
normal. Without screen protector the product is quite delicate. (Bapun, 2010)
2m The product can only run on iOS operating system and so widespread Window Linux
programs can't run on the system. Only the apps from Apple Store can run on the
2m The product is small but the price is high and with limited distribution channels its
tough to get the product and if ordered from website it takes at least 2-3 weeks before
they ship the product. The product is not so much suitable for business professionals
although the company is marketing the product for business presentations. (Apple
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2m The company can The trend of online book publishing is picking up which has given
rise to new iPad publishers and developers. With millions of iPhone and iPad users,
the company can earn lot of money as they always charge when the apps are
downloaded and share it with the developer company. The company can sell their
iTunes content more widely which will help them to sell future products to them. It
can¶t be considered that Apple has cannibalize the PC segment as the tablet market is
still underserved and has been in existence since and the product has new market of
its own. But a recent review from Morgan Stanley research shows that iPad Tablets
has impacted the PC and laptop sales and its quite low during March & April 2010.
(Blodget, 2010)
m
2m The company is facing huge competition from Windows Table t, Kindle, Google
Nexus One (sold nearly 80,000 units in one month), Blackberry has launched Storm
and so there are lot of competitors. Lot of users are using Windows operating system
and Window 7 is a new brand competitor which is a dominant operating system and
lot of applications already exist in the market which are also free compared to iPad
apps (140,000) compares to millions of other software¶s which can run on Windows.
(Stern, 2010)
2m The company is offering products at a higher price in Asia and Europe compared to
2m Other products like HTC Flyer is coming with camera while Black Berry Playbook
has got two cameras Other competitors include Dell Steak 10, Toshiba has got SD
card slots and removable battery & 2 cameras, Acer has also launched Iconia Tab
A500 with 2 cameras, LG is another big challenger and has launched G-Slate with
HDMI out port while Samsung Galaxy is quite cheap ($249 with contract) and has
Bluetooth features and 2 cameras and lastly Motorola Xoom is expensive but is
X @
business managers to decide their product or market strategy. There are basically four types
of strategies where Market Penetration and Market Development is used for existing products
and Product Development and Diversification is used for new products. Diversification has
been considered to be the most risky as it is a new product for a new market. (Kotler, 2010)
As far as iPad is concerned the company has been adopting Market Penetration and Product
Development strategy at the same time, which is minimum risk strategy. The company has
launched iPad 2, which is a new product for the existing markets and the company knows
very well to ignite the selling of iPad 2. Recently by using the buyback strategy the company
is increasing the sale of iPad 2 and also attracting the low purchasing power customers. Apple
decided to drop the price of the original gadget i.e. iPad and have attracted the secondary
market consumers who still want to buy the original iPad in under $400. Companies like
reCommerce Gazelle have offered to give money equivalent to 70% of the original price of
the product on the "like-new" conditions as in Figure 7. After large number of consumer
(2000 in few hours) decided to give back the product the company lowered the bid to 50%.
Sellers can gain $300-$375 for 16GB and $595 for 64GB Wi-Fi. This is a good strategy to
finish the old inventory and a way to promote the new product in the existing market
m ð
The company is using hybrid distribution strategy (as in figure 9 below) and using the stores
of their partners to sell their product which is helping them to sell with low cost. However the
company is also getting revenue as the consumers have to take contract to get a good price on
iPads. The strategic partners are quite strong like Cingular has database of 58 million
customers with 18ml already tried iPod. This has created a dual win status for both
firms.(Warren, 2010) The company has adopted business processes outsourcing similar to
Nike where the manufacturing is done in China and the company is focusing on design and
architecture of the product. From Transaction Cost Economy theory it is costing quite
cheaper if they had done the same in USA due to high labour cost similarly from Resource
Based View the company is focusing on their core competency (design & development)
while there is no risk for the firm to outsource the assembly. Apple also has enough money to
give upfront to get products at good price due to high bargaining power as a buyer with
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iPhone and they have used the same pricing and marketing strategy as they have done with
iPhone making it difficult to be imitated by the rivals. They have also proved that iOS is
better than Android which is still at the development stage but is also a big threat for Apple
in future which demands more innovative products and the company still need to adapt to
expected changes in iPad which they have already started in their new iPad 2.
m
2m Although Apple iPad is still a huge success but the company can
take more steps to make it better like the introduction of multi-tasking which
limits the usage of the iPads. They can use good screen guard because iPads
are delicate and can be quite expensive investment on behalf of the users.
Internet can only be used if the user has 3G or Wi-Fi which restricts the sale in
the developing countries where 3G has just started and not affordable by all
consumers. Also Bluetooth for file transfer can be quite helpful. Company can
2m The price is quite high and the company can earn more from economy
of scale and the company has earned enough they can lower the price so they
can also attract middle class consumer segment. Every country is facing tough
2m m The products are sold only by websites and retail stores or big
companies, but the company can penetrate the mass market by making
regional dealers which is not in place now. This will help them to gain better
internet users in countries like India, Bangladesh, Sri Lanka, the company
should use regional languages in TV and news papers which has never started
so far. (Researcher)m
Apple Annual Reports, 2010, Annual Report [Available at] http phx.corporate-
ir.net External.File?item=UGFyZW50SUQ9Njc1MzN8Q2hpbGRJRD0tMXxUeXBlPTM=&
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