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Strategic Business Unit: Apple iPad


Executive Summary
Apple iPad is one of Apples successful strategic business units. iPad is the
leading tablet in the market in terms of sales, demand, market share, ownership, and
usage. In 2010, iPad was distributed in the market, but until now, there is no single
tablet that has exceeded its performance, design, features, and pricing scheme. Despite
the many criticisms, iPad was able to surpass sales of other rival devices. However, the
SBU is significantly challenged by intense competition in the tablet computing market. In
fact, its market share is slowly declining because of so many tablets released in the
market. Also, the iPads growth and profitability are also challenged by its macro and
micro-environmental factors (politics, economy, demographics, etc.) caused by rapidly
changing behavior and strong competition in the market. Thus, there is a need to modify
some of its strategies including market, product, price, place/distribution, and place/
communication to remain competitive.
Apple iPad needs to diversify (related & unrelated) to remain its position in the
tablet computing market. Also, it needs to enhance its features, designs, and
applications to compete well with other tablets while pursuing its aggressive pricing
scheme. It should also increase the number of its distribution networks (physical &
online stores), so that sales will be maximized. In addition, iPad should be aggressively
promoted both in the real and virtual community to generate awareness and demand.
Extensive market research and development, innovative plan, and unparalleled talent
base are always necessary in the expansion of iPad product lineup.

Table of Contents
1.0 Corporation & SBU Background

1.1. Corporation

1.2.1 Product

1.2.2 Geographical Scope

1.2.3 Operations

1.2.4 Strategic Fit within the Corporate Culture

1.2.5 Overall Financial Performance

2.0 SBU Situation Analysis

2.1 SBU Corporate Appraisal

2.1.1 Senior Management

2.1.2 Corporate Culture

2.1.3 Corporate Stakeholders

2.1.4 Corporate Resources

2.1.5 Review of Past Performance

2.2 SBU Customers

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2.2.1 Relevant & Major Changes & Trends within the SBU Industry

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2.2.2 Relevant Changes & Trends in the Macro-environment

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2.2.3 Market Performance

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2.3 SBU Competition

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2.4 Key Findings

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3.0 SBU Objectives and Goals

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3.1 Goals

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3.2 Objectives

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4.0 Recommended Strategies

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4.1 Market Strategies

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4.2 Product Strategies

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4.3 Pricing Strategies

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4.4. Distribution Strategies

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4.5 Communication Strategies

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5. Implementation Program

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1.0 Corporation & SBU Background


1.1. Corporation
Apple Inc. is a U.S.-based multinational company established in 1976 by Steve
Jobs, Steve Wozniak, and Ronald Wayne. Apple is one of todays most successful
companies in terms of market capitalization, revenue, and profit, which are majorly
credited to their iconic products like the iMac, iPod Touch, iPhone, iPad, and iTunes
Store. This company is capable of designing, making, and selling their own product
portfolio such as computer hardware and software, consumer electronics products,
applications, and many more. Also, it has many stores (357 retail units) worldwide,
which are situated in the U.S., Europe Union, and Asia-Pacific. Aside from physical
stores, Apple has also online stores and third-party carriers to expand its distribution
coverage. Also, the company is very committed to its stakeholders such as customers,
employees, shareholders, investors, government, suppliers, and many more.
On the other hand, Apple has a strong financial growth with a total revenue and
gross profit of $108,249 million, a net income of $25,922 million, and an operating
income of $33,790 million in 2011 (Financial Times, January 25, 2012). Overall, there is
a 42.41%, 25.80%, and 33.87% increase in gross margin, net profit margin, and
operating margin from 2007 to 2011. Computer hardware (i.e., iPhone, iPod Touch, and
iPad) and computer software segments are among the leading revenue contributors in
the companys financial performance.
1.2 SBU: The Apple iPad

1.2.1 Product

iPad is one of the newest and innovative designs of Apple Inc., which was
introduced and released in 2010. This device was created and distributed under the
leadership of Steve Jobs (Apples former CEO), and it had been successful in the global
tablet computing market. The iPads connectivity has two versions, the Wi-Fi and the
Wi-Fi+3G models, which are run by a 1GHz single-core Apple A4 (modified version). It
has a display of 9.56-inches with 1.5 pounds (weight) and 0.5 inches (depth), multitouch LCD screen, resolution of 1024 x 768 pixels, and storage memory models of 16,
32, or 64GB. In terms of battery and power, iPad has a 1 month standby battery, 80%
battery lifespan, and 10 hours battery life (depends on usage rate, settings & other
factors).
The unveiling of Apple iPad has created many expectations in the tech industry,
particularly on its applications. Consumers were excited on its applications including
iBookstore, iWork, iTunes Store, iPod Touch and iPhone apps, ebook reader, email and
web access, and many more; however, most applications are controlled by Apple App
Store. iPads features, designs, and price entry have also received different reactions,
particularly from the tech-savvy and Apple fanatic consumers. The entry price is
characterized as modest compared to public price expectations. See table 1 (in
Appendices) for the Apple iPad suggested retail price in the U.S. market alone. On the
other hand, some have commented that the iPad is just an oversize iPod Touch or
iPhone, and it has no camera, flash, SD card slot, USB slot, exchangeable battery, and
memory card slot; thus, multi-tasking is difficult. However, these criticisms are
outweighed by iPads benefits and gave Apple a high record sales volume and revenue.
These criticisms are also the foundation of the second generation iPad, which was
introduced and released in the 1st quarter of 2011. This is 33% thinner than its
predecessor...has a better processor, a dual core Apple A5 that Apple says is twice as
fast as its predecessor for CPU operations and up to nine times as fast for GPU
operations, but the pricing scheme has remained the same (iPad 2012).
1.2.2 Geographical Scope
iPad was first introduced in Apples domestic market (U.S.), and 5 months after it
was distributed in several developed countries in the European Union (Australia & Italy),
U.S. (North & South America), and Asia Pacific (Japan) (Menn and Bradshaw 2010). In

addition, iPad was also released in Austria, Belgium, Hong Kong, Ireland, Luxembourg,
Mexico, Netherlands, New Zealand, Singapore, and China (iPad Available 2010). Apple
iPad target markets are the real and virtual community; thus, they have strengthened
and increased their retail and online stores worldwide through franchising, strategic
alliances, and authorize online retailers.
1.2.3 Operations
Apple has displayed their superior and innovation abilities when they have
created a device that is more intimate than a laptop, and its so much more capable
than a smartphone with its gorgeous screen (Stone 2010). In fact, according to LG
Display CEO Kwon Young-soo, the Demand [from Apple] keeps growing and we cant
meet it all (Wailgum 2010). The booming demand has shocked Apples production and
supply chain management considering that they have to double their operations to meet
the rising demand. Thus, Apple iPad operations are superior to any other devices in the
consumer electronics market. To meet this demand, Apple planned to have second
manufacturers or contractors that would help them increased availability of iPad to
worldwide consumers. In fact, Apples manufacturing partner, Foxconn, has started
mass production...[and started to produce] about 300,000 iPads per month (Oliver
2010). Apple iPad projected demand is 2 million per month; however, the management
has decided to increase the supply up to 3 million, so that they would not run out of
supply when the demand-supply ratio is changed (Paczkowski 2010). In terms of
distribution, Apple has a tight control on the availability of iPad and its applications; thus,
it could not be purchased anywhere (retail or online stores), but only on Apples
authorized dealers/ distributors. However, they have managed to gain a distribution
advantage considering that About a third of Apples iPads are sold through its own
retail stores and online, where it pays no commission to channel partners (Savitz
2011).
1.2.4 Strategic Fit within the Corporate Culture
It is the companys culture that founded the Apple iPad. Product design matters a
lot to Apple, particularly to its former CEO Steve Jobs who said that [Design is] not just
what it looks like and feels like. Design is how it works (ABC News, October 6, 2011).
iPad is perceived as the best and most recommended tablet computer in the market in

terms of design, feature, applications, and performance. This success only showed that
Apple has understood consumers wants and preferences (Perenson 2011; Bell 2011).
Also, the company is not concentrated on getting more money from consumers; their
job is to understand all the customers needs and help them solve their problems
(Kane and Sherr 2011). Hence, the best possible tablet experience is attained by users
through the iPad considering that the vast majority of tablets sold are iPads (David
2011, 3). Creativity, leadership, and innovation are among the many values that made
Apples corporate culture significant to the technology industry. In fact, it has been a
companys philosophy that computers would make the world better, and that their
[Apple] computers would do it best (Kurtzman 2010, 115).
1.2.5 Overall Financial Performance
By the end of FY2010, Apple has announced a record revenue of $26.74 billion
and record net quarterly profit of $6 billion, or $6.43 per diluted share, and these are
relatively higher over FY2009 (Apple Reports 2011). Apples strong financial
performance in the 4th quarter of FY2010 is indebted to the sales of their Macs (4.3
million), iPhones (16.24 million), iPods (19.45 million), and iPads (97.33 million). In
addition, the total shipped tablets in the global market are 4.8 million, and iPad owned
the 87.4% market share or 4.2 million (Reisinger 2011). However, it was forecasted that
Apples tablet computing market share will decline by the year 2015 because of intense
competition among tablet manufacturers (mobile & PC based technology) (see figure 1
in Appendices).
2.0 SBU Situation Analysis
2.1 SBU Corporate Appraisal
2.1.1 Senior Management
A companys success mostly relies on how committed is the senior management
to their roles. Steve Jobs is commonly believed to be the savior of the company
because he was able to revitalize the firms innovative capabilities (Hitt, Ireland, and
Hoskisson 2011, 72). It was in 1985 that Jobs was discharged from Apple because he
was not able to fulfill his duty in improving the companys performance; however, he
was brought back to the company 12 years after to help in reversing the declining profit
margin and restoring innovative approach (Kane and Fowler 2011). It was believed that

Apple has Jobs DNA and personality because it is also an aggressive and risk taker
marketer (Dvorak 2009). In fact, it has managed to gain sales and improve revenue
despite economic recession in 2008 because of investment in marketing activities. Jobs
is a perfectionist CEO, a man that is very attentive to detail, arrogant, and wanted to
dominate on everything, but all these values have led Apple to success. These values
could be seen in Apples operations for it believed that it has produced best-loved
products in the world (Jobs at Apple 2012).
2.1.2 Corporate Culture
A corporate culture is a system of shared values and beliefs that actively
influence the behavior of organization members (Dubrin 2011, 287). Business leaders
around the world believed that culture is one of determinants of success, and their roles
are influential to a firms culture. This is absolutely true at Apple in the personality of its
then-CEO Steve Jobs, which the company is associated most of the time. Jobs is a
showman, perfectionist overseer, visionary, enthusiast and opportunist, and his
insistence upon design, detail, finish, quality, ease of use, and reliability are a huge part
of Apples success (Fry 2010). His personality is already emulated in Apples operations
and environment, which has made their organizational culture undefeated (Kurtzman
2010, 116). Just like Jobs, Apple is known as a detail-oriented company that always
opts for perfection with regard to their product designs and reliability. He also wanted
the company, as well as his people, to think differently and believe that they are the best
tech firm in the world, and they can beat all their field competitors. Apple has been
successful in inculcating these values and attitudes to their employees, which brought
them to success. Today, most workers believe that they are part of a superior group of
people and that whatever they produce is outrageously good...[and they learned] to
denounce the competition (Dubrin 2011, 287).
On the other hand, the characteristic of Apples organizational structure is a flat
hierarchy (Nelson and Quick 2008, 371). The hierarchy is very informal; in fact, the CEO
himself (Steve Jobs) does not follow hierarchical reporting because he wanted all
designs (from executive positions) or ideas to be directly reported to him. Thus, he is
viewed as the thinker, simplifier, and designer at Apple (Martin 2009, 29). This attitude
has made the employees work harder and become multi-skilled, not to please their

CEO, but because of greater responsibility or expectations in their level of work. See
figure 2 (in the Appendices) the Apples organizational structure.
2.1.3 Corporate Stakeholders
Organizations need, to mutually satisfy, the interests and expectations of their
stakeholders to increase their wealth-creating capability. Among the primary corporate
stakeholders at Apple are consumers, shareholders, employees, and suppliers/
manufacturers. The consumer has a positive influence on the growth of Apple iPad.
Apples focused is to satisfy their customers, not only in terms of their product features,
but its about the experience. The company is known to have a bunch of loyal and
enthusiastic customers who fell very excited every time Apple will be releasing a new
product line or design. In fact, these people are willing to wait or line up for days just to
acquire the new tablet computing device, iPad. Also, 65% of tablet consumers would
prefer to have an iPad than any other tablet computing products (Worley 2011). This is
because Apple understands the needs [of their customers] so well and delivers really
cool stuff to meet them (Webb 2001, 7).
Apple at the same time wanted to satisfy expectations and interests of their
shareholder/investors because they are the companys capital provider and decisionmarkers. This group expected a good investment return and wanted to know the
companys plan. Shareholders at Apple are not receiving their dividends because they
are confident on the skills of Steve Jobs to use the money for product development and
worldwide marketing. Hence, the death of Jobs has created skepticism and many
shareholders are worried about the companys future, whether Apple can continue to
push out innovative gadgets (Forgione and Mukherjee 2011). On the other hand, Apple
has 32,000 employees in FY2008, but it has increased to 46,000 in FY2010 (Applce Inc.
Company 2011, 4). In 2011, Apple is held as the number one employer in the tech
industry in terms of their revenue per employee, which is $419,528 (a growth rate of 2.8
%) (See figure 3 in Appendices). Just like other tech firms, Apple wanted the best
people to work for them and the loyalty, and the teamwork has made Apple a valuable
company.
Also, the suppliers are among the important stakeholders at Apple considering
that this group will be the one to provide products and services that are to be used in

making the best of Apple. The company has acknowledged the importance of suppliers
and partnerships in its overall success, but they also want them to consider Apples
values, culture, and expectations (Simson 2007, 10). In fact, Apple is always looking to
expand supplier base to accommodate the rapidly growing customer base (Apple and
Procurement 2012). However, to be a part of Apples business operations is a very
challenging task to a supplier considering that the company is operating in a rapidly
changing and highly competitive environment. Therefore, suppliers at Apple are
expected to be flexible enough to deal with various situations and should always aim for
the highest quality standards because it is the companys promise to the market. See
figure 4 (in the Appendices) for the list of Apples 2011 production suppliers.
2.1.4 Corporate Resources
The success of Apple iPad in the tablet computing market is an evidence that the
company has effectively allocated and managed its corporate resources. According to
Hitt, Ireland, and Hoskisson (2011, 71), Resources are the foundation for strategy, and
unique bundles of resources generate competitive advantages that lead to wealth
creation. Technology (hardware and software), leadership (Steve Jobs), unparalleled
human resource, strategic alliances, retail locations, industrial design, and many more
are among the visible and invisible corporate resources at Apple. In terms of designing,
Apple believed that a small team of top talent can run the circles around far larger but
less talented groups, and this small elite team will be trained to focus on quality over
quantity (Burrows and Grover 2006). Furthermore, the head of the team is identified as
Jonathan Ive, Apples Senior VP for Industrial Design who is closely working with the
CEO. Ive is the person behind some of Apples iconic products including iMac, iPod,
iPhone, and iPad for almost two decades (Owen 2011). The people are among the
critical corporate resources that played a great role in transforming Apple iPad
strategies into action, and they are equipped with comprehensive training and ongoing
education programs that will enhance their skills. Apple was able to integrate their
hardware and software systems through their talented development teams and by not
confiding on third-party capabilities to improve their systems function. Instead, they are
investing millions of dollars in the employees training and R&D to enhance the role of
their iconic products.

2.1.5 Review of Past Performance


Apple is always associated with Steve Jobs because he has great influences on
the companys performance. It was in 1985 that Jobs has been discharged from Apple
and was brought back to the company in 1997. For 12 years, Apple was in a
devastating and near death situation, but they have learned about the new technology
and about what customers wanted and did not want (Bower & Christensen 1995).
When Jobs returned to Apple, he has revitalized the companys strategies, product
offerings, supply chain management, and many more (OGrady 2009, 34). In other
words, he had led the company to a profitable direction. Jobs resumed as Apples CEO
and launched new gadgets such as iMac (1998), iPod (2001), iTunes (2003), iPhone
(2007), iPad (2010), and iCloud (2011) despite the fact that the company is losing
money. Apple has taken the risk in developing these products, and it has doubled its
cash and investments...fueled by sales of the iPhone an iPad (Levy and Satariano
2011). Furthermore, the companys aggressive personality is shown in the companys
determination to expand product lines, product upgrades, and increase advertising
campaigns in the midst of global economic recession in 2008. However, it did not lose
money, but it recorded record sales volume...[which] is largely credited to its innovative
capabilities (Hitt, Ireland, and Hoskisson 2011, 71). Among the significant
performances of Apple are the following:
It is at number 35 in the Fortune 500 annual ranking (2011).
In 20 most profitable tech companies, Apple is at number 8.
It is the most valuable global brand in 2011 based on BrandZ Global Top 100
ranking.
It is the most admired company from 2008 up to the present with an overall score
of 8.16.
It is at number 21 in the U.S. Top 100 Retailers in terms of sales.
It is Americas most inspiring company.
Apples achievements are mostly associated with Steve Jobss leadership considering
that he always wanted the company to think differently. Thus, his death has created
uncertainty on the companys future performances. However, Apples executive team

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has assured their stakeholders that they would continue Jobs legacy through their
unparalleled talent base and corporate culture (Fontevecchia 2011).
2.2 SBU Customers
2.2.1 Relevant & Major Changes & Trends within the SBU Industry (5-10 years)
The industry is challenged with the rapidly changing and highly competitive
environment. In fact, the peoples purchasing behavior is greatly affected by the global
economic crisis in 2008. This event has eventually weakened the sales and growth rate
of economies around the world. However, through Apples innovative approach and
aggressive personality, it has managed to record sales during the economic crisis. Also,
it has successfully produced new devices to the enterprise and consumer electronics
market like the iPod Touch, iPhone, iTunes Store, and iPad, which have doubled its
cash and investment. Mobile Internet is perceived as todays largest and fastest
technology trend, but within this trend is another computing device whose adoption will
ramp faster than any previous mobile device (Morgan Stanley 2011, 4). Figure 5 (in
Appendices) shows that tablets will have the highest penetration rate in the next 5 years
compared to other mobile devices such as Smartphone, cellphone, netbook, and many
more.
iPad has been successful worldwide, and it has become a replacement of other
devices such as mobile computer (i.e. smartphone), laptop, traditional computer (i.e.
desktop), MP3 player, mobile video/ TV, and mobile gaming. In fact, its ownership and
usage share have increased, particularly in the field of work communication (see figure
6 in Appendices). The increased usage of iPad in the workplace is attributed to iPad
applications that increased user productivity...reduced paperwork, and increased
revenue (King 2010). Furthermore, various agencies and industries around the world
are also interested to use Apple iPad including publishing, mobile gaming, mobile video,
TV experience, journalism, tourism, education, healthcare field, airline industry, and
many more (iPad Opens the Scene 2010).
2.2.2 Relevant Changes & Trends in the Macro-environment within the SBUs
Industry
A. Political/ Legal

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The United States as the domestic market of Apple has a stable political and
legal environment. However, some of Apples foreign markets have uncertain political
environment (e.g. Asia) caused by the threat of terrorist attack and armed conflict, which
would limit their ability to expand globally. These activities have a negative impact on
the sales operations and logistics of Apple because the company could not anymore
meet their sales target. Also, any political event would always affect Apples operation
because most industry players are operating in the international market. For instance,
the Net Neutrality or Open Internet authored by the Federal Communications
Commission (FCC) has been finally approved in the political arena. This rule regulates
transparency and no-blocking of network management activities, which are considered
a threat to the innovation and economic growth of the technology market (Peterson
2011). Apples legal environment is also vulnerable to legal issues like changes in legal
requirements (i.e. International Trade Regulations), taxation, labour legislation,
suppliers social responsibility, patent issues, and many more.
B. Economic
The economy has a significant role in Apples profitability considering that most of
their product portfolios are exclusively high-end; thus, economic factors such as interest
rate, inflation level, exchange rates, employment rating, etc., have to be considered
carefully. The company should consider these factors, particularly in its global sales
expansion because these could increase operating expenses and decrease the
purchasing behavior of consumers. Also, it should consider expanding in emerging or
developing economies (i.e. Asia) because the demand of high-end products in rich
countries will remain weak until the recovery from great recession is over. Countries in
the midst of a stabilization phase are growing slowly, and their economic activities are
weak because people are discouraged to spend, public-debt is rising, standard of living
is low, unemployment is going upward, interest rate is rising, and fiscal is tightening.
According to the United Nations (UN) forecast, the sluggish economic growth in
advanced economies (e.g. Europe Union & America) will extend up to 2012 - 2013 while
developing economies (e.g. China & India) will continue to have a robust economic
growth (World Economic Situation 2012).
C. Socio-Cultural

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Apple should always consider market trends, demographic profile, consumer


preferences, lifestyle, disposable income, etc., because these elements have great
influence on the level of demand. Apple does not have a specific target market because
most of their products are made available to all ages; however, they always consider
that these groups have different culture, perspectives, and experiences toward their
products. Thus, they are employing people from around the world who could help them
understand different consumer backgrounds. On the other hand, Internet connectivity is
one of the reasons why consumers demand on technological devices is rapidly
growing; however, the new market trend is Internet connectivity via handheld devices
(Vujosevic and Laberge 2000). Apple iPad is on-the-go device that dominated the tablet
computing market, which is primarily used in web browsing, reading, and news
consumption. Another socio-cultural factor that Apple should consider is the consumer
growing concern on environmental issues. Based on Neilsen Global Online
Environment & Sustainability Survey, 69% of online consumers are concerned about
climate change/global warming, particularly on air and water pollution (Sustainability
Survery 2011). Majority of Apples carbon emissions are from their production; thus, they
have started to use less and recyclable materials, smaller packaging, and energyefficient designs to produce greener products.
D. Technology
Apple is a leader of innovation and technology; in fact, they have the first-mover
advantage in some of todays iconic gadgets like iPod, iPhone, iTunes, and iPad.
However, industry players are now greatly challenged by the growing rate of
technological outmode and the shortening technology life cycle. Thus, Apple spent $2.4
billion on research and development in 2011, $4.3 billion on equipment, $3.2 billion on
intangible assets and $244 million on acquisitions to give consumers new diverse
technology as possible (Stevens 2011). This is also for the company to stay ahead of
the competition and remain as the industry leader.
2.2.3 Market Performance
The tablet market is an opportunity for technology manufacturers because its
market performance is increasing. In fact, it is disrupting the growth of other devices
because of its functionality in the business, communication, and entertainment world

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(iPad for Business Survey 2012). In the consumer electronics market, 11% and 30% of
consumers are extremely and somewhat interested to be a tablet owner while 71% of
employers in the enterprise market are going to purchase a tablet for their employees.
The success of iPad in the tablet computing market is attributed to its innovative
designs, features, and pricing scheme.
A. Apple iPad Market Segments
Apple has one of the most fiercely loyal, dedicated, and faithful customer bases
in the world (OGrady 2009, 39). Traditionally, Apples previous high-end product and
services (i.e personal computers) are primarily targeting the business and professional
markets, but they have decided to diversify and focus on the consumer electronics
market. Furthermore, At the turn of the millenium, Apple identified four key segments
within the customer profile, Business, Creative Professionals, Education, and high-end
consumers (Ashcroft 2012). Apple iPad is declared as the undefeated winner in the
tablet computing market among the consumer electronics and enterprise market in
terms of market share, sales, and profits.
B. Sales, Growth & Market Share
Apple iPad was introduced and distributed in the market in 2010, and 28 days
after it announced that it sold one millionth iPad...iPad users have already downloaded
over 12 million apps from the App Store and over 1.5 million ebooks from the new
iBookstore (Apple Sells One Million 2010). Furthermore, for almost 3 months, Apple
has recorded sales of 3 million units in the U.S. market alone (Apple Sells Three Million
2010). Since iPad was released in the market, the sales and profit of Apple from 2002 to
2011 have nearly doubled surpassing the performance of Apples other devices such as
iPod, iPod Nano, and iPhone (see Figure 7 in Appendices). Also, these devices have
doubled Apples cash on hand from 2003 to 2004 with a total of $97.6 billion (higher
than any other multinational companies) (see Figure 8 in Appendices). On the other
hand, the iPad consumer market share in the 2010 media tablet ranking is 85% (Apple
iPad Held 2011). In addition, more IT and business professionals worldwide said that
they always use their iPad for work communication (54%) than for personal
communication (42%) (iPad for Busines Survey 2012, 16). Thus, this survey entails
that the professional market is a viable market segment of Apple iPad because of its

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work functionality or as a business tool. Also, the enterprise tablet adaption is increasing
and awarded iPad as a Good for Enterprise Solution Device with a net iPad activation of
29% from September 2010 to December 2010 (Morgan Stanley 2011, 10). Also, the
industry with the highest net iPad activation from March 2011 to June 2011 is the
financial services, followed by business & professional services, life sciences,
healthcare, and many more (see Figure 10 in Appendices). The success of Apple iPad
is credited to the companys innovative designs, unparalleled talent base, culture of
secrecy, pricing scheme, and many more. The company has a good pricing strategy
Given that entry level iPad gross margins are only around 25% [that] makes it
extremely difficult for competitors to undercut -- or in some cases --even match Apples
pricing (Savitz 2011).
2.3 SBU Competition
It was two years ago that Apple iPad was released in the market, but until now, it
remains as the number one tablet in the market in terms of market estimate and market
share (see figure 10 in Appendices). Apple iPad has market estimates of 39.1 in 2011
and 58.8 in 2012, and market share estimates of 65% in 2011 and 57% in 2012. Even
though the market estimates are in favor of the Apple iPad, the findings showed that
Apple tablet computing market power is declining because of intense competition
(existing & new-entry). However, Apple must anticipate that competition will become
more intense considering that the tablet market life cycle is emerging or growing
wherein profit, sales, and demand are very attractive to new and existing industry
players. See figure 11 (in Appendices) the detailed comparisons of tablets in terms of
specifications. The figure illustrated that since the launching of iPad, many tablet
manufacturers have tried to be an iPad killer, but they failed to exceed iPads pricing
scheme, designs, or features (Tapellini 2012). Currently, the iPad has the highest
market share (54%), and it will remain in its position with 50% market share followed by
other tablet brands such as Samsung, Amazon, Motorola, HTC, and other (see figure 12
in Appendices). Furthermore, Apple with brand value of ($153,285 million) is declared
as the worlds most valuable brand ahead of Google (Babej 2011); this is also one of the
factors why Apple sales climbed year-on-year. On the other hand, iPad also competed

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with other digital devices; however, these rival devices are now completely or partly
replaced, particularly in the professional market (see figure 13 in Appendices).
2.4 Key Findings
Apples macro and micro-environment have possessed threats to the growth and
profitability of Apple iPad. The political and economic settings in some of their foreign
markets are not favorable to the company, particularly the stabilization phase in
advanced economies (i.e. America & Europe). However, Apple can anticipate higher
tablet demand and sales in high-end products in Asia-Pacific region (i.e., China &
India) because of strong economic growth. Also, Apple should consider the changing of
consumer behaviors and attitudes toward technological inventions considering that the
life cycle of product technologies is in the short-term. Hence, continuous innovations
and extensive market R&D should be highly capitalized. Also, the growing demand of
Internet connection via wireless devices and becoming a device replacement is a great
opportunity for Apple to expand its iPad product line through the introduction of new
tablet applications. Furthermore, the professional and enterprise market also showed
interest on iPad as a viable business tool used for work communication aside from the
consumer market.
3. SBU Objectives and Goals
3.1 Goals
To make every individual (one person-one computer) in the world has their own
iPad through an aggressive pricing scheme
To increase media tablet awareness by destroying the gap between other
devices and put all functions in the iPad.
To remain iPads position (number one) in the market by giving users the best
possible computing experience through system integration, innovation, pricing,
and design.
To expand its market segment and create a larger pool of customers.
3.2 Objectives
To improve market share from 54% to 75% in the next 3 to 5 years by raising the
level of media tablet awareness.

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To expand iPad product line and enhance its simplicity, reliability, and ease of use
to the highest level without changing the pricing scheme.
To become the single technology in the consumer and enterprise electronics
market in the next 3 to 5 years.
To expand its distribution networks or click-and-mortar stores by 30% worldwide.
To increase sales percentage by 50% after 3 to 5 years despite economic
stagnation.
To increase iPad ownership (50%) and usage (30%) in the next 3 to five years.
4. Recommended Strategies
Apple has been successful in the market by introducing innovative and up to date
strategies, which are in line with trends or consumer preferences. However, the
company should continually review these strategies considering that SBUs industry is
in a rapidly changing and highly competitive environment. Among the areas that it needs
to examine are its product offering, pricing scheme, place/distribution networks, and
promotional/communication strategies (4Ps of marketing). However, Apple should
always see to it that these strategies are consistent with their other strategies, so that
objectives and goals will be met.
4.1 Market Strategies
Apple is known as a company that thinks differently, and they are always
innovative in every product they design, develop, and produce. They always see to it
that they provide the exact product/service that consumers wanted (best consumer
experience) by designing smart technologies at affordable prices or by helping them find
solutions to every tech problem; this is how they value their customers. Due to this
commitment, Apple iPad was formulated, developed, and marketed all over the world.
The product life cycle of media tablet is at the emerging or growing phase; thus, there
are still lots of opportunities for tablet manufacturers to diversify and exceed Apples
performance in the market.
Diversification. Apple iPad is the best tablet in the market today in terms of
sales, demand, usage rate, and ownership. It does not only capture the consumer
electronics market (which is the primary target), but also the professional and business
market segment through its functionality. Apples position in the market is also attributed

17

to their first-mover advantage; however, it becomes a threat to their growth and


profitability because competitors (existing & entry-level) have taken advantage with their
designs or innovative plans. In fact, Apple iPad market share is slowly declining
because of intense competition. Thus, diversification can be attained if consumer
preference is carefully perceived through an extensive market research and innovative
plan. For instance, it can diversify in other market lines by working with other industries
(i.e. financial services, legal, healthcare, education, public sector, entertainment, etc.),
and make iPad the standard media tablet for their operations. Together, they can create
an efficient customer service tools that will help in building stronger customer
relationship. For instance, doing-patient analysis, record client history in the database,
documentation of tourist places, events, and campaigns (public sector), and segregating
financial customers (delinquent) via Apple iPad.
4.2 Product Strategies
Apple iPad has unique and innovative features and design that are not present in
other tablets. However, competitors are destroying iPads customers base in terms of
applications (internal and external) that are not present in the iPad. Below is the SWOT
of Apple iPad, which is important in determining product strategies:

18

Based on SWOT analysis, Apple iPad environment is greatly challenged with


intense competition; thus, it needs to modify some of its product strategies to continue
dominating the market. They need to extend its iPad product lineup considering the
different feedback and criticisms of stakeholders. They could modify the features and
applications of their iPad series based on consumer preferences to protect their tablet
consumer base. Apple should consider the rising demand of Internet connectivity using
on-the-go devices, which would give a lot of opportunities for the iPad. For instance, the
company can create a new iPad product line that is a mobile phone at the same time or
a model that has full-phone capabilities.
4.3 Pricing Strategies
Just like other companies in the tech industry, Apple is in the midst of intense
competition; thus, it needs to secure an effective and efficient pricing strategy to remain
competitive. Price competitiveness is one of the critical issues within the iPad
environment. Traditionally, Apple was known as a company that produced products
offered at higher prices where adjustments are made after these products have
dominated the market. However, iPad had been exempted from the high-price
proprietary scheme because it was marketed at a very low price (as lows as $499)
when it was first released in 2010. The affordability of Apple iPad did not signify that the
device was a low quality product, but the companys goal is to offer the iPad to the mass
market. Many tablet manufacturers have tried to compete with this strategy, but they
have failed. However, the strategy was made perfect by other competitors like Amazon
and Android tablet markers (e.g. Samsung). Therefore, Apple needs to strengthen the
relationship with their third-party capabilities (i.e. suppliers & manufacturers), so that
they can continue to offer low-priced tablet. Also, it would be suitable for the company to
organize a committee that will deal with price optimization or be committed with a lowprice policy.
4.4. Distribution Strategies
In times of intense competition, efficient supply chain management and
placement strategies are necessary. Apple iPad is distributed all over the world using
their own stores (physical & virtual retail stores) and third-party carriers. However, when
iPad was first released in the market, a supply constraint was experienced; thus, the

19

companys distribution strategy is ineffective. Therefore, it is important that Apple iPad


will increase the number of their stores, so that their product will be available to
consumers any time. They should consider expanding in the Asia-Pacific region like
China and India because the economic growth of these countries is growing despite
economic stabilization phase. Along with its global sales expansion, Apple could also
penetrate in purchasing franchised properties or entering into strategic alliances to
widen its pool of customers and distribution coverage. Having third-party carriers are
important to product distribution, but it is more appropriate for the company to lessen
their dependence on this capability, so that their operating cost will be reduced. Also,
they should enhance the handling of their product inventories to avoid supply shortage
by adapting new technologies that will monitor product inventory and demand. iPad
demand and sales will grow if it will be introduced in organizations or industries aside
from individual consumers because the purchasing behavior among these segments is
by higher volume. The use of e-shopping, e-supply chain management, and ecommerce should also be considered by Apple because they are also targeting the
virtual or online consumers.
4.5 Communication Strategies
Apple should use the push and pull strategy to promote Apple iPad. Traditional
advertising (e.g. TV & radio commercials, print ads & brochures), direct marketing,
personal selling (e.g. face-to-face or telephone), public relations (e.g. press/media
relations, product placement), sales promotions (e.g. discount), trade shows, and the
Internet are among the important communication strategies that are applicable to the
SBU. The Internet is the newest promotional media used by many companies today
considering that Internet users are growing. In fact, over 85% of the worlds online
population has used the Internet to make a purchase in 2008 (Trends in Online 2008,
1). Through the Internet, customers can do transaction anytime they want by just
browsing the companys website or through other trading sites where they can access
all information about the product/ service. The highest number of Internet users could
help both the company and users to build a stronger relationship even though there is
no personal interaction. The more the business and customers interact through online
channels like website forum, the more it would be easy for the business to determine

20

the needs of their customers. However, Apple should try to be transparent enough with
their product information to encourage usage and ownership. They could also
participate in environmental movements as a publicity enhancement by showing that
they are an environmental-friendly company, and they are producing greener products.
5. Implementation Program

21

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Appendices
Table 1: Prices of Apple iPad Models
Apple iPad Models

Price (US)

Wi-Fi 16GB, 32GB, & 64GB

$499, $599, & $699

Wi-Fi + 3G 16GB, 32GB, & 64GB

$629, $729, & $829

Source: (Apple Launches iPad 2010)

Figure 1: Global Shipments of Tablet Computers

Source: (Taking the Tablets 2011)

27

Figure 2: Apple Organizational Chart

Source: (Apple 2012)

28

Figure 3: Year Profit Per Employee, Past 12 Months vs. 2008

Source: (Apple Staff Raking 2011)

29

Figure 4: Apple Suppliers 2011

Source: (Apple Suppliers 2012)

30

Figure 5: Tablets: Fastest Ramping Mobile Device

Source: (Morgan Stanley 2011, 4)

31

Figure 6: iPad Use at Work

Source: (iPad for Business 2012)

32

Figure 7: Apple Annual Sales and Profit

Source: (Goldman 2012)

Figure 8: Apples Cash (2003-2010)

Source: (La Monica 2012)

33

Figure 9: Net iPad Activations by Industry (March 2011- June 2011)

Source: (Good Technology 2011)

Figure 10: Tablet Market Estimates and Market Share

Source: Paczkowski 2011

34

Figure 11: Detailed Comparisons of Tablets

Source: Morgan Stanley 2011, 17

Figure 12: The Current and the Next Tablet Brand

Source: (Huberty and Liu 2011, 6)

35

Figure 13: No. of Professionals that has Partly or Completely Replaced Rival Devices

Source: (iPad for Business Survey 2012, 4)