This case deals with the story of Apple Inc. in 2010. In spite of the great recession that had hit the United States in 2008, Apple Inc. had celebrated the record quarterly revenues and sales of its computer, smartphones and tablets during the third quarter of 2010. The company’s quarterly revenues of $15.7 billion were its highest ever quarterly sales figure. Apple had sold 3.47 million Macs, 3.3 million iPads and 8.4 million iPhones during the quarter (Marino,L. & Gamble,J.2010. Apple Inc. in 2010. c153). Although the sales of its flagship iPod declined from the previous quarter, its revenues increased by 4% as consumers purchased majority of its high end- iPod touch models.
If we look at the political factors that affected Apple, one of them was an inquiry that was launched by the U.S. Justice department into the allegations that Apple had forced and discouraged music companies in participating in the promotional activities of its rival, Amazon. The major economic factor that was responsible for Apple’s rise was the reviving of the U.S. economy and its concentration on developing markets. Social factors would include company’s ability to deliver innovative and newer products that gave value to its customers (Kotler, P.2011. Marketing Management. p146). By introducing iPod, the company became a market leader in the media player industry, in spite of the fact that there were many players with cheaper and competitive products. Speaking of technology, Apple did not invent anything, but still made its name by reinventing its products through stylish designs and cutting edge technology. Let us take an example of an iPad. Tablet computers were there in the market since late 1990’s, but only Apple’s iPad could taste success with its launch in 2010, as it allowed its users to experience PC like functions in a hand held device.
The problem with Apple and analysing its Strategies
If we look at this case, it is difficult to find any major problem with the company. However, if we analyse the market carefully, we can infer that Apple was operating under monopolistic competition in most of its markets. Monopolistic competition is a situation where many players are present in the market, and they sell differentiated products to the customers. Because of this kind of competition, Apple has got into trouble as the U.S. Justice Department launched a preliminary inquiry against its iTunes store. Apple was accused of forcing the music companies to stall the promotional activities of its rival, Amazon. Another issue that the company faced was its product recalls due to technical snags and malfunctions. In 2010, Steve Jobs was personally called to address the issue of its iPhone’s antenna design that caused call-drops. The technological issue was mainly related to its smartphone business. As on July 2010, about 1.7% of the total iPhone4 were returned by customers, while iPhone 3GS had a 6 percent return rate (Marino,L. & Gamble,J.2010. Apple Inc. in 2010. c141).
The strategy of Apple was to be the market leader in smartphone, computer and media player industry by implementing innovative design, information technology and international competitiveness in all its products. The company’s strategy stuck firmly to the company’s mission which was to create the finest and the best-selling computers, music players and tablets (Farfan, B. 2011. Apple Inc. Mission Statement). Looking closely at the internal problems that Apple faced, it could be seen that the issue of technical malfunction had to be resolved as it tarnished the clean image of Apple Inc. Some of the ways in which this problem could be resolved was: A. Invest in more Research and Development. B. Increase efforts in quality control procedures. C. Concentrate more on the smartphone markets as the problem of technical malfunction is related to Apple’s iPhone. If we look at the option (C) more closely, we find that the worldwide shipments of smartphones declined in 2009 because of the U.S. recession. Sales picked up in 2010 with a growth of 21.7%. Apple’s iPhone had a higher Average Selling Price (ASP) as compared to its competitors. So, it made sense for the company to increase its efforts in making iPhone more advanced and devoid of any technical glitches.
Competitor’s analysis and porters 5 force analysis
Looking at the PC industry, Apples’ Macintosh computers compete with PCs made by Hewlett- Packard, Dell, Acer, Toshiba and Lenovo. HP had a highest market share of 20.3% in 2009, Dell had a share of 13.1%, Acer had 13%, Lenovo had 8.5% and was followed by Toshiba which had 5.4% share(Marino,L. & Gamble,J.2010. Apple Inc. in 2010. Exhibit 3. c146). However, in the US market, Apple was at number four with a market share of 8%. In media industry, Apple’s iPod was the undisputed king with a 73% market share in 2010. In smartphone category, Apple was behind Nokia, Samsung, LG, RIM and Sony Erricson in terms of shipments or market share.
When we apply porter’s five force model with reference to Apple Inc., we find (Kotler, P.2011. Marketing Management. p227):
Threat of New Entrants: Since there were already a lot of established players in all the three industries in which Apple Inc. was operating, the threat from a new player was relatively less.
Bargaining Power of Suppliers: This was pretty less in case of Apple Inc. Its suppliers were located all over the world.
Bargaining power of the Consumer: Apple always believed in providing innovative products to its consumers, and all its products commanded a premium. The consumers have little bargaining power here.
Threat of Substitutes: If we look at Apple’s competitors and their similar products, we can infer that this force is pretty significant. However, it was very unlikely that an Apple user would very easily shift his loyalty towards another brand.
Competitive Rivalry: This is especially very high in the smartphone and PC industry where Apple is pitted against Samsung and HP respectively. There are other players too, that are ready to grab any available opportunity. Competitive rivalry for Apple is very high.
Conclusion and Recommendations
Apple has successfully created a nice for itself in the world of technology. With its focus on innovation and technology, along with the vision of Steve Jobs and Tim Cook, the company has become of the most respected and trusted brands in the world. The ‘i’ in its iPhone, iPod and iPad stands for innovation. It is interesting to observe through this case that Apple never invented any of its products. Be it an iPod or an iPhone, all it did was reinvent the product by putting innovative new design and cutting edge technology. Success of its iTunes was one of the best examples. One of the reasons for iPod’s phenomenal success and popularity was the iPod/iTunes combination. In 2010, more than 50 million customers made their purchases via iTunes (Marino,L. & Gamble,J.2010. Apple Inc. in 2010. c150). It also became the world’s most popular online movie store.
However, the phenomenal success of Apple cannot hide the fact that it needs to quickly address certain key issues. Some of the recommendations that Apple can incorporate are:
- Try to cut its costs and reduce the prices of some of its products, this might open newer markets for the company.
- Tying up with local suppliers and service providers in new markets and focusing on innovation and technology.
With the way Apple is performing, it is well on its way to become the most valuable company in the world!
References
Marino,L. & Gamble,J. (2010) Apple Inc. in 2010. Alabama. Print.
Kotler, P (2011). Marketing Management. Washington. Pearson. Print.
The Icfai University Press, (2004). Marketing Management. Hyderabad. Print.
Farfan, B. (2011). Apple Inc. Mission Statement. Retrieved from: http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Apple-Inc--Mission-Statement.htm
