Marketing Analysis of Apple Inc.

Executive summary: The Purpose of this report is to conduct a market analysis of Apple Inc. and discuss its commitments and brand strength. This report will also discuss Apple Inc. business strategy, its privacy policies, goals and market share. Furthermore this report will analyse the smartphone industry globally and identify the market size of the smartphone industry. This report will also identify the key factors that can add value to the smartphone industry in terms of B2B environment. This report will identify key players in smartphone market globally and provide the segmentation of business consumers in smartphone market. This report will identify the smartphone market segmentation approaches and finally this report will discuss the future growth of smartphone market. Table of Contents Executive summary: 1 1) Introduction: 3 1.1) Study Objectives of this report: 3 1.2) Study Approach of this report: 3 2) Apple Inc.: 3 2.1) Apple Inc. background: 3 2.2) Apple Inc. Board of governance: 4 2.3) Commitment: 4 2.3.1) Product Innovation: 4 2.3.2) Business process innovation: 4 2.3.3) Business model innovation: 4 2.4) Apple Inc. Brand Strength: 4 2.5) Apple Inc. environment management: 4 2.6) Apple Inc. business strategy: 5 2.7) Apple Inc. privacy policy: 5 2.8) Apple Inc. goals: 5 2.9) Apple Inc. market share: 6 3) Industrial analysis: 6 3.1) Size of smartphone industry: 6 3.2) Value Factors in B2B environment in Smartphone industry: 6 3.3) Key Players: 7 3.4) Key business consumers of smartphone industry: 7 3.5) Segmentation approaches: 8 3.5.1) Geographic segmentation: 8 3.5.2) Demographic segmentation: 8 3.5.3) Psychographic segmentation: 9 3.5.4) Behavioral segmentation: 9 3.6) Future growth potential of smartphone industry: 9 4) Apple Inc. approaches and strategies to achieve identified goals: 10 4.1) Facilities to run on renewable energy: 10 4.2) Minimum utilization of natural resources: 10 4.3) Great products: 11 5) Recommendations: 11 6) Conclusion: 11 References: 12 Appendices: 15 Introduction: This focus of this research report is to demonstrate the Apple Inc. characteristics that will contribute towards achieving its organisational goals. We will discuss the following mentioned objectives of this report that will affect the new organisations that are trying to enter the industry. Study Objectives of this report: This report will briefly discuss: Apple Inc. Industry size in US market Value factors in B2B environment Key players in US market Key business Consumers Segmentation approaches Future growth potential of Apple Inc. Study Approach of this report: This report will utilize academic theories and frameworks to analyse the marketing strategy of Apple Inc. to achieve their marketing goals followed by an effective implementation plan. Apple Inc.: 2.1) Apple Inc. background: In the last three decades, Apple Inc. has possibly appeared as one of the most technologically innovative company (Mallin & Finkle 2011. P. 63). In general public mainly because of three things, it’s fascinating CEO late Steve Jobs, remarkable IOS and especially the iPhones and iPods (Lazonick et al. 2013, p. 249). Apple Inc. design, manufacture, and market mobile communication devices, portable digital music players and personal computers, as well as it sell related software, operating systems, services and networking solutions (Ashcroft 2012). 2.2) Apple Inc. Board of governance: Apple Inc. board of governance comprises a diverse group of leaders which contains one CEO, one Chairman of the board and sir directors including CEO. To serve the long-term interest of shareholders the board manages the CEO and the senior management competent and ethical operations in a company (United States Securities and Exchange Commission Washington, D.C. 20549 2016, p. 9). 2.3) Commitment: Apple Inc. has the commitment to innovation which can be further classified into three categories; Product innovation, business process innovation and business model innovation (Mittan 2010). 2.3.1) Product Innovation: In product innovation Apple Inc. focus on enhancing the features of a current product just like Apple iPod and its shocking effects on its competitor i.e. The Sony Walkman (Mittan 2010). 2.3.2) Business process innovation: Business process innovation encompasses reengineered business processes by creating totally new markets to meet available customer needs (Mittan 2010). 2.3.3) Business model innovation: The Business model innovation of Apple Inc. introduces entirely new value plans to the market. The combination of iPod and iTunes is the best example (Mittan 2010). 2.4) Apple Inc. Brand Strength: According to Forbes, Apple is the world most valuable brand. The contributor to the Apple brand strength is its design which is simple, good-looking and attractive (Badenhausen 2013) 2.5) Apple Inc. environment management: Apple has established a thoughtful way of recycling 1.2 million phones a year through a line of robots (Apple 2016). To reduce the carbon footprint on environment Apple Inc. is investing in new solar projects (Apple 2016). Over 99 percent of paper used in packaging of Apple Inc. products is recycled (Apple 2016). In February 2016, Apple Inc. has the honor of being the first U.S. tech company to issue a USD 1.5 billion green bonds (Apple 2016). 2.6) Apple Inc. business strategy: Apple Inc. believes in the development of innovative products and technologies. The essence of Apple Inc. business strategy lies in its custom made and user-friendly products, hardware, software and operating systems (Ashcroft 2012). 2.7) Apple Inc. privacy policy: Apple Inc. respect its customer’s privacy and protects all data through encryption and strict policies (Cook 2016). Apple Inc. has never worked with any government agency of any country and does not provide them access to their servers (Cook 2016). Apple Inc. uses two-step verification to protect its user’s Apple ID account information and protects all the data stored with iCloud and Apple Inc. does not read email or messages of its users to sell to advertisers (Cook 2016) 2.8) Apple Inc. goals: Unlike most companies Apple Inc. primary goal is to become greener or more ecofriendly instead of increasing revenue and cutting prices (Mittan 2010). Apple Inc. tends to achieve the following goals: Apple Inc. desires to run 100 percent of their facilities on renewable energy (Apple 2016). Apple Inc. wants to minimize the utilization of natural resource into their products (Apple 2016). Apple Inc. hunger to utilize all the waste produced from all the Apple Inc. facilities around the planet to reuse, recycle and converted into energy (Apple 2016). To make great products (Rushton 2012) 2.9) Apple Inc. market share: In 2015 Apple Inc. holds the 15.9 percent of the global smartphone market share by selling 225,850.6 thousand units globally (Jones 2016). Refer to appendix 1 for worldwide smartphone sales to end users by vendors in 2015. In U.S Apple’s iPhone market share is 44.2 percent while Android smartphone hold the 51.4 percent of the market (Jones 2015). Industrial analysis: This section of the report will focus on the smartphone industry including the size of the industry, key players, key business consumers, segmentation approaches, value factors in B2B environment, and finally the future growth potential of the industry. 3.1) Size of smartphone industry: In the first quarter of 2016 world smartphone shipments fall by 3 percent from last year, which is the first ever decline of smartphone industry (Su 2016). In the first quarter of the last year 2015, the smartphone shipment was 345 million smartphone while in the same quarter of this year 2016 the shipment declined to 334.6 million smartphones (Su 2016). In 2015, Huawei sold 108 million smartphones while Samsung sold 324 million smartphones and apple sold 231 million iPhones globally (Shepard 2016). Huawei increased their sale by 10 million units by year to year increase which is 28 million units by first quarter, while Samsung smartphones sale remained flat and iPhone sales actually went down (Shepard 2016). So far china remains the largest smartphone market responsible for shipping one in three of all 334.6 million smartphones globally (Su 2016). 3.2) Value Factors in B2B environment in Smartphone industry: There are too many options for customers in the smartphone industry that they can buy a smartphone of same specifications of different manufacturers at different prices. Now a day’s customer tends to evaluate brands as per their preferences which depend on upon their culture, education and individual needs (Sethi & Chandel 2015 p.1174). Brand Value is important in current B2B environment and it depends on upon functional qualities, emotional qualities, situational factors and environment factors of the product (Christodoulides & Leek 2012, p. 106). Functional qualities can be characterized as quality, technology, capacity, infrastructure, after sales service, capabilities, reliability and innovation (Christodoulides & Leek 2012, p. 106). Emotional Qualities of a brand are risk reduction, reassurance, and trust (Christodoulides & Leek 2012, p. 106). Situational factors are the nature of the purchase of the customer while the environmental factor could be the economic condition (Christodoulides & Leek 2012, p. 106). 3.3) Key Players: Key payers of smartphone industry with market share and units sold according to the year 2015 are mentioned below. Samsung holds 22.5 percent of global market share by selling 320,219.7 thousand units (Jones 2016). Apple holds 15.9 percent of global market share by selling 225,850.6 thousand units (Jones 2016). Huawei holds 7.3 percent of global market share by selling 104,094.7 thousand units (Jones 2016). Lenovo and Motorola globally hold 5.1 percent market share by selling 72,748.2 thousand units (Jones 2016). Xiaomi holds 4.6 percent of global market share by selling 65,618.6 thousand units (Jones 2016). Rest of the 44.6 percent of the market share is held by other smartphone brands (Jones 2016). View appendix 1 for global statistics. 3.4) Key business consumers of smartphone industry: Smartphone users are categorized into seven segments mentioned and briefly described below: Prodigies: Five percent of the smartphone users are prodigies who constantly remain connected and adopts the technology before everyone. And they are usually the trend setters. Prodigies are the one who mostly buy products after watching an advertisement on their smartphones (Fetto 2014). Tribals: Thirteen percent of smartphone users are Tribals, who are hyper-connected often through multiple devices, they are device agnostics and socially influential and are influenced by Instagram, Pinterest, and flicker to plan shopping and trips (Fetto 2014). Personals: Eleven percent of the smartphone users are personals who loves their smartphone and use it for the purpose of messaging on social media (Fetto 2014). Pragmatists: Eighteen percent of smartphone population is made by Pragmatists who love are mobile professionals and use their smartphone to balance their professional and personal life (Fetto 2014). Browsers: Twenty-four percent of the smartphone users are the browsers who use their smartphones to browse the internet, they are still in the learning phase of what they can do with their smartphone? They are usually one out of every four adults (Fetto 2014). Occasionals: Occasionals are the one who use their smartphones to make calls, play games and check the weather. They make the eleven percent of the smartphone population (Fetto 2014). Talkers: Thirteen percent of smartphone users are talkers who use their smartphone to make verbal communications and video calls (Fetto 2014). Refer to the appendix 2 for smartphone consumer’s segmentation chart. 3.5) Segmentation approaches: Geographic segmentation, Demographic segmentation, Psychographic segmentation and Behavioral segmentation are the four consumer market segmentation defined by (Kotler et. al. 2005). 3.5.1) Geographic segmentation: Geographic segmentation divides the market into units such as nations, regions, states, counties, cities and neighborhood (Kotler et al. 2005). In U.S Apple Inc. has 265 retail stores across 44 states (Apple Inc. 2016). 3.5.2) Demographic segmentation: Kotler et al. (2005), categorized demographic segmentation into groups of age, gender, family size, income, education, religion race and generation. In U.S 49 percent of males use iPhone and 51 percent of females use iPhone while out of 100 percent android users 56 percent of males use android smartphones and rest of the 44 percent android smartphone users are females (Hixon 2014). Refer to appendix 3 for demographic segmentation of iPhone and Android smartphone user in U.S 3.5.3) Psychographic segmentation: Psychographic segmentation categorized the consumers according to their social class, lifestyle, and personality (Kotler et al. 2005). Apple iPhones are expensive so the rich tends to buy iPhone as a status symbol, while Android smartphone have in a wide range of prices so both the middle class and upper class can afford them (Worstall 2014). 3.5.4) Behavioral segmentation: Behavioral segmentation divides the consumer market into groups based on their loyalty, attitude, knowledge, uses and response to a product (Kotler et al. 2005). Samsung, LG and Apple share the 80 percent of U.S smartphone market (Levin2015). Most of the smartphone users are loyal to their brand, in U.S over 79 percent of iPhone users stay loyal to their iPhone brand while Samsung and LG smartphone users are less loyal to their brand which are 56 percent and 47 percent respectively (Levin 2015). 3.6) Future growth potential of smartphone industry: The emergence of smartphones in the mobile industry has revolutionized the industry dynamics in terms of innovation. The most successful companies in this market e.g. Samsung and Apple were not initially in this industry at first, but they took the competitive advantage of merging information technology and communication (Corrocher et al. 2014, 173). The future of smartphone industry looks bright as their growth is linked to multiple factors like technological innovation, improved usability and increased accessibility which tends to lower their prices so increase in the amount of consumers (Kissonergis 2015) The penetration of smartphones in the global market can be viewed in appendix 4. It is forecasted that in the year 2016 the smartphone shipment will incline by 5.7 percent from 2015’s 1.4 billion units and will reach 1.5 billion units, and are estimated to reach 1.9 billion units by the year 2020 resulting in a CGAR of 6.0 percent (Scarsella 2016) Currently half of the world adult population has smartphone by the year of 2020 eighty percent of them will have smartphones (Berkeley 2015). It is estimated that smartphone industry will hit 2.1 billion units by the year 2021 (Mckitterick 2016). Refer to appendix 5 for the graphical representation. One of the main reason for this growth is that now smartphone companies are targeting India with a population of 1.2 billion and currently their smart phone users are estimated between 110-120 million units although they have 900 million mobile subscriptions (Bajarin 2014). Another reason is the Chinese smartphone manufacturer Xiaomi which holds 4.6 percent of global market makes phones of high quality and specification but very low in terms of prices tends to attract more consumers (Tylor 2014). Apple Inc. approaches and strategies to achieve identified goals: 4.1) Facilities to run on renewable energy: Ninety-three percent of Apple Inc. facilities worldwide runs on renewable energy while all the data centers worldwide and the facilities in twenty-three countries run on 100 percent renewable energy including China, Germany, U.S and Singapore (Apple 2016). Apple Inc. reduced sixty-four percent of their carbon foot prints in the past five years. Apple Inc. considers their suppliers as a part of their facilities and trying to convince them worldwide to make the same commitment to clean energy (Apple 2016). 4.2) Minimum utilization of natural resources: Apple Inc. knows that none of us can manufacture natural resources so they need to invent new ways to utilize a minimum of them. Apple Inc. is finding new ways to reduce the usage of water and reuse the waste water to lower the impact on water footprints (Apple 2016). Apple Inc. endorses that their waste from iPhone and iWatch final assembly is reused and does not go to a landfill. Apple Inc. has also launched a program called Apple Renew through which you can recycle any Apple device at any Apple store (Apple 2016). 4.3) Great products: Apple Inc. follows a simple strategy when it comes to product great design and better product. If they cannot make it better they will not make it and we can see this strategy when Apple Inc. first launched iPods, then to the smartphones and more recently to the iPads (Bajarin 2012). Apple Inc. follows the strategy of keeping things simple when it comes to usage, user friendliness is important than the product itself (Bajarin 2012). Recommendations: Apple Inc. smartphone are no doubted user-friendly but they are expensive. Currently, iPhones are more of a status symbol than a personal commodity. Moreover, iPhone does not change their shapes and but the style, size, and performance. By the time iPhones are becoming more and more expensive but the shape and features are unchanged, this could be the reason for their global sales decline this year. So either Apple Inc. has to change their iPhone shape or they have to invest a lot in research and development to come up with a new technological breakthrough to make customers buy new iPhones. Conclusion: In a nutshell, smartphones have not only become a part of our lives but the need. Through new breakthroughs in technologies, there will be a constant development of the new products. Due to a lot of competition in the market only the one with high quality, high performance, high features with reasonable prices can survive. There are still consumers in the global market which are untouched because smartphone are out of their reach. Chinese smartphone manufacturers understand it and are developing products of the low price range with reasonable quality to grasp bigger chunk or global market. References: Apple 2016, Environmental Responsibility Report 2016 progress report, covering fiscal year 2015, Report, http://images.apple.com/environment/pdf/Apple_Environmental_Responsibility_Report_2016.pdf Apple Inc. 2016, Apple retail, http://www.apple.com/about/job-creation/ Ashcroft, J 2012, Apple from the iPod to the iPad: A case study in corporate strategy, Prentice Hall. 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Rushton, K 2012, Apple design chief: 'Our goal isn't to make money', http://www.telegraph.co.uk/technology/apple/9438662/Apple-design-chief-Our-goal-isnt-to-make-money.html Scarsella, A & Stofega, W 2016, Worldwide smartphone forecast 2016-2020, https://www.idc.com/getdoc.jsp?containerId=US41084216 Sethi, A & Chandel, A 2015, ‘Consumer buying preference towards entry level smartphone’, IJABER, vol.13, no. 3, pp. 1173-1189. Shepard, W 2016, China’s Huawei ‘Growing up’ to become the world’s no.1 smartphone brand, http://www.forbes.com/sites/wadeshepard/2016/05/25/chinas-huawei-growing-up-to-become-the-worlds-number-one-smartphone-brand/#7cda7d69589a Su, JB 2016, The smartphone market shrinks for the first time, http://www.forbes.com/sites/jeanbaptiste/2016/05/01/smartphone-market-shrinks-for-the-first-time-ever/#21678f6a3e4b Tylor, B 2014, How China will change the smartphone industry: Predicting winners and losers, http://time.com/3151777/china-smartphones/ United States Securities and Exchange Commission Washington, D.C. 20549 2016, Apple Inc.: Notice of 2016 annual meeting of shareholders, http://investor.apple.com/secfiling.cfm?filingid=1193125-16-422528&cik=320193 Worstall, T 2014, Surprise; Apple’s iPhones are expensive so rich people are more likely to have them, http://www.forbes.com/sites/timworstall/2014/04/05/surprise-apples-iphones-are-expensive-so-rich-people-are-more-likely-to-have-them/#6ea4be2073ed Appendices: Appendix 1: worldwide smartphone sales to end users by vendors in 2015. (Jones 2016) Appendix 2: Smartphone consumer’s segmentation chart. (Fetto 2016) Appendix 3: Demographic segmentation of iPhone and Android smartphone user in U.S. (Hixon 2014). Appendix 4: The penetration of smartphones in the global market (Kissonergis 2015) Appendix 5: Global smartphone shipment forecast (Mckitterick 2016) SYED MOSA RAZA ZAIDI Charles Darwin University, Sydney, Australia 1