Quantitative Forecast of iPhone 6 - Essay Example

Operation management of the of the Number Operation management Introduction Launched by Steve Jobs, Apple is one of the well-reckoned companies across the globe. The company is headquartered in California and specializes in designing, developing and selling of computer software, consumer electronics, personal computers and online services. Some of its world famous product lines are MAC computers, iPod (media players), iPhones (smart phones) and iPad (Tablets). In terms of revenue, Apple is the second largest provider of information technology services, after Samsung. It is also world number three in terms of mobile phones. iPhone was first designed, launched and marketed in 2007 running on iOS operating system. By the end of 2013, Apple has successfully launched seventh generation iPhones, namely iPhone 5C and iPhone 5S (“Q1 2014 Unaudited Summary Data”). iPhones have been extremely popular since its inception mainly owing to the unparalleled design and exclusive features as well as numerous software and applications to use. Since its launch, Apple has been able to create a niche set of loyal customers, which is continuously increasing in numbers. The net sales of Apple iPhones increased 9 percent from 156.5 dollars in 2012 to 170.9 billion dollars in 2013 (“Q1 2013 Unaudited Summary Data”). Overall units of iPhone sold were almost 150 millions in 2013 compared to 125 million in 2012 (“Q1 2013 Unaudited Summary Data”). Marketers and analysts have argued that increase in the sale of iPhone 5 is majorly due to its advanced software and greater facilities in terms of applications as well as attractive design. Quantitative forecast of iPhone 6 A survey including 4000 consumers from the US revealed that anticipation and rumours related to iPhone 6 has surpassed all other previously launched iPhones. Also, the number of consumers waiting to pre-order iPhone 6 is higher compared to that of iPhone 5 (“iPhone 5 Release Could Push Apple to 170 Million Units Sold Annually”). The release date of iPhone 6 is expected around September 2014, which is similar to other iPhone launches. Also, the new iPhone 6 will be available in two different sizes, along with a whole new design and advanced operating system. On the whole, Apple management is anticipating a huge revenue turnover following the launch of iPhone 6. Sales statistics after one month of launch In order to understand the sales forecast and trend for iPhone 6, the average global sales of iPhone after one month of its launch can be calculated. It is observed that a majority of the iPhone launches take place in August or September of a financial year. Furthermore, during these months, the festive season boosts the sales. As a result, the sales of iPhones are highest during first three months of the launch. In order to forecast the sales of iPhone 6 after first month of the launch, the same needs to be divided on the basis of regions. The global sales of iPhone 4S was observed as follows; Figure 1: Q4 (2012) sales of iPhone (Source: “How Many iPhones Apple Will Sell around the World”) Considering the above quarter sales of iPhone 4S, the average sales forecast has been divided as per the different regions. Majorly due to the upcoming festive seasons during the last quarter, Europe and America will contribute highest sales in the first quarter, with 45 percent and 28 percent respectively, which is followed by APAC region (Asia-Pacific) and Japan. Figure 2: Sales forecast by region (Source: Author’s Creation) The expected sales of iPhone 6 can be forecasted taking into account the overall sales of iPhone 5 after its launch. Below here are the overall sales of Apple iPhones in dollars and in units. Numbers Year (in Quarters) iPhone sales (Units) Revenues (Million Dollars) 1 2013 (Jan-Mar) 47789 30660 2 2013 (Apr-Jun) 37430 22955 3 2013 (July-Sep) 31241 18154 4 2013 (Oct-Dec) 33797 19510 5 2014 (Jan-Mar) 51025 32498 According to the above table, the overall number of units sold escalated from 33797 to 51025 from the end of 2013 to first quarter of 2014. This rise can be attributed to the launch of iPhone 5. Using regression analysis, a summary output for the iPhone sales have been prepared. Summary Output Regression Statistics Multiple R 0.635217873 R Square 0.403501746 Adjusted R Square 0.10525262 Standard Error 8332.029726 Observations 4 ANOVA   df SS MS F Significance F Regression 1 93922114.05 93922114.1 1.352901686 0.364782127 Residual 2 138845438.7 69422719.4 Total 3 232767552.8         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 23203.9 13690.92189 1.69483839 0.232190668 -35703.38245 82111.18245 -35703.38245 82111.18245 1 4334.1 3726.196971 1.16314302 0.364782127 -11698.43157 20366.63157 -11698.43157 20366.63157 RESIDUAL OUTPUT Observation Predicted 47789 Residuals 1 31872.1 5557.9 2 36206.2 -4965.2 3 40540.3 -6743.3 4 44874.4 6150.6 From the summary output, the coefficient have been considered and further analyzed for forecasting the sales of Apple iPhone 6 after six months of the launch. Time (In Quarters) Forecast (In 000) Coefficient 4334.1 6 49208.5 Intercept 23203.9 7 53542.6 Figure 3: Sales forecast of Apple iPhone 6 (Source: Author’s Creation) Therefore, from the above analysis, it is forecasted that the average sale of iPhone 6 will be approximately 49.2 million dollars after 3 months of the launch and around 53.5 million dollars after 6 months. Qualitative analysis with arguments Trend Analysis (Models and designs) The abovementioned sales of iPhone 6 can be argued by way of historically analyzing the shipments of iPhone in terms of region and model. The average sales of iPhones have appeared to be steady across regions. Hence, it is easier to calculate the shipment figures across regions per quarter, especially for the recent launches. Figure 4: iPhone sales trend according to design and regions ( Source: “How Many iPhones Apple Will Sell around the World”) The above figure clearly indicates that sales of Apple’s iPhone category have increased manifolds in past few quarters, owing to an increased demand among youths and professionals. The demand of iPhones has constantly increased with the launch of upgraded models, which are supported with enhanced operating system, designs and available applications. Another survey conducted by Forbes revealed that almost 52 percent participants from the group who already owned an iPhone were planning to buy the new model. In the same survey, nearly 51 percent of the participants were ready to sell their previous iPhone versions (Welch and Welch, 110-120). Around 50 percent of the surveyed participants expected discounts and exchange offers in respect to purchasing the newly launched iPhone 6 (“iPhone 5 Release Could Push Apple To 170 Million Units Sold Annually”). Analysts have predicted that the overall market for smartphones is set to increase at a steady range of 20 to 30 percent on a year on year basis (“How Many iPhones Apple Will Sell around the World”). Although the worldwide percentage of iPhone market is low compared to that of other mobiles, the percentage is gradually increasing. Apart from that, nearly half of the revenues of Apple come from iPhone sales, suggesting its strong performance and steep growth in the market (“Q4 2013 Unaudited Summary Data”). Consequently, Apple is heavily dependent on the sale and revenues of its smartphone portfolio. Apple is expected to continue introducing new and unique designs as well as latest technological advancements in its iPhone series so as to capture the increasing demand for smartphones. The increasing demand for Apple also implies that customers will be willing to spend extra money for added value provided by the new iPhone 6 (David 293-298). Price and Demand Among consumers The price and demand elasticity influences the overall sales of Apple iPhones. For instance, it is estimated that the customers who already have Apple’s iPhone would like to upgrade with a newer version. Also, Apple has a niche set of loyal customers who only buy its products and are look forward to new models and designs. As such, it is reckoned that the total sales of iPhone 6 will be divided into two sets of consumers. One set comprising those who already have an iPhone and are willing to buy the newer version. The second set will constitute customers who will buy an iPhone for the first time. Another price-demand factor influencing the sales of iPhone 6 will be the price-cut. Due to high competition between Apple and its competitors such as, Samsung and Blackberry, as well as internal competition among different iPhone versions, the prices of mobile phones are cut shortly after their release. In general, the price of Apple iPhones is reduced after a year of the launch. However, undercut pricing strategy is common in some territories, where the objective is gaining volume in a highly competitive environment. While the above situation might increase the overall volume, average sales will remain same (“Q2 2013 Unaudited Summary Data”). Hence, on the basis of previous sales, it can be forecasted that the sales of iPhone 6 will be high during first three months of the launch, might slow down after three months and then will again rise after 6-9 months when discounts and price-cuts are offered (“How Many iPhones Apple Will Sell around the World”). Even so, considering the current demand among new as well as old users and heightening curiosity regarding iPhone 6’s features and design, the quarterly sales is anticipated to continue rising on a steady basis. Works Cited David, Fred. Strategic management: Cases and concepts (13th ed.). Florence, South Carolina: Pearson, 2011. 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