Omni-Channel Retail Management of Apple Inc - Term Paper Example

Omni-Channel Retail Management Term Project Apple Inc. Step Research History and background of the Apple Inc. Apple Inc. was incorporated in 1977 and co-founded by Steven Jobs and Steven Wozniak. The first Apple I computer was introduced in 1976, and four years later Apple offered its initial public offering (IPO). In 1984 Apple introduced Macintosh, the first mouse driven PC (“Apple Inc.”, 8). In 1996, Apple Inc. acquired the NeXT Company, whose operating system became the next-generation OS of Apple. A year later the company was trapped in a financially-burdensome position, and Steve Jobs has been appointed as the interim Chief Executive Officer. Under the leadership of Mr. Jobs, Apple Inc. has undergone reorganization processes, where the main focus was made on the more profitable competencies. During the next years the company has pursued several acquisitions and expanded its business lines (“Apple Inc.”, 9). Nowadays, Apple Inc. is a well-known and established technology company that offers personal communication devices, accessories, operating system software, application software and related solutions (“Apple Inc.”, 4). It is a company’s mission actually ‘To create great things that change people’s live’ (Kotler and Kotler, 443). Some of the major products include iPhone, iPod, iPad, the iOS and OS X operating systems, consumer and professional software applications, iCloud, and others (“Apple Inc.”, 4). In addition to technology products the company sells and provides its services through the App Store, Mac App Store, iTunes Store, and iBooks store (“Apple Inc.”, 4). The company operates globally, including South and North Americas, Asia Pacific and European regions. In order to sell its products the company uses integrated approach, by utilizing not only retail stores and direct sales force, but also online stores, wholesales, value-added resellers, and third party-cellular network carriers (“Apple Inc.”, 4). Financial performance in FY 2014 The company’s total revenue has grown from FY 2013 to FY 2014 by 7%, generating $182, 795 million. In FY 2014, Apple Inc. has achieved substantial sales growth in Americas, which accounted for more than 40% of the total revenues, while Europe was accounted for 25, 4% (“Apple Inc.”, 21). More detailed revenue generation breakdown by geographical aspect is presented in Figure 1. Figure 1: Apple’s revenue distributions by geographical markets (Source: MarketLine Advantage, “Apple Inc.”, 21). Among the six major product lines, iPhone has generated the highest share of revenue. Below is provided more detailed breakdown of each product line and its market share (see Figure 2). Figure 2: Apple’s revenue distributions by business lines (Source: MarketLine Advantage, “Apple Inc.”, 21). Comparing the sales of FY 2014 with the previous FY, it is worth to mention that some products of Apple have shown strong increase (for example, iPhone product line +11,7%, Mac Product line +12,1%, iTunes +12,5%, and accessories +6,8%), while other product lines have shown weakening position (for example, the iPad – 5,3% and iPod -48, 2%) (“Apple Inc.”, 21). Advertising and other promotional vehicles Apple had adopted an integrated marketing approach in order to advertise and promote its products, services, and brand. It means that the company has combined traditional media channels with digital media (Menn, n.p.). Apple utilizes all widely used online platforms (YouTube, Facebook, Twitter, Instagram, etc) for its promotional activities (Elmer-DeWitt, n.p.). Apple also has entered the mobile advertising market through its iAd service, which enabled the company to perform a range of such targeting functions as application preferences, demographics, location, movies and music choice (Müller, Alt and Michelis, 121). The company uses this information purposefully in order to advertise its product to specific target groups. Step 2: SWOT Analysis In order to better understand in what external environment Apple Inc. currently operates there was carried out SWOT analysis. This analysis helps to evaluate internal strengths and weaknesses of the company, and also to identify potential opportunities and threats. SWOT analysis for Apple Inc. is summarized in Table 1. SWOT analysis Brief overview Strengths Unique minimalist user-friendly design of the products Apple is a globally recognized brand due to the unique and user-friendly design of its products. This specific factors makes consumer to purchase Apple’s products, as well as prestige and status factors. Own iOS and preferred use of this system to Android and Window Apple has its own operating system (iOS), which differentiates the company from other brands and discourages consumers to switch to other PC/mobile technology brands. Integrated ecosystem of products and services Apple has an integrated ecosystem due to its own iOS (operating system), which enables it to pursue vertical integration strategy and to keep customers in “the product loop” (Euromonitor International, 6). Loyalty to the brand Customer’s loyalty to the Apple brand is a powerful instrument in the hands of the company’s management as loyal customers stay with the brand and promote it among their friends/colleagues (Euromonitor International, 6). Significant growth rates and cash flows (“Apple Inc.”, 23). Focus on innovation Apple has a strong focus on continuous innovation, which enables the company to be ahead of its competitors Weaknesses Limited product portfolio Apple has a relatively narrow product range and is heavily dependent on its two products: iPhone and iPad (“Apple Inc.”, 23). Limited price range presence Apple pursues premium pricing strategy, which makes the brand less attractive for many potential consumers (Euromonitor International, 6). Opportunities Wearable electronics The category of wearable electronics is viewed as a long term prospect for Apple Inc. (Euromonitor International, 6). Platform expansion The company has an opportunity to expand its iOS to in-home, e-payment, and in-car systems (Euromonitor International, 6). Apple Pay platform also provides a great growth opportunity (“Apple Inc.”, 23). Growing popularity of Apple products’ adoption in the enterprise market Apple gains greater popularity in enterprise sector which enables the company to gain this market niche and gain more business opportunities (“Apple Inc.”, 23). Threats Rival smartphone producers The company is operating in challenging and complex competitive environment (“Apple Inc.”, 23). Competition in smartphones’ market becomes fiercer, especially among such mid-priced smartphone vendors as Samsung and low-priced smartphone vendors as Xiaomi. Declining iPad sales Decline of iPad sales for two consecutive years imposes a threat to financial stability of the company as iPad is one of the two major revenue-generators in Apple Inc. (Euromonitor International, 6) Smartphone subsidy cuts Cuts in telecom carriers’ subsidies could negatively impact the company’s shipments (“Apple Inc.”, 23). If the subsidies will be withdrawn price-sensitive consumers might switch to the other smartphone models Weak presence in emerging markets Table 1. SWOT analysis – Apple Inc. Step 3- Omni-Channel Strategy at Apple Inc. Omni-channel retail implies that customers can either visit a physical store to get the necessary information, or they can obtain this information remotely/online through a website or a catalogue. This strategy is related not only to information gathering process but also to actual purchase process, whereas buyers can physical visit the store and pick up their purchase, or order the product/service online without actual visit (Bell, Gallino, and Moreno, 47). Moreover, consumers are free to buy and receive products through a diversified range of channels: brick and mortar, online, and mobile (Melsted, n.p.). Many companies aim to focus on providing customers with both offline and online retail channels. However, for successful application of omni-channel strategies creating the same in-store and online environments is not enough. Retailers are integrating these channels and allow customers to choose how they can get their purchases (Melsted, n.p.). It is important to focus on the reasons why the shoppers visit each site and on the emotional connection with the customers, and, based on this information, to create a very clear value proposition to the customers (Headland, 2). All these aspects help the companies to place the customer experience at the top of priorities, considering individual needs and preferences of each customer. Apple has introduced a well-developed Apple retail model, whereas the shoppers could buy in the physical or digital store with no problems or difficulties (Hiwaizi & Wolfram, 4). Initially, Apple was a brand intending to “demonstrate empathy with human creativity”, but not a network of Apple Stores (Headland, 2). The idea of Steve Jobs to open retail Apple stores in 2001 was widely criticised by many business editions, such as Businessweek (Edwards, 2011). Despite the criticism, the company has opened Apple Stores in order to give customers direct physical access to products and to provide with an opportunity to examine merchandise onsite (Bell, Gallino, and Moreno, 47). The showroom-style environment of Apple’s retails stores continuously indicate that the company has “placed the shopper at the heart of the experience from the outset” (Headland, 2). In order to ensure customer-centric approach, the company has invested in its salesforce via Genius Bar in the physical retail store. Customers can appoint a face-to-face meeting at the Genius Bar if they need a hardware repair, or other technical support (Apple.com, n.p.). Thus, the company has managed to establish successful retail stores, which provide consumers and visitors with an opportunity to play with the products, test it, and get advice about the products and services from the well-trained knowledgeable employees (Hulkower, n.p.). In Apple’s case the physical stores perform not only the function of sales channel and marketing function but also they offer consumers relevant service and technical support (Hulkower, n.p.). A great proof to Apples’ retail stores success is provided in the figure 3.This table illustrates continuous growth of the number of Apple Retail outlets and substantially increased sales per outlet during the period from 2009 to 2012. Figure 3. Apple Retail: Outlet data, 2009-2013/2014 (Source: Mintel Group Ltd., n.p.). There are no doubts that Apple has successfully integrated its physical and digital arenas. The company has embraced also virtual environment and technology as a connection point to its brand at any time and from anywhere (Deloitte, 10). With the development of tablet and mobile technology, Apple has managed to link its physical presence through its digital channels (Headland, 3). Thus, for example, every third shopper uses his/her smartphone for gathering/requesting information about the product. This approach means that customer can find answers to their questions in a matter of seconds (Hiwaizi & Wolfram, 4). Step 4: Competitor analysis Samsung Electronics is recognized to be one of the key competitors of Apple Inc. According to a Harris Poll report, Samsung now is even more popular than Apple among the American consumers, not saying about Asia Pacific region (Mourdoukoutas, n.p.). Samsung did not hide its strategic objective to become a leading Android smartphone brand in the American market and to achieve a binary leadership position between Apple and Samsung Galaxy brands (‘Samsung Mobile USA: The Next Big Thing is Already Here’, n.p.). In order to achieve this strategy Samsung has focused on the product development strategy supported with extensive marketing campaigns. Product strategy Samsung Electronics the same as Apple Inc. has focused on innovation strategy. The company invests heavily in Research & Development activity in order to provide high quality, innovative products (such as smartphones and tablets). Pricing strategy Samsung is not differentiating its brand as Apple by premium pricing strategy. On the contrary, the company is more focused on mass market and thus achieves substantial economies of scales. Marketing and advertising strategy In order to advertise its new product Samsung Galaxy SII to the US market, the company has launched a massive campaign combined of both offline and online media channels. Samsung also has focused on storytelling tactics in order to attain attention of its target audience. Samsung has placed its ads in cinema and TV during NFL games during the Thanksgiving weekend, followed by 30 spots for 4 weeks in high profile programming such as Big Bang Theory, Glee, and X Factor, Top Chef, The Daily Show, etc. (‘Samsung Mobile USA: The Next Big Thing is Already Here’, n.p.). In addition to TV spots and cinema the company used the following communication touch points: Print (Newspaper –digital), PR, Guerilla (Street Teams and Ambient Media), Events, Interactive/online (display ads, digital video, search engine marketing), social networking sites, consumer involvement (viral and word-of-mouth), trade shows, and retail experience (POP) (‘Samsung Mobile USA: The Next Big Thing is Already Here’, n.p.). Samsung has invested in advertising and marketing more heavily than Apple did since 2011. Below is the comparative table (see Table 1). Huge increase of ads investment indicates that Samsung is planning to achieve the above stated objective in the shortest period of time. It is possible to predict that the company will significantly outperform its major competitor Apple very soon (Ramstad, n.p.). 2009 2010 2011 2012 2009-12 (%) Samsung (£) 419 5,783 14,995 21,344 +5,000 Apple (£) 11,749 14,868 11,993 13,501 +15 Table 1. Samsung and Apple, by ad spend, 2009-12 (Source: Mintel Group Ltd., n.p.). Omni-channel strategy In order to create an emotional connection with consumers Samsung has adjusted brand experience for each channel. Samsung the same as Apple has pursued omni-channel strategy, and opened its own “experience stores” (Mintel Group Ltd, n.p.). Samsung flagship brand stores open their doors for retail consumers in the US, Europe and Asia (Shaikh, n.p.). These stores also offer consulting and technical support and serves as a showroom of Samsung’s technology products. Samsung has offered similar after-sales service as Apple’s Genius service, where customers can book one-to-one appointments at Samsung’s Smart Academy (Mintel Group Ltd, n.p.). The company has also given an opportunity to learn more about its products and purchase it via online stores. Also, as part of its omni-channel strategy, Samsung has focused on social media channel, such as Facebook and Twitter. Use of these social media pages helped to involve substantial number users and lead to a sensational explosion in click rates (Shaikh, n.p.). Emotional expanding enabled Samsung to enrich its omnichannel sales concept and grow sales (Shaikh, n.p.). Step 5: Recommendations In order to make Apple Inc. bigger and better there were provided some recommended strategies, differentiated by short-term, intermediate term, and long-term strategies. Short-term strategies For short-term period Apple should focus on its strength and develop its market share in enterprise market segment. As it has been identified, the company has an opportunity to develop business in this niche. Therefore, Apple should put all efforts in order to sign contracts with enterprises and government institutions. The company should be aggressive in implementing this strategy as its major competitor, Samsung Electronics, also can pursue this market segment. Also, Apple Inc. is recommended to focus on the opportunity to expand its iOS to in-home, e-payment, and in-car systems as well as Apple Pay system (Euromonitor International, 6). This strategy will help the company to retain its customers and generate new sources of income. Intermediate strategies As it has been identified in the SWOT analysis the company is heavily dependent on its two major products, the sales of which are declining. Apple Inc. should focus on expanding its product portfolio, focusing on more budgetary products. Production of price-sensitive smartphones and tablets will enable the company to capture broader market share and focus on developing/emerging economies. Current Apple’s premium pricing strategy filters loyal customers ready to pay for iPhone or iPad from a general public who want a high quality smartphone at reasonable price. The company should consider low-cost and geographical diversification strategies. The company could launch new product line squeezed between Windows hybrids and Android tablets (Euromonitor International, 35). Also, the company could acquire some of the local players/competitors and focus on developing business in such highly attractive countries and China and India. Long-term strategies Also, the company should focus on searching new revenue streams in smartphones, as the competition on the market intensifies (Euromonitor International, 35). Apple’s major competitors such as Samsung and Lenovo increase the speed of launching new products to the market. Therefore, Apple should make more efforts on its R&D activities, and the speed of launching new products. The company should me aggressive in terms of the speed of developing and launching new/improved products (especially hardware specifications such as screen resolution and camera) (Euromonitor International, 35). For implementing this strategy significant investment might be required. Also, Apple might consider mergers and acquisition strategy in order to expand its business in emerging markets.   Works Cited: Apple.com. Apple Retail Store - Genius Bar. Web. 18 Feb. 2015. Available at: https://www.apple.com/retail/ ‘Apple Inc.’ MarketLine Advantage, Nov. 2014. Company Profile. Available at: www.marketlineadvantage.com Bell, David R., Santiago Gallino, and Antonio Moreno. "How to Win in an Omnichannel World." MIT Sloan Management Review 56.1 (2014): 45-53. ProQuest. Web. 17 Feb. 2015. Deloitte. Global Powers of Retailing 2013.Retail Beyond. Available at: http://www2.deloitte.com/be/en/pages/consumer-business/articles/global-powers-of-retailing-2013.html Edwards, Cliff. Commentary: Sorry, Steve: Heres Why Apple Stores Wont Work. Businessweek.com. N.p., 2001. Available at: http://www.bloomberg.com/bw/stories/2001-05-20/commentary-sorry-steve-heres-why-apple-stores-wont-work Elmer-DeWitt, Philip. Video: Apple Tugs At Heartstrings With A New Christmas Ad. Fortune. 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Has Apple Lost Its Cool To Samsung?. WSJ. N.p., 2013. Web. 18 Feb. 2015. Available at: http://www.wsj.com/articles/SB10001424127887323854904578264090074879024 Samsung Mobile USA: The Next Big Thing is Already Here’, Effie Worldwide: Silver, North America Effies 2013. Available at: www.warc.com Shaikh, Faisal. Emerging Shopping Trends, a Retail Innovation With Omnichannel Presence. Ephlux Insights. N.p., 2014. Web. 18 Feb. 2015. Available at: http://www.ephluxinsights.com/emerging-shopping-trends-a-retail-innovation-with-omnichannel-presence/ Read More