The Key Market Trends after the Launch of First Apple iPhone - Case Study Example

Case Study: Apple iPhone Abstract With the launch of iPhone in 2007, Apple bought another revolutionary and innovative product in the market, creating a strong brand value for its products. In this paper the theories and concepts related to innovations are being understood and dealt with in accordance to the launch of iPhone. Apple’s performance related to innovation is also being studied and found that the company really created an innovative product, which helped it in generating revenues and brand name, keeping it ahead of its competitors. Introduction The paper focuses on the innovative product iPhone, launched by Apple Inc. in 2007. The paper attempts to understand the concepts and theories that govern (Afuah, 2003) and guide the development and implementation of innovation, which, say market analysts, signifies newness, covering six different paradigms of news services, new products, new markets, new methods of production, new ays of organizing the product and exploration into new markets. (Johannessen , 2001) Further, it would critically analyse how well Apple performed in these areas. It would discuss various theories related to innovation and find out whether Apple had adhered to these theories while launching iPhone in the market. The report would also identify any gaps between actual practice and theory-based practice recommendations, and should make appropriate inferences. Understanding product innovation A product is defined as anything which could be given in a market for generating attention, for consumption or for acquisition and may fulfil the want or need of the consumers, stated management expert, Phillip Kotler. Therefore, a product could be a retail store, a person, a physical good, an organisation, an idea or even a place. Product innovation therefore is the sum total of generating a new product or service to address a customer’s issue or problem, which would not only benefit the customer but also the customer. In case of innovation, the system is driven by business processes, guiding principles, organisational charts, roadmaps and systems (Kuczmarski 1995). Although, it could be stated that only strategic planning (Charitou & Markides 2003) would not be able to make creative products but these definitely helps in preparing to create innovative designs and ideas, which could be translated into tangent products. Therefore, it is important to create a structure for the product design and make better, experiment, innovate and make discoveries surrounding it (Tidd et al. 2005). Therefore, it is important to focus on innovation in order for companies to not only become successful but also sustain themselves in the long run. This keeps up with longterm goal of staying abreast with global economy and competitions while intending to make profits through a sustainable product line (Dunphy, Griffiths, Benn 2003) This is especially true for products that in global markets have too many competitors. In such cases, an innovative product helps in creating differentiation in the market and attracts the target audience as well (Afuah 2003). Apple in fact is an exceptional instance of a firm that has witnessed dramatic turnaround in its revenue in the last few years, due to its policy to create innovative products with universal appeal. The iPod, iPhone and the recently launched iPad are the examples of the innovative products being launched by Apple to create a niche market. Further, studying the revenues of the company in the last few years have also shown that there exist a clear association between the revenue and products being launched by Apple (Sharma et al. 2007). Apple’s iPhone’s Startegies Apple’s trend to take the market by storm was proved again with the launch of Apple iPhone. After the huge success of iPod, consumers were seen waiting uneasily on 29th June 2007 to get the sight of the handset in the US. The iPhone became one of the most discussed instruments, exceeding the coverage of other very famous mobile phone products available in the market. Apple’s design process has always been fundamentally different from most of the handset manufacturing companies. They operate as a system company by creating integrated hardware and software solutions for better quality and keeping in mind consumer’s expectations. Apple’s product design is difficult for many companies to copy as they would have to integrate Operating System, online services, user interface and hardware design into a single unit. The instrument is also an example of a smart phone designed as an appliance instead of a device (Sherman 2002). Furthermore, Apple iPhone is likely to harm the market share of the entertainment device manufactures; analysts said that in the long run, it may have a more bigger impact with Apple improving up the technology going by the consumer demand. The launch of 3G instrument in the recent past has set a benchmark, which now becomes a qualifier for the other competitors to achieve. The strategy adopted by Apple involves two significant principles. First, they have been able to clearly cut across their consumers i.e. the youngsters and the technology conscious. Second, they have marketed their product Mac through various channels thus gaining widespread popularity (Krazit 2007). Target Audience: Almost 50% of the iPhone users are under 30 years of age. The features such as wide screen, large flash storage and storing huge music files attracts younger generations who want to enhance their lifestyles. These features do not attract the professionals as they are required to be linked into their emails and business software for official purposes. Thus, rather than competing with Treo and Blackberry, Apple reaches out to young, tech technology loving consumers. In the US and Europe, they account for 12% of mobile phone users. Global Roaming: As iPhone is backed up by GSM, it cuts across the other competitors worldwide. The phone can be used in other parts of the world without facing problems on technology front. Increased sale of Mac: Apple leveraged its Macintosh installed base to establish the iTunes music store, and then built the iPod business. iTunes and the iPod enabled Apple to connect with youngsters, and helped convert millions of Windows users into becoming Apple customers. Additionally, Apple's large and loyal installed base makes it much easier for the company to get into a related market. Product Concept/Idea generation and shaping Product concept is very central to the success of a innovative product and a thoughtful concept, creatively crafted with strategic market planning goes a long way in raking up revenues for the product (Mintzberg & 2002 ).The anticipation around the brand was huge when the launch of iPhone was announced by Steve Jobs on 9th January 2007 during the annual Macworld trade show. The announcement created the latest news about iPhone, which became famous overnight and the consumers waited for its launch later that year. As compared to earlier products that focused on convergence, iPhone’s differentiating feature was its wide screen, which was around 8.9cm diagonal, 320x480, largest among the standard-sized mobile phones available during that time. In order to create the large screen, the design of the phone in fact removed the dialing keypad from the phone and instead provided a touch screen which could be used for dialing numbers as well as for other input functions. The mobile phone consists of a lower version of the Unix-based OS X operating system used by Apple in most of its products, and had a user interface that is iPhonespecific, which in fact claims to match with the ease of using iPod and Macintosh (O’Grady 2007). Although, the phone was launched with loads of publicity, the phone did face oppositions as well. Just as the original iPod, with regards to iPhone as well, the analysts stated that the product was being overprice, was very big and was only for the niche market segment. Many also focused on the fact that the phone did not have the ability of good feedback from the keyboard. Further, they also stated that the phone did not have battery that can be changed by the user, did not have an expansion provision, did not support 3G networks and other such important features (O’Grady 2007). However, the greatest criticism that Apple faced was the phone being defined as ‘closed’. In fact, the most visible criticism that the users also stated was that the phone only used a single carrier, i.e. Cingular, which was later in January 2007 was renamed as AT&T. Apple’s strategy was to lock in the product with a single carrier so that the initial subsidy provided to the carrier could have a payback. Further, Apple also leveraged its success of iPod and demanded considerable control of the distribution of its phone through Cingular, which at that time had the largest market share in the US that is of 26.6 per cent. Further, as compared to Verizon which had a market share of 24.4 per cent, Cingular was more willing to agree with the terms of Apple (Sharma et al. 2007). Another problem that Apple faced was the criticism from the users that the iPhone did not allow installation of any user software which could be done in case of iPods and PCs. Idea distillation The attempts for making a phone that could be used as a convergent model and convergence devices which could be a PDAs and or any handheld device—was able to use general-purpose computing as the platform strategy. This was first developed by IBM and later adapted for workstations, minicomputers and computers for personal use (Moschella 1997). Some of the successful platform strategies were able to bring to forefront three key attributes. The new platforms could identify a need that is customer market segment and not been met by other platforms and could win adoption through serving by segment which was better than the alternatives which existed in that time (Bresnahan & Greenstein 1999). Over the period of time, some of the winning platforms were able to shift from some of the vertically integrated strategies (e.g., the IBM S/360) that has a single firm controlled the whole platform, and that to divided technical leadership where the firm was able to control some of the different parts of the platform which was put up (Bresnahan & Greenstein 1999). And controlling the value provided by the platform requires control of the complements (e.g., through application programming interfaces) that make the platform valuable (West and Dedrick 2000). Some of the well known cell phone vendors have been able to adopt changing strategies with regards to the operating systems. At the onset, they were able to have a business model styled after PC market. Most of the vendors that included Motorola and Nokia were able to band together for creating Symbian, which was a shared operating system which they were supposed to use in conjunction. Palm was able to license its operating system to a spin out PalmSource and was adopted by several vendors who included Sony as well as Samsung. While Microsoft focused on licensing the Windows CE operating system to other companies at a faster rate with the success from HP and Dell, and some of the other companies in Asia (West and Dedrick 2000). Until recently, some of the handset OS strategies adopted by the vendors, has been taken as an ownership. Companies like, Nokia has been able to run their own software layer which is called S60, alongside their Symbian based phones. On the other hand, SonyEricsson is able to run a not suited\layer which is called UIQ on its Symbian devices. Also, Palm was able to regain its rights for its OS, and is able to make a proprietary change to the same. While, Motorola has a Microsoft as well as Symbian licensee, but has been investing heavily on its own version of Linux. In the early 2007, mobile phone market had appeared to be headed towards situation where the leading the vendors had their own incompatible software. Strategy adopted by Apple has been more proprietary. It was able to adapt its own desktop operating system with an unspecified subset of Mac OS X desktop operating system which could run an iPhone. By this, Apple was able to leverage some of the desktop software which included web browser, TCP/IP and QuickTime media player (Palomäki 2004). The company claims that this would let the iPhone get a display which is standard HTML and http websites that were created for personal computers. That could be a great advantage as most mobile device browsers were having trouble in displaying these websites that was designed for the PCs. On the other hand, mobile browsers have been able to make substantial progress, the difference between PC web and the mobile web has been ongoing source of confusion for the consumers (Sigurdson 2001). Although, Apple’s platform strategy has been more accommodating to the consumers than any other vendors in particular. Not like the Palm, Symbian, and Microsoft, Apple has not been allowing any open development for the third party applications for the iPhone and is developing the platform by itself. Concept definition and design Inspite some of the predictions with regards to convergence devices which has been stated to take over the electronics industry most of the results generated in the past has been very disappointing. When one has such previous examples, the best way for companies to create a shift is either by creating fresh and innovative business models or refurbishing the old one (Hargadon & Sutton 2000). Apple chose the former and its strategy has been able to generate some problems which are between the market conceptions. While the goal has been to produce the device which can be used for convergence with maximum functions and could be introduced in the mass market. This has been completely driven by the strategies with regards to product, that stated that firms which offered convergence devices which can be a MP3 player in the mobile device, or DVD players which has been built into the videogame consoles or even a Sony’s UMD movie format for the PlayStation Portable has been able to reach some point or the other. Such a conception would lead to a mobile device across the possible roles i.e. computing, entertainment content, communications, information management and other functions offered in the portable device (Mintzberg and Quinn 2002). Conformance and Deviation from Earlier Strategies Some of the studies on strategic management have been traditionally emphasized how such managerial discretion could allow the managers for choosing these strategies which would maximise the success of the firm. Recent research studies have been able to emphasize the strong inter-firm differences which have been able drive the strategies and the success from the scarce, valuable resources and unique, or may be from the capabilities of the firm as well as competencies which has been taken from the resources (Vrakking and Cozijnsen 1997). Strategic Analysis Impact on the mobile phone industry The traditional methods of using mobile phones and PDA’s have seen a shift in idea with the launch of Apple iPhone. The smart phone integrates high end capabilities such as touch screen navigation and without problem internet browsing. Thereby, challenging the mobile manufacturers to shift gears by providing advanced and smooth technology to the end-users. The following points focus on the impact of the launch of Apple iPhone on the mobile phone industry (Boland et al. 2007). Shift from service provider to manufacturers: Apple’s exclusive deal with AT&T witnessed a shift in decision making power. Traditionally, mobile operators have controlled the decisions of selling handsets to the users. However, with the success of iPhone asked people to switch operators in the US, the decision making power no longer rests with the operators. Thus, the handset companies like Apple has demonstrated the ability to generate demand (Boland et al. 2007). Improvement in the margins: The survey conducted by Rubicon Consulting Inc, confirms that users prefer to browse more on iPhone because of better compatibility and touch screen control. This has in-turn benefited the service providers, with significant rise in the mobile phone bills of the users. Per CNET, iPhone users pay as much as 24% higher mobile bills because of more usage in the US. Additionally, AT&T has seen a yearly increase of $2 million service revenue because of the iPhone deal (Boland et al. 2007). Source: Rubicon Consulting Inc. Touch Screen: The first of its kind to be launched by Apple, the iPhone touch screen technology is bound to propel a huge adoption in the industry. The iPhone uses the more advanced projected capacitive technology; which allows for a more insight as the finger can run across the surface. In addition, the iPhone is the only device that can handle more than one finger at a time; some features like "two pinch" used to resize graphics on the iPhone would take a while to be copied (Gawer and Cusumano 2008). OS X: Another feature that stands out for Apple iPhone is the adoption of advanced operating system. This allows users to access desktop-class applications and software, including rich HTML email. iPhone also allows users to multi-task; read a web page while downloading the email in the background. Notebook Replacement: Survey results announced by Rubicon Consulting Inc, found that one fourth of Apple iPhone users often carry the iPhone instead of a notebook computer. Wi-fi: The instrument is a Wi-Fi enabled device and can connect to the Internet once in a hotspot. It determines the fastest network it comes across (Wi-Fi or Edge) and connects the users to the Internet. Per the survey results published by Hotwire, respondents said that they were amazed by the speed of the Internet. Most of the respondents could easily send email, get maps, weather forecasts and connect to messengers. Connection to YouTube: iPhone provides wireless connection to YouTube allowing end users to watch the most-viewed streaming videos along with search capabilities. Furthermore, YouTube is likely to fix the full catalog into a format iPhone can recognize. End-users are also allowed to share YouTube links by e-mail. The downloading capability announced by YouTube would add to the bottom line of the service provider. Impact on media and entertainment sector Analysts predict that iPhone with its handheld computer capability will create a huge impact on music and gaming industry. The iPhone removes the barrier of accessing and using content designed for computer-based applications on a mobile phone. This restriction has stopped the growth of mobile content, unlike the computer-driven success of Internet sites such as YouTube and MySpace. Further, iPhone has made the handset vendors realize that the market for music phones would not develop like camera phones. This is based on the fact that media industry is still regulated under various licensing act which can only be sold by handset producers with deep pockets (Gawer and Cusumano 2008). Over-the-air (OTA): The global market for OTA mobile music download is stated to see a huge rise in the next five years, per Screen Digest. The growth would be driven by mobile subscription services in Japan. Whereas, in Europe and the US, downloading tracks online and saving them on the handset would be the trend. This would score up business for iPhone in a big way as it provides the capability to download music on-the-move. Content Creators: Content creators trading on sites such as voeveo.com would witness a surge in downloads and browsing. Analysts state that they would see a significant growth in the market share as mobile users adopt the converging technology. Additionally, they will be able to deal directly from where the content is created and benefit from competitive pricing as the content market opens up across different platforms and applications. Mobile TV Market: The enhanced capability to connect TV and video in the handset gives a cutting edge to iPhone. Per Analysys Mason “Consumers are very content and have accessed TV and video content, with greater frequency than subscribers using other types of mobile handsets.” Analysts predict that if iPhone gets significant worldwide market share, it will impact the way mobile subscribers purchase and watch mobile TV and video content. Competition Microsoft’s inability to customize and think advanced has badly hit its popularity. With successive launches made by Apple, such as Macintosh, iPod, and iPhone has spoilt Microsoft’s bottomline in a big way. Analysts state that Windows Mobile is “sandwiched” between two big competitors, Google and Apple. Apple is creating hardware-software systems that deliver a great user experience, while Google is giving away an operating system to the very companies that license Windows Mobile today (Garnham 2009). Blackberry RIM: Although, target segment for both Apple and RIM are very different. Wherein, Apple's device is entertainment-centric, while RIM's devices are communication-focused and have traditionally sold to businesspeople in a higher age group. That said, if iPhone can customize and add thumb keyboard along with other features such as extra data storage space, Apple may be able to enter the other market segment as well (Garnham 2009). Nokia: Nokia being present in various parts of the world may be an advantage over Apple iPhone. However, if Nokia does not upgrade their handsets and copy some of the high-end features such as touch screen etc, it may soon loose its market share to iPhone (Wray 2009). Product/service launch Launch of 3G iPhone On July 11th 2008, Apple launched the latest version of the iPhone with 3G technology. The new iPhone is built on third-generation, or 3G, technology that is faster than the original iPhone's network. Apple cut the prices of the product in the US but the contract with AT&T was maintained. iPhone costs were slashed by 50%, an 8-GB model was priced at $199, and 16-GB version costs $299 (Wray 2009). Launch of iPhone 4 The latest iPhone 4 from Apple is another important device which continues with the history of Apple to create innovative product that is an unique one rather than a revolutionary product. The newest version of Apple iPhone do have some issues such as call drops, still the company is being able to deliver an attractive phone which is as impressive as its history of creating innovative products. Some of the important changes that the new version of the iPhone has are FaceTime video calling, greater processing speed, HD video recording, editing and multitasking. Although, the latest smartphones and handsets from competitors such as Nokia, Research in Motion (RIM), Motorola, Google Android, Samsung and HTC are also very important, the latest iPhone 4 would still have considerable demand globally from its current user base as well as from new customers. However, experts believe that the new iPhone might not be as innovative as the previous versions of iPhone has been. It is believed that the introduction of iPhone and iPhone 3G which created revolution in the world of mobile phone in 2007 and 2008, may not be repeated with the launch of iPhone 4. The Apple usability, the interface, the form factor, the ease of use and the operation of the third-party application have since been copied by other companies as well. Therefore, just not Apple but even other phones in the smartphone industry would have difficult time in creating another such leading device yet again. In its place, the sector would look for improvements which would be typical in consumer electronics market (Garnham 2009). Recommendations Although, Apple has been able to create an innovative product through iPhone by using various theories related to the concept of innovation, it still needs to focus on other areas as well such as creating a global reach for its brand, solving third-party issues, focusing on being compatible with keyboard and providing memory slot. That apart it has to adhere to the discipline of innovation (Drucker 2002) apart from six essential pillars of innovation to make it a completely flawless brand with high growth potential (Breen, B. 2004). In order to create a global reach for its products, apple should aggressively plan to market iPhone to all the major countries in the world. With consumers anxious to use the handset, it may be a good business opportunity for competitor companies such as Nokia to quickly make their models better. This may prove detrimental for Apple as Nokia has strong hold in most of the geographies (Linder 2003). Apple also need to solve third party issues: iPhone does not allow usage of third party software. Apple should work with developers to host a platform that should recognize them and also sell their product through their website (Linder 2003). It needs to make iPhone compatible with the keyboard. Apple should upgrade the iPhone so that it can be well-suited to any keyboard, this may become an entry point for taking on the market share from RIM and Treo (Christensen and Overdorf 2000). Apple should add memory slot for attracting users other than their target audience. This would help Apple in competing with the laptop/notebook segment and allow professionals/businessmen to carry only one device. Thus, increasing the dependability and usability of the handset (Christensen and Overdorf 2000). Conclusion The paper analysed the key trends after the launch of first Apple iPhone in June 2007. It takes into account the platforms and technology introduced by Apple a few year ago and how has that changed the face of mobile industry. It also briefly talked about the launch of 3G iPhone and the latest iPhone 4, and its impact on the telecom sector. The paper understands the change in the mobile industry market after the first iPhone was launched. The paper especially focuses on the concepts and theories that support and guide the development and implementation of innovation (Tidd, Bessant & Pavitt 2005). Further, it critically analysed how well Apple performed in these areas. 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