Marketing strategy of Apple - Case Study Example

Marketing Strategy of Apple Introduction Marketing strategy refers to specific approaches for targeting market, positioning, marketing mix, and marketing expenditures levels (Capon, 2008). It offers a framework of how the organization plans to create value for the target clients in order to capture value in return. Companies use different marketing strategies to get people buy their products and develop loyalty. Pricing strategy is one of the most common marketing strategies that attract people to buy the products (Whittington, 2001). This study investigates the Apple’s marketing strategy. The investigation involves the strategies analysis, formulation and implementation of the Apple Company in order to establish how the company has managed to maintain market leadership position in computing and other consumer electronic goods (Zylla-Woellner, 2013, p. 3). Apple Inc. is a multinational organization based in California in America. It manufactures and sells consumer electronic products such as personal computers and computer software. The most common brands include Macintosh computers, iPad, iPod, and iPhone. Other products include iTunes, iWork, Logic Studio, Mac OS X, Final Cut Studio, Safari Browser, and iOS (Kyle et al., P. 3). The company operates in more than 360 outlets across the globe. In order for the company to achieve its goals, they assess the external environment and analyse the internal conditions of the company (Shankar et al., 2012). Other strategies of the company include innovative techniques that have helped the company to expand its market (Zylla-Woellner, 2013, p. 5). They have highly diversified their products in order to meet the needs of different consumers. The company has innovative and resourceful managers who are responsible for formulating and implementing the company’s goals (Lynch, 2008). The study examines various strategies used by Apple Inc. to develop and implement its strategies in order to achieve its goals. Also, it will assist in understanding the impact of customer loyalty to the brand of the company and how loyalty can be made more competitive (Kyle et al., P. 4). Their implementing strategies include developing new employee’s benefits, pricing, marketing, and sales strategies. Strategic analysis Strategic management refers to plans implemented by the organization to achieve long term objectives which are pre-defined and examined towards reaching the goals of the organization (Thompson & Martin, 2005). Once the management decides on the steps they will undertake they have to monitor them regularly to ensure they achieve the predefined organization’s goals as stated in the mission (Zylla-Woellner, 2013). Organization strategies change depending on the situation and requirements of internal and external business environment, but must be focused towards achieving the organization’s goals. The organization decides on the steps to undertake in order to develop a comprehensive plan and how to implement the plan within the company (Whittington, 2001). There are various approach used for developing organization’s strategies. The organization identifies its market, product mix, innovation and competitors in order to establish and implement the best strategies they can employ to achieve their goals (Johnson et al., 2009). Apple identifies its competitors and the products they offer in the market so that they can modify the products according to customer needs (Thompson & Martin, 2005). They experience immense competition from rival companies dealing with consumer electronic products. These include Hewlett Packard offering HP Slate, Lenovo UI dealing with 16GB and 11.6 inches, JooJoo offering 4GB and so on. Dell and Hewlett-Packard dominate the market for PCs market (Kyle et al., P. 4). The company recognizes the trends to ensure product reliability. It creates customer loyalty through development of apple tribe (Zylla-Woellner, 2013, p. 6). For example, in order to create customer loyalty Apple Company partnered with other companies such as archenemy and brand powerhouse Microsoft to establish a Microsoft Office for Macintosh they partnered with peripheral, entertainment software companies and so on. This has helped the company to increase its revenue and profitability (Campbell et al., 2011). Apple has highly diversified products that help it increase profitability due to increased sales volume. The company focuses on increasing sales volume through launching new products and identifying new market segments (Zylla-Woellner, 2013, p. 8). They have diversified the market from computing to the digital market by producing portable music players such as iPhone, IPod, and ITunes. They target on satisfying customer needs through diversified products that have resulted to the creation of customer loyalty (Whittington, 2001). For example, in 2003, Apple’s revenue was $6.2 billion while the profit stood at $01057 billion in the same period (Johnson et al., 2009). In 2012, the revenue increased by 5000% to $156.5 billion, and revenue rose by 8000% or $41.7 billion in the year 2012 (Shankar et al., 2012, p. 154). Also, its capitalization increased by 9700% during the same period. Significant portion of the company’s growth was attributed to the iPod, iPhone, and iPad. Until 2013, the company had sold 200 million iPad, 160 million iPhones, and 120 million iPhones (Lynch, 2008). The company has a reputation for high brand image because they make innovative products with an exceptional design and superior quality (Finlay, 2000). They create scarcity of products as a strategy of ensuring consumers who missed the product had to wait until the stock is replenished a week later (Johnson et al., 2009). The situation created tension between the customers who had the phones and those who wanted to have them. The distress of those who missed the phones went into the social media and infected people who could not even care about the products. They expressed their sympathy for those who did not get the products they needed (Mintzberg et al., 2009). The occurrence favoured the company because the exchanges in the social media boosted the advertisement for the products and resulted to increase in demand for iPhones as more people joined the social media conversation (Kyle et al., P. 5). Therefore, the artificial shortage of Apple products increased demand for the products since many people desired to get that rare product (Lynch, 2008). In the subsequent year, Apple continued releasing the iPhones in limited supply. However, they varied the colour of the products and produced three different colours (Campbell et al., 2011). The gold colour was very scarce and once more many it caught the attention of the people who started looking for the gold colour. The increasing demand for gold colour iPhone intensified advertisement for the Apple products without the company incurring any cost (Zylla-Woellner, 2013). Furthermore, Apple introduced Sim free iPhones in the UK market that ensured customers did not sell PayG iPhones unless for those who had Sim only contact or those who were willing to visit Apple stores to acquire new iPhone (Zylla-Woellner, 2013). The objective of Apple Company using exclusivity approach aimed at creating a feeling of specialty among the customers who bought the products and jealousy for those who did not get the product in the market even though they needed them (Kyle et al., P. 5). It created a desire for those who missed them to get those phones irrespective of their price in order to feel the vacuum (Zylla-Woellner, 2013). Although Apple Inc. knew that there are people who would not even fancy to have an iPhone they intentionally used exclusivity approach in order to create conflict between those who already have them and those who disliked them (Campbell et al., 2011). The company was able to succeed in their mission because the conflict generated a lot of publicity, and that served as an advertisement for their products without adding cost to the company. Apple creates demand for their products through product differentiation. This involves making its products distinctive and appealing to the buyers (Lynch, 2008). The company ensures innovative advertisement to established brand loyalty and build up demand for the newly launched products. The company creates artificial entry barrier to rivals in the market by targeting buyers who are willing to pay a higher price while maintaining volume low (McGee et al., 2005). Apple deals with its products and those of third party directly to consumers through its major retail outlets and online stores as well as direct sales force (Mintzberg et al., 2009). In addition, the company utilizes indirect distribution channels such as wholesalers, retailers; third-party network carries and value added resellers. They use “minimum advertised price” retail strategy that forbids resellers and dealers advertising manufacturer’s products below minimum price (Kyle et al., P. 6). This strategy is achieved through offering market subsidies by the producers to the resellers (Thompson & Martin, 2005). The company offers marginal wholesale discount for its high-priced products to limited retailers such as Wal-Mart and Best Buy. Due to that small discount margin retailers sell the products to consumers at a price similar that which is offered directly by the Apple Inc. (Zylla-Woellner, 2013). Whereas some retailers could reduce their profit margin and offer discounts to the consumers, apple prohibits such decisions by providing monetary incentives to de retailers so that they can sell the products at “minimum advertised prices” set by the company (Finlay, 2000). The company offers superior products for a premium market. Strategy formulation Policy formulation refers to the articulation of strategies to accomplish the business undertakings (Zylla-Woellner, 2013, p. 14). They include the business mission and vision, strength and weaknesses of the company as well as opportunities and threats related to internal and external business environment. When formulating the business strategies the management establishes long-term goals and objectives, creates alternative strategies and selects particular goals strategy to pursue in order to achieve desired performance (Capon, 2008). The formulation of strategies should focus on issues such as business intention to enter new market or retain the market, allocation of resources, possibility for mergers and acquisitions, plan to join foreign market, protection against takeover, strategy to liquidate the business and whether or not to expand its operations (Whittington, 2001). The steps of formulating strategy begin by skimming the external environment to establish opportunities and threat, analysing the internal environment for strength and weaknesses of the company and formulating goals based on the external skimming and internal analysis (Whittington, 2001). One of the Apple goals is to expand the market for its products, maintain competitiveness and increase business revenue (Lynch, 2008). The company uses skimming marketing strategy for its highly innovative products. Once the company introduces a new product into the market they set the price very high and observe consumer reaction (Ranasinghe et al., 2012). It enables them establish the market for their products. Through skimming strategy, the company can determine consumers who are willing to pay a high price to acquire their products (Thompson & Martin, 2005). Price skimming enables the company to increase the value for the products and offers the company an opportunity to adjust the price in case of intense competition. Apple targets the market in the developed country including UK and US (Lynch, 2008). However, they have recently started establishing their operations in China and Hong Kong because most of their products are for middle-class consumers. Apple conducts scan of the external business environment in various geographical locations where it is conducts its operations. The scan focuses on political stability, competition, demographic computer data and technology (Zylla-Woellner, 2013). The company makes an assessment of particular product resource availability and income of the population. In addition, the company assesses the rate of inflation, exchange rate of the currency and the balance of payment. They will examine the market potential and predict the possible share of the market and that of its rivals (Thompson & Martin, 2005). Finally, the company examines the political atmosphere of the region where they intend to venture into, nationalism, government influence and profit potential of the region they are targeting to invest in. The marketers of Apple products believe that market stratification is the best approach to achieve the company’s goals (Campbell et al., 2011). They have identified three special categories of consumers based on age, income, and geographic location. On the basis of age, iPad has great demand among the youth and middle aged class who prefer the product for entertainment and business utility. On the basis of income, the medium income earners prefer iPad because of the acquisition price while on the geographic location the company’s main target is Europe, North America and other nations in the Asian continent (Ranasinghe et al., 2012). When conducting internal environment analysis Apple examine the available resources including technical competence, existing managerial capacity, available finances, as well as technical competence. Apple has relied on the managerial competence of the chief executive officer (CEO) Steve Jobs, who has wide experience in business management (Johnson et al., 2009). The Apple’s procedure for implementing strategic goals is driven by the profit and market expansion motives (Johnson et al., 2009). When investing in an overseas market the company focuses on generating higher revenue than in the domestic market because of higher risks and struggles associated with the international market. International market involves more challenges because of increased competition. International market offers greater opportunity for expanding the business and increasing business profitability (Johnson et al., 2009). Furthermore, the external environment has a direct influence on the business profitability and market share. When formulating organizational goals the management should take into consideration various strategies appropriate for success of the organization. For example, Apple was able to recognize the trend of consumer behaviour and the commoditization of PC industry (Johnson et al., 2009). This lead the company into envisaging plans for a product that satisfied consumer needs. In the assessment of competitors, Apple realized they were losing market share because of its strict licensing policy (Johnson et al., 2009). Therefore, the formed an agreement with Microsoft to produce core competence and also used Intel chips in their laptops that resulted to faster and power efficient gadgets. Through competitor analysis, Apple Company was able to partners with its rivals in a way that helped them strengthen their brand (Lehuan, et al., 2011). Apple focused on consumer needs and based its strategies on creative destructive model so that they were able to improve their existing products (Lynch, 2008). Through their spirit of innovativeness, Apple has been able to increase demand by bringing new products into the market. This has helped them maintain take the advantage of first mover that has consequently enabled them to realize high up-front market share and profit margin. Apple creates awareness for its brand using informal advertising approaches and creative campaigns for Mac brand (Campbell et al., 2011). Also, they differentiated their products that resulted to the growth of the brand awareness. It has been able to position its product in the market by replicating its products that serve as re-invention. For example, Apple Store acted as a supplement for iPhone. The launch for iTunes Store created significant demand for iPods was established (Johnson et al., 2009). Apple refurbished their distribution system from local outlets to international chains. They set up retail outlets in more than ten countries that increased total revenue to 16% (Zylla-Woellner, 2013). The local outlets were of great significance because they enabled consumers to familiarize with the products before they could make any decision on whether to purchase them or not to purchase them (Zylla-Woellner, 2013, p. 13). Finally, Apple makes a follow up on its consumers to ensure they achieve the satisfaction they were looking for through feedback sent through online means (Lynch, 2008). The company obtains a competitive advantage creating and sustaining high-quality customer service model. Strategy implementation Implementation of business strategies requires the firm to articulate annual intentions, formulate policies allocate resources and motivate the workers in order to ensure execution of the designed strategies (Thompson & Martin, 2005). It involves establishing strategy supportive environment, creating efficiency, motivational and leadership skills and managing forces during action. The steps upon which the company can achieve its policy goals includes changing the sales strategies, developing new employee benefits, changing advertising strategies, hiring new employees and changing organizational pricing strategies (Capon, 2008). One of the strategies Apple has implemented is the branding of its products. The development of apple brand has enabled it to achieve strong competition in the market (Lynch, 2008). Through branding strategy, the company has been able to expand the range of products and services in the market. Product branding is essential because it enables customers to distinguish the products of different manufacturers in the market (McGee et al., 2005). Branding is the use of names, symbols, designs, terms or mixture of all of them in order to identify the goods or services of a particular producer or seller from those of rivals (Whittington, 2001). In addition, it enables consumers to determine the products of a particular vendor and recognize them as the only products capable of satisfying their needs (Zylla-Woellner, 2013, p. 14). Branding gives the company identity and guarantee that the products they offer to the consumers have potential to satisfy their desires. Apple Inc. has well-established brands for Macintosh and laptop computers, computer software as well as other consumer electronic products such as iPod, iPad, iPhones, etc. (Campbell et al., 2011). Also, the offer music distribution through iTunes music stores, smartphones using Apple iPhone games, books, magazines, etc. published through Apps Store. Apple Incl. has established its presence in the advertising marketing through iAd and business Apps network to compete with Google (Campbell et al., 2011). The company engages in rigorous advertisement campaign to create brand awareness in order to familiarize consumers with the availability of the products. Brand awareness refers to consumer loyalty to specific goods or services (Ranasinghe et al., 2012). It includes: recognizing the brand by sharing knowledge about the product with customers. Consumers with the knowledge about the product can differentiate the characteristics of various goods and identify the products according to the seller or manufacturer. Brand familiarity leads to brand recall whereby the clients can recall the products and associate it with a particular seller or producer. Consumers gain experience with the products after using it and getting their needs satisfied (Capon, 2008). Product advertisement aims to familiarize consumers with the products by creating product awareness. Most companies incur huge expenses in order to promote the products and develop a brand name in order to win customer loyalty (Thompson & Martin, 2005). Apple Inc. does not advertise their products either through traditional media or social media. They advertise their products through other companies that also bear the cost of advertisement. For example, the network operators pay for the Apple iPhone ads when they are advertising their interest to sell the iPhone (Zylla-Woellner, 2013). Network operators consult Apple Inc. before designing the adverts, they intend to place in the media. Apple dictates to them the nature of information and assesses the impact of the ads on their products (Zylla-Woellner, 2013). Therefore, apart from paying for the advertising cost the network operators must comply with Apple’s requirements on the contents to be displayed. That requirement has enabled the ads for Apple products to appear the same all through. The mobile network operators benefits from this arrangement because (Finlay, 2000). Apple smartphones are the strongest brands in the market hence marketers gain from massive sales of the apple products. Since the operator’s market apple trademark, they have to conform to the requirements of the trademark owner (Lynch, 2008). Apple uses exclusivity techniques when marketing their products (Ranasinghe et al., 2012). This involves issuing special offers to the buyers depending on the duration they have interacted with the company either through Facebook or as existing buyers. The technique makes a section of the buyers feel special and get attracted to the company (Capon, 2008). This results to the long-term relationship with the organization which results to brand loyalty. In the implementation of exclusivity strategy, Apple made all of their iPhone products range exclusive instead of having selecting special category of customers (Campbell et al., 2011). It is through the exclusivity technique that has made their mobile phones emerge at the top in the mobile market. After Apple had released their first iPhone in the market, they distributed them through a single retailer (Zylla-Woellner, 2013). This created demand for the product yet the supply was limited. In the subsequent products that were released the company ensured the products were not enough to satisfy the existing market demand (Capon, 2008). The approached worked in favour of the company because consumers who needed the products could queue for a long time at the outlets in order to get the product. This favoured Apple because it attracted the media that offered free promotion from the publicity it created (Zylla-Woellner, 2013, p. 15). Exclusivity creates demand for the products because it makes the product appear as though it was for special customers or as though it were an investment opportunity. The company prices its products with the aim of prohibiting competition of their stores by the retailers. In addition, it ensures no retailer is advantaged or privileged than others (Ranasinghe et al., 2012). The approach enables Apple to maintain its distribution channels clear as well as ensuring they get more revenue from their direct sales. One the company’s goals are to deal with substandard goods or low priced goods (Finlay, 2000). That is why both hardware and user interface are intended to offer value for the price thus helping the company to keep profit high. Apple can continue charging premium price for its products as long as they remain competitive in the market (Ranasinghe et al., 2012). However, there is a significant threat on Apple products due to low-priced smartphones and saturation of the developed market. The introduction of Android offering turnkey processing solutions has increased the number of smartphone venders in the market. Those vendors are targeting on cheap devices intended to create brand awareness (McGee et al., 2005). Conclusion Apple Inc. is one of the leading manufacturers and marketers of computing and consumer electronic good especially in the US and UK market because since they target buyers from the middle-class consumers. Their marketing strategies include introducing new products in the market, examining products market and assessing external and internal market. In order to achieve their goals of increasing profitability and market expansion the company varies marketing strategies, build the employees capacity, change advertising strategies and sale of sales strategies. They continuously diversify their products to suit clients’ needs. They produce innovative products and offer differentiated products. The media owners advertise Apple’s products, and this leads to a reduction in cost of operating a business. Developing nations such as Africa, India, and Indonesia offers prospects for stronger market and increase revenue. The company should focus on price reduction of its products based on product quality and design in order to attract clients from the low class. Apple Company should involve social media in increasing advertisement for their products. 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