Analyzing Market Segmentation for Apple's Products - Case Study Example

Apple’s Data Analysis Executive Summary For various reasons like its philosophy of comprehensive aesthetic design to its advertising campaigns that are much distinctive, the company has established a reputation that is very unique in the industry of consumer electronics. The company products faces completion from alternative sources of computer hardware like Dell, HP, Lenovo do exist. There also exist online music stores that are similar to iTunes stores (Nepster). Though the market is unfavorable, but new entrants have tried their way, namely; there is streaming audio and video with v-cast (Verizon) and the new entrants with disruptive technologies. In this market, substitute products are highly available. Due to the uniqueness of Apple’s products, they are more vulnerable for imitations. The bargaining power of suppliers in the market is high but Apple as opposed to other companies, is self sufficient depending mostly on its own. in addition, in Apple Company, major business customers acquire bargaining power, but on the other hand, most of Apple’s customers are private customers. Apple Company has a unique and renowned brand. It is one of the companies that are successful world wide. However, it has been reported that iPod Nano have screens that break under impact and the firm is replacing all faulty ones, in 2005, it announced that it was to end its long term relationship with IBM as a chip supplier and about to switch to Intel, there exists pressure for the firm to increase the price of its music downloads, from the music industry itself. This forms the company’s weaknesses. Its opportunities include; opportunity of developing its iTunes and music player technology into a format of mobile phones, international expansion, revolutionizing another industry among others. Apples threats are; increase in taxation, existence of high product substitution effects in the innovative and first moving Information Technology consumable products, and global economic conditions that cause reduction in demand of consumer products that are highly priced. Apple Inc has divided the markets into categories that are workable, they include homes, education, large businesses, small businesses and government. All this can be categorized under three major customer segments. It usually appeals to; early adopters who in most cases think different. Late majority consumers; who usually wants something easy to use that just works in any way. The last category is professional content creators. Although Apple has taken leadership, it faces completion from the likes of Dell, Microsoft, Amazon, real networks, Google and to some degree Sony. Introduction Apple Inc is an American multinational corporation that deals with designing and marketing of consumer electronics, computer software and personal computers. The best known hardware products for the company includes; iPhone, iPod, and the ipad. The company’s software products include Mac OSX operating system among many others. It usually operates 301 retail stores in 10 countries and also has online stores where software and hardware products are sold. It was established in April 1976 in Cupertino, California. The company removed Computer from its original name to reflect the ongoing expansions into the consumer electronics market on top of its original concentration on personal computers. For various reasons like its philosophy of comprehensive aesthetic design to its advertising campaigns that are much distinctive, the company has established a reputation that is very unique in the industry of consumer electronics. This includes; customer base that is much devoted to the firm and its brand, especially in the United States. In 2008, it was named the most admirable company in the United States by the Fortune Magazine and world in 2008, 2009 and in 2010. The widespread criticism has also been received by the company for its contractors’ labor, environmental, and business practices. This assessment is for the analysis of Apple by the use of significant data and business analytical methods. It highlights the changes and challenges that Apple has undergone through in the marketing and delivery of their products and services, and the opportunities that might be available over the next five years. This assi9gnment is presented as a written report and includes recommendations that are supported by analysis of available data. Analysis Apple Porters five Forces Analysis Existing Rivalry Rivalry among competing firms is the most powerful of the five competitive forces in the consumer electronics, computer software and personal computer industry for gaining customer share in order to increase their revenues and profits. The PC and technologies is a rapidly growing area, and entering of new firms is always expected. This strengthens competition. The windows OS and media player for playing music and videos pause competition to Mac OS X (LINUX), alternative sources of computer hardware like Dell, HP, Lenovo do exist. There also exist online music stores that are similar to iTunes stores (Nepster), as explained by (Kippen 1998) and (Baker 1992). Potential Entry of New Competitors Potential entry for new competitors also tends to be a factor in intensifying the competition in this industry that Apple operates. A large number of new entrants results to changes in intense competition. Luckily enough there are barriers to entry, hence restricting firms from entering the market. This market that Apple operates in is not attractive to new comers due to; the existence of highly established companies likes Apple itself, Dell, HP, and Compaq. This shows that a larger of the market is already controlled by these companies, low margins and an overflowed market. Though the market is unfavorable, but new entrants have tried their way, namely; there is streaming audio and video with v-cast (Verizon) and the new entrants with disruptive technologies, as shown in the research by Porter (1980). Potential Development of Substitute Products Apple not only monitors the trends within the industry so that it tracks the strategies, but also know that competition might not only a rise within similar industries but also in different industries. There are companies that offer products with similar properties and functionality or even at times better act as substitutes for the product. In this market, substitute products are highly available. Due to the uniqueness of Apple’s products, they are more vulnerable for imitations. The substitutes include Satellite radio for music, alternative means of acquiring music for example DVDs and alternative sources for video like cable and Broadcast. Bargaining Powers of Suppliers Producers and suppliers relationship matters a lot particularly in the manufacturing industry. Suppliers play important roles in the production of services and goods, making raw materials better till final product is out. Bargaining power of suppliers affects intensity of competition especially if there number is huge. Less availability of some materials and the cost of changing suppliers or raw materials might be high. Most of the industry that Apple operates depend on various suppliers, Apple as opposed to them, was self sufficient depending mostly on its own, as concluded by (Baker 1992). Bargaining Power of Consumers Since consumers are final products ‘users, the companies’ performance totally depends upon the consumers. Is mostly experienced where consumers are huge in number and purchase in large quantities. As a result, rivalry firms offer discounts, and service to switch consumers from one brand to the other in the same industry. It is also experienced when products are undifferentiated and widely available. In Apple Company, major business customers acquire bargaining power, but on the other hand, most of Apple’s customers are private customers, as shown in the research by Porter (1980). Analysis of the Apple Organization SWOT Analysis Strengths In the research by Piercy & Giles (1989) and Brooksbank (1996), it is evident that Apple is one of the successful companies. Its sales of iPod music player, increased its 2nd quarter profits to $320 in 2005 June. The sales of Macintosh Computers were also increased due to favorable brand perception. So iPod gives the company an access to a whole new series of segments that buy into other parts of Apple brand. Their notebook product sales are very strong also, and represent a large contribution to the Apple’s income. What is all important is brand. The company is one of the most established and healthy IT brands around the world, and has a very loyal set of enthusiastic customers that advocates the brand. Such powerful loyalty signifies that Ample not only recruits customers that are new but also retains them. Meaning that they come back for more products and services from Apple, and it also has the opportunity of extending new products to them. Weaknesses It has been reported that iPod Nano have screens that break under impact and the firm is replacing all faulty ones. This is another problem with early ipods that had faulty batteries, as the firm offered customers free battery cases. There exists pressure for the firm to increase the price of its music downloads, from the music industry itself. Most of these firms make much money from iTunes than their original CD sales. Apple has sold around 22 M iPod digital music players and above 500M songs throuth its iTunes music store. This makes around makes about 82% of legally download music in the U.S. if the company gives it to music producers is perceived to be a commercial weakness. In 2005 it announced that it was to end its long term relationship with IBM as a chip supplier and about to switch to Intel. It was recommended that the swap might confuse its customers. Opportunities The firm has an opportunity of developing its iTunes and music player technology into a format of mobile phones. The Rokr device of mobile phone was developed by Motorola. The Apple version has been developed for the phone for the users are able to manage the tracks they store on it. Availability of downloads is through the USB cable and software on handset pauses music if phone call enters. These offer new opportunities for Apple. Other opportunities include; international expansion, Steve jobs, other consumer electronic , reduced prices for its products, hence easier for the people with less money to buy, high market share for personal computers and software space, hence enjoy the economies of scale, and revolutionizing another industry Threats The global economic conditions are likely to cause a reduction in demand of consumer products that are highly priced. Since Apple does not offer any alternative product that cost low price, consumers will move to other manufactures in the face of falling incomes. There also exist high product substitution effects in the innovative and first moving Information Technology consumable products. So the iPod and MP3 rule nowadays. Tomorrow’s technology may of a completely different version. The wireless technology could easily replace the need for physical music players, as concluded by Kay (1993). Other threats can be summarized as; increase in taxation, competitors actions, and new competitors entering the market Key Customer Segments The research by Taylor et al (2008), concludes that Apple Inc has divided the markets into categories that are workable, they include homes, education, large businesses, small businesses and government. All this can be categorized under three major customer segments. It usually appeals to; early adopters who in most cases think different. Late majority consumers; who usually wants something easy to use that just works in any way. The last category is professional content creators. Apple has an ability that is unique that enables them to appeal to the first two segments. This is because of the shelf space they have tried to cover out for themselves. They usually make hard stuffs easy. This is the reason that that makes them mostly cast as a complete opposite of other firms like Microsoft. However wining in professional market is so different. This group comprises the professionals who expect complete work flows and expect their dealer to keep on improving and updating the product which they build their business on. With this in mind Apple has never shown the staying power in professional markets. Generally Apple’s customers are like any others customers, as it comprises of a rich blend of the most sociologically elite with these looking for elegant, computing that is simple. The panache of the firm has enabled them maintain the highest margins in the industry, while at the same time sustaining a brand loyalty which is very envious. On top of singular demographics, the users of Apple have a profile that is very unique in the manner in which they use personal computers. Unlike other users of Intel or Windows computers, a reasonable portion of Apple’s users are ever active, exploratory, avant-garde and early adopters. The activities they usually enjoy are unique in the manner in which they more often incorporate rich media like video and music on top of more active pro-Sumer behaviors than many more-passive Windows users. On the other hand, just as Apple continues innovating and pioneering new technologies and ways to creatively enjoy private computing, there are many other firms that that closely trail Apple and continuously threatens the firm’s successes, as shown by Taylor et al (2008). Competitors of Apple When explaining about customer segmentation, Numaira (2009), Linzmayer (1999) and William (2005), explains that although Apple has taken leadership, it faces completion from the likes of Dell, Microsoft, Amazon, real networks, Google and to some degree Sony. The success of Apple is due to effective operating system, application environment, inter-phase in managing personal digital assets, providing content for the user and application of the dedicated mobile devices like iphone. For the content Amazon has become the real competitor, having content commerce model that delivers digital music, movies, TV shows and books to its users. Amazon has cloud-based approach that eases customers’ access and management of that digital content in a simpler UI. However it has long way for it to deliver to deliver a localized approach to managing and accessing this content beyond levels of PCs, basic mobile devices and a broad range of products as Apples does. Google has a chrome browser that is actually Web-based OS with UI that enables it to manage users’ cloud-based assets in a single-user environment. Android, Google’s OS and applications for Smartphone is quickly coming into a product that challenges the iphones. Another competitor is Dell. It is the world largest PC maker and for a couple of years, it has held its position as a market leader. Its brand is among the best ever known and renowned computer brands in the world. The company also supplies directly to customers. Its IT, and consumer relation management is used to get data on its loyal customers. However the company has wider range of products and components from several suppliers from many countries hence occasional product recall occurs, causing embarrassment. Also, it s a computer maker not manufacture, though this is an advantage as it buys a group of concentrated high tech component manufacture, the company is reliant suppliers, as explained by Menon (1999) and Valentin (2001). Kay (1993) explained that microsoft forms another competitor. The strengths are its recognition and its speedy product development. It productivity like Word and Excel, are widely used throughout the business community. The company is also known for releasing new product updates and product fixes throughout its network. On the other hand, Microsoft didn’t distinguish the growth opportunities of the internet; hence Google got a foothold in search engine arena. Recommendations In the present times, other forces like technology globalization, and deregulation are to be incorporated in Porters analysis, these issues have deeper impact on the organization as well. The strategies that consider all the internal and external environmental variables are to be put into consideration in order to formulate fine-tuned strategies. Apple should continue not to compromise on price for quality as this will maintain their potential customers. They should also choose products to sell and manufacture basing on individual needs, other than the groups needs, as indicated by Kottler (2005) and Turner (2002). The main concentration should be consumer’s electronics but the company has to include dedicated eBook readers and even non-windows net-books. It has to create its own back-end commerce services or partner with other company that already has a solid cross-platform commerce services that can be customized and use a cross vendors’ range of products. Conclusion In conclusion, there is a great deal of information available in the public arena and after undertaking the necessary research I have properly assessed Apples Company. In undertaking this research, detailed analysis was given by the use of Porters five forces and SWOT analysis as business analysis methods. The paper has identified the required data and turned it into useful information. The paper has identified a range of products available from iphone, iPod to personal computers. This has assisted in analyzing market segmentation for such products. Consideration has been placed on changes and challenges that usually impact upon various market segments that Apple serve. References Baker, M., 1992. Marketing Strategy and Management. London: Macmillan. Brooksbank, R., 1996. The BASIC marketing planning process: A Practical Framework for the Smaller Business. Journal of Marketing Intelligence & Planning. 14(4), pp. 16-23. Kay, J., 1993. Foundations of Corporate Success: how business strategies add value. Oxford: Oxford University Press. Kippen, B., 1998. Strategy according to Michael Porter. The Antidote. 3(6), pp. 24-25. Kottler, p., 2005. Principles of Marketing. 4th ed. New York: Pearson education Linzmayer, W., 1999. Apple Confidential: The Real Story of Apple Computer. New Jersey: John Wiley & Sons. Menon, A., 1999. Antecedents and Consequences of Marketing Strategy Making. Journal of Marketing. 63, PP. 18-40. Numaira, T., 2009. SWOT Analysis- Apple. Available at: http://mgmt280.blogspot.com/2010/01/swot-analysis-apple.html. [accessed 27 October 2010] Piercy, N. & Giles, W., 1989. Making SWOT Analysis Work. Journal of Marketing Intelligence & Planning. 7(6), PP. 5-7. Porter, M., 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: Macmillan.  Taylor, P. Allison, K. & Parker, A., 2008. Apple’s 3G iPhone aims to dominate smart phones. The Financial Times, 9 July. PP.12. Turner, S., 2002.Tools for Success: A Manager’s Guide. London: McGraw-Hill. Valentin, E., 2001. SWOT Analysis from A Resource-Based View - Journal Of Marketing Theory And Practice. 9(2), pp. 54-68. William L., 2005. Icon Steve Jobs: The Greatest Second Act in the History of Business. Hoboken, New Jersey: John Wiley & Sons. Read More