Marketing Environment of Apple - Case Study Example

Running Head: Report about Apple Report about Apple Name Course Lecturer Date Table of Contents Table of Contents 2 Executive Summary 3 Introduction 4 Apple’s market 4 Summary of the marketing environment 5 Micro-environmental factors 5 Entry barriers 5 Supplier power 5 Buyer power 6 Threat of substitute products 6 Degree of rivalry 6 Macro-environmental factors 7 Political/Legal factors 7 Economic factors 7 Sociocultural factors 8 Technological factors 8 Market segmentation 8 Behavior of consumers in the market segment 9 Apple’s marketing mix 9 Product 10 Price 10 Place 10 Promotion 11 Recommendations 11 Conclusion 12 References 13 Executive Summary Apple Inc. manufactures and sells a wide variety of computer software, personal computers and electronics. It has outlets in a number of countries in the world and also has an online retail shop. Its main rivals are Microsoft, Google and Exxon. The firm’s market is very wide and has different types of customers. The computer market has strong barriers to entry because key players have strong brand names. Supplier power is very high since there are only two key suppliers of computer components. Difference in consumer needs pose a big challenge to manufacturers. Personal computers are losing relevance due to increase in substitutes. Net neutrality debate in Congress, economic downturn and technological developments are posing threats to Apple business operations. Transformation in healthcare structures and transition in the socio-cultural settings presents growth opportunities for Apple. The firm gives training to its consultants’ network. Skimming and premium pricing policies are utilized in setting the prices of Apple’s products. Report about Apple Introduction Apple Inc. is a transnational corporation which manufactures and retails computer software, electronics and personal computers. The company’s most famous products are Macintosh computers, iPad, iPhone and iPod. It is considered one of the trendsetters in the computer manufacturing sector. Apple has brought several changes to the sector and its products are being used by other companies as a basis for designing their own products. Apple has over 350 retail outlets in 13 countries as well as an online retail site. It contends with established companies such as Google, Microsoft and Exxon Mobile (Chazin, 2007). This report will give an account of Apple’s market, forces and drifts in the micro and macro business environment, market segment, customer behavior in that segment, marketing mix as well as recommendations for improving its marketing effort. Apple’s market According to Chazin (2007), Apple operates in the portable computer market. The market is broader with diverse users as compared to the markets of its rival firms. The company’s market comprises of mostly students and other professionals such as business owners, managers and researchers who constantly use computers as well as other digital technologies. This kind of a market requires devices which can present customers with entertainment even when they are far away from their homes. The company is aware that, its products are very expensive. Most of its buyers have typical profiles; either the person has a given amount of disposable income or is a professional in the design and media industry. Apple is also aware that, people will always sacrifice other needs for its high quality or lavish products. The company has right from the beginning targeted everyone. Its products are designed for all people regardless of their social classes. This steady company nature has helped Apple to be accustomed to changes that are present in its business environment as well as the constituent lifestyles of individuals nowadays. Individuals are presently not classified by their careers and thus Apple aims at appealing to an individual and his or her vast collection of needs instead of just their profession’s needs. Summary of the marketing environment Micro-environmental factors Entry barriers There are several openings through which new competitors may penetrate the computer market. However, there are many barriers which may hinder successful entry. At present, the market has a number of big, well established participants which have considerable brand identification and loyalty such as Apple, HP and Dell. Developing a strong brand is very difficult for the new entrants. In addition, the participants dominate and maintain low costs through large economies of scale. The new entrants cannot easily achieve that without large capital outlay. Despite all those barriers, there is still a possibility of entry. New competitors may originate from newly set up lean firms which depend mainly on third-party novel equipment producers to manufacture their products. These kinds of producers often operate from Asia; have attained economies of scale already and can thus give these savings to new organizations which use rebranding as their market penetration strategy. The mounting convergence of mobile gadgets coming as a result of push of Netbooks and Smart-phones is drawing phone manufacturers into the computer market. Another form of entry is through forward integration of the original equipment’s manufacturers. This strategy has gained popularity in the recent years, bringing firms such as Acer Inc. to compete directly with renowned industry players like Apple Inc (Nagel, 2010). Supplier power Suppliers have substantial influence on personal computers’ manufacturers because they rely much on personally owned industry standards and technologies. Normally, the technology ought to be licensed or needs entry to a paid-participation industry for it to be used. For instance, for the design and application of PCI-Express that is found in almost all personal computers, the concerned firms must be members of PCI-SIG group. Moreover, the relative number of suppliers for certain inputs puts a lot of pressure on rivals. Within Apple’s industry, CPUs (central processing units) are supplied by Advanced Micro Devices, Inc. and Intel Corp. Although manufacturers have two alternatives, Intel dominates the semi-conductor marketplace while Advanced Micro Devices gets licensing from Intel on the technology that it uses in manufacturing CPUs. Despite possessing well-matched chip technologies, these two firms use proprietary cut designs which require diverse motherboard socket blueprints. Due to this incongruity in design, for computer manufacturers to change CPU suppliers, they ought to also get a new form of motherboard, a case which increases switching costs. This results in discounts for huge purchasing and exceptionality agreements, which lessens pressure from leading suppliers (Nagel, 2010). Buyer power According to Nagel (2010), just like in other industries, buyers always make the final decision and have substantial influence on computer producers. The range of buyers who have several, broadly differing needs impacts computer manufacturers directly because they must become accustomed and respond to those needs by offering wide product lines. The difference between power customers looking for the newest and greatest products and average customers who require a product which is simply good enough creates a hindrance for manufacturers who desire to draw as many consumers as possible. Manufacturers benefit from the broad approval and use of personal computers which leads to a high demand for the computers. Proprietary structures and brand commitment are too used by the manufacturers to keep clients coming back. Extremely complementary closed-systems are habitually used to retain customers inside a circle of merchandise that are offered by single firms. Threat of substitute products The technology market has considerably grown over the last ten years with the introduction of several options of personal computers rising from palmtop computers to the current smart phones which are rich with different features. This represents the advancement in technology in the Middle American families. Such developments lead to the extension of consumer expenditure far from personal computers. Nevertheless, in spite of the extension, there is low possibility of smart phones leading to significant diminishing of the significance of personal computers in coming days like the Blackberry or iPhone did. The expansion of customer digital lifestyles gives an opening for growth of computer manufacturers, an action which many of them have already taken (Cruikshank, 2006). Degree of rivalry The computer market was once classified by few big firms and very costly products, targeting a niche group of people. However, the arrival of personal computers has resulted in an industry sudden increase which now comprises of many manufacturers targeting millions of consumers around the globe. Due to the entry of computers into daily life as well as business activities, personal computers are turning out to be more of a commodity product. Technological advancement is also exerting augmented pressure on computer manufacturers to rationalize production and renew products at a very high pace (Cruikshank, 2006). Macro-environmental factors Political/Legal factors Bach (2007) maintains that, debate on net neutrality has pierced the political field, with Congress drafting bills and the Federal Communication board is waiting to enact regulations where necessary. Transforming the manner in which internet functions may de-incentivize fresh innovations which in turn may reduce prospective value that is to be gotten by Apple Inc. New and pioneering technologies are habitually relied on by hardware firms who try hard to present the best ways of integration while manufacturing their products. Reducing such innovation may suppress new creation of value by Apple. The drive for transformation of the health system in America in the suggested reform legislation may give funds to the government for developing infrastructure by medical care givers. Flexibility of Apple’s main portables in inventive health-centric ways may present the firm with new revenue sources. Economic factors Although the United States’ economy is showing some progress and there is indication of full upturn, the position is not yet certain at present. This uncertainty makes consumers tired of expensive purchases such as computers. Apple Inc.’s premium pricing strategy makes the company to be disadvantaged to less costly competing products. Nonetheless, when customers directly experience the growing economy and increase their spending, Apple will be at a good position. Customers looking for a treat subsequent to economic recovery may be drawn by Apple’s premium computers, seeing them as luxury commodities. Moreover, since Apple is famous for quality products, outstanding customer service and reliable machines, consumers may view it as giving a superior value to that of its rivals with fewer accompaniments at lower prices (Bach, 2007). Sociocultural factors The significance of internet as well as connectivity is increasing the desire for access wherever, through the use of high-speed wireless devices. The demand for smart phones which facilitate internet connection anywhere is growing faster than that of conventional personal computers. Apple among other computer makers experience loss of application in the modern technological landscape. However, Apple huge outlay in research along with development in very popular gadgets such as the iPhone puts the company ahead of the current transition. The manufacture and shipment of devices by Apple are substantial sources of environmental pollution but Apple is committed to ‘green’ manufacturing methods and the use of eco-friendly packaging and components. This may be used in marketing to garner admiration from concerned consumers (Bach, 2007). Technological factors According to Bach (2007), the likelihood of ordinary computers becoming less significant through mounting appliance convergence is real. Apple’s laptops will therefore be less relevant in users’ routine use because Apple’s multifunction gadgets meet nearly all their needs. Apple is currently the leader in portable technology and innovation. It is handily positioned to be dominant in the market of convergence gadgets by restating their present portable and mobile devices such as the iPhone and the iPod touch. An ever rising pressure to advance due to shorter product lifecycles may lead to missed chances because of market entry frequencies and losses from obsolete stock. Apple’s lean production value chain has gotten used to fast turnover and may be leveraged to fight the threat of stock obsolescence. Market segmentation Pearl (2011, p.21) maintains that, market segmentation enables a firm to give complete, integrated product solutions which are agreeable with customer outreach, messaging as well as distribution channel policies for trading and supporting consumers. In this view, Apple product policy is an analysis in market segmentation against simply stuffing a product with so many distinct features. The company targets certain user experiences and creates the product based on those experiences. Apple’s market is divided into three main segments. The first segment includes early adopters who are very creative and like to be noticed. The second segment consists of ordinary consumers who simply want a device that works such as iPod and iLife consumers. The last segment is professional content developers like musicians, filmmakers and authors who desire a tool which will liberate them to concentrate on their talents and not on technology. Apple has an exclusive capacity to attract consumers in the first two segments. Apple makes difficult things easy hence it is considered the opposite of firms like Microsoft. Apple does not target any specific segment. It instead targets certain types of people in the three market segments. For instance, when it invented iPod, it targeted teenagers but currently the device is bought and used by any person who likes listening to music (Pearl, 2011). Behavior of consumers in the market segment Different consumers of Apple products have different perception, thinking and behavior in relation to certain products. In terms of personality, products like iPod and iPhone are linked to simplicity, lifestyle, emotions, passion and innovation. Unique playlists and accessories in these products show individuality as well as a sense of belonging in the society. Those who do not own any of the two products may experience alienation. Individuals travelling, doing outdoor activities, going for holiday and work are included in the list of people likely to listen to music while carrying out their activities (Chazin, 2007). Rasmussen claims that, Apple premium computers show need for attainment because it is viewed as a classy brand. The company’s products also bring about observational learning since a big number of people purchase products like smart phones, iPad, iPod and iPhone because they see several famous celebrities and actors with them. In other words, consumers are influenced by others and personality beliefs to buy Apple’s products. Customers buy iPods simply because it is considered a lifestyle and is associated with certain personalities like individuality. A big percentage of Apple’s customers are not price sensitive. Many a times, consumers withdraw from products when the prices go up. Most of Apple’s products are highly priced so if when the prices are increased consumers still buy them (Rasmussen, 2010). Apple’s marketing mix According to Ferrell & Hartline (2011), Marketing Mix refers to a business tool which is applied in marketing the products and services of a given organization. It is very important when ascertaining a product’s specific selling point. Marketing mix consists of four elements which are product, price, place and promotion. Product Apple offers a number of products. The first product line is portable computers which include Mac products like iMac, Mac Mini, MacBook Pro and MacBook Air. Additionally, it retails servers such as Xsan, Xserve and MobleMe. Moreover, it offers accessories which include keyboard, MagicMouse and Led Cinema display. It also has a variety of iPod and iPhone including iPod Nano, Classic and Ipod Shuffle. In addition, Apple runs Wi-Fi oriented stations such as Airport Express and Time Capsule. Moreover, it deals in developers like iPhone program, Mac program and developer connection. The firm also sells peripheral devices such as printers, computer storage devices and digital video cameras (Ferrell & Hartline, 2011). Price One of the pricing strategies that are used by Apple is skimming. This is a strategy where a seller sets a comparatively high price at first; the price is then lowered overtime. It enables the company to get back its sunken outlay faster before rivalry steps in (Ferrell & Hartline, 2011). Another pricing strategy is premium pricing. Under this strategy, Apple maintains its products’ prices temporarily high so as to encourage a good view among buyers based exclusively on the products’ prices. Apple iPad’s pricing policy incorporates flexibility to reduce prices if customers’ reactions dictate such an action. For instance, in 2007, the company reduced the price of its iPhone by $200. In addition, in 2009, a lower cost pricing strategy was announced for iTunes. The changes were done in response to a sluggish speed of music downloads. Competition-based pricing is also used by Apple in efforts to eliminate rivalry. It entails lowering prices to a level where competitors cannot contend and as a result, they quit business. The firm also uses penetration pricing strategy. Under this strategy, Apple set a comparatively low preliminary entry price in order to draw new customers. It is assumed that, customers will shift to the new product due to its lower price (Ferrell & Hartline, 2011). Place Drawing from Cruikshank (2006), Apple Inc.’s head office is situated at Cupertino in California. Its network of consultants comprises of independent expert service givers as well as technology consulting companies which specialize in Apple along with third-party solutions. Being professionals in Apple technologies, the service givers render on-site expertise services and also support home based users and business establishments of every size. Moreover, these providers are qualified technicians who undergo customary Apple training and evaluations and render repair services as well as exclusive availability of authentic Apple parts. They are situated in Asia, Middle East, Africa and Latin America. Applet has many retail shops in various regions around the globe including the UK, US and Canada. Promotion Apple uses different forms of promotion to market its products and attract more customers. In the first place, it gives special discounts to buyers of revamped MacIntosh computers, iPod Touch and iPod Nano. In all cases, a warranty of one year is given on all products. Additionally, it has a website for its consultants that present visitors to the website with a search tool that enable them to locate close-by licensed Mac product specialists in Canada, U.S and several global locations. Moreover, Apple’s online store provides free shipping for purchases that cost over $50. The store also gives iTunes gift tags. In addition, its training centers are situated all over the United States and provide guidelines to customers on Mac OS X, Apple’s expert applications and Mac systems. Apple also has back-to-school offers some of which are targeted towards college students. It in addition, gives a $100 rebate to the customers who buy A Mac or certain types of printers from the web-based store (Pearl, 2011). Recommendations After looking at the market and industry in which Apple operates as well as the consumer behavior in the firm’s market segments, several recommendations are suggested for the firm to assist it improve its marketing efforts. First, Apple should improve its differentiation strategy. The personal computers’ market gives continuous downward demands on prices, a case which erodes the company’s profitability. Developing a product image which distinguishes the firm’s products from stiff competition will lessen the adverse impacts of pad margins and destructive competition. Apple should also institute a close rapport with suppliers. There is only a small number of suppliers for major components that are needed in the manufacture of computers and thus having close associations with suppliers is very important. Instead of looking for suppliers offering the lowest prices, keeping a mutual and exclusive corporate rapport will assist in lessening the supplier power and locking in favorable component prices. Apple should diversify its consumer electronics. Although the computer market has become more and more crowded with opponents and saturated with customers, other sectors dealing with consumer electronics keep on growing. Developing corresponding products in different categories will present Apple with wider sources of income by attracting more consumers in the markets that have less stiff competition. Moreover, Apple should conduct a campaign for actual network neutrality. Rich interests are mudding the Congress debate over net neutrality so as to cover up the issues. Apple should therefore support open networks that are devoid of content or packet discrimination in order to protect its future value and innovation. Since Apple is by now a market leader in Smartphone, it should shift its competencies to fresh, innovative convergence gadgets which will maximize the company’s structure of simple to use and integrated devices as well as applications. In addition, Apple Inc. should stress on the value for customer’s dollar. The firm is famous for offering substantial value in relation to quality, service and satisfaction in its products. Such traits ought to be expressed openly to convey its products’ value as compared to those of its competitors. Conclusion Apple Inc. functions in a wide market and is a market leader in manufacturing and selling of personal computers and other devices. However, it faces very stiff competition from other firms like Microsoft. The company’s products are not targeted towards a particular group of individuals. Supplier power is very high in the computer market. The advancement of technology is the main driving force in the company’s innovations and business success. Apple use premium and skimming pricing strategies on its products. Reforms on net neutrality and economic downturn are the major challenges in Apple’s macro-environment. Apple ought to adopt the above recommendations so as to counter the challenges it is encountering in the market. References Bach, B. (2007). Implications of Enabling Technologies for Apple Inc.: Cybermarketing & Enabling Technologies. Santa Cruz: GRIN Verlag. Chazin, S. (2007, September 12). What market is Apple in? Retrieved May 29, 2012, from http://www.marketingapple.com/marketing_apple/2007/09/what-market-is-.html Cruikshank, J. L. (2006). The Apple way : 12 management lessons from the world's most innovative company. London : McGraw-Hill, cop. Ferrell, O. C., & Hartline, M. D. (2011). Marketing strategy. Mason, Ohio: South-Western Cengage Learning. Nagel, S. (2010). Analysis of Value, Image and Positioning of a Brand:An Analysis of the Brand Apple in Regard to the VIP-Criteria. Santa Cruz: GRIN Verlag. Pearl, M. (2011). Grow globally : opportunities for your middle-market company around the world. Hoboken, N.J: John Wiley & Sons. Rasmussen, J. (2010, October 19). On the Road to Success: Consumer Behavior and Apple Inc. Retrieved May 29, 2012, from http://myportfolio.usc.edu/jmrasmus/2010/10/on_the_road_to_success_consumer_behavior_and_apple_inc.html Read More