Table of Contents
1.1 Mission Statement
1.2 Summary of Performance
2 Market Overview
2.2 Customer needs
2.3 Product life cycle
2.4 Boston Matrix
2.5 Advertising & marketing
3 Competitor Analysis
4 SWOT Analysis
5 PESTLE Analysis
7.1 Ansoff Matrix
7.2 Objectives & Strategies
Apple, based in Cupertino, California, is the world’s ninth largest revenue generators and the largest technology company when considering total assets as of 2016. With 487 physical stores, Apple is continually growing as one of the largest organisations in the globe, operating a huge portfolio of products worldwide, including the iPhone, Mac, iTunes, iPad, iPod, Apple TV, Apple Watch and also software and services.
The firm boasts one of the strongest brand loyalties to exist, providing them with guaranteed sales no matter what product is launched. In order for Apple to continue the huge success which they have experienced over the last two decades, Apple must look into growing their business in China, the world’s fastest growing economy, which has seen major drawbacks when it comes to the sale of Apple products.
1.1 Mission Statement
“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad.” (Schleckser, 2016)
1.2 Summary of Performance
In the recently reported financial summary of Apple, its 4th quarter revenue was posted as $42.4 billion, a 9% decline from the previous quarter (Apple Inc., 2016f). Apple’s international sales accounted for 63% of their revenue this year. The board of directors declared a cash dividend of $0.57 per share of common stock. Furthermore, Apple’s gross margin has fallen from 39.7% to 38% in a year. Apple’s latest cost of revenue figure is at $26,252 million, compared to $30,636 million 3 months prior. Apple also invest heavily into research and development, this figure has increased by $500 million over the last year (Allsopp, 2016). In the smartphone market, Samsung, Apple’s main rival, have managed to overtake Apple in terms of sales. In the latest reports, Samsung had a US market share of 28.8% compared to Apple’s 23% (Spence, 2016)
Apple tend to manufacture their products in a way that will benefit their sales performance for models in years to come. With regards to their product life cycle, their products tend to go into a state of decline towards the introduction of the latest model. This often means when a customer’s product breaks or begins to deteriorate, they tend to upgrade to the latest model.
Apple have faced issues in breaking into the Chinese market, with companies such as Huawei, Oppo, Xiaomi and Vivo (local companies) all having higher sales in the smartphone market than Apple in China (Rapoza, 2016). With many Chinese people not being able to afford Apple products and buying counterfeit equivalents which Apple have had major issues with in China (England, 2015), gaining a higher market share may prove a difficult task.
2 Market Overview
The main aim of market segmentation for Apple as part of their marketing planning process is to ensure that its efforts are targeted on “the most promising opportunities depending on the strengths and weaknesses…to help determine realistic and obtainable marketing and sales objectives.” (McDonald & Wilson, 2011, pp. 119–120)
Geographic: Apple has 487 physical stores in 20 countries worldwide, including one in 45 out of a possible 50 states in the United States of America (Apple Inc., 2016a) and a plan is in place to construct 25 new stores in China by the beginning of 2017 due to the rapidly growing Apple market there. The Apple online store is available to 41 countries across the globe, with new additions to this list typically being added after Apple Keynote press conferences (Apple Inc., 2016b). Stores tend to be found in urban areas of cities characterised by built up environments, such as shopping centres, and high population densities compared with the surrounding environment.
Demographic: Ranges across the product lines, but the age range for owners of Apple products is now between 10-55 years old. Products like the iPod and iPad are now being used by children and also more elderly people, and the higher end products such as the MacBook and the iPhone are used by students and professionals (King, 2015). The common ground between the Apple demographic is that they are either high earners or come from a family with higher income due to it being a premium brand. As of October 2015, male customers were outspending female customers by 42% across all age groups and product ranges.
Psychographic: Apple pursue a brand personality revolving around simplicity, lifestyle and innovation (Kahney, 2002). Simplicity is displayed effectively in the physical stores within the open planned store layout, availability to talk to any member of staff and try out any product within a calm environment. The strategy used by Apple to reduce complexity can be seen as a humanistic approach to business due to the connection with customers that it forms.
Behaviouristic: Total loyalty base that it has formed (potentially the most loyal set of customers in the world) by creating a huge distinction between themselves and the PC market (McDonald & Wilson, 2011, p. 143). The portrayal of Apple users as superior to PC users through marketing methods such as TV advertisements pushing negative thoughts on the PC to viewers has also occurred. This loyalty also allows Apple to maintain its high retail prices. The brand loyalty is enforced by the use of an ecosystem across the entire product line through its iOS and MacOS software which allows all customers to seek similar benefits from the products (Dudovskiy, 2016).
2.2 Customer Needs
Apple are customer orientated and provide unparalleled customer service; most other technology companies focus on the technology itself rather than the customers (Ogg, 2010). Within physical stores, it is clear so see that customers wish to experience the best customer service, which Apple are able to provide. Several strategies are followed in order to provide this in retail, including the idea of welcoming people into the stores and providing information on products based on their needs and wants. This allows customers to receive help on their decision from the moment they enter the store, which is useful in order to make their visit simpler. With this method, it is seen that Apple staff tend to not be forceful in their sales, thus letting customers purchase products when they are ready and allowing customers to feel valued by the company and allowing a loyal customer base to be formed (Khan, 2016).
A large focus can be noticed on the desire for a multitude of functions within Apple’s products which now allows minimal things to be taken out with you other than one of their products. An example of this is the iPhone which can now be used to pay for goods in store and online via ApplePay, it can hold tickets for events via the Wallet and it can also assist in the organisation of your day-to-day life through apps such as Reminders and Calendar. Technology has also been made easier to use for a variety of customers through the simple interface and ecosystem across all products to the more specific parental restrictions on iPads which are growing more popular for younger children.
It is clear that customers thrive for “a better way to use our phones, to browse the web, to find and use information, to communicate with family and friends, to get our jobs done, to enjoy and capture moments of life.” (Brannan, 2015)
2.3 Product Life Cycle
Apple are notorious for forcing its products into a product extension stage, where growth continues in the product life cycle and the time it matures at is pushed back. This can be seen when Apple improve the quality of products, roll out new features and technological advances (Yadegari, 2012), be it through a software update or a full hardware change, for example the recent addition of a second backwards camera on the iPhone 7 range.
New products are launched annually by Apple, with the iPhone typically following their “tick-tock” cycle. This follows the pattern of a small change to the iPhone in the “tick” stage e.g. software change or creating a more lightweight or thinner phone (shown in the development of the S models – 5S, 6S etc.) to a major redesign in the “tock” stage which alternate annually, however, it is becoming apparent that Apple are moving towards a “tick-tock-tock” life cycle whereby a major redesign will occur every three years as opposed to every two (Ritchie, 2016).
Every product released under the Apple brand follows the same life cycle which is used to assist in improving the environmental performance of the business: Production, transport, customer use, recycling. The end goal of Apple’s product life cycles is to be as energy efficient as possible, which has seen the company reduce packaging and provide a recycling scheme for old devices which have reached the decline stage where users no longer see a use for their products and want to upgrade to one of the new, innovative devices which Apple have released (Apple Inc., 2016c).
2.4 Boston Matrix
Apple have topped the Boston Consulting Group ranking of the world’s most innovative company every year since 2005 proving that a rigorous pattern of effective R&D, using a variety of technology, exploring similar markets and high speed turnovers is effective across its product line (Ringel, Taylor & Zablit, 2015).
iPhone is the prime example of a star within Apple’s product portfolio. Stars consist of high market shares and high growth rates and with an ever growing demand for smartphone, these continue to make profit for the company. iPhones are very cheap to produce for Apple, it is estimated that the iPhone 7 costs just £174 to produce, which allows for a £425 profit to be made on each unit of the most basic version of the phone (Agerholm, 2016). The iPad also saw sales growth again in the most recent quarterly revenue reports from Apple with the introduction of the new iPad pro which acts as a 2-in-1 tablet (It is able to perform to a computer-style specification but still be carried around as a tablet).
Despite a renewed model of AppleTV being released in late 2015, it hasn’t reached its full sales potential, nor has it gained what would be seen as a desired market share in the TV streaming device market, with Roku, Google Chromecast and the Amazon Fire stick all placing higher than Apple in terms of market share.
The iPod and iTunes are two large cash cows for Apple. These both have relatively high market shares in their respective markets (iTunes = 64% of paid digital music downloads (Statista, 2016) and iPod = 70% of MP3 players in 2009 (Hollister, 2014)) but also fairly low growth rates. These products generate a lot of revenue for the firm which is used to reinvest in other areas of the matrix and at the current rates of development for the iPod and iTunes, it is clear that only a small amount is invested in these products to keep them in their current market position, relative to the other products Apple produces.
Apple is not a market leader in the computing segment, with their Mac range having a low market share and also a low, but steady, growth rate. It is very difficult now to grasp a larger market share in the personal computer market due to how overcrowded the market is with computing brands and the growing popularity of laptops, exemplified by the sales from Apple’s MacBook range.
(International Data Corporation, 2016)
2.5 Advertising & Marketing
Simplicity is the main focus when it comes to all of Apple’s advertising and marketing methods; be it a dig at PC users or simply to show off a new product. Apple are known for displaying products on billboards around cities and typically all that is included is a picture of the product, the name of it, and the Apple logo (DeMers, 2014). This simple advert runs parallel to the philosophy of Apple in that their products are designed to be simple and easy to use which makes them better.
With each iPhone launch, Apple apply restrictions on the way in which telecommunications networks are allowed to advertise and market the upcoming phone. They usually all use the same in store branding and advertising, seen as small Apple section of the shop which sometimes attempts to mimic an official Apple store. Through implementing these restrictions, it allows Apple to “promote uniformity in its marketing message” (Yeung, 2016). When a telecommunications company wishes to advertise a product such as the iPhone however, they are the ones who have to pay for it. Originally in the UK, O2 had the exclusive rights to sell the iPhone which restricted the supply and made it a very desirable smartphone. This means that Apple effectively double the money they could be making as they are spending less on advertising, yet still making profit on the sales of each unit or device as demand continues to rise.
In the fiscal year of 2015, Apple spent $1.8billion on marketing; the most it has ever spent. Although this seems like a huge amount, this only ranked Apple as the 33rd highest spender on marketing and advertising in the world (Wadlow, 2016). Although Apple believes that ongoing investment in a sector such as advertising and marketing is necessary for the success of the business, the lower amount of spending shows just how effective Apple has been with their previous marketing methods.
3 Competitor Analysis
Samsung Electro- Mechanics Co., Ltd., headquartered in Suwon City, Republic of Korea, is a company which provide electronic components. They yield and sell diverse products and components. The company has a huge sale volume & their sales market includes Europe, China, the US, Japan, and South East Asia.
HTC Corporation is a Taiwanese consumer electronics company, founded in 1997. HTC is a manufacturer of producing smartphones and tablets. Their sales market includes the America, Europe and Asia. They manufacture, assemble, process and sell smartphone devices.
Microsoft Corporation, founded by Paul Allen and Bill Gates in 1975, is an American multinational company which develops, sells computer software, personal computers and services. The company is one of the largest competitors of Apple, especially in the tablet and software industries.
For the fiscal year ended December 2015 (FY2015), Samsung reported that their revenues, which were KRW6,176,258.1 million, have increased by 1.2% over FY2014. The operating profit of the firm was KRW297,477 million in FY2015. Compared to the net margin which was 8.3% in FY2014, the company recorded a net profit which was 0.4%. In 2016, the company reported that their revenues which was KRW1,616,385.9 million had increased by 0.8% in the second quarter over the first quarter.
For the fiscal year ended December 2015(FY2015), HTC Corporation reported that their revenues, which were (Taiwanese Dollars) TWD121,684.2 million, have decreased by 35.2% compared to FY2014. Compared to the operating profit which was TWD121.3 million in FY2014, the operating loss was TWD17,123 million in FY2015. Compared to the net profit which was TWD1483.1 million in FY2014, in FY2015 the company’s net loss was TWD121.3 million. In 2016, the company reported that their revenues which were TWD18,862.1 million had increased by 27.3% in the second quarter over the first quarter.
For the fiscal year ended June 2016(FY2016), Microsoft Corporation reported that their revenues, which were (US Dollars) USD85,320 million, have decreased by 8.8% compared to FY2015. Compared to the operating margin which was 19.2% in FY2015, the operating margin was 23.3% in FY2016. The company generates revenues through these 6 segments: Device and Consumers Phone Hardware (8.1% of total revenues in FY2015), Device and Consumers Computer and Gaming Hardware (10.9%), Device and Consumers Licensing (16%), Commercial Licensing (44%), Device and Consumers Other (9.5%) and Commercial Other (11.6%).
As a competitor of Apple their electronic products are competitive in China. They offer computers, digital cameras, displays, game consoles, LED lighting, mobile phones, printers, tablets, e-books and so on. Their smartphone products occupy the biggest proportion in China’s market compared to any other companies selling smartphones.
The main products of HTC Corporation are electronic products. Especially smartphones and tablets. The smartphone
portfolio includes HTC one series, HTC 10, HTC Desire series, HTC One, HTC One mini and HTC One max, among others. Most important of all, HTC has an integrated industry chain for their smartphone.
Microsoft have created Windows, Office, Skype, Xbox, Surface, Mobile, Servers and many more since its creation. Microsoft is a huge competitor in the computer field against Apple. Microsoft also have a large loyal following, like Apple, who are devoted to being “anti-Apple” no matter what product is created.
Sony Corporation, headquartered in Tokyo, Japan, is a company which provide electronics and professional products for customers. Their sales market includes Asia, Africa, Latin American, North America, Europe and Oceania.
Huawei Technologies Co Ltd., founded in 1987 by Ren Zhengfei is a Chinese multinational networking and telecommunications equipment and services company. Most people know about Huawei due to its increasingly popular smartphone products.
LG Electronics, Inc., headquartered in Seoul, South Korea, is a consumer electronics company. Their sales market includes Americas, Europe, the Middle East, Asia, Africa and Common wealth of Independent States. Most of China know about LG due to its smartphones and TV production.
For the fiscal year ended March 2016(FY2016), Sony Corporation reported that their revenues, which were (Yen) JPY8,105,712 million, have decreased by 1.3% compared to FY2015. Compared to the operating margin which was 0.8% in FY2015, the operating margin was 3.6% in FY2016. Compared to the net loss which was JPY123,980 million in FY2015, in FY2016 the company’s net profit was JPY147,791 million. In FY2015, the company reported that their revenues which were JPY8,215,880 million had increased by 5.8% over FY2014.
For the fiscal year ended December 2015(FY2015), Huawei Technologies Co Ltd. reported that their revenues, which were CNY27,609 million, accounted for 7% of the company’s total revenue. In order to improve their user experience, Huawei’s research and development activities concentrate on new solutions. Such as proving broader, smarter, and more dependable pipes and zero wait time. For FY2015, Huawei Technologies Co Ltd. spent CNY59,607 million, which as a percentage of revenue stood at 15.1%, enhancing research and development.
For the fiscal year ended December 2015(FY2015), LG Electronics reported that their revenues, which were KRW56,509,008 million, had decreased by 4.3% over FY2014. Compared to the operating margin which was 3.1% in FY2014, the operating margin was 2.2% in FY2015. In 2016, the company reported that their revenues of KRW14,002,942 million had increased by 4.8% in the second quarter over the first quarter.
Sony corporation operates through nine segments: mobile communications, music, home entertainment and sound, game and network services, financial services, devices, imaging products and solutions, pictures, and all other. The most competitive segment is home entertainment and sound in China.
Huawei mainly concentrate on manufacturing smartphones. Except for this, their products also include broadband, transmission networks, data communication products and core networks.
LG Electronics engages in manufacturing home entertainment products, home appliances, and heating, ventilating and air conditioning products, mobile communications and others. The most familiar products with China are smartphones and laptops.
4 SWOT Analysis
• Extremely effective innovation process – Avoiding Strategic Drift (Nokia). High Research and Development Budget (Dziri, 2013).
• Economies of Scale means that high profit margins are available.
• Enormous brand image, already established the trust and loyalty of their customers.
• Huge market for Apple products. Male and female from 10-55 on average.
• International sales
• High prices which could put customers off Apple products (cheaper alternatives).
• Therefore, sales are focussed to the high-end market, losing out on a lot of business.
• Small network when distributing items, only a small branch of stores has the ability to sell new Apple products (Cybart, 2015)
• Increasing demand for products other than iPhones i.e. (TV’s, iPad’s.). Can take over the electronic market as a whole.
• Expanding the distribution network to maximise potential sales.
• Cheaper and more simplified phone that will attract both the younger generation and older, opening up a whole new market for Apple.
• Competitors constantly trying to match them, need to ensure their innovation is always effective, or risk losing their customers.
• Cheap manufacturing methods in China coming under pressure. Minimum wage is rapidly rising. Apple may need to look elsewhere (Chan, Pun, & Selden, 2013).
5 PESTLE Analysis
Political: For the US, the combined federal and state statutory corporate tax rate is 39.1% this is the highest out of all developed nations. The average for developed nations is 24.8% which is 14.1% lower than the U.S.A (Sullivan, 2015). This is a huge problem for corporations such as Apple, as in June 30 2015 they had $34.7billion in the bank. There have been calls for greater corporate taxation as income equality has become a major issue.
Economic: Rising labour costs in China will come as a massive blow for Apple as their cheap labour force will now cost them a significant amount more annually. Minimum wage has risen from “1450CNY in 2012 up to 2020CNY in 2016” with it only looking to increase more (Trading Economics, 2016). The rapid economic growth of developing countries such as BRIC and MINT shows there is going to be an even greater market for Apple products, especially with increasing amount of outwards FDI shown by China, which is only going to increase the marketing power for Apple products (Collins, 2013).
Social: Apple and Foxconn have come under increased public pressure resulting in workers holding direct elections for union representatives. This would have a massive impact as they would then have the ability to uphold the rights of the Trade Union Law, and the Labour Contract Law. This would affect the balance of power from the highest chain of command and the workers. Ultimately this has called for an increase in minimum wages that will damage Apple along with forcing certain policy concession and to raise domestic consumption in response of the struggle to aggrieved workers (Chan, Pun, & Selden, 2013).
Technological: The reason why Apple have been at the top of the electronic manufacturing industry for so long (avoiding strategic drift, seen by Nokia) is due to their innovation process (Dziri, 2011). They have always been able to stay ahead of their competitors through meeting the customer needs with the most up to date technological requirements. However more recent times show that Apple could be in danger as their products are being matched from other high end competitors such as Samsung taking over Apple on camera quality.
Legal: Apple recently refused the FBI access to obtain information that would help with a criminal case to ensure their customers wouldn’t feel like their private information could ever be accessed by anyone but themselves, ultimately increasing trust and loyalty (Apple Inc., 2016e). The case went to court, with the FBI being able to hack into Apple’s software using a third-party company showing that Apple’s security system could be breached. This left questions on whether Apple were doing enough to protect personal information for the customers. This was only later enforced with the hacking of celebrity iCloud accounts.
Environmental: Pollution has always been a big problem in China, even more so now with the extensive use of manufacturing from huge companies such as Apple. The disposal of lithium batteries is damaging the environment and creating pressure from the government and public on Apple. To deal with the issue, Apple have launched “clean energy programs” in China to reduce the carbon footprint of its manufacturing partners. With China being such a vital part of Apple’s plans they must satisfy the needs of the country. The aim is to avoid the production of more than “20 Million metric tonnes of pollution from 2015 to 2020” (McCormick, 2015).
Due to the latest iPhone resembling the past two models, sales have seen a decline for the first time. It would be sensible to assume that Apple are going to go for a huge redesign in 2017 of their smartphone, coinciding with the 10th anniversary of the iPhone. However, with an ever growing global population, Apple has sold over one billion smartphones since its first release. This exemplifies that the smartphone market is massively saturated and it will only become further saturated as the firm begins to support sales in more countries (Titcomb, 2016), especially the developing nations such as India, who currently aren’t able to buy Apple products, despite having one of the largest domestic service industries in the world.
With patent filings made by Apple in technology such as on-screen touch identification (as opposed to on a physical button) and also electric car batteries, it is clear that Apple are looking to expand into other markets and make major design changes within their products. With the potential introduction of an Apple manufactured car, it will be a way of entering yet another technological market as a possible attempt to compete with the likes of Elon Musk’s Tesla, which contains its own ecosystem and technology, just like all of Apple’s products (Muoio, 2015). With increasing regulations surround labour standards, the cost of labour is likely to continue increasing, despite outsourcing to developing countries such as China and India. This in turn will lead to an increase cost of production of Apple products which may see either prices increase for consumers and profit margins fall for Apple, coinciding with the rising price of aluminium used in their products, which will also cause a loss in profit (London Metal Exchange Limited, 2015).
7.1 Ansoff Matrix
• iPod – radical changes in design were carried out over the years helping make the music player more portable
• iPhone – new version introduced every year to compete in the smartphone industry
• iPad – whist the tablet market took off after the release of the iPad, it was not the first tablet produced, Microsoft had produced a tablet around a decade before
• Apple watch – apple have developed a smartwatch to complete in the smartwatch market. So far 2 versions have been created
• iPod shuffle – Released for existing customers as a “super portable” MP3 player due to its ruggedness and size
• Expansion of the iPhone and Apple products to new countries and making it more widely available. This is demonstrated through the initial release of the first ever iPhone in the UK where O2 were the only carrier to offer the product.
• iPod touch – for the initial release the iPod touch was seen as revolutionary. It was seen as a multimedia device with the ability to access the internet, play games and download music as well as being touch screen. The same functionality as an iPhone without the ability to make or receive calls. This contributed to the death of older iPod models which could only play music. All iPods are now touch screen through the development of technology.
(Kempster et al., 201
7.2 Objectives & Strategies
The original plan for Apple when entering the Chinese market was to be able to break through and reach all smartphone users. The firm became one half of a partnership with China Mobile, the biggest network provider in China with over 760 million customers (Apple Inc., 2013). For the fiscal year ended September 27, 2014, net sales in greater China were at $29,846 million (Apple Inc., 2014), an increase of 17% from the previous year and in 2015, China was the most rapidly growing market for Apple. China had accounted for 24% of Apples sales and also 66% of its net sales growth, with an 84% increase in sales; driven primarily by the iPhone (Apple Inc., 2015)
It has been revealed that the Chinese smartphone market is in decline due to the market being over-saturated with many of Chinas own brands maintaining high market shares. In Q1 of 2016, 104.9 million units were shipped to China by vendors; a decrease from the previous year at 109.8 million units of smartphones in the general market (Kharpal, 2016). This in turn has impacted Apple, with a reported dip of market share to 11% and a fall in revenue of 26% for the first quarter of 2016 (Rapoza, 2016).
Tim Cook claims “I see China as — we may not have the wind at our backs that we once did, but it’s a lot more stable than what I think is the common view of it” (Rosenfeld, 2016). Apple have a new upgrade plan that is expected to help boost margins. This is done by with the Apple Care+ service plan which shortens the time it takes for users to upgrade their device. This may help Apple to keep consumers’ faithful to the brand as well as improving unit sales. This is also expected to increase the market share in China which is currently falling. This has largely been attributed by consumers “no longer rushing to upgrade their older devices” (Rapoza, 2016).
The Apple ecosystem can be seen to make things easier for current Apple consumers, allowing them to go about daily tasks all in one place, making the process much more convenient Other strategies to help increase profit margins have been in place for a significant time period which are mainly through hardware and software updates. Whilst the original charging port was the same for the first iPhone up to the 4s, it was changed to a lightning port meaning that users could no longer use previous cables and had to buy new ones. Upgrades to the operating system also help to drive sales for Apple, with old models becoming obsolete. Apple has announced that the new iOS10 update is available, along with the list of devices that
are compatible with it.
(Apple Inc., 2016g)
The list shows that Apple are withdrawing support for the iPad 2, 3 and Mini (1st generation). It is estimated that this could render just over 40% of current iPads obsolete (Kingsley-Hughes, 2016) which may help drive up new iPad sales. Below shows each iPad model in terms of popularity:
Product: In recent years, Apple products have felt manufacturing issues such as a bending phone and the screen being overly fragile. Apple products such as the iPhone 6 and the iPad have a year-long warranty on their product. This could be made longer or adjusted to fit screen failures in order for Apple to increase popularity (Apple Inc., 2016h). Furthermore, the introduction of Apple Pay, Apple Watch and Wallet; although growing slowly, sees less importance for other daily utilities. Apple should aim to develop these features further as it is a USP. A large segment Apple target is families and day-to-day workers. Apple should offer a cheaper, simpler iPhone which has recently been introduced with the iPhone SE, however, with a 16gb version still costing £379, (Apple, 2016d) it is unlikely to appeal to the older generation. Apple need to introduce a phone that can appeal to this market, which could be a low costing basic handset that still follows the typical Apple design.
Price: Apple are able to charge high prices whilst also having a large customer base worldwide. They tend to adopt a price skimming strategy on their products which has allowed for Apple to assess the correct market value that their iconic product should be priced at (Mack, n.d.). The issue in China continues as they are ranked 5th in terms of iPhone sales. Apple products are “out of the price range” for many consumers in China (Schiavenza, 2013). Following the import tariffs Apple face, it is very difficult for Apple to be price competitive in China. Apple should aim to manufacture more parts in China which will reduce their costs and will enable them to offer cheaper products in the world’s fastest growing economy. With Apple’s sales issues in China mainly being the iPhone 7 being unsuccessful and the banning of iTunes (Levy, 2016), it may be an useful to incorporate a loss-leader pricing technique on the Apple Watch. If this was set at a lower price, it may see a rush of demand for the product and also as the Watch links into to the iOS ecosystem it will see an increase in demand of the complementary iPhone.
Place: Apple are seeing a decline in market share of the Chinese market falling from 12.8% to 10% in 2016. They are currently sitting behind brands such as Huawei, Oppo and Xiaomi, all hailing from China (Ramli, 2016). In Greater China, Apple are also seeing a 26% decline in their sales. Gaining a better understand of the local markets can be achieved by market mapping and understanding the demographic who are buying Apple products in China (mainly middle class) (Levy, 2016). There are plans to build an R&D centre in China which should help Apple have a better understanding of customer needs, and according to Tim Cook there will be a specialist operations and engineering team working at the new centre (Jie & Dou, 2016).
Apple is renowned for it’s iconic adverts which have graced television in the US and the UK for years. However, as Apple is such a well-known brand, promotion may not be as important as other elements in their business plan. In the few years, Apple has introduced the Apple Pay function to its iPhone 6, 6s and 7 model. Following quick growth, it has been made available to be downloaded on the iPhone 5 as well (Apple Inc., 2016i). The new feature is seeing more and more people using it, with a reported 10 million contactless-enabled terminals around the globe. Which is 2 million higher than February 2016 (Meola, 2016) thus implying there should be a focus on the promotion of Apple Pay they head into the future.
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