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Singapore Institute of Management (SIM)
Bachelor of Marketing
MKTG 1275Strategic Marketing
1 30 March 2016 Charles Tee
Tuesday, 12PM
Ng
Ng
Lin
Ooi
Shun Li
Shih Teng, Brenda S3450143
S3532095
Wei Heng
Shi Chen S3506215
S3506475
Weiheng
SIM
MKTG 1275 Strategic Marketing
Case Study Analysis on Apple Inc. with Product Focus on Apple TV
Lecturer: Charles Tee
Lecture Group: LF01, Tuesday, 12pm
Group Members Student Number
Lin Weiheng S3506475
Ooi Shi Chen S3506215
Ng Shih Teng, Brenda S3450143
Ng Shun Li S3532095
Table of Contents
Executive Summary .................................................................................................................................... 4
1. Company Overview ............................................................................................................................. 5
1.1 Past Strategy and Structure ............................................................................................................... 6
1.1.1 History of Apple Inc. .................................................................................................................. 6
1.1.2 Change in corporate strategy ...................................................................................................... 7
1.1.3 Shifts from main lines of businesses .......................................................................................... 7
2. Macro Environment Analysis ................................................................................................................. 8
2.1 Context .............................................................................................................................................. 8
2.1.1 PESTLE Analysis ....................................................................................................................... 8
2.2 Competitive environment................................................................................................................ 11
2.2.1 Industry Insight ......................................................................................................................... 11
2.2.2 Porter’s Five Forces Model ...................................................................................................... 11
2.2.3 Product Life Cycle Model ........................................................................................................ 17
2.3 Customers ....................................................................................................................................... 18
2.3.1 Market Size ............................................................................................................................... 18
2.3.2 Market Segmentation ................................................................................................................ 18
2.3.3 Market profitability of each segment........................................................................................ 20
2.3.4 Factors influencing purchase behaviour ................................................................................... 21
3. Internal Environmental Analysis .......................................................................................................... 22
3.1 Porter's value chain ......................................................................................................................... 22
3.1.1 Primary activities ...................................................................................................................... 22
3.1.2 Support Activities ..................................................................................................................... 24
3.2 Collaboration................................................................................................................................... 26
4. Evaluation of SWOT analysis ............................................................................................................... 27
4.1 Internal Strength Analysis of Apple ............................................................................................... 27
4.2 Internal Weaknesses Analysis of Apple ......................................................................................... 28
4.3 External Opportunities Analysis of Apple ...................................................................................... 29
4.4 External Threats Analysis of Apple ................................................................................................ 30
4.5 Converting Weaknesses into Strengths ........................................................................................... 31
4.5 Converting Threats into Opportunities ........................................................................................... 32
5. Corporate Strategy Analysis ................................................................................................................. 33
5.1 Corporate Mission ........................................................................................................................... 33
5.2 Corporate Vision and Goals ............................................................................................................ 34
5.3 Corporate Strategies ........................................................................................................................ 35
6. Business Strategy Analysis ................................................................................................................... 37
6.1 Generic competitive strategy .......................................................................................................... 38
6.2 Functional Strategies ....................................................................................................................... 39
6.2.1 Production Strategy .................................................................................................................. 39
6.2.2 Marketing Strategy ................................................................................................................... 40
6.2.3 Research and Development Strategy ........................................................................................ 41
6.3 Core Competencies ......................................................................................................................... 41
6.4. Feasibility in Pursuing Both Low-Cost and Differentiation Strategies ......................................... 41
7. Evaluation of alternative strategic options ............................................................................................ 42
7.1 Alternative strategic option 1 .......................................................................................................... 42
7.2 Alternative strategic option 2 .......................................................................................................... 43
7.3 Alternative strategic option 3 .......................................................................................................... 44
8. Recommendations ................................................................................................................................. 45
8.1 Corporate and Business-level strategy positioning ......................................................................... 45
8.2 Marketing Plan ................................................................................................................................ 46
8.3 Conclusion ...................................................................................................................................... 48
9. References ............................................................................................................................................. 49
Executive Summary
This report provides an in-depth analysis of the impact of the external and internal forces and the various
levels of strategies that may affect the prospective profitability, liquidity and financial stability of Apple
TV from Apple Inc. (Apple).
Our analysis was performed through both External Environment Analysis and Internal Environment
Analysis where the External Environment Analysis included analysis on Context and Competitive
environment using PESTLE Analysis, Porter's Five Forces Model and Product Life Cycle model.
Additionally, we analysed our external customers through market size, segmentation and profitability of
each segment, then evaluated the factors influencing purchase behaviour. This enabled us to gain insight
to the external opportunities and threats faced by Apple. Next, the Internal Environment Analysis that
included Porter's value chain and Collaboration facilitated our understanding on the internal strengths
and weaknesses encountered by Apple. Eventually, from the set of external opportunities and threats,
along with internal strengths and weaknesses derived, the SWOT was further evaluated to assess the
overall competitive standing of Apple in the Technology Industry.
From our initial analysis, we gained insight to Apple’s corporate and business-level strategy where we
further evaluated the current strategy with reference to the current market situation and viability of
Apple TV. We later assessed the viability of the current corporate and business strategies
implementation on Apple TV and recognised the limitation of the current strategy in relevance to Apple
TV. Hence, we brainstormed and recommended one out of three alternative strategic options namely,
Market Expansion strategy that is designed for the prospect of Apple TV to maintain their current
market positioning. We also suggested for a change in current business strategy from broad
differentiation to focused differentiation in efforts of growing the market shares of Apple TV in a year’s
period.
In conclusion, we recognised that all corporate and business strategies have to be constantly adapted to
an ever-changing competitive landscape in the Technology Industry, as strategies inevitably have
limitations for not being of good business fit to all of the businesses Apple has. Hence in the case for
Apple TV, the current business strategy is advised to be shifted to create opportunity for the product
whilst enabling profitability in the long-run. Thus, it will allow for Apple’s market growth and remain
competitive.
1. Company Overview
Apple Inc. (Apple) was established in 1977 where it innovates, creates and markets communication
devices, computers and portable digital music devices along with a series of related software systems,
technical services, network solutions and collaborative digital content and applications. Apple’s product
portfolio is illustrated in Figure 1.0 which includes an extensive collection of consumer and Apple-
exclusive software applications.
Figure 1.0 Product Portfolio of Apple (Apple Inc. 2016)
• iPhone series
• iPad series
•Apple TV
Media/Mobile Communication devices
•Macbook series
• iMac Personal Computers
• iPod series Portable digital music
devices
• iCloud
• iTunes
•Mac App Store
•Operating System Software
•Server and Application software
Apple exclusive softwares &
Third Party digital applications
•Apple Watch series
•Cases, Protection, Mice & Keyboards
•Displays & Mountrs
•Power & Cables
•Remotes & Controllers
•Storage
Accessories
•Apple CarAutomobile
1.1 Past Strategy and Structure
1.1.1 History of Apple Inc.
Figure 1.1 Historical chart of events at Apple
In 1976, Apple was founded by Steve Jobs, Steve Wozniak and Ronald Wayne. The first product –
Apple I, featured a prototype of Computer where it slowly grew with the development of more Apple
products and eventually the first Macintosh which was launched in 1984. A historical chart of events is
illustrated in Figure X for an overall view of the development of Apple throughout the years.
1.1.2 Change in corporate strategy
Apple’s corporate strategy has seen changes since Tim Cook succeeded the late Steve Jobs as the new
CEO of Apple in 2011.
The initial business model of Jobs’ emphasised on constructing new, innovative technologies charged at
a premium pricing in reflection of high quality where they only managed to triumph by strongly
incorporating hardware and software to provide a superior user experience than their competitors. The
current business model of Cook’s, however, shifted to production of improved versions of existing
Apple products.
Cook has been utilising Apple’s significantly-sized market share of loyal customers and providing only
slightly modified products, knowing that they will upgrade to the latest products (Williams et al. 2012).
As such, Apple’s existing products have seen vast improvements in terms of hardware and software
upgrades - such as changes in screen size and occasional iOS updates.
1.1.3 Shifts from main lines of businesses
Apple has experienced a shift from its main lines of businesses (i.e.smartphones, computer and portable
media players) to other consumer electronics such as Apple Watch and Apple TV. This shift in line of
businesses and expansion of product offerings allows Apple to gain a larger market share and increasing
profits by tapping into a new market.
2. Macro Environment Analysis
2.1 Context
2.1.1 PESTLE Analysis
Macro-Environmental Factors
Influencing the USA Market
Relevance and Impact on the Customer
Purchase Behaviour and Apple’s ability in doing
business
Political
● Outsourced manufacturing
process to foreign countries
● Tax policy: Progressive Taxation
● Apple is exposed to political issues in host
countries that it has outsourced its
manufacturing process to. For instance,
Powell and Akhtar (2012) illustrated the
cases of worker abuse in Foxconn, Apple’s
contract manufacturer. In order to tackle the
arising problem of tarnished company’s
image, Apple engaged the Fair Labor
Association, a global monitoring group, to
report on working situations at Foxconn.
● Additionally, as it is subjected to changes in
tax rates in U.S., the increase tax rates
would affect Apple's operating and cash
flows in business.
Economical
● Exchange rate: The strength of
the US dollar against other
currencies like euro and Japanese
● The increasingly strong US currency may
pose as a threat for Apple as its global
customers and business partners may reduce
demand for the premium brand due to
yen is increasing (Monica 2015).
● Consumer Expenditure: A
relatively high spending of
US$37,288.9 per capita in 2015,
which is estimated to grow by
1.5% in the coming years.
(Euromonitor 2015a).
increased import costs. This may bring
about overall falling revenue for Apple as
the US market only contributed to an
approximate 35% of its revenue in 2011
(Powell & Akhtar 2012).
● Given the premium pricing of Apple
products, the growing consumer expenditure
poses an opportunity for Apple as
consumers are more likely to purchase its
products.
Social-cultural
● Consumer behaviour: Online
shopping is increasingly becoming
a mainstream channel for
consumers as estimated total
household spending on online
shopping to surge to US$2,962 in
2019 (Euromonitor 2015b) .
● The increasing switch to online shopping by
consumers provides an opportunity for
Apple’s online retail store, allowing Apple
to reach out to its customers directly and
forge stronger customer relationships.
Technological
● Increasing trend of technological
integration of devices
(Lombardo 2015)
● The increasing trend of technological
integration of devices serves as an
opportunity for Apple as it can continue to
tap on its current “ecosystem” which allows
seamless connection between its products
through iCloud and hence ensuring
maximum compatibility and quality for its
users (Anonymous 2009).
Legal
● Intellectual property (IP) laws
● Rising privacy protocols
● Rising telecommunications
protocols
● Apple is highly dependent on many
products that obtained IP laws for its profits,
making it highly susceptible to litigation and
piracy. The company is subjected to
litigation and regulations implemented
which would incur operating expenses and
affect the business negatively.
Environmental
● Stringent environmental
regulations
● Solid and hazardous waste
● With increasing international calls on
companies for environmentally sustainable
practices, Apple faces increasingly stringent
environmental regulations in the market. As
Apple’s Lisa Jackson had mentioned, these
regulations may pose as constraints to
innovation (Fingas 2015) which may in turn
affect the research and development process
in Apple’s product innovation.
● The disposal of its electronic devices at the
end of its life cycle is a rising concern as it
incur high cost and pose harm to the
environment in rid of such products.
Table 2.0 PESTLE Analysis of Apple
2.2 Competitive environment
2.2.1 Industry Insight
Apple stands formidable in the highly competitive technological industry with its varied innovative
product offerings. Apple’s core strength includes extensive innovation, vigorous marketing and
branding. Apple contends on innovation, distinctive product differentiation strategy and deeply
integrated products (Nair, P.B. & Quay, A.L 2012). It effectively differentiated its products from the
competitors by focusing on quality, elegant design and premium customer service. However, technology
gets obsolete rapidly in this competitive industry, and Apple’s established position is highly subjected to
fluctuation. Hence, it must constantly adapt to changing market and seek new, innovative approaches to
maintain or increase profits whilst creating value for customers and shareholders. Also, it is essential for
Apple to look into new and expanding markets for growth leverage and as sources of revenue.
Therefore, the stiff competition within the industry and external forces impose considerable challenges
to the firm. The competition will be further analysed using Porter’s five forces and Apple’s product life
cycle.
2.2.2 Porter’s Five Forces Model
Competitive
Forces
Competitive pressures in the
industry
Strengths of Competitive Forces
Rivalry
Among
Competitors
Increasing number of competitors.
- Direct Competitors
(Operating System
Developers)
○ Google (Android)
○ Microsoft (Windows)
Strong
● Direct competitors like Google
and Microsoft are major
developers of operating systems,
namely Android and Windows
respectively. Android is currently
the top mobile OS used in the US.
Android is still going strong with
- Indirect Competitors
(Computer and peripherals
manufacturers)
○ Samsung
○ HP
○ Dell
○ Amazon and others
Products of rival sellers become less
strongly differentiated.
- Competitor offerings are
similar to Apple in terms of
design, form factor and
functionality. Apple is only
differentiated directly at the
core level which is the
operating system in their
products.
Diversity of competition.
- Countries of origin: Korea
(Samsung), China (Huawei and
Xiaomi).
Low switching costs.
- A consumer is able to switch
between devices of different
brands without requiring a
an increase of 1.7 percentage
points to 65.6% of the US’ market
share (Whitney 2015), posing
significant competitive pressures
on Apple.
● Indirect competitors are the
computer and peripherals
manufacturers like Samsung, HP
and Dell among others.
● Apple currently dominates this
industry in the United States with
25.7% of the market share as
compared to the second largest
market share holder, Hewlett-
Packard Development Co LP,
with only 13.4%. But competitors
like Samsung is rapidly gaining
market share with only 1.8% in
2010 to 8.5% in 2015. Apple will
have to be aware of its
competitors to retain or increase
its market share (Euromonitor
2015d).
substantial investment.
Competitors are of similar size and
competitive strength.
- Competitors in this industry
such as Samsung, Google and
Amazon invests significant
capital on marketing and R&D
which is comparable to Apple.
Threat of
New
Entrants
Strong brand preferences and high
degree of loyalty.
- In industries like smartphones,
Apple and Samsung has a
brand retention rate of 90%
and 77% respectively (Richter
2014).
Cost advantages.
- Existing industry members
have cost advantages over new
entrants through economies of
scale and long-term
relationships with suppliers.
Strong “network effects” in
customer demand.
- Half of all US households own
at least one Apple product in
2012, resulting in strong
Weak
● Apple is dominating the consumer
electronics industry with a high
brand retention rate coupled with
strong network effects. Existing
competitors are finding it hard to
gain a foothold in this industry,
much less new entrants therefore
discouraging entry due to the
huge competitive disadvantage
they will be at.
network effects (CNBC 2012).
High capital requirements.
- New entrants would have to
expend a significant amount of
capital just to establish the
company’s brand name in this
industry. More has to be spent
on building product portfolios
to rival existing industry
leaders.
Threat of
Substitutes
Substitutes readily available and
attractively priced.
- Substitutes for products in this
industry are like cameras to
substitute iPhone’s photo-
taking capabilities, landline
phones to make calls, video
game consoles to play games
instead of mobile gaming.
New Technologies
- Substitutes may come in the
form of newer technologies to
replace current functions of
Apple’s products.
Weak
● Substitutes for products in this
industry are cheap but are limited
on variety of features that
smartphones and tablets provide.
Therefore, Apple does not have to
worry too much about substitutes
with lower technologies in the
industry.
● An example of new technologies
is Google Glass which provides
many of the same functions as
tablets and phones. If similar
products catch on, it would be
damaging to Apple’s profitability
as Apple’s operating system is
still a minority in the PC industry.
Bargaining
Power of
Suppliers
High supply as items being supplied
are considered “commodities”.
Large number of suppliers relative
to industry members.
- Apple alone has more than 200
suppliers for components,
materials, manufacturing and
assembly of products
according to Apple’s 2015
Supplier List.
Weak
● With the abundance in supply and
suppliers, industry members have
an array of suppliers to choose
from therefore the bargaining
power of suppliers is of low
priority.
Bargaining
Power of
Buyers
Switching costs.
- Switching costs may be
significant but not in the cash
aspect. The significant
switching costs arises from the
need to move outside of
Apple’s ecosystem if an Apple
user was to switch to another
brand. Switching operating
systems would be too costly
and many users would not do
it.
Weak bargaining power at
individual level but strong as a
collective.
- Due to it being easy to switch
Strong
● Individual buyers’ purchase
insignificant in this industry but if
customers switch brands as a
collective, it will exert a very
strong force on the company.
● If product quality becomes a
major issue, Apple users may
decide to switch brands as cash
costs involved is negligible.
between brands, customer
satisfaction is very important to
retain loyalty.
Table 2.1 Porter’s Five Forces Model of Apple’s Industry
From the five forces analysis, it is evident that rivalry among competitors and the bargaining power of
buyers represent strong competitive pressures in this industry. The competitive pressures stemmed from
threat of new entrants, threat of substitutes and bargaining power of suppliers are relatively weaker
elements among the industry forces.
The industry that Apple operates in is still able to sustain long-run profitability due to Apple’s strong
positioning in the market against competitive pressures. Profitable players like Apple are also better
positioned due to discouraging new entrants and having a stronger bargaining power against suppliers as
analysed in Figure 2.1. In order to stand out from competitors and gain customer loyalty, Apple will
have to continuously invest in R&D for new and unique products while maintaining their brand value
which currently occupies the top spot worldwide (McAlone 2015).
2.2.3 Product Life Cycle Model
Figure 2.2 Apple Product Sales Volume
Based on the sales volume in Figure 2.2, the stages of the different products in the product life cycle is
shown in Figure 2.3.
Figure 2.3 Product Life Cycle of Apple Products
From Figure 2.3, Apple’s best-selling products are mostly in the maturity and declining stage of the
Product Life Cycle. Generally, Apple has a short product life cycle and being in a highly competitive
technological industry, it constantly demands for innovative new products to stay competitive in their
business.
2.3 Customers
2.3.1 Market Size
The market size the technology industry is very large with the increasing technology device ownership
in the US, where about 68% of Americans own smartphones and 45% own tablets and computers which
are the most commonly owned devices and are in demand (Monica 2015)
Considering the Apple product users, their market is relatively large in the US with about 50% (55
million) of households that owns at least one Apple product (Jodi 2012). Also, Apple’s market share in
the US continues to strengthen in the smartphones and tablet industries (Lucas 2015).
2.3.2 Market Segmentation
Geographical
(Region)
Apple has about 268 stores located all over the United States, in popular
cities with high human traffic such as New York and California. They also
spread exposure online through sales and information of their products in
their official website in 88 different countries (Apple Inc. 2016).
Demographics
(Age, lifecycle,
occupations,
income)
The demographic segmentation is successfully covered by Apple through its
consideration of the age group and lifecycle of its users, as well as their
occupations in the US. The Applications (Apps) available cater to the
different needs of the users to suit the age group, such as for business
professionals, young adult and students etc. For example, the younger users
enjoy the variety of simple educational games and entertainment activities
through Apps that are available. Moreover, Apple seems to be more popular
to the younger and more affluent users (Dana 2012).
With income in consideration, Apple adopts a single pricing internationally,
keeping its products at a premium price mainly targeting at the middle and
higher income group. With higher income, it would mean higher spending
where shoppers of Apple products are generally higher than its competitors,
according to IBM (Dana 2012).
However, based on Euromonitor (2016), the richer households gained by
10% while poorer households suffered by 10% of real income, resulting in
the worsening of the disposable income gap. This could pose as a problem as
it gives rise to a fragmented market where the middle income group declines,
thus potential decline in sales volume.
Psychographics
(Lifestyles,
personality)
Apple explores the emotional aspects of its branding strategy. Recognising
its efforts to empower people through technology, it creates a sense of
innovativeness and creativeness that enhances the users’ experiences
(Elizabeth 2011). The simplicity and sleekness of the product designs display
a connectivity it has in its product line with its customers. This means the
interface of the products are relatively similar to use with additional value
add-ons in its development of product line.
Apple lines its innovations through its brand experience and product design
which reflects the needs of users’ lifestyles, hobbies and interests,
incorporating the essence of individuality and creativity. It has embodied and
transcended into a leading technology lifestyle brand that creates a sense of
connectivity between their products and the customers (Alice 2003).
Behavioral
(benefits sought,
loyalty status, usage
segmentation)
Through Apple’s continuous innovation of its product line, its development
caters to their users’ needs. Since technology has played a significant role in
influencing consumers’ buying behaviour (Mazher 2012), Apple actively
engages in interaction with their customers through their official website as
well as in-stores, creating platforms for them to build strong relationship to
generate brand loyalty. Apple also recognise the different types of their
users, ranging from those who own an Apple product to those who are
fanatically devoted to the brand, known as ‘Macolytes’.
Furthermore, they concern themselves with customers’ who face difficulties
with the products by providing good after-sales service programs such as the
AppleCare Products that gives technical support, and also hardware and
software support (Apple Inc. 2016) to encourage repeat purchases.
Table 2.4 Apple’s Market Segmentation
2.3.3 Market profitability of each segment
Table 2.5 Profitability of Market Segments
Table 2.6 Potential Target Market
2.3.4 Factors influencing purchase behaviour
Apple users are highly influenced by the functions and appeal of the product (Tom 2008).
2.3.4.1 Internal Factors: Perception, Memory, Emotions, Attitude
The importance of the functional aspect is crucial in meeting customers’ needs and
expectations. Through the simple user interface, the additional quality functions such as high
camera megapixels, as well as the basis of the product design, cultivates excitement and
convinces the customer to purchase the product.
Apple successfully engages in brand equity through making their products memorable and
easily recognisable to customers as well as emphasizing on the reliability and quality of their
products (Maha 2013). Also they create a ‘friendly’ customer experience to strengthen their
customer relationship to build brand loyalty.
Table 2.7 Internal Factors affecting Consumers’ behaviour
2.3.4.2 External Factors: Marketing Activities
The appeal to emotion is closely linked to the psychological factor, which is displayed in
Apple’s effective advertising strategy and also creating an image to attract customers who
identify the values of Apple and thus also feel valued through making their purchase of
Apple products. Apple engage in building relationship with the media and celebrities online
to create buzz and hype on their brand and products. The positive word-of-mouth encourages
higher demand in their products (Catherine 2012).
Table 2.8 External Factors affecting Consumers’ behaviour
3. Internal Environmental Analysis
3.1 Porter's value chain
3.1.1 Primary activities
Inbound logistics: Strong
Apple is highly reliant on suppliers and strives to foster good relationship in return for commitment
and quality of production. As Apple deal with a large pool of suppliers across the globe, it does
quality control by shortlisting potential suppliers with matched values as Apple through an Apple
Supplier Diversity Program (Apple 2016).
Furthermore, supplier relations are based on stringent control of product information where
instantaneous response to new parts of product failures within two weeks of parts inventory within
the various assembly plants in China. This policy allowed Apple to handle huge product launches
without needing to maintain large and costly inventories (Satariano & Burrows 2012).
Operations: Strong
Apple focused its efforts further up the value chain that goes to taking advantage of worldwide
manufacturing resources. It creates value through outsourcing to partners in Asia and worked
closely with them in manufacturing of majority of their hardware products.
However, while most Apple outputs are manufactured abroad, the economic benefit accrues
enormously to Apple. For instance, each iPad table computer sold contributed $275 to U.S. trade
deficit, this transaction comes with added benefits to all parties involved in supply chain (Wright
2012).
Outbound logistics: Strong
Apple ensures that their product offerings are readily accessible and reached out to consumers
through direct selling via retail and online stores. It is found that sales margins increase when Apple
sells the products via its Website or stores (Wright 2012). Nevertheless, 72% of the total net sales
are conducted through indirect distribution channels such as 3rd party cellular network carriers,
wholesalers, retailers and value added resellers. This expansion of distribution channel is for Apple
to reach out to more consumers to stay competitive alongside with competitors’ offerings and to
provide high quality sales and post-support sales experience more efficiently.
Apple reduce excess stock through proper management of inventory by reviewing products and
anticipating demand, forecasting order components and build inventory in advance of shipments to
ensure sufficient stock to dispatch yet reducing monetary loss from inventory stocks.
Marketing and Sales: Strong
Apple staffs are well-equipped with knowledge to help add value and sell the products through
interactions via online and offline in stores to manage for a superior customer experience. It also
invests in programs to enhance reseller sales by integrating reseller’s stores with Apple employees,
improving and standardising product placement displays for a uniform experience.
In addition, it builds long-term relationship with its customer by building brand equity through
marketing its premium quality product and services. It has shown that Apple has strong brand
loyalty through a survey that found more than 83% of Apple iPhone users would stay with Apple
for their next smartphone in comparison to 64% of Samsung users staying with the brand (Seitz
2015).
Service: Strong
Apple is known for its superior quality of customer servicing through the three stages: pre-
purchase, purchasing and post-purchase stage. Apple products can be acquired through both click-
and-mortar and brick-and-mortar channels where it provided relevant information and personnel for
customers to reach Apple directly should they have any enquiries. Additionally, Apple included
training programs where their staff would teach customers on how to better use Apple products
after purchase.
Furthermore, maintenance services such as hardware warranties are included in purchase that
allowed customers to do exchange and repair extension programs and safeguarded their product
purchase. This has brought value to customers and in exchange for trust and commitment to Apple.
Table 3.0 Porter’s Value Chain - Primary Activities
3.1.2 Support Activities
Human resource management: Strong
Apple started Esprit de Corps hiring program where they would reward current employees $500
for recommending another talented individual they admired to the pool. The member who
brought in the person was held accountable to ensure that the new hire is informed to ensure that
the ongoing relationship (Elliot 2012).
Technology development: Strong
Apple made a competitive environment for its component suppliers such that they would do the
hard work to offer the company its cutting-edge hardware innovations to win its profitable
business (Satariano 2015) allowing it to invest a considerable but low amount into R&D yet
receives sufficient opportunities and information for development. Additionally, Apple hires the
very best people to work for them in various teams to think, innovate and design game-changing
ideas into feasible products for potential market.
Procurement: Moderate
Apple outsourced to reliable suppliers and implemented a Supplier Code of Conduct and
Supplier Responsibility Standards that set out their desired work requirements. Suppliers are
managed through assessment and auditing before adding them into the supply chain.
Additionally, Apple does on-site inspections and surprise visits where they send a team of
supporting people from a third-party led by an Apple auditor to ensure consistent quality control
are done (Apple 2016).
Firm infrastructure: Strong
Apple is highly dependable on its strong corporate leadership by previous CEO Steve jobs. He
has set a standard of leadership, work culture and ideology that is now undertaken by Tim Cook.
Jobs innate ability to understand human behaviour aided him to predict future desires before
consumers knew it themselves. His high intellect skills enabled him to transform technologies
integrated in products that flourished (Finkle & Mallin 2010). This is exemplified by the
company’s vision and mission statement seeking for continuous innovation to impact the world.
Table 3.1 Porter’s Value Chain - Support Activities
3.2 Collaboration
Apple holds a strong and long-lasting commitment to a diverse supplier base. They are open to all
suppliers from any background so long as they have the same values and goals in mind. They have
designed a sourcing process that ensures fair treatment such that they can immerse entirely in a
competitive procurement process (Apple 2016). By having a Supplier Information Database, Apple has
access to all of their registered supplier’s information so that they would have the higher control in
collaboration with selected suppliers for quality control.
Apple is involved in deep collaboration by forming strategic alliances with competing companies like
Microsoft, IBM, Samsung and Cisco to boost innovation, company growth and market potential for its
products. For instance, in the most recent collaboration with IBM, it enabled a mix of distinct strength of
both companies. By combining IBM’s analytics capabilities with Apple’s innovative and service
integration capability, it allowed businesses to work Apple’s products more effectively. This successful
collaboration looked beyond mere competition which allowed for opportunities to an extensive reach out
to more individual and business consumers globally through IBM. In the long-term perspective of
Apple’s growth. It is important to look into potential collaborating partners instead of restricting
opportunities by regarding them as solely competitors.
Apple outsourced to production internationally for a higher cost advantage in producing its products.
They seek for commitment and quality of work and have strict regulations and guidelines in short listing
a manufacturer. Last, Apple now looks into increasing collaboration internally. It has shifted its attention
to strengthening by adding responsibilities to leaders across the hardware, software and services teams
(Apple 2016). For instance, Jony Ive, being the leader of Industrial Design, will provide leadership and
direction for HI across the company instead of solely on design. By integrating leaders guiding the team,
it will have a clear direction in achieving their goals, enhancing the efficiency of teamwork in churning
ideas and products.
4. Evaluation of SWOT analysis
4.1 Internal Strength Analysis of Apple
Internal
Strengths
- Corporate culture: Apple’s strength lies in its corporate culture strategy
which involves training employees to convey the value of Apple’s products
to customers and providing high-quality customer service. It has built a
communal-like and laidback environment that has resulted in strong
organisational identity. (Nair, P.B. & Leng, Q.A. 2012). Apple’s corporate
culture is crucial to its success as it determines the ability of the company
retain and build a long-term relationship with its customers.
- Financial resources: Apple marks its presence in the technology market
by having large financial resources set aside to expand the business. Apple
anticipates investing $13.0 billion for capital expenditures in 2016 that
includes manufacturing facilities, hardware and software systems and retail
store facilities (Apple’s Annual Report 2015) A significant amount of
financial resources creates an opportunity for Apple to expand on its
advertising resources and grow as a market leader.
- Innovation: Apple leverages in superior technology and innovation in
products. It prides itself on its ability to bring the best user experience and
seeks for the discovery of innovative technology that would provide
customers with ease-of-use and easy integration. (Apple’s Annual Report
2015). Apple’s differentiation through product innovation creates market
demand for its products, and sets an entry barrier for potential new
competitors.
- Advertising capabilities: Apple’s advertising capabilities is more cost
effective and superior than its competitors’. For example, Apple spent less
on advertising than its competitor Samsung while managing to gain higher
returns than them. 0.77% of Apple’s sales revenue was spent on
advertising in comparison to Samsung who spent 1.83%. (Jurevicius 2016)
Apple’s advertising capabilities is more superior than its competitors’, as it
is able to reach out to more customers while reducing unnecessary costs on
advertising.
- Customer perception: Apple is generally perceived as a strong brand
name in the minds of consumers. This is evident from the sale of Apple
iPhones which have increased from 51 million in 2014 to 74 million in
2015. (Statista 2016) Apple’s products are easily identifiable and stay in
the memory of consumers. Its strong brand name and large loyal customer
base generates positive feelings in consumers, leading to increased sales.
Table 4.0 Internal Strength Analysis of Apple
4.2 Internal Weaknesses Analysis of Apple
Internal
Weaknesses
- 3rd party distributors: Apple relies on 3rd party distributors, carriers and
other resellers to distribute its products. Many resellers have small
operating margins and have been negatively affected by weak economic
conditions.(Apple’s Annual Report 2015) Apple’s reliance on 3rd party
distributors affects the Apple negatively as resellers might not have
expertise to convey the value of products to customers. Apple would suffer
losses when these distributors decide to withdraw from their services to
further distribute Apple products.
- Incorrect forecasting: Technology market is volatile, there is a risk that
Apple might forecast incorrectly and produce excess or inadequate amount
of products and components. (Apple’s Annual Report 2015) Volatility in
the technology market results in Apple’s inability to forecast their sales
correctly results in overspending of Apple’s resources.
- Premium pricing: Apple is well-known for their luxury positioning in the
market and therefore commands a premium price as compared to many
other products of the same category. This subjects Apple to price
competition from rival sellers. This makes the company vulnerable to price
competition by Samsung and other OEMs like China’s Xiaomi which is
growing rapidly over the past few years.
- Reliance on a single product line: According to Apple’s 2015 Annual
Report, the iPhone’s sales alone takes up 66% of Apple’s entire net sales in
2015. Such heavy reliance on one product may result in losses if the
product is unable to generate revenue.
Table 4.1 Internal Weakness Analysis of Apple
4.3 External Opportunities Analysis of Apple
External
Opportunities
- Distribution network expansion: As mentioned in the geographic
segmentation of customers, Apple currently has 268 stores across the
United States. This is a small number as compared to stores like Costco
which has 488 stores across the country (Costco Wholesale 2016). An
expanded distribution network can help Apple reach more customers
domestically.
- Increasing technology dependency: Smartphone ownership in the US
in 2015 accounts for nearly two-thirds of the population as mentioned in
the market size. This shows an increasing dependence on smartphones
and technology in general. Most Millennial have grown up with
technology, therefore requiring intensive technological interaction in
their day-to-day lives (Euromonitor 2015c). This represents a potentially
viable consumer segment with an estimated spending of $200 billion in
2017 alone, that Apple can explore (Euromonitor 2015c).
- Growth in internet retailing: Apple is a major player in the online
retailing scene as hardware sales through their website is one of their
main distribution platforms. Digital sales in the app store and iTunes also
contributes substantially to Apple’s profits (Banjo 2016). From the PEST
Analysis, it indicated the increasing trend of online shopping as a channel
for consumers Apple can expand their online retailing presence on and
grow their business by riding on consumer’s behaviour in online retail
spending.
Table 4.2 External Opportunity Analysis of Apple
4.4 External Threats Analysis of Apple
External
Threats
- Product imitations as substitutes: Counterfeit Apple products may be
used as substitutes for Apple’s premium priced products due to the
similarity in functions and aesthetics. Counterfeits are usually of low
quality, low-priced and offers the same functions to attract customers.
This may be detrimental to Apple’s brand equity.
- Harmful taxation policies: Apple’s profits and cash flow will be heavily
affected by the high statutory tax rate for corporations at 35% in the
United States (Internal Revenue Service 2012). Apple has ventured into
holding money overseas to avoid the high tax rates in US. With $181.1
billion held offshore, Apple would owe an estimated $59.2 billion in
taxes if it tries to bring all these money back to the United States (Reuters
2016).
- Cyber-criminal activities: Apple’s increased popularity in its product
offerings have become a significant target for cybercriminals. A monthly
average of 10,000 to 70,000 Mac computers was infected with malware
in 2014 (BBC News 2016). Despite the number being far fewer than
Windows computers, Apple cannot be complacent in security matters
that may affect brand equity. Hence, Apple must respond to rising threats
and infections to protect the privacy and security concerns of their
customers.
- Strong rivalry among competitors: Products in the industry are getting
less differentiated and have low switching costs therefore intensifying
rivalry. Apple have to either improve on their current strategy, create or
enter new markets in order to stay ahead of its competitors or risk losing
market share to competitors playing by cost-leadership as their
competitive strategy.
- Strong bargaining power of buyers: The collective marketplace
bargaining power of buyers is a strong force as buyers have common
demands regarding Apple’s products such as the preference of having
USB ports in tablets. Not dealing with common demands will affect
Apple’s reputation negatively and force buyers to switch brands.
Table 4.3 External Threat Analysis of Apple
From the SWOT analysis, Apple’s strengths greatly outweighs its weaknesses and positions them in a
strong overall competitive position. Apple’s core strength includes its financial resources, advertising
capabilities and strong brand name. These assets are hard to replicate therefore representing
competitively superior internal strengths which allows Apple to compete successfully.
4.5 Converting Weaknesses into Strengths
With approximately $16.7 billion in cash and cash equivalents at the end of 2015 from their balance
sheet for the quarter ended December 26, 2015. These financial resources available at their disposal can
be re-invested into the business to grow other product lines to avoid over-reliance on the sales of the
iPhone. A strong and diverse product portfolio will become a strength for Apple.
As Apple does not get involved in price wars, price competition can be avoided through expansion of
product lines, advertising and create hype on new product launch. Apple can justify its use of premium
pricing strategy through reflection of premium quality products by investing in research and
development (R&D) for production as well as market research activities and advertising promotions.
Apple’s inability to forecast the market presents an opportunity for it to grow as a brand, as it pushes
Apple to release products that are innovative to the technology industry, thereby building its brand
image as an Innovator. This would also enable Apple to evaluate and understand their target audience
better, as well as prevent future product failures from occurring.
Weaknesses branching from reliance on 3rd party distributors will stimulate Apple to further improve its
customer service in Apple stores and online store as it is highly dependent on its direct sales force in
producing sales.
4.5 Converting Threats into Opportunities
Threats can present themselves as opportunities to Apple to gain a competitive advantage over rivals.
Cyber-criminal activities that are targeting Apple’s systems are on a rise and an opportunity arises to
form strategic partnerships with cyber security companies to combat this. Apple could also capitalize on
this partnership to share ideas and technologies to enter new market segments that their competitors
currently do not have a presence in.
With the products from competitors getting less strongly differentiated in this industry, competition is
intensifying and Apple can utilize this opportunity to build on their strengths in advertising capabilities
to capture consumers. This can further help Apple establish themselves as a premium brand among
competitors.
The advancement in technology has allowed consumers to easily air their opinions about products as
compared to before. Apple can take this opportunity to listen to what consumers want, offer a new
product, and market it in a way that consumers feel involved in the design of the new product. The threat
of increasing bargaining power of buyers turns into an opportunity to capture consumer’s loyalty.
Although Apple’s current business and corporate-level strategy has proved its success over the years
with its product offerings, the competitive analysis shows that the technological industry is an ever-
changing competitive landscape with the constant need for new innovative strategies and products to
cater to the market. In order for Apple to remain competitive and maintain its standing, it is essential for
Apple to constantly take external and internal factors into consideration and adapt accordingly to
changes to stay relevant in the U.S. Market.
5. Corporate Strategy Analysis
5.1 Corporate Mission
From Apple’s corporate mission statement, we recognise the various success market penetration with
their product offerings. The Apple’s mission statement highlighted their utmost concern on production
of high-quality products.
Considering some of Apple’s acquisitions as shown in the Figure 5.0, along with the type of technology
that each company has a niche in, we can derive that Apple actively sought for these acquisitions to
reinforce and strengthen their ongoing research (Heisler 2015). Therefore, giving rise to more innovative
products and product lines of high-quality.
Figure 5.0 Acquisitions by Apple
5.2 Corporate Vision and Goals
From Apple’s corporate vision statement, we have enumerated six major points in achieving their goal
as shown in figure 5.1.
Figure 5.1 Points extracted from Apple’s Vision Statement
Apple's vision statement is clear in addressing the various aspects of its business, reflecting on the
overall approach of their leaders and indicates the direction of the company. Such statement is crucial in
guiding decision makers and its employees in working towards the company's goal of continued global
success, stemmed from excellence and innovation.
5.3 Corporate Strategies
Corporate Strategies Evaluation of corporate strategy
1. Premium Pricing
Apple’s strategy as reflected from their product
offerings, are priced to generate high margins to
achieve the highest profits possible. This
strategy is viable due to the Apple’s brand loyal
customers and the tightly integrated ecosystem
that Apple users are being locked-into.
The primary value proposition of all Apple’s
products are the ease of synchronisation
between each other, centralized access of
applications and similar user interfaces across
all devices which makes up the closed
ecosystem. This leads to cross-side network
effects that attracts new customers to use
Apple’s products which in turn attracts content
and application developers to Apple’s platform.
Taking the competitive environment of the
technological industry into account, the
diversification strategy is relatively appropriate
with their focus revolving around creating the
‘best product’ for Apple users. By creating a
‘best product’, the value created will then justify
the use of the premium pricing strategy.
Given the strong rivalry of competitors in the
industry, Apple’s corporate strategy of premium
pricing may soon lose out to price competition
from competitors’ products as they are becoming
less strongly differentiated. Apple will have to
rely on retaining the current customers through
satisfying common demands by creating or
enhancing products, thus tackling the threat of
buyers’ strong bargaining power and turning it
into brand loyalty.
2. Diversification
Apple is also seeking growth in a broader sense
through its subsidiaries and acquisitions from
figure X of other technology companies.
Furthermore, with Apple’s financial
capabilities, they are able to expand in their
Apple’s diversification strategy allows it to
provide more value to its customers through
acquisition of niche companies and collaboration
of brands. This also enables Apple to deal with
the current over-reliance on a single product line
as diversifying provides stability and continued
product innovations and even venture in other
industries (Jeremy, C 2015). Apple engages in a
combination of both related and unrelated
diversification, where they choose companies
such as Camel Audio and Beats Electronics Inc.
(Sean, B 2015) to further enhance on their
music and sound systems of their products.
Also, they acquired other companies with niche
areas such as mapping from Mapsense in order
to delve into a potential market of navigation
and routing.
Apple focuses on several technological
products, computers, software, digital music
online store, mobile phone, media and
computing devices (tablets). They operate
several businesses while seeking other areas for
expansion in both innovation of its current
existing products and also developing research
on new products to venture into other industries
like media, wearable accessories and vehicles.
profits, preventing sudden unforeseen
circumstances to impact the company severely.
Apple can also target the current trend of
increasing dependence on technology by
entering new market segments that will expand
the company’s competencies to fulfil the needs
and wants of consumers. Cybercriminal
activities can then be tackled by enhancing
security of the systems and devices through
exposure to new technologies from acquired
companies or collaborations.
Figure 5.2 Two Corporate Strategies of Apple
Apple’s current strategy of relying on a single product line to generate most of its profits may be short-
sighted due to the risks involved should the single product line flop. After evaluating Apple’s SWOT,
we have concluded that the diversification strategy would be the most viable strategy for Apple to
utilize, as its strengths needed for product diversification provides Apple with a long-term corporate
strategy that outdo its weaknesses such as the inability to predict the market and its premium pricing
strategy that is vulnerable to price competition.
6. Business Strategy Analysis
Due to strong competition from rivals such as Google, Amazon and Roku, Apple has to differentiate
their product in order to capitalize on the growth of the streaming media device market. All streaming
devices currently offer similar apps including major video apps such as Netflix and Hulu therefore it
may be difficult to stand out in this area. But Apple managed to differentiate themselves through
building on the success of their services, namely iTunes and Apple Music, by including them in the list
of Apple TV apps alongside its own “Apple TV App Store”. The 81.1 million active users of Apple
Music in 2015 are therefore potential buyers of the new Apple TV Apple operates in several businesses,
most notably smartphones, tablets and computers with the iPhone still remaining as Apple’s biggest
priority. The Apple TV has not been updated in 3 years from 2012 to 2015, showing a lack of interest in
this segment by Apple (Pino 2015). However, attention is slowly shifting as a new Apple TV was
released on October 26, 2015.
Apple TV is currently at the introduction-growth stage according to Figure 2.3, where it sold 25 million
units from introduction in 2007 to 2015 (Ingraham 2015). And in 2014 alone, Apple TV’s sales is seen
as growing exponentially with 5 million units sold (Kafka 2015). Apple now owns the second largest
market share in the streaming media device market at 20% after the release of the new Apple TV (Seitz
2016). In an effort to induce cross-side network effects by locking-in consumers into Apple’s ecosystem
in Figure 6.0, like what was done for all the other products, significant investment has been made into
the new Apple TV including the development of an entirely new OS called the tvOS.
Figure 6.0 Apple’s Ecosystem
6.1 Generic competitive strategy
The streaming media device market is currently still in the growth stage with only 20% of all US
broadband households owning at least one streaming media player (Parks Associates 2015). Competitive
pressures in this industry is high as tech companies seek to capitalize on its profitability and potential
growth. Current major players in this industry include Google Chromecast, Amazon Fire TV, Roku and
Apple TV, who together dominate 86% of sales in the US streaming device market (Parks Associates
2015).
Based on the combined model of Porter’s generic strategies and Miles & Snow’s typology as shown in
Figure 6.1, Apple is currently classified under a combination of Differentiation and Analyser strategy
where they seek to build customer perceptions of superior quality, content and gradually place heavy
emphasis on the expansion into Apple TV’s product-market.
Figure 6.1 Combined Typology of Business-Level Competitive Strategies
Due to strong competition from rivals such as Google, Amazon and Roku, Apple has to differentiate
their product in order to capitalize on the growth of the streaming media device market. All streaming
devices currently offer similar apps including major video apps such as Netflix and Hulu therefore it
may be difficult to stand out in this area. But Apple managed to differentiate themselves through
building on the success of their services, namely iTunes and Apple Music, by including them in the list
of Apple TV apps alongside its own “Apple TV App Store”. The 81.1 million active users of Apple
Music in 2015 are therefore potential buyers of the new Apple TV (Mihalcik 2016).
6.2 Functional Strategies
6.2.1 Production Strategy
From design to retail, Apple has control over nearly every aspect of the production process as illustrated
in Figure 6.2, therefore ensuring quality of all the little details for every product that ends up in the
consumer’s hands. Apple’s forte is product design and marketing as mentioned by Tim Cook, assembly
of products are thus outsourced but Apple still maintains quality control by only partnering with
manufacturing companies that understands the efficiency and quality standards that Apple expects
(Strategos Inc. 2016)
Figure 6.2 Apple’s Supply Chain
In order to support its Differentiation and Analyser strategy, Apple has to ensure that third-party
assembly plants are able to churn out new products with very short lead times. Heavy emphasis was
placed on flexibility, quality and cost in choosing a manufacturing plant (Strategos Inc. 2016)
Foxconn’s website defines its competitive advantages for company products as: Speed, Quality,
Engineering Services, Flexibility and Monetary Cost Saving (Foxconn Electronics Inc. 2013). With
these competitive advantages being in line with Apple’s key manufacturing tasks, Foxconn Technology
Group was contracted to become Apple’s main manufacturer due to their flexibility for new products,
design changes and volume changes providing superior efficiency and quality.
6.2.2 Marketing Strategy
Apple’s objective for the Apple TV is to build shares and be the market leader. By continue pursuing its
current business strategy - Differentiation, Apple attempts to revolutionise the modern-age TV
experience.
The new Apple TV is of special interest to existing Apple product users as its tvOS platform is designed
to work seamlessly with all Apple devices and software in a tightly integrated ecosystem (Nielson
2014). A notable feature available in the Apple TV is Airplay, where the iPhone, iPad and iPod touch
can mirror its entire screen to the Apple TV easily. These features alongside the exclusive Apple TV
App Store seeks to attract new customers by providing enhanced benefits.
Apple also emphasizes on a high-quality buying experience for products sold at retail stores as
evidenced from the minimalistic store designs to enhance the visual marketing environment of Apple
products. Staff at these retail stores are also trained to be well-versed in Apple’s products, being able to
provide customers with service, advice and training. This leads to increased customer responsiveness as
the staff will be able to accurately and insightfully serve customer’s needs and wants efficiently
(Leviticus, J 2016).
6.2.3 Research and Development Strategy
One of Apple’s strengths from the SWOT analysis is their ability to innovate. Apple will have to invest
more into R&D, utilize their available resources to differentiate the Apple TV from Competitors.
Collaborations, mergers and acquisitions as detailed in the corporate level strategy can also help in
stepping up R&D efforts through sharing of ideas and innovations.
With Apple’s immense financial resources and innovation abilities, the Apple TV has large potential to
excel in the streaming media device market and support its business-level strategy of broad
Differentiation and as an Analyser.
6.3 Core Competencies
From Table 4.3, Apple’s competitive assets are its corporate culture, financial resources, ability to
innovate, advertising capabilities and customer’s perception of the brand name. Through these
competencies, it is able to pursue the Differentiation strategy through value creation.
Apple’s aim for the value proposition of the Apple TV is to offer an “Apple Streaming Service” which
gives users access to all major streaming services (Netflix, HBO, Hulu, etc.) and live cable TV (Heisler
2015). This will eliminate the need for all other set-top boxes as the Apple TV is the all-in-one solution
for users who want to watch both streaming and cable TV.
The potential and strategic fit that the Apple TV brings to Apple’s product portfolio coincides with the
corporate level strategy of high margins and a market segment where there is room for innovation and
differentiation.
6.4. Feasibility in Pursuing Both Low-Cost and Differentiation Strategies
Apple focuses on Differentiation and also attempt to pursue Low-Cost strategy, according to Apple’s
CEO, Tim Cook (Nielson 2014). It is therefore feasible for Apple to pursue both Low-cost and
Differentiation strategies due to their current market position standing.
From Figure 2.1, the bargaining power of suppliers is weak therefore low costs are easily achieved from
the suppliers. This is due to the Apple Supplier Diversity Program as mentioned in Figure 3.0, it implies
that suppliers would offer the lowest cost whilst maintaining output quality in hopes of forming a
relationship with Apple amongst the shortlisted potential suppliers. As Apple has been in the consumer
electronics industry since 1977, it is able to cut costs and achieve economies of scale due to the large
production output and demand of its products. This allows Apple to achieve cost leadership in the
industry on top of their current focus on differentiation.
7. Evaluation of alternative strategic options
As Apple TV is a challenger in the streaming media device market with Apple TV being in the growing
stage. It currently holds the second largest market share of 20%. Hence we utilized three alternative
strategic options in aim to maintain the current market position of Apple TV in the market.
7.1 Alternative strategic option 1
Strategy 1: Leapfrog
Opportunity
identified
Since competitors’ product offerings in the streaming media device segment
are not strongly differentiated, Apple can utilize the leapfrog strategy due to
their financial resources and ability to innovate, by incorporating more
desirable customer benefits into the Apple TV.
Outline of
potential
● Apple’s offering of Apple TV can attract new customers from a
niche market.
● Apple can leverage on its superior technology and innovation to
cater to the needs of its targeted market
Advantages ● Apple can justify its premium pricing with these enhanced benefits
● Able to gain market share from other brands
Disadvantages ● Significant investment into R&D in order to include new
technologies into the Apple TV
Financial
implications
Cost: Moderate
As Apple is required to survey the market to gain insights on customer’s
needs before delving into R&D to develop these new technologies. Apple
can then incorporate these new benefits into the current tvOS platform and
“Apple TV App Store”. By utilizing the leapfrog strategy, Apple can avoid
direct confrontation with competitors therefore preventing price wars.
Table 7.0 Evaluation of Strategic Option 1
7.2 Alternative strategic option 2
Strategy 2: Flanker (Share maintenance strategy)
Opportunity
identified
● To attract existing Apple product users to the Apple TV instead of
trying to gain market share from competitors in the streaming media
device market.
Outline of
potential
● Gain market share from existing Apple product users to the Apple TV
instead of from competitors in the streaming media device market.
Advantages ● Tap on the potential stability in Apple TV’s sales
● Able to take advantage of current customer’s brand loyalty in other
market segments (e.g. smartphones).
Disadvantages Tapping on current customer database will limit on reach out to a larger
potential market.
Financial
implications
Cost: Low
Apple can establish the Apple TV platform through their current network
effects of other segments therefore not requiring much advertising costs to be
incurred.
Table 7.1 Evaluation of Strategic Option 2
7.3 Alternative strategic option 3
Strategy 3: Market Expansion (Share maintenance for Share leaders in Growth markets)
Opportunity
identified
Expansion into Gaming market with added gaming features to Apple TV
Outline of
potential
● Apple can rectify its weakness of over-reliance on one product line -
iPhone of dominating 56% of its net profits in 2014 (Apple 10k).
Reliance can be minimised by diverting and focusing efforts in other
business segment such as with Apple TV.
Advantages ● Leverage on current acquisitions like Faceshift (Shead 2015) company
with virtual reality technology to develop gaming applications to attract
users.
● Capture a larger share of new customer segment who had preferred a
varied version of the current Apple TV product with added or improved
gaming features.
Disadvantages ● Costs might be incurred for R&D implementation to further innovate
Apple TV by rectifying its current shortcomings and making up with
added gaming features.
Financial
implications
Cost: High
Apple will have to spend a significant amount on advertising to the gaming
community as well as in R&D to surpass current gaming consoles such as the
PlayStation and Xbox.
Table 7.3 Evaluation of Strategic Option 3
8. Recommendations
8.1 Corporate and Business-level strategy positioning
Prior to the business strategy analysis, we recognised the limitations of Apple’s current business-level
strategy using broad differentiation. No doubt it reflects their success by distinguishing Apple TV from
its competitors through premium pricing. However, Apple TV is a personal product that may not have
considered the broad U.S. TV market thoroughly. Thus, the application of the current strategy to Apple
TV may not be as successful compared to other businesses that cater to a more specific market.
Hence, in order to improve the viability of Apple TV in the industry overtime, it is crucial for Apple to
shift its generic business-level strategy from broad differentiation to focused differentiation. Through
identification then aggressively penetrating into target market groups, Apple will understand its current
consumers’ needs and grasp the emerging and future needs of consumers in the TV industry. This allows
Apple to better adapt and improve on Apple TV to satisfy consumers’ needs.
Thus, focused differentiation will not only allow Apple to continue competing with differentiation
strategy, but also focus specifically on the target market group for Apple TV.
Therefore, this would improve Apple’s business sustainability in controlling and minimising the social
and environmental risks and at the same time, not limiting the potential opportunities for growth of
Apple TV. Moreover, it would encourage the rise in their profitability through greater outreach in the
long-run.
8.2 Marketing Plan
A marketing plan is derived in Table 7.0 for implementation of the newly recommended strategies.
Situation
Assessment
There is an opportunity for us to expand the market reach into a major market
segment - Gaming. By rectifying the shortcomings of the previous Apple TV
product with improved and added features such as improved gaming functions,
we are able to implement focused differentiation by keeping Apple TV at a
premium pricing for differentiation and also focusing efforts to attract the
selected gaming market segment.
Target Market Medium and High Income Gaming Consumers in the US.
Marketing
Objectives
● Market Share: Increase 10% of market share of Apple TV from 20% to
30% within a year time frame.
● Revenue: Increase by 30% after introduction of the gaming market segment
for Apple TV within a year.
Targeting and
Positioning
Strategies
We will position Apple TV as a premium product with added features and
functions to expand the current market to reach out to gamers.
Incorporating
Marketing Mix
Components
Product: Apple TV (32gb / 64gb)
Premium Pricing: We are able to keep the original premium pricing at USD
149 - 199 (Apple Inc. 2016), as it focuses on the differentiated business strategy
for Apple TV and enable us to maintain the profit margin.
Place (Distribution):
● Apple Store
● Telephone Communications: AT&T
● Authorised Retailers (e.g. Target, MacMall, Best Buy)
● Apple’s Official Website
Promotion: Moderate Level of Promotion
- Apple will engage in marketing activities through online social media,
via Facebook and Instagram, to create hype and excitement among
consumers and also traditional media such as publishing in IT magazines
(e.g. Technology Review, Wired and Discover Magazine) with creative
advertising before the official launch of the product.
- Trained sales personnel in Apple Stores, authorised resellers and
distributors to promote, demonstrate and provide customers with
information of the Apple TV. Furthermore, it encourages the
development of customer relationship with Apple.
Supporting
financial
statements
Table 8.0 Marketing Plan
8.3 Conclusion
Through our in-depth analysis on Apple Inc., we are able to gain knowledge on their internal and
external factors that influences the marketing of their Apple products. In addition, we recognised the
background of their collaborators as well as their acquisitions which enables us to further develop a
business strategy that can potentially enhance their sales in Apple TV. Even though Apple Inc. is
considered as a very successful organisation in marketing their products, they could possibly focus on
the market expansion and delve into the larger potential market for gaming. This would enable them to
increase and maintain their profitability in the long-run.
Word count: 3,803
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