Apple inc

1 Individual Assignment: Apple iPod

Marketing Management and strategy

Semester 2

Individual Assignment

Seminar Leader: Anna Zacharewicz

London South Bank

Student ID: 2704583

Date: 23rd February 2011

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Introduction: (Background to Apple)
Apple was first established in 1976 by Steve Jobs, Steve Wozniak and Ronald
1
Wayne . In 34 years Apple has seen a fluctuating rise and fall in sales from 2002 till 2011 (as
seen in the table below). During the first quarter of 2011 Apple has yet again seen an
increase in sales as seen by reports published to their investors2 with a reported record in
sales for the Mac, iPad and iPhone sales growing by 76% and a total growth of 78% across
the company. Initially launched as Apple Computer Inc. the company decided to change its
name to Apple Inc. due to the expansion of its market into the consumer electronics
market3. Since 2005 Apple has seen a peek in sales due to the launch of their various
products such as the iPad, iPhone and MAC notebooks and laptop computers, within those
products they also offer a wider range of various specifications to customers 4. Since then
Apple has set a reputation for their products ensuring their customers the best of the best!

Apple’s prime sin is cannibalising people most favoured music player, the iPod.
Whilst sales for the iPad and iPhone have soared the sale of the iPod has suffered greatly.
The iPod was first launched in 2001 and has now expanded into the Nano, Touch and
Classic. The product most in jeopardy however is the Classic version of the iPod. Since 2010
Apple has seen a steady decline in their sales for the iPod for every quarter of sales5 even
the latest figures from the first quarter of 2011 Apple has seen a drop in sales for the iPod.

iPod sales chart from 2002 - 2011

(Source: Apple Inc. 20116)

1
http://extras.denverpost.com/books/chap0411h.htm
2
http://www.apple.com/pr/library/2011/01/18results.html
3
http://www.digitaljournal.com/article/88258?tp=1
4
http://store.apple.com/uk/
5
6
http://en.wikipedia.org/wiki/File:Ipod_sales_per_quarter.svg

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Apples position in the market is definitely a strong one, using a PEST and SWOT analysis and
TWOS matrix I am going to asses exactly how strong their presence in the market is and
what they can do to revive the iPod brand.

PEST analysis

Political Economical
Market share and Monopoly, Apple’s The interest rates in the UK
market volume currently stands at Income and Employment in UK are
31%7 and this by far dominates suffering9; this means less people can
competitors. afford luxuries such as iPods.
The recent increase in TAX and VAT Disposable income has also dropped
prices8. This can have an effect as as people as left without jobs and
more money will be dispensed on have many bills and basics to pay due
TAX and VAT. It will also effect on to increase in living costs. As seen in
customer spending as prices will the Price indices report10which has
increase. been published by the government.
Economic growth in UK is slow; in
2008 the UK’s economic growth
suffered a great shock, and has
steadily been increasing since then.
In the final quarter of 2010 there was
an increase of just 0.5%11.
Social Technology
The present attitude towards Development of smart phones has
electronics, according to Must-Have meant that some older gadgets have
Gadgets.com, in 2011 the latest no more uses in the market. The fact
trends are to own things such as that people can have a gadget that
iPads, or iPhones12 however the calls, goes in the internet at fast
trend for the iPod has certainly died speeds and used as a tool for apps
of. has certainly kicked of.
Brand demand and people attitude Development of the internet, this has
towards the brand, however this also been a great development as
certainly has not been Apple’s fall people can now have access to the
due to increase in sales overall. internet on phones and other devices
However the decreases in iPod sales wherever they go.
are a major brand issue. The revolution of apps and app
Targeted audience and appeal, this is usages has also been a major
another one of Apples forte’s as development as they have become
everyone across all ages wants to the new best thing. From shopping

7
http://www.apple.com/investor/
8
http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-changes.htm
9
http://www.statistics.gov.uk/cci/nugget.asp?id=12
10
http://www.statistics.gov.uk/downloads/theme_economy/focus-on-cpi-jan-2011.pdf
11
http://www.statistics.gov.uk/cci/nugget.asp?id=192

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own an Apple gismo. Be it an iPod on the go to learning a new language.
nano, Mac, iPad or even and iPhone. Apple apps range from A-Z and this
The use of websites such as eBay and has certainly had an effect on the
Amazon mean people can buy second sale of the iPod classic as apps cannot
hand items such as iPods and other be used on it.
Apple products as knock of prices.

Form this PEST we can see that there are various points which affect the sales of the iPod
especially with regards to the economical stability of the UK. Less people can afford to buy
luxuries such as iPod and a person who already owns one may not need to upgrade to a
newer version providing that there is no major change in the product. The fact that people
no more than ever are trying to save money they are also choosing to purchase items of
auction websites or second hand websites. Also the rate of technological improvement and
the development of the smart phone in particular the iPhone people don’t feel the need to
have an iPhone and iPod. We can also see that Apples market position is very strong being
the market leader in what it does at the moment, however this is not working in favour for
the iPod classic as sales are increasing in the “latest must have” gadgets and the iPod is not
one of them.

12
http://www.trendygadget.com/2010/12/13/must-have-gadgets-of-2011/

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SWOT analysis:

Strength Opportunity

The brand image and its position in As they are market leaders in the
the market is a very strong one as it development of iTunes and the usage
almost dominates the market with of apps they need to use this to their
31% of the market share13. Therefore advantage.
it has the resources and assets in They are market leaders and not
revolutionising the iPod brand. many competitors are in the same
Its reputation in the market is also league as them and therefore they
exceeding as Apple customers know have the resources into turning the
what they are getting for their iPod into something better and
money. This is also covered by their branching into a new growing
excellent warranty that they provide market.
their customers14. Their customer base was already big
The fact that it doesn’t have a target and due to recent developments in
market, but instead it target their products more people are
people15, and this is why you find switching to Apple unless substitutes
many people across all ages and all bring out something better and this
backgrounds that own either a Apple again can be seen in their increase in
gadget or more than one. market share.
Its portfolio of product range is
immense following current trends
and needs of customers. They have 4
distinctive products and these are
the Mac, iPad, iPhone and iPod16.
However within these products their
ranges go into a lot of depth.
Across their range of products they
get it right with regards to the
majority of their products such as the
iPhone and iPad and this reflected in
their sales, however due to these
developments it has made other
products within their range suffer.

Weakness Threats

The speed of product development has The rate they are developing their
caused suffering across some of their products, are putting others in the dark

13
http://www.apple.com/investor/
14
http://www.infoworld.com/d/the-industry-standard/apple-scores-another-victory-in-customer-satisfaction-
315
15
http://gigaom.com/2010/08/26/apple-doesnt-target-markets-it-targets-people/
16
http://store.apple.com/uk/

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product ranges such as the iPod Classic as people prefer to purchase other
and the iPod range. As people don’t seen products to the ones that are already on
then need to spend money on buying an the market.
iPhone and then buying and iPod. Substitutes are latching on to the trend
Market research on a couple of their of smart phones and other Apple trends
products such as the iPod Classic could and this could affect Apples position in
use some investing into, as this will help the market, such as the new Samsung
Apple in gaining an insight into whether Galaxy or the Blackberry Torch.
or not its worth upholding its production. Bad press circulating around the
The powers they posses in the market company such as “the death of the iPod
and people expectations are very high so Classic” as seen from the PC World
unsuccessful products receive very bad article, so many people are rethinking
Reponses, and this in turn makes sales whether or not to buy the iPod.
suffer. People no tend to review a lot of Cheap imitations of the brand that have
products online and a lot of people no the same characteristics and are sold at
read reviews about products before cheap prices are also something that
making a purchase. Most press and affect Apple especially in recession
reviews about the iPod lately have not
been great and therefore many people
have been put off as seen in this article
from PC World17

From this we can see again that Apple bears a very strong position in the market with
regards to some of its products. The company’s strength into what it owns and its resources
are by far very good, and it is able to invest in money into revolutionising the iPod brand.
However some may think is this worth it. The iPod brand has been around since 2001 and
has been through a lot of adaptations with the launch of various models such as the Nano,
Shuffle and Touch. It is also clear that Apple’s products are also market leaders and also
trend setters as many competitors are now releasing products which are in the same league
as the Apple brand.

17
http://www.pcworld.com/article/219205/ipod_classic_is_dead_rumors_are_back.html

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TWOS Matrix

Maintain market position and growth
Strength
Leverage brands across the range and
Power in market and market shareproduct range
leadership in its categoryresearch and development its leadership culture with new
innovations. Build on the fact that
Brand image, everyone knows who Apple are people know who Apple is and what
Opportunity they are getting for their money. also
Their products are known to be the best of
promote that their products withhold
Technological market the best
their value.
is growing as more
Product price depreciation is
technological improvements very low like other brands Develop brand positioning
are being made.
People are buying There products as Make people think that iPods are still
shares are increasing and profits are the new best thing to have by
being made developing new features or models.
Although substitutes exist Apple need
to focus on being the best of the best.

Increase channel power
Weakness
Need to promote that customer get
Some people may regard prices as high
what they pay for even though it
especially during times of current climate
may be at a higher price. Leverage
Competitors are making similar brand strength and play on the fact
products at cheaper prices that they are market leader.

Develop brand positioning
Opportunity
Make people think that iPods are
Technological market still the new best thing to have by
is growing as more developing new features or models.
technological improvements Although substitutes exist Apple
are being made. need to focus on being the best of
People are buying There products as shares
the best.
are increasing and profits are being made

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Maintain market position and growth
Strength
Leverage brands across the range and
Power in market and market share product range
its leadership culture with new
leadership in its category research and development
innovations. Build on the fact that
Brand image, everyone knows who Apple are people know who Apple is and what
Threats they are getting for their money. Also
Their products are known to be the best of
promote that their products withhold
Consumer brands the best
their value.
are coming out Product price depreciation is very
fast and strong low like other brands Increase channel power:

There is a strong price competition Leverage brand strength and their
from with regards to similar products leadership culture through promoting
available cheaper their products are the best and it’s what
“consumer” wants by giving the
impression that this is a “must have”

Increase channel power
Weakness
Need to promote that customer get
Some people may regard prices as high what they pay for even though it
especially during times of current climate may be at a higher price. Leverage
brand strength and play on the fact
Competitors are making similar
that they are market leader
Threats products at cheaper prices
Increase channel power:
Consumer brands
are coming out
Leverage brand strength and their
fast and strong
leadership culture through
There is a strong price competition promoting their products are the
from with regards to similar products best and it’s what “consumer”
available cheaper wants by giving the impression that
this is a “must have”

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Key Strategic Marketing Issues (KSMI)
It is clear that Apple Inc. has strong appeal in the market with regards to the majority
of its products however; the iPod brand has suffered in recent years. There has been many
articles such as PC World, and many other gadget shops that are warning customers that a
“death upon the iPod” is near. This is because many outlets are now showing limited stock
availability of the iPod. Also the pattern in consumer spending has been diverting to new
gadgets such as the iPad and iPhone, as there has been a large increase in sales across the
years and in the last quarter it was up 76%18. Many people also feel that Apple need to re-
develop the iPod as all other product ranges have received a “fresh look” where as there is
nothing being done to the iPod19.

It is clear that people are demanding a new revelation of the iPod. The iPod has not
been given a new image since 200920. People also doubt as to what Apple can change with
the iPod as many feel that it had developed to its potential as the only way it can get better
is by increasing memory size. Or is a brand new direction what Apple need? There have also
been talks and discussion amongst papers that Apple may be doing this on purpose in order
to test consumers and see where they would spend their money if the iPod Classic was to be
taken of the market21. As the iTouch is now Apples biggest seller from the iPod range there
has also been insights that the company should maybe focus on developing this further 22.

1. So how would Apple communicate to people that iPod is still a must have?
2. How would Apple do this?
3. Why should consumers new and existing pick Apple over other retailers?

Due to apples high profile in the industry they already have a major brand name that
people know ad are aware of. Apple knows its gadgets such as the iPhone, iPad and Mac are
a nations must have, however this was achieved through hardcode marketing and
advertising. For example Apples advertising campaign for the new iPhone 4 were “This
changes everything. Again” this alone drew customers in as they new that Apple have yet
again launched a must have product even though they may own something similar.
However on the other hand with the iPod nothing as such has occurred, instead Apple have
only focused on the fact that it fits 40’000 songs, this fact is not something that would make
people want to buy the iPod Classic, as there are may other products on the market that can
do the same.

18
19
http://www.prefixmag.com/news/is-apple-thinking-of-killing-off-the-ipod-classic/49227/
20
21
http://www.pcworld.com/article/219205/ipod_classic_is_dead_rumors_are_back.html
22

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Apple need to first invest into re-freshen the iPods image, buy giving it a new look and
offering customers more, be it various colour range like they do with the Nano range.
Another thing they need to consider is a major advertising campaign as clever as the iPhone
and iPad’s making consumer feel that this a gadget they cannot live without. It’s called the
iPod Classic for a reason, so they need to focus on the fact that it used to be and still the
nations favourite music device, after all it is what got Apple to where it is now.

Although their market share is increasing and profits are going up year on year,
Apple need to focus on promoting to customers the importance of returning again and
purchasing new products by promoting their value for money, not as in cheap for crap
quality, but the fact that you get what you pay for. They need to promote that their
products are the best of the best and that their quality is sure to last longer than the rest.
This can be seen with the way Apple’s products do not depreciate in price immediately such
as other products.

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Bibliography:

Websites:
1. Apple [http://store.apple.com/uk/] (accessed on 18th February 2011)
2. Apple [http://www.apple.com/pr/library/2011/01/18results.html] (accessed on 18th
February 2011)
3. Apple [http://www.apple.com/investor/] (accessed on 19th February 2011)
4. Buzzle [http://www.buzzle.com/articles/economic-factors-affecting-business.html]
(accessed on 20th February 2011)
5. Gigaom [http://gigaom.com/2010/08/26/apple-doesnt-target-markets-it-targets-
people/] (accessed on 20th February 2011)
6. Guardian [http://www.guardian.co.uk/business/2010/aug/29/apple-ipod-apps-
music-industry] (accessed on 19th February 2011)
7. HMRC [http://www.hmrc.gov.uk/vat/forms-rates/rates/rate-changes.htm] (accessed
on 19th February 2011)
8. InfoWorld [http://www.infoworld.com/d/the-industry-standard/apple-scores-
another-victory-in-customer-satisfaction-315] (accessed on 20th February 2011)
9. Marketing Teacher [http://marketingteacher.com/lesson-store/lesson-pest.html]
10. PC World
[http://www.pcworld.com/article/219205/ipod_classic_is_dead_rumors_are_back.h
tml] (accessed on 19th February 2011)
11. Prefix Mag [http://www.prefixmag.com/news/is-apple-thinking-of-killing-off-the-
ipod-classic/49227/] (accessed on 19th February 2011)
12. Statistics Government [http://www.statistics.gov.uk/cci/nugget.asp?id=12]
13. Statistic Government
[http://www.statistics.gov.uk/downloads/theme_economy/focus-on-cpi-jan-
2011.pdf] (accessed on 20th February 2011)
14. Statistic Government [http://www.statistics.gov.uk/cci/nugget.asp?id=192]
15. Trendy Gadget [http://www.trendygadget.com/2010/12/13/must-have-gadgets-of-
2011/] (accessed on 20th February 2011)

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