Apple Iphone Analysis

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Apple iPhone Marketing Analysis

Marketing Management Apple Inc. Case Study
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Table of Content
Introduction 2
Apple SWOT analysis 7
Apple PESTEL Analysis ............. 9
Porter's 5 Forces Analysis 11
BCG matrix perspective 12
Ansoff Matrix Perspective 15
Extended Marketing mix Analysis
Conclusion... 17
Recommendation 18

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Introduction
The phone starts ringing, we're going to pick it up and when we touch it, the ringer volume
smartly goes down! Yes! Today a company like HTC could make this kind of cellphone.
Since the launch of the IBM Simon in 1993, smartphone technology has reached levels that
until recent times had only been dreamed about. Features such as wireless sharing, HD video
recording and mobile internet are now commonplace and todays average smartphone has more
processing power than computers used by NASA to land a man on the moon. All over the
world, the smartphone experience is being shared by more and more people every day. (Belic,
2012)
The convergence of mobile telephony, Internet services, and personal computing devices is
resulting in the emergence of a mobile Internet (Ishii 2004; Funk 2001). The key devices for
accessing the mobile Internet -currently dubbed smartphones - are powerful new computing
devices offering traditional wireless voice service as well as native software applications and,
perhaps most importantly, the ability to connect to and run a myriad of Internet-based services
including email, geo-location, streaming video, and social networking, while providing a good
user experience. The business opportunities presented by this new category have attracted many
of the major global information and communications technology (ICT) firms, including firms
from the mobile telephony, personal computer, Internet, and personal digital assistant (PDA)
industries, into a complex new landscape of competition. For many of these firms, capturing a
portion of the total value created by the smartphone industry is believed to be a key to future
growth and profits. (Kenney, 2011)
The interest is understandable. Today more than 1.3 billion mobile phone handsets are being
sold annually, and in 2010 smartphones made up almost 20% of that total (Gartner, 2010;
Ahonen, 2010). Sales of smartphones are increasing almost 100% per year, and total global
sales volume is expected to surpass that of PCs by 2012 (Gartner, 2010). By collapsing the
boundaries between previously distinct devices, smartphones are subsuming sales of mobile
phones entirely and, increasingly, netbook and notebook PCs. To complicate the landscape, the
smartphone is not the only device at stake, tablets and ebook readers are emerging as key
components of the mobile universe. Across all devices, total mobile revenues - including
advertising, subscriptions, handsets, applications, and so on - are forecast to surpass $1 trillion
by 2014 (Gartner, 2010). Given the rate at which smartphone are penetrating the market and
component prices are declining by 2015 there will be, at least, 2 billion smart mobile devices in
use globally. (Kenney, 2011)
According to the instructions we should make a report with a organizational business plan
structure to depict current situations of Apple Inc./ iPhone division, and then analyze strength
and weakness of the company. I will start with SWOT and PESTEL analysis. Then we review
the most effective force on iPhone production with Porter's 5 forces. Then we will analyze
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Apple iPhone Growth and market share in depth with BCG matrix. I use mostly 2012 figures to
draw an up to date image from Apple iPhone production and market situation. Ansoff matrix
will be the next analysis which helps us understand iPhone market penetration and how it
reached diversification.
Apple is a big company with several products and services that provide along with products.
Each product has its own market. It is possible to use multiple factors and combine related
statistics for analyzing a company with different product. But in this case we are required to
analyze smartphone industry only. I use recent figures (2010 to 2013) for analyses. For brands
comparisons I consider Apple, Samsung, HTC, ZTE, and RIM (BlackBerry).
For set goals and making the reports objectives we should specify what we want.
It is required to indicate strength and weaknesses of smartphone section. In my opinion
weaknesses are more important. They could emerge in any areas such as production lines,
technological aspects or selling process and cause big failures. Prominent strength and
weaknesses will be identified and then will be matched with political, social, technological and
environmental factors.
Industry intensity will be assessed using Porters 5 forces analysis. This analysis classifies
strong and weak points within 5 forces: Threat of new entrants and substitute products,
bargaining power of suppliers and customers, and segment rivalry. These forces analyze micro
environment. For macro factors we could look into PESTEL analysis.
For market share and growth analysis Growth-share matrix (BCG matrix) will be used. This
method indicates a product strength using its sales cash flows. iPhone position will be
determined among 4 BCG matrixs categories: Star, Cash cow, Dog and Question mark.
Apple iPhone as a new product in comparison with existing products within a new or existing
market will be analyzed using Ansoff matrix. Result shows that iPhone as a new product in
2007 was magnificent. 270,000 units were sold at that time.
Expanding the concept of the marketing mix is important for companies that want to adapt to
new markets. For example, just placing a product in stores is not enough. A manufacturer with
retail outlets also needs to think about physical environment and layout. The store should
convey the right look and feel, leading consumers to build up positive associations with the
brand. Products inside the store should be displayed logically and consistently, in the locations
customers would check first if they were looking for specific items. (WiseGeek.com) Because
of all these factors a complete extended marketing mix (7Ps) will be presented.

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Global Smartphone trend
The global smartphone market has been experiencing explosive growth for the last several
years. Competition has remained fierce all throughout, but the numbers don't lie. Two
technology titans dominate the market, taking a whopping 92% of market share for themselves.
These two companies are Google and Apple. Data regarding smartphone sales during Q4 2012
has come out during the last several days, evidencing how much people all over the globe want
to get their hands on a smartphone. After a quick look at the information, it becomes evident
that the high-end phone market is a one of the most extreme oligopolies of the 21st century.
With the release of Blackberry 10 just two days away, investors are starting to ask if there really
is any room left for Research In Motion's latest offering. (Deshkovich, 2013)
Smartphones are flying off the shelves. According to Strategy Analytics, global smartphone
shipments have increased from 490.5 million during 2011 to 700.1 million during 2012, which
is roughly 30% growth year-over-year. If anything, there is room for disruption within the
industry: people will keep buying more phones. As the market grows, however, so does
Android's market share: Android went from having 48.7% of the market in 2011 to a whopping
70.1% in Q4 2012. Apple's iOS has also grown slightly, capturing 22% of the market share by
the end of the same period. How much is there left for everyone else? As of Q4 2012, a meager
7.9%.
The success of the iPhone, Pre, and Blackberry shows the strength of consumer demand for
an intelligent, multifunctional device. The appeal of the smartphone will create significant new
revenue streams for carriers and developers, who should strive to create new service bundles
that build off this mobile platform with converged video, voice, and data applications. (Cellular-
news.com)
Future Smartphone sales forecast
Smartphone sales blew past the number of PCs sold last year, and they'll be nearly twice PC
sales this year, analyst Alex Cocotas of BI Intelligence predicts.
More startling, smartphone sales will exceed 1.5 billion units per year by 2016. This
compares to about 350 million PCs and 1.7 billion mobile handsets sold globally last year.
Smartphone sales will be driven by two main factors, BI Intelligence says:
Replacement of nearly 5 billion "dumbphones" with smartphones (smartphones
currently make up only 10% of handsets worldwide)
Price declines. The average price of a smartphone will drop from about $315 last year to
$200 over the next several years
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This will obviously have a huge impact on the mobile Internet economy, which is already
exploding from the growth of smartphone penetration in the past few years.
Some other highlights from the report:
Smartphone unit sales will grow at nearly a 30% compound annual growth rate
over the next five years
Smartphones will represent about two-thirds of all mobile phone purchases by
2016,
Smartphones will be a $320 billion market by 2016.
These forecasts are much higher than those of other industry analysts, who generally expect
smartphone unit sales to hit about 1 billion a year by 2015. (Gobry, 2012)

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Apple Mission and Vision 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. (Investor
Relation: Apple.com)
Apple vision statement:
Apple is committed to bringing the best personal computing experience to students, educators,
creative professionals and consumers around the world through its innovative hardware,
software and Internet offerings.

Apple Background
On December 2012 The Economist reported that Apple became the most valuable company
ever (in nominal terms), beating the record that Microsoft hit in December 1999. Apples share
price peaked at $705 before entering bear territory and falling by 25%, to $510; at the start of
2012 it had been $410. (News: The Economist, 2012)
Apple Incorporated is an American corporation that designs and manufactures computer
hardware, software and other consumer electronics. The company is best known for their
Macintosh personal computer line, Mac OS X, extremely loyal user-base, iTunes media
application and the iPod personal music player. The company headquarters is in Cupertino,
California, CEO and co-founder is Steve Jobs and the company boasts 284 retail locations
spanning 10 different countries (Bright Hub, 2010).
Apple Inc. was founded on April 1, 1976 in a garage by Steve Jobs and Steve Wozniak. The
young entrepreneurs brought different strength to their fledgling company: Jobs had a flair for
conceptualizing products, while Wozniak had the technical know-how to make them happen
(Washington Post Economy, 2012).
Apple I was the first product that Apple Inc. produced. It was a personal computer (PC) with
a MOS 6502 cpu clocked at 1 MHz and 4Kb memory. In 1977, Apple introduced Apple II
which became a very successful device. After that the company began to produce Apple II
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series. The Apple II was followed by Apple II plus, Apple IIe, Apple IIc, Apple IIGS, Apple IIc
Plus and Apple IIe Card.
Apple introduced Macintosh in 1984 that became a very successful computer. It was a first
computer featuring a graphical interface and a mouse for navigation. The new computer sold
very well, pushing apple's fiscal 1984 sales to an unprecedented 1.5$ billion. (Chapman &
Haskisson)
By 1985, however Jobs and Scully began to disagree over the direction they wanted the
company to take. After Jobs' attempt to remove Scully failed, Jobs left Apple in May to start his
own new business, NeXT Computers. (Chapman & Haskisson)
In December 1996, Apple acquired NeXT, with the plan of using its technology as the basis
for a new operating system. After being gone for more than a decade, Jobs returned to the
company he had originally cofounded with Wozniak. (Chapman & Haskisson).
In 1998 Apple introduced the new generation of PowerMacs, PowerBooks, and the highly
anticipated iMac and iBook, which were less expensive computers aimed at the how-end
computer market. After an entire year without showing a profit, the first quarter of 1998 began
three years of profitable quarters for Apple. (Chapman & Haskisson)
Apple ventured into the market of legal downloads with the introduction of its iTunes Music
Store in 2001. iTunes offers downloads at a specified price without requiring subscription or
monthly fees. iTunes offers its users a selection of more than 6 million songs, with new songs
continually added. (Chapman & Haskisson)
For music lovers, the iPod is the greatest invention since the Walkman. With up to 160 GB of
storage, it allows users to carry up to 40,000 songs or 200 hours of video wherever they go.
There are currently four different iPod styles: the iPod shuffle, iPod classic, iPod nano, and iPod
touch (Chapman & Haskisson). Apple earned 5,615 million just from iPod in 2012 (APPLE
INC., 2012).
Brief Chronology:
1976 With $1,300, Steve Jobs and Steve Wozniak found Apple Computer, Inc.
1980 Apple converts to public ownership.
1982 Apple becomes the first personal
computer company to reach $1 billion in annual sales.
Figure 1 1977 Apple II Introduction Ad Cover
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1985 John Scully assumes the helm after a management shakeup that causes the
departure of Jobs and several other Apple executives.
1991 PowerBook line of notebook computers is released.
1994 Power Macintosh line is released.
1996 Acquisition of NeXT brings Steve Jobs back to Apple as a special advisor.
1997 Steve Jobs is named interim chief executive officer.
1998 The all-in-one iMac is released.
2000 Jobs, firmly in command as CEO, oversees a leaner, more tightly focused Apple.
2001 The iPod is released; Apple opens its first retail store in Virginia.
2003 Apple opens its first store in Japan.
2005 The release of a video iPod, the fifth generation of the device, pushes total iPod
unit sales to 30 million.

In first-quarter 2007, Apple launched its "revolutionary" product, the iPhone. iPhone
combines three concepts popular with customers: a mobile phone, a widescreen iPod, and a
internet communication device. The iPhone brags "an entirely new user interface based on a
large multi-touch display and pioneering software." which users can control with just their
fingers. The iPhone default Internet browser will be
Apple's own Safari **, but it is open to other software as
well. The iPhone allows for 8 hours of talk time. Apple
sold 1million iPhone less than three month after this
product was available to customers. Apple expects this
trend to continue during 2008 and to reach sales of 10
million iPhones, stealing 1 percent of the mobile phone
market share. (Chapman & Haskisson).
One year following the untimely death of Steve Jobs,
the company he co-founded and led for most of his adult
life appears to be thriving and lacking any serious
obstacles to its break-neck growth in a rapidly changing
technology market. (Gallagher, 2012)
That said, Apple Inc. still has plenty of challenges
ahead. Some of those stem simply from the nature of the
fast-paced, hyper-competitive consumer technology
business the company currently competes in and largely dominates. (Gallagher, 2012)
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Other challenges may be more unique to Apple and its singular focus on a relatively narrow
line of products. And long-term, the company may still feel the loss of a leader who possessed
an uncanny ability to see around corners, and bend other strong personalities to his will.
(Gallagher, 2012)
The guy who could literally pull rabbits out of his hat no longer exists, said independent
technology analyst Roger Kay. (Gallagher, 2012)
Apples had a phenomenally strong year since Jobs death from cancer last October, which
left the company permanently in the hands of the senior management team he spent years
cultivating, led by CEO Tim Cook. Its also had some stumbles along the way. (Gallagher,
2012)
Some missteps with features such as Siri the infamous personal digital assistant first
embedded into last years iPhone 4S and the Apple Maps tool in the latest iPhone 5 have
caused some level of embarrassment. The company under Jobs direction was not free of slip-
ups either, and some issues have spanned both periods, such as growing concerns about the
treatment of workers in the massive Chinese factories that produce the companys popular
products. (Gallagher, 2012)
But if proof is in the numbers, investors may find it hard to argue against the crew running
Apple now. The company is conservatively projected to report a 44% revenue gain for its just-
ended fiscal year with earnings expected to post a gain of more than 60% from the previous
year. (Gallagher, 2012)
Apples stock is up more than 70% from the day Jobs passed away, despite the stated
concerns at the time of many investors and analysts about how well the company could keep its
pace of innovation without its chief visionary at the helm. (Gallagher, 2012)
The key challenge for Apples management team will be in keeping the companys strongest
profit engines humming. And this will involve the right mix of technological innovation and
deal making. (Gallagher, 2012)
The iPhone is the most crucial element. First launched in 2007, the smartphone accounted for
nearly 55% of Apples total revenue in the first nine months of the just-ended fiscal year. While
the company does not disclosed profitability data on its product lines, analysts believe the
iPhone is the major driver of operating profits, with a gross margin of well over 50% on the
devices. (Gallagher, 2012)
Apple can command those high subsidies because of the strong consumer demand for the
iPhone. But competitors are pushing hard into the smartphone space. Samsung has already
outpaced Apple in global shipments thanks to its use of Googles Android operating system and
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its wide line of phones that appeal to a broader array of markets and consumers. (Gallagher,
2012)
Apples old nemesis Microsoft is launching an updated Windows Phone platform this fall,
with Nokia and Samsung building devices for the software. (Gallagher, 2012)
Investors will continue to watch closely for signs that Apples current team can not only push
forward its existing product line, but add to them with new categories and innovations. Though
the iPhone 5 launched a year following his death, a report by Bloomberg BusinessWeek cited
unnamed sources as saying that the device received detailed input from Jobs prior to his
death. (Gallagher, 2012)
Despite Apples strong run of success, its narrow product line and strong reliance on the
iPhone makes it vulnerable to competitors who may come up with better ideas. (Gallagher,
2012)
Apples future success will likely hinge on its ability to maintain that posture no matter
whos in charge. (Gallagher, 2012)

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Apple SWOT Analysis:
SWOT is a great indicator of an agency's strategic ineptitude. This involves you creating a
two-by-two grid and then populating it with a list of incredibly obvious client strengths and
weaknesses, and another list of equally palpable opportunities and threats. Then you stand back
and gaze at this list of incredibly humdrum words, such as 'competitors' and 'new product', and
attempt to intuit a bold, new, innovative way of doing business. (News: Marketing Magazine,
2005)
The table below provides information about current situation of Apples smartphone market
position, strength and weaknesses and also its possible future situations, threats and
opportunities.

Table 1 Apple Inc. Strengths and Weaknesses
Strengths Weaknesses
Universally accredited and well-known brand
which also began kind of revolution in
smartphone industry
Apple is a Big name in the technology world.
It brings so much responsibility and kind of
obligation for company and its product. New
iPhone map application problem and
customer frustration would be a good
example.
Brand loyalty is incredible. People will line
up in the freezing cold overnight just to be
one of the first to get their hands on the new
iPhone! (Guenette, 2012)
From the anti-capitalism point of view
devices like iPhone counts as luxuries. They
think this kind of huge prices could be spend
somewhere more vital.
Employ high technologies. This offers
unique features for at least two purposes.
One, First degree price discrimination and
two, luxury customer satisfactions
Utilize high technology along with high
quality hardware component turn Apple
iPhone into very costly merchandise.
Probably many people cannot afford the
price.
Ease of use. Apple utilizes user friendly
design elements for both hardware and
software parts of iPhone. 3.5 mm audio jack
would be a good example!
iPhone is equipped with own Apple closed
operating system, iOS. And apps which work
with iOS can only be downloaded from App
Store. Other rivals like Android have more
distribution channels.
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Former CEO, Steve Jobs role in developing
iPhone and leading Apple to the market
incredibly.
Steve Jobs died on Oct 2011. We can still see
his works and ideas in Apple iPhone. His lost
can be an excessive damage to the company.
Having strategic agreements with well-
known mobile carriers. like T-Mobile and
AT&T

Apple summary of PESTEL Analysis
Political
factors
The supply and manufacture of many critical components is performed by sole-
sourced outsourcing partners in the U.S., Asia and Europe. Outsourcing partners
in Asia perform final assembly of substantially all of the companys hardware
products. Manufacturing or logistics in these locations or transit to final
destinations may be disrupted for a variety of reasons including, but not limited
to, natural and man-made disasters, information technology system failures,
military actions or economic, business, labor, environmental, public health, or
Political issues. (APPLE INC., 2012)
War, terrorism, geopolitical uncertainties, public health issues, and other
business interruptions have caused and could cause damage or disruption to
international commerce and the global economy, and thus could have a material
adverse effect on the Company, its suppliers, logistics providers, manufacturing
vendors and customers, including channel partners. The Companys business
operations are subject to interruption by natural disasters, fire, power shortages,
nuclear power plant accidents, terrorist attacks, and other hostile acts, labor
disputes, public health issues, and other events beyond its control. (APPLE INC.,
2012)

Economic
factors
The global recession is having a serious impact on Apple's retail performance
The follow-on effects from global economic conditions on the Companys
suppliers could affect the Companys ability to obtain components. Therefore,
the Company remains subject to significant risks of supply shortages and price
increases. The Company expects to experience decreases in its gross margin
percentage in future periods, as compared to levels achieved during 2012,
largely due to a higher mix of new and innovative products with flat or reduced
pricing that have higher cost structures and deliver greater value to customers
and anticipated component cost and other cost increases. Future strengthening of
the U.S. dollar could also negatively impact gross margin. (APPLE INC., 2012)

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Social factors
The Companys business requires it to use and store customer, employee, and
business partner personally identifiable information (PII). This may include
names, addresses, phone numbers, email addresses, contact, preferences, tax
identification numbers, and payment account information. Although malicious
attacks to gain access to PII affect many companies across various industries,
the Company may be at a relatively greater risk of being targeted because of its
high profile and the amount of PII managed. (APPLE INC., 2012)
Technological
factors
Apple R&D expense is increasing year by year. $1.8 billion for 2010,
$2.4 billion, and $3.4 billion for 2012 which is a crucial manner in these
days competition (APPLE INC., 2012)

Environmental
factors
The Company also sells its hardware and software products to enterprise and
government customers in each of its geographic segments. The Companys
products are deployed in these markets because of their performance,
productivity, ease of use and seamless integration into information technology
environments. The Companys products are compatible with thousands of third-
party business applications and services, and its tools enable the development
and secure deployment of custom applications as well as remote device
administration. (APPLE INC., 2012)
Legal Factors
The Company is subject to laws and regulations affecting its domestic and international
operations in a number of areas. These U.S. and foreign laws and regulations affect the
Companys activities including, but not limited to, areas of labor, advertising, digital
content, consumer protection, real estate, billing, e-commerce, promotions, quality of
services, telecommunications, mobile communications and media, television, intellectual
property ownership and infringement, tax, import and export requirements, anti-
corruption, foreign exchange controls and cash repatriation restrictions, data privacy
requirements, anti-competition, environmental, health, and safety. (APPLE INC., 2012)

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Porters 5 Forces Analysis
The Porter's Five Forces tool is a simple but powerful tool for understanding where power
lies in a business situation. This is useful, because it helps you understand both the strength of
your current competitive position, and the strength of a position you're considering moving into.
(Articles: MindTools.com)

Six years to the month after Steve Jobs unveiled the first iPhone, the smartphone industrys
go-go years are officially over. Cautious comments from Samsung Electronics on Friday
underlined the message conveyed by the latest quarterly results from Apple earlier in the week:
even as it scales new heights, the smartphone market is entering a phase in which vaulting
growth rates and high profit margins will be much harder to come by. (Waters, 2013)
The developing world, is riding a wave of cut-price devices, many of them closer in nature to
feature phones than the high-end smartphones that have put Apple and Samsung at the top.
(Waters, 2013)
Apples shares continued to slip following its announcement of weaker than expected iPhone
sales in the final quarter of 2012, with Exxon taking its crown as the worlds most valuable
company. (Waters, 2013)
Despite selling 47.8m iPhones 29 per cent more than in its previous record quarter a year
before Apple failed to live up to Wall Streets high hopes, leading some analysts to predict the
years of super-charged growth that began with the iPod were behind it. (Waters, 2013)
Competitive
rivalry
Threat of new
entrants
Bargaining power
of suppliers
Bargaining power
of customers
Threat of
substitutes
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* (Chapman & Haskisson)

competitive
rivalry in
Smartphone
industry
Threat of new entrants:
1. powerful companies like samsung that has a lot to say these
. days with new products in Smartphone market
2. Android, as a partially free operating system could be a
influential competitor

Bargaining power of customers:
as I said before, iPhone counts
as a luxury device. it is
expensive in comparison other
smartphones. retailers often
reports customer dissatisfaction
about iPhone and other Apple
product price.

Threat of substitutes:
in this conpect we do not look for other brands
similar products. In fact we should find totally
different product s for this section of analysis.
with the all capabilities that a smartphone could
have , there most be another revolution or kind of
invention for substitute product.
Bargaining power of suppliers:
a disassembled iPhone reveals
that the microprocessor chip is
supplied by samsung; Philips
and ...many other companies
provide chips that are central to
the camera, display, and
motion sensor. maintaining
good supplier relationships is a
balanced that apple will have to
find in order to stay ahead of its
competitor. *
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BCG Matrix Perspective
The growth share matrix is a framework first developed by the Boston Consulting Group
(BCG) in the 1960s to help companies think about the priority (and resources) that they should
give to their different businesses. Also known as the Boston matrix, it puts each of a firm's
businesses into one of four categories. The categories were all given memorable namescash
cow, star, dog and question markwhich helped to push them into the collective consciousness
of managers all over the world. (Ideas: TheEconomist.com, 2009)
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For creating a Growth-Share we need two measures. One relative market share and two
market growth. I used a chart which developed by IDC (International data Corporation) to
gather market share informations about Apple iphone and its rivals.

Figure 2 World Smartphone Market Share
According to this chart Apple iPhone share market is 15% of the overall market for 3
rd

quarter, 2012. And it takes second place after Samsung with 31.3% share market. Black Berry
(Research in motion), ZTE, HTC are 4.3%, 4.2% and 4% respectively. For developing the BCG
matrix we need relative market share. It means we should compute one brand's share to its
largest competitor: (Wikipedia)

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For market growth rate current sales figures are used in comparison the same last year.

Figure 3 Smartphone unist sales estimates by OEM (in millions)

Brands Samsung Apple RIM ZTE HTC
Market share 31.35% 15% 4.3% 4.2% 4%
Largest competitor 31.35% 31.35% 31.35% 31.35% 31.35%
Relative market share(
approximately)
1:1 1:2 1:8 1:8 1:9
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For Market growth rate I used the table above and derive the table below:
Smartphone brands 2012 sales* 2011sales Market growth rate
Apple 148.4 93.1 %59
Samsung 177.4 95.2 %86
Research in motion (Blackberry) 41.4 52.8 -%21.5
HTC 39.2 44.6 -%12.1
ZTE 26.7 14.9 %79.19
* In millions

Figure 4: BCG Matrix for iPhone and its Competitors
15 % market share in 2012 is a fair figure for Apple iPhone. However Samsung is
dominating the market by share of 30% as a result of perseverance in combination with
Googles Android during recent years. According to data and calculation iPhone is categorized
in stars segment. It means high market share within a fast-growing industry.
Stars may generate cash, but because the market is growing rapidly they require investment
to maintain their lead. (Quick MBA)

-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
-5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0
Market growth
Market Share
Cash cows
Stars
Dogs
Question marks
Apple iPhone
Samsung
RIM
ZTE
HTC
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Ansoff matrix perspective
In 1957, Igor Ansoff published the Ansoff Matrix in the Harvard Business Review. It was
such an excellent illustration of innovation that many entrepreneurs still use it today. The Ansoff
Matrix shows four different growth strategies that result by combining existing or new products
with existing or new markets: market penetration, market development, product development,
and diversification. For existing markets and existing products, you'll want to work on market
penetration. How can you do incremental innovation? How about product-line extension? That
would work. (Comaford, 2007)

Table 2: Ansoff Matrix

Apple launched iPhone in 2007. People faced a well-built cellphone that had only one button
in front of. And equipped with Wi-Fi, GPS and a multiple touchscreen. iPhone market started
growing so fast. iPhone were sold 270,000 units at the very beginning of its release. In 2010,
apple earned 25.179 million dollars just from selling iPhone and its related product and services.
I derive this two very useful and comparative tables from Apple Inc. Form 10-K which helps us
to understand iPhone's furious growth over 5 years and its revenue making role.

Market
Development
Product
development
Market
Penetration
Diversification
Existing products New products
N
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Table 4: iPhone net sales by operating segment
Net sales by operating
segment
2012 change 2011 change 2010
Americas net sales $ 57,512 50% $ 38,315 56% $ 24,498
Europe net sales 36,323 31% 27,778 49% 18,692
Japan net sales 10,571 94% 5,437 37% 3,981
Asia-Pacific net sales 33,274 47% 22,592 174% 8,256
Retail net sales 18,828 33% 14,127 44% 9,798

table 3 shows iPhone "product development". We can see iPhone sales figure and its
changes year by year. This kind of growth is terrific for a new product with no past market
experience. As I mentioned earlier Apple sold 1 million iPhones less than three month after its
release in 2007.
For market penetration I can refer to table 4 figures. iPhone had some decline between 2011
and 2012. Maybe it was because of Samsung and unexpected success. However, still it is a
furious growth for apple in all over the world.

2012 change 2011 change 2010
iPhone and related
product and services
$80,477 71% $47,057 87% $25,179
Apple total net sales
$156,508 45% $108,249 66% $65,225
iPhone sales out of
proportion to Apple total
net sales
51.4% 43.47% 38.6%
Table 3: iPhone net sales for 2010, 2011 and 2012
Page 22 of 29

Extended marketing Mix (7Ps)
The extended marketing mix is a combination of elements that make up a campaign to sell a
product. It is an expansion on the original marketing mix of product, placement, price, and
promotion, adding additional factors that can influence the success of a campaign. Companies
preparing to launch new campaigns need to think about how to organize them, given the
product, the companys reputation, and the market. Failing to assemble the right marketing mix
can result in a catastrophic introduction to the market. (WiseGeek.com)

Product
iPhone combines a mobile phone, an iPod, and an Internet communications
device in a single handheld product. Based on the Companys Multi-
Touch user interface, iPhone features desktop-class email, web
browsing, searching, and maps and is compatible with both Mac and
Windows-based computers. iPhone automatically syncs content from
users iTunes libraries, as well as contacts, bookmarks, and email accounts.
iPhone allows customers to access the iTunes Store to download audio and
video files, as well as a variety of other digital content and applications. In
September 2012, the Company launched iPhone 5, its latest version of
iPhone. In addition to the Companys own iPhone accessories, third-party
iPhone compatible accessories are available through the Companys online
and retail stores and from third parties. (APPLE INC., 2012)
Unlike other brands, iPhone was not released in many versions. During 6
six years it just has 3G, 3GS, 4, 4s and now iPhone 5. It is a clever strategy
somehow. Building few phones with splendid features, instead focusing on
quality and fundamental parts. In my opinion Apple should continue this
strategy.
Apple provides its own operating system software and applications. I OS is
the Apple mobile operating system. The company released the latest
version, I OS 6 in September 2010. And Apple App Store which is
currently has 400 million accounts with registered credit cards provides
more than 650,000 software applications for customers.
Price
Apple produced few versions, as I said above. And iphone is pricey.
It was heard that apple intended to release mini iPhone but it did not
happen. I think it would be a clever strategy to attract customers who
do not want spend that much for their smartphone and also want to
experience Apple world. Mini iPhone could be a moderate price
phone with apple magic features!
In an industry of low profit margins and cost cutting, Apple takes a
different approach to the design of its products. While competitors
are doing everything they can to keep costs down, Apple does what
it can to make its product different. (Chapman & Haskisson)

Page 23 of 29

Promotion
Smart Advertising, user's training and customer's instructions are
apple tools for promoting its iPhone more and more. Apple do
regards relationship with its customer. However, it might be
effective to offer more discounts and other options like free shipping,
accessories gift and so on. It will definitely keep current customers
close and attracts more.
Apple heavily promoted the iPhone when it was introduced in July
2007. Customer and investor expectations, due to Apples reputation,
boosted the stock price. But when customers do not believe that the
marketing promises have been delivered, stock price, brand equity,
and investor lies in a carefully thought-out plan. (Chapman &
Haskisson)

Place
Marketers develop distribution strategies to ensure that their
products are available in the proper quantities at the right time and
place. I think Apple do this very well. But in some third-world
countries Apple does not service like us and Europe. Maybe it is
because of low demand but markets are growing so fast and Apple
have to concentrate on those place that even has low demand
currently.
Apple has revealed For consumers, who are covered by consumer
protection laws or regulations in their country of purchase or, if
different, their country of residence, the benefits conferred by
Apple's One Year Limited Warranty are in addition to all rights and
remedies conveyed by such consumer protection laws and
regulations, including but not limited to these additional right
(Apple Support)and the country list is very limited. According to
consumer laws In Asia pacific only Australia and New Zealand
could cover consumer needs

Physical
layout
in the days when manufacturing dominated the economy, the physical layout
of production units such as factories was not very important to the end
consumer because they never went inside the factory. However, today
consumers typically come into contact with products in retail units - and
they expect a high level of presentation in modern shops - e.g. record stores,
clothes shops etc. in my opinion Apple doing great in this section. Apple
stores in all over the world provide good deal of sales and services to
customers. However in some location these retail store does not provide the
complete service that a store in us could.

Provision of
customer
service
Customer service lies at the heart of modern service industries. Customers
are likely to be loyal to organizations that serve them well - from the way in
which a telephone query is handled, to direct face-to-face interactions.
Although the 'have a nice day' approach is a bit corny, it is certainly better
than a couldn't care less approach to customer relations. Call center staff and
customer interfacing personnel are the front line troops of any organization
Page 24 of 29

and therefore need to be thoroughly familiar with good customer relation's
practice. (Business Case Studies, 2012).Steve jobs offer 100$ credit for
itunes to customers who already purchased iPhone at higher price and they
were upset about iPhone price cutting. Which company do this to its
customers?!
Processes
associated with customer service are a number of processes involved
in making marketing effective in an organization e.g. processes for
handling customer complaints, processes for identifying customer
needs and requirements, processes for handling order etc. (Business
Case Studies, 2012).
Apple 1 year limited warranty and AppleCare Protection Plan benefits are
in addition to rights provided by consumer law (Apple Support)

Conclusion
In this report, I used marketing tools for analyzing Apple iPhone's market position and
growth situation. We all know Apple is a big company with worldwide reputation. People
willing to line up for new products and mostly they are satisfied with results. Nevertheless
Apple has problems too. Technology is a very competitive market. And day by day companies
do more R&D to make products better than others.
We reviewed Apple strength and weaknesses, all the good things like brand loyalty, unique
technology especially in iPhone, matchless interface and applications, strategic agreements with
big companies like AT&T and Weaknesses like expensiveness, retailers controlling problems,
vigorous competitor like Samsung and RIM. Apple is on top from so many points now, no
doubt. But with PESTEL summary that I discussed earlier we know there is no certainty in these
days market. Brands devour fame and income and willing to do their best.
I reviewed Apple form 10-K deeply. Apple financial statements say everything is ok and
growth is more than satisfactory. But in risks section many items were mentioned to remind
investor it is a very hard business.
Both Ansoff and BCG matrix are fine for iPhone, Samsung running so fast but Apple still
dominates US and aside recession points, figures show Apple knows the business.

Page 25 of 29

Recommendations
Regarding all the analysis is made; there are some suggestions and strategies for Apple which
can be useful in educationally scale.
iPhone Operating System It is a privilege that apple has its own operating system
for iPhone, but regarding open source operating systems like Android, there could be
a slip for Apple in these days. iOS has a lot of unique features that distinguish it from
other OSs. Sometimes iPhone users say they can not switch to any other operating
system and they love Apple and its iOS. But open source OS are growing so fast.
Android is capturing market and sure we should expect others that maybe come
tomorrow or a bit later. None-free applications are often pricey in App Store. Even
some essential software for backing up and data storing has a price in iOS. Apple
should break or eliminate some of these and let the customers enjoy from free or low-
price stuff more.
Mini iPhone and China Market An iPhone Mini priced at $330 in China would
provide a healthy shot in the arm to Apple's Chinese smartphone sales, according to
Morgan Stanley analyst Katy Huberty. A low-priced iPhone would add another 20
percent to the 10 percent Chinese market share currently addressed by the iPhone 5,
the analyst said today. Smartphone prices are starting to stabilize in China, which will
open up the market for such a phone. But a deal with China Mobile is also key.
(Whitney, 2013)
Industry Smartphone industry is a highly attractive industry. As it is mentioned
before, other company is growing furiously. According to Ansoff matrix we are to
face both existing markets and new markets. Non-stop technology cause new
demands and new markets, the more technology growth, more demand and bigger
markets will rise. Apple should play with prices cautiously with continuing premium
price strategy. Technologically Apple is on Top but R&D should rise due to
competition.
R&D expense increased $952 million or 39% in 2012 compared to 2011 and $647
million or 36% in 2011 compared to 2010. The growth in R&D expense was driven
by an increase in headcount and related expenses to support expanded R&D activities.
Although total R&D expense increased 39% and 36% in 2012 and 2011, respectively,
it remained fairly consistent as a percentage of net sales. (APPLE INC., 2012)
Statistics shows Apple doing this strategy very well.
The Company continues to believe that focused investments in R&D are critical to its
future growth and competitive position in the marketplace and are directly related to
Page 26 of 29

timely development of new and enhanced products that are central to the Companys
core business strategy. As such, the Company expects to make further investments in
R&D to remain competitive. (APPLE INC., 2012)
Stock markets Both technical analysis and fundamental analysis support a
potential target of $340 for Apple stock. A less discussed but more important problem
for Apple is its heavy dependence on subsidies from phone carriers. When a
consumer buys an iPhone 5 from a carrier for $199 the carrier may be paying Apple
over $600 and subsidizing the consumer. Recently there have been negative musings
both from AT&T and Verizon about the high level of subsidies for iPhones. The
subsidies on Google Android based phones and Microsoft Windows phones are
lower. (Arora, 2013)

The foregoing is a negative long-term outcome. For the time being according to our
proprietary sentiment indicator, sentiment on Apple has reached the level of
negativity that is interpreted as bullish.
We recommended Apple long at $131 and have now taken profits on 90% of the
position. The plan is to hold on to the remaining 10% as a long-term core position in
the portfolio and trade around it with short-term trades. On Friday, the stock dipped
below the upper band of our buy zone for a short-term trade. (Arora, 2013)

Page 27 of 29

Bibliogaphy
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Bright Hub. (2010). Retrieved from http://www.brighthub.com/computing/mac-
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APPLE INC. (2012). Form 10-K. Cupertino.
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Apple Support. (n.d.). Retrieved from Apple.com: http://support.apple.com/kb/he44
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mix.htm

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