Apple Iphone Essay

Apple has been one of the most successful companies worldwide in designing, manufacturing and selling desktop and notebook computers, portable digital music players and iPhones for the last couple of years. Apple’s business strategy was highly focused on differentiation and was successful in grabbing a lot of opportunities by being the first mover in a couple of industries and specially the smart phones industry. This report sets out to provide a historical background about Apple in general and iPhone in specific.

We will discuss Apple’s business strategy in terms of differentiation, a detailed SWOT Analysis of the company and a 5 forces analysis of the industry. While the smart phone industry continues to grow, iPhone seems to maintain a stable growth rate for a couple of reasons such as the industry’s low entry barriers and the aggressive competition on the price as well as the release of new smart phones that are serving both the recreational and the professional lives. Apple is a master in differentiation, it built through the years a very strong brand image and eputation and in terms of functionality, its products and iPhone in specific is durable, reliable, high tech and designed in a very innovative way. Since Apple wants to maintain and grow its market share in the smart phone industry, it should reevaluate its strategy and start focusing on building a device that can be used by business people. Also it should reconsider its pricing strategy in a market where the competition on price is becoming more and more aggressive especially if it is looking to enter new markets such as Africa and South America.

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Introduction Apple was founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne. Their first product was the Apple I which was a personal computer kit hand built by Wozniak. In 1977, Wayne sold his share for $800 and the company was incorporated. In 1980, Apple had a staff of computer designers and a production line then it went public at $22 per share creating more millionaires (300) than any company in history. In 2006, Apple stock price reached over $80 per share ($665 in 2012) and its market cap surpassed that of Dell.

Despite its growth in the computer industry (8% of desktops and laptops in US), it remained behind competitors using Microsoft Windows. (www. wikinvest. com/stock/Apple_(AAPL)/Price_Range_Common_Stock) Apple has evolved from a computer oriented company to a digital entertainment company. It incorporates most of its product lines, such as the Mac, iPod, iTunes online store and iPhone into its mission statement. Steve Jobs projected since the iPhone’s initial release in 2008 that he intends for it to capture 1% market share by the end of 2008.

According to market research firm Gartner, the iPhone has actually captured 20% of smart phone sales during the third quarter of 2007, a market share surpassed only by long established Research in Motion (RIM) BlackBerry, a still maintains a commanding 41% share. Based on the above figures, iPhone, with its first smart phone product has been able to surpass the quarterly sales of Motorola, Nokia, and Palm, an incredible feat in itself. (www. macrumors. om/2008/02/05/iphone-with-28-of-u-s-smartphone-marketshare-for-q4-2007/ )

The company became a leader in the digital entertainment industry with the iPhone alone generating more than $150 billion of revenues since its launch. A quarter of a billion iPhones have been shipped cumulatively worldwide in the last five years. On April 24, 2009, the App Store surpassed one billion downloads and in 2012, two million iPhones were sold in the first twenty-four hours of pre-ordering (www. engadget. om/2012/09/17/iphone-5-pre-orders-crack-2-million-in-first-24-hours/) The iPhone is a revolutionary piece of hardware. Matching simplicity with power, it is the epitome of what Apple does well and will certainly appeal to the company’s longtime faithful customer base. Since its initial release, Apple’s iPhone has garnered an incredible amount of excitement. With one face composed entirely of a touch screen, the iPhone is able to provide its user with both a convenient and familiar “qwerty” keyboard, and a widescreen cinema display, all at the touch of a finger.

Despite the fact that iPhone had been marketed as a smart phone, it does not include many of the functional business applications used by both the Microsoft Mobile and Symbian operating systems. On the other hand, Samsung is expanding its popular Galaxy portfolio and providing Apple with more credible competition (Businesswore. com). Prior to any strategy planning, a firm’s management would conduct a number of market researches in order to analyze the market and the industry’s situation as well as the firm’s performance and efficiency.

In this research paper, we will be discussing two of the most used research matrixes and applying them to the iPhone case. The first one is the SWOT Analysis which focuses on the firm’s performance, weaknesses and opportunities and the second one is the 5 forces analysis which focuses on the industry in general. SWOT analysis: SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is very important for finding out where a business currently stands and where it could be tomorrow.

In other words, it analyzes the current situation of a firm in terms of performance and efficiency and highlights the opportunities and threats that might be facing it in the future. Based on the SWOT Analysis, the management will be able to put together a strategy that focuses on developing the weaknesses and capturing the opportunities. The internal factors consist of the strengths and weaknesses and external factors consist of the opportunities and threats are analyzed. Starting with iPhone’s strengths, they include the well-designed programs services that Apple puts out. iPhone has loyal customers and the superiority of its product in terms of reliability, design, technology and durability allows it to charge more than its competitors. It provides superior Artificial Intelligence services as well as the iCloud services that allows the customer to store documents, file and music with a wireless access to the Mac and the Windows machine.

It also has a reputation for value and for a wide range of products which let her grow substantially over the recent years. Phone is innovative, it has many functions of other mobile products all in one device; it is a context aware monitor that the customer could take with him anywhere, it is a cell phone, a PDA, an MP3 device, a GPS, a web surfing device, a dictionary and much more. The iPhone is compatible; it works with iTunes and other Apple devices like the new Apple TV, allowing for wireless connectivity to the big screen. It is also compatible with many Mac OS software tools. Mac OS compatibility means that the iPhone has limitless potential for upgradability. The new touch screen interface is easy to use making operations extremely intuitive.

It is different from those of other phones or PDAs that recognizes multi finger gestures, just as the human hand normally behaves. Apple is known for their state of art devices and designs; they have very strong brand awareness and a very recognized brand image that reflects innovation, class and high technology. The I Phone is of great quality; it has one of the brightest and scratch resistant screens in the market. It also has a fine metallic finish that is durable and light. The software suite included is also unsurpassed with their ease of use and resistance to computer viruses.

It has combined functions in one device. iPhone’s weaknesses, however, reflects its relative softness in the business market; most of iPhone products are bought by everyday’s consumers who are looking for a fun entertaining device where they can store songs, search their emails and social media platforms and take good quality pictures but on the other hand they aren’t widely used by businesses. Blackberry phones, has long produced preferred tools for those in the working world which makes iPhones less common to find in an office and Research in Motion. The Apple rand is not targeted towards business people like most smart phones. It does not have the functionality or the reputation for being compatible with the corporate world. Apple’s price range is considerably high; it does not offer lower priced models for more cost conscious consumers. For example, upon launching its iPhone5, it priced it at around $1000 where other smart phone devices from Nokia or Samsung could be found at a price of $300 or even $200. Also, when it comes to the user interface; the touch screen suffers from the “gorilla arm”, in which long term use of a flat, solid surface for input becomes uncomfortable.

On the external level, a couple of opportunities rise up; they are presented as offers, trends, or needs that promise beneficial outcomes for the company. Smart phone industry is expected to grow by 30% to 865 million unit in 2013 as per research firm Digitimes so more customers are expected to ditch their standard mobile phones for smart phones. A couple of markets are still considered as “virgins” in terms of the smart phone invasion; Africa is a huge market with a great potential due to the high population number and so is South America.

So Apple should seriously consider a strategy that includes gaining market share in these geographical markets. On an individual level, people have become more dependent on technology; they rely on it to communicate and to stay up to date especially the new generations that will form the future market in the coming decades. Finally, threats are negative external factors that the company has no control over. In the case of the iPhone, threats include the growing use of the Android platform for smart phones from companies like HTC, Motorola, Samsung and the growing tablet computer market.

Smart phones are easier to make than before, the technology has become accessible to most competitors. More companies may enter the market, given that there are few barriers to entry, other than patents. Competitors can maneuver around patents to create similar devices. The iPhone is marketed as a high-end phone, but smart phone prices are almost certainly going to fall when other companies such as Nokia undercut the price of iPhones, therefore, the smart phones industry will be facing a downward pricing pressure.

Apple is facing a difficulty expanding into Asian market since smart phones are better known and already widely used so they need to find new markets to compete in such as Africa, but they would need to review their prices before doing that. Micheal Porter’s five forces model Another very popular analysis tool is Micheal Porter’s five forces model. Porter analyzes an industry by looking at how hard it is to enter a certain industry (barriers to entry), stay in the industry (threat of substitutes), and the bargaining position of suppliers to and buyers of industry products and services. This helps identify the attractiveness of the industry.

You might think of Porter as helping to direct our focus to where the opportunities and threats might be found. The fifth force is the competitive position of industry rivalry–their strengths and weaknesses. So we will be listing below the five forces along with data on the smart phone industry under each: 1. Market entry (high threat) * Product differentiation: a high product differentiation is required due to the aggressive competition on the design, the features and the applications downloads available. The greater the uniqueness and the differentiation between companies, the less competitive it becomes.

I believe Apple has accomplished the sense of differentiation in its iPhone, which will be discussed further later throughout this paper. * Access to distribution channels: many distribution channels are available for the iPhone, from online platforms to department stores to stand alone shops, but a new entrant may have to persuade the distribution channels to accept its product by providing extra incentives which reduce profits. * Cost: high proprietary technology is required as well as a favorable access to raw materials. * Capital: huge investment in R&D and operations level required.

Apple has spent very big amount of money on research and development, they always ensure that anything produced by them is always the first in the market and the most up-to-date product. * Economics of Scale: at hardware level it is difficult where it gets easier at software level due to the Open platform. However, Apple does accomplish take benefit from the economies of scale as they produce millions of iPhones to different countries in the world, and of course it is very well known how the iPhones get out of stock very quickly, especially during the first 3 months of the launch of the new iPhone. 2. Industry Rivalry (high threat): The Smartphone production industry is one of the most highly competitive industries.

The main competitors of Apple (iPhone) are Samsung, Research in Motion (Blackberry), LG, HTC and Palm (Treo), along with other competitors as well. According to market research firm Canalys, total global smartphone shipments in the third quarter of 2012 grew to 44% to 173. 7 million units. Samsung was the world’s top vendor in the quarter, having shipped an estimated 55. 5 million smartphones and growing its market share from 22. 7% in Q3 2011 to 32% last quarter. Apple remained in the No. 2 spot with smartphone shipments totaling 26. 9 million units.

The Cupertino, California-based company’s global market share grew from 14. 2% to 15. 5% year-over-year according to Canalys, and shipments grew by 57. 6% during that period — a figure bested only by Samsung’s staggering 103. 6% growth. Sony (SNY) jumped into the No. 3 spot with smartphone shipments totaling 8. 8 million units in the third quarter, but the fourth and fifth spots come alongside grim news.

Shipments of HTC smartphones plummeted 36. 1% year-over-year in the third quarter, falling to 8. 4 million units for a 4. 8% share of the market. Meanwhile, RIM lost even more ground — channel sales of BlackBerry smartphones dropped 38. % in the third quarter, totaling 7. 3 million units for a global market share of just 4. 2% (http://bgr. com/2012/11/08/smartphone-market-share-q3-2012/ ) * However, we can say that the main and most direct competitor of the Apple iPhone is the Samsung Galaxy. * iPhone life cycle: when the iPhone first came out, it was always in the growth stage because it didn’t have any competitors and the sales were always going up because everyone wanted one. That did not last, because competitors copied the technology and came out with touch screen phone that were cheaper than the iPhone.

Also, as of right now, the smart phones industry has reached the maturity stage. 3. Substitutes (high threat of substitutes): * The threat of substitutes is linked with the threat of new entrants because their ability to take up the latest technology might lead to cheaper substitutes. Competitors are trying to differentiate their services and the availability of substitute products hurts Apple iPhone`s ability to raise prices, because customers can easily switch to another phone with a cheaper price. * Although Apple has a large consumer base, such disappointment might also lead to a decrease in consumers’ loyalties to Apple.

As the mobile device market is becoming more competitive day after another, consumers would be easily tempted to look for other close substitutes. So the threat of substitute for Apple iPhone would be increased. 4. Bargaining power towards Suppliers (low threat): * Today, phones have a lot of functions in addition to calling/receiving, so there are many kinds of suppliers for the camera, MP3 players, Video players, memories, etc. * Firms have a high bargaining power over their suppliers because they are able to outsource much of their manufacturing and they also have been able produce some of their own supplies. A firm can easily switch to another supplier due to the low switching cost of actually having to go through the process of installing or using the new product/service from the new supplier. He harder it is to do so, the higher the switching cost. 5. Bargaining power towards Customers/ Consumers (high threat):

* There is essentially no switching cost for customers when they switch from to using another band of cell phone or model. They just need to pay for what the cell phone costs. Customer loyalty is very high because loyalty is based on the quality and the brand of the iPhone, so they do not usually switch easily to another smart phone brand, unless they really do offer something that iPhone is not. * All the major competitors in the cell phone industry are endlessly trying to catch up with customer demands. After stating the 5 forces and their level of threat, it seems that entering the smart phone industry and competing with the big players is most likely to happen. Many established companies represent a threat to the existing market leaders because of their potential and capabilities.

For example, a firm such as Google is an expert in the technological field and has a very advanced R&D department and might be considering the smart phone industry as a part of its expansion strategy plan. On the other hand, companies expanding in China might be of great threat; they’re well established companies with great technological skills that should be taken into consideration especially when competing in markets with moderate purchasing power.

For example, Lenovo is shifting its focus from PC to smart phones. Its share in the smart phone market rose from 1. 7% in 2011 to 14. 8% in 2012 and surpassed Apple (6. %). While China is the largest smart phone market with a record of 60 million in 2012, 405 of its shipments consist of smart phones costing less than $200 and only 11% of its shipment consists of smart phones costing more than $700. So Apple had to figure out its competitors in each and every market and customize its strategy accordingly. (http://moneymorning. com/2013/01/16/the-china-smartphone-brand-thats-beating-apple-nasdaq-aapl/) Differentiation Differentiation is a strategy applied by organizations and companies in an attempt to gain competitive advantage over their competitors.

A company can distinguish itself from other competitors through product differentiation. A product can be distinguished through the functional value that includes the design of the product, durability, reliability, technology, and support/service. It can also be differentiated through the emotional value it provides such as the image, branding, and reputation. Functional Value: The Apple iPhone is unique in its features, it is sleek and user-friendly.

The unique look of the iPhone, the IOS operating system and the other features that came with it have generated high sales for Apple including very strong customer loyalty. Design: We can see that the design of the iPhone over the years is very different from any other Android entering the market. Some people actually buy the iPhone because it is sleek and makes them look smart while holding it. Apple has made sure that their phones are definitely different and unique from all other, the iPhone 5 is known to be the lighter and thinner phone in history so far with 112 g in weight, 3. 31 in? in volume and 7. 6 mm in depth. They have also created the first Retina display with integrated touch technology meaning they have reduced one layer between the finger-touch surface and what we see on the iPhone 5.

In their website, they mentioned something that shows how much they strive for being different: “We could have taken the easy way out and designed something more reasonable and less remarkable. But we didn’t. If the technology didn’t exist, we invented it. If a component wasn’t small enough, we re-imagined it. If convention was standing in the way, we left it behind. The result is iPhone 5: the thinnest, lightest, fastest iPhone ever. ” * Durability: Apple obtained rights to Liquidmetal, which made a strong metal alloy that had the properties that can make future Apple products stronger, lighter and resistant to corrosion.

Also, it has been tested that an iPhone can be under a bus’s tires and it will not be harmed. It is well known for its durability as it has very strong base that will not break easily at the slightest drop like other Android phones. In addition, the battery of the iPhone is one of the strongest batteries available; they charge super fast and don’t empty very quickly. I think one of the strongest points iPhone has is that its battery charges very fast, if not used at all, it can stay on for 4 days without shutting down. Reliability: One of the differentiation points in the iPhone is that Apple ensures it has an anti-virus system installed in all its devices that automatically protects its iPhones from any potential threat coming from any internet downloads.

The iPhone is not easily hacked, also, if a thief comes and steals an iPhone with a secret code installed in it, it will be almost impossible for the thief to unlock the lock, which is very assuring to the consumer knowing that all pictures, information, and phone numbers are safely stored in his/her iPhone and no one can access it easily. * Technology: “If the technology didn’t exist, we invented it. Apple is very well known in having the most recent technology to offer its customers, one of which is the iCloud, which allows its customers who own any Apple products to connect to the other Apple products he/she owns easily remotely having all the information available whenever needed in a very secured channel. Emotional Value: Apple is a master in differentiation. Differentiation at Apple has reached a level where it doesn’t need to mean something anymore, it is just “Apple”, no need for a rationale behind it. * Image: The iPhone provides an image that says, I am young, up-to-date, and classy.

The Apple brand screams innovation, people will hold an iPhone in public with so much pride and confidence like they are holding a very expensive handbag. It is not what the phone is worth, it is what it represents. When people associate what Steve Jobs has done and what he has accomplished by himself using his own resources, that indeed affects the image of the brand. People relate to Steve Jobs and are so proud of him and his accomplishments. I do not believe that it is only about the product, I believe that the way this product developed plays a role in the image it represents to its consumers. Branding: Their brand and level of differentiation is so strong that when their competitors come up with similar products in terms of performance, people still believe that Apple is “different”. Some people even call themselves an “Apple person”, they will only pay for, buy and consume an Apple, not even if its competitors outrun them, they are what some call Blind Loyalty.

I believe Apple is trying to increase that level of loyalty through launching the iCloud, which allows those who own several Apple devices to use it very comfortably, this increases the sales of Apple and makes it hard for consumers to switch between competitors easily. Reputation: Since Apple was the Early Mover and invented the whole iPhone touch/application idea, people have more loyalty to them and respect them much more than the other brands. Knowing that Apple developed it and researched it first, gives them the advantage of gaining such a positive reputation. Even if Apple fails to produce a better iPhone 6 in the future, its reputation stays as the brand that started it all, and the respect and loyalty of its fans I believe will remain and the loss will not be huge as there are people who buy iPhones because its an Apple product, and “Apple” is just the one to buy.

Conclusion and Recommendation: While a sophisticated entertainment vehicle is indeed alluring, the iPhone must also become a device integral in both the professional and recreational lives of its users in order to achieve true convergence. As a conclusion to this paper, Apple is very strong in applying its differentiation strategy; the iPhone is durable, reliable and unique in its design and is always including the most up-to-date technology. Its brand is very strong and its customers are very loyal to Apple. Their image and reputation are very positive and considered as strength to the iPhone product.

We suggest that Apple, to take advantage of more segments in the market, and increase its target market to include companies/organizations to buy in the iPhone. Apple can improve the iPhone in a way to enable companies to use iPhone as if they were the usual desktops at their offices. Many companies are now using the Blackberry for sending emails, attaching files and attending business calls, however, almost no organization uses the iPhone. We believe that this will be a great opportunity for Apple iPhones to have an increase in demand and result in high profitability.

It would also be advisable if Apple could produce some lower priced iPhones that do not contain highly professional features. Apple could take advantage of the current opportunity in Africa and South America and target those with lower budgets as it is often priced and targeted for those with high budgets. If the iPhone could have another version that is less professional or “techy” then it could increase its market share and go ahead to target those living in Africa and South America. By doing this Apple can gain competitive advantage of being an