Executive Summary

This report is a marketing audit on Apple Inc. Apple Inc., is a major manufacturer of personal computers and other digital devices, including the popular digital music player, the iPod, and the online music service known as the iTunes Music Store. With headquarters in Cupertino, California, Apple designs, produces, and sells personal computer systems for use in business, education, government, and the home. It also creates its own operating system software, server software, and World Wide Web browser. In addition to these products, Apple also makes printers, monitors, scanners, a cell phone, a digital video system, Web services, and networking products. Apple also operates a chain of retail outlets. The Companys customers are primarily in the consumer, SMB, education, enterprise, government and creative markets. Apple has no set geographic target area in particular. By leveraging the expansive reach of the internet and multiple distribution channels, Apple serves both domestic and international markets. The market demographics served by Apple are: 1. Middle/Upper income people who can and are willing to pay a bit more for a better user experience; 2. Individuals in a profession that require high-powered computing performance and expansion capabilities, networking functionality, and seamless integration with complementary products, such as professionals in media and design; 3. Music enthusiasts and fans especially between the ages 12-35; 4. People who like to have fun with technology. Swot Analysis: Strengths: 1. Strong Brand Equity 2. Successful business model 3. Unique Retailing Strategy 4. The Apple Halo Effect 5. Expansive opportunities due to new focus. Opportunities: 1. Strategic relation with Nike. 2. Less expensive new product lines. 3. Multiple streams of revenue. Weakness: 1. Uncertain health of Steve Jobs. 2. Weak brand in emerging markets. 3. Vulnerable to acquisition. 4. Rumours of faulty products. 5. Apple TV less promising Threats: 1. High level of competition. 2. Substitution effect. 3. Vulnerable to leaks and law suits. 4. Cannibalization of IPod by IPhone.

Major Competitors: Against the Mac: HP, Dell Against the IPod: Creatives Zen, Microsofts Zune and SanDisks Sansa players. Against ITunes and Apple TV: Napster and Rhapsody/Real Player Against IPhone: Nokia, Sony Ericsson, Motorola and Blackberry. With favorable trends, it is reasonable to assume that Apple will continue to increase in its sales, earnings, and market share just as long as it keeps developing and acquiring new strengths. Competitors will find it difficult to compete against the company if Apple continues to strive for innovation, as it is its mission, continuing its well-developed marketing plan, further developing more high quality products, and taking advantage of its opportunities. Strategy Summary: The Companys business strategy leverages its unique ability to design and develop its own operating system, hardware, application software, and services to provide its customers new products and 1

solutions with superior ease-of-use, seamless integration, and innovative industrial design. The Company believes continual investment in research and development is critical to the development and enhancement of innovative products and technologies. In addition to evolving its personal computers and related solutions, the Company continues to capitalize on the convergence of the personal computer, digital consumer electronics and mobile communications by creating and refining innovations, such as the iPod, iPhone, iTunes Store, and Apple TV. The Company desires to support a community for the development of third-party products that complement the Companys offerings through its developer programs. The Companys strategy also includes expanding its distribution network to effectively reach more of its targeted customers and provide them with a high-quality sales and post-sales support experience This report has focused the analysis specifically on Apples line of portable digital music players, especially in the U.A.E. The marketing mix that has been implemented for this line is as below: Marketing Mix Product: Price: - 4 classes of Ipods differentiated by size, hard Premium pricing strategy has been used. disk capacity and other features like user Ipod Shuffle-1GB: AED 199; 2GB: AED 299 interface and internet connectivity. Ipod Nano-8G: AED 649; 16GB: AED 849 - Strong brand image and packaging that has won Ipod Classic-120GB: AED 1,099 various design distinction awards Ipod Touch-8GB: AED 999; 16GB: AED1299; 32GB: AED1499 Promotions: Placement: Apple through ABM, their independent Apple Ipod uses indirect distribution in the U. A. marketing company has used many promotional E, through ABM. ABM provides functions such strategies successfully such as advertisements in as: Fragmenting bulk supplies of inventory, usual media like magazines and newspapers, inGiving financial services to retailers and store advertising, sponsorships, tie-inIncreasing ease of customer purchase. They have promotions, premiums, cross promotions and a retailer network that aligns with their brand retailer contests. image.

As most people agree, Apple is a company leading the herd into new realms, discovering new technologies and new civilizations, boldly going where no company has gone before. Unfortunately, it seems not even Apple could escape recession completely, since their cool down has started already, despite the excellent results shown by some of the latest sales reports. But the fact is phones and computers have become increasingly essential to society and consumers will still buy them if the recession turns into a depression and there are a couple of suggestions that can be made to capitalise on these consumer needs. Under the present situation when consumers would hesitate to shell out premium prices, it would be a most appropriate time for Apple to make their pricing more flexible. By marketing their products under various promotional schemes that offer discounts as frequently as possible Apple could capture that segment of the target market that have always been aspiring to own the brand and its products but have never been able to afford to do so. Apple is also notoriously famous for its cult marketing. It is suggested that Apple could focus more on cult marketing their products to the youth market through strategies like sponsoring events for youth like rock concerts and sports competitions. Getting them hooked on to the brand and making them Apple fanatics would go a long way in enhancing Apples market leadership in the future. In terms of product attributes, Apple is reputed for its innovation and technological and aesthetic superiority. For ensuring the success of Apple, this is the way it has to remain. However Apple could channel this innovation in

collaborating with other successful brands like auto manufacturers through various strategies like cobranding for bringing them closer to and sustaining market leadership.

Table of Contents:

1. A Brief Overview of the Company 2. Situational Analysis 3. Marketing Strategy 4. Marketing Mix 5. Conclusion and Recommendations 6. References

6 10 26 30 35 37

Brief Overview of the Company

Apple Inc., incorporated on January 3, 1977, designs, manufactures, and markets personal computers, portable digital music players, and mobile communication devices and sells a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. In addition, the Company sells a variety of third-party Macintosh (Mac), iPod and iPhone compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, , and digital content through the iTunes Store. It sells to consumer, small and mid-sized business (SMB), education, enterprise, government, and creative customers (Thomson Reuters, 2009) I Introduction

Apple Inc., is a major manufacturer of personal computers and other digital devices, including the popular digital music player, the iPod, and the online music service known as the iTunes Music Store. With headquarters in Cupertino, California, Apple designs, produces, and sells personal computer systems for use in business, education, government, and the home. It also creates its own operating system software, server software, and World Wide Web browser. In addition to these products, Apple also makes printers, monitors, scanners, a cell phone, a digital video system, Web services, and networking products. Apple also operates a chain of retail outlets. II Founding

Apple Computer was formed by Steven Jobs and Stephen Wozniak in 1976 to market the Apple I, a computer circuit board that they had designed and built in Jobss garage in Los Altos, California. They scrapped their plan to sell the board alone when Jobss first sales call yielded an order for 50 units. They were, however, sold without monitor, keyboard, or casing. The company was incorporated in January 1977 by the charismatic Jobs, the meditative inventor Wozniak, and their new partner and chairman, Mike Markkula. Markkula brought credibility, maturity, engineering and product management experience, and an extremely broad-based knowledge of the business world, as well as investment cash of his own and contacts among Silicon Valleys venture capitalists. Markkula also recruited all of Apples outside board members and lured away managers from other major hightechnology firms, including Hewlett-Packard, Intel, and National Semiconductor. II I Apple II Macintosh and

In 1977 Apple introduced the Apple II, a personal computer able to generate color graphics, with its own keyboard, power supply, and eight slots for peripheral devices, which gave users wide possibilities for add-on devices and software programs. Apple established its corporate headquarters in Cupertino in 1978. The Apple III computer, introduced in 1980, sold poorly because of hardware problems and a high price. With Apple II sales soaring, in 1982 Apple became the first personal-computer company to record annual sales of $1 billion. In 1983 Apple introduced the Lisa, a personal computer designed for business use that incorporated a handheld mouse to select commands and control an on-screen cursor. The Lisa was followed in 1984 by the Macintosh personal computer, based on the 68000 microprocessor manufactured by Motorola. Like the Lisa, the Macintosh, also known as the Mac, incorporated a graphical user interface, which made the computer easy to operate for the novice user. 5

Apple entered the office market with the introduction of its LaserWriter printer in 1985 and Macintosh Plus computer in 1986, a combination that launched the desktop publishing revolution. Although the company prospered in the early 1980s, Wozniak left Apple in 1985 to start a company of his own. That same year disappointing sales and internal wrangling led to restructuring, the companys first layoffs, and Jobss departure from the company. John Sculley, whom Jobs had hired in 1983 as Apples president and chief executive officer, replaced Jobs as chairman of the companys board of directors. IV Expansion and Change

The late 1980s and early 1990s were times of growth and change at Apple. In the late 1980s Apples net income increased substantially, and in 1990 Apple introduced a new line of Macintosh computers, priced at 50 percent less than previous models to attract new customers to the Macintosh. In addition to expanding the Macintosh line, Apple extended its system software, the modular System 7. In 1991 Apple formed an alliance with International Business Machines Corporation (IBM) and Motorola to develop the PowerPC family of reduced instruction set computing (RISC) microprocessors. In 1992 Apple introduced the family of Macintosh PowerBook laptop computers, which offered built-in networking capabilities. That same year the company introduced its QuickTime software, which allowed computers to play video clips in multimedia applications. In 1993 Michael Spindler replaced John Sculley as chief executive officer of Apple. That same year the company introduced the Newton, a handheld communications device with several functions including the ability to translate handwriting into typewritten text. The company also announced restructuring plans that included substantial layoffs, wage freezes, and changes at the executive level. In 1993 Apple discontinued its Apple II product line. V Financial Woes in the 1990s

In 1994 Apple launched the Power Macintosh line of high-performance computers, the first Macintosh computers based on Motorolas PowerPC chip. The company also began licensing its operating system, Mac OS, to other computer manufacturers for the first time. After a year of solid growth, Apples fortunes declined again in 1995. A string of problems, including severe shortages of some computer models, led to sluggish sales and financial losses. In 1996 Gilbert F. Amelio, a business executive credited with saving the National Semiconductor Corporation from financial ruin, replaced Spindler as Apples chief executive officer. Apple abandoned its plans to release a major upgrade of its operating system. Later in the year, the company paid $400 million to acquire NeXT Software, a company headed by Apple cofounder Jobs, and announced plans to release a new operating system based in part on NeXT technology. Jobs returned to Apple as a part-time consultant. Despite losing $816 million in 1996, Apple rejected a number of proposed mergers. In 1997 the companys sales continued to drop due to competition with manufacturers of Macintosh clones and computers using the Windows operating system developed by Microsoft Corporation. (Encarta Encyclopedia is published by Microsoft.) That year Apple laid off 4,100 workers, or about 30 percent of its workforce, as part of a sweeping reorganization designed to return the company to profitability. Also that year, Apples board of directors dismissed chief executive Amelio. At the time of his dismissal, Amelio had not managed to bring about a promised reversal of the companys fortunes.

Although he held no formal position at Apple at the time of Amelios departure, Jobs embarked on a bold plan to turn the company around. He persuaded longtime rival Microsoft to invest $150 million in Apple, to pay sizable fees to license Apple technologies, and to develop new Macintosh versions of Microsoft Office, a suite of business application programs. In September 1997 Apple hired Jobs as interim chief executive officer, and he continued to make fundamental changes in Apples business strategy. Jobs reversed the companys decision to license the Mac OS to other computer manufacturers, which had taken away market share from Apple. He discontinued the Newton, Apples handheld computer that had never made a profit. The company also introduced a successful line of high-powered desktop and notebook computers based on the PowerPC G3 processor made by IBM and Motorola. In 1998 Apple introduced the iMac, a low-cost computer with an eye-catching design; this quickly boosted Apples share of the personal computer market. The same year it launched a new operating system, the Mac OS X. Building on the success of the iMac, Apple introduced the iBook laptop the following year. VI Entering Century the 21st

Under Jobss leadership, Apple experienced a significant financial rebound after years of losses, and the companys profits steadily increased. In 2000 Jobs accepted the role of permanent chief executive officer and dropped the word interim from his title. Apple began 2001 with a new round of product upgrades, but the most dramatic turnabout in its fortunes came with the introduction of the digital music player known as the iPod at the end of the year. The music player became extremely popular and was credited with helping turn the company around. The same year the company announced plans to open retail stores, which helped Apple provide better marketing support for its products. Following on the success of the iPod, Apple in 2003 debuted an online music site called the iTunes Music Store that enabled computer users to purchase and download music. The service quickly became one of the most popular music download sites on the Web. By 2005 Apple had opened more than 100 retail outlets in the United States, along with stores in Canada, Japan, and the United Kingdom. It continued to pioneer in music services, unveiling the iPod nano, a smaller, thinner version of the iPod. In 2006 Apple sold about 39 million iPods and announced that users had downloaded more than 2 billion songs from its iTunes Music Store. Building on the success of the iPod, Apple continued to diversify its product line. In January 2007 the company renamed itself Apple Inc., dropping Computer from its title to signify that it was no longer just a personal computer company. The same month Apple announced the development of the iPhone, a cellular radio telephone capable of playing music and videos, surfing the Web, and sending e-mail, as well as making telephone calls. Although other companies had pioneered such smartphones long before, Apple brought its unique graphical user interface design to the product, including touchscreen capability rather than a built-in keyboard. The iPhone proved extremely popular, and in July 2008 Apple introduced a new 3G version, shorthand for third generation wireless communications that enable high-speed Internet access. Apple also makes Apple TV, a digital video system that plugs into a television set and stores up to 50 hours of video. The system enables the wireless transfer of videos from a computer to the television set. 7

In January 2009 Jobs announced that he was taking a six-month medical leave of absence due to a hormonal condition that was depleting proteins in his body, causing him to lose weight. Although he would no longer be in charge of day-to-day operations during that period, Jobs said he would remain involved in strategic decisions for the company (Microsoft, 2008)

Situational Analysis
Apple has expanded from computer maker to include consumer electronics over the last 30 years, officially changing their name from Apple Computer, Inc. to Apple, Inc. in January 2007. The Group's principal activities are to design, manufacture and market personal computers and related software, peripherals and personal computing and communicating solutions. It offers a range of personal computing products including desktop and notebook personal computers, related devices and peripherals, networking and connectivity products and various third-party hardware products. The Group also designs, develops and markets a line of portable digital music players along with related accessories and services, including the online sale of third-party audio and video products and iPhone products. The customers of the Group include educators, creative professionals, consumer and business markets. The Group sells its products through its online stores, direct sales force, third-party wholesalers and resellers and its own retail stores. It has its operations in the United States, Europe, Japan and Asia Pacific. As on 29-Sep-2008, the Group operated 247 stores. Market Summary The company primarily targets retail consumers rather than enterprises, and has become known for unique promotion and distribution strategies. These tactics have paid off over the past few years - in 2007, Apple generated revenue approaching US$ 24 billion, growing market share for its niche of Mac desktops and laptops and continuing to dominate the PMP market, where it captured a 50% share that year. In 2007, the company continued its rapid growth with a 28% yoy increase in fourth quarter earnings, driven by strong iPod and iPhone sales. Unlike many other technology companies, Apple has not evinced a strong commitment to increasing its presence abroad, and the quarterly revenue breakdown by region reflects this. The Americas continue accounting for a hefty48% of total revenues, while Europe rings in second, contributing just 21%. Apple is especially weak in Asia, where its Japanese revenues have dropped 10% from 4Q06 levels (the rest of Apple's Asia/Pacific sales have grown by a paltry few percentage points.) However, strong revenue growth in Apple's retail division (nearly 42%) bodes well for the future. The company's success in the mobile phone and personal media player markets may carry over into other consumer devices, with the company using its brand to grab significant market share. The company continued its growth in the first quarter of 2008, posting 35% revenue growth and the largest profits in company history (Apple, 2008) Markets & Distribution The Companys customers are primarily in the consumer, SMB, education, enterprise, government and creative markets. The Company distributes its products through wholesalers, resellers, national and regional retailers, and cataloguers. No individual customer accounted for more than 10% of net sales in 2006, 2007 or 2008. The Company also sells many of its products and resells certain thirdparty products in most of its major markets directly to customers through its own sales force and retail online stores. Market Demographics Geographics: The U.S. represents the Companys largest geographic marketplace. Approximately 57% of the Companys net sales in 2008 came from sales to customers inside the U.S. Final assembly of the Companys products is currently performed in the Companys manufacturing facility in Ireland, and by external vendors in California, the Republic of Korea (?Korea?), the Peoples Republic of China 9

and the Czech Republic. Currently, the supply and manufacture of many critical components is performed by sole-sourced third-party vendors in the U.S., China, Japan, Korea, Malaysia, Philippines, Taiwan, Thailand, and Singapore. Sole-sourced third-party vendors in China perform final assembly of substantially all of the Companys portable products, including MacBook Pro, MacBook, MacBook Air, iPods, iPhone, and most of the Companys iMacs. Margins on sales of the Companys products in foreign countries, and on sales of products that include components obtained from foreign suppliers, can be adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including tariffs and antidumping penalties. Apple has no set geographic target area in particular. By leveraging the expansive reach of the internet and multiple distribution channels, Apple serves both domestic and international markets. The Information below has been extracted from their last Annual Report.

Demographics: 1. Middle/Upper income people who can and are willing to pay a bit more for a better user experience. 2. Individuals in a profession that require high-powered computing performance and expansion capabilities, networking functionality, and seamless integration with complementary products, such as professionals in media and design. Psychographics: 1. Music enthusiasts and fans especially between the ages 12-35. 2. People who like to have fun with technology. Market Needs: 10

Apple seeks to fulfil the following benefits to its catered markets: 1. Effective integration of technology into classroom instruction, which can result in higher levels of student achievement, especially when used to support collaboration, information access, and the expression and representation of student thoughts and ideas. 2. High-powered computing performance and expansion capabilities, networking functionality, and seamless integration with complementary products. 3. Portable digital music with access to third-party music, audio books, music videos, short films, television shows, movies, podcasts, and other applications and an integrated mobile communication experience. Market Trends and Growth Throughout its growth and development, the computer hardware and software market, like many others, has changed a great deal as a result of customer demands. Generally, the overall PC market is being influenced by many trends. One in particular, however, is affecting the market more than any other. Customers are being more educater about their purchases. Computers are being sold less to first time buyers, and much more consumers who have purchased personal computers at least once before. As an increasing number of customers become knowledgeable about computers, other trends are beginning to take shape. As a result of this consumer education, buyers want increased customization of personal computers. The growing amount of knowledge among consumers is creating the ability for buyers to distinguish their personal needs in a computer from a standardized product. The laptop market is growing faster than desktop computers. This trend is being driven by global integration and communication technology. In addition, customers are demanding for greater performance capabilities. Consumers need their computers to operate at higher speeds, work with more memory and to be easier to navigate than ever before. Computer users depend more and more on their laptops to organize their lives and to hold vital information, and as a result companies must work to provide them with the best available technology (Pinegar, 2002) The worldwide market for Flash-based and Hard Disk Drive (HDD)-based players reached 140 million units in 2005, up from 35 million units in 2004. Expectations for this market are high, with InStat forecasting unit shipments to reach 286 million by 2010. Drivers for this thriving market include falling price points, the availability of legitimate subscription and pay-per-download online music sites, increasing Flash memory capacities, and enhanced functionality (Instat, 2005) According to a new report from In-Stat, Year-to-year growth in the Smartphone market will exceed 60%, and will continue to grow robustly for the next several years. The growth is seen as strong despite major challenges in user adoption. There is a risk, however, that these devices will be seen by consumers as just very expensive feature phones, the high-tech market research firm says. A major problem is that many users do not download applications that make the devices more useful after they leave the store. The markets growth will involve major shifts in share among the OS platforms, says Bill Hughes, In-Stat analyst. The winners will be Microsoft and Linux. Their growth will be at the expense of Research In Motion (RIM) and PalmSource, although these organizations will continue to see their numbers grow. The recent report by In-Stat found the following:

The median number of applications that Smartphone users have downloaded is only one, and the ownership of PDAs, the devices that Smartphones are meant to displace, is twice that for Smartphone users as non-users. 11

Consumers, as well as the industry, still lack a clear definition of Smartphone. Many wireless organizations are wary of Microsofts intentions with Windows Mobile. Microsoft is working to overcome the reluctance by the wireless industry by integrating the delivery of content to Windows Mobile-based Smartphones with its server software. SWOT Analysis

Strengths: 1. Brand is all-important. Apple is one of the most established and healthy IT brands in the World, and has a very loyal set of enthusiastic customers that advocate the brand. Such a powerful loyalty means that Ample not only recruits new customers, it retains them i.e. they come back for more products and services from Apple, and the company also has the opportunity to extend new products to them, for example the iPod. 2. Vertical integration builds a self-reinforcing business model: Apple's vertical integration provides seamless integration and a self-reinforcing business model that has a unique ability to spread the effects of success in one area into others as well. It also can have a multiplicative effect, as in the case of iTunes and iPod: the successes of each amplify the successes of the other. Apple is a very successful company. Sales of its iPod music player had increased its second quarter profits to $320 (June 2005). The favourable brand perception had also increased sales of Macintosh computers. So iPod gives the company access to a whole new series of segments that buy into other parts of the Apple brand. Sales of its notebook product are also very strong, and represent a huge contribution to income for Apple. 3. The "Apple Halo": Apple's self-reinforcing business model leverages the technological integration of products to turn new buyers into loyal Apple fans. End-to-end control over the design and manufacture of hardware, software, and peripherals alike allows for high compatibility between products, and high-quality customer support ensures satisfaction and loyalty. Apple's encouragement of differentiation between product designs and its promotion of secrecy around new product launches also heightens the Apple mystique. Together, these combine to create the Apple "halo effect," where a buyer of one Apple product has a high probability of returning to Apple for other products as well. 4. Apple's multi-pronged approach to product development and its new focus on consumer electronics diversifies its markets, significantly improving its expansion opportunities for the next few years. 5. Retail stores a unique way of extending brand visibility and loyalty: Apple's retail stores remain a unique and effective means of reaching new users and encouraging both brand visibility and loyalty. Apple continues to be the best revenue per square foot retailer in the world. They also capture profit from retail resell margins and let Apple sell third-party peripherals like compatible printers and other drivers that Apple would not otherwise have access to. The company plans to open several high profile stores in the remainder of the year, and its "Store within a Store" concept and increased presence at Best Buy (BBY) stores has grown to 400 locations, with plans to expand into 600 as the end of the summer. Sales growth rates in all regions are strong and once again sales of Macs in Apple's retail stores, 50% of the time, went to first time Mac buyers. Without a shadow of a doubt, this company is continuing to grow, and grow dramatically, has some very exciting events and products in the pipeline, and has the potential to significantly expand market share in the Computer and Cell phone business segments. Weaknesses: 12

1. Steve Jobs is Apple - innovation as we know it today. With uncertainty surrounding his current medical condition and the extent of his future involvement with the company, investors on Wall Street are concerned of where Apple is heading in the near term and the long term. While not necessarily bad long-term, this could have large short-term impact on the stock price. 2. Weak brand in emerging markets. The emergence of China and India as key players in PC sales and general technology consumption is troubling for Apple. With relatively light presence in lowermargin, higher-growth geographic areas, Apple will experience less of its halo effect and reduced product/brand recognition, lowering sales potential. With China and India estimated to make up about 66% of PC market growth through 2010, this could be a significant challenge for Apple. 3. Even though Apple may seem so financially strong, its lack of debt may just be a fatal weakness. Apple is very vulnerable to a major stock acquisition by other groups or companies. In addition to the debt/equity issue, Apple has not issued any dividends to its shareholders for many years, which may cause the investors to lose their confidence in this company. 4. It is reported that the Apple iPod Nano may have a faulty screen. The company has commented that a batch of its product has screens that break under impact, and the company is replacing all faulty items. This is in addition to problems with early iPods that had faulty batteries, whereby the company offered customers free battery cases. 5. There is pressure on Apple to increase the price of its music download file, from the music industry itself. Many of these companies make more money from iTunes (i.e. downloadable music files) than from their original CD sales. Apple has sold about 22 million iPod digital music players and more than 500 million songs though its iTunes music store. It accounts for 82% of all legally downloaded music in the US. The company is resolute, but if it gives in to the music producers, it may be perceived as a commercial weakness. 6. Early in 2005 Apple announced that it was to end its long-standing relationship with IBM as a chip supplier, and that it was about to switch to Intel. Some industry specialists commented that the swap could confuse Apple's consumers. 7. Apple TV: less promising. Touted as the future of digital entertainment, the Apple TV nevertheless faces significant competition from on-demand and traditional TV/video offerings. At a hefty US $299 (US $399 for 160GB model), Apple TV targets a consumer group that probably already has access to either cable TV, on-demand, or a DVR/ TiVo. The long download times and spotty video selections (fewer than 300 titles were available on iTunes as of April 2007) could be significant downsides for many buyers. Because the Apple TV has no optical drive, all media content must come from the user's computer (through iTunes or YouTube). Opportunities: 1. Apple is known for its innovative thinking. They have developed a product line that is both functional and attractive. Their product line has recently expanded to another level. Their iPods will soon be able to communicate with specially designed Nike running shoes where you could receive data such as calories burned and distance ran. This project can benefit both companies and boost the demand for iPods. Apples iPod line will have a clear advantage over all the other mp3 players in the market. In addition to Apples integration with other products, many cars models from all major automakers have equipped their new models with iPod connectivity.

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2. In regards to their desktop and notebook sectors, Apple has developed new lines that are less expensive while maintaining its high quality standards. These less-expensive computers should help increase sales in the future. Apple has also changed its chip supplier from IBM to Intel. This change would make Apple more compatible with other systems. It enables Apple to run the Windows operating system, which gives the user more flexibility. 3. Apple has the opportunity to develop its iTunes and music player technology into a mobile phone format. The Rokr mobile phone device was developed by Motorola. It has a colour screen, stereo speakers and a advance camera system. A version of Apple's iTunes music store has been developed for the phone so users can manage the tracks they store on it. Downloads are available via a USB cable, ands software on the handset pauses music if a phone call comes in. New technologies and strategic alliances offer opportunities for Apple. 4. Podcasts are downloadable radio shows that can be downloaded from the Internet, and then played back on iPods and other MP3 devices at the convenience of the listener. The listener can subscribe to Podcasts for free, and ultimately revenue could be generated from paid for subscription or through revenue generated from sales of other downloads. Threats: 1. The biggest threat to IT companies such as Apple is the very high level of competition in the technology markets. Being successful attracts competition, and Apple works very hard on research and development and marketing in order to retain its competitive position. The popularity of iPod and Apple Mac are subject to demand, and will be affected if economies begin to falter and demand falls for their products. 2. There is also a high product substitution effect in the innovative and fast moving IT consumables market. iPod and MP3 rule today, but only yesterday it was CD, DAT, and Vinyl. Tomorrow's technology might be completely different. Wireless technologies could replace the need for a physical music player. 3. In 2005 Apple won a legal case that forced Bloggers to name the sources of information that preempted the launch of new Apple products. It was suspect that Apple's own employees had leaked confidential information about their new Asteroid product. The three individuals prosecuted, all owned Apple tribute sites, and were big fans of the company's products. The blogs had appeared on their sites, and they were forced to reveal their source. The ruling saw commercial confidentiality as more important as the right to speech of individuals. Apple are vulnerable to leaks that could cost them profits. 4. Cannibalization. The proliferation of iPhones could come at the expense of iPod sales, as the iPhone includes an iPod. Competitors: Against the Mac: Apple's position is improving in the worldwide PC market, growing 40% in 2007, compared to 13% global growth during the same period. [4] However, the Mac still represents a small fraction of the overall PC market. Apple's main competitors remain HP and Dell, both of which have experienced significantly lower growth rates than Apple recently. Apple enjoys a unique advantage of having something of a niche market without needing to compete directly with Hewlett-Packard Company (HPQ) and Dell (DELL) and Microsoft (MSFT) operating systems for enterprise endorsement. 14

Against the iPod: Although Apple remains the industry leader in PMPs, the competition is making significant gains. The popularity of flash-based PMPs is problematic for Apple, which has much stronger market presence in hard-drive based (HDD) players. To combat this, Apple may release a new flash-based line of players, in addition to a souped-up and rehauled version of HDD iPods. Apple's main competitors in this area include: SanDisk's Sansa players, one model of which beat the Nano to market, with more GB and a lower price point. Creative's Zen, which has a strong grounding in flash-based players--including the first true widescreen video PMP with the Zen Vision W. Microsoft's Zune, currently uninspiring, but with the potential for significant growth and the ability to leverage unique file transfer technology.
Market Share of Parent Company Price (est. end 2006) Storage Capacity Storage Type Screen Size (dia. inches) Display Resolution Apprx. Dimensions Weight Battery Life (hours, playing music) Video Playback FM Radio Tuner Media Download Source iPod Video 75.6% US$ 250 30 GB HDD 2.5 high 4.0 x 2.5 x 0.5 5 oz 14 yes no iTunes iPod Nano 75.6% US$ 250 8 GB Flash 1.5 Low 3.5 x 1.5 x 0.5 1.5 oz 24 No No iTunes Sansa e280 9.7% US$ 190 8 GB Flash 1.8 medium 3.5 x 1.5 x 0.5 2.5 oz 20 yes yes Real Rhapsody Zune --US$ 250 30 GB HDD 3 high 4.5 x 2.5 x 0.5 5.5 oz 12 Yes Yes Zune Marketplace Zen Vision:W 4.3% US$ 300 30 GB HDD 4.3 very high 5.5 x 3.0 x 1.0 9.5 oz 13 yes no Amazon Unbox

Against iTunes and Apple TV: iTunes' main competitors are Napster and Rhapsody/Real Player, but the service far outstrips both of these in market share. To combat the rise of a wave of new subscription music services, iTunes may launch one of its own in the near future. Apple TV, on the other hand, may face much stiffer competition. While the concept of digital media played on the TV initially seems very promising, Apple TV actually has rather limited functionality--especially against established and well-received sources of media, from Video On-Demand to Netflix to recordable cable programming. All three of these distribution channels offer significantly higher image quality than much of what is available on Apple TV. Against the iPhone: Apple's iPhone must compete with established mobile phone and PDA companies, including the likes of Motorola, Nokia, and Sony, many of which have significantly larger R&D budgets than Apple. The company also experiences challenges from BlackBerry and similar high-end PDA-phone combinations. Because it is unlikely that the iPhone will be issued by corporations as a productivity tool, the BlackBerry and similar devices may enjoy a significant edge in the corporate market. While there has been talk of a Google "G-Phone," this possibility is slim. Google's recent new hires from Sidekick are reported to come from its software section, making it

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probable that Google is developing new applications for mobile phones. This would put Google in a position to work with, not against, the iPhone. Product Offering: The Company offers a range of personal computing products including desktop and portable personal computers, related devices and peripherals, and various third-party hardware and software products. In addition, the Company offers its own software products, including Mac OS X, the Companys proprietary operating system software for the Mac; server software and related solutions; professional application software; and consumer, education, and business oriented application software. The Company also designs, develops, and markets to Mac and Windows users its family of iPod digital music players and its iPhone mobile communication device, along with related accessories and services, including the online distribution of third-party content through the Companys iTunes Store. The Companys primary products are discussed below. Hardware Products The Company offers a range of personal computing products including desktop and notebook computers, server and storage products, related devices and peripherals, and various third-party hardware products. The Companys Mac desktop and portable systems feature Intel microprocessors, the Companys Mac OS X Version 10.5 Leopard (?Mac OS X Leopard?) operating system and iLife suite of software for creation and management of digital photography, music, movies, DVDs, and website. MacBook Pro The MacBook Pro family of notebook computers is designed for professionals and advanced consumer users. First introduced in January 2006, the MacBook Pro includes a 15-inch or 17-inch widescreen display, a built-in iSight video camera, and the MagSafe magnetic power adapter. In October 2008, the Company redesigned its 15-inch MacBook Pro models to include a widescreen light-emitting diode (?LED?) display, the latest Intel Core 2 Duo processors running at up to 2.8GHz, and a new Nvidia GeForce 9600M graphics processor. The 15-inch MacBook Pro includes up to 4GB of 1066MHz synchronous dynamic random access memory (?SDRAM?) with a 1066MHz frontside bus, up to a 320GB hard drive, a slot-loading double-layer SuperDrive, a glass trackpad with MultiTouch TM gesture support, AirPort Extreme 802.11n wireless networking, and Bluetooth 2.1. In addition, the Company updated its 17-inch MacBook Pro models to include larger hard drives of up to 320GB, as well as an optional 128GB solid state drive. MacBook The MacBook is designed for consumer and education users. First introduced in May 2006, the MacBook includes a 13-inch widescreen display, a built-in iSight video camera, and the MagSafe magnetic power adapter. In October 2008, the Company introduced new MacBook models with allmetal unibody enclosures, LED-backlit glossy widescreen displays, Intel Core 2 Duo processors running at up to 2.4GHz, NVIDIA GeForce 9400M graphics processor, support for up to 4GB of 1066MHz SDRAM memory, up to 320GB Serial ATA hard drive, a double-layer SuperDrive, a glass trackpad with Multi-Touch TM gesture support, and built-in AirPort Extreme 802.11n wireless networking and Bluetooth 2.1. MacBook Air 16

In October 2008, the Company updated its MacBook Air, an ultra-slim notebook computer that measures 0.16-inches at its thinnest point and 0.76-inches at its maximum height. The new MacBook Air includes an Intel Core 2 Duo processor running at up to 1.86GHz with 6MB of Level 2 cache, an NVIDIA GeForce 9400M graphics processor, 2GB of memory, and a 120GB hard drive. The MacBook Air includes a 13.3-inch LED backlit widescreen display, a full-size backlit keyboard, a built-in iSight video camera, a trackpad with Multi-Touch gesture support, and built in AirPort Extreme 802.11n wireless networking and Bluetooth 2.1. Mac Pro The Mac Pro desktop computer is targeted at business and professional users and is designed to meet the performance, expansion, and networking needs of the most demanding Mac user. In January 2008, the Company introduced the new Mac Pro featuring up to two Intel Quad-Core Xeon processors running at up to 3.2GHz, 12MB of Level 2 cache per processor and dual-independent 1.6GHz frontside buses, and up to 32GB of 800MHz fully buffered memory. The Mac Pro also features a direct attach storage solution for snap-in installation of up to four 1TB hard drives for a total of 4TB of internal storage and optional AirPort Extreme 802.11n wireless networking and Bluetooth 2.0. iMac The iMac desktop computer is targeted at consumer, education and business customers. In April 2008, the Company updated the iMac to include Intel Core 2 Duo processors running at up to 3.06GHz, up to 4GB of 800MHz SDRAM memory, a faster graphics card option using NVIDIA GeForce 8800 GS graphics, and a slot-loading double-layer SuperDrive. All iMac models also include a built-in iSight video camera, AirPort Extreme 802.11n wireless networking, and Bluetooth 2.1. Mac mini The Mac mini is an Intel-based desktop computer that includes 1GB of 667MHz memory that is expandable to 2GB and either a 1.83GHz or 2.0GHz Intel Core 2 Duo processor. All Mac mini models include built-in Gigabit Ethernet, AirPort Extreme 802.11g wireless networking, Bluetooth 2.0, a total of four USB 2.0 ports, and one FireWire 400 port. Mac mini includes a full-size digital video interface and a video graphics array output adapter to connect to a variety of displays. Xserve Xserve is a 1U rack-mount server powered by up to two Quad-Core 128-bit Intel Xeon processors running at up to 3.0GHz and features Mac OS X Server 10.5 Leopard, which became available in October 2007. Xserve supports up to 32GB of random access memory, remote management, storage drives of up to 3TB, and an optional internal Xserve RAID card. Music Products and Services The Company offers its iPod line of portable digital music players and related accessories to Mac and Windows users. All iPods work with the Companys iTunes digital music management software (? iTunes software?) available for both Mac and Windows-based computers. The Company also provides an online service to distribute third-party music, audio books, music videos, short films, television shows, movies, podcasts, and applications through its iTunes Store. In July 2008, the Company launched the iTunes App Store that allows a user to browse, search for, or purchase thirdparty applications through either a Mac or Windows-based computer or wirelessly download them directly onto an iPhone or iPod touch. In addition to the Company?s own iPod accessories, thousands 17

of third-party iPod compatible products are available, either through the Companys online and retail stores or from third parties, including portable and desktop speaker systems, headphones, car radio solutions, voice recorders, cables and docks, power supplies and chargers, and carrying cases and armbands. iPod shuffle The iPod shuffle weighs half an ounce and features an aluminium design and a built-in clip. The iPod shuffle is available in 1GB or 2GB flash memory configurations and is capable of holding up to 240 or 500 songs, respectively. The iPod shuffle is available in a variety of colours and provides up to 12 hours of battery life. The iPod shuffle includes a shuffle switch feature that allows users to listen to their music in random order or in the order of their playlists synced through iTunes. iPod shuffle works with iTunes? patent-pending AutoFill option that automatically selects songs to fill the iPod shuffle from a users iTunes library. iPod nano In September 2008, the Company introduced the new iPod nano, a flash-memory-based iPod featuring the thinnest iPod design ever. The iPod nano incorporates a two-inch display with 204 pixels per inch, a built-in accelerometer, and an updated user interface featuring Cover Flow and Shake to Shuffle mode. The new iPod nano also features Genius technology allowing users to automatically create playlists from songs in their music libraries. The new iPod nano provides up to 24 hours of audio playback or up to four hours of video playback and is available in 8GB and 16GB configurations in a variety of colors. iPod classic The iPod classic is an upgraded version of the original iPod, the Companys hard-drive based portable digital music player. In September 2008, the Company introduced the new iPod classic, which has 120GB of storage and is capable of holding up to 30,000 songs, 150 hours of video, or 25,000 photos. The iPod classic provides up to 36 hours of audio playback or up to six hours of video playback, features ?Genius? technology, and includes a 2.5-inch color screen that can display album artwork, photos, and video content including music videos, video and audio podcasts, short films, television shows, movies, and games. iPod touch In September 2008, the Company introduced the new iPod touch, a flash-memory-based iPod that is 8.5 mm thin and features a 3.5-inch widescreen display, Genius technology, a built-in speaker, and an accelerometer. The iPod touchs user interface is based on the Companys Multi-Touch display allowing users to control the device with a touchscreen. It also includes Wi-Fi wireless networking, which allows users to access the iTunes Wi-Fi Music Store and iTunes App Store to purchase and/or download audio and video files, as well as a variety of other applications. The iPod touch is available in 8GB, 16GB and 32GB configurations and features up to 36 hours of audio playback and up to six hours of video playback. iTunes 8 iTunes is an application for playing, downloading, and organizing digital audio and video files and is available for both Mac and Windows based computers. iTunes is integrated with the iTunes Store, a service that allows customers to find, purchase, rent, and download third-party digital music, audio 18

books, music videos, short films, television shows, movies, games, and other applications. Originally introduced in the U.S. in April 2003, the iTunes Store now serves customers in 22 countries. In September 2008, the Company announced iTunes 8, which includes the new Genius technology and features new ways of viewing music and video libraries and allows the purchase of high definition television programs from the iTunes Store. In July 2008, the Company launched the iTunes App Store that allows users to browse, search, purchase, and wirelessly download third-party applications directly onto their iPhone or iPod touch. In January 2008, the Company announced iTunes Movie Rentals, a service allowing customers to rent movies from the iTunes Store that can be watched on Macs, Windows-based computers, current generation video-enabled iPods, iPhones, and digitally enabled televisions using Apple TV. iPhone In June 2008, the Company announced iPhone ? 3G, the second-generation iPhone that combines in a single handheld product a mobile phone, a widescreen iPod with touch controls, and an Internet communications device. iPhone features desktop-class email, web browsing, searching, and maps and is compatible with both Macs and Windows-based computers. iPhone automatically syncs content from users? iTunes libraries, as well as contacts, bookmarks, and email accounts. Its user interface is based on the Companys Multi-Touch display allowing users to control the device with a touchscreen. iPhone 3G combines the features of the original iPhone, which was released in June 2007, with 3G networking, a built-in global positioning system (?GPS?), and iPhone 2.0 software. iPhone 2.0 software incorporates new enterprise features, including support for Microsoft Exchange ActiveSync and Cisco IPsec virtual private network (?VPN?). iPhone 3G is a quad-band GSM phone featuring 3G, EDGE and Wi-Fi wireless technologies for data networking, Bluetooth 2.0, a built-in 2.0 megapixel camera, and a 3.5-inch touch widescreen with 480-by-320 resolution at 163 pixels per inch. iPhone 3G provides up to 10 hours of talk time on 2G networks and five hours using 3G networks, up to five to six hours of web browsing, up to seven hours of video playback, or up to 24 hours of audio playback. It is available in 8GB and 16GB configurations. In July 2008, the Company began shipping iPhone 3G in certain countries and made iPhone 2.0 software available to all iPhone customers. The Company has signed multi-year agreements with various cellular network carriers authorizing them to distribute and provide cellular network services for iPhone 3G in over 70 countries. These agreements are generally not exclusive with a specific carrier, except in the U.S., U.K., France, Germany, Spain, Ireland, and certain other countries. The Company expects to ship iPhone 3G in over 70 countries by the end of calendar year 2008. In addition to the Companys own iPhone accessories, third-party iPhone compatible products, including headsets, cables and docks, power supplies, and carrying cases, are available through the Companys online and retail stores or from third parties. Peripheral Products The Company sells a variety of Apple-branded and third-party Mac-compatible peripheral products directly to end-users through its retail and online stores, including printers, storage devices, computer memory, digital video and still cameras, and various other computing products and supplies. Displays The Company manufactures a family of widescreen flat panel displays including the 23-inch and 30inch Apple Cinema High Definition (?HD?) Displays?, and the 20-inch Apple Cinema Display. In October 2008, the Company introduced a 24-inch LED Cinema Display that features a built-in iSight camera, microphone, built-in 2.1 speaker system, and MagSafe charger. 19

Apple TV Apple TV is a device that permits users to wirelessly play iTunes content on a widescreen television. Compatible with a Mac or Windows based computer, Apple TV includes either a 40GB or 160GB hard drive capable of storing up to 200 hours of video, 36,000 songs, 25,000 photos, or a combination of each and is capable of displaying content in high definition resolution up to 720p. Apple TV connects to a broad range of widescreen televisions and home theater systems and comes standard with high-definition multimedia interface, component video, and both analog and digital optical audio ports. Using high-speed AirPort Extreme 802.11n wireless networking, Apple TV can auto-sync content from one computer or stream content from up to five additional computers directly to a television. Software Products and Computer Technologies The Company offers a range of software products for consumer, SMB, education, enterprise, government, and creative customers, including the Companys proprietary operating system software; server software and related solutions; professional application software; and consumer, education, and business oriented application software. Operating System Software Mac OS X is built on an open-source UNIX-based foundation. Mac OS X Leopard is the sixth major release of Mac OS X and became available in October 2007. Leopard includes 300 additional features and introduces an updated desktop with Stacks, a means of easily accessing files from the Dock; a redesigned Finder? that lets users quickly browse and share files between multiple Macs; Quick Look, a way to instantly see files without opening an application; Spaces, a feature used to create groups of applications and instantly switch between them; and Time Machine?, a way to automatically back up all of the contents of a Mac. Application Software iLife ?08 In August 2007, the Company introduced iLife 08, the latest release of its consumer-oriented digital lifestyle application suite, which features iPhoto, iDVD, GarageBand, iWeb, and iMovie 08. All of these applications are Universal, meaning that they run natively on both Intel and PowerPCbased Mac computers (Universal). iPhoto is the Companys consumer-oriented digital photo software application. iPhoto ?08 adds new features for organizing and browsing photos, including event-based grouping, new professional quality image editing tools, and enables publishing to the MobileMe Web Gallery. The MobileMe Web Gallery, is fully integrated with iPhoto 08 and iMovie 08, allowing MobileMe users to share photos and movies over the web. iPhoto ?08 features print, photo book, greeting card, and calendar layout tools and integrated online ordering services. iMovie 08 is the latest version of the Companys consumer-oriented digital video editing software application. iMovie 08 provides new tools for quick movie creation and video enhancements, including transitions, titles, music and sound effects. Projects in iMovie 08 can also be published to the MobileMe Web Gallery.

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iDVD is the Companys consumer-oriented software application that enables users to turn iMovie files, QuickTime files, and digital pictures into interactive DVDs that can be played on most consumer DVD players. iDVD 08 features 10 new Apple-designed menu themes in both widescreen (16:9) and standard (4:3) formats. GarageBand is the Companys consumer-oriented music creation software application that allows users to play, record and create music using a simple interface. With GarageBand, software instruments, digital audio recordings and looping tracks can be arranged and edited to create songs. GarageBand 08 allows users to export finished songs to their iTunes library, or publish a podcast through iWeb and MobileMe that includes artwork, sound effects, and music jingles. iWeb allows users to create online photo albums, blogs and podcasts, and to customize websites using editing tools. iWeb08 offers new features to make websites more interactive by adding live web widgets, which are snippets of live content from other websites, such as Google Maps, targeted ads using Google AdSense, and photos or movies from the MobileMe Web Galleries. iWork ?08 In August 2007, the Company introduced iWork 08, the latest version of the Companys integrated productivity suite designed to help users create, present, and publish documents, presentations, and spreadsheets. iWork 08 includes updates to Pages ?08 for word processing and page layout, Keynote ?08 for presentations, and introduces Numbers ?08 for spreadsheets. All of these programs are Universal and feature advanced image tools, including enhanced photo masking, resizable picture frames and edges, and Instant Alpha, which easily removes the background of a photo. Final Cut Studio 2 In April 2007, the Company introduced Final Cut Studio 2, an upgraded version of the Companys video production suite designed for professionals. Final Cut Studio 2 features Final Cut Pro 6 for video editing, DVD Studio Pro 4 for DVD authoring, Motion 3 for real-time motion graphics, Soundtrack Pro 2 for audio editing and sound design, Color for color grading and finishing, and Compressor 3 for encoding media in multiple formats. All of these applications are Universal. The Company also offers Final Cut Express HD 3.5, a consumer version of the Companys movie making software. Logic Studio In September 2007, the Company introduced Logic Studio, a comprehensive suite of professional tools used by musicians and professionals to create, perform, and record music. Logic Studio features Logic Pro 8, an upgraded version of the Companys music creation and audio production software; MainStage, a new live performance application; Soundtrack Pro 2, a professional audio post production software; Studio Instruments, made up of 40 instrument plug-ins; Studio Effects, with 80 professional effect plug-ins; and studio Sound Library. In addition, the Company offers Logic Express 8, a standalone version of the Logic Pro 8 application that provides an easy entry into professional music production. All of these applications are Universal. FileMaker Pro The FileMaker Pro database software is Universal and offers relational databases and desktop-to-web publishing capabilities. In July 2007, the Company introduced FileMaker Pro 9 featuring a new Quick 21

Start screen, which stores users favorites and gives them access to the new videos in the FileMaker Learning Center; Conditional Formatting, which highlights data based on parameters the user sets; and the ability to email a link to other FileMaker users to instantly access a database. Internet Software and Services The Company is focused on delivering seamless integration with and access to the Internet throughout the Companys products and services. The Companys Internet solutions adhere to many industry standards to provide an optimized user experience. Safari In March 2008, the Company made available Safari 3.1, a web browser compatible with Windows XP, Windows Vista, and Mac OS X. Safari 3.1 includes built-in Google search; SnapBack to instantly return to search results; a way to name, organize and present bookmarks; tabbed browsing; and automatic ?pop-up? ad blocking. Safari 3.1 supports the new video and audio tags in HTML 5 and supports Cascading Style Sheets Animations and Web Fonts, which provide designers additional choices of fonts to create web sites. QuickTime QuickTime, the Companys multimedia software for Mac or Windows-based computers, features streaming of live and stored video and audio over the Internet and playback of high-quality audio and video on computers. QuickTime 7 features H.264 encoding and can automatically determine a users connection speed to ensure they are getting the highest-quality content stream possible. QuickTime 7 also delivers multichannel audio and supports a wide range of industry standard audio formats. The Company offers several other QuickTime products. QuickTime 7 Pro, a suite of software tools, allows creation and editing of Internet-ready audio and video files. QuickTime 7 Pro allows users to create H.264 video, capture audio and video, create multi-channel audio, and export multiple files while playing back or editing video. MobileMe In June 2008, the Company introduced MobileMe, an annual subscription-based suite of Internet services that delivers email, contacts and calendars to and from native applications on iPhone, iPod touch, Macs, and Windows-based computers. MobileMe services include Internet message access protocol (IMAP) mail, an ad-free email service; website hosting for publishing websites from iWeb; iDisk, a virtual hard drive accessible anywhere with Internet access; Web Gallery for viewing and sharing photos; MobileMe Sync, which keeps Safari bookmarks, iCal calendars, Address Book information, Keychain, and Mac OS X Mail preferences up-to-date across multiple computers, iPhones, and iPod touches. MobileMe provides combined email and file storage of 20GB for individuals and 40GB for families with additional storage options (Apple, 2008).

Timeline of Apple Products

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Products on this timeline indicate introduction dates only and not necessarily discontinued dates, as new products begin on a contiguous product line (Reuters, 2008) Keys to success Apple can definitely expect a prosperous future especially in the near future. Over the past five years, net sales have been steadily increasing with almost a 200% increase from 2004 and 2005. Correspondingly, net earnings have been increasing as well. Apple owns over 80% of the market share with its iPod product. With such favorable trends, it is reasonable to assume that Apple will continue to increase in its sales, earnings, and market share just as long as it keeps developing and acquiring new strengths. For example, Apple has established its name as one of the leading, innovative forces in the computer industry that has a much diversified, high quality products that appeal to many markets. Competitors will find it difficult to compete against the company if Apple continues to strive for innovation, as it is its mission, continuing its well-developed marketing plan, further developing more high quality products, and taking advantage of its opportunities. Critical issues Although it seems that Apple is not in a position where its favorable future outlook is threatened, it is best that Apple works on its weaknesses so as to further increase its sales and decrease the possibility of losing its customers to its competitors. For example, Apple is known for its high quality products, which puts them into a competitive advantage. However some components of its products such as the iPod batteries and the iPod Nano screens are of lesser quality. Apple must increase its R&D efforts to really minimize the number of products with faulty components. Thus, customers would not be lost and customer loyalty would be maintained. Another weakness that must be addressed is the high prices of its products which discourage potential customers from purchasing Apples products. The solution to this weakness is to decrease the prices to the point where profits are still increasing. Likewise, the cost of sales should be decreased but only to the point where the quality of the products is not sacrificed. 23

Another weakness that should be addressed is the lack of paying dividends. Although other computer companies do not pay dividends, they will eventually start paying dividends. Apple have not paid dividends since 1995 and because of its increasing earnings, the company has the ability to pay off dividends. Starting as soon as possible will put Apple in a better competitive advantage because it will definitely improve stockholder loyalty as well as allow for an increase in shares.

Marketing Strategy
Mission 24

Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone (Apple, 2008). Marketing objectives The Company participates in several highly competitive markets, including personal computers with its Mac line of computers, consumer electronics with its iPod product family of portable digital music players, and distribution of third-party digital content through its online iTunes Store. With the introduction of iPhone, the Company has also begun to compete with mobile communication device companies that have substantial experience and technological and financial resources. While the Company is widely recognized as a leading innovator in the personal computer and consumer electronics markets as well as a leader in the emerging market for distribution of digital content, these markets are highly competitive and subject to aggressive pricing. Thus to remain competitive in such markets, Apple has chosen to concentrate on the following marketing objectives: 1. Focus spending on R&D for further developing its existing line of personal computers, operating systems, application software, and portable digital music players; developing new digital lifestyle consumer and professional software applications; and investing in new product areas such as iPhone and wireless technologies. 2. To increase product and brand awareness in the markets where it competes, especially in the emerging markets, for which it is critical that investment in marketing and advertising programs is critical. 3. Utilize a variety of direct and indirect distribution channels: The Company believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware, software, and peripheral integration, demonstrate the unique digital lifestyle solutions that are available only on Mac computers, and demonstrate the compatibility of the Mac with the Windows platform and networks. The Company further believes providing a highquality sales and after-sales support experience is critical to attracting and retaining customers. To ensure a high-quality buying experience for its products in which service and education are emphasized, the Company has expanded and improved its distribution capabilities by opening its own retail stores in the U.S. and internationally. The Company had 197 stores open as of September 29, 2007. The Company also staffs selected third-party stores with the Company's own employees to improve the buying experience through reseller channels. The Company has deployed Apple employees and contractors in reseller locations around the world including the U.S., Canada, Europe, Japan, Asia, Latin America and Australia. The Company also sells to customers directly through its online stores around the world. To improve access to the iPod product family, the Company has significantly expanded the number of distribution points where iPods are sold. iPods can be purchased in certain department stores, member-only warehouse stores, large retail chains, and specialty retail stores, as well as through the channels for Mac distribution listed above. The Company began shipping iPhone in the U.S. on June 29, 2007, in the U.K. and Germany on November 9, 2007 and in France on November 29, 2007. AT&T Mobility LLC ("AT&T"), O2 25

Limited ("O2"), T-Mobile International AG & Co. KG ("T-Mobile"), and France Telecom ("Orange") are the exclusive cellular network carriers for iPhone in the U.S., U.K., Germany, and France, respectively. iPhone is distributed through the Company and its exclusive cellular network carriers' distribution channels (Apple, 2008). Financial objectives 1. The Company intends to utilize approximately $1.5 billion for capital asset purchases during 2009, including approximately $400 million for Retail facilities and approximately $1.1 billion for corporate facilities and infrastructure. 2. The Companys short-term investment policy and strategy attempts primarily to preserve capital and meet liquidity requirements. A portion of the Companys cash is managed by external managers within the guidelines of the Companys investment policy and to an objective market benchmark. The Companys internal portfolio is benchmarked against external manager performance, allowing for differences in liquidity needs. 3. The Company had $117 million in net unrealized losses on its investment portfolio, primarily related to investments with stated maturities ranging from one to five years, as of September 27, 2008, and net unrealized losses of approximately $11 million on its investment portfolio, primarily related to investments with stated maturities from one to five years, as of September 29, 2007. The Company intends to hold such investments for a sufficient period of time to allow for recovery of the principal amounts invested. 3. Although total R&D expense increased 42% during 2008, it remained relatively flat as a percentage of net sales given the 35% increase in revenue during 2008. 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 timely development of new and enhanced products that are central to the Companys core business strategy. As such, the Company expects to increase spending in R&D to remain competitive. 4. The Companys asset retirement obligations are associated with commitments to return property subject to operating leases to original condition upon lease termination. As of September 27, 2008, the Company intends gross expected future cash flows of $28 million to be redirected to fulfil these obligations. Target markets Consumer and Small and Mid-Sized Business The Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Companys products and services greatly enhances its ability to attract and retain customers. The Company sells many of its products and resells certain third-party products in most of its major markets directly to consumers and businesses through its retail and online stores. Education Throughout its history, the Company has focused on the use of technology in education and has been committed to delivering tools to help educators teach and students learn. The Company believes effective integration of technology into classroom instruction can result in higher levels of student achievement, especially when used to support collaboration, information access, and the expression 26

and representation of student thoughts and ideas. The Company has designed a range of products and services to address the needs of education customers. These products and services include the Companys Mac computers, iPods, and iTunes, in addition to various solutions for video creation and editing, wireless networking, professional development, and one-to-one learning. Enterprise, Government and Creative The Company also sells its hardware and software products to enterprise, government, and creative customers in each of its geographic segments. These markets are also important to many third-party developers who provide Mac-compatible hardware and software solutions. These customers utilize the Companys products for their high-powered computing performance and expansion capabilities, networking functionality, and seamless integration with complementary products. The Company designs its high-end hardware solutions, including desktops such as Mac Pro, portable Mac systems such as MacBook Pro and MacBook Air, and servers to incorporate the power, expandability, and other features desired by these professionals. The Companys operating system, Mac OS X, incorporates powerful graphics and audio technologies and features developer tools to optimize system and application performance. Other In addition to consumer, SMB, education, enterprise, government and creative markets, the Company provides hardware and software products and solutions for customers in the information technology and scientific markets (Apple, 2008). Positioning The Company believes that for both professionals and consumers the personal computer has become the centre of an evolving digital lifestyle by integrating with and enhancing the utility of advanced digital devices such as the Company's iPods, iPhones, digital video and still cameras, televisions, personal digital assistants, and other digital devices. The attributes of the personal computer that enable this functionality include a high-quality user interface, easy access to relatively inexpensive data storage, the ability to run complex applications, and the ability to connect easily to a wide variety of other digital devices and to the Internet. The Company is the only participant in the personal computer industry that controls the design and development of the entire personal computerfrom the hardware and operating system to sophisticated applications. This, along with its products' creative industrial designs, intuitive ease-of-use, and built-in graphics, multimedia and networking capabilities, uniquely positions the Company as offering innovative integrated digital lifestyle solutions. Strategy summary The Company is committed to bringing the best personal computing, portable digital music and mobile communication experience to consumers, students, educators, businesses, and government agencies through its innovative hardware, software, peripherals, services, and Internet offerings. The Companys business strategy leverages its unique ability to design and develop its own operating system, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design. The Company believes continual investment in research and development is critical to the development and enhancement of innovative products and technologies. In addition to evolving its personal computers and related solutions, the Company continues to capitalize on the convergence of the personal computer, digital consumer electronics and mobile communications by creating and refining 27

innovations, such as the iPod, iPhone, iTunes Store, and Apple TV. The Company desires to support a community for the development of third-party products that complement the Companys offerings through its developer programs. The Company offers various third-party software applications and hardware accessories for Mac computers, iPods and iPhones through its retail and online stores, as well as software applications for the iPhone platform through its iTunes App Store. The Companys strategy also includes expanding its distribution network to effectively reach more of its targeted customers and provide them with a high-quality sales and post-sales support experience.

Marketing Mix

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This analysis of this report has been restricted to Apples line of portable digital music players, the Ipod. Thus the following paragraphs contain Apples marketing dimensions only with respect to this product line. Product The IPod allows consumers to download through Apples iTunes digital music management software, not only their favourite music but also books and other literature which can be read and listened to. Additionally the Ipod can be used in your car and in other mobile settings. The company has also released various accessories for this product to increase its utility in various environments such like your home or your car. Apples IPods are available in various colours and prices in accordance to their storage capacity and other additional features as seen below.

iPod Shuffle 1GB

iPod nano 8GB 16GB

iPod classic 120GB: AED 1,099

iPod touch 8GB: AED 999 16GB: AED1299 32GB: AED1499

Branding Apple has a branding strategy that focuses on the emotions. The Apple brand personality is about lifestyle; imagination; liberty regained; innovation; passion; hopes, dreams and aspirations; and power-to-the-people through technology. The Apple brand personality is also about simplicity and the removal of complexity from people's lives; people-driven product design; and about being a really humanistic company with a heartfelt connection with its customers. This is the image that has rubbed off on the IPod. Therefore the IPod has been aimed at the middle to high class and will be positioned in department stores associated with prestige/classy products. This will create a strong, clear and consistent image of the product in the consumers mind which is essential. Various editions of the Ipod have also been released such as the one featuring Irish Rock Band U2 for creating the IPods unique classy image (Marketing Minds, 2008). Packaging: Apple's iPod packaging has been called "flawless," "inventive," and "utterly consistent with what we've come to expect," among various other things and has won several design distinction awards (Mnm Media Llc, 2008). They give the consumer the best out-of-the-box experience in the industry. In keeping with tradition, the packaging for the Classic is a nicely scaled down box of minimalist design. To add a touch of class, the front surface picturing the player is also raised along the edges of the image. Pop it open and that virtual cardboard fantasy becomes a cold metal and plastic reality. In a sense, you are almost unveiling the product to yourself. This is actually kind of interesting, as it plays nicely on a psychological phenomenon called object permanence (Brandon, 2007). Under the tray holding the multimedia mega-monster, there is a scant quick start/warranty/disclaimer notice, followed by a bag containing the accessories. These include ear bud headphones, a USB sync/charging cable, wall adapter and a docking station adapter to Appleapproved docking stations (if included).

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(Source:www.digitaltrends.com) Price Apple uses premium pricing in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the tendency for buyers to assume that IPods enjoy an exceptional reputation or represent exceptional quality and distinction. In this way the Ipod achieves consistency with the brand image that Apple has conceptualized for it. The current pricing for the various products in Apples line of portable digital music players is listed below. Ipod Shuffle1GB: AED 199; 2GB: AED 299 Ipod Nano8G: AED 649; 16GB: AED 849 Ipod Classic120GB: AED 1,099 Ipod Touch8GB: AED 999; 16GB: AED1299; 32GB: AED1499

Promotions Apple through ABM, their independent marketing company has used many promotional strategies successfully, since the launch of the Ipod here in the U.A.E. The strategies that have been commonly used have been listed below and with examples in certain cases: 1. In-store advertising: In store advertising includes ads inside retail outlets, including ads on shopping carts aisles and shelves as well as promotion options such as in-store demonstrations.

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2. Advertisements in usual media such as Magazines and in alternative options like Place advertising. Also called out-of-home advertising, place is a broadly defined category that captures many different ad placements such as billboards and public spaces. 3. Sponsorships: Eg: The Hayah Film Competition; a section of the Middle East International Film Festival (MEIFF) in Abu Dhabi, UAE. Anyone in the Middle East can submit films, no more than five minutes long, in an iPod compatible format, in one of three categories: Student, Professional, and Amateur. Each category will have a winner who receives a cash prize and other awards which will be presented at the MEIFF Closing Night Ceremony. The Hayah Film Competition, presented by Abu Dhabi Womens College and EmiratesMac Apple User Group, promises to be an exciting event which combines creativity with the latest technology, and it fits well in with the overall spirit and ambition of MEIFF (Hayah Film Competition, 2007). 4. Consumer promotion tools: -Tie-in-promotions: Two or more brands or companies team up on coupons, refunds, and contests to increase pulling power. Eg: Use your HSBC Credit Card & the blue Air Miles Card together every time you shop in August 08 and September 08 and you could win 1 million Air Miles. The more you use these 2 cards together, the more your chances of winning a million Air Miles. One winner will be chosen every week and the names of the 8 lucky winners will be announced at the end of the promotion period. 8 lucky winners will win 1 Million Air Miles each. If you are not into travelling, then you can use your 1 million Air Miles to redeem various gifts (HSBC Bank Middle East Limited, 2008). 1 million Air Miles could fetch you*:

A Canon camcorder, BenQ digital camera, 8GB ipod Nano and a Philips 32" LCD TV. Or, AED 7100, worth gift vouchers from Damas Jewellery or Lamcy or Spinneys Or, Choose & make your own combination of gifts, from the list available on www.airmilesme.com

-Premiums: Merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. Eg: The exclusive offer gives customers a chance to purchase a 4th Generation iPod with Dock and Charger with a capacity of 40GB (thats 10, 000 songs). The iPod is compatible with Windows and Macintosh and has a touch-sensitive click wheel feature that helps select playlists, scroll through thousands of songs and start music at the click of a button. The promotion includes the iTrip Digital FM Transmitter allowing one to play music wirelessly through any FM radio in the car, at a party, or at home (Jumbo Corporation Limited, 2009). -Cross Promotions: Using one brand to advertise another noncompeting brand Eg: With the purchase of every calibration set, you will receive an EasyLung and iPod nano free. Order your calibration set today and enjoy the summer while listening to music on your iPod nano! (Intmedical ag, 2008) -Retailer contests: Prizes are offers of the chance to win cash, trips or merchandise as a result of purchasing something. 31

Eg: Register for any CCNA Concentrations Course (IIUC, IINS or IUWNE) and be eligible to enter the draw to win a 4GB iPod Nano! Please make sure to mention 'Arabian Business' as a reference on your registration form and become eligible to win a 4GB iPod Nano (Fast Lane Institute for Knowledge Transfer, 2009). -POP displays: Displays that take place at the point of purchase or sale. By promoting the Ipod through these multiple strategies Apple is able to extend its exposure in target markets and by the use of specific vehicles Apple is able affect consumer perception so as to amplify its brand image. Placement Apple Ipod uses indirect distribution in the U. A. E where an intermediary organisation is involved in the process. Arab Business Machine Ltd (ABM) is Apple's Independent Marketing Company (IMC) for the Middle East region. They also provide consulting services for pre and post-sale technical marketing support, new product support, resellers and customer education and marketing support. ABM was trophy awarded in 1989 as the fastest growing IMC of Apple Africa, Mediterranean and the Middle East department (AMME). ABM sells directly through its network of Distributors, Resellers, VARs (Value Added Resellers) & Retailers in the following countries: 'Lebanon, Egypt, United Arab Emirates, Bahrain, Oman, Qatar, Kuwait, Jordan, Yemen & the Kingdom of Saudi Arabia. ABM provides functions such as: - Fragmenting bulk supplies of inventory - Giving financial services to retailers - Increasing ease of customer purchase. This strategy assists Apple as they can concentrate on other areas of the business. The distributor network through which Apples Ipod is made available has been listed below (Jelsoft Enterprises Ltd, 2009).
Seller Bose Store Cellucom Computer Direct Access Abu Dhabi Computer Direct Access Dubai Graphitech iStore iStyle Abu Dhabi Mall iStyle Festival City iStyle Ibn Battuta iTek FZ LLC Jarir Bookstore Jumbo Electronics ProTECH Sharaf DG Virgin Megastore Virgin Megastore Location Marina Mall, Abu Dhabi City Center, Sharjah La Marquise Furniture Building, Hamdan Street, Abu Dhabi Sheikh Rashid Road, Dubai Airport Road, Dubai Bur Dubai, Khaleed Bin Waleed Street, Dubai Abu Dhabi Mall, Abu Dhabi Festival City, Dubai Ibn Battuta Mall, Dubai Dubai Meena Mall, Mina Zayed, Abu Dhabi Mall of the Emirates, Dubai Sheikh Zayed Road, Dubai Ibn Battuta Mall, Dubai Mall of the Emirates, Dubai Abu Dhabi Mall, Abu Dhabi Phone N/A N/A Web site N/A www.cellucom.com

02-6717275 www.cdauae.com 04-3359800 www.cdauae.com 04-2822559 www.graphitech.co.ae 04 3525211 N/A 02-6444934 www.istyle.ae 04-2329979 www.istyle.ae 04-3669797 www.istyle.ae 04-3915333 www.itekmds.com 02-6733999 www.jarirbookstore.com 04-3410101 www.jumbocorp.com 04-3435501 www.protech-me.com 04-3685115 www.sharafgroup.com N/A N/A N/A N/A

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Conclusions and Recommendations

Over the past few years, Apple has been moving into brand new markets with impressive frequency. In 2001, the company rolled out the iPod and kick-started the market for digital music players. In the end, this turned out to be a natural fit for Apple, despite limited success with earlier consumer electronics. Both were excellent products, but perhaps came to market before their time. On a dollar basis, the iPod has more than an 80% share of the digital music player market. Then came the iTunes Music Store. Like the iPod, Apple was not first to develop an online music store, but the company once again kick-started the market, rolling out an easy pay-per-song system 33

with a single price across the board -- a dollar menu for music fans. There was some early doubt -many observers, including myself, wondered if users would pay for music when LimeWire, Kazaa , and other tools enabled users to easily take the songs they wanted for nothing. However, Apple leveraged its existing iPod dominance and created the only truly successful online music store. Users who wanted everything to "just work" -- a Steve Jobs mantra -- found their lives made easier by the iPod/iTunes Store combo. As high-quality, full-length digital video became an online possibility thanks to near-universal highspeed internet access, Apple rolled out per-episode pricing for day-and-date plus-one television shows, movie purchases, and, most recently, digital movie rentals. Video hasn't achieved the same sales rates as songs for Apple, mostly because of alternate online services such as Hulu, on-demand services through traditional cable providers and digital video recorders like TiVo. In addition, there hasn't been a killer product for digital video like the iPod was for music -- though the Apple TV and iPod Touch/iPhone are slowly getting there. Most recently, Apple got into the mobile phone market with the iPhone. The iPhone has been a tremendous success, with Apple selling more than 5 million of the original iPhone and probably millions more of the iPhone 3G. The Mac has always been Apple's bread and butter, providing the majority of profits and revenue, while its other businesses like the iPod and iPhone have existed mostly to drive users to the Mac (Golson, 2008). As most people agree, Apple is a company leading the herd into new realms, discovering new technologies and new civilizations, boldly going where no company has gone before, but here's the story - while Apple is usually ahead of the industry, when it comes to the worsening global economy, they were a few steps behind. Unfortunately, it seems not even Apple could escape recession completely, since their cooldown has started already, despite the excellent results shown by some of the latest sales reports. But the fact is Phones and computers have become increasingly essential to society and consumers will still buy them if the recession turns into a depression. Cell phones especially have very inelastic demand. Even if someone loses their job, has their house foreclosed on, and loses their life savings in the stock market - their cell phone would be one of the last things they would give up. At $199, the iPhone is more expensive than free phones that come with new service contracts, but inline with most other smart phones. It also adds another $30/month for data, but that is less expensive than most Blackberry plans. The added value of advanced internet browsing, the App store, iTunes, visual voice mail, push email, and highly rated user friendliness goes a long way in making up for the increased price tag. Additionally, cell phones have an average life of one year. This recession will cause some people to delay new computer purchases, but given the speed technology changes and the limited life of hardware, people will continue to buy new computers. Apple computers are more expensive than low end PCs and notebooks and this will surely slow the PC-to-Apple adoption rate. But, as said earlier, with Apple currently selling only a tenth of what Windows does, that leaves many potential customers with the money to buy them. Other reasons for Apple computer sales growth: iPods halo effect and the Macs popularity in pop culture. Hence under such economic circumstances there are definitely certain recommendations that could be made for Apple to grow its market share, especially in the U.A.E.

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A constant criticism of Apple, dating back to the hugely profitable 80's and early 90's, has been the perceived or real price premium the company puts on its products. Apple has briefly had sub-$1,000 computers in the past, and still offers the Mac Mini desktop for $600, but the company has never aggressively competed on price for full-sized desktops and laptops. Instead, users have paid an upfront premium for a better user experience and better design. However, under the present situation when consumers would hesitate to shell out such a premium, it would be a most appropriate time for Apple to make their pricing more elastic. Though prices need not be slashed, Apple can market their products under various promotional schemes that offer discounts as frequently as possible. This would not only cause minimum damage to their brand image but would also help in capturing that segment of the target market that have always been aspiring to own the brand and its products but have never been able to afford to do so. Another aspect of the marketing mix that can be worked on is promotion. Brands are all about connecting emotionally. No one connected more emotionally than Apple fanatics that stayed with the company when no one cared. Apple is notoriously famous for its cult marketing. And this is the strategy that it can enforce in this market. It is suggested that Apple could focus more on promoting its products to the youth market through strategies like sponsoring events for youth like rock concerts and sports competitions. It is this segment that Apple can focus on for attaining a chunk of their future revenue. It is from this youth market that spring out Apples target segments like creative and media professionals. Getting them hooked on to the brand and making them Apple fanatics would go a long way in enhancing Apples market leadership in the future. In terms of product attributes, Apple is reputed for its innovation and technological and aesthetic superiority. For ensuring the success of Apple, this is the way it has to remain. But certain suggestions that can be made are strategies like co-branding or even ingredient branding. Apple should seek to capitalize on the compatibility of its products with other digital technology and seek to create synergistic and profitable relationships with other brand or companies. For instance, it could conceptualize a co-branding relationship with a classy auto manufacturer like BMW wherein its products like the IPod and the Mac Os could be integrated in the cars of the auto manufacturer. As an offshoot of this scheme more promotional strategies could be recommended. This would lead to more cross promotional opportunities. In the same context another suggestion that could be made is for creative and media professionals to advertise in their work (be it movies or music or ads) that their efforts have been made possible by Apple products. These strategies would work well in advancing Apples presence and leadership in the market.

Reference List
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