Assignment DSM 401: Consumer Behavior

Name IC No. Student ID Lecturer

: Lam Wai Kit : 921020-08-5475 : 09-201012-00003 : Mr. Jalaluddin

Why should a consumer want to buy Apple Phone brand instead of Samsung Phone brand?

Prepare by, Lam Wai Kit, Faculty of Business Management, Cosmopoint International College of Technology Ipoh, No. 68, Jalan Sultan Idris Shah, 30000 Ipoh Perak.

ACKNOWLEGMENT On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards all the personages who have helped me in this endeavor. Without their active guidance, help, cooperation & encouragement, I would not have made headway in the project. I am ineffably indebted to Mr. Jalaluddin for conscientious guidance and encouragement to accomplish this assignment. I am extremely thankful and pay my gratitude to my faculty of Business Management for their valuable guidance and support on completion of this project in it is presently. I extend my gratitude to Cosmopoint International College of Technology Ipoh for giving me this opportunity. I also acknowledge with a deep sense of reverence, my gratitude towards my friends and colleagues, who has always supported me morally as well as economically. At last but not least gratitude goes to all of my friends who directly or indirectly helped me to complete this project report. Any omission in this brief acknowledgement does not mean lack of gratitude.

Thank You, LAM WAI KIT

TABLE OF CONTENT PAGE Title Page Acknowledgement Table of Content List of Table List of Figure

CHAPTER 1: INTRODUCTION 1.1 Company Profile Name Industries served Geographic areas served Headquarters Current CEO Revenue Profit Employees Apple Inc. Computer hardware, Computer software, Consumer electronics, Digital distribution Worldwide U.S. Tim Cook $ 156.508 billion (2012) $ 41.733 billion (2012) 72,800 (2012) Samsung Electronics Co., Ltd., Amazon.com, Inc., International Business Machines Corporation, Cisco Main Competitors Systems, Inc., Google Inc., Microsoft Corporation, Dell Inc., LG Electronics, Lenovo Group Limited, HewlettPackard Company, Sony Corporation and many others. Table 1.0 Apple Profile Apple Inc. is an American multinational corporation, which designs, manufactures and sells personal computers, consumer electronics and software, and provides related services. The company has experienced a tremendous growth from 2001 when it has introduced its iPod mp3 player. Apple Inc. is considered to be the most successful electronics company in the world.

CHAPTER 2: SWOT ANALYSIS FOR APPLE PHONES Apple SWOT analysis Strengths 1. Customer loyalty combined with 1. High price expanding closed ecosystem 2. Incompatibility with different OS Weaknesses

2. Apple is a leading innovator in mobile 3. Decreasing market share device technology 3. Strong financial cash, 4. Patent infringements performance 5. Further changes in management gross profit 6. Defects of new products 7. Long-term gross margin decline

($10,000,000,000

margin 43.9% and no debt) 4. Brand reputation 5. Retail stores 6. Strong marketing and advertising teams Opportunities

Threats

1. High demand of iPad mini and iPhone 1. Rapid technological change 5 2. iTV launch 2. 2013 tax increases 3. Rising pay levels for Falcon workers

3. Emergence of the new provider of 4. Breached IP rights application processors 5. Price pressure from Samsung over key

4. Growth of tablet and smartphone components markets 5. Obtaining patents through acquisitions 6. Damages from patent infringements 6. Strong dollar 7. Android OS growth 8. Competitors moves in online music

7. Strong growth of mobile advertising market market 8. Increasing demand of cloud based services Table 2.0 Apple SWOT Analysis 2013

Strength 1. Customer loyalty combined with expanding closed ecosystem. While at first Apples closed ecosystem was a weakness for the business, this has now changed. First, Apple now has a full range of apps, software and products that are interlinked and support each other. Second, new products and supplements will be released soon (iTV), hence expanding the ecosystem. Third, Apple has a strong customer loyalty, which increases due to Apples closed ecosystem, which, in turn, is supported by customer loyalty. So the combination of Apples expanding closed ecosystem and customers loyalty increases firms competitive advantage. 2. Apple is a leading innovator in mobile device technology. Apple has been chosen as the most innovative company in the world for the 3rd time in 2012. Companys core competency of producing innovative products is the strength the company builds upon and is able to bring the most innovative products to the market. 3. Strong financial performance (RM 10,000,000,000 cash, gross profit margin 43.9% and no debt). Apples financial performance is one of the best among many companies. Company currently (end of 2012) holds about $10,000,000,000 in cash, which can be used for acquisitions, buying back company shares and other matters. It also has higher gross profit margin than its main competitors, which is equal to 43.9%. Company has no debt and is not directly affected by interest rates or credit markets. 4. Brand reputation. Apple has a reputation of highly innovative, well designed, and well-functioning products and sound company performance. Apple brand is valued at $76.5 billion and was the second most valuable brand in the world in 2012. 5. Retail stores. Apples retail stores ensure high quality customer experience; provide direct contact with knowledgeable staff and increases brand awareness. Besides, Apples stores are one of the most profitable in terms of sales/ft2. 6. Strong marketing and advertising teams. Marketing is one of the strongest functional areas Apple has. It can sell pricier products, build superior stores (they are more or less built to achieve marketing goals) and advertise their products in a compelling manner.

Weakness 1. High price. Apples products cost much more than its competitors devices. Some critics argue that the price is not justified. When theres such a fierce competition, Apple products price becomes a weakness because consumers can easily opt for similar quality but lower price products. 2. Incompatibility with different OS. The iOS and OS X are quite different from other OS and uses software that is unlike the software used in Microsoft OS. Due to such differences, both in software and hardware, users often choose to stay with their accustomed software and hardware (Microsoft OS and Intel hardware). 3. Decreasing market share. The less market share Apple has, the less it can influence its potential customers and persuade them to jump into using Apples closed ecosystem products. 4. Patent infringements. The firm is often accused of infringing other companies patents and has even lost some trials. This damages Apple brand and its financial situation. 5. Further changes in management. Apple has lost Steve Jobs in 2012 and Tim Cook became the new CEO. Scott Forstall and John Browett (chief of retail) left the company too and this will have an impact on companys management, which, as many think, will be negative. 6. Defects of new products. This is not current Apple weakness but one that jumps out time to time. Some of Apples iPod and iPhone releases had clear faults and thus disturbed sales of the products and firms reputation of superior product performance. 7. Long-term gross margin decline. Current Apples gross margin is one of the highest in the tech industry but analysts fear that due to increasing component prices and competition current margins will not be sustained. Hence, glooming firms future financial performance.

Opportunities 1. High demand of iPad mini and iPhone 5. iPad mini sales will increase Apples market share in the tablet market and, will strengthen firms competitive advantage. 2. iTV launch. iTV launch will support Apple TV sales and the products ecosystem. 3. Emergence of the new provider of application processors. Samsung, the main Apples competitor, is also the only provider of application processors for Apples products. Apple has to find a new source for the component but could not find a suitable one yet. Nonetheless, new manufacturers with superior engineering capabilities are arising and its just a matter of time, when Apple will seize upon the opportunity of being less dependent on its direct competitors. 4. Growth of tablet and smartphone markets. Growth of tablet and smartphone markets is a good opportunity to expand firms share in these markets. 5. Obtaining patents through acquisitions. Apple lacks of some patents to sustain its growth and the best way to acquire those patents is to acquire the firms holding them. In addition, Apple could develop new skills and competencies. 6. Damages from patent infringements. Apple patents are often infringed by its competitors. Thus, collecting the damages from the companies that do so is a viable opportunity to not only increase the cash reserves but to damage the competitors reputation and sales as well. 7. Strong growth of mobile advertising market. Apple has developed iAd advertising platform, which allows advertising on Apple iPhone, iPad and iPod touch. The growth of mobile advertising market is an opportunity which could be further seized upon. 8. Increasing demand of cloud based services. Apple could expand its range of iCloud services and software as the demand for cloud-based services is expanding.

Threats 1. Rapid technological change. One of the most severe threats Apple and the other tech companies are facing is rapid technological change. Companies are under the pressure to release new products faster and faster. The one that cannot keep up with the competition soon fails. This is especially hard when a company wants to introduce something new, innovative and successful. Apple was able to bring very innovative products to the market so far but for the moment, even Apple hasnt unveiled any plans for the new products (except iTV) and may lack new introductions to keep up with competition. 2. 2013 tax increases. Tax increases in USA in 2013 will negatively affect Apple. 3. Rising pay levels for Foxconn workers. Pay levels for Foxconns workers already rose 3 times from 2010 to 2012. Foxconn is the main manufacturer of Apple products and the rising pay level for Foxconns workers will likely raise the prices for Apple products. 4. Breached IP rights. The companies that breach Apple patents might not be discovered soon and may benefit from it, while weakening Apple at the same time. 5. Price pressure from Samsung over key components. Samsung has already asked Apple to pay higher price for its application processors. Due to intense competition and no viable substitutes, Apple may be asked to pay even more. 6. Strong dollar. Apple earned more than half of its revenues from outside US. Dollar appreciation against other currencies reduces potential profits from those countries. 7. Android OS growth. Android OS is the main competitor for iOS in mobile device market. The domination of Android decreases iOS power over influencing consumers to join Apple. 8. Competitors moves in online music market. Apple faces threat from online music stores, such as Amazon, Wal-Mart and online music subscription companies, such as Spotify.