Professional Documents
Culture Documents
of iPhone 5 series
BUSINESS DYNAMICS
Final Project report
Abhik Tandon
Vishal Lunker
Anmol Pandey
Akshat Gupta
Table of Contents
Contents
Background _________________________________________________________________ 1
Success Factors _____________________________________________________________ 2
CLD & SFD _________________________________________________________________ 4
Final results ________________________________________________________________ 18
Appendix __________________________________________________________________ 20
Background
Pg. 01
Background
iPhone 5 became an instant success when it was launched in 2012. Apple witnessed record
sales and the product series was one of the most important reasons to propel Apple as most
valued company in history. This success was followed by another launch in September 2013
with the introduction of iPhone 5S. The growth of iPhone 5 series has been phenomenal and
has been attributed to various factors ranging from brand loyalty to product superiority. This
growth phenomena has been studied and modelled in this report.
Apple announced the launch of iPhone 5 in September 2012 and simultaneously began taking
pre-orders. It received two million pre-orders within the first 24 hours. The phone was a
considerable upgrade from the 4 series with better hardware and software features. iPhone 5
was reported to be sold out twenty times faster than the 4 and 4S models. However, the model
was discontinued in the subsequent year to give way to the 5S model - keeping in with Apples
strategy for previous iPhone generations.
iPhone 5S was launched with its mid-range counterpart iPhone 5C in September 2013. 5C
model has not been considered as part of this model as it was targeted at a different segment
altogether than 5 and 5S models. A comparison of features and specifications of iPhone 5 has
been summarised in Appendix 1.
Success Factors
Pg. 02
Success Factors
The success factors of a new product launch has been studied in a publication by Gabriela
Capatina and Florin Draghescu1. The authors have identified the below success factors for a
new product launch
1.
2.
3.
4.
5.
6.
The authors go on to illustrate the success factors at different levels for iPhone product series.
These factors were included in the model.
Consumer factors
1. Demographics The word of mouth publicity of iPhones target consumers
was a big factor in the success of the product.
2. Preferences Consumers wish to have a mobile device which could function
as a mini computer was answered with iPhone. This increased attractiveness
of the product coupled with a great app ecosystem helped boost the sales of
the phone.
Company factors
1. Product The product features as highlighted in Appendix 1 was one of the
most important factors in fuelling the demand for the product
2. Price Apple provided the phone under a contract with telecom operators.
This helped customers to get the phone with a reasonable price
3. Distribution The phone was distributed through Apple stores and Apples
website. The Apple stores provided a good platform for Apples salesforce to
increase iPhones consumer base and convert potential sales into final sales.
4. Promotion Apple launches its product through keynote presentations. The
date of these presentations are announced in advance. The tech media helps
Pg. 03
Success Factors
in creating the sufficient buzz for these events. Speculation is rife and is fuelled
by the media reports with new phone rumors. This helps Apple promote its
products. Apple also used traditional advertising but only in later stage of the
product launch.
Pg. 04
Pg. 05
The 4 loops shown above form the back bone of our diagram and are explained below along
with the SFD
Stock Variables
Potential Sales: The potential sales is total number of users that fit into the income category,
inclined to buy a smartphone from Apple and would buy once they like the product features.
This pool gets of potential sales, would get more users from geographic expansion indicated by
additional sales force addition and quality.
Sales: Final converted sales of iPhones in the time period, which is taken as quarter due to the
data constraints of analyst reports. Taking time period as quarter also makes sure that the
geopgraphic expansions and launches do not cause a kink and are accounted for inside
quarter from launch
Installed Base: The installed user base consists of current users of iPhone devices across
different generations who have bought the phone in previous 12 months , i.e.iPhone 3G, 4,4S
users.
Complementary Goods: The complementary goods here are referring to the app ecosystem,
where app developers work on the apps which are utilizing the current product features of the
launched phone. Now initially the apps launched would be huge using the current features
Pg. 06
which then would increase at a declining rate.
The above diagram describes the various stocks and flows. As can be seen from the diagram
the effects of complementary goods and media reports feed into the attractiveness of the
product. While the word of mouth and network effects along with the advertising directly impact
the demand factor.
The variables are documented in Appendix
Pg. 07
Network Effects on the sales of iPhone
Network effect is the largest contributor after the attractiveness of the product to the sale of the
iPhone. Easy switch to the newer iPhones from the existing ones and high costs of switching to
other smartphones has ensured the iPhone 5 series was able to build on the existing user base.
Pg. 08
The variable attractiveness from network size is exponentially dependent on stock variable
Installed Base
.
Figure 4: Dependence of attractiveness from network size on Installed Base
This attractiveness feeds into the demand factor with a weight of 30%. The demand factor is a
multiplicative factor of the conversion rate ranging from 0 to 1.
Pg. 09
Competitiveness of the product
As a new phone is launched, it is capable of competing with all the phones in its segment. But
with passing time, it is expected that competitors take appropriate actions and the phone in
itself becomes less attractive and consequently less competitive.
Competitiveness is modeled as having a counteractive effect on the demand factor.
Competitiveness ranges from -1 to zero and has a ramp down effect with passage of time as
can be seen from the plot below. New phone launches propel competitiveness towards 0.
Pg. 10
Every product attracts two types of customers, existing users of similar products and new
users.
The sales force has been modeled to attract new customers through the quality of the sales
force and the size of the sales force. Potential sales are the stock which is also affected by the
discard rate of existing users.
Pg. 11
Impact of complementary goods
The decision by third parties to produce complementary goods for a particular product depends
on the installed base of users and the potential revenue that can be generated.
Pg. 12
Thus, as the sales increases the market power over app developers continuously increases.
The variable can take values between zero and 1 but even at the highest sales the value
achieved is approximately 0.8.
The market power over app developers and attractiveness of market to third parties along with
a dampener which varies over time. As time increases, the impact of these variables reduces
as shown below -
Pg. 13
Product differentiation
Another set of positive feedback arises from the ability of the firm to invest in product features.
Apple invests heavily in its products. In the case of iPhone 5 the product was differentiated due
to its new and improved 16:9 form factor (larger screen) and certain other features. Based on
research reports we identified that the following trends justify the investments done by Apple
Pg. 14
The productive value of the investment is shown in the graph shown above. The productive
investment drops in the 3rd quarter where the iPhone 5 investments are no longer made. After
that, investments for iPhone 5s become productive and these get reflected from 5 th quarter.
Figure 14:Favorable Word of Mouth positive feedback loop (indicated by red arrows)
Favorable Word of Mouth Lookup function(range [0,1]) consists of already a loyal iPhone user
base, which makes it start from intermediate value, which first increases rapidly and then with
declining rates as the number of installed user pools starts to cover the smartphone user base
completely.
Pg. 15
Pg. 16
Figure 16: Media reports positive feedback loop (indicated in red arrows)
Growth rate factor which indicates the growth rate of Apple in terms of revenues also helps
attract media reports. Higher growth indicates stronger reception from buyers, and more
analyst, media coverage on brand of Apple itself. We have limited the growth rate for modelling
purposes in a time period to 200%, indicating factor as 1 for the value, and increases
exponentially between 25-50% quarter growth and plateaus after that.
Pg. 17
Favorable Word of Mouth helps in generating mass interest in the product which is then picked
up the media and more articles start coming out of it. The new iPhone rumors are taken only
for quarters before launch, using the pulse function to indicate 0.5 from time period 5 till the
launch of iPhone 5s.
Media reports indicate that since launch of iPhone 5, there has steady coverage, which
increases rapidly with the rumors of new iPhone 5s and then remain steady and then die down
as they are replaced by newer iPhone rumors and other products. Media reports feed into the
product attractiveness which then feeds into demand with weight of 50%.
Final results
Pg. 18
Final results
000 units
25000
20000
15000
10000
5000
0
Dec
Mar
Jun
Sep
Dec
Mar
Actual
Jun
Sep
Dec
Mar
Model
Based on the model we were able to simulate the key trends of iPhone 5 series sales and
compare that to the actual sales given in the research reports. The results were encouraging
and we were able to achieve a MAPE of 0.32. Due to certain limitations of the model this
MAPE may look high but by introducing some additional but less important variables we can
improve the accuracy of the model. Also, the model improvement can be modelled more
accurately if geographic expansion scenarios (apart from those included via sales force
addition) are included explicitly with proper dates of launch. Also, if data is available on monthly
basis it could help us in predicting trends with better accuracy and would obviously be more
insightful instead of just 4 data points in a year.
Final results
Pg. 19
2.5
2
1.5
1
0.5
0
Dec
Mar
Jun
Sep
Dec
Complementary Goods
Mar
Jun
Sep
Actual data
Dec
Mar
Appendix
Pg. 20
Appendix
Variable explanation
(01)
advertising=
Min(0.5,Revenue*1e-012)
Units: **undefined**
(02)
(03)
Competitiveness=
RAMP(-1/25, 2 , 4 )+STEP(0.075, 5 )+RAMP(-1/10, 6 , 12 )
Units: **undefined**
(06)
(07)
Conversion rate=
Appendix
Pg. 21
IF THEN ELSE(Time<1,0, Max(Demand
factor+Competitiveness,0.01)*Potential Sales
)
Units: **undefined**
(08)
Demand factor=
advertising*0.1
+Attractiveness from Network Size*0.3
+Favorable Word of Mouth*0.1
+Product Attractiveness*0.5
Units: **undefined**
(10)
Discard rate=
(Installed Base-Sales)*Max(0.05*ABS(COS((2*3.14/8) * Time)),0.01)
Units: **undefined**
(11)
FINAL TIME = 12
Units: Quarter
The final time for the simulation.
(13)
Growth Rate=
IF THEN ELSE(New users added/Installed Base*100 >200, 200 , New users
added
/Installed Base )
Units: **undefined**
Appendix
Pg. 22
(14)
INITIAL TIME = 0
Units: Quarter
The initial time for the simulation.
(16)
(17)
(18)
Media reports=
Favorable Word of Mouth*0.3+Growth rate factor*0.4+New phone rumours*0.3
Units: **undefined**
(20)
(21)
(22)
Appendix
Pg. 23
(23)
(24)
(25)
Price=
600
Units: **undefined**
(26)
Product Attractiveness=
Attractiveness from availability of Complementary Products*0.2
+Media reports*0.1
+Product Features*0.7
Units: **undefined**
include qlty of wrk 0.1
(27)
quality of salesforce=
1000
Units: **undefined**
(29)
Revenue=
Price*Sales
Units: **undefined**
(30)
Sales= INTEG (
Conversion rate,
10)
Units: **undefined**
(31)
(32)
SAVEPER =
TIME STEP
Units: Quarter [0,?]
Appendix
Pg. 24
The frequency with which output is stored.
(33)
TIME STEP = 1
Units: Quarter [0,?]
The time step for the simulation.
iPhone 5 comparison
Apple
Samsung
Galaxy S III
Droid RAZR HD
iPhone 5
Nokia
Lumia 920
Screen Size
4 inches
4.8 inches
4.7 inches
4.5 inches
Resolution
1,136 x 640
1,280 x 720
1,280 x 720
1,280 x 768
Weight
3.9 oz
4.7 oz
5.1 oz
6.5 oz
CPU
Dual-core Apple
A6
Dual-core
1.5GHz
Snapdragon S4
(in the U.S.)
Dual-core
1.5GHz
Snapdragon S4
Dual-core 1.5
GHz
Snapdragon S4
12GB+microSD
slot
32GB, no card
slot
microUSB
Android 4.0.4
(Ice Cream
Sandwich)
microUSB
Microsoft
Windows Phone
8
300 hours
standby, 10
hours talk time
(3G)
8MP,
3264x2448
pixels, optical
image
stabilization,
autofocus, dualLED flash
Wi-Fi, 2G, 3G,
4G LTE
Storage
Connectors
16GB, 32GB or
64GB, no card
slot
Apple Lightning
16GB, 32GB or
64GB +microSD
slot
microUSB
Android 4.0.4
(Ice Cream
Sandwich)
790 hours
standby, 11:40
hours talk time
(3G)
Operating
System
iOS 6
Battery
225 hours
standby, 8
hours talk time
(3G)
Camera
8MP,
3264x2448
pixels,
autofocus, LED
flash
8MP, 3264x2448
pixels, autofocus,
LED flash
8MP, 3264x2448
pixels, autofocus,
LED flash
Networking
TBA
Appendix
Pg. 25
$199 for 16GB,
$299 for 32GB,
$399 for 64GB;
avail. Sept. 21
Price
$199.99 + $35
carrier fee
$199 (estimated,
launch end of
2012)
TBA, launch Q4
2012
iPhone 5 vs 5s
Design
Device type
Smart phone
Smart phone
OS
Dimensions
3.95 oz (112 g)
the average is 5 oz (143 g)
Main body: aluminum
3.95 oz (112 g)
the average is 5 oz (143 g)
Main body: aluminum
4.0 inches
640 x 1136 pixels
326 ppi
IPS LCD
4.0 inches
640 x 1136 pixels
326 ppi
IPS LCD
Weight
Materials
Display
Physical size
Resolution
Pixel density
Technology
Screen-to-body ratio
Colors
Touchscreen
Features
Camera
Camera
Flash
Aperture size
Focal length (35mm
equivalent)
Camera sensor size
Pixel size
60.82%
60.82%
16 777 216
Multi-touch
Light sensor, Proximity
sensor, Oleophobic
coating
16 777 216
Multi-touch
Light sensor, Proximity
sensor, Oleophobic
coating
8 megapixels
LED
F2.4
8 megapixels
Dual LED
F2.2
33 mm
29 mm
1/3.2"
1.4 m
1/3"
1.5 m
Appendix
Pg. 26
Features
Settings
1.2 megapixels
Apple A6
Dual core, 1300 MHz,
Apple Swift
PowerVR SGX543MP3
1016 MB RAM
64 GB
Apple A7
Dual core, 1300 MHz,
Cyclone ARMv8, 64-bit
PowerVR G6430
1024 MB RAM
64 GB
Shooting Modes
Camcorder
Features
Front-facing camera
Hardware
System chip
Processor
Graphics processor
System memory
Built-in storage
Battery
Stand-by time
Appendix
Pg. 27
Browser
Built-in online services
support
Technology
Safari
Safari
YouTube (upload)
GSM
UMTS
FDD LTE
CDMA
Data
nano-SIM
Positioning
Navigation
Connectivity
Bluetooth
Wi-Fi
Mobile hotspot
USB
Connector
Features
Other
4
802.11 a, b, g, n, n 5GHz
Yes
Yes
Proprietary
USB charging
TV-Out, Tethering,
Computer sync, OTA sync,
AirDrop
4
802.11 a, b, g, n, n 5GHz
Yes
Yes
Proprietary
USB charging
TV-Out, Tethering,
Computer sync, OTA sync,
AirDrop
Other features
Notifications
Additional microphone(s)
Sensors
Accelerometer,
Gyroscope, Compass
Appendix
Pg. 28
Hearing aid compatibility
Other
Availability
Officially announced
Shopping information
Accessories
M4, T4
Voice dialing, Voice
commands, Voice
recording
M4, T4
Voice dialing, Voice
commands, Voice
recording
12-Sep-12
10-Sep-13