Apple Watch

Introduction
Over the years, Apple has been the pioneer in terms of
research and innovation. Apple products carve a niche in the
market and are known for their innovative yet simple design.
Wearables market is said to be the next big thing with
enormous growth potential. It is estimated that the global
wearables market is set to grow at a compound rate of 35%
over the next 5 years. Within the wearables market the
smart watch is set to be the leading product with a growth of
41% and total share of 59% of the total wearable devices
and this is expected to grow till 70% by 2019.
Hence it was no surprise when Apple decided to enter this
lucrative market with the launch of Apple Watch on April
2015.

What is it?
To wear it is to love it.
The Apple Watch is a compelling timepiece that places
fitness, health, news, messaging, commerce, and other
capabilities on the user's wrist. The device is available in
four variants: Apple Watch Sport, Apple Watch, Apple
Watch Herms, and Apple Watch Edition and features two
case sizes: 38 mm (1.5 in) and 42 mm (1.7 in). It is
compatible with the iPhone 5 or later models running iOS
8.2 or later, through the use of Bluetooth. For input, the
watch includes a "digital crown", which can be turned to
scroll or zoom and pressed to return to the home screen, and
a touchscreen that features Force Touchtechnology, which
makes it pressure-sensitive and capable of distinguishing
between a tap and a press. The Apple Watch uses
the S1 system-on-chip. The watch is equipped with a builtin heart rate sensor, which uses both infrared and visiblelight LEDs and photodiodes. All versions of the Apple Watch
have 8 GB of storage; the operating system allows the user
to store up to 2 GB of music and 75 MB of photos.

Strengths of Apple Watch

Innovative Product: The wearables market was
previously composed of less stylish fitness devices or
smart watches possessing limited application choices
and smartphone integration. However the apple smart
watch offers a wide array of feature ranging from
fitness tracking to messaging capabilities. It has
seamlessly integrated the iPhone with the watch and a
lot of functionalities of the phone can now performed
using the watch itself. Also the product has an
innovative design, which makes it stylish and pleasing
to the eye.

 Supportive Software: The Apple watch is compatible

with iPhones running on iOS 8.2 or later and hence can
be a perfect tool for integration with the Apple iPhone.
Brand Equity: Apple is a leading brand in the market,
which is known in the market for the quality of its
product and their usability. The Apple watch would be
able to leverage from the companies very high
reputation in the market

Weakness
Price: The Apple watch is currently priced at US$349
for 38mm model and US$399 for 42mm model.
Compared to its peers, the apple watch is steeply
priced and it could act as a deterrent for many
customers who wish to purchase the device.
Dependent on iPhone: The apple watch is not a
stand-alone device and requires the customer to have
an iPhone to be able to properly use the device. Not
being compatible with other operating system could
affect the sales figures.
Complicated Device: Unlike other apple products, the
device requires the customer to understand the
functionalities well to be able to fully utilize it. The
watch is not suited for tech novices.

Opportunities
Creation of a New Product Category: With the
launch of the smart watch, Apple has entered into a
new product category of wearables. Entering into
uncharted territories would provide apple with the
opportunity to increase their brand awareness and
might improve sales of other products as well.
Growth prospects in wearable technology
market: The wearables market is growing at a rapid
pace and the entry of apple into this segment can be
very lucrative for the firm in terms of profitability. Also
apple can leverage their extensive research and
development to come up with updated versions in the
market in coming years.

 Compete in the luxury watch segment as well:

With its pricing on a higher side, the watch can also
compete in them luxury watch segment market and
hence can further improve apples sales.

Threats
Competitive Industry Environment: The number of
players in the wearables segment and especially in the
smart watch section is very high and hence there is
enormous competition within the industry. Also apple
watch will have to compete with fitness bands, which
are available in the market at a much lower cost.
Low Customer Adoption: The customer might not be
able to realize the importance or rationale behind
owning such a device. Also the watch is not a standalone device and hence would only be bought by
people owning an iPhone.
Differentiation: With such a competitive industry, the
threat of differentiation always persists. Apple needs to
make sure that it keeps coming up with updates and
new devices if it wants to maintain its market share.

Porters Five Forces Analysis

Threat of new entrants: Although the development
of a smart watch requires high degree of research and
development but the number of players within the
segment is still very high. Also with the success of the
apple smart watch, the threat of imitators coming in
the market is always very high. Also with such stiff
competition, the companies are also competing on
price and if a company can offer a better product at a
lower price, then the customers can be swayed.
Threat of substitute products or services: In term
of substitutes industry competitors Samsung, Google,
and Sony have all released their own smart watches
with their own operating systems. Also all these
competitors offer their device at a much lower cost and
hence apple would need to differentiate their product
from all these companies. Currently Apple watch seems

to have placed itself ahead of its competitors in terms

of using their own technological advancements, making
it more desirable than its substitutes.
Bargaining power of Buyers: The watch has been
launched in four variants and two price ranges. Hence
the buyer can decide which one they would want to
purchase. This puts pressure on competitors to better
price smart watches at the low end of the price range.
Also the presence of a number of players in this
segments gives the buyers multiple pricing options.
Bargaining Power of Suppliers: Apple has
attempted to quell the threat of bargaining power of
suppliers by creating a product with state of the art
design, pressure sensing technology, and unique
operating system all created in-house (Swider, 2015).
This gives apple the pricing advantage and provides
cost efficiency as well. Concerns arise with the
bargaining power of potential third party app producers
for the software or the factories where the raw material
is manufactured.
Intensity of competitive rivalry: The industry rivals
for Apple smart watch include major players like
Google and Sony. However Apple is also competing
with the tap-to-pay feature, which mimics debit and
credit card system for quick payment option. This is
currently being used in Europe. Apple would need to
focus on technological advancements if it wishes to
increase its market share and also leverage on their
loyal consumer base.

Strategies that Tim Cook can implement

and 5 Year forecast for Apple Smart
Watch
The wearables market is booming currently and it will only
grow in the next 5 years. With the industry set to grow at a
compound growth rate of 36% on the next 5 years, Apple is
in a great position to capitalize from this. Apple already has
50% share of the smart watch segment and if it can keep it
position as the leader in term of research and development,
then this number is set to grow further. However Apple

would need to be wary of its competitors and not be

complacent. The company should try and come up with
updated on a regular basis and also bring new products in
the same segment. This would ensure that the company can
meet changing consumer demands and also ensure they
maintain their position as the market leader.
Currently a major chunk of Apples sales is still in the US,
although they have presence across the world, the company
needs to focus on increasing their sales abroad as well.
Apple would be able to achieve this by marketing their
products extensively abroad and also ensuring the right
price point. Another way to increase there sales abroad
could be opening Apple stores in countries like India and
other South East Asian countries.
Right now Apple smart watch is not an independent device
and it has to be paired with an iPhone. In order to increase
their sales, the company can also consider a variant of smart
watch, which is device independent, and even Android user
can use the watch. This would not only increase there sales
in the smart watch segment but would also bring the user
under the Apple ecosystem.

Apple Pay
What is it?
Apple Pay is Apple's system for making purchases at many
major retailers or through in-app purchase. With Apple Pay,
you'll be able to hold your iPhone up to a credit card
terminal, then use Touch ID -- Apple's fingerprint tech -- to
make a purchase. You'll also be able to buy stuff within apps,
such as the Target app, just by using Touch ID at the
appropriate time during checkout.

With the Apple Watch, Apple Pay is also extended to the

iPhone 5, iPhone 5c, and iPhone 5s. To use Apple Pay with
one of these devices, a paired Apple Watch is required to
make the payment. This is made possible through the NFC
chip included in the Apple Watch.

How It Works
Once a credit or debit card has been added to Wallet, Apple Pay is
ready to be used in stores and in apps.
In a retail store, when approaching a point-of-sale system compatible
with Apple Pay, the screen of the iPhone will light up and open Wallet
automatically, where a user can tap on a credit card to be used or pay
with the default card.
A payment is made by holding a compatible iPhone or Apple Watch
near a checkout system that includes NFC, most of which look like
standard card checkout terminals within stores. A finger registered
with Touch ID must be kept on the home button for a short amount of

time (or the Apple Watch must be kept on the wrist), after which a
payment is authenticated and the transaction is completed. A slight
vibration, a check mark on the screen, and a beep, denotes a
completed payment.

Strengths of Apple Pay

Convenient: Apple Pay is a highly convenient way for
people to make their payments without the need of
actual cash and in only a few steps. It ensures that
people can pay for anything with just a click of a button
on their phone and dont have to worry about theft or
fraud.
High Credibility: The fact that the feature has been
brought by Apple in the market brings to it a certain
sense of credibility and hence eliminates any
apprehensions, which the people might have on
transacting through their phones or making payments
through this medium.
Safety: Transacting through Apple Pay offers a safe
way of making payments. The chances of trader
charging extra or chances of theft are minimized with
this way of transaction. Hence more and more people
are adopting this way of making payments.

Weakness
Vulnerability of NFC Transmission: There are still
question marks over the credibility of NFC
transmissions since quite a few fraudulent practices
have been reported earlier. Hence a few customers
might be hesitant to use this mode of transaction.
Limited Presence: Apple Pay is currently only in a
very few countries and also compatible with very few
Apple iPhone models.

Opportunities
More retail stores support Apple Pay: The list of
retailers which support apple pay is only growing and
hence in the long run this would bring more profitability
for the firm
Rapidly growing mobile payment industry: The
mobile payment industry is currently in its growth
stage and hence the benefits of being an established
player in a growing industry are numerous

Threats
Competitors: Since this is a growing industry, the
competition is extremely stiff and more companies
have plan to get a share of the pie. Google wallet and
CurrentC are major players within this industry and
have a significant share of the market.
NFC Technology is costly: NFC technology is
extremely costly and hence there might be some
friction from retailers in accepting this technology.
Threat of unauthorized access of information:
There have been cases wherein people have got access
to phone information and hence this can be a deterrent
for some people. Apple should ensure that they have
safety measures of highest order

Strategies that Tim Cook can implement

and 5 Year forecast for Apple Pay

Apple Pay is still operating in a very concentrated

geographical location and in order to really make it
successful Apple would need to launch it in various other
countries as well. Although countries like India and Brazil
might not be the most favorable location due to large
percentage of unorganized retail, however, Apple can
consider expanding to various European Countries. It would
expand the reach of Apple Pay and would allow international
transactions on the system as well.
Apple should also continue to expand the retail network
under their coverage and also keep adding various banks as
well. Addition on more retailers would expand their business
and it would also attract more and more customers who
would want to transact through their service. Apple also
needs to maintain good relations with merchants and banks
if they want to increase their reach within the industry.
Lastly, Apple should clear any issue which the customers
may have regarding the safety or anonymity of their
transactions through the Apple Pay service and if in case
there are any issue, they should be immediately addressed.
This would help increase customer confidence and in turn
result in more number of transactions through their system.

References
http://www.businessinsider.in/THE-SMARTWATCH-MARKET-GrowthConsumer-Attitudes-And-Why-This-Is-The-New-Device-Category-ToBet-On/articleshow/45116246.cms
https://en.wikipedia.org/wiki/Apple_Watch
http://www.techrepublic.com/article/apple-watch-the-smart-personsguide/
http://thestute.com/2015/04/17/apple-watchs-early-reviews-revealstrengths-and-weaknesses/
https://applewatch237beedie.wordpress.com/portfolio/porters-fivecompetitive-forces-model/
http://www.cnet.com/news/everything-you-want-to-know-aboutapple-pay/
http://www.macrumors.com/roundup/apple-pay/