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Part I Overview

1. Time Context Present


2. Viewpoint - Worldwide Marketing Head, Philip Schiller.
3. Mission Statement
"Apple is committed to bringing the best personal computing experience to
students, educators, creative professionals and consumers around the world
through its innovative hardware, software and Internet offerings."
4. Background of the Case
The Company
The iPod is a line of portable media players and multi-purpose pocket
computers designed and marketed by Apple Inc. Apple Inc. is an American
multinational organization located at 1 Infinite Loop, Cupertino, California
95014. It was founded in 1976 and since then it has been leading the way in
innovating new products.
The first line of iPod was released on October 23, 2001. It has become the
leading product in the MP3 Market. There are three current versions of the
iPod: the iPod Shuffle, the iPod Nano and the iPod Touch.
The Industry
PLC - Decline Stage
Reasons why iPod is in decline stage:
1. iPod Sales is declining. Refer to the table.

Reasons for declining sales:

a. Consumers find it redundant if they will buy iPod since iPhone


has mp3 player capability as well.
b. No product development. The latest iPod was released 2012
which is the iPod Touch 5th generation. Usually, purchases pick
up drastically every time Apple releases a new iPod.
c. People can get their music through streaming services like
Spotify. Constant internet connection is the key.
d. People can illegally download music.
e. Imitators.
2. iPod only accounted 1% of Apples Total Revenue. Refer to the
table.

3. Even Apple CEO, Tim Cook, admitted that iPod is a declining


business.
4. BBC used iPod as an example of declining business.
5. Customer base are the loyal customers.
Market Structure - Oligopoly
Reasons why iPod is an oligopoly:
1. Portable Media Player (PMP) market is dominated by few
producers such as Apple, Samsung, Microsoft, Creative, SanDisk
and iRiver).
2. There is an emphasis on non-price competition as a way of
gaining and protecting market share - Strong focus on the brand

and on new generations of digital media players with new features /


extra functionality / stronger design and improved portability
3. Heavy investment in research and development to speed up
product and process innovation - Encouraging developers to bring
out new applications for products such as the iTouch.

4.The existence of entry and exit barriers which limit the number
of businesses that can operate profitably in the market
o The use of patented technologies such as digital rights
management to protect Apples position
o Exploitation of large economies of scale which brings down
the unit costs of production
The Management

5. Environmental Analysis
A. PEST Analysis
Political Factors
Government Policies - Governments create the rules and frameworks in which
businesses are able to compete against each other. From time to time the
government will change these rules and frameworks forcing businesses to change
the way they operate. iPod is thus keenly affected by government policy.
Wars, Terrorism and Bad Political Relations - Apple Inc has reportedly obtained
52% of its business from outside US in 2007. Due to the bad international relations,
wars and terrorism might influence Apple Inc in a huge way, and also the
organization has no control over these factors. Apple Inc manufactures a number of
its parts and products from outside the US, like Czech Republic, Ireland, China,
Korea and Cork. If these countries face any political instability, war, terrorism or bad
relationship with US, it might cause cause delay in production.
Economic Factors
Inflation Rate Changes - inflation decreases people's ability to pay for goods. If
cost of goods increases, then people can afford less goods.
High Unemployment Rate High unemployment rate across the globe would
automatically mean lesser costumers with purchasing power causing a decrease in
the demand for iPod and since it is viewed as a luxury product, unemployed
individuals are most likely to ignore it and tend to goods or services that are
necessary for survival.
Exchange Rate Changes - For example an increase in the exchange rate will
mean that price abroad goes up, lowering sales; price of imported raw materials
falls, either leading to a fall in price and more sales, or an increase in profits;
competitors prices fall, meaning lower sales.
Social Factors

Consumer Preferences - Consumer preferences shift.


Brand Consciousness some individuals are brand conscious as many teenagers
believe that the brand would enable them to fit in
Population Growth Rate Once a group has seen your product or service for
years, you wont see the exponential growth you experienced when you launched
Technological Factors
Rate of Technological Changes - The technology has been fast changing in the
world and the market for it has become gigantic, which has added to more and
more competition and thus, as soon as technological change are concerned the
product life cycle has been shortened drastically, which the Apple Inc takes the
advantage of by introducing newer products in the market, which ultimately lead
the market.
Research and Development - Apple Inc has invested largely in its product
research and development field and thus, Apple products are at the top of the new
innovative products ranking.
Information Security - Technology provides a lot of advantages but we should
also take into consideration the responsibilities that come with it. Businesses should
take into account the rise in data breaching and various cyber-crime elements and
must invest in effective ways of preventing or combating these factors. Imagine if
an important process becomes unavailable suddenly or a system is hacked.
B. Swot Analysis
Strengths
1. Brand Reputation we considered this as strength because a brand well
recognized offers a lot of benefits. If they are to launch a new product, the
acceptance will speed up.
2. Product Design - we considered this as strength because the design is iconic and
has stylish look which is appealing to everyone.
3. Mass Quantities and Varieties - we considered this as strength because iPod has
different styles that cater to different target markets.
4. 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.
5. Awesome Interface iPod and other Apple product has sophisticated interface
that is appealing. This is one of the major factors that urge people to buy iPod and
other Apple products.
Weaknesses
1.High Price Customers would just switch or buy products that offer same
functionality at a lower price.
2.Operating System Incompatibility The iOS is 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.Further Changes in Management - Management of Apple is constantly being
changed and shuffled. This situation puts Apple in an unstable position.
4.Hazardous to Health - a study recently discovered that iPods can cause
pacemakers to malfunction when placed near them like in a shirt pockets.
5. Targeting only with certain demographics only targeting middle and high class
and teenagers to young adult.
Opportunities
1.Growing Population - population of the world is growing at a rapid pace and thus,
this opens the front for many new markets
2. Increasing number of individuals who are brand conscious many people
nowadays buy luxury items for status. This can be an opportunity for Apple to grow
sales since their product is viewed as luxury items. They can offer limited edition of
iPod partnered up with luxury brands to make it more appealing to people hungry
for luxury.
3.Increasing number of people who are health conscious Many are now health
conscious. They run, swim, bike to be healthy. This can be an opportunity for Apple
to develop the iPod to a waterproof device to cater to this target market.
4. Partnerships Apple already teamed up with Nike, Starbucks, Beatz and these
partnerships shown favorable results. This is a great opportunity for Apple to team
up with more brands.
5. Market need for custom-made products more people are becoming
individualistic and into personalization. This is a great opportunity for Apple to add
functionality in their website that allows people to design their ideal iPod.
Threats
1.Economic Slowdown this decreases the purchasing power of the people which
can cause a lesser demand for iPOd.
2.Consumer wants are changing the desires and wants of people are constantly
changing and this will be a threat to Apple if they will not develop the iPod to the
needs and wants of the customers.
3.Online Music Market There are music streaming services like Spotify and
Pandora. This is a threat to iPod because with just an internet connection, people
can listen to any music for free.
4.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.
5. High Unemployment Rate - this also decreases the purchasing power of the
people which can cause a lesser demand for iPod.
C. Competitors Analysis (at least 2-4 Ps)
1. PRODUCT: Samsung Galaxy Player 5.0
PRICE: $178
2. PRODUCT: Microsoft Zune HD
PRICE: $349

3. PRODUCT: SanDisk Clip Sport


PRICE: $49.99
4. PRODUCT: CREATIVE Zen X-FI3
PRICE: 8GB $149.00, 16GB $189.00
5. PRODUCT: iRiver AK100
PRICE: $699
6. Present Marketing Strategies
1. Product - iPod Touch 5th generation
2. Price - 16GB: $199, 32GB: $249, 64GB: $299
3. Place/Distribution - Available Worldwide
4. Promotion - TV Commercials, Print ads, Posters in public places, and Wrap
advertising campaigns.
Part II Problem Resolution
1. Background of the Problem
The once iconic MP3 player that laid the foundation of Apple is facing its own
death. According to the latest report, iPod experienced a 54% drop of sales last year
and now the lowest revenue contributor in the company.
The drop in sales is being attributed to the increase in music apps, and streaming
services including Spotify. Additionally, iPhones come with iTunes built-in, making
the iPod redundant for many iPhone owners.
2. Statement of the Problem
What marketing strategies will increase the iPod sales and revenue? (Even if profits
remain stable or decline, an increase in sales satisfies many people. The assumption
is often made that if sales increase, profits will eventually follow)
3. Statement of Objective
1. To increase sales by 20%
2. To increase revenue by 20%
4. Alternative Courses of Actions (5 strategies with 3 advantages &
disadvantages)
ACA No. 1: Market Penetration
Concept: lower prices to generate demand for the product
Reasons:
o current market is saturated with particular products and services.
o music industry sales have been increasing, market share of major
competitors is decreasing
o sales and marketing expenditures historically has been high
Advantages:
1. Lowering the price will cause the sales to increase quickly.
2. May convert non-users
3. Will encourage distributors/retailers due to fast sales.
Disadvantages:
1. Since iPods are expensive to create, lowering the price may not lead to a
significant
profit.
2. Since Apple products are viewed as luxury item, lowering the price may
cause some
people to avoid buying the product now that it is cheaper.
3. Lowering the price of iPod may hurt the sales of other Apple products.

ACA No. 2: Horizontal Diversification


Concept: A signature card for present customers which includes discounted
repair fee; ability to acquire points when purchasing Apple products; ability to
redeem points; overnight hotel or resort accommodation.
Reasons:
o Apples present channels of distribution can be used to market the
new product/service
o Organizations present products might increase significantly by adding
this product/service
Advantages:
1. Creates loyal customers.
2. Customers positive experience in iPod may cause them to try the new
product.
3. Customers would feel more engaged and connected to the company.
Disadvantages:
1. It may stretch existing resources.
2. This can also divert investment and operating funds away from existing
activities, limiting potential growth in those areas.
3. Diversification may raise concerns among existing customers that the
company is less interested in their business, and those customers may look
for alternative suppliers.
ACA No. 3: Product Development
Concept: Enhancing and adding more features to the product. Making it
waterproof to cater to the swimmer target market, enhance the camera, add
more space)
Reasons:
o In the past, sales of iPod increases every time the company releases a
new version of iPod. Releasing a new version of iPod Touch has a great
chance of increasing the sales.
o There is a study which shows that iPod users are most likely to buy if
iPod touch releases a new version.
o Apple has a strong research and development capabilities.
Advantages:
1. Win business from competitors that cannot match the new level of
performance.
2. Improves companys reputation with quality.
3. May convert non-users.
Disadvantages:
1.High Costs and High Risk of Failure: When a business attempts to innovate
its product, it will inject lots of capital and time into it, which requires severe
experimentation. Constant experimentation could result in failure for the
business and will also cause the business to incur significantly higher costs.
Furthermore, it could take years for a business to successfully innovate a
product, thus resulting in an uncertain return.
2.May hurt sales of other Apple products.
3.Requires intensive planning and research.
ACA No. 4: Conglomerate Diversification

Concept: Adding new product. It can be external hard disk. There are rumors
that Apple is currently producing an electric car.
Reasons:
o Declining annual sales and profits
o Capital and managerial talent to compete successfully in
a new industry
o Exiting market for present product which is the iPod is saturated
Advantages:
1.New product acceptance will speed up because of favorable image of the
brand. (According to a Brandgym survey in 2003, 58% of consumers will be
more likely to try a new product from a brand they knew, versus only 3% for a
new brand).
2.Builds up the brand. (when a brand appears in another field it can be a
more effective and efficient brand-building approach than spending money on
advertising)
3.Loss may be compensated if new products sales turn out well. (Good sales
figures of the new product will offset the loss to the current product.)
Disadvantages:
1. There may be an increase in administrative problems associated with
operating in unrelated business. (Managers from different divisions may have
different backgrounds and may be unable to work together effectively.
Competition between strategic business units for resources may entail
shifting resources away from one division to another. Such a move may
create rivalry and administrative problems between the units.)
2. Decision making may become slower due to longer review period. (Caution
must also be exercised in entering businesses)
3. Expanding your business means paying for more space, people.
ACA No. 5: Retrenchment
Concept: (reduction in the corporation's activities, which also generally
necessitates a reduction in number of employees)
Reason:
o To reverse declining sales and profits
Advantages:
1. By laying off based on seniority, experienced workers will remain
lessening the need for supervision and allows you to focus with other aspects.
2. Increases profits and returns to shareholders.
3. Reduces costs.
Disadvantages:
1.It may affect the quality of work because of overloading the tasks of
retained employees.
2.Retrenchment may discourage retained employees causing decrease in
productivity.
3. It may discourage the most talented workers which may lead to an
increase in voluntary retrenchment.
5. Decision Statement - Product Development
PART III Implementation Program

1. Detailed plan of action


Gather feedback from current users of iPod Touch 5 th generation of
what features they want to be improved and added to the product.
o Set a meeting with the department responsible for enhancing the
product once the results are out.
o Set a product launch.
2. Proposed Marketing Strategies
o

1. Product: iPod Touch 6th generation with maximum capacity of 128GB; 4.7-inch
screen; waterproof, and 7-megapixel iSight camera
2. Price: 32GB $249; 64GB $299; 128GB $349
3. Place: Apple Online Stores; Apple Retail Stores; Best Buy; Wal-Mart
4. Promotion: TV Commercials; Print Ads; Product Launch

Important Points:
o
o

Tim confirmed they now have over 407 retail stores across 14 countries, and
they serve million of users daily (http://www.slashgear.com/apple-retailstores-serve-1-million-customers-daily-407-locations-worldwide-10285704/).
69 percent of iPod touch users are between 13-24 years of age. 31 percent of
iPhone users are 35-49 years old, while only 12 percent of iPod touch users
fall in this age segment. 31 percent of iPod touch users are over the age of 25
(http://www.mactech.com/content/study-looks-demographics-iphone-ipodtouch-users).
More than 70 percent of users on both the iPhone and iPod touch are male
(http://www.mactech.com/content/study-looks-demographics-iphone-ipod-touch-users).

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