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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
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
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. 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).