INNOVATION MANAGEMENT AND NEW PRODUCT DEVELOPMENT
NAME: TCHANY TCHOUAMENI SYLVAIN STEPHEN ID: TP016888 MODULE CODE: BM050-3-3-IMNPD INTAKE: UC4F1501ME HAND OUT DATE: 21 JULY 2015 HAND IN DATE: 12 OCT. 2015
Marking Scheme
Question 1 1 2
3
Background of the case should be clearly discussed. In depth discussion of market entry and launch activities of Apple Watch and its impact. Able to relate to and discuss the brand management strategies of Apple products.
Percentage 10% 20%
20% 50%
Total
Question 2 1
2
3
Thorough discussion of the internal and external factors affecting industry. (SWOT) Feasible application of analysis to develop growth strategy (Ansoff). Use of proper formatting, structure, language, grammar, referencing, and acknowledgement of external sources. Total
20%
20%
10% 50%
i
EXECUTIVE SUMMARY
This report analyses the Apple watch market entry, launching activities, brand management, product platform, brand extensions, market evolutions, competitive evolution, external and internal factors, and growth strategies. From the analysis it emerges that Apple watch is a successful brand which positions itself as a luxury and fashionable product and product a healthier lifestyle. It also emerges that, Apple is a follower as far the smartwatch business is concerned that has managed to exploit advantages of that of being a follower to gain the largest market share of smartwatch. An analysis of the current Apple watch platform reveals that enhancement needs to be made so to meet customers’ satisfaction, an enhancement that will lead to the Apple watch next generation that will probably be named Apple Watch 2, equipped better features. It has emerged from customers review that Apple needs to invest more in research and development as they have been many complaints pertaining to the quality of the watch. Though Apple watch market segment consists of people who already have an iPhone, analysis shows that can also benefit from increasing it market segment by making a cheaper version of apple watch for college students, and by widening its geographical market. The analysis also shows that Apple faces internal and external factors that influence its revenues positively and negatively.
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CONTENTS
EXECUTIVE SUMMARY.................................................................................................... ii CONTENTS .......................................................................................................................... iii TABLE OF FIGURES .......................................................................................................... iv TABLE OF TABLES ............................................................................................................ iv QUESTION I ......................................................................................................................... 1 1.1 Introduction to Apple as a company .................................................................. 1 1.2 Introduction to Apple Watch .............................................................................. 2 1.3 Background of the case ...................................................................................... 2 1.4 Market Entry ...................................................................................................... 2 1.5 Launching Activities .......................................................................................... 4 1.6 Brand management ............................................................................................. 6 1.6.1 Buyer Behavior ....................................................................................... 8 1.7 Product Platform and Brand extensions ............................................................. 9 1.8 Market Evolutions and Competitive Evolution ................................................ 10 QUESTION 2 ....................................................................................................................... 13 2.1 External Factor - PEST Analysis ..................................................................... 13 2.2 Internal factors Analysis ................................................................................... 15 2.3 Strengths ........................................................................................................... 15 2.3.1 Weaknesses .......................................................................................... 15 2.4 SWOT Analysis................................................................................................ 15 2.5 Growth strategy ................................................................................................ 20 2.5.1 Market Penetration ............................................................................... 20 2.5.2 Product development ............................................................................ 21 2.5.3 Market development ............................................................................. 21 2.5.4 Diversification ...................................................................................... 21 Conclusion ........................................................................................................................... 23 References ............................................................................................................................ 24
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TABLE OF FIGURES
Figure 1-1 : Global Smartwatch Vendor shipment and market share in Q2 2015(Source Strategy Analytics) ................................................................................................................. 6 Figure 1-2 : Global Smartwatch Vendor shipment and market share in Q2 2015(Source Strategy Analytics) ............................................................................................................... 10 Figure 1-3 : Numbers of billions dollars. Source: Apple financial statement. July, 2015(macworld.com, 2015) ................................................................................................. 12
TABLE OF TABLES
Table 1-1 : Advantages and disadvantages of the follower ................................................... 3 Table 1-2 : product, price, promotion and place .................................................................... 6 Table 1-3 : product, price, promotion and place(Continuation Table1-2) ............................. 8 Table 2-1 : External Factors Analysis .................................................................................. 13 Table 2-2 : External Factors Analysis(Continuation of Table 2-1) ..................................... 14 Table 2-3 : SWOT Analysis ................................................................................................. 16 Table 2-4 : SWOT Analysis(Contination Table 2-3) ........................................................... 17 Table 2-5 : SWOT Analysis(Contination Table 2-3) ........................................................... 18 Table 2-6 : Apple watch Ansoff Matrix .............................................................................. 22
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QUESTION I
1.1
Introduction to Apple as a company Formerly known as Apple Computer Inc., Apple Inc., is an American multinational corporation that designs, manufactures, and commercializes electronic products such as consumer electronics, personal computers, computer software, commercial servers, etc. Founded in 1976 by Steve Jobs and Steve Wozniak, whom started working together in 1970 to create a personal computer, Apple computer was incorporated in 1977 in Cupertino, California, where the main headquarters is located. Apple is also a digital distributor of media content and online services, and has a string of retail stores known as Apple Stores. While Apple’s current vision is “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.”, its current mission statement, “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad,” which is profoundly different from Steve Job’s original ideals, ideals ingrained in his mission statement: "To make a contribution to the world by making tools for the mind that advance humankind.” Apple is best known for its hardware products, and amongst its core product lines are the iPhone, iPad, iPod, and Macintosh computer line. Apple recently added a new product to its portfolio, the Apple smartwatch.
1
1.2
Introduction to Apple Watch Back in 2011 there were several rumors of an Apple-developed wearable device, a device conceptualized as a variation of the iPod; several other hearsays ensued after, and ultimately the Apple smartwatch was released on April 24, 2015. Available in three variants (Apple Watch Sport, Apple Watch, and Apple Watch Edition), Fitness tracking and health-oriented capabilities, iOS integration, and other Apple products and services are some of the features integrated in it. Discernible by its various casings and first or third party interchangeable bands, Apple Watch runs iOS 8.2 or later and depends on a wirelessly (Bluetooth or Wi-Fi) connected iPhone (5 or above) to execute many of its default functions (e.g. calling and texting) (Tim Cook, 2014).
1.3
Background of the case Apple Inc. had remained successful in a difficult operating environment through the first half of 2014. And because of that, the company needed a new products to perpetuate its success as the slow demand and intensifying competition had been threatening the iPhone and iPad sales. The Apple smartwatch was released in 2015 and was immediately a massive success. In this report, activities pertaining to the development of the Apple smartwatch, the market strategies employed and the factors that impacted Apple smartwatch and Apple as a company will be analyzed.
1.4
Market Entry Entering a new market depends on the timing, timing that characterizes a company either as a first mover or a follower. As far as the smartwatch business is concerned, Sony Ericsson was the first-mover. Other potential competitors such as Samsung, Apple, and etc are just followers. Being follower presents some advantages and disadvantages, and Apple certainly experienced them:
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Table 1-1 : Advantages and disadvantages of the follower Advantages As a follower, Apple had the opportunity to observe how well the Market Viability
smartwatch was received by the general consumer public before getting involved. This helped alleviate a number of risks and limit the amount of research and development invested in determining public perception.
Tweaks
and Apple had the opportunity to observe early movers’ difficulties Improvements and made adjustments before jumping into the business. This not only reduced risks for losing money, but it also positioned Apple to quickly introduce its own new and improved version of smartwatch Limited
Apple had the advantage of observing how the smartwatch’s
Financial Risk
features, price points and functionality were received, and then adjusted its own approach accordingly. This means less time and money put into creating prototypes, conducting market studies. Disadvantages
Timing of the Timing of the product certainly affected Apple because product launching new products takes time and resources to develop. Acceptance of Buyers may not accept Apple smartwatch as they may view it as the market imitations follower must Wining market share via imitation is difficult for a follower. As play catch-up a result, Apple had to design an innovative smartwatch to allure customers, innovation which can be expensive. Having decided the type of market entry, Apple had to outline the launching activities for its smartwatch.
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1.5
Launching Activities The launching of Apple smartwatch involved 3 strategies: the pre-launch, the launch, and the post launch strategies. In executing this strategies, Apple Inc. exploited both the pull and push strategy in its communication with customers: The former by advertising and promoting the product by itself using the full spectrum of the communication mix channels, and the latter by relying on the selected exclusive distributor region wise to advertise the Apple smartwatch. This way, the customer was approached from two different sources, creating differentiation from the competitors and delivering the product message with added value service or application. Table 2 : Apple Smartwatch Launching strategy Activities involved
Strategy
Prelaunch
Advertising campaign
Blogs – Opinion Leaders & specialized websites
Sneak Peaks on R&D info
Buzz & viral Marketing
Promotion campaign Apple.com Printed Media (e.g. Vogue, on the wrist, etc) Launch
TV(Apple Live, BBC, YouTube, etc) Outdoor Media Social Media Advertisement (Facebook, Tweeter, Myspace, etc) Apple press event
Carrier handheld advertisement
Post-
Apple.com
launch
Independent review Websites
Digital Campaigning
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Table 3 : Other activities involved during the Launch A message was sent to every Apple customer few Email Marketing
weeks prior to Launch Extensive introduction to the advantages the use of
Apple.com Display ads Blogs Search Engine marketing
Apple smartwatch brings. Banner Ads, Interactive Ads Industry blogs, forums, Discussions boards Affiliated marketing, other paid listings
Considering all the activities involved in the Apple smartwatch launch, it can safely asserted that the launch was mostly web based. The Apple website does not have any explicit positioning statement for the Apple smartwatch; however, considering the price starting at $349, considering all the leading luxury fashion publications such as vogue, Self, Style, East touch, etc in which the Apple smartwatch was advertised, considering the choice of premium materials –Leather, stainless steel, even solid gold –and styling for the watch, it can be asserted that Apple positions its Apple watch as a luxury fashion product. The analytics results of the global smart watch vendor shipment and market share in the second quarter of 2015(Figure 1-1) reveals that, Apple gained a massive 75.5% of the global smartwatch marketshare in the second quarter of 2015 with the launch of the Apple Watch in late April. It also shows that Apple’s entrance stole a huge portion of Samsung’s marketshare as the previous smartwatch market leader dropped 66 points from 73.6% marketshare to a single digit 7.5 %( Strategy Analytics, 2015); therefore, it can be safely asserted that the launching activities were successful in positioning Apple Watch.
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Figure 1-1 : Global Smartwatch Vendor shipment and market share in Q2 2015(Source Strategy Analytics) 1.6 1.6.1
Brand management Analysis of Apple smartwatch distinctive identity and Added value
Providing the product or service to the customer, the marketing team outlines the best set of characteristics to attract customer (Solomon et.al, 2012). A single marketing activity does not work to reach the organizations objective; thus, the independent attributes of product, price, promotion and place sets the target to meet that objective (Solomon et.al, 2012). Table 1-4 : product, price, promotion and place product, price, promotion and place The Apple has designed the watch by considering the vast extend of consumers and their options; thus, the 3 variants of Apple Product
smartwatch: the Apple watch sport offers a causal, sporty and elegant look. The 2 different sizes of this watch allows men and women to get the one that suits them. The vast variety of straps allows 6
consumers to interchange straps, making them look fashionable and opulent. Apart from keeping customers healthy by monitoring their fitness and keeping track of it, the watch gives a sense of a more personalized touch by providing features such as sending actual heartbeat signal, sending instant scribbling drawings, a and vibration signal with just taping, and most of all senses the user’s response pattern and provides options based on that (Apple, 2015). The cheapest option, the 38mm Apple Watch Sport, is available from £299, despite costing Apple just £55 to build, while the larger 42mm model costs £339. The more expensive Apple Watch version is available from £479, going up to £949 depending on the case and band combination. For instance, a 38mm Apple Watch with a Black Price
Classic Buckle strap costs £559, while the 42mm model is £50 more expensive. The Apple Watch Edition, which is crafted from rose or yellow 18 carat gold, is the most expensive. It's available at the Apple website from £8,000, going up to £13,500 for the most expensive version ((Theinquirer, 2015). Proving a large array of price like this, Apple ensures that each of its customers can get a watch according to their budget.
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Table 1-5 : product, price, promotion and place(Continuation Table1-2) The Apple watch was unveiled at an international scale by Tim cook, CEO of Apple Company in USA earlier in September 2014(Times, 2014). Apple uses social media to attract the attention of consumers. Apple YouTube channel also provides customers with detailed Promotion
specification of the watch. This promotion strategy not only enables Apple to emphasize on the value added by product to the lives of individuals, but also makes the product accessible, relevant while highlighting personal choice of consumers. It also focuses on focus on the healthier lifestyle with features such as fitness tracker Apple watch can bring.
1.6.2
Buyer Behavior Learning about the whys of consumer buying behavior is not so easy—the answers are often locked deep within the consumer’s mind. Factors influencing buyer behavior are social, cultural, personal, and psychological. Reading the reviews of Apple watch may help understand what they consider benefits and the values promoted behind their choices: some users of the apple watch claim that buying Apple watch is not about time, they know the time satisfactorily from their iPhone, computer, and clocks, as well as intuition and the sun, they say, but is about Fashion. Other claim that it is not about fashion, but about the real value the integrated apps within Apple Watch bring more closely into our lives (Anon, 2015). Other say that they like to exercise and Apple watch tracks how much they move, exercise, and stand. Then converts this information into beautifully visualized data and provides tools for analysis as well as guidance for how they can be healthier.
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1.7
Product Platform and Brand extensions Nowadays, several companies are developing product platforms and designing families of products based on these platforms to provide enough variety for the market while keeping the necessary economies of scale and scope within their manufacturing and production processes. Apple is one of these companies and the product platform for its three variants of Apple watch (Apple Watch Sport, Apple Watch, and Apple Watch Edition) comprises this set of common components: the operating system (watchOS), the processor (Appel S1), the memory(512MB RAM), display(AMOLED: 38mm and 42 mm). Although this platform makes Apple Watch one of the best smartwatches on the market, it can still be enhanced; for example, the next series of Apple watch may have larger memory and screen, along with an upgraded operating based on the this platform so as to improve the speed and make the user experience a lot more enjoyable. According to CNET.com, a website for high-tech review, the customer reviews indicate that Apple Watch scores only five for the battery life and seven over ten for performance; therefore, the next generation of Apple watch may have a long battery life, a faster operating system, a larger memory size to address the performance issue, a larger screen and a mini camera onboard. With the trust that Apple has already with its customers from the first watch coupled with the enhancements mentioned earlier, along with the luxury and fashionable aspects of Apple watch maintained, Apple can extend its brand by naming its next Apple watch generation Apple Watch 2. Naming the next Apple watch this way will convey to the customers that the new watch is faster, better, more stylish and fashionable than the previous one.
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1.8
Market Evolutions and Competitive Evolution Prognosticating on whether there will a lengthy introductory period prior to a rapid growth requires an analysis of the Global Smartwatch Vendor shipment and market share in 2015. Though Apple has not released its third quarter earnings from Apple Watch yet, its global market share and shipments in relation to its counterparts in the launch quarter or the quarter in which Apple watch was released can help project.
Figure 1-2 : Global Smartwatch Vendor shipment and market share in Q2 2015(Source Strategy Analytics) Figure 1.1 shows the analytics results of the global smart watch vendor shipment and market share in the second quarter of 2015, according to strategy analytics, a company specialized in Data and Analysis. Business Consulting. Custom Research. According to this company’s data, Apple claimed a massive 75.5% of the global smartwatch marketshare only within the 4 months of the Apple Watch launch (in late April 2015). It also depicts that Apple’s entrance stole a huge portion of Samsung’s marketshare as the previous smartwatch market leader dropped 66 points from 73.6% marketshare to a single digit 7.5%(Strategy Analytics, 2015); therefore,
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it can be conjectured that there will not be a lengthy introductory before the any rapid growth. There are 3 variants of Apple watch; although all of them target people who already have an IPhone, each of them focuses on a specific market segment: according the Prezi(2015), the Apple watch Sport targets dedicated physically active consumers between 25 and 50 years old, technological fans, with middle income; the Apple watch focuses on early adopter consumers, between 25 and 50 years old, technological fans with mid/upper income; and the Apple watch Edition focuses on consumers with high income, between 30 and 50 years old, that use watch as a luxury on a daily basis. According to Forbes (2015), teens and people in their early 20s demonstrate the most interested in wearing smart watches, but they fall behind those in their late 20s and 30s when it comes to ownership, likely because they’re priced out of the market; therefore, Apple may consider in the future developing an affordable, fashionable Apple watch for this demographic market segment. Apart from widening its demographic target market segment, Apple can also do so for its market geographic scope: according to the Macworld (2015), the graph depicted in figure 1-3 indicates that most of the revenues of Apple comes from Americas, Europe, and China. This implies that Apple is not well implanted in regions such as Africa, Asia, etc, and therefore; can, in the future, can consider reaching that potential market with its wearable.
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Figure 1-3 : Numbers of billions dollars. Source: Apple financial statement. July, 2015(macworld.com, 2015) According to Strategy analytics (2015) the major competitors of Apple smart watch Samsung Gear S2, Pebble steel, Asus Zenwatch, Sony smartwatch 3, and LG Watch Urbane. Apart from this major players there are several other smartwatches on the market, and the competitors will keep coming up at any time opportune, as the smartwatch business is still in its nascent stage and the smartwatch can be used for so many applications. When the competitors come, they will meeting more customers’ needs, setting themselves apart with smartwatches that have larger screens, longer battery life; that are cheaper and compatible with all operating system; and that do not require to be tethered to a smartphone to function such as the Intel smartwatch(International business times, 2015).
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QUESTION 2
2.1
External Factor - PEST Analysis External factors are the possible political, economic, and social-cultural and the technological influences on the organization: Table 2-1 : External Factors Analysis Factors
Descriptions
Apple performance is subject to political stability and other political factors in each market it operates. A call by Dmitry Gorotsov, a Member of Parliament in Russia to stop lawmakers in the country “using iPhones and iPads to protect themselves from eavesdropping by foreign special services” (Russia Today, 2014) can be referred to as an example where politics interferes Political
with business. This case shows potential impact of a political factor on Apple sales in Russia. Other factors are: governmentlevel trade restrictions and tariffs and industry-specific government initiatives that might affect Apple’s performance. Moreover, the nature of relationship between Apple’s home country USA and other countries may impact the company’s performance in relevant countries due to its substantial share of revenues from outside the US.
Apple revenues can be adversely impacted by recessions Economic
and economic crises to a significant extent compared to other businesses due to its choice of premium pricing strategy.
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Table 2-2 : External Factors Analysis(Continuation of Table 2-1) Descriptions
Factors
For instance, as a direct consequence of economic difficulties in Europe, Apple revenues decreased by 16% in the third quarter of 2012 compared to the same period of the previous year (TechCrunch, 2012). Apple is also affected by increasing rate of inflation in the US due to its large amount of cash Economic
reserves. Moreover, due to the global scale of its operations, Apple is a net receiver of currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars(Apple Inc., 2014). Apple has always been in forefront of innovation and is known around the world for its premium quality, luxury
Social-cultural
products, which add values to customers and reflect their lavish lifestyle, because of the high status Apple’s image conveys. This image of Apple can boost the Apple watch sales and profit of the company. Technology has a short lifetime. That is why Apple needs to upgrade their product more often so they will outdo
Technological
their competitors easily. Apple has invested largely in its product research and development field and thus its products are at the top of the new innovative products ranking (Appleinsider, 2015).
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2.2
Internal factors Analysis
2.3
Strengths The iTunes platform produces a stream of revenue as it is available for various Apple products, and is also compatible with Windows platforms. Having loyal customers, Apple ought not to compete with competitors in terms of prices but in performance and reliability. Apple has no debts, meaning that it is able to invest in any undertaking it deems to be lucrative. Because Apple always improves its existing products it will always be able to entice new customers or revitalize repeat purchases from existing customers. Apple’s flagship retail stores acts as demonstration points enabling skeptical customers to test features of Apple’s products. Finally apart from acquaint customers with the features of all Apple’s products, Apple’s website is also used as a sales channel to customers who prefer to purchase online and directly from Apple.
2.3.1
Weaknesses Apple relies too much on product launch to create attention for its products. Furthermore, the company has weak relations with its key counterparts in the market that has the potential to take Apple to new heights if it was willing to partner with these organizations such as Microsoft Corporation. Finally, unlike the other competitors who own strong presence in various markets, Apple’s presence is mainly confined to in Japan, China, America and Europe.
2.4
SWOT Analysis SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is very important of finding out where a business currently is and where it could be tomorrow. In order to find out Apple’s position and define the strategy to be used, internal factors (strengths and weaknesses) and external factors (opportunities and threats) are analyzed.
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Table 2-3 : SWOT Analysis Characteristics
Descriptions
Apple is an innovator and technology leader.
Strong cash position, $160 billion in long term marketable securities and only $40 billion in long term debt.
Excellent EBITDA of $72.3 Billion on revenue of 212.2 Billion. (34% Net Profit)
Excellent brand loyalty by its customers. Many own multiple products (Mac, iPhone, iPad, Watch, etc.)
Global reach, Apple’s brand is strong around the globe, including China with Q2-2015 revenue of $16.4 billion in sales, a 70% increase from Q2-2014.
Strengths
The recently released Apple Watch is estimated to reach 36 million units sold in its first 12 months (Morgan Stanley).
Apple AppStore reached over 100 billion downloads in June 2015. Over 1.5 million apps are available.
Excellent Research & Development division that is able to deliver (premium) products that customers will stand in line to buy
Apple iCloud storage and backup services provide for a predictable recurring revenue stream.
Consumers like bigger phone screen sizes, sales for iPhone 6 and iPhone 6 plus have eaten into Samsung’s market share.
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Table 2-4 : SWOT Analysis(Contination Table 2-3)
Premium Pricing continues to drive away price conscience buyers, including Millennials. Price sensitive consumers tend to not consider Apple in buying decisions.
New product introductions are massive and challenge the supply-chain. Tim Cook told Charlie Rose, “We had an intense team working on Apple Watch for 3 years”. Add the fact any new release must be able to respond to demand in the millions of units. Apple cannot release a new product from idea to delivery in 12-months, like startups, simply because the fan base is massive, therefore new products are a multi-year effort.
IPad users are holding on their existing iPad’s, not upgrading as often resulting in a decline in new iPad sales. Apple sold
Weaknesses
12.62 million iPads in Q2-2015, down 23% year-over-year, which translates to roughly $5.43 billion in sales.
Security concerns. Hackers we’re able to gain access to celebrity phones via iCloud. Apple’s customers are see an increase in phishing attacks as hackers spend more time focusing on Apple’s security weaknesses.
Patent infringements, Apple was ordered to pay $533 million to Smart flash LLC for infringing on three patents found in iTunes.
As smartphones continue on their journey to become a commodity, companies like Samsung will continue to apply pricing pressure. Apple tends to lead innovation and then watch other companies control the market once it has reached the tipping point and wider consumer adoption.
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Table 2-5 : SWOT Analysis(Contination Table 2-3)
Apple CarPlay, still very new, huge license opportunity for Apple.
Apps for Apple Watch will become a major revenue source, 3,500 apps have been created for the Apple Watch in the first 6 weeks, that number will continue to grow, providing Apple will a consistent revenue stream from App sales and inApp purchases.
Apple HomeKit, moving to iCloud with advance security features, HomeKit will help you manage lights, locks, security systems, motion sensors, fire and carbon dioxide monitors, window shades and garage door openers. This will drive additional license revenue.
Opportunities
Apple HealthKit, more integration into Apple watchOS, providing additional app sales. This technology is still very early, in five years it will be amazing to see how HealthKit is adopted by health care professionals and in-turn drive more Apple Watch sales.
Apple Watch, introduced April 2015 is just six weeks old, though sales figures haven’t been disclosed, some experts predict 30 million watches could be sold in 2015. Apple’s Watch OS will have a major update in Sept 2015 as Apple watchOS.
Apple Music, introduced June 2015, adds a 24/7 global radio station, fan community ecosystem and music service. The new service will cost between $9.99 to $14.99/month. These recurring revenue opportunities have the ability to add significant revenue if consumers adopt them.
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Apple’s direct online sales channel will continue to grow, helping improve their already impressive gross margins. The Apple Watch was been sold direct allowing Apple to cut retailers out of the launch revenues.
Apple Pay is gaining traction and provides a new recurring revenue stream for every transaction it processes.
Technology moves quickly, new threats from startups
are likely.
Pandora, Amazon Music and other streaming music
systems will continue to make it less attractive for consumers to actually buy music or subscribe to Apple Music.
Cheaper laptop computers from Dell, Toshiba, HP, Sony and IBM and a low cost Windows 10 OS to OEMs will continue to add pricing pressure on Macs.
Threats
Mobile Phones based on Microsoft’s new Windows 10 Operating system could eat into Apple’s market share.
Mobile Phones based on Google’s Android Operating System continue to be a formidable competitor.
iPod sales continue to evaporate, commissions on music purchases will likely decline further as more consumers rent vs buy.
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2.5
Growth strategy Growing their business is one of the cardinal objectives of every company, but it is often difficult to determine the best way forward. The Ansoff analysis helps determine which strategy to exploit to achieve that growth. Below are the analysis of four different growth strategies involved and their applications to Apple watch.
2.5.1
Market Penetration Market penetration occurs when a company tries to sell its current product to the existing customers. It can be achieved in various ways. For example, by changing pricing, adding minor features, changing the packaging, highlighting alternative uses, sales promotion (Marketing equity, 2011). It helps companies Maintain or increase the market share of current products, Increase usage by existing customers, Restructure a mature market by driving out competitors (Tutor2u, 2014). The current Apple Watch on the market is a new product; therefore, this strategy is not applied to it. However, after some time, Apple may exploit this strategy by providing variant apple watch colours, lowering the prices, introducing customer loyalty schemes and promotions.
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2.5.2
Product development It occurs when a company develops new products for the existing market. This strategy involves significant new product developments and not minor changes in an existing product of the firm. It helps companies counter competitive entry, perpetuate the company's reputation as a product innovator, utilize new technology, and to preserve the overall market share (Papers4you.com, 2009). Apple watch is a new product and its target is the existing customers of apple products (people who already own an iPhone); thus, this strategy is applied to the current Apple watch.
2.5.3
Market development This strategy occurs when a company tries to sell its existing products into new market. It often involves selling into new international markets. This may require new geographical markets, new product dimensions or packaging, new distribution mediums, different pricing policies to entice various customers or develop new market segments(Tutor2u, 2014). Though apple watch is a new product, this strategy is applied to it, as Apple exports its smartwatch to Europe, China, Japan, etc;
2.5.4
Diversification It occurs when a company introduce a totally new product to a completely new market. It essentially moves out of its current products and markets into new areas. This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience. This strategy is not applied to the current Apple watch as apple targets its usual customers, those already owning an iPhone. From this analysis, it can be asserted that Apple pursues multiple strategies for growth at the same time in order to achieve their strategic objectives.
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Table 2-6 : Apple watch Ansoff Matrix Product Existing Market Penetration
New Product Development
Apple may after some time Apple released the Apple Watch for its release an upgraded version of the existing iPhone customers as an option
Existing
for a device that will allow user to keep
Better camera, bigger and sharper their phones in the pockets and do screen, faster processor, faster almost everything from their watch. internet
connections,
colours, etc
various Small, wearable, and rugged for the times when you want to keep your larger iPhone your pocket.
Market development
New
Market
current Apple watch.
Diversification
Apple exports its Apple watch in This strategy is not applicable to apple various countries in the world: watch as this watch depends on the China, Japan, Greece, France, etc. iPhone to execute all its functions.
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Conclusion
This work has analyzed the Apple watch’s case to look at its market entry, launching activities, brand management, product platform, brand extensions, market evolutions, competitive evolution, external and internal factors, and growth strategies. It can be concluded that Apple watch is a successful brand which positions itself as a luxury and fashionable product; that Apple is a follower in the smartwatch business; that being follower Apple has managed to exploit advantages of that position and gained the largest market share of smartwatch; that the current Apple watch platform could be enhanced to meet customers’ satisfaction, that Apple watch next generation may be called Apple Watch 2, equipped larger screen, faster processor, etc, that Apple needs to invest more in research and development as they have been seen complaints from customers regarding the quality of the watch,, that though Apple watch market segment consists of people who already have an iPhone, Apple can have more segment by making a cheaper version of apple watch for college students, and by widening its geographical market, that Apple faces internal and external factors that influence its revenues positively and negatively, that combining three strategies Apple to gain more market share of smartwatch.
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