Marketing Report: iPhone

Brief History

The initial name of Apple, Inc. was Apple Computer and it was created on April 1, 1976 by Steve Jobs and Steve Wozniak. The company was incorporated on January 3, 1977, in Cupertino, California. Initially, the company was engaged in the manufacture of personal computers. In the year 1985, Steve Jobs was ousted from the company.

In the year 1996, Apple bought Steve Job’s company neXT and made him the Chief Executive Officer. Apple introduced the iPod music player in 2001 and within the last few years, more products were added like iPhone, iPod Touch and iPad. Today Apple is of the largest technology firms in the world, with annual revenues of more than $60 billion.

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Introduction

As Marketing Manager of Apple’s mobile phone division, I have been assigned the task of researching the marketing programme and environment of the company. One of our core products is the iPhone. It was launched on January 9, 2007 at San Francisco. It is a three-in-one device that includes a mobile phone, an iPod and web surfing.

According to a press release of Apple, “iPhone introduces an entirely new user interface based on a large multi-touch display and pioneering new software… iPhone also ushers in an era of software power and sophistication never before seen in a mobile device, which completely redefines what users can do on their mobile phones” (Kerris 2007, para. 1).

Part 1: Macro and Competitive Environments

Macro Environment

Macro environment consists of such factors that affect an organization but the organization doesn’t have any control on them. It is obvious that there is always competition in the market and moreover, if the product is being marketed globally, the level of competition increases. In such circumstances, organizations have to be more careful about new companies entering the market.

Certain audits have to be done in order to know the macro and competitive environments of any company. Actually there are two kinds of audits that are usually done namely, the external audit and the internal audit. The external audit is done on variables that the organization cannot control. The internal audit is done on the variables that can be controlled by the organization.

As far as environmental audit is concerned, it is again external as well as internal. According to the Confederation of British Industry, Environment audit is explained as, “The systematic examination of the interaction between any business operation and its surrounding.

This includes all emissions to air, land and water legal constraints; the effects on the neighbouring community, landscape and ecology; and the public’s perception of the operating company in the local area” (CBI, 1990). Strategic audits are normally conducted to enable the management to establish a match between internal operations of the firm and the business environment it operates in (Porter 1996, pp. 61-78).

External Audit

The external environmental audit can be better understood with the help of the PESTEL analysis. PESTEL means the Political, Economic, Social, Technological, Environmental, and Legal factors that can affect a business. Following is a representation of a typical PESTEL analysis.

Figure 1: PESTEL Analysis

Political: Apple’s success is co-related to the policies that help the company in creating a healthy business environment. Apple participates in the political process in the greater interests of the company as well its stakeholders. Apple has a policy that pertains to the political expenditures. The company follows and adheres to all prevalent laws and also declares the political expenses incurred.

Economic: Due to the recent global recession, the purchasing power of people decreased to a great extent. This had a severe impact on the sales of Apple products. But the situation is improving now and the company is optimistic of better sales in the current financial year. The pricing of iPhone has been done in a manner that people can afford the device. There are several schemes available in the markets that allow people to buy iPhone on credit.

Social: The social and cultural aspects have a great effect on the performance of any organization. Products should be designed keeping in view the society and their culture. Building a brand name is very crucial. Apple has a worldwide image of providing best products at reasonable prices.

Technological: In order to be at the top and different, organizations need to adopt the latest technological inventions and developments to make their products world-class. Apple has always believed in this principle and has always come out with innovative devices. The latest iPhone is a revolutionary mobile device that also has an inbuilt iPod and web-surfing facility. Today’s generation is always on the lookout for new and stylish mobile handsets. iPhone is the best option available for such people.

Environmental: Apple uses ample precautions to minimise the greenhouse gas emissions from its facilities. It was observed that only 2% of such emissions were from the facilities. The balance 98% was related to the products. Ever since, it has been Apple’s endeavour to minimise the greenhouse emissions. The measures taken in this regard are using less material in manufacturing the product, using material that is toxic-free, using recyclable material, using smaller packaging for shipping, and being energy efficient.

“Apple is perfectly positioned to be the first company to create a Congo conflict-free phone, using minerals from the Congo that further stabilize the economic development and don’t use slave labour or fund mass atrocities” (Sesete 2011). “ Clearly Apple is assuming that its customers have many iPhone compatible leads lying around…so has kept things minimal, and of course saved packaging, and therefore penguins and polar bears, in doing so” (Beavis 2011).

Legal: The legal aspects of any organization also have an impact on the performance of the organization. Unfavourable rulings of legal cases may hamper the organization’s image. Presently, there are several patent infringement cases, pertaining to Apple, under consideration.

Competitive Environment

Due to the free market policy prevailing worldwide, any company can launch its products freely. There are very less entry barriers and as such, every company wants to enter the market and take whatever possible share for its products. Due to this, there is saturation in the market and each company gets only a small share.

Apple also has some big competitors like Alcatel, Blackberry, HTC, LG, Motorola, Nokia, Samsung, and Sony Ericsson. Even though Apple’s iPhone is a device with different features but the company has to keep its prices lower in order to sustain the competition.

The irony is that Apple purchases high quality components that are costly and as such, the cost of iPhone is on the higher side. Moreover, the company cannot reduce the price of iPhone after a certain limit. This acts as a hurdle in gaining greater share in the market of mobile phones.

It is notable that there was a time when Apple was dominant in the mobile and iPod market but due to its inability to cope up with the reducing prices due to competition, in 2001, Apple’s share in the market was a mere 3%.

Part 2: Marketing Programme Elements

Steve Jobs pioneered the idea of iPhone and today the mobile handset is one of the most desired by customers all over the world. This has been possible due to the innovative and imaginative thinking of Steve Jobs. Other factors responsible for iPhone’s popularity are the new style and design, new and latest features, and the marketing strategy. Apple’s overall success can be credited to iPhone and iPod.

During the years 2003 to 2008, Apple’s stock prices witnessed a twenty five times increase. From $7 per share, the price rose to $180 per share. Owing to this increase, Apple’s stock market capitalization, in July 2008, was $160 billion. Despite the US Financial Crisis, the stock price per share of Apple rose to $210 by January 2010.

With the launch of iPhone in 2007, Apple added yet another feather to its cap of innovations. Despite the fierce competition in the mobile market, iPhone has been able to carve a niche for itself. It will not be off the mark to say that iPhone is five years ahead as far as technology is concerned.

Its competitors have to go a long way to be at par with the innovative features that are installed in iPhone. As mentioned earlier, Apple is always on the path of innovation and keeping up its tradition, the company launched iPhone 3G in 2008 and iPhone 3GS, a third generation mobile phone in the year 2009.

iPhone is a true work of genius and is way ahead from its competitors as far as technology is concerned. It has been designed by Jonathan Ive, who has brought a masterpiece and revolutionary product in the field of mobile phones. In fact iPhone is a mix of a mobile phone and a mini computer.

Owing to its features, iPhone has surpassed the category of smart phones. The iPhone has become the major piece of technology that allows the users to perform multiple functions with their portable mobile phone. It has a variety of user-friendly services, from basic communication to entertainment, GPRS, internet, camera and touchpad.

Mistakes Committed by the Management

The introductory price of iPhone in 2007 was $599. But within three months of its launch, the price of iPhone was slashed by 33% to $399. This was a big mistake and bad decision on the part of the management and marketing team. The result was that the early buyers and the faithful customers got a wrong message that they were betrayed and utilized.

As a result of Apple’s profit sharing pact with AT&T, the customers were required to sign in with AT&T. This arrangement was not approved by majority of the customers.

It is noteworthy to mention that Apple could have done better if it would not have ignored the European market while making its marketing strategy. Due to this mistake, Apple lost on sales in the European countries. It is estimated that had Apple concentrated on the European market, it could have made 300 times more revenue during the years. The following table depicts the number of stores that Apple had in the US and the European countries in 2005 and 2008.

CountryApple Stores in 2005
US110
UK1
France0
Germany0
Switzerland0
Italy0
Netherlands0
Spain0