10/31/2011 Marketing Assignment 1 APPLE INC. APPLE INC. THE OVERALL UK MARKET SIZE AND TRENDS/PROJECTIONS Coursework in Marketing 9Apple retail stores 9Computer Sector 9Communications Sector 9Other Rankings Students: Darena Churchulova, 10004799 Nadka Popova, 10004820 Vasilka Kukusheva, 10004811 Program: MBA Lecturer: Dr. V. Blagoev APPLE PRODUCT – DISTRIBUTION CHANNELS UK: • • • • • • Apple Online Store Apple Retail Stores Direct Sales Force Premium Reseller Stores Premium Reseller Stores Authorized Resellers Third‐Party Cellular Network Carriers (Vodafone, Orange, O2, T‐mobile and other small ones) APPLE RETAIL STORES According to Mintel (2009): • Allow Apple to control its brand & provide additional marketing tool • Growth has been consistently strong as a result of expansion, strong retail format and product demand • Constant innovations and high‐profile product launches drive interest • High level of customer service and value‐added in‐store experience APPLE RETAIL (Cont’) UK PC MARKET According to MINTEL (2009), Apple Retail is the fastest‐growing operator in the sector, with sales more than doubling in 2008 thanks to six new store openings and its very desirable and innovative ranges. Figure 2: UK: Leading retailers of PCs, market shares, 2007 and 2008 35 00 35.00 30.00 Fi Figure 3: United Kingdom: PC Vendor Unit Shipment Estimates for 2Q10 (Thousands of Units) 3 U it d Ki d PC V d U it Shi t E ti t f 2Q10 (Th d f U it ) 29.30 26.30 30.00 25.00 20.00 15.00 10.00 5.00 In Q2 2010, the UK market remained the weakest of the larger PC markets in Western EU. PC shipments increased with 15.1% compared to the same period last year, and mobile PC market grew with 17%, with consumer PC leading the way with more than 30% growth compared to professional mobile growth. Also applies for desktops. This indicates the recovery of the professional market is being delayed. No change is expected in the remaining of 2010 (Goasduff, L. 2010) 25.00 12.4011.60 9.50 8.90 5.70 2.70 5.80 5.60 20.00 27.60 26.70 18.90 0.90 0.80 20.50 17.10 4.10 4.50 0.90 1.00 23.70 22.40 15.90 15.00 0.00 7.60 8.30 10.00 5.90 5.20 5.00 0.00 Acer Market share 2007 (%) Market share 2008(%) HP Dell 2Q10 Market Share (%) Toshiba Samsung Others (incl. Electronics Apple) 2Q09 Market Share (%) 1 10/31/2011 COMPUTERS SECTOR – COMPUTERS SECTOR – BRAND SHARES COMPUTERS SECTOR – COMPUTERS SECTOR – BRAND SHARES (Cont’) BRAND SHARES (Cont’) Figure 6: Brand of computer owned, October 2008 Base: 2,000 internet users aged 16+ (Source: GMI/Mintel, 2008) Figure 4: Estimated brand shares in the laptop sector, 2006 and 2008 (Source: Mintel, 2008) 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 30.00 15.00 14.00 14.00 15.00 15.00 15.00 14.00 11.00 17.00 13.00 19.00 8.00 0.00 Acer A 2006 (%) TToshiba hib 2008 (%‐est) H l tt P k d Hewlett‐Packard D ll Dell S Sony VAIO VAIO P k d B ll/NEC* Oth Packard Bell/NEC* Others (Apple, (A l Lenovo, Samsung) Figure 5: Estimated brand shares in the desktop sector, 2006 and 2008 (Source: Mintel, 2008) 60 50 50 45 40 30 20 20 15 16 16 14 10 11 3 0 3 3 2 2 0 Dell Hewlett‐Packard Acer Packard Bell/NEC* 2006 (%) Apple Fujitsu Siemens Others 2008 (% ‐ est) Although the Apple brand is now firmly embedded in the consumer psyche, as a home computing option its appeal is fairly limited to about 3% of the sample. Their much higher prices than Windows OS competition, and the reluctance of PC users to learn a new operating system, still remain major barriers for most consumers (Mintel, 2008). % % Don’t know 5 Other 27 Mesh 1 Lenovo 1 Asus 1 I do not own a computer at home 2 Advent 3 Fujitsu 3 Apple 3 Toshiba Compaq 5 6 Packard Bell 8 HP 8 Acer 8 Dell 20 GLOBAL TRENDS GLOBAL TRENDS ‐‐ PCs UK COMMUNICATIONS EQUIPMENT MARKET • According to Datamonitor Plc (2010), “the worldwide mobile PCs market segment is forecast to record strong growth in coming years.” In 2009 there was a growth of 15% for mobile PCs (laptops, notebooks, netbooks and tablet PCs) and decline in desktops. The forecasted ) p increase in 2009‐2014 is 19%. • “Apple is one of the top five leading players in the mobile PCs market segment”. • It is very possible that the trend of increase also affects the UK mobile PCs market share, including Apple. • “The UK communications equipment market (covers fixed‐line and mobile) accounts for 12.2% of the total EU market. It grew with a compound annual growth rate (CAGR) of 1.6%, over the same period, to reach period to reach $1.3 billion $1 3 billion in 2009. 2009 The The performance of the market is forecasted to decelerate in the five‐year period 2009‐2014, and the UK market will decline with a compound annual rate of change (CARC) of ‐0.9% or 1,2 billion in 2014” (Datamonitor Plc, 2010). COMMUNICATIONS SECTOR –– BRAND SHARE COMMUNICATIONS SECTOR GLOBAL TRENDS ‐‐ SMARTPHONES GLOBAL TRENDS Again according to Mintel (2010‐b), the Apple iPhone is still a niche brand – 2% of market share, compared to the market leader Nokia – 64% which has been historically dominant player in the UK handset market. • According to Datamonitor Plc (2010), the worldwide smartphones shipments which account for 15% in 2009 will double in 2010, in 2012 will increase to over 35% and more than half in 2013. • “Apple became the third largest player in the smartphone market segment in 2009 since launching its first mobile device iPhone, in 2007”. • It is very possible that the trend of increase also affects the UK smartphones market share, including iPhone. 2 10/31/2011 OTHER RANKINGS According to statistics for July 2010 (Mintel, 2010‐b), APPLE Inc ranks on the following places: • Top 100 Internet properties: rank 10th with 15,6 mil unique visitors • Top 100 entertainment properties: iTunes Software (App) rank Top 100 entertainment properties: iTunes Software (App) rank 2nd with 12 mil unique visitors and iTunes – 12th, with 4 mil unique visitors • Top 100 Retail properties: Apple.com Worldwide sites rank 3rd with 8,7 mil unique visits. Arndt et al. (2010) ranked Apple Inc first out of the 50 Most Innovative Companies in 2010 & 2009. GEOGRAPHIC CHARACTERISTICS THAT DETERMINE THE MARKET SEGMENTATION THE MAIN MARKET SEGMENTS ‐ THE MAIN MARKET SEGMENTS ‐ THEIR SIZE AND TRENDS/PROJECTIONS 9Geographic Segmentation 9Demographic Segmentation 9Psychographic and Behavioral 9Customer needs 9Other segmentation GEOGRAPHIC CHARACTERISTICS THAT DETERMINE THE MARKET SEGMENTATION DETERMINE THE MARKET SEGMENTATION (Cont’) • Apple Inc. manages its business primarily on the basis of geographic segments which are 5: 9 The Americas 9 EMEA 9 Japan 9 Retail segment 9 Other segments • Location of the retail stores – 29 out of 84 international and out of total 317 worldwide are in UK: • Concentrated in the large urban areas and cities – 4 in London (The largest Apple cities 4 in London (The largest Apple retail store in the World is located there at Covet Garden (Kiss, J. 2010); 2 in Bristol – South‐East part – higher concentration – greater urbanization (fig.12) • Desirable and high‐traffic locations DEMOGRAPHIC CHARACTERISTICS • Age 16 – 25 o High‐price is an obstacle!!! Does not possess purchasing power; need financial support from their parents o 17 % unemployment rate in UK (18 – 24 years old) o Brand Loyalty is not a driving force for purchase behaviour; want value for money (Mintel, 2010‐c) o Young People and their wishes are driving force though for their parents to purchase (53% Christmas gift from their parents) o Introduction of payment price – spreads the high retail cost over years (73% personal savings; ) o 77% ‐portable computers (85 % of students); 42% ‐ Smartphone; 46% ‐ portable music player o Appearance and design matters for more females: males (71% : 61%) o 50.4 % ( 2004‐2009) – broadband increase – higher than the average penetration in this demographic group; social media sites use. o This age group are leaders in accessing Internet through their mobile phones (Mintel, 2010 ) DEMOGRAPHIC CHARACTERISTICS(Cont’) DEMOGRAPHIC CHARACTERISTICS • Age 25 – 50 High‐disposable income; strong purchasing power Brand Awareness; Brand Loyalty Parents – indirect target for the technology companies‐ driven by their children Already existent customers; Families and individuals which affiliate themselves with the Brand o Women are more fascinated than men with the design rather than with the Women are more fascinated than men with the design rather than with the technical specification (Mintel, 2010‐c) o o o o • Age 50+ Æ? ‐ trends/ projections • Ethnicity and Nationality – White British, White Irish, White and Black Africans, White and Black Asians • Income ‐ high‐disposable income 3 10/31/2011 PSYCHOGRAPHIC AND BEHAVIORAL CUSTOMER NEEDS which determine the market segmentation • Psychographic o Business people o Young people (esp. Students who are financially supported by their parents) o Gamers o Readers o People high income ‐ sophisticated o People who enjoy listening to music o Users of social networks – Facebook, Twitter • Behavioural o Heavy users o People associate themselves with their Apple device o Easy and comfortable to carry o App Store and iTunes – source of amusement o Used in everyday life – turned to be one’s “business partner”, “amusement centre” , “communication and social mediator and facilitator” • New and innovative technologies applied in all product and solutions; superior ease–of–use; seamless integration; innovative industrial design (Apple Inc.10‐K/ A, 2010, p. 27) • Way to replace heavier, bulkier computers – “extra device to carry around” ‐ ex: I ex: I‐Pad Pad – satisfies the needs of customers who are mainly satisfies the needs of customers who are mainly Web‐surfer; note‐taker; (Mossberg W., 2010); readers and gamers VS. Customers Needs to creating and edit giant spreadsheets or long documents ; elaborate systems for organizing emails (Hunt, P. 2010) • Broadband (high‐speed Wi‐Fi Internet) – growing like “wild‐ fire” –need for 3G software devices (Pigford, J. 2009) CUSTOMER NEEDS MARKET SEGMENTATION (Cont’) which determine the market segmentation • App Stores and iTunes – nearly 200 000 applications – gaming, educational, music, movies, books – strong merchandizing skills and excellent customer service (Mintel, 2009) • Apple Retail Stores –single branded, high‐profile venues– promote brand awareness, trade on aspiration, innovation, experience and excellent customer service; experienced technical support; “demo areas” consumer adoption (Mintel, 2009) (Apple Inc.10‐K/ A, 2010) Main buyers of Apple products fall in 5 categories: • Home users/ Consumers • Small and medium Small and medium‐sized sized businesses (SMB) businesses (SMB) • Education • Corporate, Government and Creative customers • Others – IT technologies and scientific market (Apple Inc.10‐K/ A, 2010) MAJOR MICRO & GLOBAL ENVIRONMENTAL INFLUENCES ON THE MARKET INFLUENCES ON THE MARKET –– THREATS* THREATS* • MAJOR MACRO AND GLOBAL ENVIRONMENTAL INFLUENCES ON THE MARKET THE MARKET 9Threats 9Opportunities • • • • • • • • • Economic conditions (tighter credit, unemployment, negative financial news, declines in income or asset values, costs increase); Foreign Currency Exchange rates fluctuation; Weakening of the US dollar value; Stock Price; International Trade Regulations (tariffs, anti‐dumping penalties; increased duties 7 taxes); Patents Trademarks Copyrights and Licensing; Patents, Trademarks, Copyrights and Licensing; Legalization (laws, regulations and industry‐imposed standards); legal proceedings; Aggressive & Intense competition; Third‐party manufacturers – dependence for key components; Distributors, carriers and resellers; Third‐party digital content (iTunes Store); patents and intellectual property; software developers; Cellular network carriers (in some countries are exclusive); * Source: Form 10-K which Apple Inc. filed with the US Securities and Exchange Commission (SEC) for Fiscal Year Ended September 25, 2010. 4 10/31/2011 MAJOR MICRO & GLOBAL ENVIRONMENTAL INFLUENCES ON THE MARKET INFLUENCES ON THE MARKET –– OPPORTUNITIES * MAJOR MICRO & GLOBAL ENVIRONMENTAL INFLUENCES ON THE MARKET INFLUENCES ON THE MARKET –– OTHER OTHER ** • Business seasonality (after the intro of iPhone and iPad this is no longer the case); • Political instability, war, terrorism, public health issues, natural disasters and other circumstances; • Legal proceeding – Legal proceeding Apple is involved in large number of legal Apple is involved in large number of legal proceedings. * Source: Form 10-K which Apple Inc. filed with the US Securities and Exchange Commission (SEC) for Fiscal Year Ended September 25, 2010. • • • • Focused R&D drives innovation New business strategies and acquisitions Technology creates competitive advantage ‐ Brand loyalty Environmental Laws (to date they had no significant effect on the company’s capital expenditures, earnings or competitive h ’ i l di i ii position) * Source: Form 10-K which Apple Inc. filed with the US Securities and Exchange Commission (SEC) for Fiscal Year Ended September 25, 2010. Apple in competitive environment THE MAIN MARKET COMPETITORS ‐ THEIR MARKET SHARE AND STRENGTHS/WEAKNESSES 9 Tablets market bl k 9 Mobile phones market, Smartphones 9 Operational systems 9 PC market 9 Gaming market 9 Mp3 players market • Rapidly evolving industry • Intense competition • Rapid technological advances in hardware and software • Frequent introduction of new products (Datamonitor, 2010) Tablet Market Comparison table of tablets (Edwards C., 2010, October 25) Operating Screen Weight Battery Launch Connect Price Bonus system size lbs life ivity iOS 9.7-in. 1.5 10 h. Apr. Wi-Fi, $499 High-definition screen, (680g) 2010 3G Thousands of apps available Android 5-in. 0.5 10 h. Aug. Wi-Fi, $299 Connects to cellular Dell (220g) 2010 3G networks to make Streak calls Android 10.1-in. 1 12 h. Nov. Wi-Fi $299 High-definition Archos 2010 graphics 10.1 Apple iPad • • • • 26% growth of tablet shipments 4.4 million units in Q3 2010 Apple is the clear market leader Impressive 95% share with the iPad and beating Android into second place (Evans, J. 2010) Figures 14 and 15. (Source: Evans, J. 2010) 7-in. Samsung Android Galaxy Tab Toshiba Android 10.1-in. Folio BlackBerry 7-in. RIM tablet PlayBook 0.8 (380g) g 1.7 0.9 (400g) n/a Optimus Android Pad LG HP Slate Windows 7 8.9-in. 670g Google HTC Chrome Google Chrome 7 h. Nov. 2010 3G $400 Gyroscopic sensor, front and rear cameras, flash support <7 h. Nov. Wi-Fi 2010 $550 N/A N/A Syncs with BlackBerry devices; corporate apps; multitasking n/a Lighter and thinner n/a 5 h. Early Wi-Fi, 2011 3G n/a 26 Nov. 2010 n/a Wi-Fi $799 Wi-Fi subsidis ed by Verizon (US) High-definition graphics 1,8GhZ processor Web Based Applications, Multitasking 5 10/31/2011 Brand trust and awareness (Barber N., 2010) STRENGTHS AND WEAKNESSES OF APPLE’S IPAD Strengths Figure 16 (Source: vouchercodes.co.uk) Figure 17 (Source: vouchercodes.co.uk) • High‐definition screen • Huge range of applications • Competitors not available for the h lid (Bulik B.,2010) holiday • Customer service: Genius Bars • Apple is like religion to its fans. • Independent strategy • Jobs knows he's never going to get fired, so he devotes years to attain Apple's high standards Weaknesses • • • • No camera No multitasking No flash support Make people looking forward to newer versions (Manjoo, 2010, July) (Manjoo, F., 2010) MOBILE PHONES MARKET RESEARCH IN MOTION WEAKNESSES Figure 18: Handset usage, by brand, July 2010 (Mintel, 2010‐a) Base: 974 at‐home internet users aged 16‐64 who have a mobile phone in the household • • • • • Smaller screen size Is it for consumers or the enterprise? No 3G. The timing is off. Strong competition of iPad (Reisinger, D. 2010) 2% 4% 8% 31% 4% Nokia Samsung 6% Sony Ericsson LG Apple iPhone 7% Blackberry Motorola HTC 16% STRENGTHS OF NOKIA • Used by 34% of respondents • Nokia is the market leader. • Greater number of models and a higher number of budget handsets • Nokia has historically been a dominant player in the UK handset market. • Over‐55s are more likely to own a Nokia than any other handset brand • More accessible. The cheapest Nokia costs £4.95, compared to the Apple iPhone at £342.50 22% Other SMART PHONES • Smart phones are increasingly popular, owned by 28% of internet users. • The UK market of smartphones is dominated by Apple. • Apple: record profits of £2.1 billion (in 3 months). • Nokia has appeared a laggard in the smartphones sector. • Nokia has suffered from delays to the launch of the N8. • Nokia: a 40% drop in profits (in 3 months)(Mintel, 2010‐b) 6 10/31/2011 CUSTOMER SATISFACTION WITH SMART PHONES 3. OPERATIONAL SYSTEMS • Nokia lost share from 44.6% to 36.6%. • Android phones grew their sales dramatically, leaping from 3.5% to 25.5% to become the second‐biggest gg smartphone OS in a year, replacing RIM • Research In Motion saw its share fall from 20.7% to 14.8%, falling into fourth position. (Arthur, C. 2010) On the left: Figure 20. (Source: Arthur, C. 2010) Figure 19. Source: Carton P., 2010 APPLE VS. GOOGLE 4. PC MARKET (Burrows, P. 2010) APPLE GOOGLE Date founded 1976 1998 CEOs Steve Jobs Eric Schmidt Market caps $190 billion $186 billion Motto Think different Don’t be evil Key to success Elegance Algorithms The employees who matter Designers Engineers How decisions get made Because Steve says Data, data, so data Big challenge Does anyone but Jobs have a vision? Can they make money on anything but search? UK: Leading retailers of PCs, market shares Company Market share 2007 (%) Market share 2008 (%) PC World 29.3 26.3 Dell 12.4 11.6 Currys/Currys.digital/ Currys/Currys digital/ Dixons Travel stores 95 9.5 89 8.9 Apple Retail 2.7 5.7 Comet 5.8 5.6 Dabs.com 4.1 4.5 MISCO 0.9 1.0 Micro Anvika 0.9 0.8 Figure 21. (Source: Mintel, 2008) THE MAIN MARKET STRENGTHS OF APPLE ON THE PC MARKET It's the entire experience ‐ hardware, software, and content distribution. Apple understands that better than anyone and understands that better than anyone, and none of the hardware companies are willing to invest the money to really take them on. (Copeland, M. V. 2010) GAMING MARKET • Major games studios are developing games for iPhone and iPod touch; • Direct competitors: Sony’s PSP console and Nintendo’s DS; • Sony is launching PlayStation Phone (Daily Telegraph/Mintel, 2010). • Nintendo: The demand for its Wii console is slowing due to "increased competition in the handheld business from Apple's iPhone" (Hartley, A. 2009). 7 10/31/2011 THE MAIN MARKET MP3 PLAYERS MARKET: WILL SMARTPHONES REPLACE MP3 PLAYERS? • The main iPod competitor is… the iPhone. And now Ipad (Kolakowski, N. 2010); • Sound quality: Sound quality: many smartphones can many smartphones can’tt compare to MP3 players; • Most people probably wouldn’t want to take an expensive smartphone into the gym; • Mobile’s battery issue (Trup, N. 2010). STRENGTHS OF IPOD • It’s Apple's Trojan horse for its entire product portfolio; • Good looks; • Four different models; F diff t d l • Extremely well‐engineered; • The main advantage: iTunes (Evans, 2009) IPOD AND COMMPETITORS • iPod Touch +: The benchmark for other players. Great touchscreen, fast processor and lots of built‐in software. Integrated Wi‐Fi provides access to the iPhone App Store. ‐: Lacks FM tuner and integrated digital camera. • iPod Nano +: Ultra‐portable size, great interface, now features videocam. Relatively inexpensive. ‐: Not as flexible or sophisticated as the Touch. • Microsoft Zune HD +: Good design, big touchscreen, HD video output, FM tuner and Wi‐Fi, integrates well with Zune marketplace. ‐: Lacks extensive app support and peripherals. • Sony X Series Walkman +: Good design, great sound quality, incorporates noise‐cancellation technology. Integrates well with PC‐based music services. ‐: Relatively expensive, lacks app store and peripherals. (Taylor P., 2010, January 22) IDENTIFICATION OF SEGMENTS OFFERING ENTRY/GROWTH OPPORTUNITIES OPPORTUNITIES 9Entry opportunities 9Growth opportunities SEGMENTS OFFERING ENTRY OPPORTUNITIES SEGMENTS OFFERING GROWTH OPPORTUNITIES • “Desk‐free" computer ‐ a machine that lets you slump on the couch with a wireless keyboard while surfing on a giant projected screen. • Surface that can recognize handwriting gestures, in order to let y you sign your name on a touch screen without using a stylus. g y g y • Instead of fussing with flat windows on your iMac, cubes, prisms, and pyramids would represent apps, and you'd rotate one in 3‐D space to interact with different parts of the program. • All these are mentioned in recent Apple patent filings. (Manjoo, F. 2010). • Apple Should focus its efforts to expand the size of its market segment of people over the age of 50 (50 +) (S. Hanson,2010) + people with high purchasing power (in UK); they know what they want and they are ready to spend money on it what they want and they are ready to spend money on it. + Apple designs easy to use and operate with devices • Apple Inc. Combines and do projects with education institutions and other companies, thus creating new useful applications and and its products/solutions becoming more and more useful in everyday life. – ex. With NOVARTIS (apple.com/uk) 8 10/31/2011 REFERENCES (1) • • • • • • • • REFERENCES (2) • • • • • • • Carton, P. (2010, November 19) Consumers Weigh in on Their New Smart Phones – iPhone vs. Motorola vs. BlackBerry vs. Samsung vs. HTC, ChangeWave, [online] Available at: http://www.investorplace.com/23576/new‐smart‐phones‐iphone‐vs‐motorola‐vs‐blackberry‐vs‐samsung‐ vs‐htc/ [Accessed 23 November 2010] Copeland, M. V. 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(2010, September 28) RIM's PlayBook Tablet Will Falter: 10 Reasons Why [online] Available at: http://www.eweek.com/c/a/IT‐Infrastructure/RIMs‐PlayBook‐Tablet‐ Will‐Falter‐10‐Reasons‐Why‐470010/ [Accessed 16 November 2010] 9 10/31/2011 THE END After the death of Moses, Einstein and Steve Jobs each in his time falls into Heaven. God welcomes them and generously says: ‐ If during your earthly time you have not found the answer to vital question, now is the right time to ask! y Moses says: ‐ I’ve never understood how to properly execute Your will. Einstein asks: ‐ I would like to learn the laws with which You have created the world. It is Steve Jobs’ turn: ‐ And me, I would like to know why the hell you are sitting on my place?! 10