1
Apple iPad 1st Generation 16GB
Apple Inc.
NAICS Code, 334111, Electronic Computer Manufacturing
Apple® -iPad® 16GB* Tablet
(1st Generation)
Model: MC349LL/A ǀ SKU: 9811424
Group 2
Ladorise Bedard-Webb, Mersadees Henry, Kevin Muvunyi, Thi Pham,
Megan Steele, Whitney Wang
Mercyhurst University
February 13, 2013
Apple iPad 1st Generation 16GB
2
Apple iPad 1st Generation 16GB
The Apple iPad 1st Generation 16GB is a convenient tablet that can be used for a number
of different functions. It was built “using incredible ingenuity in structure and design and solid
components to create a reliable and desirable piece of hardware,” when it came out in 2010
(Allen, 102). We chose to research this product for a variety of different reasons:
•
“iPad inspires creativity and hands-on learning with features you won’t find in any other
educational tool” (Apple in Education, 2012).
•
“The iPad had evolved from the iPod, the iPhone and the MacBook and their respective
operating systems into something similar, yet different” (Allen, 102).
•
Apple is one of the “most valuable companies in history” as the “market capitalization of
$624 billion made it nearly 15 times more valuable than Facebook” (Bond, 2012).
•
The “iPad tablet computer has become another game-changer in the consumer market”
(Apple Inc., 2012).
•
In high demand since it is at the “top of the charts as most peoples’ favorite new piece of
technology” (Allen, 102).
3
Apple iPad 1st Generation 16GB
References
Allen, J. (2012). Using The Ipad for Profit and Fun in Family Law Practice. American Journal of
Family Law, 26(2), 102–109.
Apple in Education - iPad makes the perfect learning companion. (2012). Retrieved December 13,
2012, from http://www.apple.com/education/ipad/
Apple Inc. | Company Profile from Hoover’s. (2012). Retrieved December 13, 2012, from
http://www.hoovers.com/company-information/cs/companyprofile.Apple_Inc.4c9baa063908dbd8.html
Bond, P. (2012). Apple Becomes the Most Valuable Company in History - The Hollywood Reporter.
Retrieved December 13, 2012, from http://www.hollywoodreporter.com/news/apple-mostvaluable-company-history-624-billion-364125
Apple iPad 1st Generation 16GB
4
Part Two: Situational (3Cs) Analysis
a. Apple iPad 1st Generation Marketing Mix

Product – Apple iPad 1st Generation 16 GB
The iPad is a tablet computer developed by Apple. The iPad “lets users browse the web,
read and send emails, enjoy and share photos, watch HD videos, listen to music, play games,
read ebooks and much more” (Apple - Press Info - iPad…). The iPad had been “described by
some as a cross between the iPhone and a MacBook laptop” (What is the iPad…). Apple’s
CEO at the time, Steve Jobs, mentions how the “’iPad connects users with their apps and
content in a far more intimate and fun way than ever before’” (Apple - Press Info - iPad…).
According to Ross Catanzariti, the iPad 1st Generation is 9.7 inches in display size with a
display resolution of 1024 x 768 pixels; its processor is the Apple A4 (1GHz), RAM is 256
MB; battery life up to 10 hours. (1). It does not include rear or front cameras. As for internal
memory, the focus is on the 16 GB iPad 1st Generation. More features about this product can
be seen in Table 1.

Price
The price of the Apple iPad 1st generation varies base on how much internal memory you
want with it. Today, the value of the first generation iPads had decreased due to the
introduction of the newer versions of this product – iPad 2 in 2011, iPad 3 in 2012, and the
iPad mini a couple months afterwards. Due to the advancements based off the first iPad, not
many stores are selling the iPad 1st Generations anymore. However, when the first iPad was
released in April 3 2010, Apple retail stores offered their prices and other retailers offered
slightly different prices compared to what Apple stores. These prices are listed below.
Apple iPad 1st Generation 16GB
5
Apple.com (2010 prices)
16 GB: $499
32 GB: $599
64 GB: $699

Place/Distribution
When the iPad 1st Generation was released in April 3 2010, it was only purchasable in
“all 221 US Apple® retail stores and most Best Buy stores” (What is the iPad…). After some
time, stores like Wal-Mart and Target started selling iPads. And even stores around the world
started selling them after the release date. However, nowadays, due to the creation of iPad 2,
iPad 3, and the iPad Mini, apple.com is no longer selling 1st Generation iPads. Online stores
like Amazon and eBay still might be selling them but at a cheaper price compare to what
they were worth in 2010.

Promotion
The iPad 1st Generation was promoted through commercials and advertisements. These
ways of promoting the 1st Generation of iPads were important because Apple was
introducing a tablet for the first time ever. They even had Apple CEO of the time, Steve Jobs,
do many talk shows about the product so that many people will understand the product.
Top 3 Competitors: Samsung Galaxy Tab, BlackBerry PlayBook, and HP Slate 500
*These are the top three competitors of the Apple iPad 1st Generation in 2010
Samsung Galaxy Tab

Product
Apple iPad 1st Generation 16GB
6
o Based off of Samsung Galaxy S smartphones
o 7 inch Android 2.2 tablet
o A tablet that can be used as a communication or entertainment tool

Price
o 16 GB $399
o 32 GB $499

Place/Distribution
o Not sold on Samsung.com anymore
o Some retail stores might still carry them
o Online stores (amazon.com)

Promotion
o Many videos about the product
o Websites (samsung.com) listing the specs and features
o Photos of the product
BlackBerry PlayBook

Product
o 7-inch tablet built “on its own QNX operating system” (iPad competitors: The top
20…).
o Specific features and specs are on their website (blackberry.com)

Price
o 16 GB $499
o 32 GB $599
Apple iPad 1st Generation 16GB
o 64 GB $699

Place/Distribution
o Amazon.com
o eBay.com
o Not sold anymore on BlackBerry.com

Promotion
o Blackberry.com
o Some videos about the product but not many
o Not too many advertisements about the product
HP Slate 500

Product
o Microsoft product running on Windows 7
o 1.5 pounds
o Includes a HP Slate Digital Pen, Dock, Portfolio, and webcam

Price
o 2GB $799

Place/Distribution
o Amazon.com
o eBay.com
o Not sold anymore on HP.com

Promotion
o Videos and advertisements
7
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Apple iPad 1st Generation 16GB
Table 1: Comparison between Apple iPad 1st Generation, Samsung Galaxy Tab, BlackBerry
PlayBook, and HP Slate 500
Apple
iPad
Samsung Galaxy
Tab
BlackBerry
PlayBook
HP Slate 500
Display
Weight
Operating
System
Browser
Processor
9.7 inch LED
7 inch TFT-LCD
7 inch LCD
8.9 inch
1.5 lbs
380 g (<1 lb)
0.9 lbs
1.5 lbs
iOS
Android 2.2 (Froyo)
Blackberry tablet
OS
Windows 7
Safari
Web Browser
Blackberry
Explore
1 GHZ
APPLE A4
1 GHz DUAL
CORE CORTEX
Intel Atom
Processor Z540
RAM
Camera
Storage
Battery Life
Connectivity
256 MB
Cortex A8 1.0GHz
Apllication with
PowerVR SGX540
512 MB
1 GB
2 GB
NO
Yes
Yes
Yes
16 GB 32 GB
16 GB 32 GB
10 hours
7 hours
N/A
5 hours
Wi-Fi
Bluetooth
Wi-Fi
Bluetooth
Flash Support
Application
NO
Yes
Wi-Fi
Bluetooth
USB
Yes
Wi-Fi
Bluetooth
USB
Yes
Apple Store
Blackberry
Microsoft
Price (approx.)
$500-$600
Android Market and
Samsung Apps
$400-$500
$300-$350
$799
64 GB
b. What need the product solves for the consumer
Portable computers have revolutionized the way that people live their lives. They are
able to carry with them an unlimited supply of knowledge wherever they go. The world is at
their fingertips. The iPad has been a major component to this new, modern lifestyle. Not only
does the iPad provide its users with a vast array of information on the go, it also contains apps
for entertainment, education, and business purposes.
Apple iPad 1st Generation 16GB
9
The iPad is extremely beneficial because it aids in the education process. Students are
able to access textbooks different from the average classroom textbook. Textbooks on the iPad
have the potential to contain pictures that are interactive with its readers, as well as movable,
three dimensional graphics to aid in the learning process. By using a textbook on the iPad, a
student has the power to instantly look up a definition to any word that they come across.
Furthermore, these textbooks are cheaper than printed textbooks and have the luxury of being
more updated (Apple in Education). Students can learn the most recent information that is being
learned by using their online textbooks.
Educational apps on the iPad also have changed the world of learning. There are over
20,000 apps designated specifically for educational purposes. These apps can help a student
study and track their assignments. It is an efficient way for students to stay organized and take
notes (Apple in Education). Organization is vital for the learning processes of students
everywhere. The iPad helps students experience knowledge in a newer and more effective way.
Other aspects of the iPad also aid in education. iWork is a tool used by both teachers and
students that contains Pages, Keynote, and Numbers. These programs can be used for a number
of different classroom elements such as creating tables, charts, animations, and spreadsheets.
iWork can be used in many different ways to aid in the learning process. The iPad has been
successful for teachers as well. Teachers can use the iPad to display their notes, images, videos,
and webpages to their students as teaching tools (Apple in Education). In this way, the iPad
benefits both teachers and students.
The iPad also helps businesses and business actions function more smoothly. The iPad
contains thousands of apps for business purposes that help with a number of activities and
services. Business workers can create and exhibit presentations using the iPad. They also can
Apple iPad 1st Generation 16GB
10
communicate with partners for meetings. Furthermore, these apps give people the power to
create spreadsheets, charts, diagrams, and tables to display the different aspects of how a
company may be doing. Another important feature of the iPad is that it is portable and therefore,
can be taken anywhere. One can always be connected to the people and information that they
need to be (Apple iPad in Business). Brian Spearman, the Senior Vice President of PepsiCo
North American Beverages, stated that, “We think iPhone and iPad technology is absolutely a
game-changer for us, both in terms of communication and service and in productivity” (Apple
iPad in Business). The iPad makes business more efficient and effective.
The iPad also has a number of apps for entertainment. Games can be played on the highquality touch screen for ultimate entertainment. The iPad also has access to the internet for quick
facts and knowledge for on-the-go questions. It can be used for e-mailing, listening to music,
playing games, looking at pictures and videos, and reading (Form 10-K, 2011). The iPad can
provide one with the entertainment that they desire wherever they are.
c. How does the industry segment or “divide” the market?
Apple divides its market into a number of different segments. Apple Inc. is in the
Electronic Computer Manufacturing industry. Personal computers, laptops, desktops, and servers
are manufactured in this industry (US Census Bureau, 2012). Apple’s personal computers were
the first to be produced and were the first to make personal computers that were made for
everyone, not just professionals (APPLE COMPUTER, INC., 2003). The iPad is in the portable
computer segment of that industry (Computer Manufacturing in the US Market Research |
IBISWorld, 2003).
Apple iPad 1st Generation 16GB
11
These products are manufactured for individuals, businesses, and government for
educational, personal, and scientific reasons (Apple inc., 2003). The industry targets
professionals, businesses, people seeking entertainment, and middle class to upper class families.
Identify the segment and category for your product.
Industry – US Computer Manufacturing 334111, Electronic Computer Manufacturing
Segment –Portable Computers
Product – Apple iPad 1st Generation 16GB (US Census Bureau, 2012).
d. Summarize a recent news story about your product (the news story must be attached as an
addendum to your paper)
In March 2013, Apple has been rumored to be releasing a new 5th generation iPad. This
iPad will have some of the same features as the iPad mini. While the 4th generation iPad only has
been out for one month, this would mean a shortened life cycle for Apple products. New versions
of the iPad have been released every several months and this would be no different. The new
product is said to have Retina Display and dimensions that are 4mm shorter in height, 17mm
shorter in width, and 2 mm shorter in depth than the current iPad. The 5th generation iPad will be
similar to the 4th generation iPad but will be smaller and lighter (Fresh iPad rumor: Thinner,
lighter version due in March, 2012).
(ARTICLE ATTACHED)
http://news.cnet.com/8301-13579_3-57560694-37/fresh-ipad-rumor-thinner-lighter-version-due-inmarch/
Apple iPad 1st Generation 16GB
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Brief History of the Company
Apple, Inc. was originally Apple Computer, Inc. until January 9, 2007 (Honan, 2007).
It is a multinational corporation that was established in Cupertino, California. It was
established in 1976 and has been booming ever since. The name of the Corporation
changed because Apple, Inc. transitioned from selling Apple I computers to a chain of
electronics such as tablets, mobile phones, and media players (“Apple,” 2008). The
company also offers a variety of software programs and Apple, Inc. has 390 stores across
10 countries and if you include online stores the total expands to 88 countries (Apple
Appraisal Magazine 2010). This expansion allows the company to have a diverse target
market. Apple, Inc. targets consumers in education, government, and business.
Table 2: Apple’s Segmentation Strategy
Financial history of the Apple Inc.
Apple has been a leader and innovator in the world of technology since it busted onto in
scene in 1976, when founder Steve Jobs, Steve Wozniak, and investor Ronald Wayne planned to
13
Apple iPad 1st Generation 16GB
sell the Apple 1. When the company began Jobs and Wozniak both owned 45% of the company
and Wayne owned 10%. However, fearing the instability of funding a new company Wayne sold
his share to Jobs and Wozniak for $800, today Wayne’s share would have been worth over 3
billion dollars. The technology company has been steadily growing and (despite low sales and
market shares in the early 1990’s) has become the largest publicly traded corporation in the
world by market capitalization, being valued at over 600 billion dollars (Dougherty, 2010).
Between the years 2010 and 2012 Apple has made over 300 billion dollars in net sales, as seen in
Table 3 below (Apple, 2012):
Results of Operations - (In $ millions, except shares in thousands, per share amounts)
Table 3: Apple’s 3-year Sales
Fiscal Year
Domestic sales
International sales
Total net sales
2010
$60,949
$95,559
$156,508
2011
$41,812
$66,437
$108,249
2012
$28,633
$36,592
$65,225
Apple has been able to create so much revenue because the groundbreaking and state-ofthe-art products that ranges from phones, to computers, to tablets. Figure 1 below shows some of
the products that are made by Apple, as well as how much each product has made between 2010
and 2012.
Figure 1: Apple Product Total Revenues
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Apple iPad 1st Generation 16GB
3. Write a description of the industry. Your industry description must include, but is not
limited to the following:
a. Three year sales history for the industry and segment. You must include both a graph
and table that depicts this information in your paper.
The Computer Manufacturing industry is a very large industry in the US as it generates
billions of dollars in revenue each year. Statistics show that the number of people in the US that
have at least one computer increased 7.5% from 2007 to 2012. However, despite the fact that
demand for computers has increased, the industry revenue dropped rapidly during the three-year
period from 2010 to 2012. As computers have become popular and almost everyone has at least
one computer, intense price competition is one of the reasons that make the industry profit
continue to fall. The success of tablet market after the Apple introduced its first tablet, to
consumers is another reason. The computer manufacturing companies in the US now have to
focus more on something else like server systems and IT services. The following table and graph
show the three-year sales history of the Computer Manufacturing industry (IBISWorld).
Table 4: Sales history of Computer Manufacturing Industry in the US
Year
Revenue (in millions)
2010
$43,770.30
2011
$41,340.10
2012
$36,750.60
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Apple iPad 1st Generation 16GB
Figure 2: Sales History of Computer Manufacturing Industry in the US
Revenue (in millions)
$44,000.00
$42,000.00
$40,000.00
$38,000.00
$36,000.00
$34,000.00
$32,000.00
2010
2011
2012
(IBISWorld)
b. Using supporting data (i.e., graphs, tables, or charts), you must analyze and elaborate
whether the industry and segment are growing, shrinking, or are stagnant. Also state and
defend whether the industry and segment growth/loss is accelerating or slowing.
The sales history of the Computer Manufacturing industry shows that the industry has
been shrinking in recent years. The revenue was about $43,770 million and $41,340 million in
2010 and 2011, respectively. In 2012, it went down to approximately $36,750 million. One of the
reasons that make the profit continue to fall is because of price competition as computers have
become popular nowadays. Another reason is the success of Apple since this company launched
its new product, the first-generation iPad, in 2010. Other companies then quickly produced their
own tablets, which have made tablets have a great impact on the market. However, all tablets are
manufactured abroad. This problem does not bring any benefits to the industry’s financial
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Apple iPad 1st Generation 16GB
performance and the tablets also become more competitive compared to the products
manufactured in the US. Many manufacturing companies also produce their products abroad to
lower their labor costs. The industry seems to continue shrinking, but with a much lower speed
since many computer manufacturing companies in the US have started focusing on and investing
in their computer server systems and services more. The industry revenue is also expected to
slightly grow up in 2013 and 2014 as described in the chart below (IBISWorld).
Percentage Change in Sales
Figure 3: Percentage Change in Sales in the Computer Manufacturing Industry
0.00%
-2.00%
-4.00%
-6.00%
-8.00%
-10.00%
-12.00%
Percentage Change in Sales
2010
2011
2012
2013
(est.)
2014
(est.)
-0.30%
-5.60%
-11.10%
-10.80%
-7.90%
c. Name the top three competitors in your product’s industry and segment.
Top Three Competitors in the Industry
Based on the companies’ revenue, the top three computer manufacturing companies in
the US were Hewlett-Packard (HP), Dell, and IBM in 2010 and 2011. In 2012, IBM was no
longer in the list as it was replaced by Apple and went down to the fourth place. Also in 2012,
HP, Apple, and Dell are the top three companies in the Computer Manufacturing industry based
on their market share.
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Apple iPad 1st Generation 16GB
Figure 4: Top 3 Competitors in the Computer Manufacturing Industry Based on Revenue
Top 3 US Computer Manufacturing Companies
(based on revenue)
12000
Revenue (in millions)
10000
8000
Apple
HP
6000
Dell
4000
IBM
2000
0
Fiscal 2010
Fiscal 2011
Fiscal 2012
Figure 5: Top Computer Manufacturing Companies in US Based on Market Share in 2012
Top Computer Manufacturing Companies in
US (based on market share in 2012)
Other
11.2%
IBM
16.7%
Apple
21.3%
Apple
HP
Dell
Dell
23.3%
(IBISWorld)
HP
27.3%
IBM
Other
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Apple iPad 1st Generation 16GB
References
“1984” Apple Macintosh Commercial (Full advert, Hi-Quality) - YouTube. (n.d.). Retrieved January
17, 2013, from http://www.youtube.com/watch?v=HhsWzJo2sN4
Ackerman, D. (n.d.). Is the HP Win 7 slate already dead? CNET. Retrieved January 16, 2013, from
http://news.cnet.com/8301-17938_105-20003790-1.html
Apple, Inc. (Segmentation Strategy). (n.d.). Retrieved January 17, 2013, from
http://yousigma.com/benchmarking/applessegmentationstrategy.html
Apple - Press Info - iPad Arrives This Saturday. (n.d.). Retrieved January 13, 2013, from
http://www.apple.com/pr/library/2010/03/29iPad-Arrives-This-Saturday.html
Apple in Education - iPad makes the perfect learning companion. (n.d.). Retrieved January 16, 2013,
from http://www.apple.com/education/ipad/
Apple iPad in Business. (n.d.). Retrieved January 16, 2013, from
http://www.apple.com/ipad/business/
APPLE COMPUTER, INC. (2003). Retrieved January 16, 2013, from
http://www.credoreference.com/entry/encyccs/apple_computer_inc
Apple inc. (2003). Retrieved January 16, 2013, from http://www.businessteacher.org.uk/freebusiness-essays/apple-inc.php
Apple Inc. - Financial History. (n.d.). Retrieved January 17, 2013, from
http://investor.apple.com/financials.cfm
Buy 4G LTE BlackBerry PlayBook - Tablet PC Price - US. (n.d.). Retrieved January 13, 2013, from
http://us.blackberry.com/playbook-tablet/where-to-buy.html
Catanzariti, R. (n.d.). iPad vs. iPad 2: We compare Apple’s two tablets. PC World. Retrieved January
13, 2013, from
Apple iPad 1st Generation 16GB
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http://www.pcworld.idg.com.au/article/378714/ipad_vs_ipad_2_we_compare_apple_two_tablets
/
Computer Manufacturing in the US Market Research | IBISWorld. (2003). Retrieved January 16,
2013, from http://www.ibisworld.com/industry/default.aspx?indid=740
Dougherty, M. (n.d.). A Brief History of Apple, Inc. Retrieved January 17, 2013, from
http://www.brighthub.com/computing/mac-platform/articles/65346.aspx
Form 10-K. (2011). Retrieved January 16, 2013, from
http://www.sec.gov/Archives/edgar/data/320193/000119312511282113/d220209d10k.htm
Fresh iPad rumor: Thinner, lighter version due in March. (2012). CNET. Retrieved January 12, 2013,
from http://news.cnet.com/8301-13579_3-57560694-37/fresh-ipad-rumor-thinner-lighterversion-due-in-march/
Galaxy Tab: Android Tablet, Digital Electronic Book Reader & More | Samsung Galaxy Tab. (n.d.).
Samsung Electronics America. Retrieved January 13, 2013, from
http://www.samsung.com/us/article/do-more-on-the-go-with-the-galaxy-tabHiner, J. (n.d.). iPad competitors: The top 20 to watch [UPDATED] | TechRepublic. Retrieved
January 13, 2013, from http://www.techrepublic.com/blog/hiner/ipad-competitors-the-top-20-towatch-updated/6460
Honan, M. (2007, January 9). Apple drops “Computer” from name | Macworld. Macworld. Retrieved
January 17, 2013, from http://www.macworld.com/article/1054770/applename.html
HP Slate 500. (n.d.). Www.findthebest.com. Retrieved January 16, 2013, from
http://tablets.findthebest.com/l/19/HP-Slate-500
IBISWorld. (2012). IBISWorld Industry Report 33411a Computer Manufacturing in the US.
Apple iPad 1st Generation 16GB
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Number of Apple stores worldwide from 2005 to 2012 | Statistic. (n.d.). Retrieved January 17, 2013,
from http://www.statista.com/statistics/192067/number-of-apple-stores-worldwide-since-2005/
Ridden, P. (n.d.). BlackBerry PlayBook tablet gets price and release date. Retrieved January 13, 2013,
from http://www.gizmag.com/rim-announces-pricing-and-availability-information-for-playbooktablet/18197/
Samsung Galaxy Tab preview. (n.d.). Engadget. Retrieved January 13, 2013, from
http://www.engadget.com/2010/09/02/samsung-galaxy-tab-preview/
Snapshot. (n.d.). Retrieved from http://us.blackberry.com/playbook-tablet/where-to-buy.html
The Origin of Apple | Apple’s Story of Origin | Apple’s History | The origin of Companies |
TheOriginOf.com. (n.d.). Retrieved January 17, 2013, from
http://www.theoriginof.com/apple.html
Trijot. (n.d.). Apple iPad vs Blackberry Playbook, the BlackPad. Technolism. Retrieved January 16,
2013, from http://www.technolism.com/apple-ipad-vs-playbook-the-blackberry-blackpad-whichis-the-best.html
US Census Bureau. (2012). US Census Bureau Site North American Industry Classification System
main page. Retrieved January 16, 2013, from http://www.census.gov/cgibin/sssd/naics/naicsrch?code=334111&search=2012%20NAICS%20Search
What is the iPad, and what does it do? - Boston.com. (n.d.). Retrieved January 13, 2013, from
http://www.boston.com/business/technology/gallery/ipaddetails/
Apple iPad 1st Generation 16GB
21
Part Three: Environmental Scan and Segmentation/Targeting
1. Global Sales
During 2012, Apple’s international net sales were approximately 61% of the total net sales
(Apple, 2012). The iPad 1st Generation is a widely recognized product in the world, which has
brought billions of dollars in revenue to Apple since it was first launched (Apple, 2010). Apple’s
operating segments include America, Europe, Japan, Asia-Pacific, and Retail operations. The
Retail segment consists of the company’s retail stores in 13 countries, including the United
States. Thus, Apple’s international revenue comes from Europe, Japan, Asia-Pacific, and 12
other countries in the Retail segment. While the Europe segment was affected because of the
uncertain economic conditions and some of the European currencies depreciate, net sales in the
Japan and the Asia-Pacific increased stably due to consumers’ strong demand and the rapid
economic development of some countries in the region such as China, Japan, etc (Apple, 2012).
Top markets by region
Apple does not break down its total net sales of iPad by either region or country. However,
the company has released the information of net sales in its three main operating segments
outside of the U.S., which are Europe, Japan, and Asia-Pacific. The Europe segment represented
approximately 23% of Apple’s total net sales in 2012. However, the net sales in this region only
went up $8.5 billion, or 31% of the total net sales, compared to 2011, due to the economic
conditions and currencies depreciation as mentioned above. Japan continues to be a separate
segment as a result of strong sales growth each year in this country. The Japan segment itself
represented approximately 6.75% of Apple’s total net sales in 2012, which increased $5.1 billion
or 94% from 2011 to 2012. Also, Apple cannot ignore its very potential markets in other
countries in Asia as those countries have been developing really fast in recent years. The Asia-
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Apple iPad 1st Generation 16GB
Pacific segment represented 21% of the total net sales and it grew $10.7 billion or 47% from
2011 to 2012 (Apple, 2012). The strong sales growth came mostly from China as it has been
considered Apple’s “fastest-growing market” and Apple has just spent millions of dollars on
legal issues in China in order to make billions of dollars in revenue in the future (Guglielmo,
2012). A report found that seven out of ten tablets sold in China were Apple’s iPads. However,
Apple will not have to concern about the potential growth of this market, as the middle-class
population of the most populous country in the world also increases, which leads to the growth
of consumers’ demand (McKenna, 2012).
Table 1: Apple’s Total Sales by Region (in millions)
Operating Segments
2010
2011
2012
Europe
$18,692
$27,778
$36,323
Japan
$3,981
$5,437
$10,571
Asia-Pacific
$8,256
$22,592
$33,274
(Apple, 2012)
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Apple iPad 1st Generation 16GB
Figure 1: Apple’s Total Sales by Region (2010 - 2012)
40000
Revenue (in millions)
35000
30000
25000
20000
Europe
15000
Japan
Asia-Pacific
10000
5000
0
2010
2011
2012
Global Brand
Although Apple does not announce the domestic and international net sales of iPad, we all
know that this brand is very popular in the world. A research shows an estimate of 38% of total
iPad sold in the United States, which means that 62% of Apple’s iPad sales comes from
international markets (Farano, 2012). The iPad, like other Apple’s products, is sold worldwide
through the company’s retail stores, online stores, as well as third-party cellular network carriers,
wholesalers, and retailers (Apple, 2012).
2. Environmental Scan
Significant Trends Influencing Apple Incorporated
The major trend influencing Apple is the popularity of its products. Apple has become
known for their customer loyalty and their innovative products. This puts a certain expectation
on Apple to constantly come out with new and improved products. While the popularity clearly
Apple iPad 1st Generation 16GB
24
is a great thing for Apple’s sales, it also places immense pressure on the company to deliver the
high quality and innovative products that its loyal customers expect. When Apple fails to
measure up to its consumers’ high expectations, people are disappointed.
However, Apple’s popularity and customer loyalty continues to help its sales grow each
year. In 2012, Apple’s net sales increased by 45% compared to 2011. When new products are
release to the market, sales sharply increase and then level back out. This substantial increase of
sales proves that Apple products are the current trend in society (Form 10-K, 2011).
Environmental Forces: Opportunities and Threats
Economic Environment Forces
Apple’s high customer loyalty provides for an excellent economic opportunity for their
company. Apple customers have a loyalty to Apple products like no other company’s consumers.
This gives Apple the opportunity to raise its prices and hang on to their customers, where other
companies do not have that luxury. Apple customers are willing to pay a little extra in order to
have Apple products (Strengths, Weaknesses, Opportunities, Threats: The SWOT Analysis,
2012, March 20).
One economic threat to Apple’s growth is the current recession in the United States. As
more and more families are struggling financially, people have less money to spend on Apple
products. Even though Apple’s consumers are loyal, in tight economic times, even the loyal
customers may not be able to splurge on an iPad or another Apple product. While Apple is very
well off financially, the purchasing power of many families has decreased, resulting in a
potential threat to Apple.
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Social Environmental Forces
Currently, society is infatuated with environmental-friendly products and ideas. Socially,
one great opportunity that Apple has over its competitors is its awareness of the environment and
its work to reduce its negative impact on the environment. Apple is doing this by packaging
more efficiently while using fewer materials. They also are making their products thinner,
lighter, and smaller to use less plastic and other materials that are harmful to the environment.
“Apple remains committed to creating products that have the least amount of impact on the
environment” (Apple - The Story Behind Apple’s Environmental Footprint).
Figure 2: Apple’s Environmental Footprint
(Apple - The Story Behind Apple’s Environmental Footprint)
A major social threat to Apple has to do with the fact that there is a lack of Apple
products sold to businesses. Apple products are sold mainly as customer products, meaning that
people buy Apple products mainly for personal use. There are not many businesses that use
Apple products for their serves, but instead use PCs and other companies’ products. Unless
Apple figures out a way to make their products more appealing to businesses, this could be a
potential danger to their company (Strengths, Weaknesses, Opportunities, Threats: The SWOT
Analysis, 2012, March 20).
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Competitive Environmental Forces
One strong point that Apple has against its competitors is their patience and ability to
wait. This gives Apple the opportunity to release products with more features and better quality
than its competition. Apple has patience to wait so that they can test their products and be
confident in them when they are released. While competitors may rush this process, Apple takes
the time they need to release high quality, functional products, providing them with the
opportunity to sell superior products than their competition (Understanding Apple – SWOT
Analysis, 2012, November 7).
The major competitive threat for Apple simply is the growing competition. There is a
growing market, especially for tablets and smartphones. Apple has achieved high name
recognition in the world; however, it will be increasingly difficult for Apple to remain on top.
With advances in technology around the world, Apple’s competitors are working hard to get
word out about their products and rising above Apple. Apple has a huge target on them, as they
have been so successful and popular among consumers. Although competitors have a long way
to go to beat Apple, they remain a threat to Apple’s industry (Strengths, Weaknesses,
Opportunities, Threats: The SWOT Analysis, 2012, March 20).
Technological Environmental Forces
Technologically, Apple is extremely advanced. They have a major opportunity
technologically because their tablets, such as the iPad, are easy to use for all generations. The
ability to make the print larger with one swipe of the finger makes the iPad compatible with the
older generations who may have a difficult time with the size of fonts. Also, it is easier for those
with arthritis to use the touchscreen to navigate the Internet and any app on the iPad. This
Apple iPad 1st Generation 16GB
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technology displayed in the iPad makes it compatible with the older generation, opening up a
huge opportunity for Apple to reach out to an entire other market segment (Apple - Accessibility
2013).
The major technological threat to Apple simply is issues with their products. Although
Apple works hard and is patient when releasing its products, there are still many technological
issues that consumers have had with the products. Many have complained that the iPad Mini has
low-quality display compared to competing tablets. There are also many complaints made by
customers about cracked screens and other technological bugs and problems with their products.
While these issues are bound to occur for any computer manufacturing company, like Apple,
unhappy customers are a major threat to the entire company and can result in sales loss (Apple
Quality Complaints).
Demographic Environmental Forces
Individuals that are born between 1979 and 1994, also known as Generation Y, are the
ones that contribute the most towards the sales increase of technological products like the Apple
iPad 1st Generation. There are approximately “71 million ‘Millennials’ that spend over 200
billion dollars annually” (Fields, 2010). Not only do they spend a lot but “[t]hey’re hyperconnected, tech savvy” (Schawbel, 2010), as they are “the first generation of kids to grow up
with Mickey Mouse and the computer mouse” (Bobis, 2010). These individuals are very
connected with new technology that even “Gen Y workers report spending an average of 10.6
hours of every work day accessing social networking web sites” (Bobis, 2010). Thus, the iPad 1st
Generation will experience great sales from this group.
Apple iPad 1st Generation 16GB
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On the contrary, the iPad 1st Generation will not be receive great sales from the Baby
Boomers, who are born between 1946 and 1964. In fact, when the “youngest members of the
Baby Boomers were already in their 20’s” when the first Apple product came out (Bobis, 2010).
Because the iPad 1st Generation, along with the other Apple products are very technological, they
are not profitable toward the Baby Boomers.
3. Segmentation
Demographic Segmentation: Age
Age is a really important factor when Apple is marketing its iPad 1st Generation. Even
though it is targeted mainly towards the younger generation (ages 25-34), Generation Y, than the
older generation, Baby Boomers, it is still the device of entertainment, education, work, and
much more for almost every age. As the co-founder Steve Wozniak said, “the ‘iPad is for the
normal people of the world,’ not necessarily the tech savvy crowd” (Etherington, 2011).
Studies have shown that iPads are replacing many full-blown computers, as they are more
convenient and “typically less expensive than a full-blown computer” (Eckel, 2010). Because of
its convenience, many college students use this product along with employees whom do not want
to carry a big computer around with them. In fact, a study by the Reynolds Journalism Institute
found that “the average iPad owner is a college-educated 48-year old man” (Etherington, 2011).
Not only is the iPad used as a computer for school or work, it is also used by many
younger teens and kids as a device of entertainment. In fact, “the iPad is more reminiscent of an
oversize iPhone than a laptop” (Perenson, 2010). Because of the many variety of Apple apps and
due to the size of the iPad screen being “three times larger than that of the iPhone/iPok Touch,
Apple iPad 1st Generation 16GB
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you’ll be tempted to use the iPad…” (Perenson, 2010). Thus, if you are simply looking for
something entertaining to do, the iPad has music, games, and movies.
As for the older generation, typically the Baby Boomers can use this product for its big
screen and the feature of zooming in. There are also certain apps that the App Store carries that
can be said to direct its attention to the older generation. As Philip Moeller points out in Why the
iPad Appeals to Older Users, the iPad can be used as a travel guide, a way to look up cooking
instructions, and the audio book – which are all typical favorites of the older generation (2010).
Figure 3: iPad’s Target Age Group
Demographic Segmentation: Gender
For the Apple iPad and other Apple products, they do not specifically target certain
gender groups. They produce products that aim to every gender. The iPad and other Apple
products are simply made to target “[p]eople who like to have fun with technology” (Who are
apple’s target…). Because there is no targeted gender, the Apple products keep many people in
the unknown as to whom their target audience is.
Apple iPad 1st Generation 16GB
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Demographic Segmentation: Income
Demographically, the Apple iPad is targeted at the “[m]iddle/upper income folks who are
willing to pay a bit more for a better user experience” (Who are apple’s target…). Because the
iPad, and many of Apple’s products, are high in cost, those who are interested in buying or have
bought an iPad are “high earners, making more than $100,000 a year” (Hughes, 2010).
Due to the high price of the iPad, the only threat it will bring to the Apple Company is the
fact that not everyone can afford it but only the high middle or upper earning classes.
Figure 4: iPad Purchaser’s Income
Demographic Segmentation: Family Life-Cycle
With the Apple iPads, this product is not limited to any particular family life-cycle
segment. The family life-cycle is stages in life that includes the combination of age, martial
status, and rather there is a presence of a child or not. Because the iPad is for entertainment,
Apple iPad 1st Generation 16GB
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work, teaching, gatherings, and almost anything, there is no specifically life-cycle group. The
iPad can be for the dad with a wife and kids, for the student attending school, or simply for
single parent. Basically the iPad is for everyone.
Psychographic Segmentation
“While there is a surfeit of options in the market, the tablet world is predominantly
divided between the Apple iPad and Android hemispheres” (Bhatia, 2011). Psychographically
Apple, Inc. targets individuals who value the status of their lifestyle. Customers enjoy the
designs and convenient programs that come with the product. The Apple iPad is trendy
technology that is valued by college students and high-end business workers. The apple logo is
known and favored by many individuals and is the most popular out of well-known electronic
companies in the world, which is why consumers chose the iPad tablet over android tablets. The
iPad provides portability and simplicity to an individual’s daily activities. It also targets non-tech
savvy consumers because of the “natural user interface touch” (Bhatia, 2011). Psychographically
and behaviorally Apple Inc. expects the non-tech individuals to purchase their iPads just to “fit
in.” During an interview a recent iPad consumer was asked why did they purchase an iPad and
many individuals said it was an impulse buy do to the “media buzz” (Crothers, 2010).
4. Target Market Strategy
The Apple Company began its journey in the high technology industry, with a focus on
the PC market. The only product of Apple at the time was the Macintosh computer. Over the past
few years, Apple had changed its marketing strategy from a concentrated targeting strategy to a
multi-segment targeting strategy in order to increase its overall sales. The definition of a multi-
Apple iPad 1st Generation 16GB
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segment marketing strategy is, “a type of marketing strategy used when a company tries to gain
customers from more than one type of market for the same product and uses, therefore, different
types advertising” (WebFinance Inc., 2012).
After adopting the multi-segment targeting strategy, Apple manufactured and introduced
new products, namely the iPod, which was a sensation in the music industry. Then it introduced
the iPhone, which also gain much popularity, and recently Apple has introduced the iPad, which
is a sort of hybrid between the iPod and the Mac computers.
Apple has made the right choice in its marketing strategy, and has also succeeded in its
implementation. When Apple first introduced the iPod, Apple made sure that it had an iTunes
store in place, not only did Apple get money from the sales of iPods but also from the music
people bought from iTunes. With the iPod’s success, Apple entered the cellphone market. Apple
decided to use the same methods it used with the iPods - building on the idea of the iTunes store,
Apple introduced the “App Store.” The various Apps provided by the App Store made the
iPhone different, and better than any other cellphone on the market.
Finally, through the multi-segment target strategy, Apple introduced the iPad tablet, the
first of its kind in the high-tech industry. This is the advantageous strategy that Apple uses
because of the many different types people that the company is attempting to market to. One way
that Apple tries to appeal to many different customers is through the various numbers of
gigabytes of memory offered in an iPad. Those in the market for an Apple tablet can get an iPad
with 16, 32, 64, or 128 gigabytes of memory (Apple, 2012); this is ideal because it gives
customers more options to choose from. For example an older, retired person may only need a
tablet that can connect to the Internet and download books, so they would purchase and iPad
with low memory. On the other hand a young college student might need an iPad to download
Apple iPad 1st Generation 16GB
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music, books, and games as well as connect to the Internet, so they might purchase one that has a
lot of memory. The more gigabytes there are the higher the cost, so someone who is in need of
an iPad but is on a budget would purchase one with low memory. Users of the Apple iPad also
have access to the Apple App store. The App store is a feature that allows users to access over
700,000 apps, ranging from games for children to organization apps for professionals (Costello,
2012). The App store offers an app for everyone that Apple targets.
Even though there are many advantages to the multi-segment strategy there are also a few
disadvantages. One disadvantage is the cost of promotion, production, market research, and
advertising. One of Apple’s main forms of advertising is through commercials. The average tier
one commercial averages between 3,500 dollars and 5,000 dollars for production ("Maus media
group," 2011). An example of how this can add up would the Apple’s “Get a Mac” campaign,
which ran from 2006 to 2009. In that three-year period Apple released sixty-seven commercials
in North America alone; that is over $100,000 a year ("Get a mac," 2011). Another flaw with
multi-segment marketing is cannibalization. Cannibalization is what happens when a company
releases a new product and it cuts into the sales of the existing product (WebFinance Inc., 2012).
Since the release of the first generation iPad, Apple has released a newer version at least every
year. While the release of the newer product may cause the profits for the newer sales to
increase; the existing older product often shows a decrease in sales.
However, despite the disadvantages, the Apple Industry is still profiting from their
products by using the Multi-segmenting strategy. In 2012, Apple had sold a record 37 million
iPhones, 5.2 million Macs, 15.4 million iPods, and 15.2 million iPads in 2012. With the sales of
Apple products continuing to rise little by little, it’s a clear sign that the Apple’s multisegmenting strategy is definitely working to enhance their industry’s overall performance.
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References
Apple - Accessibility. (2013). Retrieved February 3, 2013, from http://www.apple.com/accessibility/
Apple - Press Info - Apple Reports Record Results. (n.d.). Retrieved February 3, 2013, from
http://www.apple.com/pr/library/2013/01/23Apple-Reports-Record-Results.html
Apple - The Story Behind Apple’s Environmental Footprint. (n.d.). Retrieved February 2, 2013, from
http://www.apple.com/environment/
Apple Quality Complaints. (n.d.). Retrieved February 3, 2013, from
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Apple Inc. (n.d.). Apple. Retrieved February 02, 2012, from http://www.apple.com
Apple. (n.d.). Retrieved February 3, 2013, from http://www.apple.com/
Bhatia, A. (n.d.). iPad versus tablets war hots up - Business Today - Business News. Retrieved
February 3, 2013, from http://businesstoday.intoday.in/story/ipad-vs-other-tablets/1/20011.html
Bobis, D. (n.d.). Techno Gap Face Off: Gen Y vs Baby Boomers | bizMe. Retrieved February 2, 2013,
from http://www.bizme.biz/bizclass/techno-gap/
BusinessDictionary.com - Online Business Dictionary. (n.d.). Retrieved February 3, 2013, from
http://www.businessdictionary.com/
Costello, S. (n.d.). How Many Apps Are in the iPhone App Store? Retrieved February 3, 2013, from
http://ipod.about.com/od/iphonesoftwareterms/qt/apps-in-app-store.htm
Crothers, B. (n.d.). Reasons people gave for buying the iPad. CNET. Retrieved February 3, 2013,
from http://news.cnet.com/8301-13924_3-10472553-64.html
Eckel, E. (n.d.). Why iPad popularity is slowing PC sales | TechRepublic. Retrieved February 2, 2013,
from http://www.techrepublic.com/blog/mac/why-ipad-popularity-is-slowing-pc-sales/1235
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Etherington, D. (2011, April 6). Apple Co-Creator Says iPad is a Computer for “Normal People”.
GigaOM. Retrieved February 2, 2013, from http://gigaom.com/2011/04/06/apple-co-creatorsays-ipad-is-a-computer-for-normal-people/
Farano, A. (2012, January 25). How many iPad have been sold in the US so far? Retrieved February
01, 2012, from http://adrianofarano.com/2012/01/25/how-many-ipad-have-been-sold-in-the-usso-far/
Fields, B. (n.d.). Marketing to Gen Y: What you can’’t afford not to know. Retrieved February 2,
2013, from http://www.startupnation.com/business-articles/9011/1/marketing-GenY.htm
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Billions in Tablet Sales. Retrieved February 01, 2012 from EBSCOhost:
http://ehis.ebscohost.com/ehost/detail?sid=bc9ca2ec-d61f-47fd-99046cad85a55e97%40sessionmgr113&vid=2&hid=103&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d
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McKenna, BA. (2012, July 12). Just How Important is Apple’s Chinese Market? Retrieved February
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Moeller, P. (n.d.). Why the iPad Appeals to Older Users. Retrieved February 2, 2013, from
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Perenson, M. (n.d.). Apple iPad Delivers on Entertainment, but Lacks Productivity Punch. Retrieved
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Part Four: Marketing 4 P’s
1. Product Life Cycle
The Apple iPad is in its maturing stage. Although the Apple iPad first generation has
been discontinued, different models of the iPad has been made yearly since then. “Annual
models begin to appear during the maturity stage” (Lamb 191). Post the introduction of the iPad
as one of the first tablet PC’s, many competitors have entered the market. Competitors sell their
tablets for a lesser price and still provide most of the features that Apple does. In response to the
increasing competitors, Apple released the Apple iPad 3rd generation with retina display at a
lower price (Johnathan 2012). The third generation sold 3 million units globally in March of
2012. If consumers continue to respond as well to future generations, analysts believe that tablets
could eventually cause the laptop segment to show no growth (Hulkower 2012).
2. Pricing Objective
3. Promotional Strategy
Apple has been very successful in the promotion of the various products that it manufactures.
These include the iPod touch, the MacBook pro, MacBook air, the MacBook, the different
iPhones, and the different iPads. Apple employs five different promotional strategies to ensure
that the company’s sales are kept high. Apple uses the following elements of promotion:
advertising, the social media, public relations, personal selling, and sales promotion. Apple’s
promotional mix can only be labeled as innovative and prosperous, since its logo has become one
of the most recognizable symbols worldwide.
The main promotional tool used by Apple is advertising, which Apple has intensely invested
in. Apple’s advertisements are so popular, and can be found on television networks, magazines,
and the Internet, especially on YouTube. In 2008 Apple came up with a revolutionary set of
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televised series that used a form of comparative advertising. Apple came up with a scenario
which two men, one older man dressed in a suit representing the “regular” PC, and the younger
man dressed casually representing the MacBook. The aim of the advertisement was to portray
how highly effective the MacBook computer is, and how ineffective the other PCs are. The
advertisement was also designed to be comical, thus it appealed to a lot of potential customers of
all ages, and this resulted in it becoming a sensation. The advertisement campaign was so
popular that Apple even expanded the scenario globally.
Apple also uses personal selling as promotional tool in its many stores around the world. The
many young people working in these stores are always up to date with the latest products, and
upgrades the company produces. Their understanding of the various products helps them deal
with all the different types of customers; therefore this has helped Apple to build itself a good
image in the short and long run all over the world.
Apple also uses public relations as a means of marketing its products. Apple has used public
relations campaigns in order to introduce new products. For example Apple carefully
choreographed a public relation campaign for the iPad. Apple carefully started to give out bits of
information to the media about a new product, in order to create a mystery about the product, in
return this created a desire to have the product. Apple also created some speculation about the
scarcity of some parts that were essential in the manufacturing of the new product, for the same
purpose of creating a desire to have that product. It is simple if you want to gain people’s
interest, create a sort of mystery around the object of their interest.
In conclusion Apple mainly uses three promotional strategies, which are advertising,
personal selling, and public relations. Apple also uses sales promotion though on a smaller scale.
For example the RadioShack, and Apple promotion, shows that if you buy an iPad for 500$, you
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get 100$ worth of gift cards for RadioShack products. This is a partnership between RadioShack
and Apple for sales promotion.
4. Promotional Task
When it comes to promoting Apple products, the company focuses mainly on the
advertising, especially through commercials. As mentioned before, the company spends an
average of $3,500 to $5,000 on tier one commercial productions (How Much Does It Cost…
2011). Tier One commercials are the most expensive of the Three Tiers because “tier 1
commercial is a national commercial…can be as simple as being created in a studios with a
green screen or as elaborate as a Hollywood production” (How Much Does It Cost…2011).
However, commercial advertising is not the only type of advertising Apple company do. They
also advertise their products in “any technology magazine, and all over the Internet” (Apple –
Promotional Strategy). They also focus on other forms of promotion, like personal selling and
social media; however, their biggest way of promoting their products is through advertising.
Advertising will grab the audience’s attention and interest.
With the Apple iPad, when it first came out, “Apple [had] done an amazing job of
promoting their iPad” (Turja, 2011). Turja also noted that promoting the iPad was very
successful for there were “several videos spread around the web in addition to commercials on
TV and Radio” (2011). In addition to the commercials, “[t]hey also sent out several iPads to
technology reviewers in order to promote the iPad” (Turja, 2011). Also, according to Turja, the
employees in the Apple stores all carried around an iPad to show potential customers or just
visitors what the iPad was and what it can do (Turja, 2011).
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Many different advertisements were created for the iPad to target different market
groups. Apple tried to create a variety of different ads that will target the business industry,
teachers, senior citizens, teenagers, and so on. However, in the end, their message about the iPad
is the same to every target market, they are “showing how iPad can be useful, fun and intuitive
for everyone” (Turja, 2011).
5. Channel Structure
Apple has a number of different channels for distribution. They distribute their products
to the consumer directly and indirectly using a number of different channels such as retail and
online stores, direct sales force, and wholesalers, retailers, and value-added resellers (Form 10-K,
2012). Apple begins the distribution process with manufacturing the products and shipping them
to the distribution centers, or hubs. From there, the products may be shipped directly to the
online stores and retail outlets, which sell them directly to the consumer. Another option is that
Apple ships its products to a direct sales force, which ship the product to a retailer and then to the
customer. Apple may also ship their products to a third-party wholesaler, who also functions to
ship the products to a retailer to sell to the customer (Form 10-K, 2012).
Figure 1: The Distribution Channel
Apple
Manufacturing
Distribution Center/Hub
Direct
Sales Force
Third Party
Wholesaler
Online Store
Retail
Store
Retailer
Added Value
Reseller
Retailer
Final
Customer
Final
Customer
Final
Customer
Final
Customer
Final
Customer
Apple iPad 1st Generation 16GB
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At the beginning of the distribution channels is the manufacturing of the products. This
channel is both transactional and logistical. It is transactional because it involves taking risks on
new products and negotiating different aspects of the products. Manufacturers also have a
logistical function as they distribute the products to the Distribution Hubs and also sort and store
the products. Then, the Distribution Channels or Hubs primarily serve logistical functions. They
also sort and store the products they receive from the manufacturers and then distribute them to a
number of different channels.
The direct sales force and third-party wholesaler channels of the distribution are involved
in transactional and facilitating functions. They are transactional because they contact and
promote the products to customers, as well as negotiating the price and other aspects of the
product. This is also a facilitating channel because it requires research and financing.
The online stores, retail stores, and retailers are all types of transactional and logistical
functions. They promote the products to the customer as a transactional function. Logistically,
they are all responsible for sorting and storing the merchandise. Also, their job is to distribute it
to the customers.
6. Channel Conflict
Apple’s products are currently sold worldwide through a variety of direct and indirect
distribution channels, such as retail stores, online stores, direct sales force, third-party cellular
network carriers, wholesalers, retailers, and so on. Thus, channel conflict within the company’s
distribution structure is definitely unavoidable. There are two types of channel conflict, which
are horizontal conflict and vertical conflict.
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Horizontal conflict occurs among channel members at the same level (Lamb et al., 2012).
Apple’s horizontal conflict usually happens because of the difference between the company’s
direct retailers’ and indirect retailers’ goals. The iPad 1st Generation is not really available on the
market now, as it has been replaced with newer versions, so we cannot compare the exact prices
being offered by the direct retailers and indirect retailers. However, the prices of products offered
by the indirect retailers, such as Amazon, Target, Best Buy, etc., are always a little bit lower than
the direct retailers’ prices. The main reason was because the indirect retailers want to attract
more customers to enhance their sales growth whereas the direct retailers care about reaching
specific sales and market share goals. The price difference has somehow made Apple’s direct
retailers unable to compete because most of the time Apple does not reduce the price of its
products. Thus, the company has been implementing stricter price requirements so that the
indirect retailers cannot give too much markdown to the price (Apple, 2012).
Vertical conflict occurs between channel members at different levels of a marketing
channel (Lamb et al., 2012). Some of Apple’s resellers have been affected because of weak
economic conditions. Due to limited number of customers, some resellers have considered the
expansion of the company’s direct sales conflicting with their business interests as distributors
and resellers of the company’s products. They do not want to compete aggressively with too
many direct distributors from Apple. This conflict has either discouraged resellers from investing
their resources in the distribution and sales of the company’s or leads them to limit distribution
of those products. In this case, Apple has invested in programs to enhance reseller sales such as
assisting resellers’ stores with Apple employees and contractors and improving product
placement displays (Apple, 2012).
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These conflicts cannot be totally avoided, but they can be reduced to minimum. Because
of different goals, strategies and capabilities, channel members will always compete with each
other. Different levels of Apple’s distribution channel may have different objectives, which lead
to conflict within the company. Overall, Apple has been trying its best to minimize all the
conflicts by applying many price requirements and giving assistance to its distributors if
necessary.
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Apple iPad 1st Generation 16GB
References
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