Apple and Microsoft Companies’ Marketing Approaches

Executive summary

The purpose of this paper is to compare the marketing approaches of two software companies, Apple and Microsoft. The psychological perception of a firm is a very vital aspect that analysts often overlook and this perception has really affected the market status of the two companies. Microsoft is an old static jumbo that is representative of the status quo because it is no longer dynamic and its past market success has motivated it to approach the market with untold arrogance. However, Apple is a recent, agile and dynamic company with high levels of creativity and innovativeness and it has a very friendly approach in the market (Blaxill, 2009). It is evident that Microsoft’s dominance in the technological industry has been brought to an abrupt end by the meteoric rise of Apple which is now the market leader. The change of guard at the top can be easily explained by marketing theories because the difference between the performances of the two industries has been brought about by the different marketing strategies that the companies employ.

Introduction

Marketing strategy is a process that lets an organization to focus on the limited resources it has to create bigger opportunities, increase its sales volume and also achieve a significant competitive advantage in the market. This process focuses on the energies and resources on a path that can lead to market dominance, increased sales and revenue. A marketing strategy combines several other processes which include product development, pricing of products and services and promotion a company products and services. The strategy identifies the marketing goals, charts a path of achievement of these goals within a specified temporal frame. The strategy determines the choice of the market segments that a company has targeted, marketing mix and positioning and it is most effective when it is part of a firm’s strategic direction. Marketing strategies of different companies may differ depending on the type of products they have and the nature of the markets in which they operate. However, the most common marketing strategies are based on market dominance, strategic scope and strength and business model innovation.

The purpose of this paper is to demonstrate the understanding of marketing theory and practice by comparing the marketing approach of two companies which and the two companies that will be studied are American based technological companies namely Apple and Microsoft. The paper will start by introducing the two companies and some of the products that each company has. The paper will then focus on the industrial background of the two companies. The paper will give a general description of the industry, focusing on the industrial trends and other significant segments in the industry. The paper will then focus on the background of each company, their market share and product segments. The paper will then look at strategic marketing and planning and an analysis of the strategic hierarchy of the two companies. After this analysis, the macro environmental forces that shape marketing in the particular industry will be identified and explained. The micro environmental forces influencing this industry will also be identified and analyzed and this will be followed by a SWOT analysis of each of the companies before the paper focuses on market segmentation and the segments that each of the company targets. The paper will then look at target markets and some of the target markets for the products of the two companies and their characteristics. Finally, the paper will look at targeting strategy, how the strategy is chosen before looking at positioning strategy and making recommendations.

Background information about the computer industry

Computer industry is a very wide industry which comprises of makers of the computers, servers, mainframes, electronic components, peripheral components and most importantly, the manufacturers of computer software. Computer industry is growing very fast because of popularity of technology in many other industries. Consumer spending on computer based equipment and accessories have also gone up. Most of the players are focusing their marketing strategies in areas where the market is not saturated and not fully mature because emerging markets provide the industry with a higher purpose. The most successful market for the computer industry is Asia because more than a third of the industry’s revenues come from the continent. Future growth of the industry is also expected to be provided by the continent. United States of America is the second largest market for this industry though the market is already mature and saturated. Europe is the third largest market for the computer industry while the rest which include Africa and the Caribbean provide a much smaller market for the players in this industry.

In the area of personal and professional computers, the leading brands are Hewlett Packard, Dell Computer Corp., International Business Machines and Toshiba and the four are leaders in manufacturing, innovation and development of personal and professional computers and other telecommunication equipment. In the area of software and operating systems Microsoft and Apple are the leading brands though apple also manufactures hardware components of a computer. The competition between apple and Microsoft has raged on for the last one decade and there is enough evidence to back up reports that Apple is encroaching into market segments that were traditionally held by Microsoft and the recent upsurge in the value of Apple shares in the stock market points at the changing market trends in the computer industry. Apple is now the most valuable technology company, a position that has been held by Microsoft for a long time and the change of guard at the top has occurred mainly because the most important technological products in the modern world no longer sits on a desk somewhere, but fits in a person’s hand and this social change has propelled apple to the top of the technological industry.

Company Background: Apple and Microsoft

Apple is a very successful company with two of its products; the iPod music player and Macintosh computers enjoying significant popularity in the market. Notebooks have also brought significant income for this technological company because they have a favorable brand perception (Rose, 1999). Microsoft is a software manufacturing company which is well known for its rapid development of products which include Microsoft office suite and its products are widely used around the world by business and general community.The success of these two companies has been brought about by branding. Apple and Microsoft are the healthiest IT brands in the world and they have very loyal customer bases who have been strong advocates of the brand. This means that the two companies have the ability to attract and retain customers. However, a look at the stock market indicates that the apple shares have been going up considerably while Microsoft’s have been stagnant and at some point, they had started going down. To understand the market dynamics, it is important to look at some important factors in the environment the two companies operate.

Strategic marketing and planning

What is strategic planning? Strategic planning is the process of setting or defining the strategy of an organization in a way that enables it to follow a certain direction that helps it to accomplish its missions and visions (Kotler, 2009). It involves making decisions on how resources should be allocated to help the organizations to pursue the strategies they have set. Strategic planning is a formal process that involves consideration of the future of a company and the decision making process involved in strategic planning must seek better ways of doing things and people to do those things. Strategic planning cannot be complete without addressing the issue of business competition meaning that beating or avoiding competition is one of the key competitive strategies (Duncan, 2000).

Strategic planning is a tool of charting the direction of a firm though the tool cannot foretell future dynamics in the market. What is strategic marketing? Strategic marketing is a process where the marketing strategies of an organization are aligned with the missions and visions of the organization. Strategic marketing therefore involves adopting marketing practices that will enable organizations to achieve their missions and visions and also gain competitive advantage in the market. Strategic marketing therefore involves activities such as analysis of business trends, analysis of the market and the market forces, analysis of the competition present in the market, segmentation of the market, creation of a marketing mix, analysis of the strengths, weaknesses, opportunities and threats of an organization and positioning of products and services (Baker, 2001).

The strategic marketing model adopted by apple is different from the model adopted by Microsoft because Apple’s intention is not to make money; its goal is to design and market good products that will be liked by people. The primary function of the hierarchical model adopted by Apple is to satisfy customers and then make money from the satisfied customers. The company is therefore producing and marketing a small number of high quality products. On the other hand the strategic marketing model adopted by Microsoft aims at ensuring that the company maintains its position of a market leader which means that fighting competition by ensuring that its products are available everywhere is the primary goal of the marketing strategies adopted by Microsoft. It is important to note that the strategic marketing model adopted by Microsoft is not hierarchical as opposed to the model adopted by Apple which is hierarchical

Macro environmental factors affecting Apple and Microsoft

Macro environmental forces are outside forces in the environment within which an organization is operating and these forces affect the strategic direction and the marketing strategies of any company (Leroy,2001).These factors include taxation, new laws, trade barriers and social factors and to help in analysis of these factors is a model called the PESTEL model which is revolves around the political, economic, social technological, environmental and legal factors that affect the strategic direction of any firm. Political factors include government policies such as the level of government intervention. Apple and Microsoft operate in a globalised environment where government regulations in the industry are minimum meaning that the players in the computer industry regulate the industry themselves. Economic factors include interest rates, exchange rates, rate of economic growth and the buying power of the consumers in different markets.

Some of the economic factors that have heightened the rivalry between Apple and Microsoft include the purchasing power of consumers because Apple’s products are relatively cheaper than Microsoft’s meaning that they are more affordable. Stronger European currencies also make exportation of the products of the two companies to Europe much difficult. Inflation has led to increased cost of operation which has affected the revenues of the two companies. The third macro environmental factors are the social forces and changes in social trends can have an impact on the demand of products and services of an organization and this is highly evident in the computer industry. For example, people today are shifting from desktop electronics to hand held electronics and technology equipment and that is why Apple’s product have become popular, enabling it to become the most valuable technology company in the world. This social shift has affected the demand for Microsoft’s products because its software cannot be used on the hand held devices that have become more popular with the new generation of technology consumers.

Micro environmental Forces

Microenvironment forces are the forces that are close to an organization and these forces affect its ability to conduct its business properly and its ability to achieve a competitive advantage (Rose, 2009). These forces include the customers, the competitors and the suppliers. Customers are the most important micro environmental force in any business because there cannot be any business without customers. Customer’s attitudes are very important because they form the foundation of any business marketing strategy. This means that companies must strive to satisfy their customers for them to be able to retain them and attract more. Customer attitudes and preferences are important in the technological industry that Apple and Microsoft operate in.

Microsoft has been there for a long time and represents the old order and the status quo. Consumers for personal devices are therefore moving from the traditional desktop based gadgets to hand held devices meaning that more people are shifting away from Microsoft’s products and moving towards Apple’s products. The other micro environmental factor that affects the performance of any organization is competition. The higher the level of competition, the harder it is for any organization to achieve its strategic objectives. There is a high level of competition between Apple and Microsoft though the competition is not among the two alone. Apple may have managed to upstage Microsoft as the world’s most valuable technological company but Microsoft still has the dominance in the market meaning it enjoys a larger competitive advantage than apple.

SWOT analysis

SWOT analysis is a strategic planning tool that helps organizations to gauge themselves. SWOT stands for strengths, weaknesses, opportunities and threats. Every organization has strengths which it should capitalize on, weaknesses which it should work to eliminate, opportunities which it should fully exploit and threats which it should avoid. Below is a SWOT analysis of a SWOT analysis of the two market leaders in the technology industry and the paper will start with a SWOT analysis of Apple.

A SWOT analysis: Apple

Strengths

1. Favorable brand perception
2. Loyal customer base
3. Innovativeness and uniqueness of products

Weaknesses

1. The company has a history of manufacturing faulty products
2. Changing from IBM to Intel chips confused its customers
3. High price of its products

Opportunities

1. New technology provides ample opportunities for apple; for example, it has the opportunity to transform iTunes to mobile phone foat
2. The company can generate a lot of revenue from podcasts

Threats

1. Competition from new entrants
2. Dynamic technology in the fast IT industry where products are being replaced by new ones at a fast rate
3. Vulnerability to leaks.

SWOT Analysis: Microsoft

Strengths

1. Rapid product development processes that have seen the company release new products to the market faster than the competition.
2. Brand reputation which creates competitive advantage
3. Controls the market with more than 88 percent share of the market

Weaknesses

1. Pre installation of Operating systems
2. High employees turn over due to burnout
3. Bureaucratic and autocratic atmosphere which hinder innovativeness
4. Single focus products

Opportunities

1. Popularity with the internet users
2. Increased demand for the products despite the growth of hand devices.
3. Opportunities for strategic alliances with mobile phone companies

Threats

1. Competition from Apple and Linux
2. Global economic patterns and fluctuating exchange rates
3. Availability of substitutes from hardware manufactures that reduce the value of windows.
4. Availability of mobile phones and hand held devices that do not require Microsoft’s operating systems
5. Numerous suits filed against the company by consumers and employees affect its reputation.

Market Segmentation

Segmentation is the identification of parts of a market that have differences with each other and this practice allows a firm to satisfy its clients better. Segmentation cannot be undertaken if a firm does not understand the needs of the customers better than the competitors. Segmentation creates market segments that are different from each other. Different market segments do not have the same needs but the needs are homogenous within the segment. Each market segment responds to a different market stimulus and a firm must study the different market stimuli that have an impact on market segments.

There are different variables that can be used to segment a market. These variables are age, gender, price and other interests. To exploit the segments properly, a firm can successfully differentiate its products and this strategy can create a very good commercial advantage. Apple has perfected the art of segmenting its market better than Microsoft and that is why the company is encroaching into the competitive advantage that Microsoft used to enjoy in the past. Apple has been producing new and unique products frequently, targeting different customer segments and it is evident that apple has a product for everyone in the society ranging from children, college students , professionals and the high end clientele.

Target Market and Target strategy

A target market is a group of clients that a business focuses on in its marketing efforts and strategies. A well defined target market is one of the most important aspects of any sound marketing strategy. Defining distinct customers precedes the marketing mix strategy of a product and the two work hand in hand to satisfy the targeted market. Apple and Microsoft have their own target markets. Microsoft mainly targets the professional population while apple targets the informal population; however Apple has also been making professional products while Microsoft is yet to venture into Apple,s growing market that is utilizing its hand held devices. Apple has been using age as a segmentation variable where its main target market is the techno savvy age group between 15 and 45 years.

Positioning

Positioning is the belief that customers have about a certain product and this feeling encompasses its value, features and benefits as compared to other alternatives in the market. Marketers usually manage product positioning by focusing their marketing strategy on pricing, promotions and advertising and there are several strategies for product positioning. The first strategy is the use of attributes or benefits, while the second strategy is by use or application. The second strategy is more applicable to the products that are under study in this paper. For example, users of apple computers can use graphics more easily that those using Microsoft windows which means that the company can position its computers based on their usability while Microsoft can position its products through product or service class strategy because Microsoft windows software has higher quality than UNIX and others sold by competitors.

Recommendations

The purpose of this study was to compare the marketing strategies used by Apple and Microsoft in order to create a proper understanding of the marketing theory. The study has found out that Apple has better marketing strategies than Microsoft and this explains why apple has overtaken Microsoft as the world’s most valuable technological company. However, there are some recommendations that this paper will make that will help the companies to improve their marketing strategies

1. The companies should differentiate their products in order to feed as many market segments as possible
2. Microsoft should adopt a customer friendly marketing strategy because its seemingly arrogant and bullish approach has started denying it a competitive advantage
3. Microsoft should also venture into the hand held devices market to minimize the threat posed by the radical shift by customers from the desktop technological devices to hand held devices like Ipads and netbooks

Conclusion

In conclusion, it is important to note that a marketing strategy determines the choice of the market segments that a company has targeted, marketing mix and positioning and it is most effective when it is part of a firm’s strategic direction. Marketing strategies of different companies also differ depending on the type of products they have and the nature of the markets in which they operate.

References

Baker, M. (2001). The Strategic Marketing Plan. New York: Harper Collins.

Blaxill, M. (2009). The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property.CA: Portfolio.

Duncan, B. (2000). Simplified Strategic Planning. London: Chandler House.

Kotler, P. (2009). Principles of marketing (4th ed.). Prentice Hall, Australia.

Leroy, H.(2001). A History of the Personal Computer. NY: Allan Publishing.

Rose, (2009).The End of Innocence at Apple Computer. WA: Penguin Books.