Apple Company Objectives and Issues

Executive Summary

Apple Incorporation is one of the leading American electronic manufactures that has specialized in the production of personal computers, Smartphone, iPod media player, tablet computers, and online services. It has its headquarters in California with global market coverage. Apple has 425 stores across 14 countries and mostly it sells its products through retailers across the world. Apple was named as the most valuable brand in the world in 2013, edging out Coca Cola that had maintained the top position for some time. The firm’s products have gained popularity in the global market despite the stiff competition experienced in this industry.

Apple Company uses mobile technology to develop products such as mobile phones, laptops, tablets, and online music sharing for customers. The company has enjoyed stable growth over the last five years and current revenues exceed 170 million dollars. Apple’s innovative products are among the most visible PCs across the globe. The company has developed a highly structured marketing distribution channels that operate independently of the mother company to guarantee sustainable competitive advantage. Apple Company has continued to create multiple brands through its innovative team in order to keep the company ahead of the other competitors such as Samsung, Nokia, and Motorola.

Company Overview

Apple Incorporation is a leading global electronics brand that retails products such as personal computers, Smartphone, iPod media player, tablet computers, and online music services. Apple Inc. has come under massive competition from its arch rival, Samsung Corporation. Samsung, just like Apple, has massively invested in research and development, and this has resulted in the production of quality products in the electronic industry. The two firms have been fighting for the global market share in the Smartphone, laptop, and television markets. The stiff competition between these two firms is unhealthy because they spend a lot of time in court battles on issues of copyright on various products.

Their attention is more focused on how to fight themselves than on how to deliver continuous quality products to their customers. Another threat is coming from the emerging electronic firms located in China. A number of Chinese companies are also entering the electronic market that has been dominated by Apple and Samsung. They are very fighting very aggressively for their market share, especially in the emerging markets in Africa and parts of Asia. This has affected the profitability of Apple as its market share in these markets has been reduced. While Apple is struggling to increase its market share for iPhone 7, Samsung is planning to introduce a tablet called Galaxy MiniS, a move that is expected to increase the competition even further (Belch & Belch, 2011).

Financial Overview

The Apple Incorporation has experienced steady growth over the last half a decade with the highest financial performance being in the year 2013. Over the years, the revenues of the company have grown from tens of billions to almost 180 billion dollars by the end of the year 2014. Actually, the recorded revenue by the end of the year 2014 was 182.795 billion dollars while the profit was 39.51 billion dollars. Total assets recorded were 231.839 billion dollars. The profit margin was 40%. The company has never experienced loses even during the turbulent financial crisis in the year 2008 and 2009. The company’s stock price has grown is currently at $664 per share (Google Finance, 2015). From the financial overview, it is apparent that the Apple Incorporation is stable in terms of financial performance over the last five years as summarized in the table below.

Apple’s 5 year Financial Performance

Apple, Inc.
Income Statement
USD in millions 2010-09 2011-09 2012-09 2013-09 2014-09
Revenue 65,225 108,249 156,508 170,910 182,795
Cost of revenue 39,541 64,431 87,846 106,606 112,258
Gross profit 25,684 43,818 68,662 64,304 70,537
Operating expenses
Research and development 1,782 2,429 3,381 4,475 6,041
Sales, General and administrative 5,517 7,599 10,040 10,830 11,993
Total operating expenses 7,299 10,028 13,421 15,305 18,034
Operating income 18,385 33,790 55,241 48,999 52,503
Interest Expense 136 384
Other income (expense) 155 415 522 1,292 1,364
Income before taxes 18,540 34,205 55,763 50,155 53,483
Provision for income taxes 4,527 8,283 14,030 13,118 13,973
Net income from continuing operations 14,013 25,922 41,733 37,037 39,510
Net income 14,013 25,922 41,733 37,037 39,510
Net income available to common shareholders 14,013 25,922 41,733 37,037 39,510
Earnings per share
Basic 2 4 6 6 6
Diluted 2 4 6 6 6
Weighted average shares outstanding
Basic 6,366 6,470 6,544 6,477 6,086
Diluted 6,473 6,557 6,617 6,522 6,123
EBITDA 19,412 35,604 58,518 57,048 61,813

(Source: Google Finance, 2015)

Current Market Situation

Market Description

The Apple retail model targets user consumers who form the majority of its market catchment. Since this target group frequent Apple distribution stores, the company is in a position to conveniently direct the customers to their designated delivery points and stores without having to directly deliver. The company has merged the strategy with advertisements, since this group of consumers has access to social media. Due to exposure to information sources such as new papers, television, radio, and magazines, product announcement through these avenues has enabled the company to double its market base (Apple Inc, 2015). Decision on the best product relies on information feedback after multiple exposures to different competing products. As forecasted in the market research, this strategy has been successful towards dominance as it offers a variety of options to consumers, while at the same time, maximizing benefits of economies of scale to the company (Apple Inc, 2015). Apple’s innovative products are among the most visible PCs across the globe.

Apple Inc. recently made some efforts to form collaborations with some of the organizational buyers in Africa as a way of boosting the sales of its products. The firm has been supplying the electoral bodies in some African countries with Smartphone to help in relaying data during election. This was witnessed in the last election in Ghana where it provided laptops and Smartphones to the electoral body. They partnered in an effort to ensure that there is free and fair election in that country. This collaborative approach has been beneficial in boosting the sales of the firm’s products to the organizational buyers. Apple has also been actively participating in the promotion of security at various airports across the world by developing screening gadgets used at the airports. This has not only boosted its image in the market, but also increased its sales volume and profitability (Jobber, 2012).

Product Review

Product development entails the innovation process aimed at modeling the existing product or improving on it to balance with the changing preferences of the customers. As a result, the older version will be phased out of the market as preferences change. As a matter of fact, Apple is the leading company in the PC industry in terms of design and innovation (Apple Inc, 2015). The company is associated with new innovations and attractive designs that appeal to their customers across the world. The Apple Inc Company has benefited from this strategy in terms of market expansion, especially among its early adopter customers. Specifically, through product development, the Apple Inc Company has been in a position to optimally exploit opportunities available in the innovation market segment and has gained a significant share in the mobile PCs market at the global level (Jobber, 2012).

The customer environment analysis can be done by classifying the customers of this firm into different groups based on their demographic factors. According to Andrews and Shimp (2013), customers can generally be classified as the low class, middle class, and the high class groups. The main target market for the products of this company is the middle class. The high class is another major market, but has fewer people. Apple brand has been characterized by high quality products. Customers who buy Apple products are always attracted to its quality. These customers are always interested in the high quality that these products offer to the users (Clow & Baack, 2012). When handling these two types of customers, the marketing unit of this firm must find a way of meeting their differing needs (Comstock, Gulati, & Liguori, 2010). This is summarized in the table below.

Segment needs Corresponding feature and benefits
Innovation Very innovative products differentiated by lifestyle appeal
Quality and reliability The products are of the highest quality and know globally for their reliability
Affordable product The Apple products are relatively affordable considering their quality and long lifespan.

Competitive Review

As previously stated, Apple is facing stiff competition from numerous electronic firms in various countries around the world. The main competitor in almost all the sectors that Apple operates in is the Samsung Corporation. This giant South Korean company is currently considered the largest electronic firm in the world (Guion, Diehl, & McDonald, 2011). It has been keenly following the trends taken by Apple, a fact that has enabled it to produce almost similar products as Apple. Just like Apple, Samsung has global market coverage, with its presence in the emerging markets being stronger than that of Apple. Nokia is another serious competitor in the field of Smartphone. Lenovo, Toshiba, and HP also offer this firm stiff competition in the field of laptops. These competitors have constantly posed serious competition to Apple as they struggle to increase their market shares. The table of competitive products is summarized below.

Main competitors Products
Samsung Laptops, tablets, and phones
Lenovo Laptops, tablets, and phones
Toshiba Laptops and tablets
HP Laptops, tablets, and phones
Dell Laptops and tablets
Nokia Phones
Other phone brands Phones

Channel and Logistics Review

The company has developed a highly structured marketing distribution channels that operate independently of the mother company. As a result, the company has been in a position to capture the fastest growing markets such as France, the UK, China, and Japan, where the innovation and stylistic design of Apple iPhone 4 has become a household name (Apple Inc, 2015). As a matter of fact, Apple Company’s stores have improved on their performance to $19.1 billion as of the year 2013. The establishment of many stores outside America has pushed the revenues of the company by 17%. The brand is trusted by many consumers across the world, making it easy to market the product to the global market. Apple’s long years in this industry offers it the experience it needs to manage competition and the emerging technologies. The huge profits of this firm give it the much needed financial strength to support research and marketing strategies. The growing size of the middle class in China and Africa offers this firm a wide market to exploit (Farris, Bendle, Pfeifer, & Rebstein, 2010).

SWOT

Analysis of the internal environment of Apple Inc. will provide a clear picture of the trend it has taken to achieve success, some of the challenges it faces in its internal operations, and how the management has been able to deal with these problems. This analysis will focus on the strengths and weaknesses of the firm in the market.

Strengths

Apple Inc. is one of the most successful electronic firms in the world today. This success can be attributed to the strengths in its operations. According to Clow and Baack (2012), one of the main strengths of Apple is its effective leadership. This scholar says that it is almost impossible to talk about the success of Apple without mentioning Steve Jobs, its former chief executive. Jobs came to the firm when it was experiencing fundamental problems in its operations. Many people doubted whether the firm would be able to sustain its operations in the market at that time. However, he brought superior management skills that changed the image of the firm completely. He made the employees realize that they had the capacity to deliver better services to the firm. Through his transformational leadership qualities, Apple was able to navigate the competitive electronic market to become a leading industry player. He helped to make the Apple brand become associated with high quality survive in the global market of electronics. He also helped in maintaining the morale of the employees.

The innovative nature of this firm is another strength that has helped it achieve massive success in its operations. The iPhone and the iPad received massive acceptance in the market because they were unique products. They offered high value to customers beyond their expectations. This helped in improving its popularity in the market. The technical skill and expertise that the firm uses is also very superior. Management has been keen on hiring a highly skilled workforce in order to enable it to address some of the technical issues in this industry. The ability of Apple to meet the market demands with superior products has also helped the firm to be successful. Its financial performance has played a major role in boosting its performance. The firm has experienced massive financial success through the sale of its products in the global market. The image of the firm, especially the strength of its brand, has also helped in achieving success in the electronics industry (Clow & Baack, 2012).

Weakness

According to Jobber (2012), it is always imperative to identify the weaknesses of a firm that may affect its ability to be successful in the market. Despite the strengths of Apple identified in the section above, there are some weaknesses that have affected its operations in the market. One of the main weaknesses that Apple has faced in the market is the inability to come up with new products that are incorruptible by the competitors. The firm has been engaged in legal battles with some of its fiercest competitors over breach of its copyright. This is so because some of its high quality products have designs that can easily be copied by the competitors.

The firm has also been accused of high-handedness in its management approach. Although Steve Jobs was a transformational leader, some of the employees considered him a dictator. This led to high turnover of employees, especially in the early years of Jobs’ return to the firm. Some consumers have accused Apple Inc. of misusing online marketing platforms. The pop-up adds on e-mails and other websites has been considered irritating. Some of these adverts were also misused by cyber criminals who fleeced unsuspecting individuals of their money promising millions of dollars in cash prizes from Apple. It took some time for Apple to respond to these issues. This in turn tainted its image in the global market (Jobber, 2012).

Opportunities

The electronic market has been rapidly expanding over the years. Mobile phone has almost become a basic need both in the developed and developing economies. This means that Apple has a massive market that needs its products. The recent rise in population of the middle class in China, India, and parts of Africa has also offered an opportunity for this firm to sell its high-end products which are popular among this class. The emerging technologies have offered various opportunities to Apple. Technology has improved speed, efficiency, and effectiveness of the production strategies. It has also reduced the time taken by this firm to deliver its products to the global market. The management of firm can also monitor operations in plants located in China without having to leave the offices in the United States (Jobber, 2012).

Threats

There are some threats that the management of this firm needs to find an effective way of dealing with in order to avoid their negative consequences. The massive competition, especially from the arch rival Samsung, should be evaluated and corrected pronto. This competition may force the firm to engage in price wars that may erode its profitability. The legal battles that Apple has had with Samsung over patent issues may also affect the operations and image of the firm. A permanent solution should be found to this problem. The emerging trends in the market are threats that the management must address. The electronic market is so dynamic that it may not be possible to predict what the consumers will demand tomorrow. Apple Inc. spends a lot of financial and human resources to conduct research to come up with new superior products. However, sometimes the products do not last in the market before they are considered old-fashioned. This forces the firm to undergo such an expensive process to deliver new products (Clow & Baack, 2012).

SWOT Table

Examples Not Useful Statement Better Statement Best Statement
Internal Strength Brand image/financial strength Our brand image is strong Our current market share for computers is 10% Our global market shares for various products have experienced growth. Currently, our market share for personal computers is 10%
Internal weaknesses Employee turnover Employees turnover is high The firm has experienced high employee turnover in the recent past In the last 4 years alone, the firm has lost 12% of its employees in various departments
External Opportunities Improved technology Technology has been useful to the firm Technology has improved production and marketing strategies The firm has benefited from improved production and distribution strategies due to emerging technologies
External threats Competition Competition is stiff We are facing stiff completion in the market Samsung, Sony, Toshiba and HP offer stiff competition in the market.

Objectives and Issues

First Year Objectives

The first year objective is promoting loyalty of customers by providing them with different exciting PC products that appeal to lifestyle and quality of each client.

Second Year Objectives

The second year objective is to expand the visibility of the company’s products by at least 25% through vigorous marketing and promotion strategies.

Issues

The company should ensure that it has a relatively stable functionality within a competitive advantage parameter. In order to maintain this, its existing forms of marketing and promotion monitoring should be upgraded to introduce multiple marketing models, such business –to-customer platform, which is compatible with tracking and analysis of product performance. For implementation of the strategy, the management should balance both the short term and long term strategic goals to guarantee business sustainability. In handling the above objectives, it is important to ensure that the marketing strategies used are superior.

Marketing Strategy

Product

This Apple’s unique iPhone brand has won the heart of customers across the world. The weakness of the Apple brand has been its association with the Americanization culture hence limiting its acceptance in some cultures against the western culture. In order to strengthen the competitiveness and equity of the Apple brand, the company should invest in latest technology to modify the iPhone brand as the leading technology oriented product. The Apple brand falls in the growth stage. In order to ensure that the customer remains eternally connected to the Apple brand, it is important to develop a highly structured marketing distribution channel to capture the fastest growing markets such as France, the UK, China, and Japan where the innovative and stylistic design of Apple iPhone 4 has become a household name.

The company offers the most reliable, dependable and affordable electronic products. The business has adopted the product development strategy of constantly modifying its products to suit the demands of the customers. The online music store as a product by the Apple Incorporation is the first of its kind in the global PC market. Moreover, the company has introduced discount rates such as the premium, regular and ordinary offers to customers. Customers who get these discounts have to pay even lower for the products as long as the conditions within the offer are met.

Price

Through the good, better, best pricing strategy comprising of discounts for every product, the target client segment is projected to increase their dependence on the company (Clow & Baack, 2012). Therefore, applying the costing strategy, the company has been able to attract customers and achieve the aim of the quantity maximization by increasing number of Apple products sold

Place

In order for the Apple Incorporation to reach the target market, the company has used television, print, and social media to announce the product across different states where the target market is easily found. The company also has a fleet of automobiles fitted with visible posters of the company’s services and discounts. The automobiles are allocated to different regions where the availability and visibility of the company’s products are minimal.

Promotion

The marketing plan of the Apple Incorporation comprises of a detailed calendar of the business advertisement. The year is divided into three segments January-April, May-August, and September-December for the company. To create customer awareness about the product, Apple runs daily advertisements on the television to make sure that consumers know about its products. As consumers get to know about the products, the company will relax its advertisement program. The second segment entails running the advertisements many times in the local media channels. This aids the company in keeping the clients aware of the product. Besides, it will target those consumers that might not have heard about the products. The last segment of the calendar year involves running the television advertisements and social media engagement

The company chooses to use sales promotion through discounts and issuance of redeemable points. This choice was made since it helps the company to increase its sales volume within a short period. In this case, the company applies sales promotion strategy such as the push up sales. This facilitates attraction and retaining new customers by issuing them with free after sales services such as free music download (Clow & Baack, 2012). Sales promotion ensures that consumers return to the company whenever they are in need of the Apple products.

Position

The process is an activity that ensures maximum availability of the service to the customers as well as guarantying them with the best quality service. To keep pace with the rising demands of the customers, a strategy that would deploy the reassurance of the quality and availability of Apple products to maximum targeted customers is extremely essential. This effective process strategy would enhance the customer-employee encounter experiences, strengthening their relationship, providing other complimentary facilities along with the service of the Apple Incorporation. The company has been positioned as an innovative idea appealing to the technology gauchos since the products are currently associated with a life style. Besides, the products are presented as first of their kind in the global PC market, thus, setting a trend which competitors struggle to follow.

Marketing Research

As a matter of fact, Apple is the leading company in the PC industry in terms of design and innovation (Apple Inc, 2015). The company is associated with new innovations and attractive designs that appeal to their customers across the world as a result of its heavy investment in R&D. The Apple Inc Company has benefited from this strategy in terms of market expansion, especially among its early adopter customers. Apple Company has invested more in R&D than its main competitor, which the Samsung Company. The Apple Company invested more than 500 million dollar in R&D as compared to 320 million dollars by Samsung. Through the use of an integrated value-chain alliance, the company has increased outsourcing to 40% of the production network. This has increased its competitive advantage through reduced cost of production.

Action Programs

The proposed marketing strategy will involve advertisement in social media and search engine optimization for the next four years. It is necessary to determine the online behavior of the target market before selecting the best channel for internet marketing to minimize the issue of changed consumer preference. Essentially, success of brand and product management depends on a proper alignment of a functional idea into the creation of flexible, involuntary, and quantifiable measurement of perception among the target audience. Thus, the Apple Company will be in a position to track the engagement ratios on its twitter fan page and classify different contents according to the level of engagement recorded before and after implementing the marketing plan.

Budgets

Advertisement expenditure

Advertisement
Year Advertising Expenditure ($)
2015 38,800
2016 39,695
2017 39,800
2018 40,800
Cost forecast
Direct Cost of Sales 2015 2016 2017 2018
SEO 24,500 25,345 26,500 27,500
Social Media 14,300 14,350 14,300 14,300
Subtotal Direct Cost of Sales 38,800 39,695 39,800 40,800

The cost of digital marketing is summarized in the table below.

Cost of digital marketing
(Source: Self generated)

Controls

The corporation may use the online traffic results to draw a growth calendar for the social media marketing strategies after every six months to fast track the initial objectives against the realities of market swings for the Apple products. Besides, the company may be in a position to locate the regions with the highest and the lowest traffic in order to improve its social media marketing strategy. In addition, the company may be in a position to accurately determine the average duration of access to these sites in order to track the success of its social media marketing channels before and after implementing the marketing plan.

References

Andrews, C., & Shimp, T. J. (2013). Advertising promotion and other aspects of integrated marketing communications. Boston, MA: Cengage Learning.

Apple Inc. (2015). Business application development. Web.

Belch, G., & Belch, M. (2011). Advertising and promotion: an integrated marketing communications perspective. New York, NY: McGraw-Hill Education

Clow, K. E., Baack, D. (2012). Integrated advertising, promotion, and marketing communications. Upper Saddle River, NJ: Pearson Education.

Comstock, B., Gulati, R., & Liguori, S. (2010). Unleashing the power of marketing. Harvard Business Review, 88 (10), 90-98.

Farris, P., Bendle, N., Pfeifer, P., & Rebstein, D. (2010). Marketing metrics: The definitive guide to measuring marketing performance. Alabama, Al: FT Press.

Google Finance. (2015). Apple’s financial performance. Web.

Guion, L. A., Diehl, D. C., & McDonald, D. (2011). Conducting an in-depth interview. Web.

Jobber, D. (2012). Principles and practice of marketing. New York, NY: McGraw-Hill Publishers.

Shimp, T. A. (2003). Advertising, promotion & supplemental aspects of integrated marketing communications. Boston, MA: Thomson South-Western.