Apple Inc.: Smartphone Industry

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Situation Review

Apple Inc. is a technology firm that specializes in computer, mobile phone, and production of components such as chips along with unique closed-source software for its devices. This report will focus on Apple’s primary segment of sales and marketing, which are mobile smartphones known as the iPhones, a globally recognized product and brand (Razak and Zawawi, 2017).

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SWOT Analysis – Apple

Strengths

  • Globally recognizable brand image and reputation
  • High-profit margins
  • Innovative in the sector

Weaknesses

  • The high price point for products
  • Dependence on one market sector and segment
  • Distribution networks are limited

Opportunities

  • Raising sales volume by appealing to lower-price market segments
  • Product line development with varying prices and features
  • Increasing opportunities for upgrades in its phone line-up

Threats

  • Competition from other firms
  • Stagnating mobile technology innovation
  • Supply-chain issues due to political and global factors (Razak and Zawawi, 2017).

Porter’s Five Forces Analysis

Industry rivalry – Strong

Offering mostly flagship higher-end devices, Apple is facing significant pressure from its main rival Samsung which has transitioned in recent years to providing high-quality flagship and mid-priced phones. Furthermore, the industry is being actively overtaken by rising Chinese smartphone makers such as Huawei, Oppo, and Xiaomi who are releasing devices with flagship specifications and innovative designs (albeit lower quality) at a much lower price. There is a low differentiation of products in the industry.

Consumer bargaining power – Strong

The consumer base for Apple is exceptionally loyal and has been the primary reason for its success financially, remaining within the Apple ecosystem. Apple must maintain consumer satisfaction and develop devices which follow consumer demands since transitioning to Android devices would require much lower cost for most.

Supplier bargaining power – Weak

Apple has developed a reliable supply chain for its products, working closely with Chinese manufacturers such as Foxconn. Apple even directly purchases some elements from its competitors such as Samsung which produces displays and chips. These firms highly benefit from partnerships with Apple and depend on the revenue trickling down from iPhone sales.

Threats of Substitutes – Weak

While there is low differentiation of products on the market and substitutes are available, Apple products are well patented, from its form factor to the software. Most alternatives to the Apple iPhone are much weaker in performance, and there is a lower buyer propensity to these substitutes, making this a weak force.

Threats of new entry – Weak to moderate

The industry is highly competitive and modern mobile technologies require a tremendous amount of investment into R&D and high capital requirements for everything starting with brand development. While some new companies, such as the above described Chinese firms have entered the market the last decade, most have small sales outside the Asian region and are unable to compete internationally with Apple or Samsung. Meanwhile, many well-known producers of mobile phones from the past (Nokia, Motorola, Blackberry, Sony) have either exited the market or have become irrelevant due to lack of innovation.

Customers

Apple appeals to a wide variety of consumer segments. The young population for its hype and style factors, the family for its unified technological and software ecosystem, and the older adults (as well as everyone else) for its streamlined software and simplicity of use. Younger populations are hyperaware of digital environments and are the most exposed to any marketing that Apple may do on social networking or media platforms. Middle-aged family populations have some interaction with digital media through the use of digital marketplaces, some exposure to social media and YouTube. Meanwhile, older adults will rely on word of mouth and limited exposure to digital marketplaces and email (Schramm, 2010).

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Competitors

Apple’s major competitor has positioned itself as a direct alternative to Apple, at one point heavily bouncing off Apple for its advertising (such as mocking the form factor or lack of certain features in iPhones). This is known as comparative advertising, which can be effective but can backfire as well since Samsung eventually tends to adopt most trends in smartphone technology and design that Apple sets. Currently, Samsung has also adopted a similar approach in advertising by attempting to create the hype and “cool” factor around its devices. It has succeeded with strong sales for its flagships, chipping away at Apple’s market share in some regions, and a brand recognition for its devices that are rapidly catching up to Apple. Samsung is directly competing with Apple in the digital marketing space, particularly social networking and media platforms such as YouTube (Ask, 2018). Apple continues its niche advertising strategy with its army of loyal consumers or technology enthusiasts, also building on the sleek factor and secrecy of its devices. Meanwhile, Samsung has for the past few years adopted the strategy of aggressive global advertising, with $14 billion annual expenditures and lots of exposed information before their phones are even announced. In comparison, Apple spends approximately $1.8 billion in global advertising, but Apple outspends Samsung in digital ads (O’Reilly, 2016).

Digital Marketing Goals

As evident, mobile devices have been and will continue to be the primary source of profitability for Apple. While Apple remains a trusted mobile device developer manufacturer, with its products retaining its reputation of reliability and some level of luxury, it is facing significant competition. The competition focuses on targeting Apple in the premium sector by attempting to remove the latest iPhone flagships from a position of cutting-edge technological devices. Furthermore, competition is reducing Apple’s market share by appealing to lower-price market segments, where Apple has little to virtually no presence (Cachila, 2019).

The following marketing goals are considered for Apple Inc.:

  1. Position Apple is the leading innovative brand in mobile technologies
  2. Appeal Apple products to more price-sensitive market segments
  3. Encourage upgrades from loyal Apple users consistently
S.M.A.R.T. Criteria Goal 1 Goal 2 Goal 3
S – Specific Introducing and marketing more cutting-edge technologies into devices. Introducing a greater range of devices in its line-up, including affordable versions A combination of the previous two goals and other factors which encourage upgrades.
M – Measurable Specifications of the devices in comparison to the competition. Tracking purchases for various devices at different price points. Rate of upgrades can be tracked easily via types of devices tied to Apple ID.
A – Assignable Development and marketing. Marketing and pricing/financial departments. Marketing department.
R – Realistic Widely available technologies and proper positioning makes this realistic Plausible and something that most brands in many segments are doing Offering proper incentives to upgrade is a matter of marketing approaches
T – Time Development cycles for phones 1 year – annual presentation of new phone models 6 months to a year, desirably in the context of the 2020 new iPhone presentation

Apple is notoriously known for being extremely limited in its social media presence and low amount of PRC advertising compared to other brands, relying on the word-of-mouth buzz and celebrity endorsements for its products (Hassler, 2018). Apple should bring back some digital strategies from its past of advertising in a simple, relatable manner by eluding technical details but highlighting features. Short-segment advertisements on platforms such as YouTube and Facebook are vital in highlighting the attention of most modern consumers. Another digital media strategy is through social media influencers. Furthermore, Apple should take advantage of its ecosystem and offer incentives for users to upgrade through subtle, non-intrusive advertisements through its service platforms such as the App Store or iCloud.

Digital Marketing Strategy

While Apple will likely never enter the budget segment, it has offered a couple of lower-priced devices, but which were underwhelming at their price-tag in comparison to their cheaper Android counterparts. This is causing Apple users who are usually loyal and well-integrated into the ecosystem, to upgrade their devices at a much slower pace, cutting into profit margins. First, the reliability and efficiency of the iPhones allow them to function well for years, and very incremental changes that Apple has made on models in recent years are not worth it for some users. Second, the pricing of new models is so high, even for lower-end models, that it is cheaper for consumers to wait for a drop in price or purchase older models.

Apple will continue to differentiate itself and attempt to achieve the set objectives through a unique value proposition, something that few companies in any industry have been able to emulate. Apple offers the best possible product in its category for its price range at the time of release, a highly functional, extremely well-designed phone that feels like the combination of luxury and peak technological innovation (Kulkarni, 2016). Apple is also well-aware of its appeal, brand, and target consumers, which are critical components in digital marketing strategies.

Some of the most successful marketing in the past for Apple has been an authentic and original approach that became synonymous with its brand (such as the Think Different and Mac vs PC ads of the late 2000s). Apple should return to this strategy, stepping away from its generic flashy advertisements of recent years. A campaign which feels personal and emotional is likely to create lead generation on social media, even if Apple does not have a strong presence on many platforms. In a modern world, consumers are looking for the meaning behind their purchases, something that suggests trust and authenticity (Digital Marketing Institute, n.d.). Creating a sense to the Apple brand as a relatable company may encourage users to upgrade their devices.

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The reputation that Apple has established, and the above-described quality of products goes beyond a single good; it reflects an experience of unboxing and using a brand-new iPhone. The experience factor is then built upon when users use the device in daily life or adventures to capture amazing moments or enjoy themselves. Recent marketing campaigns have focused on gimmicks of its devices or some sort of technological capacity. Apple assumes that the market is aware of its iPhone camera capabilities, which it may be, but lacks the connective factor to its use. By demonstrating the “experience” factor, it is able to show functionality and usefulness of its devices, even at higher price ranges, making them a worthy purchase (Taube, 2014). This also directly appeals to a broad market segment of mid-aged to older adults who are looking for high functionality from their phones for personal and business use.

Building on these factors, Apple should emphasize the visual element in its digital marketing plan. Potentially, with a focus on video advertisements where Apple has always shined at creating appealing, personable, and innovative commercials. With the majority of content consumed online through mobile by the general population, digital marketing has the unique opportunity to “take over” the little screen and be the centre of attention even for a brief few seconds with visual content (ReachFirst, n.d.). Apple is known to use the same chip with similar GPU cores in all devices of a released generation, ranging from budget-type iPhone SE to its PRO models. If Apple can capitalize on advertising these relatively unknown factors, it will be able to achieve much greater sales in its full range of phones as well as potentially improving upgrade rates, simultaneously covering all three objectives with this strategy.

Apple sells its devices primarily through retail in its stores, both physical and online, or through stores of mobile carriers and any other retailer which has electronics (Wal-Mart, Best Buy, etc.). Most consumers evaluate such costly purchases online before ordering it. Therefore, Apple should capitalize on three primary digital platforms which are its website, Instagram, and YouTube. Apple’s website is already well-developed and known for its visual factor. Instagram is used by Apple to an extent but needs to be one of the leading platforms for its marketing strategy considering how popular Instagram has become as a visual platform, mainly where Apple devices take a significant share of images. Finally, YouTube should be a strong platform, allowing for pre-video advertisements with personable commercials described earlier as well as collaborations with meaningful content creators which make Apple recognizable. These and other platforms such as Facebook and Pininterest take advantage of consumer visual engagement and can continue to interest them (SmartInsights, 2019).

Currently, the marketing and brand situation is that everyone knows of Apple, and a large population has one of the models of an iPhone. However, marketing by Apple is being ignored mainly due to its recognizability. Apple needs to return to its roots while modernizing some elements of its digital presence to remain relevant in the world of mobile and social media while driving people to upgrade to its newer and broader range of devices to stay competitive in the industry where other companies release multiple devices for all price ranges.

Bibliography

Ask, J. (2018). ‘Competing in smartphones demands more than great hardware — you need a strong ecosystem’, Forbes, Web.

Cachila, J. (2019). ‘Apple vs. Samsung: how rivalry is affecting 2019 iphones production’, International Business Times, Web.

Digital Marketing Institute. (n.d.) What are the most effective digital marketing strategies? 2020. Web.

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Hessler, N. (2018). ‘Apple’s totally bizarre social media strategy that makes perfect sense’, Medium, Web.

Kulkarni, C. (2016) 10 things you need to learn from apple’s marketing. Web.

O’Reilly, A. (2016). ‘Apple is spending far more than Samsung on digital ads’, Business Insider,Web.

Razak, W. and Zawawi, N. (2017) ‘Brand positioning by Apple Inc.’, International Journal of Business and Management Invention, 6(5), pp.48–50. Web.

ReachFirst. (n.d.) How to improve digital marketing results with visual content. 2020. Web.

Schramm, M. (2010). ‘Apple’s segmentation strategy and why it works’, Engadget, Web.

SmartInsights. (2019) How powerful is visual content in a marketing strategy? Web.

Taube, A. (2014). ‘Apple could be moving its entire ad strategy out of the ‘Mad Men’ era and into the modern day’, Business Insider, Web.

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BusinessEssay. (2022) 'Apple Inc.: Smartphone Industry'. 11 May.

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BusinessEssay. 2022. "Apple Inc.: Smartphone Industry." May 11, 2022. https://business-essay.com/apple-inc-smartphone-industry/.

1. BusinessEssay. "Apple Inc.: Smartphone Industry." May 11, 2022. https://business-essay.com/apple-inc-smartphone-industry/.


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BusinessEssay. "Apple Inc.: Smartphone Industry." May 11, 2022. https://business-essay.com/apple-inc-smartphone-industry/.