In January 2007 the Apple Computer Incorporated changed its name to Apple Inc (Jeffrey& Simon, 2005, P. 35). This was announced by its Chief Executive Officer and Co-founder Steve Jobs. The CEO also revealed the long awaited iPhone (Honan, January 9, 2007). This is a combination of the iPod and the internet-enabled smart phone. In June the following year he announced that iPhone 3G would be released one month later. This new version adds support for networking 3G and assists navigation of GPS in addition to other things. The future plans of Apple is to focus on satisfying individual consumer demands rather than just fulfilling a demographic requirement as well as better the effectiveness and stability rather than adding new features when introducing new version of a new product.
The main target of iPhone is the users who need communication and storage of information or individuals who want entertainment as well. The target segments of Apple comprise of students, corporate users, professionals, healthcare workers and entrepreneurs. The market for high-end systems like the iPhone is current small. Few individuals want video, internet and PDA features in one phone because of the high price. The market for smart phone is currently small compared with the market for the ordinary phone (Honan, January 9, 2007). Their market will increase rapidly in future due to greater power and lower prices.
iPhone is the first Internet-enabled smart phone launched by Apple. It intertwines features of a wireless internet device, iPod and mobile phone into one package. The most innovative feature in iPhone is the 3.5 inch multi-touch screen. The screen allows an interface based on touching in place of keyboard, stylus or mouse. It allows the items on the screen to be controlled by touching using two fingers instead of one finger. This device can also be viewed in portrait or landscape mode by automatic shifting of the screen based on the holding angle. The features of this device are, wide screen option (video playback), MP3 player (iPod), Bluetooth, Wireless internet access, 3.5-screen and 2 mega pixel digital camera.
Goals and objectives
- The business will aim at a one percent phone or personal digital assistant (PDA) market share in United States and United Kingdom through unit sales capacity of 400,000 in the first one year.
- Realize a ten percent share market volume based on sales, extend on the brand name of the company and link to establish substantial positioning during the second year of launch.
- Extend the company’s innovation image, value and quality during the second year.
- Measure the awareness and response during the second year in order to make changes to the marketing campaigns.
The first and foremost thing will be differentiating iPhone from other PDA’s in the market. The primary target market will be middle income and upper income professionals who want to coordinate their busy programs and communicate with families, colleagues and friends. Secondary target markets are the graduate, college and secondary school learners who require one multifunction device that is portable. Geographically, since iPhones are already in use in Europe since 2007, Apple will aim to enter Japan as son as possible so as to make it possible to become a global product. Since each country has its own needs especially in line of communications, the iPhone will be tailored to suit the tastes and regulations of each target region. Apple will partner with large cell phone service providers, Verizon, AT&T, sprint and cellular one and large enterprise software firms where communication is critical to the end user as its primary business target. The company will also partner with mid to mid size corporations that want to help employees and managers access critical data and stay in communication as secondary business target. The market segment will comprise of companies with annual sales capacity of $12 - $55. The company will use product differentiation to position the iPhone as convenient, versatile, device that has added value for personal and professional use. Apple will focus on the convenience of having one system for communication but also video and pictures, music and full access to internet. iPhone should be promoted as both hip and professional.
Consumer and demand
Smart phone market looks to expand rapidly beyond its current level. Suggestions from the International Data Corp. research firm imply that global mobile worker population will expand to 870 million by 2010 representing a 25% increase from 2005. In addition, this population will consist of 30% of the working class with no permanent offices thus requiring a facility that can make them work smoothly.
Marketing mix strategy
Apple will provide a one year warranty together with an optional three year apple care warranty, same taste for the iPhone as other Apple products, launch special edition version, and launch a cheaper version by 2014 with less complicated features together with a more advanced version for professional use. Differentiation of the product will be increased by adding features such as large disk storage capacity, thinner device, light weight, long life battery and so on. Apple will not be advised to impose a pricing strategy for the proposed product instead to stimulate the creativity of the iPhone developer community it should offer anything for example set the advanced model for the iPhone at $400 and the base model at a cheap price of around $350. The company will generally lower prices to cement its market dominance within the shortest time possible ((Jeffrey& Simon, 2005, P. 36)). The company’s profit will be determined through marginal analysis. iPhone will be promoted by integration of Apple message of revolutionary communications and audio/visual experience in almost all media advertisements. This will be a means of increasing revenue to the company. The iPhone will be differentiated from others by way the touch screen functions.
Business development strategy
Maximize on the company’s strengths which include innovativeness, compatibility, and ease of use, brand awareness, price and quality. The company should also take advantage of the opportunities available in increasing demand and expansion to new target segment. Smart phones are likely to get cheaper as technology advances and this will make Apple attract customers and get iPod users upgrading to iPhone. Apple should acknowledge its weaknesses such as poor image, high price and touch screen interfaces so as to come up with a strategy to improve its operations. Threats that apple is likely to face are stiff competition from smart phone manufacturers, pressure as a result of downward pricing, and difficulty in advancing in Asian market.
Independent third party developers will be the basis of the release of the iPhone. This will be an advantage to Apple to scoop the benefits of reduced management costs though there are issues such infighting of developers that are likely to face Apple. Apart from the issues cited above, the company has a solid foundation of employees who develop its own computer soft wares. Many of the employees involved in cutting edge products have to sign confidentiality contracts.
•The break through-even analysis assumes that the wholesale revenue is $510 per unit variable cost of $260 per unit and approximated fixed cost of $55 million. From these assumptions, the break through-even value is $55 million divided by $510 minus $260 which gives 204,000 units sold.
•Break through-even analysis indicate that Apple will become profitable after the sales capacity exceeds 204k. After the first year Apple will make a profit of 1.30 billion minus 55 million in fixed costs.
•Recommended price is $350-$400. The markup is 45 percent.
•It is estimated that sales capacity will increase at least 62percent from this shift; this will lower the impact of fixed costs and increase opportunities to raise the scale of production, which will further improve proceeds in the ends.