Marketing Management of Apple Brand Extension essay example
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Marketing Management of Apple Brand Extension

This course work was undertaken as part of the assessment in Marketing Management module. It focuses on new product line extension in the example of Apple Inc. ’s recent product iPad and comes up with a marketing plan for the extension to it. New product extension is in the form of utilizing iPad as an external monitor and in the future as a control device over other electrical equipment that have some user interface to connect.Work findings are that there are positive macro- and micro-environments coupled with excellent internal operations create good opportunities to develop new products and find ways of extending their life-cycle. iPad’s new extension should give lots of benefits both financially and in terms of innovativeness and brands perception in the market as innovative and futuristic. Most appealing part of the product is that current marketing strategy doesn’t have to change much in terms of 4Ps, expenses would be minimal but the effect of introduction will have major impact on both product itself and the brand in general.When speaking of innovation the first company that pops into mind is probably the Apple Inc.

Their latest products like iPhone, iPad, iPod etc. just revolutionized the computing industry, phone industry, music industry and in some ways gaming industry. They keep surprising the customers meeting and most of the time exceeding their expectations. Innovation and ‘thinking out of the box’ probably are the one of the many reasons for success alongside with good organization, marketing and planning by Apple Inc.

Innovation led company is yielding good results in terms of financial results as well.In its quarterly reports Apple posted revenue of $15. 68 billion and a net quarterly profit of $3. 38 billion in the first fiscal quarter of 2010, ended December 26, 20091 (reporting it as the highest ever revenue and profit) and revenue of $13. 50 billion and net quarterly profit of $3. 07 billion for second fiscal quarter of 2010 ended March 27, 20102. After the announcement of the second quarter results for 2010 the company CEO Steve Jobs said: “We’re thrilled to report our best non-holiday quarter ever, with revenues up 49 per cent and profits up 90 per cent.

We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year. ”3 This quite extraordinary achievement based mostly on innovation was behind the decision of Apple Inc. being chosen for this assignment. Namely Apple’s iPad was chosen for the assignment and extension to this line in the form of its usage as an external monitor across all operating system platforms including Windows, Macintosh, Linux and others as well as other equipment including printers and house appliances.

If we look at the current market of laptop computers and desktop computers there is still a significant lag between multi touch capabilities of the most popular operating system of Windows 7 and the technology that enables to utilize these features. Most of the laptops and desktop computers are coming with Windows 7 operating system even though they don’t have touch screens.This is making the experiencing the full features of Windows 7 quite limited.

Moreover most recent products are coming with wireless capabilities, especially printing equipment, which could exploited in other appliances. This report will try to analyse the feasibility of iPad’s usage as an external monitor and what opportunities it can give for its further market penetration. It will start with situational analysis and will try to come up with a marketing plan to further this product extension.

BackgroundEven though there are touch screen laptops and computers in the market, prices are quite high and in these economic conditions, when people are more concerned about their finances it might not be wise to assume that they will buy those computers. Prices for these computers start from around ? 700, which considering other entry level computers priced at around ? 350 and quite popular netbooks from around ? 200, is quite high. The situation gets worse if we consider the fact that mobile devices are becoming more of mini computing devices that satisfy the needs of most people.Usage of computers by many people is limited to social networking, photo sharing, emails, web usage and mobile devices handle these needs quite well.

“The market for touch PCs is heating up. About 10 per cent of new PC models in 2010 will support touch technology”, says Amy Leong, research director at Gartner Research. “The touch market is still in its infancy,” Leong continues.

“In the next few years, we are going to see touch technologies being tested and deployed for many applications. More than 6 million PCs with touch screens will ship in 2010, nearly four times more than in 2008. 4 As it can be seen from this only 10% of this year’s models will be supporting touch technology and if we consider PCs sold in previous years utilization of touch technology in PCs will be much less.

With the introduction of iPod Touch, iPhone and iPad touch technology took giant strides to become more and more popular among everyday users. They are truly showing the amazing capabilities of touch technology. Taps, flicks and other finger gestures that support multitouch experience as well are replacing the usual mouse and keyboard interaction.

Product extension This work will try to come up with a marketing plan for iPad product line extension in the form of its usage as an external monitor with its enhanced touch screen capabilities. It basically will connect to other laptops and PCs and users will be able to manipulate data of those laptops and PCs using iPad’s own touch interface bringing the users real benefit of touch capabilities of their operating systems. This means customers will be able to use whatever they have in their PCs some other equipment on the display of iPad.Currently there is software developed exclusively for iPad and iPhone called iDisplay, which enables iPhone and iPad to be used as a secondary display. But presumably this only works with the Macintosh operating system because of its more or less compatibility due to common developer. In other operating systems it can’t display it because of again those compatibility issues. But this development is very much in early stages and there are numerous problems when using this software.

Namely, they are: 5-6 seconds lag between screens; Inability of current iPad to display all the content from the Mac (Most famously flash content.Steve Jobs recently published an open letter giving his reasons behind their relative unwillingness to adopt Adobe Flash5) It often crashes Current new product extension should enable iPad being used without these problems making necessary developments and software updates. It connects using wireless connection to a PC or laptop and brings all their content on iPad display, which then can be manipulated with its touch capabilities.

Marketing plan which includes situational analysis is given in the following section of the report.Marketing plan Following marketing plan will involve situation analysis using tools such as 5C (Company, Collaborators, Customers, Competitors and Climate), PESTEL, Porter’s 5 forces analysis, SWOT and other tools of situation analysis and will come up with actual plan itself in terms of 4Ps in marketing using where appropriate the above-mentioned and other models. Because of word limits this report will be focusing mainly on the iPad and the product extension, considering wider scope on a company level wherever necessary (for instance legal, political and other macroeconomic forces, common suppliers for different product line etc. .

Objective To create an iPad extension, to create awareness of its capabilities among all iPad users and general audience, to increase iPad’s perceived value, to extend its lifecycle beyond its intended use. Situation analysis As its name suggests situation analysis involves evaluating both internal and external factors that are relevant to the company’s strategy both short- and long-term. It involves analysis of the market, competitors, customers, technological developments, legislative developments etc. to predict the trends and adjust the strategy according to it. The situation analysis can e divided into two major groups – micro-environmental analysis which analyses factors such as company operations, competition and macro-environmental which focuses on wider economic forces, which are generally not under the control of the company. For situation analysis and environmental scan purposes 5C analysis could be utilized.PESTEL analysis has been used in climate section and wherever necessary Porter’s Five Forces and Value Chain analysis have been used within the sections.

Summary of some of findings of the situation analysis has been given in brief SWOT analysis. Cs – Company Apple – Think Different. After return of Steve Jobs to Apple Inc. on December 20 1996, Apple launched marketing campaign ‘Think Different’6. As a result of the campaign Apple products used to be viewed as for people who think differently, out of the box. This reputation of the company is still living and especially after several mega-popular products it has been strengthened even more. According to Fortune magazine Apple has been recognized as the America’s Most Admired Company for three years running now from 2008[7] [8] [9].

Product line Excellent products of late from Apple Inc. ake people wait eagerly for new product developments and announcements. Just announcement itself is like an introduction phase of their products way before its actual launch.

Most people will be queuing up for their products and when the products hit the market they start living in their growth stage straight away. For instance, on opening day of its iPad sales, Apple sold more than 300,000 of them10. Currently Apple product lines are as follows: stm Page | 9 LSBF Marketing management Student ID: A4004645 – Mac and accessories iPod iPhone iPad Apple TV Mac operating system, other software solutions and services11 Substitutes One of the five forces in Porter’s analysis is the threat of substitute products. Because of the exquisite design and use of premium materials there are few substitutes for the products of Apple.Some software and phone companies are trying to come up with some substitutes but there isn’t a visible threat to Apple’s products, at least in premium products segment. Google is coming up with its own brand of phones; Microsoft is coming up with similar design to Apple’s OS; Nokia trying to produce touch screen phones, but it seems Apple’s products brushing them aside in pound-for-pound competition. Other companies like Blackberry, Sony, Amazon also came up with innovative products, still not good enough to beat Apple’s products.

Pad’s versatility and possibility of it being used for so many things make things even harder to compete with it. Even price differences and recession doesn’t seem to bother the customers when it comes to Apple’s products. As Daniel Ernst comments (from Hudson Square Research): ‘…It’s a continued sign that Apple has great products that consumers want despite this recession’12. For iPad we can think of Amazon Kindle or Sony’s Reader (Touch), which can substitute just e-reading bit, possibly social networking bit. But not all of the features offered by iPad.

But future developments are being made by other companies as well to produce some alternative to iPad and in a bit cheaper prices. Some of the other alternatives that haven’t been released yet are: HP’s Slate The Notion Ink’s Adam Fusion Garage’s JooJoo Archos Home Tablets13 Complements Apple Inc.

is working very closely with software developers and there are millions of software that can complement their existing products. This is very evident in the example of iPhone, for which there are countless applications that make it even more useful.Now those applications are being developed for iPad as well which will add so many new features to it. Current target markets Threat of new entrants to the market is quite high because of the capital requirements to enter the industry. Moreover, as Apple operates in premium market, initial and working capital requirements are so high that only existing companies can try to come up with some alternatives. But most of them are more traditional and conservative producers and rather than coming up with innovative ideas, they try to stick to their basics.Even before Apple were good at finding niche markets and performed relatively well. Nowadays, Apple has moved from niche products to premium product brand [14] [15].

Premium quality materials, excellent design and capabilities (notwithstanding some concerns about it’s products’ inability to run Flash, multitask) make the brand much sought after. Last year they’ve launched $999 Macs16 to target lower-end market but still it is way expensive than similar configuration laptops in the market. So we can conclude that Apple products are targeting premium markets. Current distribution networks Apple Inc. currently handles most of the distribution itself.

It has got close to 300 stores worldwide – more than 200 of them in the USA. Some other distribution can be attributed to cellular/mobile networks (iPhones) and other retail shops (mostly iPods).Other distribution is carried out online using the www. store. apple. com website with respective regional divisions. Software, music, videos, TV programs, various software and similar products are also being sold in iTunes store online.

Financial analysis of the company When compare with direct competitors it is evident that Apple Inc. is becoming ever increasing power in the market despite its relatively smaller market share, especially in operating systems market where Windows holds almost 90% of the market. The following table shows Apple in comparison with its direct competitors.

Apple Inc. is now a company with $50 bln plus revenue and most astonishingly year on year growth figures show that they are outperforming their rivals even in these tough economic conditions by a country mile – staggering 442% more growth than that of Dell Inc. the best of the bunch.

Earnings per share also tell similar story. 5Cs – Collaborators Distributors In addition to own shops, there are distributors and resellers of the Apple products, which are divided into several main geographical sections: UK CEMEA (Central Europe, Middle East and Africa) Americas Asia Australia and New Zealand There are Apple Channel Programs18, which outline how to provide qualified Apple sales and services becoming solution providers. Main types of channels are: Consultants – Resellers VARs (Value Added Resellers) Service providers Suppliers Apple has got many suppliers of premium quality products. It tries to assure all the suppliers as well as the company stick to the highest levels of quality throughout. Recent report in Bloomberg BusinessWeek gives details of findings of ISuppli19, where some of the suppliers of Apple have been given. Namely: Table 2. List of main suppliers and products they supply according to ISuppli Supplier LG Display Co.

Samsung Seiko Epson Corp.Wintek Corp. Texas Instruments Broadcom Corp Cirrus Logic Inc. Various Product Display Display, Memory chips Display Glass overlay Touch screen control chip Bluetooth and Wi-Fi chip Audio chip Memory chips and other components Bargaining power of suppliers is quite low given the position of the Apple in the market. As it is with its products, suppliers also feel privileged to work with Apple and it most of the time dictate the conditions of cooperation. Even recent row with Adobe don’t go for compromises when it comes to agreeing the terms.

One of the notable things in this regard is that Apple is trying to acquire some suppliers or acquire potential suppliers who can produce raw materials for them within one vertically integrated setting. Recently they have purchased chip producer called Intrinsity22 which specializes in processors. Alliances Apple has got into everal alliances and partnerships with other companies to meet its business needs and at the same time provide some benefits to other allies. Some fierce competitors could become allies when it comes to certain mutually beneficial aspects. Most notable partners of Apple are, among many others, Intel, Microsoft, HP, resellers of its products, suppliers.

5Cs – Competitors Yahoo! Finances show HP, Dell and Microsoft as Apple’s direct competitors in PC market. Depending on other products like music players, phones, tablet PCs this list can be expanded to include Sony, Nokia, Samsung, Amazon and others.Competitive rivalry is quite fierce within the industry, but due to the fact that Apple operates in premium niche it is one of the dominant forces in that segment. Although Amazon holds about 55% of the market in e-readers with its Kindle23, because of its limited functionality one can expect its market share to go down quite rapidly, especially with introduction of iPad and other upcoming products competing with it. Competitors to this product extension would be most of the touch screen laptops and desktops themselves.

One of the most popular tools in analysing the macro-environment is PESTEL analysis (which takes forms of STEEPLE, SLEPT, PEST, PESTLIED etc. in various texts, and can be extended depending on the relevance) which involves analysis of: Political Economic Sociological Technological Ecological Legal environmentsPolitical and legal environments Political environment according to Kotler et al 2008 is laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society24. These environments are to a degree interlinked with each other because most of the time policies are enforced by legal tools. One of the recent issues in this regard is the potential ‘antitrust inquiry into Apple’s new policy of requiring software developers who devise applications for devices such as the iPhone and iPad to use only Apple’s programming tools’ by Department of Justice and Federal Trade Commission25.These rules and regulations not only affect the Apple only.

It affects Apple’s suppliers and other partners as well. Recently Apple reported that it found that some of the suppliers broke 24 Kotler P. , Armstrong G. , Wong V.

, Saunders J. , Principles of Marketing, 5 European Edition, Pearson Education Ltd. , 2008, p211 25 http://www. nypost. com/p/news/business/an_antitrust_app_buvCWcJdjFoLD5vBSkguGO 03/05/10 th Page | 16 LSBF Marketing management Student ID: A4004645 labor laws, hazardous waste disposal regulations26, which shows Apple’s commitment to good business practices. Another issue in this regard could be ccessibility issues to disabled people and for people with difficulties in using the device. Apple made some arrangements in iPad adding voice overs, zoom options, white on black display and mono audio among some other accessibility options. Economic and Sociological Currently economic recession is by far the most important economic factor that affects spending capabilities of people.

Loss of jobs and reduction in disposable incomes usually hits hard the premium markets. But markets are showing signs of recovery and according to Apple’s financials they don’t seem to be affected much by the recession.Sociological factors include different demographical factors like age, gender, population growth, culture and others. iPad and other products of Apple seem to be enjoyed by most of the demographic groups and as elder population is becoming more and more technology aware and sophisticated, those products enjoying similar success among them as well. But, obviously, younger generation is still the driving force in the customer segments. Technological Technological environment includes all new developments in the technology that either makes operations or products more efficient and effective.Due to the premium nature of the markets Apple serves, it can afford to use most of the state-of-the-art technologies that are far better than those of competitors. For instance, iPad enables users to watch staggering minimum of 10 hours of video and Wi-Fi internet usage with single charge due to exceptional battery and processors; it uses finger-print resistant oleo-phobic coating27 and other high quality parts.

Ecological Environmental and social responsibility issues are taking centre stage in the modern society.More and more pressure is being put by corporate governance regulations and organizations like Greenpeace. Greenpeace had several stand-offs with Apple and criticized it on several occasions, accusing it of not doing enough to go ‘green’28. But in 2007 Environment Protection Agency gave silver rating to Apple putting it highest among laptop producers and one of the highest among PC and LCD producers29, despite earlier criticism by Greenpeace. In 2009 EPEAT gave Apple gold rating and Apple is one of the leading companies at introduction of environmentally friendly practices30. New Mac mini, iMac, and Mac Pro meet the ENERGY STAR 5.

specification31. 5Cs – Customers As in all products of Apple of late there is a buzz about iPad. It is considered something revolutionary standing in between iPhone and Mac, basically making it a device which is between smartphones and laptops. Considering the capabilities and design iPad can be considered new product targeting mainly iPhone and Mac users in the first place but at the same time targeting wider gadget loving people. Its competitive position against netbooks and eBook readers makes it real good alternative to replace them, thus making it top of the class product even in those customer and Applications that make it even more versatile and thousands of applications made for it, it can do so many functions that ordinary gadgets can’t.

So briefly, customers buying iPads are innovators (as it is the case with most Apple products), early adopters and early majority.And sales figures of 1 million in just a month can confirm this32. According to market research firm The NPD Group (www. npd. com) the awareness about iPad is highest among current Apple owners (82%), consumers with $100. 000 or greater income (80%) and 18-34 year-olds (78%)33. Average of around 9% of all surveyed consumers said they are extremely or very likely to buy one in the following 6 months – making them early adopters.

SWOT analysis Strengths Premium Brand Customer Loyalty34 Weaknesses Geographical spread of the company doesn’t allow access to many other lucrative markets No price differentiation in different markets, which would allow to gain some shares in developing countries Over-dependency on their CEO Some very popular technology is not being utilized, like Adobe Flash etc. Programming is very limited for software producers to certain languagesThey are too small of a company in search business it will be difficult to start gaining from advertisements Innovation Sound logistics Good relationships with suppliers Good relationships with OEMs Distribution network Staff CEO – Steve Jobs Hard to imitate products Work organization Patents Excellent marketing Strong cash position Opportunities Possibilities to invest in new technologies Possibilities to diversify to new products Possibilities to enter new markets Possibilities to diversify to new industries Possibilities to grant financing deals Possibilities to invest in companies, which can be vertically integrated in the future.

In some other instances Physical evidence, Processes and People are added to this model to make it marketing mix of 7Ps. This section concentrates mainly on 4Ps, because additional 3Ps are more of an organizational nature, which are well in place at Apple Inc.Product As it was mentioned above, the product is basically an extension to iPad, which performs all the functions iPad does and extra feature of being used as an external monitor to control other laptops and PCs. This can be achieved either developing new software or adding some hardware to increase power of the device and the speed at which it is connected to other devices. As such it is not a new product in itself but just an extension to iPad that enables it to be used as a touch platform for other operating systems and computers in addition to its own capabilities to be used as normal e-reader, internet browser and entertainment console.

But this feature should increase the lifecycle of the iPad to far beyond its intended use and stay in BCG Matrix’s star section for much longer eventually becoming a very solid cash cow. iPad will be advertised as if it has a new dimension of control over other devices that it is connected to and can be used in various settings: Home entertainment – connecting to multiplayer games, sharing live running applications, movies and music, by just dragging and dropping them. Portable tablet PC that can be used in educational settings for mobility.For instance, tablet PCs in LSBF don’t allow the lecturer to move around. But with this extension a lecturer can hold an iPad on his hands and move around the lecture room writing or Page | 21 LSBF Marketing management Student ID: A4004645 showing whatever he/she wants on iPad, which will be shown on the projector. Basically controlling tablets remotely.

In the future it should be able to connect not only to laptops and PCs but also to other devices in the office or home environment, allowing remote control over equipment.For instance instead of using remote controls for TVs, air conditioning, fridges it can just connect to them and bring the options on the screen and the customer can choose the options on the screen of an iPad delivering real sense of futurism. So product will remain as an iPad and marketed as iPad but those features will be introduced either as new product, as in iPhones case – iPhone 3G and then iPhone 3GS, or it would take the form of software update in the future. One very important point here not to forget is that some analysts view iPad as a distribution channel as well35.It distributes all sort of content from music and videos, books, advertisement etc. , making it another platform of operations. Promotion Promotion of the product will carry on as iPad for well into growth and maturity stages in product life-cycle to maximize gains on current features and current markets.

Once it reaches maturity stage this extension should be introduced to kick-start another cycle of product life. Marketing efforts should be concentrated on targeted premium segments with the mix of advertisement, promotional events, word of the mouth advertising, viral videos on internet.At the same time other markets should be developed to reach not only current target audiences but also other professionals, industries and general public which are interested in modernization of their settings.

It should be promoted as device of the future – magic wand with which you can control everything remotely – all you need is a wireless network Price After quite successful launch of iPad with more than 300,000 sold on debut, most analysts pointed out that pricing of iPad was very good. Evidently, Apple (AAPL) has managed to hit the pricing sweet spot at both the high and low ends of the market, which, as Abramsky observes, bodes well for its chances for success. “This data, while preliminary, suggests iPad may have greater potential than expected, to expand Apple’s addressable PC, iPod markets and to capture a segment of the home PC market (est. 35M+ units/yr),” he writes’36. Initial suggestions were that iPad will hit the market with the starting price of around $1000 but it was announced that it is going to cost between $499 and $82937.

In the first four weeks they managed to sell a million of them38.With the introduction of iPad Control sales prices should remain at the same levels, giving impression that customers are getting more value for their money. This could work even better if iPad Control is introduced in later stages of iPad’s product life cycle.

Place Distribution channels and points of sale should remain as it is giving it the sense of exclusivity. Apple Inc. might add more authorized distributors to widen the scope of the reach to target audiences in different geographical locations. This is very important for companies operating in premium segments of markets.BMW, who also operates in the premium markets, made a very wise decision to penetrate Chinese market and started producing its cars in association with local producer Brilliance.

Apple Inc. should keep these market trends in mind and be ready to exploit similar opportunities. Financial implications In terms of costs this development could possibly be quite cheap to get into iPad because it is just a matter of software and little bit of hardware, because current capabilities already allow iPad to perform most of these tasks. But the benefit of kick-starting another lifecycle will bring major benefit and will allow yielding more revenues from the same product for quite some long time, at the same time enhancing image of the brand for innovation and futurism. Page | 24LSBF Marketing management Student ID: A4004645 Individual Critical Reflection on Learning Outcomes This module, I could safely state, well exceeded my expectations with its practicality and its delivering lots of useful knowledge and information.

Concepts, theories and models were explained in way that I personally haven’t had experience before, having studied marketing in other educational establishments before. Lots of real life examples, explanation of how theory fits in real world, and sense of satisfaction seeing how marketing really creates value were the highlights of the course for me.If I speak about transferrable skills, marketing game and final report were the highlights in this regard.

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Marketing game probably developed some sense of real life imitation, sense of competition with others. Debates with colleagues, analysis, holistic thinking were all involved in the marketing game. The coursework in this context was quite demanding in researching and information finding, thinking through the strategy as it is in real life (because real life companies were taken) in terms of 4Ps and communicating the completed work.

Specifically choice of Apple Inc. for my coursework was one of the best choices I have made. Flagship company in innovation, design and of course marketing gave me very useful insight how things I’m learning in theory are being put into very effective and efficient use. I have learned how to critically assess the situation, how not to be complacent with success a company is enjoying and always search for opportunities, utilize strength and at the same time be alert to threats and eliminate

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