Apple’s strategic position

In this report, I have made a detailed market analysis of “Mobile phone industry” and Apple’s strategic position in the selected market while considering its company’s background. I have supported my research by using different techniques such as SWOT and Porter’s analysis, Cultural change, PESTEL analysis (Power and Politics) in order to analyze the strategic position of the company in relation to market. Furthermore, I have provided future directions as well as recommendations for “APPLE” in terms of strategy for your reference.

Introduction

The Board of Apple iTunes has requested a report that seeks to examine the key macro and micro environmental factors within the music download industry and provide significant information regarding the current threat of Nokia entering the music download market. Also, recent trends should be observed and a strategy has to be developed that will limit Nokia’s impact and protect Apple’s market share within Europe. In order to do so, we used significant instruments to analyse the market and we formulated a strategy accordingly.

 Apple’s Mission Statement

Apple is a company that is dedicated to introduce the best personal computing experience to students, educationalist, inventive proficient and clients in the world through Apple’s inventive hardware, software and internet offerings. Apple uninterruptedly tries to escort the industry in innovation with its unbeatable computers, e.g. OS X operating system and i-Life and professional applications. Apple is also leading the digital media revolution with its iPod portable music, video players, iTunes online store, and it also has introduced the new online phone souk in the coming year along with its ground-breaking iPhone.

Apple’s strategy

Apple is a perpendicularly incorporated company that industrializes and supplies the whole range of hardware, software as well as its own innovative operating systems. Apple Inc. preferred the following strategy in order to sustain the profit level with a guarantee not to lose their profit growth and margins by investing somewhere else. The good reason for adopting this theory practically is just to ensure to look after all relevant segments of the business by investing significantly in R&D. There are some other strategies can be adopted to attain a well groomed market status and position i.e. marketing and advertising.

Apple’s market

It is almost impracticable to accurately describe the “Apple’s market as the company plays in the multimedia download market by contributing various services i.e. music, games, Podcasts, ringtones and movies. They have made a recent integration into the mobile phone market for their new model iPhone. Mintel defines “the multimedia download market” as it transfers anything in the copy form from internet to a personal computer, other portable devices (mobile phones, PDA), game consoles or multimedia devices” (Mintel, 2007). It also covers a range of music, icons, wallpapers, games, ringtones and video/television programmes. In my report, I am going to consider more of the music segment that is a special attention area for the Apple’s management i.e. APPLE iTunes. However there are some other contemplations have to be considered with respect to the multimedia download market, because as Apple offers a range of multimedia services and sometimes a lessening of the music download market promotions might be very slender.

Apple has not entered completely in the mobile download market as defined by Mintel in the very strict terms “products that are downloaded to a mobile phone, including ongoing subscription purchases or single one-off downloads.” (As Nokia has integrated in the promotion through its new Ovi service and the commencement of its N-Series devices)

E. g. the products are, wallpaper, icons music, ringtones, jokes, games and news or video clips. And it is to make sure that these are exclusive services for mobiles only as well as comparable services can be downloaded on a Personal Computer which are barred” (Mintel, 2005) . The mobile phones market is being defined by Mintel as “handset manufacturers and network service providers” (Mintel, 2007).

Overview of the multimedia downloads market

This overview has been provided on the basis of the “Mintel” report about uploading and downloading in the UK in 2007 and the figures provided only to show the UK market. Since it can be assumed that the UK market does not differ dramatically from the European market since network providers, third party providers and mobile manufacturers have started taking part in this market which are accessible through the World Wide Web and therefore are also being used from European customers, the facts given can be transformed to the European market.

These two markets i.e. “multimedia download market” and the “music download market” are very dynamic markets in their nature as reflected by high disintegration of more parties in to this sector e.g. mobile phone producers, network- and third party providers integrating into this market very quickly.

Market Size and Segmentation

In 2006, the “download market” for UK in terms of worth and value has gone up by 179% to £343 m from 2002. The root cause for driving it is its expansion of music download that is beating mobile phone downloads which has been the most popular area of market in couple of past years. Mintel predicts more growth in the market in years 2007 – 2009.

Market Share

The multimedia download market is a highly uneven market with a number of competitors in it as reflected by an 80% market share of Apple iTunes in it. An integral basis for this market is “Third-party providers” e.g. iTouch, Napster, Zed and MonsterMob plus “mobile downloads network providers” are also important in this particular scenario.

Key Points of the Internal Market Environment

The enhanced interest level of the music lovers for pursuing new technologies can clearly be viewed particularly for “music download market”. The customer’s concentration has been drawn by introducing new products e.g. Apple iPod. In addition to it, technology has a trend to merge their functionalities in their devices linked to 1 item / product only; examples are “Apple iPhone” and the newly launched “Google G-phone show”.

Key Points of the External Market Environment

The existing inefficiencies of legislation in respect to the copyright matters hearten the consumers misguided for officially permitted download services. Mintel has noticed an increased tendency in consumers to download the contents if free, from the registered online resources more willingly.

The Future

It has been foreseen by Mintel that instead of getting an “add-on”, downloading has been turned into a function being used nearly in all devices and consequently, internet mobiles usage will be the biggest market of the era.

SWOT-Analyses

Strenghts

Although, Apple is evidently a market leader in the music download and behaving like a STAR according to the BCG Matrix in term of cash and profits.

Revenues increased from $5,742 m to $19,315 m in years 2002 – 2006. Apple’s net profit has grown from $65 m to $1,989 m in periods from 2002 -2006 (Data monitor, 2007). This sustained monetary improvement indicates a stable economic position as well as Going concern of the company.

A very well known brand that stimulates differentiation for its products and increases sales.

Apple’s victorious delivery of the iPod and software iTunes. With each unit of iPod given away in the market, the customer by design can install iTune, which is only offered by Apple’s original software in iPod.

Apple’s products are called as “hip”, “stylish” and “fashionable”.

Apple devices and software are more attractive because they are more convenient, user friendly and upgraded with the latest technology.

Apple’s collaboration with big name companies e.g. Starbucks, Nike, Google and Coca-Cola leaving a strong impact on users for its diversification and emergence with different industries. e. g. relating to drinks, sports and music.

Weaknesses

However, interlinking of iPod / iPhone and iTunes is the main element of Apple’s prosperity but can be a future issue, because of users’ requirement to download MP3 through online portals and devices.

Apple’s restricted offer of DRM-Free tracks on iTunes is a weakness as users want more DRM-Free downloads.

Expensive Apple products i.e. iPhones.

Apple iPhone’s restriction to download files directly to the mobile as compared to Nokia N-Series, is an huge weakness as NOKIA is providing a substitute which will lead to the low market share of Apple to its opponent Nokia.

Limited operators of iPhone in each country have left its customers with a limited choice of network operators.

Threats

Nokia’s access to the “Digital Download Market”.

Threat of losing super market position if Apple would not be able catch up ” The mobile download market” which is considered as one of the most opportunity-rich markets the world has ever seen.

Threat of launching of online portals that are specialized in marketing DRM-Free tracks. However, Apple is struggling for improvement towards selection of DRM-Free tracks, but Apple does not offer less or discounted rates i.e. price as well as more options in iPhone range that can divert the user from Apple to those in terms of DRM more persuasive companies.

Threat of illegitimate download sites that has an adverse effect on sales, because of the accessibility of free digital content which can lean users away from Apple’s iTunes.

Opportunities

The youth consumers is the biggest sector to hit for downloading, because youngsters are less reluctant to use the latest technologies.

It can be a profitable opportunity for Apple if it introduces more extensive and classy products and services for older and rich community. With the launch of its iPhone Apple it can challenge its competitors like Nokia on their home market.

Introducing services directly downloadable to its iPhone can be a big step and threat for its competitors like Nokia, as users are becoming very familiar of latest technologies like internet downloading.

Ad-supported content can be a significant opportunity for Apple, but if the Apple’s directors deal with advertising deals with other companies which can permit Apple to introduce free services to the community willing to see advertisement which will attract a new lot of users. However these users will only buy a product e.g. an iPhone or an iPod and they will get free services if they need.

Porter’s 5 Forces

Substitute products

A substitute product is not a direct / straight option to the product a company is offering.

For an instance, the new Sony Walkman media player is not taken as a substitute against iPod Touch, but as a competitor. But a personal CD player / MP3 player can be taken as a substitute after considering some changes in market characteristics, e.g. price and demand elasticity. As we can clearly observe the market situation with the availability of the various options for purchasing music which are the substitutes in this industry e.g. CDs, audio tapes, DVDs and vinyl. Their easy access to download makes them successful.

There is no need to purchase the complete cassette or album rather a user has a choice to download them separately one by one and at a division of the cost of a single song on another format.  Moreover users can purchase TV shows, movies, Podcasts and audio books at 24/7 terms of time. Mintel has estimated that the free internet downloading has resulted in decreasing the selling price as well as sales volume in sectors of non digital media. Individual downloading trends have drastically affected the Album sales. High definition gaming and music channels have redirected the users from purchasing the music. Although it is expected that technological inventions can be a substitute for well known digital mediums and formats, but on the other hand Apple has been proving itself as a competent company in upgrading itself with new technologies and is expected to do so in the future, so Apple doesn’t consider it as a vital threat.

The New Entrants and Their Threat

As far as the media downlaoding is concerned, various sitesa re operating in this regard, where some are the legal entrants and some are not. It has also been noticed that it is almost impossible to block or put barriers to abstain from the illegal entrants getting into the market as they do not follow any laws and are not abide by it. The y have no rights of distributing media coerage, patents and licence as well, but still they are operating in a normal way.

The organizations who starts their operation, following the proper legislations, they have many requirements to meet, such as requirements for the capital, licence requirements and patents needs. The newly entrant organization would have ultimate prospect in regards to compete with the already established and popular organizations such as iTunes. The prediction has been brought into attention by Mintel that in industry of downloading, they will be new influx among the organizations to invest in it.

The entrance of the Amazon into the current market has been a biggest threat to Apple where wide range of music portals having the capability of downloading will be announced in the near future and the music range would be DRM-Free tracks where the price would be very adoptable and less than the other competitors. This announcement constitutes the freedom of downloading the various tracks where the downloading is not restricted for downloading specific number of copies. Following that online downloading store liberties, customers are welcoming it with complete comprehension.

Apple might start losing their old and newly entered customers just due to the fact that they have restricted the Digital Rights Management tracks to be only played on the Apple iPod and it cannot run any other format such as MP3 or Wave. On the other side, Amazon have the complete liberty to download and play all formats and is not restricted to any single format of songs. Another threat has been revealed by the new entrants for Apple is the downloading through Add-driven, which specifically means that the customer can download any music track if he is agree and ready to view the Adds.

Google has decided to make and launch its own mobile phone named G-Phone and the strategy behind this service is to entertain the customer freely and pay to them by selling their Adds. It has also brought to attention that during the recent times, Nokia a famous mobile brand has launched its online Ovi store integrated with the new N-series, customer can download the tracks on the same mobile regardless of the fact that it supports all formats. It has been another threat of new entrants to the Apple. As Apple is restricted to its own downloading media strategies.

Customers and Their Bargaining Power

In the era of 21st century where vast range of substitutes and alternatives to everything are widely accepted and directly available, iTune should have sustained the competition to maintain its reputation with the availability of range of products. It is obviously easy for the customer to be redirected to buy substitute or alternate products without the influence of any super force, where downloading is free regardless of the fact that, it is illegal. But the customers should need to draw their attention on it, so they could abstain from doing illegal downloading, where in this scenario, iTune is tracked and is abiding the law.

A continuous purchase from the same music industry, encourages the potential customer to dictate and bargain the prices of same tacks from alternate stores, as the customers have the ability to choose from. The competitors have to be vigilant about the customer behaviour as they might have to reduce the prices. One single customer would not make a big difference but as a collective makes a huge impact on the organization.

During the recent surveys it has been noticed that the network powers have great strength over the iPhones, as they might ask or pressurize the organizations to pay certain amount of their generated revenue to the network provider or decide not to sell the iPhone product. Apple has patched up with the O2 network at the minute but it is assumed that the situation will change very soon and with the passage of time.

Suppliers and Their Bargaining Power

Along with the customers bargaining power, suppliers also have the bargaining power. Where on one side, iTune has to follow the consumer requirements and then submit them to consumer specific market, there iTune has the need and courage to bargain with the suppliers, due to the general reputation and volume of the company. The company iTune is not only the customer to other organizations but also the supplier.

Infect, iTune is making a huge business and its sales are very representative, so it would not be appropriate for the another organizations, if they do not compromise on the distribution rights of music and the related cost. These companies are EMI, Warner, Universal, TDK and SonyBMG. Due to the fact that these companies rely on the sales of Apple, so if Apple sales is growing, in return their sales are growing and if it goes down, alternatively their profit marginalization and maximization would go down.

The bargaining power of both supplier and buyer is limitized up to certain extent as Apple is quite aware that it cannot compete the market with the iTunes and also if they are not efficient enough according to the market demand, so the constituted organizations must adapt a possible agreement which could involve the initial setup fee and share in the sales.

Intensity of Rivalry

From the survey conducted to produce this report, it has been analysed that a lot of new entrants are getting into the music download industry but it clearly indicates that Apple is the leader even in the age of competition. A lot of companies are already functioning in this industry and are trying to compete with the Apple but still needs to integrate few more development strategies into their technology business. If we look at the current situation of Apple, it clearly depicts that the none of the entrants in the market could create an impact or threaten on it but on the other side, Apple needs to be aware that in this growing age of technology, new entrants could integrate their technologies with the advance technologies and also to enhance their service in a broad range.

PESTEL ANALYSIS

Economical aspects: Modern customer feels very secure in terms of financial aspect and wants to spend money for the luxury and fast paced technologies. So when the cost comes into attention relating to the purchase of mobile phones with the integration of web services and free music download, they are more than happy to invest money on it.

Socio-cultural aspects: Among the modern consumer, youngsters are more attractive towards the download market of multimedia as they like the new emerging technologies and have less restrictions to adapt them. Even with the population of this trend, Apple should focus that older customer is more wealthier than the young age range and can also spend money. This fact also depicts that the overall population or the consumer groups are getting older with the passage of time.

Technical aspects: Staying updated is the new threat and challenge for the competitors organizations due to the fast and rapidly changing environment technologies where the possibilities of high quality music downloads are very broad. The download market of multimedia would have considerable development in relation to mobile phone market and these challenges and new adhesions will give chances and opportunities to Apple. The newly developed 3G sets are very comprehensive and are according to the modern consumer requirement as they are becoming more realistic to them. Since the highly competitive market of newly developed technologies and download essential are over taken by the Apple, where the cultivation of technology is very fast paced, the product life cycles are very short to introduce the new technology to compete the market. So the modern companies have to invest a lot of amount towards their research and development departments if they really want to stay competitive to fulfil the consumer markets.

Legal aspects: The legal providers of the music download industry are facing major problems in relation to issues of copyrights and illegal downloads. The consumers have been comprehend and encouraged to stay away from the downloading service at the commercial level due to the former lack legislation in this field. The copyrights of music download owners have introduced the protection to the customers to prevent from illegal downloads and file sharing. In respect to the above discussed, DRM was established to limitize the number of copies of the downloaded music, obviously it would have a posiotive impact on the organization and on the other side would create some negative impact on the consumer.

Later on most of the newly emerged and already established companies started proposing and making their big portal on DRM-Free tracks suite, which will let the files to be downloaded by the consumer, legally not illegally where certain number of computers would not matter. It can be done on many computers as they want. MP3 devices are capable to play DRM-Free tracks on them. The consumer’s choice is still not very broad, even Apple has already integrated the offers with the DRM-Free tracks associating with EMI. Another issue has been noticed is that Apple’s DRM-Free trackes are bit more expensive then the competitors and it could lead to future risk for being able to adopt the pricing according to the market and consumer demand.

Strategic position of the company in relation to the market

Competitor Profiling: Benchmarking

The factors involved in the success such as, pricing and effectiveness of advertising, financial strength, recognition and brand awareness and the innovation of technology are adopted by the Nokia which is recognized as the most serious competitor to Apple, but even then after conducting the benchmark, it has been profound that Apple is far ahead and much better then Nokia specially when it comes to these above said key factors. Both the giants have very strong financial requisites in place where other companies can not reach to that stage. Nokia’s reputation in terms of innovating the new technologies is better than Apple and also the pricing factor of Nokia is appreciable due to providing the cheap hardware and software.

Analysis conclusion

It is doubtless to say that Apple is the market leader in terms of music download industry but the recent figures has shown some serious threats to this organization, possibly the worst to it, is the Nokia’s entrance into this market with proliferating the same technology but cheap price. Even surrounded by the galaxy of these threats, Apple is still considered to be the leader due to its few key success factors, such as, steady financial performance, huge investment in research and development to produce, innovate and manufacture new technology. Apple’s integration with the new technology is one major factor for its success and the other one is its association with other giants such as Coca Cola, Starbuck’s and Nike.

However few discrepancies could be find within the company products and company itself, such as, consumer cannot download the tracks directly, limited offer on downloading the DRM-Free tracks and these tracks can only be played on iPhone and iPod. We can assume that, if Apple takes these threats positively and overcome them, company can turn these threats into opportunities as the market of multimedia download is still under the progressing and growing phase. So Apple can take an advantage of these threats and can remain be the later in the innovation of technology and music downloads while competing others.

 Future Directions and Recommendations

Recommended Strategies based upon the TOWS-Matrix

a) Maximizing strengths to maximize opportunities

1. Enlarging the Customer Base: The market leader Apple is highly recommended to ascertain its more strongest part of financial stability towards the research and development to enhance and produce the products for the older and wealthier customers, so these development activities could be customized and fitted to their needs. The survey recommends that the older age groups are not the target group at this time but it might have potential in the near future if Apple cater this opportunity straight from now and focus on this segment. Apple is quite famous in terms of producing user friendly products, so it will be very easy for Apple to introduce the innovative technology to less experienced or elderly class.

If Apple focuses these two strengths of targeting the elderly people with the ease of using its products, it will not enhance the business prospects but would also improve the customer base. Along with that, Apple can increase its collaborations and strategies within the existing associated organizations such as Starbuck’s. Where Starbuck’s customers are usually been focused by the elderly age group people, so Apple can use this age group as a target and can produce the technology relating to their needs. Another option for Apple could be to demonstrate the use of iPhone and iPod products to the target consumer coming to Starbucks, through its own representatives or trained staff of Starbuck’s.

2. Improvement of Technology: In regards to Apple’s financial strength and stability, Apple should focus on to produce technology which could give functionally to download from iTunes to iPhone or iPod. This will not only enhance the customer perception towards the product but also gives an extra opportunity to the customer to download 24 hours a day and 7 days a week, and alternatively, it would increase the company sale and would entertain more profit.

3. Change Towards Ad-driven Content: More companies could be attracted due to recognition of brand and its awareness with the integration of its market shre which is nearly 80%, could finance the services which would be exactly free for the consumer. The Ad-driven context can be utilized to support the avilabale technology due to its strong competetiveness and its strength of brand name.

b) Maximizing strengths to minimize threats

1. Defend market share:

To maintain the customer loyalty to the brand along with the market share, the intense marketing campaigns could be effectively utilized to create more brand recognition, which would gives the opportunity to the business to prevent the switching of their customers towards Apple’s competitors. The advantage to Apple is, having financial stability and could invest huge amount to the research and development side to innovate more and more technology products, which infect would be highly difficult for other companies to do. It always discourages and intimate the companies to enter in the market, where inability to compete is the second name of it.

c) Minimizing weaknesses to maximize opportunities

1. Improvement of Technology: It is to be suggested to Apple that, it should reduce the conflict between downloading stuff and enhance the ability to download directly on iPod and iPhone straight from iTunes.

2. Enlarging the customer base: The intentions to enhance the customer on demographics basis, it is really important for the Apple to increase the availability of DRM-Free tracks. Which would in return gives the opportunity to non iPod user to download and use the music straight onto his portable device.

3. Change towards Ad-driven content: The Ad-driven context can be used to entertain the customer backing up by the fees and charges obtained from sponsorships and advertising fee, which would not only reduce the expensive pricing of the hardware but also enhances the offering of better value for the money.

d.) Minimizing weaknesses to minimize threats: The survival strategy is not accepted by the Apple due to its economic and financial strength. Apple is the market leader and not like other competitors to get into the galaxy of leaders in the field, but it’s already on the top and just needs to sustain its image. So the external factors cannot limitize its strengths and apart from that, external threats are not acceptable by the Apple because they cannot prevent the business to grow ultimately. The TOWS-Matrix has been used and its four strategies have generated an umbrella strategy would entails to save the Apple’s market share. The following three strategies are evolved from the above said discussion and would help Apple to sustain its leadership position in the market.

Defend Market Share by

Enlarging the consumer base: If Apple really wants to pursue for more customer than it is strongly advised that Apple should offer more contents for DRM-Free tracks, because modern customer is continuously looking for possibilities where they could download more free music with unlimited copies to be made and the customer does not want any restrictions on it. The Apple is encouraged and recommended to not only target the younger consumer but also to target the older customer segment. The financial stability and strength should be utilized to research and development phase to produce some technology or to integrate such features into the Apple technology to make it easy and friendly usable by the older targeted segments. Further to above, Apple is recommended to focus and put attention to increase its relationship with its existing and new market fellows, so the brand awareness could increase among the customers e.g. Starbuck’s.

Improvement of Technology: To sustain its position as the market leader in the in the industry of music downloading, it will be very much necessary for Apple to enhance the opportunity to download directly from iTunes to iPod and iPhone. Mobile internet has been seen by many researchers as the future of music download technology, so if Apple wants to sustain its leadership and position in the market, it would be very useful for the Apple to adopt this strategy. And also if Apple deploy these strategies, it will reduce to risk to lose the sustained customers and losing the new one’s to Nokia at the same time. Where Nokia has already given the feature to download on its mobile using some applications.

Venture into Ad-driven Content: It has been strongly recommended to Apple to integrate ad-driven context as it has been discussed and proved as the great opportunity to sustain the leadership among the market competitors. This service will create an impact on the customer to identify the trend as the market venture is expected to go through a change in near future where customer would like to download more and more if the service is free to use. In this regard, Apple can communicate and encourage other companies to integrate the business and provide the services, which would be free to the customers, therefore being the leader of the industry, it is to be recommended to Apple to introduce ad-driven context with the association of other companies. This will mean that customers can purchase a device knowing that they can download digital content for free and therefore provide better value for money. This will reduce the perception that customers believe Apple’s pricing is too high, due to offering more for the s