Apple:

Executive Summary:

The main idea of this report is to understand the challenges company face when they enter the new market. This will cover the analysis of the industry and the target segment. This will also cover the size of the industry, value factors in business environment, competitor’s analysis, Buyers & seller relationship and to identify the major buyers of the target segment of the industry.

1. Introduction:

Apple Inc. is an American multinational Technology Company headquartered in Cupertino, California, which designs & develops, and sells consumer electronics, computer software, and online services. It’s hardware products include iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, and the Apple Watch smartwatch.

Apple is the world's largest information technology company by revenue, the world's largest technology company by total assets and the world's second-largest mobile phone manufacturer.

Sources: http://lasseolsen.blogg.no/1265470886_hvordan_apple_er_s_he.html

http://www.apple.com/pr/bios/jobs.html Revised Oct. 1st 2010. Read Nov. 2nd 2010

Apple Inc. has been successful in making its brand popular and known worldwide as a valued company that offers exceptional & status products and has been successful in providing a value and customer satisfaction.

The strategy that Apple Inc. utilizes frequently for global market development includes:

Foreign outsourcing, importing as well as exporting.

Foreign operations are conducted in the Americas, Europe, Japan, and Asia Pacific

Apple has developed 417 retail stores in 13 countries and an online store available in 38 countries with sales of $16billion dollars..

2. About Industry

Electronic Equipment, Instruments & Component: The Electronic Equipment, Instruments and Components Industry in the Information Technology Sector includes producers of electronic equipment, instruments, electronic components and electronic equipment mainly for the OEM (Original Equipment Manufacturers) markets (including analytical, electronic test and measurement instruments, electronic components, connection devices, equipment not classified elsewhere, and distributors of technology hardware and equipment).

https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/industries.jhtml?tab=learn&industry=452030

Industry Fundamentals AS OF 06/10/2016

P/E (Last Year GAAP Actual) 21.97P/E (This Year's Estimate) 30.30Enterprise Value $13.44BEPS (TTM) $2.18EPS Growth (TTM vs. Prior TTM) -3.53%Revenue Growth (TTM vs. Prior TTM) 16.82%Return on Equity (TTM) 9.20%Return on Investment (TTM) 6.28%Total Debt/Equity (TTM) 57.43Dividend Yield 1.74%

2.1 Characteristics of Electronic Industry: It is one of the fast growing industries of the world. It includes wide range of products.

It has become the main foreign exchange earner for the economy. The global electronics industry is forecast to reach US $932 billion by 2017, with a CAGR

of 5.37% over the next five years. The consumer electronic industry is a highly diverse and growing industry

.

3. Industry Analysis:

The electronic industry plays a pivotal role in our economy, driving wide scale industrial activity, boosting investment, innovation and bolstering economic growth.

3.1 Size of the Industry:

The industry is expected to grow by around six percent in 2013.

 The market for electrical and electronic products was sized at about 4.6 billion US dollars (or around 3.4 billion euros).

The overall revenue of the consumer electronics market in the United States increased from 2009 to 2016. In 2014, the U.S. consumer electronics industry had a market size of 218.8 billion U.S. dollars.

In 2012, the European electronics industry was sized at around 660 billion euros (or about 915 billion U.S. dollars).

http://www.statista.com/statistics/268398/market-size-of-the-global-electronics-industry-by-country/

http://www.statista.com/statistics/268398/market-size-of-the-global-electronics-industry-by-country/

3.1.1 PESTEL

Political factors:

Political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Governments have great influence on the health, education, and infrastructure of a nation.

Environmental factors:

These include weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.

Social factors:

These include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety.

Technological factors:

These include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change.

Economic factors:

Change in the economy can affect the supply or demand for a company's products and services. Sometimes it has a positive impact, like the country’s gross domestic product (GDP) increases more than expected. Other times, economic forces can hurt a business, like consumer confidence drops, and potential customer’s starts spending less and save more.

Legal Factors:

These include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

http://www.fcai.com.au/library/publication/fcai6049_full_version_final_(2).pdf

3.1.2 Potor's five forces

The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into.

https://www.diva-portal.org/smash/get/diva2:627146/FULLTEXT01.pdf

Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are:

Supplier Power: This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over the comapny, the cost of switching from one to another, and so on.

Buyer Power: This depends upon the number of buyers, the importance of each individual buyer to the business, the cost to them of switching from the company’s products and services to those of someone else, and so on.

Competitive Rivalry: This depends upon the number and capability of your competitors. If the competitors offer the product at the same price, then the rivalry increases.

Threat of Substitution: This is the ability of your B2B customer to find a different product as a substitute If substitution is easy and easily available, then this will weaken your power.

Threat of New Entry: There is always a reason of worry for all the companies that new firms should not enter their industry; this can impact the business plans of already existing companies.

3.2 Competition analysis:

These are the top five consumer electronics companies:

- Apple

- Dell

- Hewlett Packard

- Samsung

- Sony

http://www.researchandmarkets.com/reports/2532367/top_five_global_consumer_electronic_companies

By looking at the figure one can point out that the competition is very tough in electronic industry. Profit of apple though is increasing in the subsequent quarters but they are still lagging behind Samsung. Innovation is the only factor which can keep moving the company forward. Apple is known for its brand value. The reason why they are not able to become number one in the market is the market price at which they sell the product in the market. It’s quite high and only upper class of the society can afford to purchase. This is a concern area for Apple in the future to look into.

4. Market Segmentation Approaches:

Market segmentation for mobilrs in today’s times, the electronic sector is expanding with growth and more and more players are entering the electronic industry.

4.1 Macro Segmentation:

Macro-segmentation focus on the characteristics of the buying organization thus dividing the market by:

Company size: This is one of the most practical and easily identifiable criteria which can give a good rough indicator of the potential business for a company.

Geographic location: It tells a company a lot about culture and communication requirements.

Purchasing situation: As a result of increased competition and globalization companies finding a focus in a small number of markets, get to know the market well and establish long-term relationship with business.

Supply Chain Position: A business model affects where and how they buy. If he pursues a cost leadership strategy, then the company is more likely to be committed to high-volume manufacturing, thus requiring high-volume purchasing.

4.2 Micro Segmentation

Micro-segmentation focuses on factors that matter in the daily business.

Buying decision criteria: The Company must divide the market based on supplier profiles that appear to be preferred by decision-makers, e.g. high quality, less-prompt delivery, low price etc.

Purchasing strategy: There are companies who contact familiar suppliers and place the order with the first supplier that fulfills the buying criteria. Some organizations consider a larger number of familiar and unfamiliar suppliers, fix the bids, examine all proposals and place the order with the best offer.

Structure of the decision-making unit can be one of the most effective criteria. If the decision-making process is known, it can make a difference between winning and losing a contract.

Perceived importance of the product to the business

Attitudes towards the supplier: Personal characteristics of buyers (age, education, job title and decision style) play a major role in forming the customers purchasing attitude as whole.

http://www.unescap.org/sites/default/files/AWP%20No.%2037.pdf

4.3 Identification of target markets

There are three steps to follow while identifying the target market:

Identify why a business would want to buy the product/service Segment the overall market Research the market

There are four basic types of market opportunities: Market Penetration, Market Development, Product Development, and Diversification.

Market Penetration strategies include: more aggressive marketing, increasing service to improve renewal rates, or attracting competitor customers directly.

Market Development is an effort to increase sales by selling current products into new markets. The companies can advertise to reach new target customers within a geographic region, or look for international markets for expansion.

Product Development refers to offering new or improved products to present markets.

Diversification means opening completely new lines of business with new products in new markets. Many organizations diversify their product mix to mitigate risks related to economic variables.

http://edwardlowe.org/

4.4 Strategies adopted to enter new market:

There are a variety of ways in which organizations can enter new markets:

Exporting: Licensing Joint ventures Ownership

The Apple Company should follow price penetration policy to enter the auto industry.

Price penetration policy: A marketing strategy used by firms to attract the customers to a new product or service. Penetration pricing is the way of offering a low price for a new product or service during its initial stage in order to attract customers away from competitor.

The company can also follow price skimming policy as well. It’s up to the company to follow either of the pricing policies as both of them have their own benefits.

Price Skimming Policy: Price skimming is a product pricing strategy where a firm charges the highest initial price that customers will pay. As the demand of the first customers is satisfied, the firm will lower the price to attract another which is more price-sensitive segment.

The company (Apple) has to come with a product differentiation strategy to make its product different from the market so that the B2B client gives all the manufacturing orders to them.

In the initial stage, they have to go through the marketing and advertising as well as to create a name in the industry. This will incur cost to the company but in the long run this will be greatly helpful in positioning their product.

http://www.inc.com/karl-and-bill/5-step-primer-to-entering-new-markets.html

4.5 Implementation Plan:

The diversification plan should cover a due diligence about the electronic industry. Apple should check their competitor reports how they are doing the business and how much profitable it is. Once it is found good to enter, the prospective research firms should be contacted to get the required information about the new market.http://ectacenter.org/~pdfs/implementprocess/implementprocess-stagesandsteps.pdf

Any implementation plan includes these three steps: Exploration: The Company has to explore the opportunities to enter the new industry as

well as the source of funds. Installation: If the company is diversifying its business, then the new manufacturing

facility has to be set up.

Implementation: This is the last stage where the company goes ahead with the decision.

5. Recommendations:

The company possesses major strengths that can be used to effectively address organizational weaknesses. The company can also use these strengths to exploit the opportunity to expand its distribution network. Also, Apple can use its strong brand image and rapid innovation processes to successfully develop and launch new product lines. However, the firm faces the significant threats of aggressive competition and imitation, which are major challenges affecting players in the industry. A suitable course of action is to address these threats through a stronger patent portfolio, along with continuous innovation to ensure the competitive advantage of Apple products even when competitors try to catch up.

Profit of apple though is increasing in the subsequent quarters but they are still lagging behind Samsung. Innovation is the only factor which can keep moving the company forward. Apple is known for its brand value. The reason why they are not able to become number one in the market is the market price at which they sell the product in the market. It’s quite high and only upper class of the society can afford to purchase. This is a concern area for Apple in the future to look into.

Apple Inc. Form 10-K, 2014.

6. Conclusions:

Apple continues to lead the industry with their outstanding and award-winning products and services.

The company has entered the mobile phone industry with an altogether different business strategy known as value innovation with the iPhone.

With growing demand for high-quality, powerful, user-friendly, and cost effective products, Apple is undoubtedly the leader in terms of bringing these ideas to life. . This is an excellent strategy when the goal is to keep consumers eager for the latest products and asking, “What could they possibly improve next?”

Apple should avoid the mistakes what Nokia made by being open to collaboration and by partnering with other high tech companies.

Our overall conclusion is that there are economic incentives (both from reduction of costs as well as creation of new revenue sources) for electronic markets. It is not just a fad that will go away. Electronic markets are a new institution of capitalism and they are useful because they economize on transaction costs in many instances when compared with other available transaction governance mechanisms (such as traditional markets).

David, Fred R. (2011). Strategic management: concepts and cases (13th ed). Upper Saddle River, NJ: Pearson Prentice-Hall.