In September 2013, Apple Inc. launched iPhone 5s, a new model of a smartphone. At that time, the company managed to introduce 2 iPhones simultaneously. 5s to suit its main target audience and 5c model as an attempt to occupy a lower price range market share. The distinctive feature of the 5s model was so called Touch ID that allowed to unlock the smartphone by pressing the Home button.
Following the ongoing technological progress, as it was noticed above, Apple has always tended to release a new device once per every 12 months.
So, exactly 12 months later, in September 2014, the world saw an introduction of iPhone 6 and Phone 6 Plus. Both models, if to take a closer look at their feature sets, have very similar characteristics. It is worth mentioning that the biggest difference between the two models lies in their external designs, resulting in different dimensions (5.4-inch vs 4.7-inch diagonal). This fact, in its turn, results in the variations of the display resolutions and contrast ratios for each model.
Both of the preceding models differ from the latest pair by the absence of the A8 chip (comparing to 5s and 5c models that are equipped with the A7 chip) and the size of a display diagonal (5s and 5c models have a 4.0-inch diagonal) (Apple Inc. n.d. b).
Five-year Financial Overview
Apple Inc. Five-year Financial Overview
|At end of year||2009||2010||2011||2012||2013||2014|
Revenues Growth Rate increased from 52,75% in 2010 to 66.90% in 2011, but then slowed down and finally reached the point of 9.55% and 6,71% only in 2013 and 2014 correspondingly. Profit Margin shows how good the company manages its expenses. Profit Margin was steadily increasing from 2009 to 2012, but in 2013 decreased by 5.08%, showing that Apple was more profitable in 2012 than in 2013 and 2014, as the last year did not demonstrate a drastic difference from the previous one (Market Watch n.d.).
Market Situation Overview
The smartphones’ market has shown no drastic changes in the overall sales tendency.
For example, according to the statistics, during August-October 2013 (3 months period), Android took the first place having 52.6% of sales share of the total U.S.A. market. With 40.8% iOS held the second place. At the same time, OS Windows got the third place having 4.8% of market share, and BlackBerry –0.8% (KantarWorldPanel 2013).
Having analyzed the two months statistics from 2014 for the U.S. market, Android ranked first with the total of 51.9% in June 2014 and 52.1% in July 2014, leaving iOs the second place with 42.1% in June 2014 and 41.7%in July 2014 (Table 2 below) (Lella 2014).
Smartphone Subscribers Statistics for June and September 2014
|Smartphone Platform||Share (%) Jun-14||Share (%) Sep-14||Point Change|
|Total Smartphone Subscribers||100.0%||100.0%||0.0|
At the same time, considering the global market share figures shown in the Table 3 below, it is obvious that Samsung, which has Android OS, smartphones hold the leading position with a total of 32.3% market share in2013; however, showing a slight decrease by 7.6% in 2014, with a total of 24.7% by the end of the year. Apple smartphones, which have iOS OS, keep the second place in the rating, having still achieved a reduction in the market share by 0.5%, resulting in 15.0% of the global market share at the end of 2014 (Russel 2015).
In order to make the final conclusion, a very important fact has to be taken into consideration: there are at least 4 world-known devices (Samsung, Vertu, Sony, Motorola) that have Android as their native OS. Nowadays, the only smartphone possessing iOS is iPhone. Judging from the above statement, it is possible to agree that even though iOS is taking over the second largest smartphone market share, it can be genuinely named the only leader of the market as its closest competitor’s share ,Androids’, consists of several telephone models, where iOS stands for the only one model, iPhone.
Global Smartphone Vendor Market Share
|Global Smartphone Vendor Marketshare (%)||Quarter 4 2013||2013||Quarter 2014||2014|
Market Segmentation/ Key Customer Profile
The target customer of iPhone smartphones falls under the group called young working professionals, who are 25-35 y. o., living in a city where personal style, attention to details, and technology-savvy minds are of great value. This person is self-confident, has ambitions, and is willing to grow in his/her career.
The Table 4 below contains basic information about this segment’s needs and expectations from a smartphone nowadays.
Segment Needs and Corresponding Features/Benefits of iPhone 6 Plus
|Customer Need||Corresponding Features/Benefits|
|High quality technology||· Sensitive touch;
· Many original apps;
· Good quality pictures;
· Quick processing of information;
· Fast wireless internet connection.
|· Touch ID – fingerprint identity sensor;
· An A8 chip with 64-bit architecture;
· M8 Motion coprocessor;
· Powerful apps included;
· 8-megapixel iSight camera with 1.5µ pixels;
· LTE wireless.
|Pioneer in technology||· A device to obtain a new characteristic that no other product in the market has.||· A new payment service using NFC chips;
· 5-inch diagonal.
|Brand||· Understanding that the smartphone is a premium class product and these customers want to be recognized as tech-savvy.||· Iphone is a brand. This is a pioneer technology of a very high standard.|
|Design||· Simple but an expensive looking telephone.||· Designed in three colors – silver, gold, and space grey;
· Specially tailored leather case.
For young, experienced, and well-informed about IT- professionals, iPhone 5s is a unique smartphone possessing 8 64-bit chip, a new 8 megapixel iSight camera, LTE, and a newly launched NFC technology that allows to process stored on a smartphone data within seconds only and make payments, using the device as a credit card. Unlike other smartphones, it gives a feeling of a technology of the future once a person has it in his/her hands. Experiencing the high quality and pioneer technology, a customer will not be able to refuse to use this premium class phone again.
Iphone 6 Plus is a smartphone released in three colors. It possesses the following specifications: the Apple-designed A8 64-bit chip, a new 8 megapixel iSight camera with 1.5µ pixels and others. It has a feature called LTE, which enables the device to achieve super fast download speed. In addition, iPhone 6 Plus is equipped with the NFC technology, allowing to use a phone as a credit card. The most distinctive feature this model can boast of is a large size of the diagonal, which equals 5.4 inch. The latest model of iPhone is now equipped with a battery that has 24 hours life span compared to only 10 hours available in the previous model (Apple Inc. n.d. a).
iPhone 6 and 6 Plus Pricing
The estimated production costs for iPhone 6 Plus equals $242.50. This figure includes the expenses for the following parts: A8 processor, Qualcomm MDM 9625M modem, 5.5-inch display, touchscreen, as well as details with the machine metal work etc. (Techinsights n.d.).
Apple Inc. identifies the following retail prices for iPhone 6: $199 (16 GB), $299 (64GB), and $399 (12GB) with two year contract. For iPhone 6 Plus they are: $299 (16GB), $399 (64GB), $499 (128GB) with two year contract.
Special leather cases are sold separately at a price of $35 for iPhone 6 and $39 for iPhone 6 Plus.
Channels and Logistics
In the U.S., new iPhones are available at AT&T, Sprint, T-Mobile, Verizon Wireless, Best Buy, RadioShack, Target, Walmart stores, Apple online store, and Apple Authorized Resellers. This approach will provide customers with high quality services and support in the long run.
Apple Inc. is using a selective distribution strategy by selling its goods through several market intermediaries. The company has a wide network of Apple stores located in the U.S.A. It also has a list of retail partners like AT&T, Verizon, Best Buy, Sprint, Amazon, and Ebay (Paczkowski, 2012). AT&T held the first position with 28% of the total iPhone sales in 2012, when Ebay and Amazon covered only 1% of the total sales in the same year. Apple stores provided 21% of sales. It has successfully negotiated iPhone carrier agreements around the world, including China Mobile, the world’s largest carrier by subscriber count, and NTT Docomo, Japan’s largest one (Dilger 2013).
Main competitors, brands of their products, and corresponding features are listed in the Table 5.
iPhone 6 Plus Competitor’s Features
|Competitor||Brand of Product||Features|
|Samsung Electronics||Samsung Galaxy S6 (Android) – has not been released yet. The release date is planned for April 10th 2015||· Main camera: 16 MP;
· Display size: 5.1”;
· OS: Android OS, v5.0.2 (Lollipop);
· Battery: Non-removable Li-Ion 2550 mAh battery;
· Services and applications: Fingerprint sensor (PayPal certified), Samsung Pay (Visa, MasterCard certified)
· Face zoom, Social tag, Group tag, Smart stay, etc.
|Lenovo-Motorola||Motorola Moto X4||· Main camera sensor: 13 MP;
· Display size: 5.2”;
· OS: Android (5.0, 4.4.4);
· Processor name: QQuad core, 2500 MHz, Krait 400;
· Battery: 2300 mAh;
· Autofocus, Face detection, Digital zoom, Geo tagging.
Samsung Galaxy S6
Though this smartphone is to be released on April 10th 2015, there are a lot of online sources where potential customers are already discussing the specifications and prices, as well as pre-order availability of the phone. Samsung Galaxy S6 will be available throughout the world as well as at the major U.S. carriers. Currently, the level of the expected price is speculated around $700.00 per device. However, if a customer purchases a phone through one of the mobile operators (Sprint, T-Mobile, AT & T), the price may be as low as $28,33 per month for a 32 GB device (Gokey 2015).
Samsung has lead an aggressive marketing policy and spent $401 million on advertising campaigns in the U.S. in 2012. In July 2013, Samsung Trade-In Program was introduced, where customers could bring any cellphone to a store and get a new Galaxy 3S for free in return. Final court hearings held between Apple Inc. and Samsung Electronics in November 2013 promoted the latter by showing that it produced phones of the similar design but sold them at a lower price. The company invests a substantial part of revenues into the development of technologies. In 2012, it applied for 150 U.S. technology patents, taking the second place by the total annual number of patents after IBM (Nisen 2013).
Motorola Moto X4.
After Lenovo has bought Motorola brand, it has already shown serious intentions to become the leader of the global smartphone producer market. Though the company has not achieved the aim yet, it has a very strong and supported position in China, for instance, where Apple covers a much smaller segment, the market share in China as of end of 2014 was 14.2%. This fact is the first to encourage Motorola and Lenovo take a large step forward in the direction (Tibken 2014).
Currently, the price of the phone remains nearly $150.00 per device, which makes it very attractive for the clients who have just decided to switch to a smartphone and are choosing a low-cost option provided by a trusted producer. The device is widely sold in the U.S., Latin America, and China.
Despite the strong competition, Apple Inc. will still occupy its market share due to constant introduction of pioneer technologies in its devices and a high-quality brand that has already proven its uniqueness.
Apple Inc. does not hide the information about the use of more than 200 suppliers in order to support the production and operation processes, naming each of them on the website. The company staff claims to work closely with every supplier, ensuring the best performance, as well as addressing shortfalls promptly if there happen to be any. There is a special set of internal standards based on this industry’s Code of Conduct, which allows Apple Inc. to position itself as one with “high level of transparency”.
Speaking about the production of iPhone 6 and iPhone 6 Plus models, it is important to mention that Apple has used such producers as Skyworks, Avago, Murata, and RFMD.
When coming up with iPhone 6 and 6 Plus models’ new dimensions, the company has also faced a need to change the battery supplier, as the latter had to produce a thinner version of the battery to fit into a new smartphone design.
As a result, Apple Inc. has managed to find at least three potential suppliers for the battery manufacture. One of them was the existing partner Dynapack. The other two were Simpo and Desai. The two companies were contracted to specially design the battery for iPhone 6 and 6 Plus models, as the current supplier failed to meet the specifications (Heath 2014).
To conclude, Apple Inc. does require a lot of production and human resources to cope with a growing market needs, as well as numbers of smartphones sold globally. Therefore, it is indeed the best solution for the company to have a clear and transparent system for attracting and controlling new suppliers rather than permanently increase the staff numbers and divisions within the company. However, it is worth mentioning that the market fluctuations may result in shortages of supplies or termination of the production processes in external partner organizations. That is why, it is advised to diversify the suppliers, letting no other company take over the leading role.
Key Changes of the iPhone Brand
Among the main differences that were spotted with the release of the latest version the following could be emphasized:
- With every coming release, iPhone was getting bigger and bigger. It was growing not only outside, but from the inside as well. Technologically, there is a huge gap between the first iPhone from 2007 and the latest one from 2014.
- Nevertheless, the smartphone does not make drastic external design changes, meaning that it is strong in its uniqueness.
- Because of the launch of the two models simultaneously in both 2013 and 2014, the company managed to increase its product line to 4 iPhones that are staying in the market. It means that Apple Inc. is not focusing on the premium class customers only, but widens its segmentation borders, allowing to buy iPhone 5C for free on a basis of a mobile operator contract.
- Apple Inc. has also reviewed the pricing policy by reducing the price for existing models.
There are a couple of key factors that make iPhone a very strong brand in the market:
- Perfect knowledge of the target customers and their needs.
Surely, many people will try to guess how the next iPhone model looks like. Though, it is easy to predict that it will keep the general design and have improved performance and reliability. It will “grow older” but remain popular as it is already considered to be “classic”.
iPhone Promotional Tools
Before the launching of the latest products, Apple Inc. started an advertising campaign, placing the models on billboards and magazine covers and stressing their large size. However, nothing was mentioned about the thinness of the models.
One of the promotional tools, which was widely discussed in public and resulted in the numerous videos recorded by the iPhone, allowed customers to test whether the new model could be bent or not. Immediate reaction was drawn after the very first video where a person was bending the device. Despite the fact that this product’s characteristic should be considered as a disadvantage, the number of posts on this topic, discussions, and doubts have literally filled the Internet. On Youtube only, the video has already generated more than 36 mln views. In this way, Apple received a lot of free product reviews and ensured its presence in the media even 5 months after the release date (Dilger 2014).
The company has also officially addressed the public through a number of press releases where it announced about pre-sales of the smartphones.
A couple of promotional videos for TV were recorded with the main motto “bigger than bigger”.
The above mentioned examples of promotion of a new product shows an approach to the most flexible and up-to-date part of the world’s community. These people find the information online, using social media, blogs, chats, news resources etc. This is the reason the recorded video has reached 100% of the targeted audience straight away. Other customers, the business elite, have been reached by the printed and online media. The world has already got connected, so that with the help of a video camera and Youtube, a simple idea can turn into a magnificent advertising campaign with a very small budget.
The main strength of iPhone 6 Plus refers to the popular and recognized brand supported by the pioneer innovations introduced in the device. However, one of its weaknesses is that it possesses quite a narrow product line as well as strong dependence on external suppliers. Opportunities include the existing human and knowledge resources base, which can be used for enhancement of the existing models and creation of new ones. The main threat is competitors` willingness to copy innovative ideas of Apple Inc., implement them in their products, and sell devices at a lower price.
IPhone 6 Plus has the following strengths:
- Pioneer in technology and innovation. A big number of available applications and features.
- Popularity of the brand.
- Good-looking and stylish design.
- Dedicated customers.
iPhone 6 Plus has the following weaknesses:
- Limited number of models.
- Strong reliance on external contractors.
- High price of smartphones and accessories.
- Limited distribution channels.
Phone 6 Plus has the following opportunities:
- Further differentiation and upgrading of smartphones, features, and apps.
- Exploration of new markets.
iPhone 5s has the following threats:
- Smartphone producers/competitors who copy unique features of Apple Inc., becoming more attractive in the market due to lower prices.