The Marketing Strategy of Apple Company in Australia - Assignment Example

Fundamentals of Marketing Lecturer: Table of Contents Table of Contents Executive Summary 2 0 Introduction 2.0 Industry overview and Environmental Analysis 1 2.1 Micro-environmental factors 1 2.1.0 Bargaining Power of Customers 1 2.1.1 Bargaining Power of Suppliers 2 2.1.2 Threat of New Entrants 2 2.1.3 Competitive Rivalry 3 2.1.4 Availability of Substitutes 3 2.2 Macro-environmental factors 3 2.2.0 Political Factors 3 2.2.1 Economic Factors 4 2.2.2 Social Factors 4 2.2.3 Technological Factors 5 2.2.4 Natural Environment 5 3.0 Marketing Strategy Analysis 6 3.1.1 Segmentation Strategy 6 3.1.2 Targeting 7 3.1.3 Positioning 7 3.2 Marketing Mix (4-Ps) 7 3.2.1 Product 8 3.2.2 Place 8 3.2.3 Promotion 9 3.2.4 Price 9 4.0 Recommendation 10 Apple needs to engage in further efforts to enhance people’s awareness of its product lines. These can also be aimed at increasing the understanding of their functionality to avoid confusion among consumers. There is need to engage target segments in contests that help the company to know the extent to which consumers understand product functions. With such understanding, consumers will effectively buy products that serve their functions and hence the company’s segmentation, targeting and positioning strategies will be accomplished. Even though Apple enjoys significant brand reputation, it is important to engage in road shows to enhance popularity of products especially to promote its numerous innovations (Solomon et al. 2011). 5.0 Conclusion 11 References 12 Executive Summary This paper critiques the marketing strategy of Apple Company in Australia. It is a US multinational company dealing in a wide range of technology products and services such as computers, mobile phones, software, computer peripherals, media auxiliaries, and networking services among other electronics. The company has accomplished rapid growth in the consumer electronics market as part of its brand extension strategy. It presents an industry overview, environmental analysis and the marketing strategy of Apple, which also includes how the 4-Ps of marketing mix is applied. The paper highlights some recommendations on the appropriate measures to be undertaken to improve the company’s marketing performance in the next 1-3 years. 1.0 Introduction Marketing is a significant process that helps businesses to effectively interact with customers for the purpose of understanding their needs and creating the desired value. An organization that satisfies the needs of its customers is able to maintain profitability and long term sustainability. It is important that the operating environment is understood to enhance development of a successful marketing strategy. A company needs to select the right marketing mix that gives it a competitive advantage over competitors. Environmental analysis is important as it presents an overview of the micro and macro-environmental factors that influence a company’s competitiveness in the market. The marketing strategies applied by different companies are focused on maintaining a competitive advantage in the market. Effective segmentation, targeting and positioning enhance the overall success. The 4-Ps in marketing mix represents Product, Price, Place and Promotion, which are essential in satisfying consumer needs and enhancing profitability (Kim & Meyers-Levy, 2008). 2.0 Industry overview and Environmental Analysis 2.1 Micro-environmental factors 2.1.0 Bargaining Power of Customers Australia’s communications and media market in has developed rapidly over the last decade reaching a peak between 2012 and 2013. Increased internet usage in the country has promoted developments in the digital technology industry with companies such as Apple taking advantage to increase their product choices for customers. Apple originally focused on computers but with increased demand in mobile internet access has motivated the shift to smartphone technologies that have enhanced customer experience and satisfaction. Customers have greater access to information through the widespread internet usage and the market is expanding as more on youngsters join the constantly growing consumer base. The bargaining power of customers in the industry is low especially due to the high level of innovations that are associated with high quality. They rarely bargain for lower prices from retailers (Han et al. 2009). 2.1.1 Bargaining Power of Suppliers A company can leverage on the bargaining power of suppliers by emphasizing on high quality while on the other hand commanding a significant share of key components of production. More than 60 per cent of the components used by Apple in the production of smartphones are sourced from few suppliers. Apple has managed to exploit its relationship with component suppliers as it is the largest consumer of flash memory that is used in the manufacture of portable media devices. The company has established strong ties with manufacturers of flash memory including Micron, Samsung and Intel who are the key suppliers. By consuming over 25% of global flash memory production, the company can bargain for lower prices from the suppliers as they would not wish to lose a significant market (Nelson & Hye-Jin, 2007). 2.1.2 Threat of New Entrants New entrants in the market tend to capitalize on the weaknesses of existing companies while targeting their customers. It is cheaper to target an already segmented market with products that satisfy the same consumer needs as those of established competitors. Late market entrants are able to avoid risks by learning from the mistakes of competitors. Companies in the digital technology market give emphasis to innovation to remain competitive. Apple has maintained innovativeness that contributes to the company capability to meet the constantly changing needs of customers with unique products. It has achieved strong brand equity thereby making it difficult for new entrants in the market to catch up (Apple Inc., 2011). 2.1.3 Competitive Rivalry The Australian communication technology market is faced with stiff competition. Many computer manufacturing firms are aiming at the emerging mobile technology market. Product differentiation especially in computer hardware and software is a common strategy among all competitors. Dumping is a pricing strategy that competitors in the digital technology market in Australia are applying to acquire a competitive advantage over rivals. This may hurt innovative firms such as Apple that need to sell their products at a higher price to meet the cost of production. Competitors may lower their prices compelling Apple to lower the cost of its products below the production cost (Birnik & Bowman, 2007). 2.1.4 Availability of Substitutes Substitutes give potential customers an alternative to a company’s products and may negatively affect its sustainability especially if they are offered at a lower cost. Product uniqueness offers an organization a competitive edge over competitors. Mac operating system that is installed in Apple computers and smartphones is unique in the market and hence has been able to resist the threat of substitutes. The use of flash memory in Apple iPods and iPhones is also a unique feature that attracts customers due to consistency, energy saving and physical form (Apple Inc., 2011). 2.2 Macro-environmental factors 2.2.0 Political Factors The success of multinational companies is significantly influenced by local financial regulations that can promote or hinder their operations. The reliance of Apple on government for grant and third party patent rights acquired from third parties poses a significant risk to the company’s long term strategy in Australia. International terrorism is also a major threat leading to political insecurity. Nevertheless, there are no political threats in the short-run (Lawson & Bhagat, 2002). 2.2.1 Economic Factors Economic factors influence the success of innovations and rate of adoption in the market. Australia has accomplished economic maturity with high income levels that favour innovative products such as computers and smartphones. There is increased emphasis on communication technology as a key driver to economic development and technology companies such as Apple are taking advantage of the opportunity to promote innovative products in the country. Australia has a stable currency and low inflation and hence offers a good investment climate for the company (Kaplan, 2012). 2.2.2 Social Factors Increased internet usage and communication through social networks is an important factor that has positively influenced communication technology market in Australia. Apple has been successful in developing customised software for its own computers and smartphones that serves the growing social networking needs of consumers. Mac operating system has increased the information access of users. The educational segment is a significant target for Apple as the government emphasizes on communication technology adoption in learning institutions. More people are engaging in online shopping and information search regarding various brands before making purchase decisions. The media companies are also using the internet to reach their customers and most of them relay news through online portals. These social factors have increased marketing opportunities for Apple products (Lawson & Bhagat, 2002). 2.2.3 Technological Factors Technological advancements have favoured the digital market as consumers are increasingly seeking innovative information systems and appliances. The growth of internet technology is a significant driver to the success of computer and smartphone technology market as people seek faster and more reliable gadgets for communication. Mac laptops developed by Apple have replaced conventional desktop computers in Australia. They are portable and can be used outdoors and hence increased demand (Apple Inc., 2011). 2.2.4 Natural Environment There is growing awareness regarding environmental conservation globally. Organizations such as World Bank are applying novel technologies in climatic change mapping. GPRS enabled mobile phones enable users to predict weather patterns and also to determine physical location of features and places. This has provided Apple with an opportunity to market its innovative products such as the GIS software (Kaplan, 2012). 2.2.5 Legal Factors Innovation patents are a major hindrance of Apples success in Australian communication technology industry. The company is currently involved in various law suits such as that of Beatles that is considered to pose a major threat to the company’s reputation. Double patenting is outlawed in Australia and hence Apple may not effectively acquire patent for various innovative products that are necessary in the rapidly evolving information and communication technology market. The issue of patents has kept Apple in constant legal tussles against smartphone companies applying Android operating systems and other tablet companies such as Samsung and Huawei (Apple Inc., 2011). 3.0 Marketing Strategy Analysis 3.1.1 Segmentation Strategy Market segmentation has been a significant source of Apple’s competitive advantage. It helps the company to narrow precisely on the needs of various consumer groups. The first segment is comprised of professionals who have a busy lifestyle and need to communicate often while outdoors. Others need to capture information whenever they come across it. Apple satisfies the needs of this segment through e-mail enabled iPhones, iPads and many others of its products. Mac OS X allows note taking and record keeping. Students form the second segment that is crucial for the present and future market goals of the company. They need portable devices that can serve many functions. Moreover, personality and style are also significant aspects of this segment. Apple developed products such as iPod that have many integrated features targeted at the student’s segment (Lawson & Bhagat, 2002). Promotion of Apple’s brand equity satisfies the needs of personality and style as it is considered to be a superior brand. Corporate users are also an important segment that requires efficient input and access of information, which is a need that Apple has satisfied through Mac OS X that facilitates information recording and storage. Additionally, Apple computers are compatible with commonly available software. Entrepreneurs form a major segment that needs effective planning tools that help them to access and organize contracts. Apple offers wireless access to schedules and address book that allows effective management of schedules, activities and contacts. Medical users comprise the final segment that needs to maintain up to date medical records that are easily accessible and transferable. Apple’s electronic address book that can be accessed through wireless networks enhances information management while reducing tedious paper work thereby enhancing the productivity of medical staff (Kaplan, 2012). 3.1.2 Targeting Targeting involves analysing the various market segments to determine how well they are served by competitors. The size of the segments and their potential for growth is also an important factor to consider in targeting. Apple takes advantage of its brand equity and reputation that are appealing to a wide range of consumer groups. It targets virtually all age groups from teenagers to 40 year olds that are excited about applying Apple technologies that provide many features than many conventional products from competitors. The company’s multi-segment targeting strategy allows it to increase its customer base through similar items in one product line that satisfy different needs, such as a 2GB iPod shuffle that has a functional similarity to 160 GB iPod Classic retailing at 50 and 250 USD respectively, targeted at different segments based on capacity needs and purchasing power (Hassan & Craft, 2012). 3.1.3 Positioning Positioning is the process of executing the targeting strategy. Apple has positioned itself as a premium brand dealing with high end products that are characterised by high quality and innovativeness. Each of the products is positioned in a unique style that perfectly matches the needs of the target market. For example the iPhone is positioned as an innovative device that allows flexibility and convenience that are needed by professionals. The company’s positioning strategy is focused on developing perception and a sense of identity in the minds of consumers such that they are able to associate company products with their needs (Solomon et al. 2011). 3.2 Marketing Mix (4-Ps) The marketing mix of Apple has been successful in helping the company to surpass customer needs compared to competitors and hence maintain a competitive advantage. 3.2.1 Product Apple’s products are developed targeted to different consumer segments depending on the needs identified. The company’s new product development is accomplished in line with changing technology and consumer preferences. As better technologies emerge in the market, the old products are replaced with new ones with features that match consumer desires. There are many product lines that are updated regularly, leading to increased product line length and width. Apple has a significant product line length that includes Apple computers, iPhone, iPad, iPod and iTunes among others. The company’s great product line width is accomplished by each product line having several versions with related features such as the iPhone4, 3G and 3GS in the iPhone product line. The large product line width is an indication of Apple’s differentiation strategy that is driven by consumer focused innovations. It enhances affordability of Apple products across a wide range of consumers based on purchasing power. The strong brand image of Apple has contributed to the company’s financial success with all its products marketed under one brand name of ‘Apple (Apple Inc., 2011). 3.2.2 Place Place comprises the approaches applied by a company to ensure that customers access its products conveniently. The efficiency of distribution channels, organization and location of company outlets as well as transportation and storage are important considerations to be made in determining how products reach the customer in the right quality and at the desired time. Apple ensures cost effective access of its products by customers. The company engages in direct distribution through many outlets and retail stores in Australia that can also be accessed online. It also distributes products through a network of consultants that specialize in Apple products. These together with authorized retailers such as Harvey Norman hypermarket, ‘Apple Centres’ and ‘First Byte’ outlets in Australia sell Apple hardware products such as iPhone, iMac and iPod among others (Apple Inc., 2011). 3.2.3 Promotion Promotion is aimed at enhancing consumer awareness regarding company products and how they can meet their needs. It involves advertising through various media such as the many bill boards that Apple has erected in streets and public places. It is also done through mass media and the internet to attract new customers and also to inform existing customers regarding new products. Apple also applies personal selling whereby their staffs that are knowledgeable regarding company products are deployed to retail outlets and authorised dealers. They have direct contact with consumers and provide supportive information regarding the product. Cross promotion is also applied between Apple products thereby lowering the overall promotional cost (Pride & Ferrell, 2012). 3.2.4 Price The company applies premium pricing strategies to influence customers’ purchasing decisions and also to position itself in a manner that no competitor can challenge its prices. Premium prices indicate high quality and customers are made to understand that they are getting the highest value for their money. Price skimming is used in initial product launch whereby the products begin at a higher price and are later scaled down. This applies to highly innovative products such as the iPhone that was the only one of its kind in the market hence the company was free to set whichever price was deemed fit (Lawson & Bhagat, 2002). The company also launches lower prices in different versions of existing products such as the Mac-mini that was another version of Macintosh targeted at iPod customers to influence their preference for windows based computers to the new Mac-mini. The company’s products present a cost advantage to the customer in that they do not have to pay additional cost for operating system licences as they apply Apple’s operating systems (Apple Inc., 2011). 4.0 Recommendation It is important that the company’s marketing mix strategy is organized in a way that matches the needs of its customers. Effective segmentation and targeting need to be enhanced by understanding the way customers decide on different offerings. The company can increase consumer satisfaction through evaluating customer choice conditions that reveal important requirements which need to be met to maintain competitiveness in the market. Customer loyalty needs to be maintained as it has the potential to keep off competitors. This can be enhanced through promoting company stores that are exclusively focused on Apple products. Through such stores, Apple product users and potential customers will increasingly be exposed to a variety of technologies that the company offers. They are also able to communicate their experiences with the products thereby enhancing customer relationship management in the company (Gill, 2008). It is also necessary to utilise the segmentation strategy for further product promotions. For example, educational institutions segment presents a strong consumer base in future as students are exposed to apple products early and are likely to use them after school due to the familiarity that develops and the experience acquired in school. It is therefore important to focus on selling Apple products to schools even if at discounted prices for purposes of developing future market. Consumer focused strategies need to be developed through continuous research as consumer preferences change over time. The company needs to combine the 4-Ps to establish a reliable impression. It is important to ensure that the promotional activities adequately inform the target customers regarding the benefits to be derived from buying company products. The advertising strategies need to be consistent with the company’s trend of innovative products, but should also avoid brand cannibalism whereby new brands overshadow existing ones in the same product line. This can be controlled through enhanced cross promotional strategies in which campaigns for one product has a positive influence on others (Pride & Ferrell, 2012). Apple needs to engage in further efforts to enhance people’s awareness of its product lines. These can also be aimed at increasing the understanding of their functionality to avoid confusion among consumers. There is need to engage target segments in contests that help the company to know the extent to which consumers understand product functions. With such understanding, consumers will effectively buy products that serve their functions and hence the company’s segmentation, targeting and positioning strategies will be accomplished. Even though Apple enjoys significant brand reputation, it is important to engage in road shows to enhance popularity of products especially to promote its numerous innovations (Solomon et al. 2011). 5.0 Conclusion Micro-environmental factors influencing profitability in the market include the bargaining power of customers and suppliers, threat of new entrants, competitive rivalry and availability of substitutes. Macro-environmental factor comprise political, economic, social, technological and legal factors as well as the natural environment. Apple has managed to position itself in a manner that allows it to take advantage of these factors while effectively tackling the negative aspects associated with them such as the constant legal tussles in the Australian market. Effective segmentation, targeting and positioning have been a significant source of Apple’s competitive advantage. Apple has positioned itself as a premium brand offering highly innovative products unrivalled by any other company. Product, place, price and promotion are important elements of marketing mix applied by Apple in Australia to enhance efficiency. It is necessary that the company focuses developing marketing mix that corresponds to consumer needs. Road shows and consumer contests can help generate broader awareness among target consumers regarding the benefits of Apple’s products. References Apple Inc. (2011), “iPhone and apps (the brand management and marketing aspects of Apple’s iPhone and associated applications software”, Strategic Direction, 27(3), pp. 21-26. Birnik, A. & Bowman, C. (2007), “Marketing mix standardization in multinational corporations: review of the evidence”, International Journal of Management Reviews, 9(4), pp.303-24. Gill, T. 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(2007), “A content analysis of advertising in a global magazine across seven countries”, International Marketing Review, 24(1), pp.64-86. Pride, W. & Ferrell, C. (2012), Foundations of Marketing, Cengage Learning. Solomon, M.R., Hughes, A., Chitty, B., Fripp, G., Marshall, G.W. & Stuart, E.W. 2011 Marketing 2, real people, real choices. Sidney: Pearson Education Australia. Read More