APPLE Inc.

and the
iPhone
MKT 419 A
Samantha Rodil

Andrea Guide

Gracie Sanchez

Mara Dreiser

Kevin Barry

Evan Mageau
 STAGE A

Mission & Vision Statement

Apple Inc. is a leading company in the technology industry, more specifically the personal
computer or consumer electronic industry. They have created many innovative products over the years
and continue to grow and innovate to this day. Apple’s mission statement reflects the tradition of
innovation as well as their goals they would like to achieve. Their official mission statement reads:

“Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented
the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in
innovation with its award-winning computers, OS X operating system and iLife and professional
applications. Apple is also spearheading the digital media revolution with its iPod portable music and
video players and iTunes online store. Apple reinvented the mobile phone with its revolutionary iPhone
and App Store, and has recently introduced its magical iPad which is defining the future of mobile media
and computing devices” (Apple Investor Relations).

Apple Inc.’s mission statement highlights their achievements as well as repeats one of their many goals,
of being innovative with their always evolving products. With their mission set in place, Apple created a
vision for their company to fulfill their goal of always innovating.

Apple’s current vision was set in place by CEO Steve Jobs. His vision for the company is to
continue providing top quality products to consumers around the world, with the ultimate result of every
person having an Apple product in their home, office, school, etc. Jobs’ vision ties hand in hand with
Apple’s goals of becoming the global leader in the consumer electronic industry, which they have already
achieved, while also growing and maintaining their innovative nature. As Apple continues to prosper
over the years, they have implemented many other goals besides the two mentioned above, in order to see
their vision and mission for the company come to life.
 One of Apple’s goals that has already been achieved, was to become more environmentally
sustainable by reducing their carbon footprint that occurs when they design and make their products, as
well as when the consumers take them home. Their main goal when becoming more eco-friendly was to
achieve a recycling rate of 50% for 2010. Apple achieved this goal a year earlier than expected, with a
recycling rate of 66.4% (Apple and the Environment). However, the main objective of Apple which is
still being executed today, is to “offer the best personal computing experience to students, educators,
creative professionals and consumers worldwide via its innovative hardware, software and Internet
application offerings” (“Adobe Press Room”).

History of the Organization

Steve Jobs, Steve Wozinak and Ronald Wayne established Apple in April 1976 with the
intentions of selling the Apple 1 personal computer kit. The Apple I was hand built by Steve Wozinak,
first shown at the Homebrew Computer Club, and sold as a motherboard with a CPU, RAM, and textual-
video chips. The Apple I went on sale in July of 1976 for $666.66. Steve Jobs and Steve Wozinak
incorporated Apple in January 1977 without Ronald Wayne, who sold his part of the company for $800.
Business advice and monetary founding was provided to Apple from Mike Markkula, a multi-millionaire
electronics engineer.

In April 1977, Apple II was introduced at the West Coast Computer Faire in San Francisco.
There was much success with this computer starting out, since it provided more advanced graphics and a
faster performing operating system. This device was chosen to be the desktop platform for the business
world. Apple finally has invested in a staff of computer designers and a product line by the end of the
1970’s and the beginning of the 1980’s, as well as introducing the Apple III which primarily competed
with IBM and Microsoft. During this time, Steve Jobs was given the opportunity to visit Xerox to observe
their facilities and see if it was possible for them to purchase 100,000 shares of Apple at a previously
stated price of $10 per share. Jobs took this opportunity into consideration because for the future, he saw
the possible strength of competitive advantage for the graphical user interface in Apple computers.

Shortly after, in 1984, the Macintosh was launched and advertised by a $1.5 million dollar
television commercial that was aired during the third quarter of the Super Bowl XVIII. This was
considered to be a true launching point for Apple. Initially after the launch the Macintosh was a huge
success, but shortly after, sales declined due to price and software limitability. Conflict occurred in the
Apple world when Steve Jobs and new CEO, John Sculley had power struggles. Shortly after, Jobs
resigned and founded NeXT Inc.
 The next introduction was the PowerBook in 1991. This product differentiated itself from the
other Macintosh laptops because it was designed to be as powerful as a desktop computer, but was much
lighter and had a 12-hour battery life. Revenue started to decline when Apple introduced products like
digital cameras, portable CD players, and TV appliances. These products did not have the success among
consumers that was intended. At this time, Microsoft was gaining control in the market while Apple was
losing market share.

Shortly after this setback for Apple, Board of Directors brought back Steve Jobs and purchased
his NeXT operating system to start reinventing their products. In August 1998, Apple introduced the
iMac, which featured modern technology and a unique design. The demand for this product became
higher than was ever experienced with any other Apple product. Apple started purchasing companies to
create a professional and consumer-orientated production line. In May 2001, the first retail store had
been opened.

Recently, Apple Computer, Inc. has been changed to Apple, Inc. because computers are no longer
the only products that Apple sells. Apple has designed such innovative product lines, their success is
overbearing. The rehiring of Steve Jobs helped Apple to continue with their current success, because he
was the brain to many of their innovations. In January, 2011, Jobs announced that he would take a
medical leave of absence in order to focus on his health. Although Jobs isn’t there to deal with day to day
operations, he will still be the voice of major decisions in the company.

Location, Size

The Apple corporate offices are located at 1 Infinite Loop Cupertino, CA. Beyond the corporate
offices, Apple also has a presence both across the US as well as internationally in the form of their Apple
stores which are retail stores dedicated to sales and expertise of their products, and also their numerous
development facilities. In 2010 Apple reported that it has about 49,400 full-time employees.

Owner of Apple (CEO)

Steve Jobs is currently the CEO, Co-founder, and Chairman of Apple. He was born in California
in 1955 and has lived there for most of his life. He is a Reed college drop out with a net worth of over
$6.1 billion. Apple is the leader in its industry with a variety of popular products including the iPhone,
iPad, iPod, the app store, and many others. Steve Jobs is the equivalent to a rock star in the technology
industry. He has had breakthrough innovations not only with apple but he also co-founded Pixar
animation studios. Pixar is most popular associated with some of the most successful animated films
made, Toy Story being one of them.
 Business Model (how Apple makes money)

Currently, Apple’s business model follows three broad industry categories: software engineering,
hardware manufacturing, and retail (“Apple Loop”). The strongest aspect of their business model is the
software engineering segment. This is because it is the core of the company that drives the hardware and
retail segments. Apple has truly set the pace for end user experience. They have done this by creating the
OS X which allows Apple to develop faster and superior software at a quicker pace for all of their
consumers.

The hardware manufacturing segment is always under attack by “copy cats” in the industry. With
the success of their mp3 players (iPods) and other innovative products, many competitors try to compete
with Apple, but tend to fail in the end. Apple is on its way to being a global leader due to many of their
innovative products they offer. Apple makes money through their record sales numbers for their products
like the iPhone and iPad, especially through one of their key distributors, AT&T who has experienced
high sales of the iPhone. Also, with recent news about selling the iPhone through Verizon, this will
generate considerably higher revenues by distributors.

Product Mix and Current Marketing Activities:

Apple has a very extensive product mix. It includes:

• Portable Computers: Mac products such as Mac Book Pro, Mini, iMac, MacBook, Air, Pro, and
Xserve.
• Accessories: MagicMouse, Keyboard, and LED Cinema Display.
• iPod: Shuffle, Nano, Touch, and Classic.
• iPhone: Original, 3G, 3GS, 4.
• Mac OS X Server: iLife, iWork, iOS

Source: www.apple.com

Price

Apple is a premium brand. After some of their initial product launches, they have reduced the prices to fit
the needs of consumers. They are flexible enough to lower the prices if consumers demand so. Here is
an outlook of Apple’s current product prices:

• iPhone: $49
 • iPod Shuffle: $49
• Apple TV: $99
• iPod Nano: $149
• iPod Touch: $229
• iPod Classic: $249
• iPad: $499
• Mac Mini: $699
• Mac Book & Mac Book Air: $999
• MacBook Pro: $1,199

Source: www.apple.com

Place

Apple is a worldwide organization. They are located in Asia, Africa, the Middle East, Europe,
and Latin America. Apple has over 300 stores worldwide including the US, UK, and Canada. Recently,
Apple opened a new store in Shanghai, China.

Promotion

• Apple offers special discounts on renovated Macintosh computers, iPod Nanos, and the 8GB iPod
Touch. A one year warranty is included on all of their products.
• Apple has training centers located throughout the U.S. for any consumer to access. Each center is
run by a certified trainer and provides instructional courses regarding how to use Apple’s
professional applications that can sometimes be complex to new time users.
• The online Apple Store offers free shipping for orders over $50. They also offer iTunes gift
cards.
• Apple provides a $100 rebate when you purchase from their online store.
• The company has back to school offers, including some aimed at college students.

Apple also has several marketing activities that have brought them to their high standing in the
tech industry today. Although the products are different from one another, the marketing structure is
typically the same. The way that Apple markets their products is pretty simple; they advertise the sleek
design of their products and couple that with the lifestyle of their product relevant to their customers.
They use commercials, billboards, and banner advertisements on the internet. Apple has done a great job
of separating themselves from all others with their brand marketing. Almost everyone within the target
market knows when something begins with the letter “I” (such as iPhone) they know its Apple. The
company has been admired for its marketing efforts over the years, and continues to uphold their status
today.

Present Situation

Apple presently sits at the top of its industry and is regarded as one of the most admired
companies worldwide. Fortune magazine has even given them this title two years in a row. The present
situation in terms of profitability and growth is excellent for Apple. The company posted a 2010 Q1
profit of $3.38 billion so it is clearly very healthy in terms of profit. Their 2010 Q4 profit of $4.31 billion
also shows that the company continues to grow. Looking beyond just dollars, the growth of Apple is also
apparent when you simply consider the introduction of new devices such as the iPad. As of September of
2010 Apple had annual sales worldwide of over 65 billion dollars. They continue to innovate and bring
new and better products to the technological industry making them a very successful and well known
company worldwide.

STAGE B

INTERNAL ANALYSIS

Organizational Culture

There are a number of different factors that go into an organization’s strategy to be market
oriented. Primarily, the customer becomes the main focus of the company. The organization will stop at
nothing to ensure complete customer satisfaction. Moreover, it is not just maintaining customer value; it
is being the best in the business in regards to that customer value. In order to do this, the organization
needs to have the upper hand in understanding and satisfying the rapidly changing wants and needs of
consumers. This includes increasing product innovation, along with pursuing strategies to create
competitive advantage. Furthermore, sales and growth are derived from the consequences of superior
performance within the realms of market orientation.

All the contributing factors for market orientation speak directly to the company at hand. Apple
is extremely market oriented, and they are admired for their unique industry strategies that allow them to
be strongly position among competitors. Competition is constantly trying to replicate Apple products in
order to sustain competitive advantage, have constant growth, and generate superior customer
satisfaction. Regarding product innovation, Apple is very successful in this area and they definitely
follow trends and know what consumers want. Additionally, the works of the iPhone in particular has
allowed the company to expand greatly throughout the market. Apple’s technological advancements and
their strong focus in the market orientation agenda within the entire organization have allowed them to
attract and hold onto their target market very strongly, while also bringing the company to new heights.
They are a true leader in the world of mobile phones.

Apple is so strongly based within their market orientation that they have allowed their consumers
to not only be committed to the product and the brand, but they have created a sense of “lifestyle”
belonging with their consumers as well. This is an example of that superior customer value, as was
previously mentioned. Their goal to please consumers with the most convenient, sleek, and stylistic
products can not be compared to anyone else in the industry. Examples of this dominant customer
service, with the iPhone in particular, can be experienced within their stores and even on their website.
Anyone that owns the iPhone is able to go to any of the Apple retail locations and learn more about how
to use all the features on their phone. Apple employees are trained in all facets of their products, and can
deliver that enlightening customer service straight to the consumer. Additionally, there are entire sections
on the Apple website dedicated to each individual product they offer, telling the consumer all they need to
know before they make their purchase decisions. The emphasis Apple puts on being able to satisfy all the
wants and needs of their consumers is the best in the industry.

In summary, it is clear that Apple, with the iPhone in particular, is very market oriented. The way
in which Apple management forms a strong foundation to go forward with market orientation and their
vision and plans for strategy implementation are truly admirable. Not only is the organizational culture of
Apple largely market oriented, but their company strategies are sought after by so many industries around
the world.

Organizational Structure

Apple began with five product divisions, but to eliminate overlap and make the operations less
complex, it was reduced down to three divisions. To manage the products and marketing, Apple’s
divisions are responsible for the development, evaluation, and manufacturing of their computer systems,
software, and peripheral devices such as Macintosh. The company also has product support divisions
which handle marketing, distribution, and post-sale product support. An example is the North American
Sales Division. In addition, there are a number of administrative departments in charge of overseeing
Apple’s day to day corporate activities. Apple’s organizational structure chart can be viewed in
Appendix 2 below. It shows specific individuals involved in each area of the company.
History of Apple’s Owners
 Apple was first founded in 1976 by Steve Jobs, Ronald Wayne, and Steve Wozinak. They were
financially founded by Mike Markulla. Shortly after in 1980, Apple became a publically owned company.
Their ownership is complex in that many people around the world are partial owners of the company.
Apple’s first step to becoming a publically traded company was when Xerox gave Apple the opportunity
to visit and learn about their GUI (Graphical User Interface) where they, in return, had the opportunity to
buy up to 100 shares of Apple’s stock at the price of $10. Apple also offers stock in which they are direct
holders, institutional holders, and mutual fund holders. Apple’s direct holders are: Sana Tamaddon,
Ronald B. Johnson, Arthur D. Levinson, Bertrand Serlet, and Jermone York. The shares range in number
from 50,000 to 290,793. In regards to top institutional holders, these include: State Street Corporation, JP
Morgan Chase and Company, and Bank of New York Mellon Corporation. Finally, some of Apple’s top
mutual fund holders consist of: Fidelity Contrafund Inc, Fidelity Growth Company Fund, and Vanguard
500 Index Fund. Although stated are a select few investors and buyers of Apple’s stock, there are
numerous other partial owners of Apple. This goes to show what a dramatic presence Apple Inc. has
around the world in the consumer electronic industry.

History or Apple’s CEO, Steve Jobs

Steve Jobs was the co-founder of Apple along with Steve Wozinak and Ronald Wayne. They
began their success in the industry through their introduction of the Apple 1 personal computer kit. Apple
I was built by Wozinak and was first revealed at the Homebrew Computer Club in Silicon Valley. This
unit went on sale in July of 1976 as a motherboard with CPU, RAM, and textual-video chips. Given the
appropriate monetary funding and business advice, Apple I became one of the fastest mass-market
personal computers in the United States.

In the late 1970’s and the early 1980’s, Apple decided to go public, increasing the gross margin to
$2 million. Jobs was given the opportunity to visit Xerox and become familiar with the first operating
graphical user interface while gaining valuable knowledge for future innovations. Jobs created the Lisa
personal computer in the early 80’s. This device was named after his ex-girlfriend’s daughter, who
proclaimed him as the father. Lisa became a breakthrough product because of the powerful graphical user
interface targeted toward business customers. Jobs was soon forced out of the Lisa project in 1982
because he was known to be a temperamental manager at the time. After being removed from the Lisa
project, Jobs decided to take on a small task of his own involving Macintosh. Jobs designed the
Macintosh to be a less expensive computer with a GUI that would ultimately dominate the market. Lisa
was then modified and sold as the Macintosh XL. Although Jobs had threatened the success of the Apple
II and project Lisa with the new Macintosh project, new doors were opened to Apple’s future triumph.
Jobs partnered up with his then CEO, John Sculley and introduced the Macintosh computer to the market.
This product was a remarkable innovation and huge success for Apple at first, but sales slowly but surely
started to decline. This concerned Sculley as did the arrogance portrayed by Jobs, which ultimately
caused Sculley to remove Steve Jobs from any managerial position he had once held in the business.

After this situation took place, Jobs soon founded a company of his own called NeXT, where he
took some of Macintosh’s best engineers along with him. This company created computers with the goal
of having the highest possible standards in the industry, the best operating system, and the best software.
The newly invented computer was called the NeXT Cube and was unstable in the market because of its
high price of $50,000. It soon failed in the market and Jobs redirected his focus on re-creating the new
Mac operating system. With Apple’s production decline of $700 million in 1997, Jobs had to perform an
extensive review of the company, cutting back on many of the company’s projects.

Once Apple was able to regain their success, Jobs launched a new slogan; Think Different. This
allowed people to think that by owning a Mac they had the power in their hands to “change the world.”
Significant profitability hit Apple when Jobs introduced the iMac in 1998. This was Apple’s first highly
innovative product since the Macintosh. The unique translucent design generated new interest among
consumers and soon dominated in the computer industry. In 2000, when Jobs became Apple’s CEO, he
started a revolution. He introduced iApps which consisted of software like iMusic, iTunes, iPhoto, iSync,
etc. In 2002, the iPod was introduced and this was the single greatest moment for Apple considering the
consumer hype over the new product. This product revealed breakthrough features, a beautifully crafted
design, and a brilliant interface that allowed Apple to create a superior niche in the market as well as huge
market share.

The most recent success of Apple is the iPhone and iPad, where demand is still very high for
these brilliant innovations. As it was with the introduction of some of Jobs’ other products, demand in
the beginning was not what was expected, but over time, it drastically increased as awareness of the
products spread. Today, Jobs is on a medical leave of absence but is still overlooking and performing all
managerial duties for Apple. Without Jobs, Apple would not be one of the world’s most influential
corporations in the world.

Apple’s Sustainability

Apple is an American multinational corporation that designs and markets consumer electronics,
computer software, and personal computers. The company is primarily known for their Macintosh
computers, the iPod, iPhone, iPad, and computer software. Apple plays a large role in being
environmentally sustainable. Their main goal is to reduce the carbon footprint that occurs when they
design their products and when the consumers take them home. Apple has created a life cycle analysis
that determines where their carbon footprint comes from by adding up their emissions generated from
manufacturing, transportation, use, and recycling of their products, as well as emissions generated by
their facilities. Apple’s environmental focus is to reduce their impact on the environment while trying to
improve their products. Taking this into consideration, Apple designs their products using less materials,
shipping the products in smaller packages free of any toxic substances, being energy efficient, and trying
to be as recyclable and green as possible. With this, Apple has designed a life cycle analysis that
determines where their greenhouse gas emissions are coming from. They take a look into their
manufacturing, transportation, use of products, recycling of products, and emissions generated by their
facilities and determine the overall carbon footprint. This is usually an estimated number and reducing
emissions from year to year is what Apple ultimately strives for.

Breakdown of Apple’s Total Carbon Footprint

Apple’s manufacturing accounts for 45% of their total carbon footprint. Manufacturing includes
the removal of raw materials and the assembly of the products. Apple tries to reduce their emissions
given off during these processes by developing smaller, thinner and lighter products. Their main goal is
to design more powerful products by using less material that produces and generates fewer carbon
emissions. An example of how Apple does this is through their design of the MacBooks. Apple has
invented a more powerful iMac with a larger screen compared to their first generation iMac. This new
iMac uses 50% less material and produces 35% fewer carbon emissions. Another part of Apples
sustainable manufacturing would be their toxic substance removal. Apple designs their products by
removing the toxic substances that they are made up of. Toxic substances such as arsenic, flame-
retardants, mercury, and polyvinyl chloride are all substances that Apple reduces from their products to
make them more sustainable. The entire product line of Mac computers, iPods, iPhones, iPads and
accessories are free of many of the toxic materials such as lead and mercury, and they contain arsenic-free
glass. Apple feels that in order to design greener products they must take into consideration how the
materials in these products impact the environment. Apple leads the industry in eliminating or reducing
environmentally harmful substances in their products and continues to find ways to be environmentally
conscious while doing so. The final stage in Apple’s sustainable manufacturing would be their
commitment to ensure safe working conditions, commitment to treat their employees with respect, and
the commitment to manufacture their products as environmentally friendly as possible.
 The second factor in Apple’s total carbon footprint is their transportation, which consists of 5%
or 510,000 metric tons of greenhouse gas emissions given off while transporting Apple’s products from
manufacturing to distribution locations. Apple has greatly improved their transportation method by
creating small, light, and protective packaging that reduces harmful materials and allows for more
products to be shipped at once. For example, when Apple reduced MacBook’s packaging by 53%, they
were able to ship 80% more boxes in one flight. This allowed Apple to save one 747 flight for every
23,760 units that are shipped.

Another factor that Apple took into consideration was their product usage. The use of their
products creates about 46% of Apple’s greenhouse gas emissions, which is 4,456,000 metric tons. The
majority of these emissions are produced when consumers take their products home and charge them at
their houses. Apple started to design their products to be as energy efficient as possible. Every product
that Apple has created not only met, but exceeded Energy Star guidelines and they pride themselves on
being the only company in the industry to meet such needs. In order for Apple to be as energy efficient as
possible, they design their hardware and operating systems to work together to conserve energy. An
example of an energy efficient design would be Apple’s A4 processor, which is placed in the iPad, iPhone
4, iPod touch and Apple TV. This processor is designed use a limited amount of batter life while
performing a numerous amount of complex jobs.

Apple has implemented a recycling plan where they create products using materials that are very
valuable and can be reclaimed for use in new products. Once a product reaches the end of its useful life,
Apple recycles it. Apple has implemented a recycling program in cities and college campus’ worldwide.
The goal set forth for 2010 was to achieve a recycling rate of 50%. Calculations show that this goal was
achieved a year earlier than expected in 2009, reaching a rate of 66.4%. Apple blows other competitors
out of the water where Dell and HP numbers were lower than 20 percent. Another way that Apple
reprocesses their materials is by recycling computers, phones, and iPods. In return, they give their
customers an incentive if their product has true value.

For example, if you send your old computer back to Apple and it has monetary value, Apple will
take your computer and in return you will receive a gift card that can be used in any Apple Store. If your
product doesn’t qualify for reuse, Apple will recycle this product at no cost. Apple will also recycle any
non-Apple branded products through a community based recycling cooperation called WeRecycle.
Batteries are also able to be recycled. All you have to do is bring your batteries to a local Apple Store and
they will take care of it from there. Apple also recycles iPods and iPhones. If you bring your old iPod to
an Apple retail store, they will give you a 10% discount on the purchase of a new iPod. You are also able
to send these products to Apple via mail but the discount is only available if you chose to recycle at the
Apple store. A drastic increase in regards to weight recycled per year has gone from 6.1% in 2005 to
about 65 % in 2009.

The final 3% of Apple’s emissions come from their corporate offices, distribution hubs, data
centers and retail stores. Apple explains that they need to look at the entire picture on what impacts the
environment the most. They believe their products are what impact the environment the most and must
improve upon that first. Although the primary focus is on the products, Apple tries to reduce emissions in
their facilities worldwide. Current facilities located in Austin, Texas, Sacramento, California and Cork,
Ireland are powered by 100% of renewable energy. Apple also offers an employee commuter program
where they have multiple alternatives of transportation available. One example of transportation offered
is Apple’s bio-diesel commuter coaches, where about 800 employees take advantage of this daily.
Another interesting fact pertaining to Apple’s sustainability is that they offer electronic receipts to
customers after making purchases rather than printing out copies and wasting paper. This shows a further
effort to be more environmentally friendly.

Source: www.apple.com/environment

EXTERNAL ANALYSIS

Customers

The iPhone consists of several different user groups. A wide range of people use the iPhone in a
variety of different ways. The App Store is fueling this even further on account of the huge selection of
applications available. Research has been conducted that gives an interesting insight into the profile of
iPhone users, and the main activities they perform with their device on a daily basis. 33% of iPhone users
use maps and GPS apps more than 10 times a month. This is due to the slick and easy design of Google
Maps software. This statistic is compared to the 13% of smartphone owners. Another interesting fact is
that about twice as many iPhone users perform financial transactions on their phones than users of any
other phone each month. This has a lot to do with the fact that Apple users surf the web with Safari and
trust the security not only on their computers, but their phones as well. The fact that iPhone users are
young and tech savvy is not a surprise.

Source: http://gigaom.com/apple/profile-of-an-iphone-user-interesting-statistics-about-yourself/

Current Customers
 The current iPhone user base consists mainly of young early adopters about three quarters of
whom are previous Apple customers. 50 percent of iPhone users are under 30 and about 15% are students.
Email is the most commonly used feature. Around 70% of users check their email on the iPhone at least
once a day. 60% of users browse the internet at least once a day, and about three quarters of users do
more web surfing on the iPhone than on their mobile device.

Providing a further demographic breakdown, with iPhone sales of over 100 million since its
release in 2007, there is not a demographic category the iPhone can’t reach. Statistics support this theory
showing that users are fairly evenly split amongst gender with 57% of users being male and 43% being
female. Breaking down users by age demographics, we also find the iPhone’s reach to be fairly
comprehensive. Amongst iPhone users, 13% are age 17 or under, 12% are ages 18-24, 21% are ages 25-
34, 21% are ages 35-44, 18% are ages 45-54, and 14% are age 55 or older. While 42% of users fall
between the ages of 25 and 44, all ages are well represented amongst iPhone customers. Having their
usage rate heavily concentrated in the 25-44 age range coincides with Apples original target demographic
for the iPhone upon its release, which was to young males in their 30s, who earn a salary that is
approximately 25% more than the average American or higher. What we have seen in the years since the
iPhone’s release, is that this is indeed the group of consumers that purchase the most iPhones. Currently
though, Apple is implementing more features into the phone that appeal to women as well.

Source: http://blog.admob.com/2009/06/16/new-research-on-the-demographics-and-behavioral-
characteristics-of-iphone-and-ipod-touch-users-from-admob-and-comscore/

Potential Customers

As mentioned above, the iPhone’s popularity has become so widespread that anyone who uses a
cell phone can be seen as a potential customer, especially considering the increasing demand in the
smartphone industry. This has a lot to do with brand equity as well as the way Apple advertises their
products as being top of the line devices. For example, there are many iPhone users who spend thriftily
on things such as housing, transportation, their wardrobe, etc., yet they pay more for their phone than
almost any other cell phone user.

A large base of potential customers for the iPhone are people who are users of other Apple
products such as iPod, iPod Touch, MacBooks, and iMacs. There is a certainly synergy in terms of the
user interface and features in the products as well as in terms of intangibles such as style and design. This
creates a tremendous opportunity for conversion among the users. One large restriction on potential
customers is the fact that only two networks carry the iPhone, AT&T and Verizon. This means that
customers who have Sprint, T-Mobile, or any other carrier would have to switch their carrier to get the
iPhone. The other major restriction preventing potential customers from becoming customers is the price
of both the device and the monthly plan, which is on the high side. We discussed the fact that due to its
popularity, many people will pay more than they usually would for a cell phone, or stretch their budget in
order to afford it. However, there are still some people who simply cannot afford it regardless of what
they do. With the average plan costing close to $100 dollars a month, the iPhone will cost a cell phone
user much more than the average phone.

Competition

Apple Inc. has four levels of competition when it comes to their iPhone product. These four
levels are defined as: product, product category, generic competition, and budget competition. With
Apple’s iPhone being the primary product in competition, it faces many different competitors in the
industry. The product category the iPhone is in is the high performance, high tech smartphone category.
This category has phones that not only use internet and application capabilities, but also have a touch
screen feature. The phones in this high technology smartphone category include, the Droid, HTC,
myTouch 4G and many others.

Along with competitors within the high technology smartphone industry, there is generic
competition that the iPhone faces as well. This category includes all other cell phones, whether they are a
lower technology smartphone (BlackBerry), or your average flip phone. The last level of competition in
which the iPhone faces is the budget competition. This category includes all other electronic
communication devices. Other forms of communication devices that compete with the iPhone are
landline telephones, computers, email, webcams, etc. To further illustrate Apple Inc. iPhone competitors,
please see Appendix 1 for the perceptual map.

Porters Five Forces

When looking at the iPhone and considering the rapidly changing market they are in, competition
is very strong. Among these competitors are:
• Blackberry
• Android
 • HTC
• Palm
• Nokia
• LG
Each member of the competition constantly tries to outcompete themselves and come up with “the next
best thing” nobody has yet to experience in the industry.

As far as buyers are concerned, with the iPhone it is a consumer’s market. It is relatively easy to
adapt this phone to your personal life because of the ability to customize it any way you like. In regards
to the corporate market, the iPhone has great potential in this aspect of society because it can be used for
video chat. It also has multi tasking abilities in that the consumer can be talking to someone while
checking their email at the same time. The phone also connects with the new Microsoft Exchange, which
is what a lot of businesses are using for their email source.

As was mentioned before, there is always the threat of substitutes in an industry of this sort.
Whether they are new releases to the market, or they have been around for years, there are many
alternatives for consumers to choose amongst. Among these substitutes are:
• Skype
• PDA- palm
• New emerging substitutes
• Basically any competitors coming up with new models

Suppliers are a critical factor for Apple’s successful business. As they mention on the Apple
website: “Apple is committed to ensuring the highest standards of social responsibility wherever our
products are made. We insist that our suppliers provide safe working conditions, treat workers with
dignity and respect, and use environmentally responsible manufacturing processes. Apple’s program is
based on our comprehensive Supplier Code of Conduct, which outlines our expectations for the
companies we do business with. We evaluate compliance through a rigorous auditing program and work
proactively with our suppliers to drive change.” Currently, there are not many carriers of the iPhone, but
as of now there is Apple, AT&T, and the newest carrier, Verizon.

Source: http://www.apple.com/supplierresponsibility/
 Looking at new entrants, this may also pose a serious threat to the iPhone in the future. Software
giants such as Google, already has broken into the smart phone market, but they have the greatest
potential to take over in the industry and come up with new innovations that completely turn people away
from the iPhone. Google has had tremendous success in the past years with their presence in the Android
phones, which are currently at a high standing in the industry. Other, mobile carriers could enter the
smart phone market and introduce successful products as well. There is always the opportunity for any
mobile carrier to step up and take over since consumer needs change all the time. It just takes the right
strategy and a knowledgeable understanding of the target market to ensure great success.

Overall, to summarize the main points of the five forces, the i-Phone is in a great position in the
value chain because it is one of the leaders in the industry regarding smart phones. Apple has a
competitive advantage over all other competitors because it has high brand equity. Also, the suppliers
(Verizon and Apple) are leaders in this industry helping to keep this product the best of its kind.
Consumers can adapt this phone to all aspects of their lives because of the wide variety of applications
available to them. One of the threats the product faces in this industry is that there is room for new
entrants and or substitutes, so it is essential that Apple remains highly innovative and maintains their
strong standing in the value chain. Although there is a great risk that competitors, substitutes, and new
entrants will make products that are just as good or even better than the iPhone, Apple’s iPhone continues
to be one of the strongest leaders in the industry. Their next step to compete with the Android, (which is
currently the industry leader in smart phones) is their line of 4th generation smart phones that present new
and improved features and provide faster internet speed than current i-Phones and any other smart phone
in the market.
PEST Analysis:

Political Trends: Many companies will face their fair share of lawsuits as they make their way to the
top. The same goes for Apple Inc. With many great successes, there come consequences or issues.
Apple recently faced a lawsuit in 2010 over the patent of the multitouch technology that is featured in a
majority of their products, including the iPhone. “Elan Microelectronics, based in Taiwan, filed a lawsuit
against Apple with the U.S. International Trade Commission. The lawsuit deals with the use of multiple
fingers on a touch screen device — in other words, multi-touch — and looks to prevent the import of any
Apple multi-touch product into the United States” (Newman). Although Elan Microelectronics has
previously tried to sue Apple before based on this technology, nothing ever came from it. This is because
Apple has been working to own this patent, until eventually they were granted their own patent for multi-
touch technologies that differed from Elan Microelectronics (Newman).
 So, did this lawsuit actually stop the sales and launch of their new iPhone and iPad products?
The answer is no. Apple has many consumers who are very brand loyal, they will continue to grow as a
company and gain huge profits. Also, because Apple received their very own patent, they were able to
distribute their product in the United States with no problems. Although this lawsuit was mostly directed
towards the iPad, it still has a great impact on the iPhone as well. If Elan Microelectronics won this
lawsuit, it could have posed a lot of issues for Apple and the distribution of the iPhone.

Economic Trends: The iPhone was officially launched in June 2007 and brought in a large quantity of
consumers. The first iPhone was priced at $499 and distributed through AT&T as well as Apple stores
across the U.S. The second iPhone (3G) launched July 2008, during an economic recession that started
December 2007. Although there was a recession, it still did not stop consumers from lining up to get the
newest version of this iconic smartphone. Due to the success of the iPhone 3GS model during the
economic recession, Apple was not greatly impacted like many other companies. In fact, Apple’s
“reported revenue from March to the end of June 2007 was $8.34 billion (up almost 12% from the same
time last year). That alone generated profits of $1.23 billion (a 15% increase on this time in 2008) and a
record amount for the company outside of the Christmas season” (Johnson). With revenues increasing
during an economic crisis, it shows that Apple is a strong, impressive company and consumers are very
loyal to their products.

Social Trends: Smartphones like the Apple iPhone have become a necessity in life for some. Not only do
consumers use these high technology phones, but it also represents their fashionable lifestyles. The
iPhone is used mostly by college students and working professionals, or consumers who need certain
features to their phone, such as internet, email, TV, etc. that they use on a regular basis. The iPhone
revolutionized the smartphone industry and caused major threats to its competitors such as the
BlackBerry. Because the iPhone paved the way in the industry for other touch screen smartphones, it is
still a popular pick amongst society. Also, with Apple always innovating new products, the iPhone will
cause the market to grow more due to its newer versions and upgrades. Another aspect that creates
market growth is an increase in the population. More people give Apple and other smartphone companies
a bigger market share due to the increasing population.

However, with the market size growing, there could be some other factors that affect a market’s
growth within a company. In the case of the iPhone, the only impact that could affect this market is when
a recession hits. Consumers stay with “small indulgences,” therefore giving up big ticket items such as
the iPhone, but still purchase small items like cosmetics that make them feel good. As stated above in the
economic trends section, the recession did not impact Apple or the iPhone during any of its launches from
2007 to present. Because the iPhone is capable of multitasking due to its advanced user interface, it
creates the perfect opportunity to consumers and marketers and can have positive affects on the market
size. With “multiple roles,” we as consumers can balance our many daily tasks with the help of the
iPhone, whether it is checking emails, catching up with your latest TV show, or video chatting with a
family member overseas. The iPhone also helps business professionals in the same aspects, but also
allows marketers to easily reach their consumer or target because of the different media features on this
high technology smartphone.

Technological Trends: Apple, as well as its many competitors in the industry are constantly trying to
be the first to have the newest phones with the latest technology, as well as being the trendiest. As stated
above, Apple was the first in the industry to come out with a multi-touch screen phone that included
thousands of applications. There are currently four different versions of the iPhone, with a new version
(iPhone 5) rumored to be coming out this summer. The current iPhone (iPhone 4), now features a
technology called “face time” in which consumers can video chat right from their phone. This new
technology, got competitors like the MyTouch 4G to follow Apple’s lead and implement “face time” on
their smartphone as well. Apple’s iPhone has also allowed the company to expand more on the
technology front, creating new technology developments. For example, the iPhone became a stepping
stone for Apple, in order to create the iPad (first successful tablet) which uses about the same technology
as the iPhone. This technology includes the infamous multitouch screen, applications, internet, etc.

Although Apple has had great technological success in the past, they still have their issues just
like any other company. One major issue in particular was the antenna on the iPhone 4. The faulty
antenna caused no reception if the phone was held a certain way and as a result dropped calls. Several
consumers were outraged by this flaw because the phone did not live up to its expectations. Apple
listened to their consumers and immediately fixed the issue. Even though the phone had antenna issues, it
didn’t stop over 3,000,000 consumers from purchasing the phone after just three weeks of being on the
market (Burns). So far, there are no signs of maturing technologies. With Apple being a very innovative
company, there is no stopping them in the industry.

Through a PEST Analysis, Apple has proven that the high technology smartphone industry is a
good one to be in. There are endless opportunities being in this area of the market. It is predicted that
2011 will be the year of the smartphones, not tablets, and certainly not laptops (Wilcox). With new
technological innovations coming out each year, smartphones will continue to progress and improve as
the years go by. Also, this industry proves to be a strong one. An example would be Apple’s success and
strength during the economic crisis.
 SWOT Analysis for the iPhone

Strengths

• Innovative: The iPhone has an innovative touch screen. It also has many functions of other
mobile products all in one device.
• First mover: Apple is the first company to deliver in this arena of computer phones.

• Compatibility: The phone will work with iTunes and with other Mac/Apple products and OS
software tools which means there is limitless potential for upgrade ability.

• Ease-of-Use: The all-new touch screen interface is designed for the user to be able to quickly and
easily navigate themselves throughout the features of the device.

• Brand awareness: Apple has maximized their consumer outreach and is a well known brand
name all over the world. They have gained much recognition for their creatively designed
products, along with great technological innovations like the iPhone has brought to the industry.
This has brought them to be a well respected company in the industry.

• Quality: The iPhone has a scratch resistant screen, a durable and light metallic finish, and the
software is resistant to computer viruses making the phone capable of standing up to any harmful
exrternal factor.

Weaknesses

• Image: The iPhone is not yet targeted towards business people and does not have a reputation as
being compatible with the corporate world. This is something that Blackberry has had great
success in and therefore gives them a higher standing in the business world over the iPhone.

• Distribution channels: Although the iPhone is now available at Verizon, distribution is still
limited for the the product.

• Dropped calls: Some versions of the iPhone experience problems with dropped calls. This is due
to the fact that the phones service antenna is located around the outside of the phone, so when
people hold the device in their hand, it interrupts the reception.
 • User interface: Although the touch screen is a new and creative high tech feature that is
becoming increasingly popular in today’s smart phones, many consumers are still being turned
away from this feature and prefer phones with actual buttons they can press instead.

Opportunities

• Increasing demand: There is high demand in the market for a better mobile computing
experience. The iPhone tries to combine powerful computing and entertainment into one system.

• Expansion to a new target segment: As technology advances and smart phones get cheaper,
Apple will be able to more successfully attract consumers and possibly get iPod users to upgrade
to the iPhone.

• Changing customer needs/tastes: Consumer needs are rapidly changing. This creates a great
opportunity to reach out to them and keep up with innovations to satisfy their changing needs.
This factor allows Apple to maintain their creative edge through experimenting with new trends
and designing their products accordingly.

• Partnerships: Apple can collaborate with many powerful and global mobile phone companies to
flood the market with iPhones. In the long run, this will reduce costs in marketing while
increasing revenue through long term agreement deals.

Threats

• Increased competition/new substitutes: Smart phones are easier to make now more than ever.
They are the new hype in the market and competitors in the industry will constantly try to out-
compete each other. More companies are also entering the market and some competitors, or even
Apple contractors may be able to maneuver around patents to create similar devices to the iPhone
which could then become a potential substitute to the iPhone.

• Demographic shifts: Although the iPhone appeals to a variety of consumers, a shift in

demographics could potentially be a threat to the product. Along with the changing trends,
consumers of various demographics may begin to purchase different products to satisfy their
 needs outside of what the iPhone has to offer. This is why it is important for Apple to keep up
with the changing economy and be able to provide satisfying products to consumers of all types.

• Existing Competition (Palm): The Palm has the longest history in the PDA market and has
experience in developing software for mobile devices. It is also a well-known brand and has been
widely used by many businesspeople. Existing software is well established and compatible with
many products for this market. The market is familiar with Palm products. Palm can also add
many similar capabilities to their products that match the iPhone. This will allow them expand to
a wider market segment through lower cost and higher-powered products.

• Downward pricing pressure: The iPhone is marketed as a high-end phone, but the price will
almost certainly fall when other companies provide similar phones at a lower price in the market.

Strategic Alternatives
• Diversify and use more distribution channels to get not only more accessibility to the iPhone, but
to all Apple products.
• New market: Open up more to the business world and appeal to professionals in the workplace.
• Create a new product or a new version of an existing product such as the iPhone. This could tie
in with the previous strategy to appeal more to the business world.
 Appendix 1:

iPhone Perceptual Map of Competition

Extremely Innovative

Droid iPhone

Not Very Hip Extremely Hip

 Flip phone BlackBerry

Not very Innovative

Appendix 2:

Organizational Structure Chart (2010)

Source www.theofficialboard.com/org-chart/apple
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