I phone - apple's entry strategy

I-Phone
Apple’s Entry Strategy
Tarak Roy : 2006SMF6540
Shivendu : 2006SMF6611
Jai : 2006SMF6765

The Quotes
• The iPod changed everything in 2001. We're going to do it again with the iPhone in 2007.”-
Steve Jobs, CEO, Apple Inc., in January 2007.
• "Apple Inc.'s campaign to build excitement about its iPhone may be the most successful
marketing effort ever, surpassing the drive to promote Ford Motor Co.'s 1964 Mustang and
Microsoft Corp.'s Windows 95.”- The Economic Times, in June 28, 2007.
• "I've never seen the kind of feeding frenzy we've seen in the media, We expect it [iPhone] to
be a very successful product -but I don't know how it can possibly live up to the hype.”- Ed
Colligan, President & CEO, Palm Inc, in June, 20

Background
 In 2002, shortly after the first iPod was released, Jobs started thinking about developing a
phone.
 He saw millions of Americans lugging separate phones, BlackBerrys, and now MP3 players;
naturally, consumers would prefer just one device.
 The global sales of mobile phone handsets were estimated to be just below 1 billion in 2006.
According to the International Telecommunication Union, there were an estimated 2.2 billion
mobile phone users in the world.

Motivation
 By 2004 Apple's iPod business had become more important, and more vulnerable, than ever.
The iPod accounted for 16 percent of company revenue.
 He also saw a future in which cell phones and mobile email devices would amass ever more
features, eventually challenging the iPod's dominance as a music player.
 With 3G phones gaining popularity, Wi-Fi phones coming soon, the price of storage
plummeting, and rival music stores proliferating, its long-term position as the dominant
music device seemed at risk
 Then there were the wireless carriers. Jobs knew they dictated what to build and how to
build it, and that they treated the hardware as little more than a vehicle to get users onto
their networks.
 Jobs, a notorious control freak himself, wasn't about to let a group of suits — whom he
would later call "orifices" — tell him how to design his phone.

Obstacles
 If the idea was obvious, so were the obstacles.
 Data networks were sluggish and not ready for a full-blown handheld Internet device.
 An I-Phone would require Apple to create a completely new operating system; the iPod's OS
wasn't sophisticated enough to manage complicated networking or graphics, and even a
scaled-down version of OS X would be too much for a cell phone chip to handle.
 Apple would be facing strong competition, too: In 2003, consumers had flocked to the Palm
Treo 600, which merged a phone, PDA, and BlackBerry into one slick package.
 That proved there was demand for a so-called convergence device, but it also raised the bar
for Apple's engineers.

First Attempt
 In an effort to bypass the carriers, he approached Motorola. It seemed like an easy fix:
 The handset maker had released the wildly popular RAZR.
 Jobs' plan assumed that Motorola would produce a successor worthy of the RAZR, but it soon
became clear that wasn't going to happen.
 The three companies dickered over pretty much everything
 how songs would get into the phone,
 how much music could be stored there,
 even how each company's name would be displayed.
 When the first prototypes showed up at the end of 2004, The gadget itself was ugly.

ROKR
-Won't hold more than 100 songs, even if
there's memory left.
-iTunes Music Store purchases must be
synced from a PC.
-Clunky interface is sluggish and hard to
navigate.
-Design screams, "A committee made
me."

Second and Final
• After not being satisfied with the first trial steve jobs gave his everything to bring up
something very revolutionary for the next attempt.
• The project was working under the name purple 2 and trying to incorporate the
revolutionary touch screen technology and finally succeeded.
• The network provider was zeroed down to AT&T.
• The first model was shown to the AT&T boss Stan Sigman in mid December 2006
• He was spell bound and told that “I haven’t seen anything like this “

Market Summary
• The iPhone targets consumers who need to store information and communicate or people
who want entertainment on the go.
• Apples target segments consist of professionals, students, corporate users, entrepreneurs,
and health care workers.
• Currently, the market for high-end phones like the Apple iPhone is small. Few people want
Internet, video, and PDA features in one device because of the high price.
• The smart phone market is still relatively small compared with general phone market. The
market will rapidly increase in coming years due to lower prices and greater power.

Strength
Innovative – The iPhone has an innovative touch screen that is patented and unmatched by
any other mobile product today. It also has many functions of other mobile products all in
one device.
Compatibility –The phone will work with iTunes and with other Mac/Apple products like the
new Apple TV, allowing for wireless connectivity to the big screen.
Ease-of-Use – The all-new touch screen interface making operations extremely intuitive. .
The Mac OS X application imbedded into the iPhone assures users will easily recognize what
they can do
Brand awareness – Apple is well known for cool essential gadgets like the iPods along great
technological innovations like the original Macintosh.
Price – At $350, the iPhone would be sold at a reasonable price for its value.
Quality – The iPhone has one of the brightest and most scratch resistant screens in the
market. It also has a fine metallic finish that is durable and light. The software suite included
is also unsurpassed with their ease of use and resistance to computer viruses.
SWOT

Weaknesses
 Image – The Apple brand is not targeted towards business people, which most smart phones
have targeted. Does not have a reputation as being compatible with the corporate world.
 Price – Apple does not yet offer lower priced models for more cost conscious consumers.
 User Interface – Touch screen interfaces suffer from the problem of “gorilla arm,” in which
long-term use of a flat, solid surface for input becomes uncomfortable.
SWOT

Opportunities
 Increasing demand and expansion to a new target segment – Apple will continue to target
the business productivity market who wants an all in one computing solution. But as
technology advances and smart phones get cheaper companies also have a great opportunity
to target people who want entertainment. Apple will attract these consumers and get iPod
users to upgrade to iPhones.
 Upgradeable – Since software on the iPhone can be updated, it allows new exciting features
to be brought in which take advantage of the touch screen ability. Future versions will also
be hardware upgradeable.
 Partnerships – Apple can collaborate with many powerful global mobile phone companies to
flood the market with iPhones, which reduces costs in marketing and increases revenue
through long-term agreement deals.
SWOT

Threats
 Increased competition – Smart phones are easier to make now more than ever. More
companies may enter the market, given that there are few barriers to entry other than
patents. Competitors or even Apple contractors can maneuver around patents to create
similar devices.
 Downward pricing pressure – The iPhone is marketed as a high-end phone, but phone prices
are almost certainly going to fall when other companies undercut the price of iPhones.
 Difficulty expanding into Asian market – There is less hype and interest in Asia since smart
phones are better known and already widely used.
SWOT

Product Offering
1. Multi-touch screen
2. Phone .
3. Camera
4. iPod
5. Internet communicator
6. Style
7. Built-in battery
8. Headphones Loudspeaker (two-way)
9. Synchronization with iTunes, iCal, Address Book

Distribution
 AT&T and eventually other major cellular providers like Verizon. Goal is availability with all
phone providers.
 Purchasable direct from Apple online, and from major third-party online retailers like
Amazon.com.
 Apple stores in U.S., Japan, U.K., Canada, and worldwide.
 All major electronics retailers: Wal-Mart, Best Buy, Circuit City, etc

Financials
 First year sales revenue: $2.5 billion avg.
 Wholesale price $500 per unit, variable cost of $250.
 Total volume: 10 million.
 $50 million fixed cost. Break-even is at 200,000 units.

Marketing and Communication
• They integrated their message of revolutionary communications and audio/visual experience
together in all of their media advertisements.
• Prominently featured to differentiate their product against others is the touch screen
functionality.
• They also emphasized their brand prominently and associated the iPhone with the iPod’s
groundbreaking lineage.
• Their ads were original but also tasteful at the same time.
• Research about media consumption patterns of their targeted audience will help their
advertising agency choose appropriate media and timing to reach prospects before and
during product introduction.

Marketing and Communication - 2
• A massive TV campaign was planned for the month of June will feature a soon to be
legendary ad that will remind people of Apple’s 1984 Super Bowl ad and be the talk of the
country, generating further attention.
• Thereafter, advertising appeared on a regular basis to maintain general public awareness
and communicate various differentiation messages to several targeted groups.
• To attract, retain and motivate channel partners to push the product, they sent personnel to
inform them on how to market the iPhone along with other Apple products.

The Launch of the 'Jesus Phone’
 On June 29, 2007, Apple Inc. (Apple) launched its mobile phone, branded as the 'iPhone,' in
the US, marking its entry into the highly competitive mobile phone market.
 The telecom industry had been agog about this new mobile phone, ever since Apple made an
announcement in this regard in January 2007.
 Some of Apple's fans who had been waiting for 'iDay,' as the launch date of the iPhone was
called, formed queues outside the Apple's stores to buy it immediately after the launch.
 Estimates of the sales of iPhones ranged from 500,000 to 1 million units in the first two days
of its launch. Though the actual sales figures were a lot less than that, it was still a very
successful launch.

Did the media talking
 Instead of the traditional advertising blitz in the months and weeks leading up to a product
launch, Apple takes a more subtle and viral approach. They like to slowly leak details about a
new product, then give a presentation to ‘wow’ reporters and media people, and finally they
put out a simple press release.
 The end result of their careful lead up is that literally every mainstream news outlet (and
thousands of smaller ones) starts talking about them. During this period, they don’t spend a
dime on advertising for the new product.

Charismatic CEO.
 If a company’s head is in the right place, chances are its feet will be too. At least, that’s
how a lot of customers see it—and Apple has taken the idea to heart. Having Steve Jobs
present every new product Apple releases shows customers that upper-management
cares.

Aesthetics
 Apple Strongly believed in Design and Aesthetics and hence invested a lot of money and
resources for achieving the best possible and way ahead of any of the other competitors
 They had in minds that they will be designing a revolutionary product which can change the
future of the mobile industry.

Simple Communication
Apple’s been practicing what many authors and marketing gurus have been preaching:
keep your marketing message simple. Simple messages are easier to understand, easier
to remember, and easier to share.
it’s Apple’s description of the iPhone: “Revolutionary Phone. Widescreen iPod.
Breakthrough Internet Device.”

Exclusivity
Apple created a strong exclusivity among its customers creating its own stores and its
own line of cult products.
In short it created a culture which is hip young smart and enthusiastic, And created a
notion that being a part of it is a privilege in itself.

Fans did the selling
Apple’s strategy isn’t to tell you how cool their stuff is (since you probably wouldn’t believe
them anyhow), their strategy is to show other people using and talking about their products.
It’s just more personal, and more believable, when your fans promote for you.

Review
 The enormous amount of hype surrounding the iPhone had led to the initial success of the
brand.
 The main question, however, was whether Apple would be able to match the initial hype
with bug free performance.
 It was over-hyped or not, Apple deserved kudos for coming up with a product idea like the
iPhone and also implementing it successfully.
 The company had made an aggressive entry into the mobile phone market and had managed
to attract the attention of the existing competitors.
 The introduction of the iPhone would prompt its competitors to come out with better
phones in the future, thus offering wider choice and better products to customers.

It is expected that the
much-awaited launch of
the Apple iPhone in India
will take place this
September.
The launch will be with
telecom operator
Vodafone,
The expected price is
between Rs 27,200 to
28,000, but again this
may change by the time
it is actually released..
Apple retail sources
have also revealed that
it will be the 8 GB
version of the
touchscreen iPhone
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