SWOT on "Marketing Management SWOT Analysis for Apple Brand"

SWOT 14 pages (4394 words) Sources: 14

[EXCERPT] . . . .

Apple has designed a new, mobile game console that it will market under the iPad brand, as iPad Game. This device will appeal to two main gaming demographics -- younger consumers for whom the purchase is a moderately involved one and older consumers for whom the purchase is a high involvement one. The latter demographic has more disposable income, the former is more impressionable with respect to Apple's branding. There are no significant differences with respect to gender or education within either target market.

The launch strategy will focus on saturation marketing and a strong brand emphasis. There is a major threat from the existing competitors within the industry, but Apple can counteract that with high levels of advertising expenditure and its powerful brand appeal. The company will utilize its existing distribution structure and price within the range of other consoles, slightly below the normal iPad price. As the device will not have many of the features of the iPad, no cannibalization is expected.

This product represents a major leap for Apple into a new business line, one with strong and wealthy competitors. However, the company believes that there is opportunity in consoles and that this business fits with Apple's traditional focus on consumer electronic devices and its more recent focus on the portable devices that consumers love. The iPad Game is going to be well-supported, and the company believes that even with these high costs it will contribute approximately $80 million in additional operating profit per year to the company.

II. The Challenge

The product that will be marketed is the iPad Game, a new product from Apple. Unlike most Apple products, the iPad Game will be test-marketed in Asia, as it was developed by the company's new Kuala Lumpur development office. The iPad Game is a portable video game console based on the iPad architecture. A typically revolutionary Apple product, the iPad Game fits into a new niche in consoles, delivering performance that is near that of a traditional console but in a portable format. Thus, it is vastly superior to PSP and other portable game systems, and the portability gives it an advantage over traditional consoles. The iPad Game is going to be the company's first foray into game consoles, a highly competitive industry with three major players already established. If the product is a success, Apple expects to proceed with the development of a full-sized console and a smaller portable console as well.

III Situation Analysis

Apple does not publicly state goals on its website, but the company is focused on designing, building and marketing consumer electronics products and on becoming a dominant company in the field. Apple is focused on consumer electronics such as computers, smartphones, tablet computers and mp3 players. The company is also focused on software, which it markets as complements to its hardware products.

Apple's corporate culture is a central element in its strategy. The company is highly secretive (Stone & Vance, 2009) and the culture is oriented towards promotion of the brand (Kahney, 2002).

Apple's market share varies considerably among its different products. In some instances, such as mp3 players and tablet computers, Apple holds a commanding share. The iPod has a market share in excess of 70% (Delahunty, 2009) and this is relatively stable. The iPad effectively launched its category, so while the market share is 73%, this figure is lower than historic levels and is dropping rapidly (Wilcox, 2011). The iPhone has a 25.2% share, good for third in the smartphone market and holding stable (the Independent, 2011). In computers, Apple's share is much lower, at 7.2%, trailing HP, Dell, Acer and Toshiba (Tilmann, 2010). While sales are growing, the MacOS has a microscopic share relative to Windows, and compared to the high market shares of other Apple products. Apple does not yet have a presence in game consoles.

The video game console industry is attractive, in part because of its high number of total customers. The console business in the U.S. is worth around $20 billion annually (Terdiman, 2010) and the Asian market is equally promising, driven by the strong Japanese market. The world market is expected to his $70 billion by 2015 (Takahashi, 2010). The market is divided among software (games) and hardware (consoles). The games users buy varies depending on whether the user is working with a console or computer, which has implications for the iPad Game in that its usage will vary depending on how it is perceived by customers (RocSearch, 2005). Two-thirds of households play video games; the average user age is 34 with a broad range at significant numbers. Sixty percent of the target market is male. Thus, the target market is broader than is often stereotyped, and this fuels sales in a wide variety of game types and strong growth on top of an installed customer base numbering in the tens of millions (ESA, 2010).

The key value drivers for console purchases are performance, game availability and other features. Thus, technological innovation and strategic partnerships with game producers are two essential keys to the successful launch of a new console concept. Users typically purchase the console that gives them the best access to the games that he or she wants, and will often use friends as a reference. Most gamers have tried the different consoles and chosen the one that he or she prefers.

There are three main competitors in the console business: Nintendo, Sony and Microsoft. The latter does not market the Xbox is Southeast Asia, but has a strong position in the U.S. market. While Nintendo is focused primarily on video games, the other two companies are large conglomerates that have vast financial resources from their other ventures that can be used to subsidize their console business. Nintendo has multiple products on the market and a long history of console excellence on which to draw. The three main companies lack significant weaknesses as each has made multi-billion dollar investments into their consoles. The market for consoles is roughly split along the following lines: Nintendo Wii (55% worldwide), Xbox 360 (25%), PS3 (20%) (Cavallaro, 2009). Devices other than consoles -- portables and iPhones among them -- account for a growing share of the video game industry (Appendix a) and this is where the iPad Game fits into the market.

Apple is a vertically integrated company, so there are few collaborators. To enter the video game business in a serious way, Apple will need to partner with game producers, however. The relatively simple games that are used on its current portable devices are not going to help the iPad Game capture market share away from traditional consoles and portables -- Apple will need partners to develop games specifically for the iPad Game that will serve to attract consumers to the iPad Game concept.

Apple has a number of strengths to work with. The company has cultivated a high degree of brand loyalty (Kahney, 2002) and this results in a ready-made market for new Apple releases (CBC, 2010). In addition, Apple can finance the venture with its ample war chest -- the company currently has $26 billion in cash and no long-term debt obligations (MSN Moneycentral, 2011). The company's ability to deliver innovative products that consumers want over the past ten years is a matter of public knowledge. It is hard to find weakness in Apple. There is informal debate about an abundance of corporate hubris or a dependence on CEO Steve Jobs (no author, 2010) but there is little of substance with which to work. Apple's financial statements and market cap over the past five years shows a company that has more than tripled sales (MSN Moneycentral, 2011), increased near-exponentially in value and has launched one hit product after another. Apple's dominance is evidence that it has few serious weaknesses at the present moment.

The external environment is generally favorable for Apple. The company faces few major political or legal risks, as evidenced by the lack of major legal actions taken against the company, including a lack of antitrust or other major political risk factors. While the prevailing economic environment in the U.S. is difficult, Apple's income statements indicate that the company has been completely recession-proof. That recovery is much stronger in China and Southeast Asia is a positive for Apple, as the corresponding per capita GDP increases will bring the company new customers.

The social environment has been a source of strength for Apple in recent years. The company's products are highly congruent with social trends towards mobile electronic usage, increased usage of devices for personal tasks, social networking and other broad trends on which Apple's products are built to capitalize. The social environment looks to continue to be favorable for Apple in the foreseeable future, with demographics indicating a large influx of young buyers from the baby boom echo generation in North America (Cordes, 2010). The technological environment is also favorable, primarily because Apple is an innovator at the front of changes in technology. Initiating technological change has been one… READ MORE

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