Buyers journal by Jessica Helin

Jessica Helin Buyerâ&#x20AC;&#x2122;s Journal FM312 A - Retail Buying Instructor: Sandra Henderson Williams

Table of Contents Part I: Retail Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conglomerate/stand alone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mission Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

First Year of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evolution of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Stores and Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Customer Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Competitive Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Samsung vs Apple . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Amazon vs Apple . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Google vs Apple . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Part II: Individual Store Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Floor Plan/Layout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Product Assortment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Pricing/Fabrication/Private Label Brand . . . . . . . . . . . . . . . . . . . .

Sizes and Colors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Visual Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III: Marketing Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part IV: Financial Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part V: Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Works Cited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part I: Retail Overview

Apple Inc. Apple, Inc. is a standalone company and not a member of a conglomerate. A conglomerate is a combination of two or more corporations engaged in entirely different businesses that fall under one corporate group, usually involving a parent company and many subsidiaries, while a standalone company is an independent operating firm.

Apple, Inc.’s official mission statement is, “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad” (Apple.com). This is an extremely weak mission statement. Infact, it sounds more like a product listing that an actual mission statement. It should be changed to the following: “We believe anything is possible. We exist to challenge the status quo in everything we do. We invent technologies and services that are simple to use and enhance how you live. We are committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through our innovative hardware, software and internet offerings.”

Just months before he died, Steve Jobs revealed plans for a new space-like headquarters that Apple would eventually move into sometime in the not-so-distant future. Apple CEO Tim Cook announced that Jobâ&#x20AC;&#x2122;s vision will come true by the year 2016.

Currently, Apple, Inc. headquarters is located in Cupertino, CA. and is considered a centralized organization. Centralized organizational structures rely on one individual to make decisions and provide direction for the company. They can be extremely efficient regarding business decisions because they typically develop the companyâ&#x20AC;&#x2122;s mission and vision, and set objectives for managers and employees to follow when achieving these goals. But, centralized organizations can suffer from the negative effects of several layers of bureaucracy. These businesses often have multiple management layers stretching from the owner down to front-line operations. Business owners responsible for making every decision in the company may require more time to accomplish these tasks, which can result in sluggish business operations. Examples of centralized organizations are Wal-Mart, McDonaldâ&#x20AC;&#x2122;s, Microsoft, General Motors, and Ford. A decentralized organizational structure often has several individuals responsible for making business decisions and running the business. They rely on a team environment at different levels of the business. Individuals at each level in the business may have some autonomy to make business decisions. A broad-based management team helps to ensure the company has knowledgeable directors or managers to handle various types of business situations. But, decentralized organizations can struggle with multiple individuals having different opinions on a particular business decision. As such, these businesses can face difficulties trying to get everyone on the same page when making decisions. Examples of decentralized organizations are Ebay, Johnson & Johnson, Wikipedia, Kelloggs and Craigslist.

Apple was established on April 1, 1976 by Steve Jobs and Steve Wozniak. During his high school years, Job’s worked summers at Hewlitt-Packard, and it was there that he met his future business partner, Wozniak. After dropping out of college, he began working for Atari, an early pioneer manufacturer of personal computers. Coincidentally, Wozniak also worked for Atari, and the future founders of Apple teamed together to design games for Atari computers. The two were also skilled hackers and designed a telephone blue box, which was an electronic device that stimulated a telephone operator’s dialing console and provided the user with free phone calls. Steve Jobs spent plenty of time at Wozniak’s HomeBrew Computer Club, a haven for computer geeks and a source of invaluable information about the field of personal computers. They had both learned enough to try their hands at building personal computers and they produced fifty full assembled computers that were sold to an electronics store called the Byte Shop. This sale was what encouraged the pair to found the corporation, which was named after Steve Job’s favorite fruit. The Apple logo is a representation of the fruit with a bite taken out of it; the bite represents a play on words – bite and byte.

Perhaps more than any decade prior, the 1970s played host to an explosion in consumer electronics gadgets that changed how we educate, entertain, calculate, and communicate. Many significant electronic and computer inventions that continue to play a vital role in society today date back to the 1970s. The American public was greatly impacted in various ways due to the affordability, efficiency, and novelty of these inventions. One exceptionally important invention that led to other significant innovations in computer technology was the development of the microprocessor. The 1970s, also, characterized a spirit of discovery and exploration. A voyager program was released which consisted of the Voyager 1 and Voyager 2. They were sent on unamed expeditions to several of the outer planets in the solar system. The program also sent a Voyager Golden Record with the spceship presenting aspects of life on Earth to intelligent alien life forms outside the Earth. The record contained pictures and other data about human beings and other living beings on earth. It also had an assortment of music from across cultures. Furthermore, the 1970s were also the start of Fiber Optics. In 1970 Corning glass announced that it had created a glass fiber so clear that it could be used to communicate pulses of light. Soon after, GTE and AT&T began experiments to transmit sound and image data using fiber optics, which transformed the communications industry.

July 20, 1976. The Viking 1 Lander successfully lands on Mars and send back to Earth the first close-up pictures of the planets surface

July 4, 1976. U.S. Bicentennial

September 9, 1976. Mao Tse-tung, the founder of the Chinese Communist Party, dies

September 17, 1976. NASA unviels first Space Shuttle, the Enterprise

July, 1976. First laser printer introduced by IBM, the IBM 3800

Apple Computer’s 30-year history is full of highs and lows, which is to be expected of a highly innovative company. It has evolved throughout the years into an organization that is very much a representation of its creator, Steve Jobs. Apple has made several hugely successful product introductions over the years and it has also completely fallen on its face on several occasions. Apple reached a point where many thought it would not survive. When asked in late 1997 what Jobs should do as head of Apple, Dell Inc.’s then-CEO Michael S. Dell said at an investor conference: “I’d shut it down and give the money back to the shareholders.” One thing is for sure though; Apple has repeatedly captured the world’s attention thanks in large part to its rebellious underdog attitude and continuous efforts to reset expectations of what’s possible from consumer electronics. Although, their products aren’t usually the first of their kind, they are almost always the first to get it right. Take the iPod, it wasn’t the first portable mp3 player, but it was the first to be intuitively designed and well-marketed. The same could be said of the iPhone for the smart phone market and the iPad for the tablet market. In the PC industry, there is this rule that some of the branded vendors take three tries to get something right, while Apple often gets it in one try. Apple can say to itself that it’s going to revolutionize the professional laptop or smartphone and then not only follow through with enviable designs, but sell them at unheard of profit margins. When Apple decides to go ahead and make a revolutionary product, it buys up literally almost all of the world’s stock of the components that define the gadget. This prevents the competition from quickly releasing clones of Apple’s iconic machines, or matching Apple in price without cutting corners. Moreover, where Apple really stands out, among its competition, is in its marketing. The company simply seems to understand what will get people excited about its products, and then executes on that vision. You don’t see the company talking about features or technology, but about how the computer will make your life better. Apple has not been afraid of in-your-face campaigns either. The company has run campaigns that have shown Intel-based laptops catching fire and getting flattened by steamrollers.

Opening its first store in 2003, which provided customers with a hip place to hang out, buy products and receive personal tech support from the “Genius Bar,” Apple now has over 400 stores worldwide. Backed by an army of zealous fans, and recruiting more each day eager to know what the company thinks up next, an entire ecosystem of media outlets have risen to monitor the deeply secretive company’s every move. But, Apple rarely introduces a new type of product. Thus, instead of being the pioneer, they are the expert at refining existing products. Apple increases the appeal of these products by making them stylish and more functional. True wealth doesn’t just come from launching one big product or making one big deal. It comes from tapping into streams of revenue that keep producing profits month after month. Nobody is better at this than Apple. It started in 2001 with iTunes, a free music player with a built-in store. Ever since then, Apple has been raking in hundreds of millions of dollars a year from iTunes sales of music, movies, and books. Then there’s the mobile market. Verizon and AT&T love Apple because their iPhones are great at inspiring customers to pay extra every month for a data plan. With all of these different sources of recurring revenue, Apple wouldn’t have to launch another product and they would still be making money for years to come. It all comes down to their brand – which Apple has artfully developed since their inception.

Of course, a brand is so much more than a name, ships a new iPhone, they dominate the market for a few months. Sales level off again, then the air gets marketing campaign, or aesthetic. The real substance of Apple’s brand comes from the perception sucked out of the room when everybody starts anthat their products are intuitive, reliable, and pow- ticipating the next iPhone model. Right now we’re in the post-iPhone 5, pre-iPhone 5S doldrums. erful. But according to the laws of physics, what goes up must come down. Apple has been stum- Also, Android phones have suddenly gotten super bling lately, which is the overall consensus, coming cheap. There is a class of people numbering in the from the press and Wall Street recently. Demand hundreds of millions or possibly even a billion or two who never had a smart phone because of for the iPad and iPhone is dropping and Apple isn’t doing interesting or exciting things anymore. the high cost. Suddenly, Android handset makers are churning out very low-cost smart phones. So Reuters, which is one of the companies making millions of people are moving from feature phones displays for the iPads, has slowed production, possibly because of reduced demand. This is being to smart phones, and they’re not buying the relatively pricey iPhone. So the market share numbers blamed on two factors. The first is competition have shifted strongly away from iOS and toward from the Android world. The second is that the iPad Mini is “cannibalizing” iPad sales, or in other Android. In reality, people are confused by the words, it has basically killed off the iPad. Another complexity of the consumer electronics market, problem Apple currently faces, under CEO Tim and focus on the horse-race aspect of marketshare numbers, stock prices and other metrics. But the Cook, is that the iPhone can’t keep up with the new and exciting market. The problem, some say, reality is that Apple was very successful and very profitable two years ago, one year ago and remains is that Apple screwed up and overestimated demand, while it could also be that Apple is cutting so today. But with all the competition and new demand artifically to prepare for the new iPhone technologies forming, its hard to predict Apples 5S. Apple’s fortunes are and have for a long time future. been boom-and-bust based on shipments. Apple

Apple currently has over 400 store locations worldwide. Its U.S. locations include: 2 (AL) , 1 (AR), 6 (AZ), 1 (AK), 57 (CA), 6 (CO), 5 (CT), 1 (DE), 16 (FL), 5 (GA), 3 (HI), 1 (ID), 9 (IL), 2 (IN), 1 (IA), 1 (KS), 2 (KN), 2 (LA), 1 (ME), 5 (MD), 10 (MA), 5 (MI), 5 (MN), 1 (MS), 3 (MO), 1 (NE), 4 (NV), 2 (NH), 11 (NJ), 1 (NM), 17 (NY), 5 (NC), 6 (OH), 2 (OK), 3 (OR), 9 (PA), 1 (RI), 2 (SC), 4 (TN), 18 (TX), 2 (UT), 7 (VA), 6 (WA), 3 (WI). Its international locations include: 37 (United Kingdom), 7 (Japan), 27 (Canada), 12 (Italy), 19 (Australia), 8 (China), 3 (Switzerland), 11 (Germany), 15 (France), 10 (Spain), 3 (Hong Kong), 1 (Netherlands), 2 (Sweden).

Apple’ focuses on users and lets them decide how and where they’ll use its products. In terms of the demographic characteristics, Apple is targeting the Generation X and Y cohort. Generation X consists of mostly working adults, while most have already established a successful career, ages 33 to 50. Therefore, they are earning high and steady incomes, enabling them to afford Apple’s expensive and sophisticated devices. Generation Y consists of mostly teenagers and young adults, ages 12 to 30. Generally, todays modern generation is more materialistic and modernistic, which is why the advancement of technology has attracted this group to Apple’s products. The young adults mostly have jobs and are not married, therefore they do not have to support any family or children, which means they have more discretionary income to spend on luxury items for themselves. As for teenagers, although most do work and have a steady income, their parents generally provide them money to pay for electronic goods, mostly for school and communication purposes. Overall, Apple is marketing to people who have very few characteristics: middle/upper income folks who are willing to pay a bit more for a better user experience on devices with sleeker designs and people who like to have fun with technology. Owning an Apple product makes a consumer anything but ordinary, it makes them an independent thinker, an innovator, and ahead of the crowd.

Apple competes against other companies; that’s part of doing business. But today, more than ever before, Apple faces increasing competition from companies that aim to recreate and then build on Apple’s own innovations. In 2007, Apple introduced the original iPhone. There was nothing like it in the marketplace: a multitouch screen that took up almost the entire face of the device, a user interface based on discrete apps. The competition responded, at first, by trying to recreate the iPhone. But those competitors and their customers initially found that simple iPhone knockoffs weren’t very exciting. Part of the problem was that, as late CEO Steve Jobs promised and as Samsung has found out all too well, Apple had “patented the hell out of it.” Perhaps even more significantly, simply copying the iPhone wasn’t such a simple or straightforward task; even today, some competitive platforms struggle to do smooth scrolling and zooming. It’s helpful to think of Apple as a media/technology platform company that competes against other platforms rather than against specific companies. Apple is a hardware company, but

its strength comes from the integration of the iOS ecosystem - iPhones, iPads, iPods, AppleTV box and soon the full TV. Once someone is in that ecosystem with one of the products, moving to another is really tempting. It’s almost identical to Microsoft’s position in the late 80s/early 90s - once someone had Windows, they would almost certainly use Word. And once they used Word, they’d almost certainly use Excel, etc. So the biggest threats to the Apple ecosystem are threats to the iOS ecosystem, specifically anything that eliminates the need to use a particular Apple product in conjunction with another. These can come in the form of replacement ecosystems or single products that break a specific link in the Apple chain. For example, Spotify and/ or rdio have the potential to break iOS’s lock on music consumption. No longer does one need to use Apple products, even if their existing music collection is in iTunes. Alone, that’s not enough to really threaten Apple. But imagine if every app maker made it super easy to transfer your app purchases from the iOS versions to the Android versions.

Ever since the now widespread smartphone was first introduced into our tech savvy society, the technology titans have been struggling to dominate the smartphone market. Realistically, however, Apple and its notorious iPhone has been the king of the smartphone space for years now, turning insanely large profits with each updated model that’s been released. But while Apple has continued to overpower other smartphone makers in terms of profit, the past year or so has seen an interesting trend in the rise of potential competitors—as of 2012, Apple and only one other company turned profits on their smartphone revenue. The other company? None other than Samsung. This surprising profit split has caused many to take a step back and look at Samsung as a company, and also as a viable smartphone competitor to Apple. While Apple’s profit is indeed huge, Samsung is actually selling more smartphones, and gaining buyers at a greater rate. Earlier last month, Samsung announced its partnership with Best Buy. The Korean electronics manufacturer is opening boutiques inside 1,400 Best Buy stores across the country. If this sounds familiar, it’s because Apple has already made its mark on Best Buy stores with dedicated sections that display various products ranging from iPads to MacBook Airs to iMacs (Samsung, 2013). More importantly, though, there is no question that Samsung’s Galaxy line of smartphones are giving Apple’s iPhone a run for its money. In fact, some loyal iPhone fans, disappointed with the incremental updates in the iPhone 5, already are looking for something new. Smartphone aficionados agree that when it comes to innovation, Samsung has surpassed Apple. The Samsung Galaxy S4 in particular is a real standout in the smartphone market. Its bigger screen, higher resolution camera, and lots of bells and whistles are likely to attract a lot of consumers who are fed up waiting for Apple to reset the standard in smartphones. In fact, some would say that the iPhone 5’s 4-inch display is almost retro. Truth be told, Apple has rarely been on the cutting edge of hardware. For example, the company was at least a year behind in adding 3G to the iPhone, and it took its sweet time offering 4G LTE. It still doesn’t offer NFC, the exchange of information between smartphones with a simple tap or wave, something that is becoming standard in many Android devices. There’s no question that Samsung’s devices are growing in popularity. In fact, a recent report from market researchers at Strategy Analytics suggests that Samsung’s sales grew nine times faster than Apple’s during the first quarter of 2013. Some of this growth was due to low-end devices, but Samsung is also mustering a following for its Galaxy brand of devices (Samsung, 2013).

A few years ago, almost no one had a tablet. These days, tab- foremost, Amazon knows how to sell things. Not only is it lets are nearly as common as air. As they’ve risen in popular- the biggest e-commerce player in the world, but it’s also the ity, so has the number of options you have when buying one. best. E-commerce is an art in its own right and selling prodThe two most popular on the market are the Kindle Fire HD ucts online takes a very specific skill set. Amazon has spent and the iPad Mini. The iPad Mini is everything you’ve come millions on understanding how to sell to customers, and to know and love from the full-sized iPad, shrunk down to a has been a true pioneer in using data to sell more products 7” form factor. The iPad Mini’s biggest strength is its app cat- through its recommendation engine. Secondly, Amazon has alog. It’s able to run every app in the App Store, which is far done an incredible job of persuading its customers to save and away the number one reason to buy an Apple tablet over their credit card numbers on the site. As a result it literally any other brand. But, if your on a tighter budget, The Kindle has millions of credit cards on file, which enables it to offer Fire HD 7” is $199 – two thirds the price of the iPad Mini’s services such as One-Click purchasing. This gives it a huge $329 entry point, and with more hardware power, the Kindle advantage when compared with other competitors. This Fire HD packs far more punch than Apple’s 7” tablet. Alallows for frictionless, simple transactions for a huge pool though, Amazon actually takes a slight financial hit for each of existing customers which is something that is incredibly Kindle Fire it sells, its ultimate goal to make that up in con- valuable. Also, The Kindle Fire is, essentially, Amazon’s digital tent sales. In fact, helped by the launch of its tablet computers, content portal. Whether you’re talking about Kindle eBooks, according to an industry study released on April 16, 2013, Amazon mp3, Amazon Instant Video or Amazon’s own app Amazon.com Inc has grabbed more than a fifth of the mar- store, everything Amazon is known for in the digital content ket for digital music downloads. AmazonMP3, the online realm is at home on the Kindle Fire. The sheer breadth of retailer’s digital music business, had 22 percent of the market products offered by Amazon has transformed it into a onefor music downloads in the United States in last year’s fourth stop-shop for Android mobile content. Finally, Amazon is not quarter. That compares with 15 percent in 2011, 13 percent afraid to compete on price. They’ve shown signs of this with in 2010, 10 percent in 2009 and 7 percent in 2008. Amazon its “Free App Of The Day” program through which it gives is using the Kindle Fire to try to sell more digital goods, such away one premium app each day. The interesting thing about as music, video, apps and games, where iTunes leads. Ama- Amazon as a competitor is that it can live with razor thin zon sells digital music without Digital Rights Management, margins. This makes it dangerous for companies it seeks to or DRM, a technology that limits how people can consume compete with because it doesn’t care about profit in the short such content. The company’s DRM-free approach boostterm, it is heavily going after market share in every market it ed demand because it let consumers listen to music on any plays in, unlike Apple which has preferred margins in the last devices, including Apple devices like iPods and iPhones. ten years. Amazon will make and sell hardware almost at a Although Amazon perhaps seems like the unlikeliest compet- loss to collect market share and in doing so can try to begin itors against the likes of Apple, there are a number of reasons to replace Apple’s ecosystem. for why it could be a major player in this market. First and

A new battle front for Apple is Google’s cloud: Google Maps vs. Apple Maps, Siri vs. Google voice search, and iCloud vs. Dropbox et al. As we grow accustomed to an always online world of ubiquitous computing, our phones become less of a device in and of itself and more of a gateway to its cloud services. With a subtle, yet powerful update to its Gmail for iOS app, links to YouTube, Google Maps, and Chrome now go directly to those relevant apps (if installed), instead of the mobile web (Brown, 2013). This is an absolutely brilliant play through which Google can not only neutralize Apple, but also leverage Apple’s tremendous success to its own benefit, by enhancing the experience of Google’s dedicated users, deepening loyalty to Google’s own products, and driving incremental revenue. Since mobile hardware and core OS functionality have largely reached a near-term point of peak innovation, the product itself will become effectively transparent to the end user, with attention, instead, shifting to the Web (or, cloud) services/content that those devices allow easy access to on an anywhere, anytime basis (Brown, 2013). Unfortunately for Apple, this shift substantially diminishes the value of its closed-loop hardware/software core, while simultaneously highlighting the strengths of Google’s business. Additionally, almost everything Google has done since inception has focused on anywhere, anytime cloud services that function like utilities, seamlessly across all devices, across all operating systems, all the time. For Apple to compete, it must quickly introduce a broad spectrum of high-impact, high value, high consumption Web services that also function seamlessly

across all vendors, all OS’s, and all devices. If Apple doesn’t, it risks seeing its precious hardware turned into little more access devices for Google’s services, even as it continues losing marketshare to Google’s own Android-based hardware services, which do an even better job of accessing Google’s services. Also, Google released its Chromebook Pixel laptop in February, designed to eventually get it out from under Apple and Microsoft’s thumbs completely. Much of Google’s business strategy is easy to figure out: Search is Google’s moneymaker and Android is its pipeline to mobile. So investing in its own brand of high-end PCs is a smart move for Google because it would be foolhardy for it to rely on Windows and Mac OS X to serve as a management hub for the rest of its products and services. Microsoft and Apple are very focused on emphasizing the strengths of their own goods and not those of a competing third party. Google probably built the Chromebook laptop to prove that with the right hardware, a Web browser can come amazingly close to offering the same experience as any other laptop running a full-blown operating system. And now that Android and Chrome have been joined under the same roof at Google, it’s not hard to imagine Google one day producing a dual-mode tablet, that when docked to a keyboard and monitor, seamlessly shifts over from Android to Chrome OS. It’s a good bet that’s why Google put so much effort into building this new laptop, and why we’ll be hearing a lot more about this kind of technology in the next two to three years (Brown, 2013).

Part II: Individual Store Selection Research & Analysis

Chicago’s Lincoln Park Apple store location, 801 W North Ave., Chicago, IL 60642 at 7:00pm. This location is a stand alone store and when I visited on Wednesday, May 8th, the business was quite brisk. There were over 20 employees working and almost all of them were attending guests when I arrived. But, for some reason anytime, doesn’t matter when or what day of the week I go, it’s always crowded. I think its location definitely has something to do with it, as it’s right off of the North/Clybourn CTA train stop and convenient to get to.

Store Layout:

iPhones iPhones iPads

iPhones iPhones Laptops

iPads

iPods iPods Apple TV

Laptops

ENTRANCE/EXIT

ACCESSORIES WALL

Laptops

iPods Apple TV Laptops

GENIUS BAR

ENTRANCE/EXIT

iMAC DISPLAY

iPOD DISPLAY

iPods

ENTRANCE/EXIT

Apple has historically kept a relatively small assortment of products, but over the last ten years it has slowly expanded its reach into new product categories. However, even as Apple has expanded its product assortment over the years, it has proven the merits of a closely integrated product mix, with a specific focus and a limited scope. For the second largest company in the United States its product mix and product lines are still astonishingly small, which proves that diversification isnâ&#x20AC;&#x2122;t always necessary for success. Appleâ&#x20AC;&#x2122;s product assortment by classification and sub-classification:

Computers Desktops iMac Mac Mini Laptops MacBook Air MacBook Pro Workstation Mac Pro

Portable Media Players iPod iPod shuffle iPod nano iPod touch iPod classic

Smartphones iPhone iPhone 5 iPhone 4S iPhone 4

Tablet Computers iPad iPad mini iPad 2

Digital Media Players iTunes Music Movies & TV Apps Books

Accessories AirPrint Printers Small-in-One All-in-One Multifunction Apple Care Macs iPods Apple TV iPhones iPads Cables & Docks USB Cables Charge/Sync Cables Camera Adapters AV Adapters VGA Adapters USB Adapters AV Cables iPod Docks Stereo Cables HDMI Adapters Dual-Link Cables DVI Adapters Ethernet Adapters

Apple TV

Cases iPad Cases iPad Sleeves Battery Cases iPhone Cases iPod Cases MacBook Sleeves Charging Devices Power Adapter Car Chargers External Batteries Charging Stations A/C Chargers Headphones Ear Hooks In Ear Neckband On Ear Active Noise Cancelling Wireless Keyboards & Trackpads Music & Audio Creation Guitar Inputs Microphones USB Audio Interfaces DJ/VJ USB & iOS Controllers Speakers Portable AirPlay Bluetooth Stands iPad Stands Storage Airports External Hardrives Internal Hardrives

The Apple store is dominatd by its private label brands and its products tend to follow a simple, better, best pricing hierarchy, where the only real difference is storage capacity. Because it is a master of adjusting prices to maximize profitability, it doesn’t depend on extra charges to improve margins on lower-priced products. They make the perceived benefit to the consumer obvious in the price. No percieved benefit, no high price. The products that exhibit this pricing strategy are the Mac’s, iPods, iPhones and iPads. For example, a regular iPad costs $499/599/699 for 16/32/64 GB of storage. If you want an iPad with built-in 3G, it costs $130 extra for the iPad itself. An iPad with 3G also requires the purchaser to sign up for a pricing plan with a phone carrier in order to access the iPads 3G capabilities. Since Apple’s selling prices rely heavily on its products embellishments, it uses those embelishments to create higher-cost selections into “options” available once a customer has already chosen a product. When the options dont increase product costs, the perception is price simplicity. The iPod shuffle, iPod nano and iPod classic are all great examples of this because when a consumer buys any one of them, they aren’t directed to choose more options aside from color; because these products don’t have any embellishments,

they are simple. In more complex products, Macs, for instance, the final price gets more tangled. A MacBook Pro, for example, without the retina display has two different possible screen sizes 13” and 15” and three processor speeds. Simple enough, but after that, a customer has additional choices in memory and hard-drive size. Apple represents those options as a way to “customize” or embellish a Mac, which keeps the illusion of pricing simplicity by treating the options as a special case that won’t interest most people. Even in the smartphone arena, iPhone, there is a complexity because consumers want wireless service or apps. Consequently, the wireless and app services wipe out your GB storage rather quickly, depending on the user. The older version, iPhone 4, only offers 8GB of data while the iPhone 4S offers twice that amount. The 8GB and/or 16GB on the older versions might not be enough for some and for those who want more storage capacity, their only option is to get the newest iPhone 5, which has three pricing options, $199/299/399 for 16/32/64 GB. Prices can vary quite a bit, but Apple leaves third parties, whether carriers or content producers, to set those prices, associating the complexity with someone else.

Apple’s Outside Brands

Apple Brand Mac MacBook Air 11-inch: 64GB - $999 11-inch: 128GB - $1,099 13-inch: 128GB - $1,199 13-inch: 256GB - $1,399 MacBook Pro 13-inch: 2.5GHz - $1,199 13-inch: 2.9GHz - $1,499 15-inch: 2.3GHz - $1,799 13-inch: 2.5GHz with Retina display - $1,499 13-inch: 2.6GHz with Retina display - $$1,699 15-inch: 2.4GHz with Retina display - $$2,199 15-inch: 2.7GHz with Retina display - $2,799 Mac Mini 2.5GHz - $599 2.3GHz - $799 2.3GHz with OS X - $999 iMac 21.5-inch: 2.7GHz - $1,299 21.5-inch: 2.9GHz - $1,499 27-inch: 2.9GHz - $1,799 27-inch: 3.2GHz - $1,999

iPod iPod Shuffle 2GB - $49 iPod Nano 16GB - $149 iPod Touch 32GB - $299 64GB - $399 iPod Classic 160GB - $249

iPhone

Belkin - iPhone, iPad, iPod and Laptop Cases - USB Cables - Charge/Sync Cables - Adapters

iPhone 5 16GB - $199 32GB - $299 64GB - $399

Logitech - Mouses and Keyboards - Headphones - Keyboard Covers

iPhone 4S 16GB - $99 iPhone 4 8GB - $0

Speck - iPhone and Laptop Cases

iPad

Herschel - iPad Sleeves

iPad Mini 16GB - $329 32GB - $429 64GB - $529 16GB + Cellular - $459 32GB + Cellular - $559 64GB + Cellular - $659

Sena - iPad Sleeves JayBird - Headphones RHA - Headphones

iPad 2 16GB - $399 16GB + 3G - $529

urBeats - Speakers - Headphones

iPad (with Retina display) 16GB - $499 32GB - $599 64GB - $699 128GB - $799 16GB + Cellular - $629 32GB + Cellular - $729 64GB + Cellular - $829 128GB + Cellular - $929

Sennheiser - Headphones Bowers and Wilkins - Speakers - Headphones Eskuche - Headphones

Harman Kardon - Speakers - Headphones

G-Tech - Hard Drive Moshi - Keyboards - Mouses - iPhone, iPod, iPad and Laptop Cases Incase - iPhone, iPad, and Laptop Cases - USB Cables - Charge/Sync Cables - Adapters Microsoft - Microsoft Office Adboe - Photoshop, InDesign, and Illustrator iHome - Speakers - Headphones

Most Apple products come in two colors: black or white. This is especially true for the iPads and iPhones, whereas the iPods come in a variety of color options besides just black or white. The iPod nano and shuffle come in pink, red, yellow, green purple and blue; the iPod touch is also available in green, red and blue. The only Apple product that doesnâ&#x20AC;&#x2122;t feature color options are the Mac computers. But, this assortment is not only available at Apple stores, these products and color options are also availbale at other resellers that have been approved by Apple. Some retailers also feature Apple Shops, which are Apple-designed outlets located within the electronics department of retail stores, such as Best Buy. Many are staffed with Apple Solutions Consultants, who are trained Apple employees, who can help consumers find the best soultions for their needs. A list of resellers that have been approved by Apple and sell Apple products are listed below: Catalog and Internet Resellers: Abt Electronics, Amazon.com, CDW Computer Centers, Datavision Computer Video, Frys.com, J&R Computerworld, Mac Connection, MacMall, MacZone, Micro Center, OnSale, PC Connection, Target.com, and Staples.com. Supercenter Resellers: Target and Walmart. Warehouse Club Resellers: Costco and Samâ&#x20AC;&#x2122;s Club. Specialized Superstore Resellers: Office Depot, Staples, and Best Buy. Specialty Store Resellers: AT&T, T-Mobile, Sprint, Verizon Wireless, and Radioshack.

The Apple store fits perfectly into the clean Apple image. It’s obvious that “the Apple feel” was a top priority in all of its stores development. Wide swaths of white space around tables of clean Apple electronics. Although the stores do carry products other than their own, mostly accessories, they aren’t presented the same way that their own products are. They are off to the side and harder to find. The Apple Store pays attention to every detail. You might think that Apple positions all its notebook computers for aesthetic reasons. That’s partly true. The tables are uncluttered and the products are clean. But the main reason notebook computers screens are slightly angled is to encourage customers to adjust the screen to their ideal viewing angle—in other words, to touch the computer! It’s also why all the products in the Apple Store are loaded with apps and software and connected to the Internet. Apple wants you to see the display for yourself and to experiment with apps and web sites to experience the power and performance of the devices. Customers in an Apple Retail Store can spend all the time they want playing with the devices and using the Internet and nobody will pressure them to leave. Apple’s mission statement is pretty weak and doesn’t really provide any meaningful information about the company or its objectives, instead it is more of a description of the products it carries. But, in those terms alone, the Apple store does relate back to its mission statement because the stores all feature its products in a user friendly way to show its consumers why their products are so fantastic. Interactivity is built in to every aspect of the Apple Store experience. For example, trainers who teach customers how to use Apple products in “One to One” workshops do not touch the computer without permission. Instead they guide customers to find the solutions themselves. The Apple Store was never created on the premise that people want to buy stuff. Instead Apple discovered that by creating an ownership experience, customers would be more loyal to the brand. The Apple Store was designed to create an ownership experience from the moment a customer walks through the door. When Steve Jobs gave a tour of the first Apple Store in 2001, he said that all computers were connected to the Internet. “You can go up to any computer and start surfing, go to your personal web site, or do whatever you want to do on the Internet.” The devices have changed but you can still walk up to any product in the store and start using it—read books on the iPad, discover apps on an iPod Touch, listen to music on an iPod, or play games on the new MacBook Pro. The ownership experience is more important than a sale.

Part III: Marketing Analysis Marketing is the system of business activities designed to plan, promote, and distribute products and services to present to current and potential customers. Marketing Concept is the states that all business activites should be geared towards satisfying customer wants and needs.

Apple’s marketing strategy can be summed up in one word: Empathy; the ability to understand another person, connect at a core, gut level with their innermost emotional wants and desires, build the best product on the planet, then offer them that product which fulfills their desires. Steve Jobs knew that if he focused on serving the customer, and if he built exactly what the customers wanted, they would continue to open their wallets. Apple has always been more focused on meeting customer’s needs than anything else. Therefore, they originally didn’t need to compete on price and could set their own prices, because they were delivering something much more powerful—value. What made Steve different from other marketers, is he understood that his job as a marketer was not to focus on making money or sales, and, unlike other marketers, it showed in the way he presented his products: Here are some quotes that reflect Steve’s focus in business: - “You’ve got to start with customer experience and work backward— not the other way around” (Apple.com) - “Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful; that’s what matters to me” (Apple, 2013) The company simply seems to understand what will get people excited about its products. You don’t see the company talking about features or technology, but about how the computer will make your life better . Apple has not been afraid of in-your-face campaigns. The company has run campaigns that have shown Intel-based laptops catching fire and getting flattened by steamrollers. Simply look at where Apple puts its logo on its products. On the laptops, the logo is right side up when the screen is open. Many vendors don’t understand the power of walking into an office space and seeing a large number of logos advertising it’s products to everyone in the office and anyone who comes into it. Apple understood that the logo is not for the person who bought the computer, but for the person who is in the market for one. It is a good advertising placement method and not a throw-away design element. Apple definitely does its best placement in TV shows. Most TV shows are meant to showcase real life and will often show characters on computers. Even though other vendors get a spot here and there, Apple is king when it comes to placement while its competitors logos are hard to see and generally missed. When shoppers sleep outside of stores, just to be one of the first to buy an iPhone, it’s obvious that Apple is a company that enjoys fanatical brand loyalty. However, this brand success is not a result of dumb luck or forces beyond Apples control; it’s a part of a well thought out plan to deliver strong products to create an “Apple culture.” So what makes these buyers so loyal? It’s because Apple knows that to its customers, a Mac computer or iPhone are more than just pieces of electronics equipment, they’re a part of who they are through their self-expression and lifestyle. Owning an iPhone makes a consumer anything but ordinary, it makes them an independent thinker, an innovator, and ahead of the crowd. Apple’s obsession with understanding its customers and deepening their Apple experience shows in everything the company does. Apple carefully considers what consumers are looking for, so its products are a result of both

extensive research and strong design. This planning is a large contributor to Apples high customer satisfaction rates. It’s plain and simple: easy-to-use products not only make your customers happy, but it also makes them want to buy more products from you in the future. For example, a visit to an Apple retail store is more than any other normal shopping trip. The store invites customers to stay a while, use the equipment, and soak up all of the exciting new technology. By creating a store strictly devoted to Apple products, the company has made an excellent customer loyalty move. More importantly, the staff isn’t focused on selling stuff, it’s focused on building relationships and trying to make people’s lives better. Their primary job is to figure out what a customer needs and helping them get it, even if its a product that Apple doesn’t carry. Additionally, because all of Apples products complement each other, they offer their customers complete solutions. Apple users generally don’t have to stray to find products and solutions they want. If a consumer buys an iPod, they can download music for it via iTunes. This sort of control over the user process, from hardware to software, strengthens customer loyalty. Also, Apple products are not compatible for use with other systems. For example, many files available through Apples iTunes store are encoded with DRM (digital rights management) technology. In most cases, the DRM feature keeps songs from playing anywhere besides an Apple product. For that reason, it’s not likely that a customer will want to start from scratch with another company’s MP3 player that won’t accept all of his/her music. In addition, many consumers may not be ready to buy an Apple computer, but they’re willing to give gadgets like the iPod or iPhone a try. By selling products with lower entry costs, it creates an opportunity for new users to be introduced to Apple. If these users enjoy their gadgets, they’re more likely to consider buying an Apple computer in the future. Apple, also, sells its products to schools and universities to allow students to become familiar with its interface and superior performance. By creating this early exposure, Apple is capturing customers before they even know that they are customers. Finally, Apple offers consumers a number of different ways to enjoy its products with its new innovations. Although the architecture of Apple products are consistent, its portfolio isn’t. By giving customers an opportunity to employ Apple in their living rooms, pockets, and offices, Apple makes it easy to stay loyal to a brand they already like. If there is one area where Apple beats all other industrial giants such as Microsoft, or even Samsung hands down, it is the presentations. Each time Apples goes into producing any new product, the whole world stops and zooms in to analyze and counter-analyze the specs of the upcoming products. Despite having plenty to share, Apple chooses the simplest route and that is of addressing the general public. In its advertisement campaign, rather than challenging people’s intellect and throwing all kinds of computing or mobile jargons at them, Apple sticks to the basic. The latest ad campaign for the iPhone 5S, rather than concentrating on its oh-so-powerful processors simply magnifies some of its very basic features such as its larger screen display and color options. From presentations to advertisements, Apple’s marketing strategy has been in a language people can understand and that is definitely one of the biggest reasons why its been such a successful company.

Part IV: Financial Analysis

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Appl e ' sQua r t e r l yFi na nc i a l I nf or ma t i onofi t sFourQua r t e r si n2012a nd2011

( Dol l a rf i g ur e sa r ee x pr e s s e di nmi l l i ons )

t h r d nd s t 4 Qua r t e r3 Qua r t e r2 Qua r t e r1 Qua r t e r Ne tS a l e s $ 3 5 , 9 6 6 $ 3 5 , 0 2 3 $ 3 9 , 1 8 6 $ 4 6 , 3 3 3 Cos tofGoodsS ol d $ 2 1 , 5 6 5 $ 2 0 , 0 2 9 $ 2 0 , 6 2 2 $ 2 5 , 6 3 0 Gr os sMa r g i n $ 1 4 , 4 0 1 $ 1 4 , 9 9 4Sheet1 $ 1 8 , 5 6 4 $ 2 0 , 7 0 3 Ex pe ns e s $ 3 , 4 5 7 $ 3 , 4 2 1 $ 3 , 1 8 0 $ 3 , 3 6 3 Ne tI nc ome $ 8 , 2 2 3 $ 8 , 8 2 4 $ 1 1 , 6 2 2 $ 1 3 , 0 6 4 1 . Pe r c e nti nc r e a s e / de c r e a s ei nne tr e v e n1ue : Page Q2=1 5 . 4 % Q3=1 0 . 6 % Q4=+2 . 7 % 2 . Pe r c e nti nc r e a s e / de c r e a s ei nCOGS( COS ) : Q2=1 0 . 5 %

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Part V: Perspective: In Conclusion

In conclusion, Apple has made its way to the top and is, currently, among the largest and most well known electronic and software manufacturing companies in the world. It’s achieved competitive advantages by creating an innovative hardware design and by understanding and implementing its logo, on its products, so that customers in the market for an electronic device will see it everywhere. But, lately, Apple is finding itself in a bit of a rut. Simple refreshes of their existing products, falling share prices and public opinion waning all amount to a company in trouble. Well at least they would if they didn’t have over $140 billion in the bank and a very loyal user fan base. Apple is still a big deal, obviously. The arts and entertainment industries love the iMac and Macbook hardware; the iPod is still one of the most want Mp3 players on the market; iPhone sales alone are enough to make most of its competitors jealous and the tablet revolution cleared a pathway with its introduction of the iPad. But for all their might and magic, what can Apple offer the technological community and the consumer now, that someone else can do for cheaper and sometimes better? The industry that Apple operates in is notoriously fickle, cutthroat, cruel and unforgiving. The competitive landscape will be much different ten years from now. There will be entirely new products replacing the old ones that are currently in the marketplace, and there will be new companies competing to provide those products with the best possible quality and at the lowest possible price. Nevertheless, I’ve become skeptical about its future. The death of Steve Jobs, stiffening competition, and the collapse of new product launches give ample room for doubt whether Apple is still the company we once knew.

Even taking into account its problems, Apple is still a great company with no shortage of assets. While analysts like to focus their attention on how Apple appears incapable of growing, it’s simply unquestionable that Apple has incredible buying power, and that power isn’t going to fade away. Furthermore, it retains strong competitive positions in smartphones and tablets, two categories far from saturation, and MacBooks and iTunes will still bring in serious cash for the foreseeable future. To achieve even 10% profit growth, they will need to find over $5 billion a year, which is more than most companies earn in total. But Apple needs more than good products, they need breakthroughs and right now those are looking pretty dry. As the company struggles to maintain growth on an enormous revenue base, Tim Cook and his management team seem unable to articulate any clear vision for the future. As of now, only one thing is certain: The Apple that we know today will essentially no longer exist ten years from now. Ten years from now Apple may be an even greater and more valuable company than it is today. Or the company’s brand may lose its cool, the company’s products may lose their dominant market position and profitability. The only thing we can know for sure is that the Apple ten years from now will be fundamentally different from the company it is today—selling fundamentally different products in a fundamentally different competitive landscape, and under a fundamentally different set of circumstances.

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