Part Three: Environmental Scan and Segmentation/Targeting

1. 
   Global Sales
   

Apple does not break down its total net sales of iPad by either region or country. However, the company has released the information of net sales in its three main operating segments outside of the U.S., which are Europe, Japan, and Asia-Pacific. The Europe segment represented approximately 23% of Apple’s total net sales in 2012. However, the net sales in this region only went up $8.5 billion, or 31% of the total net sales, compared to 2011, due to the economic conditions and currencies depreciation as mentioned above. Japan continues to be a separate segment as a result of strong sales growth each year in this country. The Japan segment itself represented approximately 6.75% of Apple’s total net sales in 2012, which increased $5.1 billion or 94% from 2011 to 2012. Also, Apple cannot ignore its very potential markets in other countries in Asia as those countries have been developing really fast in recent years. The Asia-Pacific segment represented 21% of the total net sales and it grew $10.7 billion or 47% from 2011 to 2012 (Apple, 2012). The strong sales growth came mostly from China as it has been considered Apple’s “fastest-growing market” and Apple has just spent millions of dollars on legal issues in China in order to make billions of dollars in revenue in the future (Guglielmo, 2012). A report found that seven out of ten tablets sold in China were Apple’s iPads. However, Apple will not have to concern about the potential growth of this market, as the middle-class population of the most populous country in the world also increases, which leads to the growth of consumers’ demand (McKenna, 2012).

Table 1: Apple’s Total Sales by Region (in millions)

(Apple, 2012)

Figure 1: Apple’s Total Sales by Region (2010 - 2012)

Global Brand

Although Apple does not announce the domestic and international net sales of iPad, we all know that this brand is very popular in the world. A research shows an estimate of 38% of total iPad sold in the United States, which means that 62% of Apple’s iPad sales comes from international markets (Farano, 2012). The iPad, like other Apple’s products, is sold worldwide through the company’s retail stores, online stores, as well as third-party cellular network carriers, wholesalers, and retailers (Apple, 2012).

2. 
   Environmental Scan
   

The major trend influencing Apple is the popularity of its products. Apple has become known for their customer loyalty and their innovative products. This puts a certain expectation on Apple to constantly come out with new and improved products. While the popularity clearly is a great thing for Apple’s sales, it also places immense pressure on the company to deliver the high quality and innovative products that its loyal customers expect. When Apple fails to measure up to its consumers’ high expectations, people are disappointed.

However, Apple’s popularity and customer loyalty continues to help its sales grow each year. In 2012, Apple’s net sales increased by 45% compared to 2011. When new products are release to the market, sales sharply increase and then level back out. This substantial increase of sales proves that Apple products are the current trend in society (Form 10-K, 2011).
Environmental Forces: Opportunities and Threats

Economic Environment Forces

Apple’s high customer loyalty provides for an excellent economic opportunity for their company. Apple customers have a loyalty to Apple products like no other company’s consumers. This gives Apple the opportunity to raise its prices and hang on to their customers, where other companies do not have that luxury. Apple customers are willing to pay a little extra in order to have Apple products (Strengths, Weaknesses, Opportunities, Threats: The SWOT Analysis, 2012, March 20).

One economic threat to Apple’s growth is the current recession in the United States. As more and more families are struggling financially, people have less money to spend on Apple products. Even though Apple’s consumers are loyal, in tight economic times, even the loyal customers may not be able to splurge on an iPad or another Apple product. While Apple is very well off financially, the purchasing power of many families has decreased, resulting in a potential threat to Apple.
Social Environmental Forces

Currently, society is infatuated with environmental-friendly products and ideas. Socially, one great opportunity that Apple has over its competitors is its awareness of the environment and its work to reduce its negative impact on the environment. Apple is doing this by packaging more efficiently while using fewer materials. They also are making their products thinner, lighter, and smaller to use less plastic and other materials that are harmful to the environment. “Apple remains committed to creating products that have the least amount of impact on the environment” (Apple - The Story Behind Apple’s Environmental Footprint).

Figure 2: Apple’s Environmental Footprint

(Apple - The Story Behind Apple’s Environmental Footprint)

A major social threat to Apple has to do with the fact that there is a lack of Apple products sold to businesses. Apple products are sold mainly as customer products, meaning that people buy Apple products mainly for personal use. There are not many businesses that use Apple products for their serves, but instead use PCs and other companies’ products. Unless Apple figures out a way to make their products more appealing to businesses, this could be a potential danger to their company (Strengths, Weaknesses, Opportunities, Threats: The SWOT Analysis, 2012, March 20).
Competitive Environmental Forces

One strong point that Apple has against its competitors is their patience and ability to wait. This gives Apple the opportunity to release products with more features and better quality than its competition. Apple has patience to wait so that they can test their products and be confident in them when they are released. While competitors may rush this process, Apple takes the time they need to release high quality, functional products, providing them with the opportunity to sell superior products than their competition (Understanding Apple – SWOT Analysis, 2012, November 7).

The major competitive threat for Apple simply is the growing competition. There is a growing market, especially for tablets and smartphones. Apple has achieved high name recognition in the world; however, it will be increasingly difficult for Apple to remain on top. With advances in technology around the world, Apple’s competitors are working hard to get word out about their products and rising above Apple. Apple has a huge target on them, as they have been so successful and popular among consumers. Although competitors have a long way to go to beat Apple, they remain a threat to Apple’s industry (Strengths, Weaknesses, Opportunities, Threats: The SWOT Analysis, 2012, March 20).

Technological Environmental Forces

Technologically, Apple is extremely advanced. They have a major opportunity technologically because their tablets, such as the iPad, are easy to use for all generations. The ability to make the print larger with one swipe of the finger makes the iPad compatible with the older generations who may have a difficult time with the size of fonts. Also, it is easier for those with arthritis to use the touchscreen to navigate the Internet and any app on the iPad. This technology displayed in the iPad makes it compatible with the older generation, opening up a huge opportunity for Apple to reach out to an entire other market segment (Apple - Accessibility 2013).

The major technological threat to Apple simply is issues with their products. Although Apple works hard and is patient when releasing its products, there are still many technological issues that consumers have had with the products. Many have complained that the iPad Mini has low-quality display compared to competing tablets. There are also many complaints made by customers about cracked screens and other technological bugs and problems with their products. While these issues are bound to occur for any computer manufacturing company, like Apple, unhappy customers are a major threat to the entire company and can result in sales loss (Apple Quality Complaints).
Demographic Environmental Forces

Individuals that are born between 1979 and 1994, also known as Generation Y, are the ones that contribute the most towards the sales increase of technological products like the Apple iPad 1^st Generation. There are approximately “71 million ‘Millennials’ that spend over 200 billion dollars annually” (Fields, 2010). Not only do they spend a lot but “[t]hey’re hyper-connected, tech savvy” (Schawbel, 2010), as they are “the first generation of kids to grow up with Mickey Mouse and the computer mouse” (Bobis, 2010). These individuals are very connected with new technology that even “Gen Y workers report spending an average of 10.6 hours of every work day accessing social networking web sites” (Bobis, 2010). Thus, the iPad 1^st Generation will experience great sales from this group.

On the contrary, the iPad 1^st Generation will not be receive great sales from the Baby Boomers, who are born between 1946 and 1964. In fact, when the “youngest members of the Baby Boomers were already in their 20’s” when the first Apple product came out (Bobis, 2010). Because the iPad 1^st Generation, along with the other Apple products are very technological, they are not profitable toward the Baby Boomers.

3. 
   Segmentation
   

Age is a really important factor when Apple is marketing its iPad 1^st Generation. Even though it is targeted mainly towards the younger generation (ages 25-34), Generation Y, than the older generation, Baby Boomers, it is still the device of entertainment, education, work, and much more for almost every age. As the co-founder Steve Wozniak said, “the ‘iPad is for the normal people of the world,’ not necessarily the tech savvy crowd” (Etherington, 2011).

Studies have shown that iPads are replacing many full-blown computers, as they are more convenient and “typically less expensive than a full-blown computer” (Eckel, 2010). Because of its convenience, many college students use this product along with employees whom do not want to carry a big computer around with them. In fact, a study by the Reynolds Journalism Institute found that “the average iPad owner is a college-educated 48-year old man” (Etherington, 2011).

Not only is the iPad used as a computer for school or work, it is also used by many younger teens and kids as a device of entertainment. In fact, “the iPad is more reminiscent of an oversize iPhone than a laptop” (Perenson, 2010). Because of the many variety of Apple apps and due to the size of the iPad screen being “three times larger than that of the iPhone/iPok Touch, you’ll be tempted to use the iPad…” (Perenson, 2010). Thus, if you are simply looking for something entertaining to do, the iPad has music, games, and movies.

As for the older generation, typically the Baby Boomers can use this product for its big screen and the feature of zooming in. There are also certain apps that the App Store carries that can be said to direct its attention to the older generation. As Philip Moeller points out in Why the iPad Appeals to Older Users, the iPad can be used as a travel guide, a way to look up cooking instructions, and the audio book – which are all typical favorites of the older generation (2010).

Figure 3: iPad’s Target Age Group

For the Apple iPad and other Apple products, they do not specifically target certain gender groups. They produce products that aim to every gender. The iPad and other Apple products are simply made to target “[p]eople who like to have fun with technology” (Who are apple’s target…). Because there is no targeted gender, the Apple products keep many people in the unknown as to whom their target audience is.

Demographically, the Apple iPad is targeted at the “[m]iddle/upper income folks who are willing to pay a bit more for a better user experience” (Who are apple’s target…). Because the iPad, and many of Apple’s products, are high in cost, those who are interested in buying or have bought an iPad are “high earners, making more than $100,000 a year” (Hughes, 2010).

Due to the high price of the iPad, the only threat it will bring to the Apple Company is the fact that not everyone can afford it but only the high middle or upper earning classes.

Figure 4: iPad Purchaser’s Income

With the Apple iPads, this product is not limited to any particular family life-cycle segment. The family life-cycle is stages in life that includes the combination of age, martial status, and rather there is a presence of a child or not. Because the iPad is for entertainment, work, teaching, gatherings, and almost anything, there is no specifically life-cycle group. The iPad can be for the dad with a wife and kids, for the student attending school, or simply for single parent. Basically the iPad is for everyone.

“While there is a surfeit of options in the market, the tablet world is predominantly divided between the Apple iPad and Android hemispheres” (Bhatia, 2011). Psychographically Apple, Inc. targets individuals who value the status of their lifestyle. Customers enjoy the designs and convenient programs that come with the product. The Apple iPad is trendy technology that is valued by college students and high-end business workers. The apple logo is known and favored by many individuals and is the most popular out of well-known electronic companies in the world, which is why consumers chose the iPad tablet over android tablets. The iPad provides portability and simplicity to an individual’s daily activities. It also targets non-tech savvy consumers because of the “natural user interface touch” (Bhatia, 2011). Psychographically and behaviorally Apple Inc. expects the non-tech individuals to purchase their iPads just to “fit in.” During an interview a recent iPad consumer was asked why did they purchase an iPad and many individuals said it was an impulse buy do to the “media buzz” (Crothers, 2010).

4. 
   Target Market Strategy
   

After adopting the multi-segment targeting strategy, Apple manufactured and introduced new products, namely the iPod, which was a sensation in the music industry. Then it introduced the iPhone, which also gain much popularity, and recently Apple has introduced the iPad, which is a sort of hybrid between the iPod and the Mac computers.

Apple has made the right choice in its marketing strategy, and has also succeeded in its implementation. When Apple first introduced the iPod, Apple made sure that it had an iTunes store in place, not only did Apple get money from the sales of iPods but also from the music people bought from iTunes. With the iPod’s success, Apple entered the cellphone market. Apple decided to use the same methods it used with the iPods - building on the idea of the iTunes store, Apple introduced the “App Store.” The various Apps provided by the App Store made the iPhone different, and better than any other cellphone on the market.

Finally, through the multi-segment target strategy, Apple introduced the iPad tablet, the first of its kind in the high-tech industry. This is the advantageous strategy that Apple uses because of the many different types people that the company is attempting to market to. One way that Apple tries to appeal to many different customers is through the various numbers of gigabytes of memory offered in an iPad. Those in the market for an Apple tablet can get an iPad with 16, 32, 64, or 128 gigabytes of memory (Apple, 2012); this is ideal because it gives customers more options to choose from. For example an older, retired person may only need a tablet that can connect to the Internet and download books, so they would purchase and iPad with low memory. On the other hand a young college student might need an iPad to download music, books, and games as well as connect to the Internet, so they might purchase one that has a lot of memory. The more gigabytes there are the higher the cost, so someone who is in need of an iPad but is on a budget would purchase one with low memory. Users of the Apple iPad also have access to the Apple App store. The App store is a feature that allows users to access over 700,000 apps, ranging from games for children to organization apps for professionals (Costello, 2012). The App store offers an app for everyone that Apple targets.

Even though there are many advantages to the multi-segment strategy there are also a few disadvantages. One disadvantage is the cost of promotion, production, market research, and advertising. One of Apple’s main forms of advertising is through commercials. The average tier one commercial averages between 3,500 dollars and 5,000 dollars for production ("Maus media group," 2011). An example of how this can add up would the Apple’s “Get a Mac” campaign, which ran from 2006 to 2009. In that three-year period Apple released sixty-seven commercials in North America alone; that is over $100,000 a year ("Get a mac," 2011). Another flaw with multi-segment marketing is cannibalization. Cannibalization is what happens when a company releases a new product and it cuts into the sales of the existing product (WebFinance Inc., 2012). Since the release of the first generation iPad, Apple has released a newer version at least every year. While the release of the newer product may cause the profits for the newer sales to increase; the existing older product often shows a decrease in sales.

However, despite the disadvantages, the Apple Industry is still profiting from their products by using the Multi-segmenting strategy. In 2012, Apple had sold a record 37 million iPhones, 5.2 million Macs, 15.4 million iPods, and 15.2 million iPads in 2012. With the sales of Apple products continuing to rise little by little, it’s a clear sign that the Apple’s multi-segmenting strategy is definitely working to enhance their industry’s overall performance.

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