The Apple Case Study, Updates, a great study in corporate strategy

The iPod Product Life Cycle, the case study continues

25/5/2013

iPod sales in the financial year ending September 2012 were over 35 million units bringing the total sales since the launch in 2002 to a staggering 356.3 million units. Peak year for sales was in 2008 when unit sales hit 54.8 million units.

The iPod continues to dominate the music player market but sales have been hit by the launch of the iPhone and the iPad. Apple is never afraid to cannibalize own product sales as the launch of the iPad mini demonstrates.

The sales pattern shows all the classic signs of a product life cycle. But where next for the iconic player? Sales were down year on year by 17.5% but down by as much as 21% in the critical Christmas quarter.

We estimate sales could fall by a further 20% over the next twelve months to around 28 million units to fulfill a classic Product Life Cycle Pattern. Even so by 2016, Apple may still be selling some 10 million iPods. It is not yet time to write off the iPod.

The Apple Case Study from the iPod to the iPad remains a classic Corporate Strategy handbook for success. Watch out for the Winter 2012 update coming soon as we review sales of the iPhone, the iPod and look at prospects for the iPad mini.
Originally published in October 2012

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iPad 3 what can we learn about the Apple Corporate Strategy

24/5/2013

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Originally published in March 2012
The new Apple iPad 3 has arrived. Weeks before the launch, no one was really sure about the final design, look and feel of the product. Of one thing we could be sure, the iPad 3 would represent a further continuation of the Apple Corporate strategy.

Apple released the first iPad in April 2010, within twelve months, (March 2011) the iPad 2 was released. Twelve months later the iPad 3 has arrived. So what are the ten key things we can learn about Apple Corporate Strategy?

1 The iPad 3 and Kaizen – constant improvement.
The Apple product development programme reflects a process of constant improvement, Kaizen, exemplified in the development of best practice (Deming and others) in Japanese industry following the second world war. Apple’s address in Cupertino is One Infinite Loop, not just a location but a dedication to the process of constant improvement of the product offer. The Apple New Product Development Programme reflects a process of constant improvement, always improving in one infinite loop.

2 The iPad 3 and cannibalisation
Apple is never afraid to cannibalise or eat it’s own as a result of the product development programme. The iPhone hit sales of the iPod and the iPad is hitting sales of the Mac. Apple never holds back on new product launches to protect sales of old established product lines. At a recent Goldman Sachs seminar Tim Cook Apple’s new CEO said “We would rather take away sales from the Mac with the iPad than someone else taking away Mac sales with another product.”

3 The iPad 3 and KSFs – Key Success Factors
Apple identify the key success factors for the product and develop a programme of constant improvement or Kaizen to improve the product offer and enhance the user experience. The mantra – thinner, faster, sleeker, lighter, longer, greater, better. Identify the KSFs in the product offer and develop a Kaizen plan to push the product development along.
Thinner – design ; Faster – processor;  Sleeker – Style;  Lighter – in weight;  Longer/stable – battery life;  Greater – storage capacity;  Better – features - higher screen resolution, better camera, updated software and more. How much of this can we see in the new iPad?

4 The iPad 3 and Product Life Cycles
The introduction of the iPad 3 develops perfectly product life cycle theory. An analysis of the sales of the Walkman, the Diskman and the iPod clearly demonstrates product life cycle theory in action. In the last financial year iPod sales fell by 15%, in the first quarter of this year iPod sales fell by 21%, sales of the iPad doubled.

5 The iPad 3 and pricing policy
Apple always engages in a premium price strategy. It is a good way of testing demand to establish the supply chain. Prices are more easily reduced following a product introduction than increased. For Tim Cook: “Price is rarely the most important thing.” A cheap product might sell some units. Then people get it home, use it and the joy is gone. And the joy is gone every day you use it. You never think, “Oh I got a good deal!” because you hate it. Apple have so much confidence in the product offer, they are never afraid to premium price.

Then the prior premium price is followed by a plethora of price points. The iPod product range exemplifies this strategy. By retaining the iPad 2 in the product line up and dropping the price by $100, the plethora of price points strategy is exemplified.

6 The iPad 3 – consistent strategy
In 2001, Apple sales fell by a third and the company reported an operating loss of $350 million 6% of sales. It was in that year the concept of the Mac as the digital hub for consumer products emerged – the iPod was launched. Since then Apple sales have increased from $5 billion to over $100 billion last year and profits have soared to $34 billion.

Over this time, the company has followed the strategy of the digital hub moving along the Golden Staircase with constant product improvement and enlargement of the product offer. In the first quarter of this financial year revenues increased by over 60%. Since launch the company has sold over 330 million iPods, 180 million iPhones and over 55 million iPads. Over 575 million digital devices sold.

7 The iPad 3 and multi channel marketing
The iPad either wifi or now 4G offers high connectivity and exemplifies best practise in multi channel marketing, almost 600,000 applications available from the Apple Apps store, millions of songs available from the iTunes store. Twenty five billion apps downloaded. The iPad offers instant interaction on line or in retail stores. The total number of own retail stores now over three hundred and sixty.

8 The iPad 3 and the Halo effect
For Apple, the success of the iPod has stimulated sales of Apple Macs and Mac Book Pros. Converting many PC users to the Mac experience. In turn the success of the iPod and the iTouch facilitated the introduction of the iPhone. The user experience on the iPod, the iTouch and the iPhone created a user base the iPad was better able to exploit. A classic halo effect.

Halo effect : a cognitive bias that involves one trait influencing others in judgement of another product or company.

9 The iPad 3 – and the Golden Staircase.
SInce launch the iPad has sold 55 million units . Says Cook : that’s something no one would have guessed, including us. It took 22 years to sell that many Macs, 5 years to sell so many iPods and 3 years to sell so many iPhones. The iPad trajectory is off the charts but the iPad stands on the shoulders of the products the products leading the way along the golden staircase. The iPad 3 continues the original strategy of the digital hub and the Golden Staircase.

10 The iPad 3 – and corporate culture : Tim Cook
The iPad 3 is further homage to strong corporate culture. Says Tim Cook, CEO
“You can’t replicate Apple. Steve grilled in all of us the company should revolve around great products and we should stay extremely focused on a few things. We should only go into markets where we can make a big contribution to society. No better thrill to look at a market and see people using iPhones or iPads. Always focused on the future. We don’t sit and think about how great things were yesterday. We are always looking to where we would like to be next.”

So there you have it, ten things we can better understand about the Apple Corporate Strategy, exemplified in the launch of the new iPad. Apple from the iPod to the iPad, it is a great case study in corporate strategy. The second edition will be published in April 2012, available as a free iBook. Slides to accompany this post are available on Slideshare.

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The iPod Product Life Cycle, the case study continues

iPad 3 what can we learn about the Apple Corporate Strategy

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