The Curious Case Of Technology Enablers - Apple

Posted in Marketing & Strategy Articles, Total Reads: 3731 , Published on 06 October 2011
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"It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them."

Steve Jobs (Business Week, May 25 1998)

Apple's products has been selling like hot cakes. People in US are forming huge cues to purchase an iPhone or another latest gadget launched by Apple. Clearly, there is some great marketing brain working behind all this. The strategy is very well captured by the opening quotes which speaks volumes about Jobs' marketing tactics. However, with his retirement, the continued success of Apple is very much in question.

People in queue to buy iPad

Take on Apple as a Strategic Adviser

Despite its success in western countries, Apple has not made any significant mark in the eastern world. Research clearly points out that the Indian Smartphone and Laptop market has its own demand and emphasis on different value. The market is highly underdeveloped with regards to the iPhone or a Mac. Given the above inputs, clearly the market is waiting to be tapped.

Competition

1. Market is highly competitive. Foreign players like HTC, Nokia, Samsung, Sony, Apple have established a large customer base in India. Emerging Indian players include LAVA, Gfive, Micromax and other players

2. Competition is more on the basis of product offerings like operating system, variety of apps, hardware features, camera quality and so on, rather than on price

Thus, even though Apple is regarded as the World's Best Marketing Machine. However, our analysis reveals that although Apple has left its competitors far behind in terms of both product innovation and marketing, it has not used its potential beyond the western countries.

One interesting fact about Apple is that even before the product is formally launched in these countries, the experimenters and enthusiast customers already have imported the unlocked version of the phone or a Mac from the West. Therefore, we feel that Apple, considering that now it is the No #1 company Worldwide, even ahead of Microsoft, should take a much more holistic view of the world.”

I thus strongly recommend that with comparably lesser marketing effort, the Indian market can generate huge dividends to Apple.

The Next Big Move for Apple- Change of Positioning to increase target market

Apple's positioning in the Western world has been "staying ahead of times". Given the fact that Apple will now be targeting the developing countries, clearly the positioning has to change. The following is the positioning Apple should adopt in these countries

Based on the interpretations of the indicative research conducted by us (See Appendix) and our understanding of Apple's positioning in other countries, the following is the positioning that Apple should pursue in India is one of "stand-out in the crowd".

This means that the advertisement and marketing strategy adopted by Apple in India should focus on how an Apple-user does things differently (more easily and in a more sophisticated way) than a regular smartphone or pc user.

We see that this positioning is more appealing to the aspiring Indian consumer who is constantly striving for success and recognition among peers.

The use of marketing media would focus on depicting the different needs of the different typical Indian consumers: for example one advertisement might show the Indian business professional - featuring the simplicity of push email, the other might depict an Indian housewife, who uses the 5 megapixel camera in a shop showing and takes a video how a massage chair is functioning, edits it using the novel video editing feature and sends it to her husband in office.

This kind of marketing strategy has 2 advantages:

1. Shows universal appeal of Apple products across professions, age-groups and genders - Apple has unique value proposition for everyone

2. Increases the awareness of a Mac or an iPhone's novel features and superiority of other features over existing products : thus shows our positioning of "standing out in the crowd"

The Future successful Keystone player

The key to being successful in the any technology driven market is rapid innovation as Apple has already showcased. Moreover, a distinct feature of this market is the huge first mover advantage it offers. Although pricing and reach are a major concern for Apple in this it is regarded as a way superior product than any other brand. Also there is an element of trust and a very high brand value that Apple has built over the years.

Apple Graph

Matrix showing comparison of features and pricing of smartphones provided by different players (Source: eWEEK “Nokia Microsoft Announce Partnership New Strategies”, Feb 2011)

Some other comparisons also reveal the superiority of Apple in key parameters:

Apple comparison chart


Thus, Given the fact that the industry offers great premium to first movers and highly perceived brand, Apple is clearly the successful keystone player of the future even if it fails to come up with disruptive innovations. The superior brand value and commitment of Apple's employees is expected to see it through all turmoils

Patent War Going Forward

As stated above, the major source of profitability in any technology driven market is through first mover advantage and how long you can sustain it. Patents are an important way of rewarding the companies for their efforts.

Previously, Microsoft with their windows mobile, and Apple with their iOS, had always been at cutthroat competition with each other but with the launch of Google Android, it seems both have come together to attack Google. Google has thrashed their claims citing it as an attempt to curb google through Bogus Patents.

To cite another incident, Microsoft had claimed that Google had been invited to bid for Novell portfolio which it declined and later on claimed that this was an attempt by Microsoft to keep Novell patents away from Google. Acquiring Novell's and Nortel's old patents would mean every Android device being dearer by $15. Google was outbid when a coalition of companies under the name "Rockstar Bidco" (Comprising Apple, Microsoft, RIM, Ericsson, Sony and EMC) offered five times more than Google for Nortel's patent covering wireless, wireless 4G, internet, optical, voice semiconductors and so on

Google's strategy of offering the Android for free has triggered several lawsuits of patent infringement filed by Apple and Microsoft on Google and its partners HTC, Samsung etc. In July, 2011 the United States International Trade Commission (USITC) had ruled that HTC was a violant of Apple's Patent rights and that all four patents filed by Apple were valid. Google does not have any workaround available to these data capture and API Patents which form the crux of Android's touch and user interface system. As a result HTC is currently paying $40 per smartphone as royalty for violating patents!

Also, Apple's patent lawsuits against Samsung are much more legally supportable and have a greater chance of being ruled in their favor.

The most notable feature of the industry is the current paucity of patents. Google has only 1500 filed as against Apple's 4000 and Microsoft's 17,000. Consequent to this paucity, even Apple is considering acquiring Inter-Digital's IPR portfolio (having 180 engineers and 18,000 awarded and pending patents). Google is looking to take advantage of the favourable regulatory bend towards open source.

Thus, it is expected to be a Patents war in this Industry going forward, because with time, the number of innovations would only decrease and the nature of competition would be based on acquiring patents and making it more expensive for each other to market your OS.

Mutually Assured Destruction?

The hyper-competition in the industry, driven by innovations and their patenting, seems like a mutually destructive. This is because most of these companies are trying to either

1. make the other's product unattractive through innovations / better offerings

2. make the other's product more expensive through royalties on necessary technologies

It is to be noted that once a technology like touch-screen becomes widely adopted, it gets the status of a necessity for the companies.

However, there is another side to this. Firstly, The government is slowly moving towards open-source and rationalizing the patent laws to be for lesser no. of years (compared to 20yrs now) to encourage superior innovation. Secondly, even though these patents make a device costlier by a few dollars, these are not expected to destroy the market since the market shows strong brand preference. Lastly, these companies are large and coming out with a workaround solution - be it technological or legal, is not expected to be a problem for most of them.


Thus, I believe that it is not going to be a mutually destructive war going forward. The market has enough space for everyone to coexist although the superior player will definitely be the one with superior innovative and marketing capabilities.


About the Author

Ankit Goel is a student of IIM Bangalore. His keen interests include Technology, Gadgets, Swimming and Workouts.



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