Apple Computers

A New Era of Micro-Processing

Analysis Team:
Hilary German
Bjorn Bruschke
Joe Gottli
Kelly Anderson
Ryan Dear G.C.
Table of Contents

Table of Contents p. 1
Business Mission p. 2
Objectives pp. 2-3
Situation Analysis pp. 3-8
Marketing Strategy pp. 8-18
Exhibit One: The Apple Computers Mission Statement p. 19
Exhibit Two: Morningstar Stock Snapshot – Apple Computers pp. 19-20
Exhibit Three: Apple Ecological Chart – Power Reductions p. 21
Exhibit Four: Apple Competition Graph p. 21
Exhibit Five: Demographics Graph p. 22
Exhibit Six: Apple Computers Sales Figures p. 23
Exhibit Seven: Consumer Reports 2005 Brand Repair History p. 24
Exhibit Eight: Consumer Reports Quick Recommendations, Sept. 2005 p. 25
Exhibit Nine: The iPod Generations pp. 26-27
Exhibit Ten: The Apple Warrantee Plan p. 28
Exhibit Eleven: Example of and Apple Advertisement p. 29
Exhibit Twelve: Apple Computers Operating Expenses, 2002-2004 p. 29
Exhibit Thirteen: Laptop Price Comparisons pp. 30-31
Additional Information/Multimedia pp. 32-35

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Statement of Vision, Mission, and Goals:
I. Business Mission

The mission statement on the company website (Exhibit 1) inadequately

expresses what should be a centralized goal that dictates a company’s business
internal and external behaviour. We have designed a new mission statement that
provides a snapshot to not only the organization, but also the department that will be
analyzed throughout this report:

“The Apple laptop division provides customers with a wide line of laptops featuring
state of the art technology and functionality, unparalleled customer service, and a focus
on simplicity and usability for any possible consumer. Utilizing the UNIX based
operating system, consumers can be assured a powerful and reliable operating system
for a multitude of tasks, including superior plug and play connectivity.”

The marketing plan will be focusing on the Apple laptop division, and in the
business of creating, marketing and selling laptops to consumers. It is almost certain
that five years from now, Apple will still be in the business of creating, marketing and
selling laptops. If Apple uses the creation of a more focused marketing plan that is
tailored to the laptop division specifically, they company will most certainly have a
greater market share.

This new mission statement will be understood throughout the organization. It will
be understood better by the laptop division, as it focuses more on the benefits that the
customers want from an Apple laptop, rather than on the goods and services offered by
the entire Apple Corporation. The new mission statement, while not mentioning specific
products, does highlight several guidelines that the laptop division should constantly be
trying to improve, including technology, functionality, customer service, simplicity and
usability. It mentions the stability of the UNIX based operating system, which is mostly
to showcase the benefit of consumers choosing an Apple computer product across the
board, be it a laptop or desktop computer.

II. Objectives

The contents of the new mission statement can be translated into operational
terms in regards to the objectives of Apple Computers. The objectives of Apple
Computers as a whole include bringing the best personal computing and music
experience to all of their target markets, designing and developing innovative hardware,
software, peripherals and Internet offerings, concentrating on seamless integration and
innovative industrial design, expanding its distribution network and reaching more of its
target markets.1 In regards to the mission statement, the mention of state of the art

1
Apple Computers 2004 Annual Report on 10-K

2
technology, functionality, the UNIX based OS as well as its plug and play connectivity
are related to the company objectives of bringing the best computing experience, the
development of hardware and software, seamless integration and design, while the
mention of unparalleled customer service lends itself nicely to the objective of reaching
more target markets through word of mouth advertising. The business objectives, as
stated above, are based on customers, and more specifically, supplying superior
products and services to Apple customers.

The marketing objectives stated in Apple’s Annual Report do not appear to be

stated in hierarchical order, but it is possible that there are currently more resources in
place with regards to developing hardware and software than there are in regards to
better reaching its target markets. The objectives dealing with developing hardware and
software are somewhat vague, as there are no reference values to benchmark future
success, but this is acceptable as within the technology market, future innovations are
almost impossible to predict, having a set benchmark to judge success upon seems
almost useless. The objective to better reach its target markets is well defined, as
success can be measured by sales per market from previous years. All of these
objectives are reasonable given Apple’s almost limitless creative, marketing and design
resources. While the objectives do not give time frames, the objectives lend themselves
nicely to the idea of constant improvement, in that Apple’s objective shouldn’t be
improvement in a certain period of time, but rather, constantly improving both their
hardware and software, as well as their consumer relations and customer bases.
Apple’s main goal is two fold: Maximize customer satisfaction through constant
improvement of their hardware and software, and to maximize their customers through
better reaching its target markets.

III. Situational Analysis

a. Internal Strengths and Weaknesses

Apple has many strengths that they possess as a company. Apple has been and
is still a highly regarded marketer. In 1984, the company came out with its commercial
to introduce the Macintosh. The powerful commercial went against the rigidity that IBM
portrayed in the 80’s and it was so influential that it was voted the best ad of the last 50
years in 1995.2 Apple also used a powerful marketing campaign with its release of the
iPod. Apple Marketers decided to use celebrity reference power to lure its customers to
the product. This is demonstrated through the U2 commercial and product placement in
such popular shows as The OC and Sex and the City. During the introduction of the
iPod, Apple also favoured large billboards, which could not be missed by any consumer.
In 2005 Apple became a very profitable company with further growth in sight. It
received an A+ in growth rating from the Morningstar website. (Exhibit Two) Apple grew
its MP3 business by 900%.3 This positive trend will allow Apple to expand into further
2
http://www.uiowa.edu/~commstud/adclass/1984_mac_ad.html
3
http://www.technewsworld.com/story/33600.html

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market areas and continue its company history in a positive manner. Please refer to
Exhibit Two for further information.

The innovation of the iPod and its success is a great strength for Apple. Steven
Jobs and the rest of Apple have had the opportunity to get its name back into the
market place through the popularity of the iPod. This strength will allow Apple to try and
market other items successfully because when a consumer likes one product from a
company, one can assume that the consumer will go searching for other products.

Another evident strength of Apple is its ability to “think different” and innovate
unique products. Apple has always had the image of being different. It did so with its
1984 commercial going against IBM. This can be seen through its unique and stylish
designs of this such as its PC’s, notebooks, and the iPod.

Apple’s team of employees is a great asset to the company. Apple has a

reputation for showing team strength in innovation and a high degree technical skill.
Since the company takes a high regard for teams, this allows the every employee’s
strength to be utilized in the idea generation process. This is also known as synergy. 4

In a business world where corporate social responsibility is of high concern,

Apple does this by demonstrating its concern for the environment. It is an organization
that takes pride in caring and doing its part as an organization to help the environment.
This is exhibited with the computer-recycling program that it offers its customers.

Although Apple has many positive aspects to its organization it also has some
weaknesses. The mission statement that Apple currently has in place is very
ineffective. Firstly, it was difficult to identify that their mission statement was in fact a
mission statement. The mission is much too general and identifies its product goals
rather than meeting customer’s needs. It does not state what Apple’s direction is in the
next years to come.

The marketing skills that Apple’s team possesses are very strong. However, the
company seems to concentrate its marketing in very select areas and not in the
notebook product line. If one currently examines Apple’s advertising it is mostly based
around the iPod. Consumers are ill informed of Apple’s notebooks and do not
understand its capabilities because of this. When Apple markets its notebooks as
heavily as it does with the iPod, it could be the next hot notebook on the market.
Apple used to have a large sector of the computing education market share.
Macs now make up only 29 percent of elementary school computers, and 15 percent of
the machines in high school classrooms. Whereas in the late 1990’s Apple made up of

4
http://www.apple.com/jobs/hardware/skills.html

4
almost half on the education market share.5 This was once an area where Apple used
to shine but must now fight to gain back market share.

The fear of many consumers when purchasing a Mac is that desired software will
be incompatible with the Apple operating system OS X. Some software programs that
run with Windows are unfortunately not compatible with Mac computers. This is true
especially in the gaming world. Many software companies do not make its software
Mac compatible. One of the only large gaming companies that make its software “Mac
friendly” is Blizzard which produces such games as Warcraft and Rollercoaster Tycoon.

Another weakness that Apple demonstrates is its reliance on Microsoft. In the

past Apple had to rely on Microsoft to make an Internet Explorer version that was Mac
friendly. It was feared that Microsoft would stop providing Apple with the Internet
explorer software after its contract obligations stopped in 2002.6 Microsoft did just this;
in 2003 they ceased providing Apple with an OS compatible version. In the future if
Microsoft wishes to discontinue providing Apple with such software programs like Office
could adversely affect its sales. 7

b. External Opportunities and Threats

Social

Apple has been responding well to social and lifestyle trends. Apple makes many
versions of laptops to fulfill people’s different lifestyles. The laptop is not just used for
work anymore. Social changes have occurred and now consumers are using laptops for
fun, not just work. Wide screens allow consumers to play DVDs. Compared to a
standard screen it is much easier to work with two windows side by side. It is also an
advantage when working with spreadsheets. The Apple PowerBook was among the first
popular models with screens whose width is 1.6 times their height, versus 1.25 times for
a conventional display. Apple realized that there was an opportunity to produce wide
screens in order to satisfy the changing demands of consumers.

Demographics

In today’s world the population is definitely aging. The number of children will
begin to decline. These variables are illustrated on the graph. These changes do not
have an impact on Apple laptops. The PowerBook family of portable computers is
designed to meet the mobile computing needs of professionals and advanced consumer
users. The iBook is designed to meet the portable computing needs of education and
consumer users. These two laptops will not be affected by the aging population.

5
http://news.com.com/2100-1042_3-5052346.html
6
http://news.com.com/2100-1042_3-5052346.html
7
Apple Computers 2004 Annual Report on 10-K

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Technology is not only for adults. Young children are learning how to use computers.
The iBook is created for surfing the web, chatting with friends, doing homework and
playing games. Starting at $999 this laptop is designed for younger users. Apple
continues to update the iBook because the company realizes that the market of younger
users is important to capitalize on for success. Please see Exhibit Three for further
information.

Economic

The Company reported results of operations In accordance with SFAS No. 109,
Accounting for Income Taxes, the provision for income taxes is computed using the
asset and liability method.8 The calculation of tax liabilities involves significant judgment
in estimating the impact of uncertainties in the application of complex tax laws.
Resolution of these uncertainties in a manner inconsistent with management’s
expectations could have a material impact on the Company’s results of operations and
financial position.9 A change in tax laws that could affect Apple is a new law that allows
companies to transfer profit from overseas operations back to the U.S. this year at a
special low tax rate of 5.25%.10 This could generate excess money for the company to
invest in marketing the laptop

Political, Legal and Financial

In the future, environmental laws could affect the marketing strategy and tactics
of Apple. Production and marketing of products in certain states and countries may
subject to environmental and other regulations including, the requirement that the
company to provide consumers with the ability to return the products at the end of their
useful life, and place responsibility for environmentally safe disposal or recycling with
the company.11 Even though Apple is a very environmentally friendly, these laws would
make them restructure the product take back policy which currently does not include
disposal of the products.

In 2005 Apple’s main focus was on preserving the company’s confidentiality and
trade secrets. A representative from Apple stated, “DNA is innovation, and the
protection of our trade secrets is crucial to our success." 12 The first case was where
Apple sued the publisher of Mac enthusiast site Think Secret alleging that recent
postings on the site contain Apple trade secrets.

8
Apple Computers 2004 Annual Report on 10-K
9
Apple Computers 2004 Annual Report on 10-K
10
Tax Break Brings Billions to U.S., But Impact on Hiring Is Unclear
Timothy Aeppel. Wall Street Journal. (Eastern edition). New York, N.Y.: Oct 5, 2005. pg. A.1
11
Apple Computers 2004 Annual Report on 10-K
12
http://news.com.com/Apple+suit+foreshadows+coming+products/2100-1047_3-5513582.html

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 The second case is Apple Computer v. Doe 1, et al. which occurred on March
11th, 2005. “Judge James P. Kleinberg of California superior court denied a request by
a trio of online "bloggers," who operate Web sites devoted to Apple news and rumors, to
block Apple from obtaining documents that might reveal who was leaking confidential
company information.”13 This decision is positive for Apple because they were able to
obtain the confidential information. It is a key to the success of the company to ensure
that the secrets are not leaked out.

Competition

The company is confronted by aggressive competition in the design,

manufacture, and sale of personal computers. The market faces rapid technological
changes, which result in frequent introduction of new products. The past several years
have had intense competition in the area of pricing for laptops. The Company’s
competitors who sell personal computers based on other operating systems have
aggressively cut prices and lowered their product margins to gain or maintain market
share14 Apple may be adversely affected by the downward pressures on gross margins.
The principal competitive factors in the market for personal computers include relative
price/performance, product quality and reliability, design innovation, availability of
software, product features, marketing and distribution capability, service and support,
availability of hardware peripherals, and corporate reputation.15 The main competitors
are Dell, HP, Gateway and IBM. The graph illustrates the percentage of market share
Apple has in comparison to its competitors. In the area of laptops the competition is
effective. Apple needs to take steps to respond to the competitive pressures.
Improvements must continue to be developed to the laptops in order to ensure
consumers to continue purchasing Apple products. The company must maintain
perceived functional and design advantages. Please see Exhibit Four for further
information.

Technological

A major technological change that is affecting Apple is how everything is turning

wireless. Apple has created products that are wireless in order to support this major
change. Built into all three PowerBook G4 models, AirPort Extreme delivers state-of-
the-art wireless performance and blazing connectivity speeds up to 54 megabits per
second.16 The PowerBook can be taken into different rooms and still maintain an active
connection. Apple is also promoting the idea of operating wireless to students. They

13
Apple Can Seek Sources of Articles; In a Blow to Advocates Of Free Speech, Judge Rules 'Blogs' Held
Trade Secrets. Nick Wingfield. Wall Street Journal. (Eastern edition). New York, N.Y.: Mar 14, 2005. pg.
B.3
14
Apple Computers 2004 Annual Report on 10-K
15
Apple Computers 2004 Annual Report on 10-K
16
www.apple.com

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created the idea of the iBook wireless mobile lab. Apple is bringing the idea of wireless
technology to the younger population

Ecological

Apple strives to make environmental protection a priority. Apple Computer is

committed to protecting the environment, health and safety of their employees,
customers and the global communities where they operate. They offer technologically
innovative products and services while conserving and enhancing resources for future
generations. 17 Apple’s product-take back and recycling policy are two environmentally
friendly elements that contribute to the firm’s competitive advantage. Apple uses
societal marketing by demonstrating to the consumers that they wish to enhance
individuals’ and society’s long-term best interests. Apple designs products to reduce
their energy consumption. This reduction results in lower energy bills and mitigates
energy waste, thereby helping reduce the environmental impacts associated with
gaseous emissions of power generation plants.”18 Apple’s efforts to reduce energy
consumption have resulted in numerous success stories. There have been dramatic
power reductions to the Power Mac G4 to G5. Please see Exhibit Five for further
information.

IV. Marketing Strategy

a. Target Market Strategy

The markets that Apple computers targets when marketing their laptops are four-
fold. The first target is the education market, which is accomplished through their
education channel, including sales to elementary and secondary schools, higher
education institutions and individual customers.19 The second target is the creative
market, which mostly deals with consumers interested in using their computers for more
artistic and design oriented functions. The third target is the consumer market, which
deals with consumers whose computer usage is very general – word processing, basic
Internet capabilities, etc. Lastly, the fourth target is the business market, deals with
consumers who intend to use their computer for business purposes, and thus, need
more security and stability than other segments. Within these four markets, the
members are fairly homogeneous geographically, as the four market segments cater to
every geographical segment of Apple.

In terms of sociodemographic and behavioural segmentation, the segments are

heterogeneous in terms of their income level and buying behaviours. The education and
consumer markets, which are more concerned with price than top of the line quality, are

17
www.apple.com
18
www.apple.com
19
Apple Computers 2004 Annual Report on 10-K

8
at a lower income level. On the other hand the creative and business segments, which
are more concerned with top of the line quality, are at a higher income level. While the
U.S. education channel alone made up over 16% of Apple’s 2004 net sales (desktops
and laptops), which includes sales to elementary, secondary schools, as well as
institutions of higher education20, Apple doesn’t seem to have separate marketing mixes
for each individual segment. Instead, Apple has a separate marketing mix for the iBook
and PowerBook. The reasoning behind this is the iBook, which is more moderately
priced, appeals to the education and consumer markets, while the PowerBook appeals
to the creative and business markets. By combining two segments per marketing mix,
Apple is able to avoid catering to the lowest common denominator. This would occur if
they combined all the segments in one marketing mix, and it would lower the marketing
costs that are involved in creating a marketing mix for each individual segment.

Out of all of Apple’s marketing segments, the education and consumer segments
seem to be the segment with the highest opportunity. Apple already has a strong market
share in the business and creative markets, as witnessed by the strong sales of their
PowerBook laptops (Exhibit Six), and because of this, have a lower opportunity to
increase sales. The education and consumer markets are very competitive and present
Apple with much more opportunity to expand their market share. For example, in the
education segment, Apple’s biggest competitor in the laptop market is Dell Computers,
which is slowly eating away at Apple’s market share.21 Therefore, Apple is presented
with a huge opportunity to out-market Dell Computers and try to regain some of their
market share.

Within these target markets, perhaps the most prevalent consumer need is customer
service and stability. Apple laptops are already an industry leader in this aspect, through
their AppleCare warrantee program. Apple laptops also rarely need service, as
witnessed through their 4th place showing in the 2005 Consumer Reports on laptop
repairs. (Exhibit Seven) With their focus on customer service and quality products,
Apple has positioned itself very well in the laptop market. With their stability oriented
operating system and flawless plug and play technology, Apple is positioned with a
unique consumer product. This is evidenced by the fact that Consumer Reports, a well-
respected consumer-reporting firm, has recommended Apple laptops as having the best
tech support and being the most reliable. (Exhibit Eight) Given that Consumer Reports
takes consumer reviews from a wide range of people, it is safe to say that Apple laptops
are highly rated in terms of reputation and quality by their target markets.

By focusing on four marketing segments, Apple is able to market to everybody while

still retaining several targeted marketing initiatives towards individual segments. The
main buyers of Apple laptops are educational institutions and students, business
professionals, creative professionals and the home-used consumer. These customers

20
Apple Computers 2004 Annual Report on 10-K
21
http://news.com.com/2100-1042_3-5052346.html

9
can find out about the Apple organization at the Apple.com website, with the majority of
the information being found in the Investor Relations section. Potential Apple customers
become customers when they purchase an Apple laptop, which can be purchased
online at the Apple.com website, at any Apple retail outlet, and at a wide range of non-
Apple retail locations.
While Apple laptops are sung praises by current owners, potential customers often
have many objections to buying an Apple product. Perhaps the most prevalent of these
is the fear that the Apple OS will be too difficult to understand compared to Microsoft
Windows. While the two operating systems differ, Apple OS has become more and
more user-friendly through the release of different versions, and is considered much
more stable than Microsoft Windows. Another concern is compatibility between Macs
and PCs, but technology advances have made these problems a thing of the past.
While Apple laptops continue to be a well-respected brand around the world, Apple
is faced with a problem in the education segment.

b. Marketing Mix

1. Product

Apple Computers boasts a diverse, extensive product line catering primarily to

business/creative professionals, and those within the education system. Hardware
products include desktops (Power Mac G4 and G5, iMac, eMac, and Mac Mini), Laptops
(iBook, and Powerbook G4), iPod (including iPod Nano and iPod Mini innovations), and
Professional Servers (XServe Raid etc.)22 Apart from the UNIX based operating system,
the processor is what really sets Apple apart from the competition. The G5 processor,
almost unparalleled in power, delivers the superior performance of the top end Apple
Products. The Powerbook and iBook, however, still have the G4 processor. Apple
Computers have capitalized on the growing societal acceptance and demand of
purchasable music files by the introduction of the iPod. The iPod is flawlessly
integrated into the Powerbook and iBook configurations, automatically updating
hardcopy personal files including music, contacts and other information. No other
laptop system has a media device specific to the operating system. With constant
pressure from the market for smaller, faster, cooler product innovations, the product line
will intensify almost exponentially. (Exhibit Nine) The iPod has incredible potential to be
a star, as illustrated in the portfolio matrix23. By comparison, the laptop has had very
little innovation – there isn’t a lot of room for growth anymore, but marginal
improvements to the product appear to be enough to sustain development and
extended life. In comparison, the laptop has some room for improvement. The laptop
division has a number of flaws that our analysis team concluded as impedances to their
full potential. Separated into their respective intended markets, the following will
illustrate this statement in further detail.

22
Apple Computers 2004 Annual Report on 10-K
23
Marketing,Third Canadian Edition. Lamb, Charles W. Toronto, Ontario 2006 Pg 35

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Products for Creative Professionals

The flagship Powerbook G4 product line has marginal improvements as you

move up the hierarchy according to specifications. To start, the processing speed has a
net change of only .17Ghz across the entire line. We felt that this lack of price
justification discourages the consumer from investing in a higher end product.
Furthermore, Apple consumers looking to upgrade their current product for something
greater may be disappointed at the marginal upgrades. For instance, 2 years ago the
top of the line 17” G4 had only 1.33Ghz of processing power. Currently, the top end
Powerbook has approximately 1.66. Another strange aspect is that the hard disk space
only increases/improves once along the line: the 12” and 15” Powerbooks include 80 gig
hard drives, but the 17” has 120 gig. We question whether or not this jump is built in to
stimulate the sales of the bigger, more expensive model. Nevertheless, it seems that
those looking to purchase a 15” over the 12” will not have the extra hard drive space
included in their purchase decision making. RAM is pretty standard across the board,
along with the video card – the 12” only slightly lacking with 64 megs of ready video
memory, an extra firewire port, and of course, the backlit keyboard.

Products for Educators, Students, Technological Enthusiast

The iBook, is essentially the tame, stripped version of the Powerbook. Smaller
disk space, slower and it looks more playful up close. It comes in two models, the 12”
and 14” inch display. The specifications of these two models are essentially the same,
the 14” just has a 20 gig greater hard drive, and Superdrive allowing for DVD burning
capabilities. It lacks the character and presence of the Powerbook, but it serves an
entirely different market. It tailors especially well to the student as a light, versatile, and
considerably powerful notebook. As we will discuss later on, Apple needs to get this
exciting information to that niche market in more effective ways. Students have to be
made aware that this alternative is available – along with all the marketable qualities
and benefits. As an additional perk, Apple offers a separate helpdesk to better service
for those in the education system (including students and teachers) who purchase their
products.

Warranty Covering Product Weaknesses

Consumers have been dissatisfied with how hot the larger models get, the
lack of expansion capabilities, and the high, elusive price. There were also mentions of
internal fan failure, causing the airport to malfunction, and frying the expensive logic
board. Overwhelmingly however, are the outcries of praise hailing from several notable
consumer relation websites. (Exhibit Eight) Perhaps this has to do with the extensive
warranty plan offered by AppleCare (Exhibit Ten) supported by Apple’s Customer
Support team. Plans can be purchased covering the entire product for defects for up to
3 years, which is quite a statement of product confidence. This specific business unit

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deals only with customer concerns, complaints, troubleshooting and has delivered
award-winning service.
So the question remains – is Apple’s Laptop line worth the price premium over
their respective competition? Superior processing, tons of accessories (iPod, iSight,
iSkins), excellent integration of similar products along the product line, and stunning
resolution are just hints of the value this product offers to consumers. It comes down to
your needs as a customer. But whether or not you are a media geek who loves to edit
movies, photos, or music – a business professional compiling complex databases or a
recording engineer who needs top of the line rendering for high profile clients – there is
an Apple laptop out there that could suit both your needs, and financial requirements.

2. Place and Distribution

Apple’s philosophy on distribution is fairly simple. Because they want their

customers to have the best buying experience possible, they have not only expanded
their indirect distributors (intermediaries picked through selective distribution) but they
have introduced their own stores worldwide, and online. So Apple offers both indirect
and direct retail channels. Furthermore, to assure customers that third party stores are
offering un-compromised quality service, Apple introduced the Apple Sales Consultant
Program. Basically, a “badged” employee from Apple direct is stationed to work at a
strategically placed third party store (usually a large storefront in a mall). That way,
devoted Apple employees can ensure their product is being sold in the manner that
head office expects, along with boosting revenues for the store.
Retail stores appear to have been working quite well for Apple, on both a third
party and AppleStore basis. In the four years that Apple has made products available
through retail, 84 stores have been opened in the United States. This year (2005),
Apple plans to open an additional 14 stores, most of which are in the “mini” format to be
situated in high traffic, high income areas – Walden Galleria in Western New York is a
perfect example24. These stores, largely in high traffic malls in high-income areas, are
always a unique experience for the customer. This is largely due to the atmosphere,
and the friendly market oriented sales approach and mentality of the professionals who
work there. Another aspect that Apple does extremely well, is visibility. Examine fig 1
in the appendix and consider witnessing one of these storefronts in your typical
shopping mall for the first time. These displays not only draw huge attention of the retail
store, but they radiate the company’s standpoint on creativity – a part of Apple’s culture
even. But Apple goes beyond offering products for sale. Training sessions and
workshops are available for kids and adults alike, covering everything from basic
operation, fun with movies, photos, and music, to professional graphics design tutorials.
These events not only draw people into the store, but also create a friendly identity for
the storefront – encouraging people to come in and explore what Apple has to offer. In
a sense, Apple has shattered the traditional retail store, transforming it into a learning
center for enthusiasts. These high volume areas will surely generate more sales, and

24
http://www.waldengalleria.com/stores.detail.html?store=Apple

12
awareness of the friendly alternative to increase market share. There are however,
enough complaints to mention that the Apple Store is not satisfying all consumers.
Most testimonials refer to a time where an employee had inaccurate, or inadequate
product knowledge. This is damaging Apple’s identity. In order for these retail outlets to
succeed, some efforts should be taken to ensure employees are performing consistently
with expectations of higher management. Perhaps a product knowledge test, or
mandatory ongoing training should be enforced immediately for all Apple Store
employees. Otherwise, Apple will risk the reputation of its collective retailing initiative.
In summation, if new stores are successful, the Powerbook and iBook will continue to
emerge and grow its market share.25

3. Promotion

Apple is committed to bringing the best personal computing and music

experience to students, educators, creative professionals, businesses and consumers
around the world through its innovative hardware, software, peripherals, and Internet
offerings. It addresses these needs and wants of customers by offering superior ease
of use, flawless integration their own unique operating system. 26This system will not
crash like a Windows operating system. Users are able to reboot without loosing
information and having to restart their entire computer as well as programs. This
message is not appropriately positioned since most individuals are unaware of Apple
matchless operating system and believe that it operates in the same manner as
Windows. This would definitely be a competitive advantage for the Apple against its
competitors and the company should be marketing this message out to its potential
customers. Many students would prefer Apple systems over others, especially if they
are taking computer-oriented courses, which most students of today are. Apple used a
variety of advertising techniques such as TV commercials, Apple magazine as well as
others, stores (both Apple and resellers such as Best Buy), and the Internet. They meet
their customer’s needs by providing them with a sleek, lightweight and stylish laptops
that are less bulky and easier to transport then other brands.

a. Advertising

Since Apple does not use an outside advertising agency, their ideas come from
fellow staff members. Apple is able to use any concepts they wish and a variety of
techniques and media such as TV, via commercials, Internet, e-mail, Mac magazines,
etc. Apple has chosen the best media to attract members of their target market by
using TV and Internet as their main sources. This is an advantage since they are using
current electronic products to introduce their new ones. Since most of their potential
customers will be computer and internet users, this is a very convenient way for Apple
25
http://applematters.com/index.php/section/comments/the_apple_store_bad_customer_service_at_
your_local_mall/
26
www.apple.com

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to reach its target market. Apple also uses a random e-mailing system to offer a diverse
amount of individual’s a variety of special offers and promotions on their products (i.e.
“win a free iPod”). 27 Apple also creates television commercials to express their
creativity and unique style. This can be quite expensive for the company because they
use only popular stations for airing and they create very elaborate, technologically
advanced commercials. National quality television commercials retail for an average of
$15,000 to $80,000, some even more because they are charged a certain rate per
thousand viewers. This all depends on what station they appear on, how long they are,
at what time, during which programs and how many people are going to see it.28 All of
the commercials are modern yet very trendy and almost one of a kind. Apple most
commonly uses a black background causing their white coloured products to pop out.
(Exhibit Eleven)
Due to the fact that Apple has created their own Mac Magazine, this company is
able to do a lot more than any other company. It is in the company’s favour to advertise
in their own magazine rather than pay another magazine to place their ad for them. The
magazine also allows them to communicate better with their current customers by
providing helpful articles about problems, concerns and general information on products
and services that are provided by Apple. They provide customers with helpful tips about
programs and operating Apple products. They unveil and inform their customers of
coming new products. There is also a section in which current users can ask questions
or send in comments.
Apple is very good at getting the attention of consumers by using a direct contrast
approach or by using everyday images to express qualities such as height or width.
They are known for their use of a black background in order to enhance their well-
known “white products”. This grabs the attention of the consumer and then creates a
brand image in which each time they see a plain black background with a white
electronic device, they will automatically know that it is an ad for an Apple product
without having to visually see Apples name or logo. The company also uses a thumb or
a pencil along side their products in order to express how small or thin their product may
be in comparison. But the company has also been focusing most of their energy on the
iPod and neglecting the laptop division. Apple should not be so concerned with the
iPod since they have excellent sales regardless. They should focus more on emerging
a similar image for their laptops and less on the other products that are already doing
well.

Apple has a consistent advertising agenda since they produce ads on a regular
basis through the year, but they are more concentrated during the last quarter each
year since there are higher sales due to the Christmas holiday. Apple should also be
advertising just as heavily in late July and early August as they do in November and
December because this is the time when students are going back to school and off to
University/College, in which most students will be looking for a new, more reliable

27
www.apple.com
28
http://www.cheap-tv-spots.com/

14
computer. University students will need to buy laptops in order to succeed through the
year and by seeing more Apple advertisements they will become interested and
possibly go out and purchase one.

The Company recognizes that focused investments in Research and Development are
critical to its future growth and competitive position in the marketplace and are directly
related to timely development of new and enhanced products that are central to the
Company’s core business strategy. The Company has historically relied upon
innovation to remain competitive. R&D expense amounted to approximately 6% of total
net sales during fiscal 2004 down from 8% of total net sales in both 2003 and 2002.
(Exhibit Twelve)

b. Public Relations

Apple allows its customers to view press releases of all of their new products and
programs by posting them directly onto their website. They are categorized by
product/program as well as by the date of their release, which makes it very easy for
one to inquire on this information. 29 There are even ways for customers to access word
for word conversations of Apple members responding to insults that come from Window
users. These conversations show that Apple has the ability to respond to bad publicity
because they have been able to maintain a positive image of their company through out
their years of competing and battling with Windows. There has always been a conflict
between Apple and Windows for years. Apple has never shown signs of weakness in
regards to them. Apple has a fairly large PR team that is organized so that each person
is responsible for an individual sector or aspect, such as iPod, iTunes, hardware,
displays, Macworld, etc. 30 There is a phone number and email link attached to each
name so that customers may instantly send email requests/complaints directly to PR
associates. They can follow up by emailing back and forth or sending customer’s info in
the mail.

c. Personal Selling

A typical sales person for Apple will spend quite a bit of time, around 30 minutes
to an hour, soliciting new customers because not a lot of people are fully aware of the
benefits of owning an apple laptop as opposed to another brand. Apple has a different
format so sales representatives need to explain that to potential buyers. Apple spends
much less time, about 15 minutes, serving existing customers within stores because
most prior customers already know what they wish to purchase and buy it. This is why
Apple personnel have a more relaxed and laid-back approach to selling their product.
They do not receive commission for sales and most of their customers are return
customers so there is much less work involved to get individuals to make purchases.

29
http://www.apple.com/pr/products/powerbook/powerbook.html
30
http://www.apple.com/pr/contacts/

15
This relates to the 80/20 principle since 20% of Apple’s consumer generate 80% of the
demand. 31

Selling, General, and Administrative Expense (SG&A)

Expenditures for SG&A increased $209 million or 17% during 2004 compared to
2003. These increases are due primarily to the Company’s continued expansion of its
Retail segment in both domestic and international markets, a current year increase in
discretionary spending on marketing and advertising, an increase in amortization costs
associated with restricted stock compensation, and higher direct and channel selling
expenses resulting from the increase in net sales and employee salary increases.32

Communication Process

There is no personal follow-up to customers after they have made their purchase
at Apple. However, there are frequent emails sent out on a regular basis with updates
in order to make sure that everything is running properly and their customers’ laptops
are up-to-date with the most recent technology and programs. This is an excellent
tactic because it makes it much easier on the consumer and prevents them from having
to remember or find a way to update their laptop themselves. But some customers
might feel more appreciated and become more frequent buyers if Apple were to make a
personal phone call to them. Apple should call their customers personally over the
phone at the three-month and 1 year post-purchase period.

Replace with database/direct marketing?

Database marketing would not be appropriate for this company since it is such a
large company with a diverse market that it would be too much information to obtain.
Apple already uses direct marketing through their website and magazine. It allows
customers to place orders either online or through mail by the magazine. This would not
be a suitable replacement for Apple’s sales force since they need individuals that are
able to explain the inner workings of the Apple operating system to those buyers that
are unaware. Sales of laptops would probably decrease drastically if Apple were to
eliminate their sales force.

31
Marketing, Third Canadian Edition. Lamb, Charles W. Toronto, Ontario 2006 Pg 620
32
Apple Computers 2004 Annual Report on 10-K

16
 d. Sales Promotion

Apple offers its current and potential customers sales promotions, such as free
shipping on certain products, or “buy any new iMac and get 50% off Microsoft Office”, in
order to get them to purchase their products for the first time or again33Due to some of
Apple products being a little more expensive then many other brands, the company
must offer some incentives to convince people to try their products out. Sales
promotions that the company currently uses are: in store demonstrations of how to use
Apple products, workshops to assist in learning programs, and rebates for educators.
All of these techniques are directed towards the final consumer or potential buyers
because they are the ultimate users of the product.

e. Price

Apple currently uses two different pricing strategies. With its lower end laptops
like the iBook, Apples uses the status-quo method of pricing. This can be seen as in
relation with its competitors (Dell, Toshiba, Compaq, and MDG) that have similar
features, Apple prices accordingly. However with higher end laptops consumers are not
as price sensitive and seem to use more of a profit approach since there are not many
laptops that are this costly with the same capabilities. (Exhibit Thirteen)

Consumers that require Apple Notebooks such as the Powerbook G4, have no
other option but to purchase at the price Apple has set. The Powerbook G4 is a very
graphic design orientated notebook with no other notebook alike it in the market. For
this reason the consumer has no choice but to purchase the G4 at the price that is set.

If Apple increases the price of its low-end notebooks like the iBook, one can
assume that it will realize a decrease in revenues. This being true because customers
searching for laptops of this caliber are quite price sensitive and are willing to “shop” in
the marketplace. For this reason, if Apple were to increase the price of the iBook,
consumers would not purchase the notebook, thus seeing a decrease in revenue.
However, high-end notebooks like the G4 are different in terms of price changes. If
Apple was to increase the price of its G4 one can assume it would realize an increase in
profits. This is demonstrated because the G4 consumers are not very price sensitive
and would still purchase the notebook even at the higher price. This in turn would lead
to higher revenues in the G4 sector.

Apple makes use of some coupon and rebate offers. Currently Apple is offering
a $100.00 rebate on an HP printer if one purchases a Mac. Mac has also cut prices by
up to 15% for students in order to try and gain back the market share that it lost in the

33
http://www.apple.com/promo/officebonus/?cid=WWW-OFFICE051119-IPLAM

17
education area. It hopes by doing so that it will be the education leader in the computer
market once again.34

Since Apple offers such highly technological equipment, it does not offer
introductory or lower pricing. Apple relies on word of mouth and consumer reviews
since it cannot ensure that consumers try the product before they purchase it. Apple,
however, does attempt to offer its notebooks at a rebate for students to attract this
target to try its laptops.

To keep with normal industry standards Apple accepts all methods of payment
including debit, credit, cheques, cash, and money order.35

34
www.apple.ca
35
www.apple.ca

18
Appendix

Exhibit One: The Apple Computers Mission Statement.

Retrieved from http://www.apple.com/investor

Exhibit Two: Morningstar Stock Snapshot – Apple Computers

Retrieved from
http://quicktake.morningstar.com/Stock/Snapshot.asp?Country=USA&Symbol=A
APL&stocktab=snapshot

19
Exhibit Two (Continued): Morningstar Stock Snapshot – Apple Computers
Retrieved from
http://quicktake.morningstar.com/Stock/Snapshot.asp?Country=USA&Symbol=A
APL&stocktab=snapshot

20
Exhibit Three: Apple Ecological Chart – Power Reductions

Exhibit Four: Apple Competition Graph

21
Exhibit Five: Demographics Graph

22
Appendix Six: Apple Computers Sales Figures

23
Exhibit Seven: Consumer Reports 2005 Brand Repair History

Readers report on more than 134,000 desktop and laptop computers.

The charts below show the percentage of computers ever needing a repair or having had a serious
problem, according to our 2005 Annual Questionnaire. Any brand's repair history includes models that
may vary in reliability, and design or manufacturing changes can also affect a brand's repair record. Still,
your chances of getting a reliable computer are better when you choose a brand of proven reliability.
Gateway was among the more repair-prone brands of desktop. Learn more about our repair history data
in the brand repair history FAQ.

Laptops

Based on more than 49,000 laptop computers purchased between

2001 and 2005, according to responses to our 2005 Annual
Questionnaire. Data were standardized to eliminate differences linked
to age and use. Differences of 3 or more points are meaningful.
Desktops

Based on more than 85,000 desktop computers purchased new

between 2001 and 2005, according to responses to our 2005 Annual
Questionnaire. Data were standardized to eliminate differences linked
to age and use. Differences of 4 or more points are meaningful.

24
Exhibit Eight: Consumer Reports Quick Recommendations, September 2005

The display is more important in choosing a laptop than a desktop. Of the tested models, all but those
with 1024x768-pixel displays and Toshiba (10) are wide-screen.

The Ratings rank by performance and features. Weight, brand reliability, and tech support may matter
more. Quick Picks takes those and other factors into account.

Quick Picks

For reliability and the best tech For a mini home entertainment
support: machine:
16 Apple $1,200 8 Toshiba $2,300

Apple has been a reliable brand and
has the best tech-support record. The
Apple (16), roughly a budget model,
scored on a par with Windows
workhorses but has a smaller screen
and lower display quality than some.
The Apple (15) did well, too, but it's
costly, and battery life was lackluster.
It has a wide screen, a TV tuner, good
sound, and many features. Weight and
battery life make it best suited for
home use.
For a good value in a lightweight
model:
11 Dell $1,655

For good value in a budget laptop: This is the lightest and least costly
1 Dell $750 slim-and-light. It's full-featured, with a
6 Toshiba $700 DVD writer, though its sharp 12-inch
display was the smallest we tested.
Battery life for the Dell (1) topped 4
hours. The Toshiba (6) has built-in Wi-
Fi and more expansion capability, but
lackluster battery life. Both lack a
memory-card slot and a DVD writer.
Both brands have provided
undistinguished tech support.

For a reliable workhorse with very

good support:
14 IBM $1,450

This offers good performance,

excellent expansion capability, and
good battery life. IBM has been a
reliable brand, and its tech support
scored highly.

25
Exhibit Nine: The iPod Generations

First Generation Second Generation Third Generation

Fourth Generation iPod Mini iPod Photo

26
Exhibit Nine Continued: The iPod Generations

iPod Colour iPod Shuffle iPod Nano

27
Exhibit Ten: The Apple Warrantee Plan

28
Exhibit Eleven: Example of and Apple Advertisement

Exhibit Twelve: Apple Computers Operating Expenses, 2002-2004

29
Exhibit Thirteen: Laptop Price Comparisons

30
Exhibit Thirteen Continued: Laptop Price Comparisons

31
Additional Information/Media

32
Additional Information/Multimedia Continued

33
Additional Information/Multimedia Continued

34
Additional Information/Multimedia Continued

35