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The iPhone is a line of smartphones designed and marketed by Apple Inc. Apple Inc is a US company based and the iPhone runs Apples iOS mobile operating system, originally named “iPhone OS”. The first iPhone was released on June 29, 2007 the most recent iPhone, the 6th-generation iPhone 5, was released on September 21, 2012. The user interface is built around the device’s multi-touch screen, including a virtual keyboard rather than a physical one. The iPhone has Wi-Fi and cellular connectivity (2G, 3G and 4G (iPhone 5 only).
It was a mobile phone, but like nothing the world had ever seen before. It was revolutionary and would change the way people interacted with the world forever. This phenomenon of a smartphone called iPhone started five and a half years ago, when Steve Jobs took the stage at MacWorld and introduced iPhone to the world. iPhone was designed with 100% of screen without a keypad button and it was created to Apple’s head of design, Jonathan Ive.
Along the revolution of iPhone, starting with the iPhone 3G, it came bundled with a range of apps which something that never been offered by any other phones previously. This included Google Maps, YouTube, Stocks, Weather, Games and thousands more which are still seen on iPhones today. This apps impressed the world where various of things can be done at just a finger tips.
iPhone Characteristics
The Apple Iphone is showing better sales and brand recognition because of product characteristics. There are several great and special characteristics to the iPhone:
Innovative – has an innovative touch screen that is specially patented and the function is extended from other mobile.
Quality – iPhone is built with most scratch resistant screens and has a fine metallic finish that is durable and light. The software suite is also resistance to computer viruses.
Functionality – iPhone evolve from one generation to another. The function will increase and extend for each development. The function and features is further discussed in the topic of Development of iphone.
Appearance – The sleek styling of the iPhone gives the device its characteristic appearance. The design and size of iPhone are able to capture attention of customer because of its stylish and elegant design.
Data Transform and communication unified – Speed up smart decisions with application that enable you to track a range of business activities, monitor current sales figures, generate reports, analyze business data and make approvals Transform iPhone into an office phone by connecting to your organization’s telephony infrastructure. It is also able to make calls over a Wi-Fi network and manage sophisticated call handling.
iPhone Target Market
Professional and Corporate Business Users
iPhone is a well-known brand for business people. Existing software is well established and compatible with many products for this market. The market is familiar with Palm products; significant switching costs are involved in going to an iPhone. These people need iPhone to coordinate their busy schedules and communicate with colleagues, friends and family. Coprorate People like from World Wide Technology are significantly rely on iPhone to communicate, coordinate to each other and maintain network infrastructures in the field.
Students
iPhone secondary consumer targets are high school, college and graduate students who need one portable multifunction device. Mainly this market will be replacing their iPod and cell phone with the iPhone. Age targeted group range are from 15 to 25 years.
Young and successful male
According to Solutions Research Group, the average iPhone customer is a 31-year-old man with a college degree and an income of $75,600 per year. A salary 26 percent higher than the American average.Almost half (43 percent) of all likely buyers lived in technically adept states such as California and New York, but only 28 percent were female. Younger buyers dominated, with 63 percent aged 34 or younger. Successful younger men were the target audience that Apple had focused on.
One month prior to the release of the iPhone, Solutions Research Group profiled a cross-section of those aware of the phone. The forecast of potential buyers for the day of the release ranked a majority of T-Mobile customers, AT&T’s only GSM-based product competitor, at 15%. The second largest group expected to purchase the new iPhone was AT&T’s existing customer base, at 12%. The Solutions Research Group also found that 72% of males, versus 28% of women were most likely to investigate the phone at its minimum price of $499. The obvious current target audiences for the Apple iPhone include young people between the ages of 20 and 35.
iPhone Marketing Strategy
As with all Apple marketing, the iPhone marketing strategy is very clear, simple and clever. With the plain and simple apple icon, Apple focuses on the pure innovative style of their products. The ground-breaking style of the iPhone was touted for months before the initial release and has remained the best of the best when it comes to cell phones over the past several years. Before the iPhone’s official release, Apple ran four television commercials promoting the new cell phone. The first of the commercials portrays the new iPhone as the next step up from the popular iPod. The first four iPhone commercials flaunted the convenience, innovation, and usefulness of a single product with the functionality of not only a phone, or a music device, but a product that can, among other things, listen to music, watch videos, view photos, make conference calls, check e-mail, browse the web, and view maps.
Development of the iPhone
The first generation
In 2007, Apple introduced another outstanding product, the iPhone. The first edition of iPhone was launch on January 9, 2007, at the Moscone Center in San Francisco. During that time, it is described as a revolutionary product since it is literally five years’ ahead of any other mobile phone. There are two initial models that had been ready to be marketed. 4GB model and 8GB model went on sale being fully marketed by 2008. The principal advantage of the iPhone was the way it could use software applications. These software applications delivered similar content to the iPhone that was in iTunes. The iPhone had the capabilities of the iPod and would synchronize when connected to a computer.
iPhone 3G & iPhone 3GS
iPhone are then further developed to iPhone 3G. This new model was launched on July 11, 2008 in eighty countries and territories. And on June 8, 2009, Apple once again announce the release of iPhone 3GS along with plans to fully marketed it in U.S., Canada and major European countries. The enhancement from first generation iPhone to iPhone is more in term of physical features such as size, weight and memory storage, while, development of iPhone 3G to iPhone 3GS has improve in term of operating system and processor.
iPhone 4G & iPhone 4GS
iPhone 4G was released on February 10, 2011. The marketing point of iPhone 4G is using video calling feature (Apple promote it as FaceTime) as main strong points compared to other competitors and it predecessors. The iPhone 4 runs using the same operating system used on Apple’s product such as prior iPhones, the iPad, and the iPod Touch which is the iOS operating system. The unique design of iPhone 4 compared to the last 3 generation is that it incorporates an uninsulated stainless steel frame that acts as the device’s antenna. Later, on October 4, 2011, the fifth generation of the iPhone has been released. It retains the exterior design of the iPhone 4, but new application voice recognition system known as Siri and a cloud storage service named iCloud is introduced.
iPhone 5
Introduction to the sixth generation iPhone is announced on September 12, 2012. Among all the iPhone that has been released, the iPhone 5 shows the most significant change in physical features. The phone portrays a slimmer, lighter model that introduces a higher-resolution, 4-inch screen to the series and the chip is 22 percent smaller than the iPhone. Despite of that, it is twice as fast, doubling the graphics performance of its. It is also operating using the new Apple’s mobile operating system known as iOS 6.
Competitors
Although iPhone has become a phenomenon in world of mobile, there is a few close competitors that can be directly compared with iPhones and giving customers a second though. The two closest competitors to the iPhone is Samsung Galaxy S-III and Nokia Lumia 920.
Samsung Galaxy S-III
The Samsung Galaxy S-III was unveiled on 3 May 2012 in London and officially released in 28 European and Middle Eastern countries on 29 May 2012, before being progressively released in other major markets in June 2012. It was designed using the concept of touchscreen, slate-format Android smartphone and marketed by Samsung Electronics. Samsung Galaxy S III is a extended and improved version of Samsung Galaxy S II. It includes additional software features, expanded hardware, and a redesigned. The S III uses quad-core processor, and employs interesting features such as intelligent personal Helpant, eye-tracking ability, increased storage, and a wireless charging option.
Nokia Lumia 920
Nokia Lumia 920 is a smartphone manufactured and marketed by Nokia. It begins to be available at the market starting on September 5, 2012. The interesting features portray by Nokia Lumia 920 is it has a 1.5 GHz dual-core Qualcomm Krait CPU and a 4.5″ IPS TFT LCD display. It is also built with a high-sensitivity capacitive touchscreen covered by curved Gorilla Glass. Using Windows Phone 8 as the operating system, Nokia Lumia 920 does have its own attraction especially to working users. It supports inductive charging (it can be charged by being placed directly onto a charging pad) compatible with Qi Inductive Charging. One of the advantage is it features an 8.7 megapixel PureView camera with optical image stabilization for still images and videos. It comes with 32GB internal storage, but the only disadvantage is it has no card slot. Memory is limited to the built-in storage only.
Malaysia Context
Market Structure
Demand & Supply
Pricing Strategy & Elasticity
Market structure
By analyzing the straits of iPhone such as the price setting, competitors and product differentiation, it is shown that iPhone display an oligopoly market structure. Oligopoly market structure is when the market is dominated by a few numbers of sellers, which each offer similar or identical products. Factors that classified iPhone into oligopoly market structure are:-
Entry and exit
The barriers of entrance are high. iPhone had to face challenges such as economies of scale, patents, access to expensive materials and complex technology. There might be also restriction from government regulation resulting difficulties for new firms to enter the market.
Number of firms
There are only few firms that involve in producing the similar products. iPhone is currently competing with several smart phone models such as Samsung Galaxy S-III, produce by Samsung and also Nokia Lumia 960 manufactured by Nokia. These are the companies that the action of one will influence the others in terms of profits. If Apple decide to change its pricing structure for iPhone, it will bring impact all oligopolies firm’s profit collection.
Demand and Supply
Looking at a Malaysia context, Apple iPhone can be considered as a luxury and premium product. iPhone arrived Malaysia somewhere in the first quarter of 2009, and it was brought in by telecommunication company, Maxis and later followed by DiGi and recently Celcom. With its unique features and designs it attracts the market accordingly. iPhone has revolves over time through their features, design characteristics and so on. This will be discussed later under the development of iPhone. The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. Apple received quite an impressive demand for their product namely iPhone.
Up to date, Celcom Axiata has revealed to MalaysianWireless early this month that it has got over 190,000 active iPhone users in their network. In comparison to Celcom, it is believed that Maxis has some 4 million smartphones users where about 60% of them are using prepaid. Meanwhile, DiGi claims that it has over 5.5 million mobile internet users. Both Maxis and DiGi have not revealed their actually breakdown on numbers or type of smartphones users in their network yet. The figures revealed by Celcom show a tremendous demand and supply as compared to a study done in 2010 where only about 132,228 users of iPhone. With this figures, we could see the demand of an iPhone in Malaysia had increase from time to time.
In the law of demand, it says that the lower the price of a good, the larger is the quantity demanded and the higher the price of good, the smaller is the quantity demanded holding other variables constant. Generally in an economic form, if Apple increases the price of iPhone, quantity demanded of the Apple product will be decrease. This is because iPhone is considered as luxuries goods where people can still live without using a smart phone. A rational consumer will tend to choose for substitution brand such as Samsung or Nokia Lumia which produce a most likely the same product. Therefore, an increase of price will decrease the demand of a good. In other words, the price elasticity of demand for Apple product is elastic whereby increase in price will result a huge reduction on the quantity demanded of the good. This statement can be supported through the graph below.
Price of iPhone (RM)
Quantity of iPhone (units)
P2
P1
Q1 Q2
The graph above shows the relation between the price and demand of the iPhone. Assume that the price of a iPhone increased and the demand for the iPhone is elastic. Initially the market price of iPhone is set at P1 and the quantity of demand is set at Q1. When there is an increase of price, there will be movement along the demand curve. The price will goes up from P1 to P2. Increase of price will decrease the quantity demand of the iPhone because people will look for substitution brand. Therefore, quantity demand will decrease from Q1 to Q2. From the above drawing, we can see that the demand curve is flatter. This is because changes of price will leads to a bigger impact on the changes of the quantity demand.
Pricing Strategy
On the 26 June 2007, the share price of Apple fell by 2 per cent on the face of it a fairly trivial event except that it was about to launch (exclusively in the USA) the arguably most-hyped mobile device in history known as the iPhone. The iPhone is a variant of what are generally categorised as smartphones, As smartphones go, the iPhone was not unduly expensive at $499 for the entry level model, nor was the scale of monthly service charges which were set between $60 and $100 in conjunction with a two-year contract. But the Apple shareholders were edgy: the value of Apple had risen by $34 billion since the iPhone had been announced to the world and they stood to lose much of their gains if the iPhone proved to be a one-week wonder
Prices1st generation 4G iPhone $499, 8G iPhone $599.Current iPhone 4 16G $199, 32G $299 with two year contract.iPhone 3GS still available at AT&T for $49 with two year contract. iPhone combines three products, is a revolutionary mobile phone, a widescreen iPod with touch controls, and a breakthrough Internet communications device with desktop-class email, web browsing, maps, and searching- into one small and lightweight handheld device. iPhone also introduces an entirely new user interface based on a large multi-touch display and pioneering new software, letting you control everything with just your fingers. So it ushers in an era of software power and sophistication never before seen in a mobile device, completely redefining what you can do on a mobile phone. Loyalty the iPhone is oriented more toward to the entertainment market than to the business market.
0 Q1 Q2
R
Total Revenue (RM)
Quantity of iPhone (units)
Maximum Total RevenueAn oligopoly is like monopolistic competition where it lies between perfect competition and monopoly. Apple who produced iPhone which is identical to some other smartphones in the market need to stay aware of the pricing strategy that best suits them in order to retain the loyal consumers. On top of that, before setting up a price of the product, they have to aware whether the demand on their product is elastic or inelastic in the market. If the demand of their product is elastic in the market, setting up a higher price on the product might cause them to lose customer. In brief, demand elasticity will affect the total revenue of a company. From the theory of economics, a luxury product will always have an elastic demand. However, Apple understood the theory and they applied with their pricing strategy. This is vital for them to preserves their market’s value until today. Apple understands the market demand very well and they always brings the new features and new design to attract the market. The graph below will show the relation between the price cut and total revenue.
Suppose the demand of iPhone is elastic, the total revenue will increases as there is a price cut – as shown at the left area of the graph. If the demand of iPhone is inelastic, the total revenue will decrease if there is a price cut – as shown at the right area of the graph. When the demand of iPhone is at the unit of elastic, the maximum of total revenue can be achieved – as shown at the highest point of the revenue curve.
Conclusion
It is undeniable that iPhone has a very unique and good market value as the company has developed very well. This is due to good business strategies such having the highest prices and lowest unit costs in the industry. The price of an iPhone is most likely the same from time to time and from our group point of view, the price elasticity of demand on iPhone in Malaysia is not elastic but it is inelastic in reality. The tremendous users of iPhone from 2010 to 2012 as discussed earlier proved this statement well. iPhone have its own loyal consumers and the product are recognized by public thus increasing of price for the new launched of iPhone will not really affect the sales in the market. For those who are affordable, they will still demand for the iPhone instead of other competitors. The features and unique design that attracts the consumers instead of the price. This is due to Apple as a premium brand, trusted quality and the worth-to-buy that lies behind it.
On top of that, iPhone in Malaysia are being sold by telecommunication providers such as Maxis, DiGi and Celcom. These telecommunication providers offer installment payment together with the data plan as part of the marketing strategy. This makes iPhone affordable as consumers able to settle the payment in a longer period. Due to their secrecy, innovation, branding and product to product connectivity and compatibility, iPhone is the most sought after mobile device and is the market leader in the mobile market.
