INNOVATION MANAGEMENT AND NEW

PRODUCT DEVELOPMENT

NAME: TCHANY TCHOUAMENI SYLVAIN STEPHEN

ID: TP016888

MODULE CODE: BM050-3-3-IMNPD

INTAKE: UC4F1501ME

HAND OUT DATE: 21 JULY 2015

HAND IN DATE: 12 OCT. 2015

Marking Scheme

Percentage
Question 1
1 Background of the case should be clearly discussed. 10%
In depth discussion of market entry and launch activities of Apple
2 20%
Watch and its impact.
Able to relate to and discuss the brand management strategies of
3 20%
Apple products.

Total 50%

Question 2
Thorough discussion of the internal and external factors affecting
1 20%
industry. (SWOT)
Feasible application of analysis to develop growth strategy
2 20%
(Ansoff).
Use of proper formatting, structure, language, grammar,
3 10%
referencing, and acknowledgement of external sources.

Total 50%

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EXECUTIVE SUMMARY

This report analyses the Apple watch market entry, launching activities, brand
management, product platform, brand extensions, market evolutions, competitive
evolution, external and internal factors, and growth strategies. From the analysis it
emerges that Apple watch is a successful brand which positions itself as a luxury and
fashionable product and product a healthier lifestyle. It also emerges that, Apple is a
follower as far the smartwatch business is concerned that has managed to exploit
advantages of that of being a follower to gain the largest market share of smartwatch.
An analysis of the current Apple watch platform reveals that enhancement needs to
be made so to meet customers satisfaction, an enhancement that will lead to the
Apple watch next generation that will probably be named Apple Watch 2, equipped
better features. It has emerged from customers review that Apple needs to invest
more in research and development as they have been many complaints pertaining to
the quality of the watch. Though Apple watch market segment consists of people who
already have an iPhone, analysis shows that can also benefit from increasing it market
segment by making a cheaper version of apple watch for college students, and by
widening its geographical market. The analysis also shows that Apple faces internal
and external factors that influence its revenues positively and negatively.

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 CONTENTS

EXECUTIVE SUMMARY.................................................................................................... ii
CONTENTS .......................................................................................................................... iii
TABLE OF FIGURES .......................................................................................................... iv
TABLE OF TABLES ............................................................................................................ iv
QUESTION I ......................................................................................................................... 1
1.1 Introduction to Apple as a company .................................................................. 1
1.2 Introduction to Apple Watch .............................................................................. 2
1.3 Background of the case ...................................................................................... 2
1.4 Market Entry ...................................................................................................... 2
1.5 Launching Activities .......................................................................................... 4
1.6 Brand management ............................................................................................. 6
1.6.1 Buyer Behavior ....................................................................................... 8
1.7 Product Platform and Brand extensions ............................................................. 9
1.8 Market Evolutions and Competitive Evolution ................................................ 10
QUESTION 2 ....................................................................................................................... 13
2.1 External Factor - PEST Analysis ..................................................................... 13
2.2 Internal factors Analysis ................................................................................... 15
2.3 Strengths ........................................................................................................... 15
2.3.1 Weaknesses .......................................................................................... 15
2.4 SWOT Analysis................................................................................................ 15
2.5 Growth strategy ................................................................................................ 20
2.5.1 Market Penetration ............................................................................... 20
2.5.2 Product development ............................................................................ 21
2.5.3 Market development ............................................................................. 21
2.5.4 Diversification ...................................................................................... 21
Conclusion ........................................................................................................................... 23
References ............................................................................................................................ 24

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 TABLE OF FIGURES

Figure 1-1 : Global Smartwatch Vendor shipment and market share in Q2 2015(Source
Strategy Analytics) ................................................................................................................. 6

Figure 1-2 : Global Smartwatch Vendor shipment and market share in Q2 2015(Source
Strategy Analytics) ............................................................................................................... 10

Figure 1-3 : Numbers of billions dollars. Source: Apple financial statement. July,
2015(macworld.com, 2015) ................................................................................................. 12

TABLE OF TABLES

Table 1-1 : Advantages and disadvantages of the follower ................................................... 3

Table 1-2 : product, price, promotion and place .................................................................... 6

Table 1-3 : product, price, promotion and place(Continuation Table1-2) ............................. 8

Table 2-1 : External Factors Analysis .................................................................................. 13

Table 2-2 : External Factors Analysis(Continuation of Table 2-1) ..................................... 14

Table 2-3 : SWOT Analysis ................................................................................................. 16

Table 2-4 : SWOT Analysis(Contination Table 2-3) ........................................................... 17

Table 2-5 : SWOT Analysis(Contination Table 2-3) ........................................................... 18

Table 2-6 : Apple watch Ansoff Matrix .............................................................................. 22

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 QUESTION I

1.1 Introduction to Apple as a company

Formerly known as Apple Computer Inc., Apple Inc., is an American

multinational corporation that designs, manufactures, and commercializes electronic
products such as consumer electronics, personal computers, computer software,
commercial servers, etc. Founded in 1976 by Steve Jobs and Steve Wozniak, whom
started working together in 1970 to create a personal computer, Apple computer was
incorporated in 1977 in Cupertino, California, where the main headquarters is located.
Apple is also a digital distributor of media content and online services, and has a
string of retail stores known as Apple Stores. While Apples current vision is Apple
is committed to bringing the best personal computing experience to students,
educators, creative professionals and consumers around the world through its
innovative hardware, software and Internet offerings., its current mission statement,
Apple designs Macs, the best personal computers in the world, along with OS X,
iLife, iWork and professional software. Apple leads the digital music revolution with
its iPods and iTunes online store. Apple has reinvented the mobile phone with its
revolutionary iPhone and App Store, and is defining the future of mobile media and
computing devices with iPad, which is profoundly different from Steve Jobs
original ideals, ideals ingrained in his mission statement: "To make a contribution to
the world by making tools for the mind that advance humankind.
Apple is best known for its hardware products, and amongst its core product lines are
the iPhone, iPad, iPod, and Macintosh computer line. Apple recently added a new
product to its portfolio, the Apple smartwatch.

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1.2 Introduction to Apple Watch

Back in 2011 there were several rumors of an Apple-developed wearable

device, a device conceptualized as a variation of the iPod; several other hearsays
ensued after, and ultimately the Apple smartwatch was released on April 24, 2015.
Available in three variants (Apple Watch Sport, Apple Watch, and Apple Watch
Edition), Fitness tracking and health-oriented capabilities, iOS integration, and other
Apple products and services are some of the features integrated in it.

Discernible by its various casings and first or third party interchangeable

bands, Apple Watch runs iOS 8.2 or later and depends on a wirelessly (Bluetooth or
Wi-Fi) connected iPhone (5 or above) to execute many of its default functions (e.g.
calling and texting) (Tim Cook, 2014).

1.3 Background of the case

Apple Inc. had remained successful in a difficult operating environment

through the first half of 2014. And because of that, the company needed a new
products to perpetuate its success as the slow demand and intensifying competition
had been threatening the iPhone and iPad sales. The Apple smartwatch was released
in 2015 and was immediately a massive success. In this report, activities pertaining
to the development of the Apple smartwatch, the market strategies employed and the
factors that impacted Apple smartwatch and Apple as a company will be analyzed.

1.4 Market Entry

Entering a new market depends on the timing, timing that characterizes a

company either as a first mover or a follower. As far as the smartwatch business is
concerned, Sony Ericsson was the first-mover. Other potential competitors such as
Samsung, Apple, and etc are just followers. Being follower presents some advantages
and disadvantages, and Apple certainly experienced them:

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 Table 1-1 : Advantages and disadvantages of the follower

Advantages

As a follower, Apple had the opportunity to observe how well the

smartwatch was received by the general consumer public before
Market
getting involved. This helped alleviate a number of risks and
Viability
limit the amount of research and development invested in
determining public perception.

Tweaks and Apple had the opportunity to observe early movers difficulties
Improvements and made adjustments before jumping into the business. This not

only reduced risks for losing money, but it also positioned Apple
to quickly introduce its own new and improved version of
smartwatch

Limited Apple had the advantage of observing how the smartwatchs

Financial Risk features, price points and functionality were received, and then
adjusted its own approach accordingly. This means less time and
money put into creating prototypes, conducting market studies.

Disadvantages

Timing of the Timing of the product certainly affected Apple because

product launching new products takes time and resources to develop.

Acceptance of Buyers may not accept Apple smartwatch as they may view it as
the market imitations

follower must Wining market share via imitation is difficult for a follower. As
play catch-up a result, Apple had to design an innovative smartwatch to allure
customers, innovation which can be expensive.

Having decided the type of market entry, Apple had to outline the launching
activities for its smartwatch.

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1.5 Launching Activities

The launching of Apple smartwatch involved 3 strategies: the pre-launch, the

launch, and the post launch strategies. In executing this strategies, Apple Inc.
exploited both the pull and push strategy in its communication with customers: The
former by advertising and promoting the product by itself using the full spectrum of
the communication mix channels, and the latter by relying on the selected exclusive
distributor region wise to advertise the Apple smartwatch. This way, the customer
was approached from two different sources, creating differentiation from the
competitors and delivering the product message with added value service or
application.

Table 2 : Apple Smartwatch Launching strategy

Strategy Activities involved

Advertising campaign
Blogs Opinion Leaders & specialized websites
Pre-
launch Sneak Peaks on R&D info
Buzz & viral Marketing
Promotion campaign
Apple.com
Printed Media (e.g. Vogue, on the wrist, etc)

Launch TV(Apple Live, BBC, YouTube, etc)

Outdoor Media
Social Media Advertisement (Facebook, Tweeter, Myspace, etc)
Apple press event

Carrier handheld advertisement

Post- Apple.com
launch Independent review Websites
Digital Campaigning

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 Table 3 : Other activities involved during the Launch

A message was sent to every Apple customer few

Email Marketing
weeks prior to Launch

Extensive introduction to the advantages the use of

Apple.com
Apple smartwatch brings.

Display ads Banner Ads, Interactive Ads

Blogs Industry blogs, forums, Discussions boards

Search Engine marketing Affiliated marketing, other paid listings

Considering all the activities involved in the Apple smartwatch launch, it can safely
asserted that the launch was mostly web based.
The Apple website does not have any explicit positioning statement for the
Apple smartwatch; however, considering the price starting at $349, considering all
the leading luxury fashion publications such as vogue, Self, Style, East touch, etc in
which the Apple smartwatch was advertised, considering the choice of premium
materials Leather, stainless steel, even solid gold and styling for the watch, it can
be asserted that Apple positions its Apple watch as a luxury fashion product.

The analytics results of the global smart watch vendor shipment and market
share in the second quarter of 2015(Figure 1-1) reveals that, Apple gained a massive
75.5% of the global smartwatch marketshare in the second quarter of 2015 with the
launch of the Apple Watch in late April. It also shows that Apples entrance stole a
huge portion of Samsungs marketshare as the previous smartwatch market leader
dropped 66 points from 73.6% marketshare to a single digit 7.5 %( Strategy
Analytics, 2015); therefore, it can be safely asserted that the launching activities were
successful in positioning Apple Watch.

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 Figure 1-1 : Global Smartwatch Vendor shipment and market share in Q2
2015(Source Strategy Analytics)

1.6 Brand management

1.6.1 Analysis of Apple smartwatch distinctive identity and Added value

Providing the product or service to the customer, the marketing team outlines
the best set of characteristics to attract customer (Solomon et.al, 2012). A single
marketing activity does not work to reach the organizations objective; thus, the
independent attributes of product, price, promotion and place sets the target to meet
that objective (Solomon et.al, 2012).

Table 1-4 : product, price, promotion and place

product, price, promotion and place

The Apple has designed the watch by considering the vast extend of
consumers and their options; thus, the 3 variants of Apple
Product smartwatch: the Apple watch sport offers a causal, sporty and elegant
look. The 2 different sizes of this watch allows men and women to
get the one that suits them. The vast variety of straps allows
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 consumers to interchange straps, making them look fashionable and
opulent.

Apart from keeping customers healthy by monitoring their fitness and

keeping track of it, the watch gives a sense of a more personalized
touch by providing features such as sending actual heartbeat signal,
sending instant scribbling drawings, a and vibration signal with just
taping, and most of all senses the users response pattern and provides
options based on that (Apple, 2015).

The cheapest option, the 38mm Apple Watch Sport, is available from
299, despite costing Apple just 55 to build, while the larger 42mm
model costs 339. The more expensive Apple Watch version is
available from 479, going up to 949 depending on the case and
band combination. For instance, a 38mm Apple Watch with a Black
Classic Buckle strap costs 559, while the 42mm model is 50 more
Price
expensive. The Apple Watch Edition, which is crafted from rose or
yellow 18 carat gold, is the most expensive. It's available at the Apple
website from 8,000, going up to 13,500 for the most expensive
version ((Theinquirer, 2015). Proving a large array of price like this,
Apple ensures that each of its customers can get a watch according to
their budget.

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 Table 1-5 : product, price, promotion and place(Continuation Table1-2)

The Apple watch was unveiled at an international scale by Tim cook,

CEO of Apple Company in USA earlier in September 2014(Times,
2014). Apple uses social media to attract the attention of consumers.
Apple YouTube channel also provides customers with detailed
specification of the watch. This promotion strategy not only enables
Promotion
Apple to emphasize on the value added by product to the lives of
individuals, but also makes the product accessible, relevant while
highlighting personal choice of consumers. It also focuses on focus
on the healthier lifestyle with features such as fitness tracker Apple
watch can bring.

1.6.2 Buyer Behavior

Learning about the whys of consumer buying behavior is not so easythe

answers are often locked deep within the consumers mind. Factors influencing buyer
behavior are social, cultural, personal, and psychological. Reading the reviews of
Apple watch may help understand what they consider benefits and the values
promoted behind their choices: some users of the apple watch claim that buying Apple
watch is not about time, they know the time satisfactorily from their iPhone,
computer, and clocks, as well as intuition and the sun, they say, but is about Fashion.

Other claim that it is not about fashion, but about the real value the integrated
apps within Apple Watch bring more closely into our lives (Anon, 2015).

Other say that they like to exercise and Apple watch tracks how much they
move, exercise, and stand. Then converts this information into beautifully visualized
data and provides tools for analysis as well as guidance for how they can be healthier.

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1.7 Product Platform and Brand extensions

Nowadays, several companies are developing product platforms and

designing families of products based on these platforms to provide enough variety for
the market while keeping the necessary economies of scale and scope within their
manufacturing and production processes. Apple is one of these companies and the
product platform for its three variants of Apple watch (Apple Watch Sport, Apple
Watch, and Apple Watch Edition) comprises this set of common components: the
operating system (watchOS), the processor (Appel S1), the memory(512MB RAM),
display(AMOLED: 38mm and 42 mm).

Although this platform makes Apple Watch one of the best smartwatches on
the market, it can still be enhanced; for example, the next series of Apple watch may
have larger memory and screen, along with an upgraded operating based on the this
platform so as to improve the speed and make the user experience a lot more
enjoyable.

According to CNET.com, a website for high-tech review, the customer

reviews indicate that Apple Watch scores only five for the battery life and seven over
ten for performance; therefore, the next generation of Apple watch may have a long
battery life, a faster operating system, a larger memory size to address the
performance issue, a larger screen and a mini camera onboard.

With the trust that Apple has already with its customers from the first watch
coupled with the enhancements mentioned earlier, along with the luxury and
fashionable aspects of Apple watch maintained, Apple can extend its brand by naming
its next Apple watch generation Apple Watch 2. Naming the next Apple watch this
way will convey to the customers that the new watch is faster, better, more stylish
and fashionable than the previous one.

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1.8 Market Evolutions and Competitive Evolution

Prognosticating on whether there will a lengthy introductory period prior to a

rapid growth requires an analysis of the Global Smartwatch Vendor shipment and
market share in 2015. Though Apple has not released its third quarter earnings from
Apple Watch yet, its global market share and shipments in relation to its counterparts
in the launch quarter or the quarter in which Apple watch was released can help
project.

Figure 1-2 : Global Smartwatch Vendor shipment and market share in Q2

2015(Source Strategy Analytics)

Figure 1.1 shows the analytics results of the global smart watch vendor
shipment and market share in the second quarter of 2015, according to strategy
analytics, a company specialized in Data and Analysis. Business Consulting. Custom
Research. According to this companys data, Apple claimed a massive 75.5% of the
global smartwatch marketshare only within the 4 months of the Apple Watch launch
(in late April 2015). It also depicts that Apples entrance stole a huge portion of
Samsungs marketshare as the previous smartwatch market leader dropped 66 points
from 73.6% marketshare to a single digit 7.5%(Strategy Analytics, 2015); therefore,

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it can be conjectured that there will not be a lengthy introductory before the any rapid
growth.

There are 3 variants of Apple watch; although all of them target people who
already have an IPhone, each of them focuses on a specific market segment:
according the Prezi(2015), the Apple watch Sport targets dedicated physically active
consumers between 25 and 50 years old, technological fans, with middle income; the
Apple watch focuses on early adopter consumers, between 25 and 50 years old,
technological fans with mid/upper income; and the Apple watch Edition focuses on
consumers with high income, between 30 and 50 years old, that use watch as a luxury
on a daily basis. According to Forbes (2015), teens and people in their early 20s
demonstrate the most interested in wearing smart watches, but they fall behind those
in their late 20s and 30s when it comes to ownership, likely because theyre priced
out of the market; therefore, Apple may consider in the future developing an
affordable, fashionable Apple watch for this demographic market segment.

Apart from widening its demographic target market segment, Apple can also
do so for its market geographic scope: according to the Macworld (2015), the graph
depicted in figure 1-3 indicates that most of the revenues of Apple comes from
Americas, Europe, and China. This implies that Apple is not well implanted in regions
such as Africa, Asia, etc, and therefore; can, in the future, can consider reaching that
potential market with its wearable.

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 Figure 1-3 : Numbers of billions dollars. Source: Apple financial statement.
July, 2015(macworld.com, 2015)

According to Strategy analytics (2015) the major competitors of Apple smart

watch Samsung Gear S2, Pebble steel, Asus Zenwatch, Sony smartwatch 3, and LG
Watch Urbane. Apart from this major players there are several other smartwatches on
the market, and the competitors will keep coming up at any time opportune, as the
smartwatch business is still in its nascent stage and the smartwatch can be used for so
many applications. When the competitors come, they will meeting more customers
needs, setting themselves apart with smartwatches that have larger screens, longer
battery life; that are cheaper and compatible with all operating system; and that do
not require to be tethered to a smartphone to function such as the Intel
smartwatch(International business times, 2015).

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 QUESTION 2

2.1 External Factor - PEST Analysis

External factors are the possible political, economic, and social-cultural and
the technological influences on the organization:

Table 2-1 : External Factors Analysis

Factors Descriptions

Apple performance is subject to political stability and

other political factors in each market it operates. A call by Dmitry
Gorotsov, a Member of Parliament in Russia to stop lawmakers
in the country using iPhones and iPads to protect themselves
from eavesdropping by foreign special services (Russia Today,
2014) can be referred to as an example where politics interferes
with business. This case shows potential impact of a political
Political
factor on Apple sales in Russia. Other factors are: government-
level trade restrictions and tariffs and industry-specific
government initiatives that might affect Apples performance.
Moreover, the nature of relationship between Apples home
country USA and other countries may impact the companys
performance in relevant countries due to its substantial share of
revenues from outside the US.

Apple revenues can be adversely impacted by recessions

and economic crises to a significant extent compared to other
Economic
businesses due to its choice of premium pricing strategy.

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 Table 2-2 : External Factors Analysis(Continuation of Table 2-1)

Factors Descriptions

For instance, as a direct consequence of economic difficulties

in Europe, Apple revenues decreased by 16% in the third
quarter of 2012 compared to the same period of the previous
year (TechCrunch, 2012). Apple is also affected by increasing
rate of inflation in the US due to its large amount of cash
Economic reserves. Moreover, due to the global scale of its operations,
Apple is a net receiver of currencies other than the U.S. dollar.
Accordingly, changes in exchange rates, and in particular a
strengthening of the U.S. dollar, will negatively affect the
Companys net sales and gross margins as expressed in U.S.
dollars(Apple Inc., 2014).

Apple has always been in forefront of innovation and is

known around the world for its premium quality, luxury
products, which add values to customers and reflect their lavish
Social-cultural
lifestyle, because of the high status Apples image conveys.
This image of Apple can boost the Apple watch sales and profit
of the company.

Technology has a short lifetime. That is why Apple

needs to upgrade their product more often so they will outdo
their competitors easily. Apple has invested largely in its
Technological
product research and development field and thus its products are
at the top of the new innovative products ranking (Appleinsider,
2015).

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2.2 Internal factors Analysis

2.3 Strengths

The iTunes platform produces a stream of revenue as it is available for various

Apple products, and is also compatible with Windows platforms. Having loyal
customers, Apple ought not to compete with competitors in terms of prices but in
performance and reliability. Apple has no debts, meaning that it is able to invest in
any undertaking it deems to be lucrative. Because Apple always improves its existing
products it will always be able to entice new customers or revitalize repeat purchases
from existing customers. Apples flagship retail stores acts as demonstration points
enabling skeptical customers to test features of Apples products. Finally apart from
acquaint customers with the features of all Apples products, Apples website is also
used as a sales channel to customers who prefer to purchase online and directly from
Apple.

2.3.1 Weaknesses

Apple relies too much on product launch to create attention for its products.
Furthermore, the company has weak relations with its key counterparts in the market
that has the potential to take Apple to new heights if it was willing to partner with
these organizations such as Microsoft Corporation. Finally, unlike the other
competitors who own strong presence in various markets, Apples presence is mainly
confined to in Japan, China, America and Europe.

2.4 SWOT Analysis

SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is

very important of finding out where a business currently is and where it could be
tomorrow. In order to find out Apples position and define the strategy to be used,
internal factors (strengths and weaknesses) and external factors (opportunities and
threats) are analyzed.

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 Table 2-3 : SWOT Analysis

Characteristics Descriptions

Apple is an innovator and technology leader.

Strong cash position, $160 billion in long term marketable
securities and only $40 billion in long term debt.
Excellent EBITDA of $72.3 Billion on revenue of 212.2
Billion. (34% Net Profit)
Excellent brand loyalty by its customers. Many own multiple
products (Mac, iPhone, iPad, Watch, etc.)
Global reach, Apples brand is strong around the globe,
including China with Q2-2015 revenue of $16.4 billion in
sales, a 70% increase from Q2-2014.
Strengths The recently released Apple Watch is estimated to reach 36
million units sold in its first 12 months (Morgan Stanley).
Apple AppStore reached over 100 billion downloads in June
2015. Over 1.5 million apps are available.
Excellent Research & Development division that is able to
deliver (premium) products that customers will stand in line
to buy
Apple iCloud storage and backup services provide for a
predictable recurring revenue stream.
Consumers like bigger phone screen sizes, sales for iPhone
6 and iPhone 6 plus have eaten into Samsungs market share.

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 Table 2-4 : SWOT Analysis(Contination Table 2-3)

Premium Pricing continues to drive away price conscience

buyers, including Millennials. Price sensitive consumers
tend to not consider Apple in buying decisions.

New product introductions are massive and challenge the

supply-chain. Tim Cook told Charlie Rose, We had an
intense team working on Apple Watch for 3 years. Add the
fact any new release must be able to respond to demand in
the millions of units. Apple cannot release a new product
from idea to delivery in 12-months, like startups, simply
because the fan base is massive, therefore new products are
a multi-year effort.
IPad users are holding on their existing iPads, not upgrading
as often resulting in a decline in new iPad sales. Apple sold
Weaknesses 12.62 million iPads in Q2-2015, down 23% year-over-year,
which translates to roughly $5.43 billion in sales.
Security concerns. Hackers were able to gain access to
celebrity phones via iCloud. Apples customers are see an
increase in phishing attacks as hackers spend more time
focusing on Apples security weaknesses.
Patent infringements, Apple was ordered to pay $533 million
to Smart flash LLC for infringing on three patents found in
iTunes.
As smartphones continue on their journey to become a
commodity, companies like Samsung will continue to apply
pricing pressure. Apple tends to lead innovation and then
watch other companies control the market once it has
reached the tipping point and wider consumer adoption.

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 Table 2-5 : SWOT Analysis(Contination Table 2-3)

Apple CarPlay, still very new, huge license opportunity for

Apple.

Apps for Apple Watch will become a major revenue source,

3,500 apps have been created for the Apple Watch in the first
6 weeks, that number will continue to grow, providing Apple
will a consistent revenue stream from App sales and inApp
purchases.

Apple HomeKit, moving to iCloud with advance security

features, HomeKit will help you manage lights, locks,
security systems, motion sensors, fire and carbon dioxide
monitors, window shades and garage door openers. This
will drive additional license revenue.

Apple HealthKit, more integration into Apple watchOS,

Opportunities
providing additional app sales. This technology is still very
early, in five years it will be amazing to see how HealthKit
is adopted by health care professionals and in-turn drive
more Apple Watch sales.

Apple Watch, introduced April 2015 is just six weeks old,

though sales figures havent been disclosed, some experts
predict 30 million watches could be sold in 2015. Apples
Watch OS will have a major update in Sept 2015 as Apple
watchOS.

Apple Music, introduced June 2015, adds a 24/7 global radio

station, fan community ecosystem and music service. The
new service will cost between $9.99 to $14.99/month. These
recurring revenue opportunities have the ability to add
significant revenue if consumers adopt them.

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 Apples direct online sales channel will continue to grow,
helping improve their already impressive gross margins. The
Apple Watch was been sold direct allowing Apple to cut
retailers out of the launch revenues.
Apple Pay is gaining traction and provides a new recurring
revenue stream for every transaction it processes.

Technology moves quickly, new threats from startups

are likely.
Pandora, Amazon Music and other streaming music
systems will continue to make it less attractive for consumers to
actually buy music or subscribe to Apple Music.
Cheaper laptop computers from Dell, Toshiba, HP, Sony
and IBM and a low cost Windows 10 OS to OEMs will
Threats continue to add pricing pressure on Macs.
Mobile Phones based on Microsofts new Windows 10
Operating system could eat into Apples market share.
Mobile Phones based on Googles Android Operating
System continue to be a formidable competitor.
iPod sales continue to evaporate, commissions on music
purchases will likely decline further as more consumers
rent vs buy.

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2.5 Growth strategy

Growing their business is one of the cardinal objectives of every company,

but it is often difficult to determine the best way forward. The Ansoff analysis helps
determine which strategy to exploit to achieve that growth. Below are the analysis of
four different growth strategies involved and their applications to Apple watch.

2.5.1 Market Penetration

Market penetration occurs when a company tries to sell its current product to
the existing customers. It can be achieved in various ways. For example, by changing
pricing, adding minor features, changing the packaging, highlighting alternative uses,
sales promotion (Marketing equity, 2011). It helps companies Maintain or increase
the market share of current products, Increase usage by existing customers,
Restructure a mature market by driving out competitors (Tutor2u, 2014). The current
Apple Watch on the market is a new product; therefore, this strategy is not applied to
it. However, after some time, Apple may exploit this strategy by providing variant
apple watch colours, lowering the prices, introducing customer loyalty schemes and
promotions.

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2.5.2 Product development

It occurs when a company develops new products for the existing market. This
strategy involves significant new product developments and not minor changes in an
existing product of the firm. It helps companies counter competitive entry, perpetuate
the company's reputation as a product innovator, utilize new technology, and to
preserve the overall market share (Papers4you.com, 2009). Apple watch is a new
product and its target is the existing customers of apple products (people who already
own an iPhone); thus, this strategy is applied to the current Apple watch.

2.5.3 Market development

This strategy occurs when a company tries to sell its existing products into
new market. It often involves selling into new international markets. This may
require new geographical markets, new product dimensions or packaging, new
distribution mediums, different pricing policies to entice various customers or
develop new market segments(Tutor2u, 2014). Though apple watch is a new product,
this strategy is applied to it, as Apple exports its smartwatch to Europe, China, Japan,
etc;

2.5.4 Diversification

It occurs when a company introduce a totally new product to a completely

new market. It essentially moves out of its current products and markets into new
areas. This is an inherently more risk strategy because the business is moving into
markets in which it has little or no experience. This strategy is not applied to the
current Apple watch as apple targets its usual customers, those already owning an
iPhone.

From this analysis, it can be asserted that Apple pursues multiple strategies
for growth at the same time in order to achieve their strategic objectives.

21
 Table 2-6 : Apple watch Ansoff Matrix
Product

Existing New

Market Penetration Product Development

Apple may after some time Apple released the Apple Watch for its
release an upgraded version of the existing iPhone customers as an option
current Apple watch. for a device that will allow user to keep
Existing

Better camera, bigger and sharper their phones in the pockets and do
screen, faster processor, faster almost everything from their watch.
Market

internet connections, various Small, wearable, and rugged for the

colours, etc times when you want to keep your
larger iPhone your pocket.

Market development Diversification

Apple exports its Apple watch in This strategy is not applicable to apple
New

various countries in the world: watch as this watch depends on the

China, Japan, Greece, France, etc. iPhone to execute all its functions.

22
Conclusion

This work has analyzed the Apple watchs case to look at its market entry,
launching activities, brand management, product platform, brand extensions, market
evolutions, competitive evolution, external and internal factors, and growth
strategies. It can be concluded that Apple watch is a successful brand which positions
itself as a luxury and fashionable product; that Apple is a follower in the smartwatch
business; that being follower Apple has managed to exploit advantages of that
position and gained the largest market share of smartwatch; that the current Apple
watch platform could be enhanced to meet customers satisfaction, that Apple watch
next generation may be called Apple Watch 2, equipped larger screen, faster
processor, etc, that Apple needs to invest more in research and development as they
have been seen complaints from customers regarding the quality of the watch,, that
though Apple watch market segment consists of people who already have an iPhone,
Apple can have more segment by making a cheaper version of apple watch for college
students, and by widening its geographical market, that Apple faces internal and
external factors that influence its revenues positively and negatively, that combining
three strategies Apple to gain more market share of smartwatch.

23
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