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Running head: APPLE INNOVATION STRATEGY

Apple Innovation Strategy Tonya Merrigan, Alexandra Dundra, La’Chera Church, Nicole Motz, and Kayla Ligett SRT/581 October 26, 2011 Tonicia Riley

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Apple Innovation Strategy Innovation, development, and growth strategies are about producing a transformation and adjustments on how societies live, work, and play. Trying to achieve that, Apple works its innovative strategy in a mix of product, solution, technology, business model, and rebranding brand management strategy. Apple innovation and continual improvements drives its vision by internal conviction about the outside world environment. Its conviction is concerned about shifting how s interact around music and entertainment. Apple develops a notion of changing consumers’ landscape. The information to follow will contains a brief explanation of Apple target, company sources for growth, Sec filings from company, the new product development, the industry gap, and tactic used to develop a successful innovative strategy. Overview Apple Incorporated is a multinational firm, which “designs, manufactures and markets a range of personal computers, mobile communication and media devices, and portable digital music players, and sells a variety of related software applications” (EdgarOnline, 2011, p. 4). Apple has continued its vision of innovation. This has allowed Apple to garner a relatively large base of loyal consumer internationally, through subsidiaries in places such as England, Japan, and Ireland. Target Initially, Apple focused on the American market because of an aging population. However, 50% of Apple customers are under the age of 30 (Rubicon, 2008, p. 29). As an observer from the sidelines, it would appear that Apple targeted teens and adults in their twenties. The product lines offered by Apple are an assortment of technology for different ages, genders, and working

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classes. Apple's visionary team share the belief that “If you make something great, then everybody will want to use it.” (Morris, 2008. p. 44). Consumers falling in the age group 15-49 for 94% of sales. Males are purchasing 74% of iPhones and college graduates for 58%. The mean household income for iPhone purchases is $75,600. IPod targets include ages 12-17 and 35-44 with male purchases slightly higher than females (Profile of the iPhone Buyer, 2008). The household income for iPod purchasing starts at $15,000. High school students are a target market; however, because iPod purchases are from different demographic groups, it is hard to narrow any comparative data (Schneiders, 2011). The iPad and Mac are two other product lines offered by Apple that have attracted different demographic groups. The Mac has appealed to businessmen, so Apple has targeted end professional markets and college students because these groups of people are updated with technology innovation (Ireland, Hoskisson, & Hitt, 2008). Mac promotions are aimed to attract the 45+ age bracket due to more disposable income. High pricing has Apple targeting college graduates because they will receive higher incomes. Sources Of Growth Apple grows from within rather than by acquisition or merger. “Apple has embraced this strategy over its existence, averaging only about 1 acquisition per year during the past 25 years.” (Cheney, 2010. para. 1). Microsoft, Google, and Cisco acquired 30 to 45 companies in the past four years. Apple's internal growth executed revenue. “Apple only spent $4.6 billion on R&D over the past four years, while revenues soared from $25 billion to $43 billion.” (Cheney, 2010.

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para. 3). Innovation is in the minds of Apple's employees, and the company is strategically choosing which ideas to invest in. SEC Filings The firm has filed its annual Form 10-K with the government, revealing specific information about the size of the company as well as specific sales for various product lines, along with other information important to shareholders such as identifying risk factors. The SEC findings are available on the company’s website, sec.gov using a searchable database of EDGAR SEC filings. The form shows a healthy, growing company for whom the stagnant and fragile international economy has not proven to be much of a barrier to growth with new markets opening and products continuing to find favor with the public. The company reiterated its plan not to pay dividends or buy back stock, saying “it will retain any earnings for use in the operation of its business” (EdgarOnline, 2011, p. 27). The company generated twice as much cash from sales in 2011 as it had in 2010 ($37.5B) compared to $18.6 billion. Sales of all product lines except the iPod were up substantially over last year. The company's margin increased to 40.5%, a two percent increase from 2010, though Apple notes that it does not expect to sustain that margin into 2012. New Product Development Apple has established a solid product development plan and after an extensive review it appears Apple is working on several new products for future growth. According to the Macworld/iWorld source for 2012 the Apple brand is considering rebranding the iOS side of the product. This process shows the entire ecosystem of Apple products and services. Apple’s purpose of rebranding the iOS side of the business is to change the perception of the product

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without changing the business. Consumers are partial to seeing what they like therefore visual changes may be the answer to Apple iOS segment changes. Apple is also venturing into music experiences that feature performances and sessions from musicians who use Apple technology and film events which highlight Apple’s role in television and movies. Apple is extremely successful even without rebranding iOS segment. The focus is on retaining heavy OSX presence with organizers introducing new packages to attract OSX developers. The Gap Apple is continually improving on the products released. Apple focuses on making customer center products to meet every age group. Every new production delivers customercentered product. New products released result in software updates to improve customer experiences within months of initial release. An example of this process developed the iPhone 4S. The latest release of the iPhone 4S delivered a new technology. With this new phone the customer speaks to it treating it more like a personal assistant instead of just a regular smart phone requiring manual programming. Apple focuses in the areas they are most familiar with to continue improvement and explore ways of making those items more customer-centered. Creative Tactics Apple has accomplished what many businesses only dream of, branding. Apple's iPod is the brand of mp3 players competing with well-known companies such as Sony and RCA. When customers think of mp3 players or digital media distribution, iPod, and iTunes are first on the brain. The comparable mix of pricing strategy, variety of accessories and continuous innovation has contributed to Apple's success as an industry leader. Conclusion

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“Apple enjoys enhanced performance by pursuing a deep customer–broad innovation assetleveraging strategy in which it consistently provides new and unique products to an entrenched group of existing customers by leveraging its broad technology portfolio” (Fang & Grewal, 2011. p. 589). By incorporating consumers experiences into apple innovation strategy and plan the company will achieve a successful edge.

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Apple Macworld/iWorld. (2011). Retrieved from http://Macrumors.com Cheney, Steve (2010) "Apple's Incredible Efficient Growth" Business Insider Retrieved from: http://articles.businessinsider.com/2010-05-24/tech/30006948_1_apple-s-dna-innovativeproducts-organic-growth Edgar Online. Apple Inc. Form 10-K. Retrieved from: http://files.shareholder.com/s/AAPL/1243487855x0xS1193125-10238044/320193/filing.pdf Fang, E., Palmatier, R., & Grewal, R. (2011). Effects of Customer and Innovation Asset Configuration Strategies on Firm Performance. Journal of Marketing Research (JMR), 48(3), 587-602. doi:10.1509/jmkr.48.3.587 Ireland, D., Hoskisson, R. & Hitt, M. (2008). Understanding Business Strategy: Concepts and Cases. Mason, OH: South Western Cengage Learning. 10-13. Morris, B. (2008). What Makes Apple Golden. Retrieved from http://money.cnn. com/2008/02/29/news/companies/amac_apple.fortune/index.htm. p=44 Profile of the iPhone buyer. (2008). Retrieved from http://www.researchcast. com/alpha/?p=51 Rubicon Consulting, Inc. (2008 March 31). “Apple iPhone: success and challenges”. Retrieved from http://rubiconconsulting.com/s /whitepapers/Rubicon-iPhone__Survey.pdf. Schneiders, S. (2011). Apple's Secret of Success - Traditional Marketing vs. Cult Marketing. Hamburg: Diplomica Verlag. 10-12.