Marketing Strategy and Competitive Positioning pdf ebook

Apple moves into fashion business with Watch 
launch
By Tim Bradshaw and Richard Waters in San Francisco
Source
: James Copeland/Alamy Stock Photo.

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353
CASE STUDY
After seeing the Watch, Citi predicts that Apple 
will sell 14m in its first year and 15m in its second. 
That overshoots its forecast for Samsung to sell 4m 
smartwatches and fitness bands this year, and will 
add $12bn to Apple’s revenues over the next two 
years.
But given the vast scale of Apple’s existing iPhone 
business, which has sold more than 550m devices to 
date, Citi sees the Watch making up just 3 per cent 
of its annual sales.
With pent-up demand from Apple customers 
with older models, analysts see the iPhone 6 kick-
starting a huge upgrade cycle. Many see the jumbo-
sized 5.5-inch iPhone 6 Plus, which costs $100 more 
than previous models, as driving higher margins, 
although that may be offset by Apple increasing the 
memory it provides for the same price in more expen-
sive models.
Concerns linger about Apple’s ability to meet con-
sumer demand for the iPhone 6 Plus in the run-up 
to Christmas. Nonetheless, IHS, a researcher, pre-
dicts that the new iPhone will propel Apple ahead 
of Microsoft’s Nokia as the world’s second-largest 
maker of mobile phones after Samsung – including 
all phones, not just smartphones.
‘The introduction of larger-screen iPhones 
eliminates a key differentiator that has insulated 
Samsung, Sony, HTC and LG large-screen flagship 
smartphones from iPhone competition,’ IHS said.
For the Watch to move the financial needle – and 
impress Wall Street, which left Apple shares broadly 
flat after Tuesday’s announcements – the tech group 
will need to convince more than just early adopters 
that its pricey bracelet belongs on their wrists.
That is something Apple’s competitors have 
failed to do, analysts say. Some have chastised 
Apple for being slow to catch up with arch-rival 
Samsung, which launched its first smartwatch more 
than a year ago, but Mr Cook is unruffled by such 
complaints.
‘We ship things when we believe they are ready,’ 
he said. ‘For us, it’s much more important to be the 
best than to be the first.’
Apple did not have the first MP3 player, smart-
phone or tablet, either, he continued. ‘You could 
say we had the first modern one of all of those, and 
I think you can make the same point today that we 
have the first modern smartwatch.’
Some analysts watching Apple’s event on Tues-
day seemed to agree.
‘They got the design right,’ said Carolina Milan-
esi of Kantar Worldpanel, a market research unit of 
WPP. ‘They’ve taken the technology out of it, which 
is not what everyone else is doing. They made it 
much more appealing to a wider audience.’
Many noted that Apple packed a lot more ideas 
in to its smartwatch than the first version of the 
iPhone, which lacked seemingly key features such 
as 3G wireless and an app store.
‘I’ve seen a lot of smart watches – this one 
was really polished,’ said Richard Doherty of 
Envisioneering.
But some complained that Apple had lost its 
famous focus by trying to sell consumers on some-
thing that is part jewellery, part sports device, part 
communicator, part wallet and even, according to Mr 
Cook, a remote control for the Apple TV box.
‘I’m underwhelmed,’ said Om Malik, a tech blog-
ger turned investor with True Ventures, a San Fran-
cisco group that counts fitness band maker Fitbit 
among its portfolio.
‘I feel that they should have tried to do a few 
things well. Apple is missing its editor,’ Mr Malik 
added, in a reference to Apple co-founder Steve Jobs’ 
capacity to axe features and products even at late 
stages of development.
Many are looking to the app developer commu-
nity to come up with something to convince con-
sumers to buy the Watch. Here, Apple retains an 
advantage over rival app stores such as Android’s 
Google Play.
Mr Cook said that part of the reason for launch-
ing the Watch months in advance of its release to 
consumers was to get developers working.
If they do not come up with the substance, Apple 
will have to fall back on the Watch’s style until they 
do, analysts say.
‘Every wearable device we’ve seen to date has 
been in search of a reason to use it,’ said Mr Blaber. 
‘This is a step in a long journey.’
Source
: from ‘Apple moves into fashion business with Watch launch’, Financial Times, 10/09/14 (Bradshaw, T. and Waters, R.).
Discussion questions
1 
Why would Apple want to move into the fashion business?
2 
What type of innovation is Apple’s new watch?
3 
What role does innovation play for a company such as Apple?

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‘Companies still have much to learn about the true meaning of service. . . If 
the two characters on my doorstep really had come to instal my broadband 
connection, why did they have the appearance and demeanour of a pair of 
burglars? I asked them to identify themselves. One fished in his sweatshirt 
and produced a plastic card on a silver necklace. The other chortled that he 
had lost his identification. . . Those first impressions can be so misleading, 
can’t they? Not really. . . ’
Michael Skapinker, Financial Times (2003)
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