Market Analysis of the Apple Ipod

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Market Analysis of the Apple iPod

The market studied here is that of the iPod: ‘a brand of portable digital media player de-signed and marketed by Apple Computer.’ Apple have cleverly created a mp3 player that has outsold all competition by using the advantage of brand loyalty. The iPod family has evolved since the original launch in October 2001 when the 5GB iPod was released, fol-lowed in 2002 with the launch of the 10GB and 20GB versions. By 2004 Apple had re-leased the iPod mini, iPod shuffle and a special edition U2 iPod which was endorsed by ce-lebrity rock band U2. 2005 proved another successful year for the iPod family, seeing the release of the iPod nano, Harry Potter special collector’s edition and the new colour, photo holding and video playing iPod.

iPod sales have continuously increased since its launch, now totaling at over 28,233,000 sales. However, as the graph shows there is a considerable growth between the last quarter of 2004, and the first quarter of 2005, which can be explained as a seasonal trend as the winter months around Christmas significantly amplify sales.

Celebrity endorsements combined with successful advertising campaigns has helped iPod to become the most desirable digital market player in the market. The luxury good has re-sponded to consumer tastes, for example, by using modern up-to-date popular songs in their adverts, acting as an incentive for consumers to be loyal to the Apple brand as it has a ‘superiority’ over competitors. Sales relate to consumer incomes and expenditures, which have increased considerably over the past few years, causing massive economic growth in the digital music player market as disposable income is being spent on luxury goods, and Apple’s ‘superior’ branding attracts the most attention from the public. Fiscal YeariPods sold

2002381,000
2003939,000
20044,416,000
200522,497,000

The iPod market is global, the product is shipped worldwide. It is an example of a product that has evolved through recent gloabalisation. Its design originates from California, yet it is manufactured in China, due to lower labour costs, therefore improving Apples profit margins, a clear example of recent business changes towards outsourcing production to less developed economies. The iPod is a luxury good phenomenon, although it is not competitively priced it outsells all competitors and has a high degree of brand loyalty. The iPod exists in an oligopolistic market in which it dominates, however, although Apple owns a high percentage of the digital music player market share, the market is not monopolistic as Apple does not set the price conditions. iPods are by far the most expensive mp3 player in the market, yet demand is so high due to the image attached to the ‘iPod’. This proves Apple’s iPod to be a leader, but not a ruler.

Recent media attention has accused Samsung of price fixing the microchips they supply to Apple for use in iPods for lower-than-usual prices. This puts other digital music player manufacturers at a disadvantage as Apple’s profit margins are increased further allowing them to invest more money in new technological and quality developments. The investiga-tion is unlikely to have serious repercussions for Apple, and whilst Samsung suffered a 5% fall in share prices, Apple’s sales continued to increase.

Despite the fact that Apple dominates the MP3 player market with a 74% share in Amer-ica with its iPod range it faces strong competition, all aiming to get its share of a multi-billion dollar market. Competitors to the iPod range from small flash based mp3 players which are commonly found sold cheaply in small retail stores at £20-30, often produced by unknown brands although branded models do exists, to competition with the $299 60GB iPod with from the ‘iRiver’ which offered video playback facilities over a year before the new iPod as well as being more functional at a similar retail price to the old fourth generation and...
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