Apple Case Study - from the iPod to the iPad - Product Life Cycles and growth potential

The Apple product life cycles indicates just how big the iPhone and the iPad will be over the next few years. It took the iPod five years to break the thirty million units per annum mark. The iPhone got there in four and the iPad will make it in year two of launch. As for the Sony Walkman it never made it, it took over ten years to top out, the iPod topped out within eight years of launch. Apple product Life Cycles are moving faster and higher sooner than ever before.

iPod sales may have peaked in 2008 at just under 55 million units and may fall to around 45 million units this year but the iPhone is set to sell just under 70 million units and the iPad is chasing fast behind. It all adds up to an exciting phase of growth for Apple over the next four years with revenues set to rise over $100 billion in 2011.

Students of corporate strategy and business theory are familiar with the concept of the Product Life Cycle. Generally the life cycle is perceived to have four specific stages, introduction, growth, maturity and decline generally plotted with volumes a function of time.

In the introduction phase, costs are high, sales volumes are slow, there may be little or no competition and customers have to be stimulated to action. Profits are limited and the product is cash extensive as marketing costs are substantial. Key customers tend to be innovators and early adopters.

In the growth phase, unit costs are reduced as volumes increase, advertising is amortised over greater volume, market awareness increases beyond the early adopters, to the “early majority”, competition increases with more competitors entering the market and price levels may begin to fall. Profits increase but the product remains cash extensive as greater investment in marketing or working capital is required.

In the maturity stage, costs are lowered further as volumes have increased, the market becomes more competitive and alternative products begin to date the initial product offering. The product remains profitable and begins to generate cash. The innovators, early adopters and early majority are joined by the “late majority”.

In the saturation and decline phase, sales volumes decline, profits margins are maintained and the product becomes remains cash generative. The laggards and luddites still do not enter the market. 

Either way for Apple, four years of strong growth are evident from products already in the line up, both the iPhone and the iPad are set to hit the one hundred million units per annum mark in 2012 and 2014. Despite the march of the Androids, the Apple growth story will continue.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University. Author of the Apple Case Study from the iPod to the iPad part of which is published in Johnson Scholes Whittington Exploring Strategy 9th edition 2010.

Comments

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Higher profits, but the product is still vast liquidity that significant investment in marketing or working capital is needed.

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Apple products had been always popular to there customers and other smartphone users. I wonder how Steve Jobs do this.

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Hi need some help with these questions for case study thanks :)
1) One critical factor that affects the success of a product innovation is the ability to offer a differentiated product that delivers unique and superior value to customers. Discuss the extend to which apple successfully accomplished this with the iphone and the ipad.

2) How would you classify the Ipod, Iphone, and iPad today in terms of each product’s stage in the product life cycle? Why?
The life cycle is perceived to have four specific stages, introduction, growth, maturity and decline generally plotted with volumes a function of time.
In the product life cycle, each product are placed in different stages. For instance, the Ipod has been introduced
3) Provide a description of what you think each type of adopter would be for an iPad. Do you think we are seeing late majority adopters or laggards yet?
4) Do you think the IPad will continue to be a success? What factors support you position?
5) Apple has introduced several winning products over the last few years – iPoD, Iphone, and iPad – in markets where the company was a newcomer that successfully challenged market leaders. How would you describe apple’s product innovation strategy in the mobile devices market? Based on your analysis, what do you think apple’s next winning innovation might be? What are some of the barriers it may need to consider?

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