Apple’s Challenge: Where Is the Future?

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A report on news.com.au said Apple’s revenue would fall at least 8.6% during Q2 2016. This will be Apple’s first revenue decline in 13 years since 2003!

The real challenge is Apple’s top 3 product lines, iPhone, iPad and Mac, representing nearly 90% of Apple total sales, are all falling. iPad and Mac actually have started declining earlier. Now the worst thing is iPhone, which generates nearly 70% of Apple total sales, started to fall.

What is the cause of Apple’s falling sales?  Can Apple maintain its future growth?

Apple: innovator or defender?

As per Iacobucci (2014), a firm’s product offering includes the core and the value-addeds, the value-addeds are those on which a company distinguishes itself from competition and competes with its competitors.

When Apple launched its first iPhone in 2007, it introduced a revolutionary user interface based on multi-touch screen, making iPhone the first smartphone to easily use email, web browsing and other features. In contrast, competition’s smartphones with physical keyboards were very difficult to be used. Mickalowski’s study shows this innovative value-added really sets iPhone apart from the competition at that time.

However, after 9 years in 2016, what does iPhone look like vs competitions?

Now all phones look similar, right?

Scholar Vivek Wadhwa, a Fellow at Stanford University and Director of Research at Duke University, said in The Age and on CNBC that after Apple’s first iPhone in 2007, every new iPhone has just been tweaking its componentry – as with the iPad and Apple Watch, no real world shocking innovation happening anymore from Apple and every big release from Apple has been a copy.

More criticism on usnews.com said Apple has gone from “Think different” (its 1997 slogan) to no different and from a visionary innovator to a defender.

These views are evidenced by the specific examples in below video from an article on GIZMODO that says Apple’s WWDC 2015 showed to the world that Apple is out of innovations.

People may argue competitions are also copying Apple. Yes, the reality is all suppliers are actually copying one another, making all products homogenized. As Apple claims, Apple itself relies on innovation to win. But now without truly innovative products, how can Apple keep beating competition?

Does Apple have right products to sustain its future growth?

As below, Apple has a long history of executing brand extensions.

Farquhar (1989) suggests one of the three factors for the success of an extended product is it must be comparable or better than competitions.

As per the previous study in this post, Apple’s early extensions such as iPhone 1 were very successful because of their innovative value-addeds. However, Apple’s latest extensions such as iPhone 6s have lost distinguished value-addeds that can make them superior to competitions.

Mason (2006) indicates cannibalization may exist within brand extensions. Apple’s product portfolio looks gorgeous but some of its products actually cannibalize each other. E.g. iPhone has killed iPod and large screen iPhone 6s plus has been nibbling away at iPad business. Furthermore, the cannibalized sales of iPod and iPad did not totally transfer to iPhone sales because some of them might go to competitions.

What other products can save Apple? Apple Watch, Apple TV, Apple Music and Apple Pay? They have been on the market for years, but just contributed 13.72% of Apple’s total revenue together with Apple’s all other small product lines. How can we place hope on them?

Where is Apple’s future?

As per the Product Life Cycle theory, the peaked sales, homogenized products, and intensified competition indicate iPhone has entered maturity stage during which sales may still be maintained at relatively high levels for some time. But the big question is: How soon will its decline stage start? Looking ahead, Apple will really need to reinvent itself. We wonder whether and when Apple can produce its next “killer” product. Will it be iPhone 7, Apple Car or a new acquisition? Will it be a real innovation or just another tweaked product?

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