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A COMPARATlVE STUDY OF

lphone Vs ipad
RESULTlNG STRATEGY
THEREOF
EXECUTIVE SUMMARY
ln this study report, analysis has been performed for iphone and ipad as a product. On
basis of analysis (since apple has to select either of iphone or ipad for its business, the
revenue generated from either of the product becomes a major controlling factor while
arriving at a decision), recommendation is made that for near foreseeable future apple
should retain iphone as its flagship product. Besides revenue other factors upon which
evaluation is carried out are product life cycle, product usability and consumer
perception. The macro environment component though touched upon in this study
report does not yield in preference to either of the products. This does not mean that
production ipad is to be stopped with immediate effect. The production of ipad should
continue to a breakeven point using current technology available with apple. An
important assumption made as a part of this conclusion is that apple will not be able to
make a revolutionary technology break through for ipad (with current spending in
research and development) which by far has remained the forte of apple. Only a
revolutionary technology breakthrough will only make the sales of ipad surpass the
sales/revenues from iphone. With the available technology at hand, ipad can at
maximum account for sales revenue in the category of macintosh.
Ipone Vs ipad
REVE!UES
The following exhibit is taken from financial report filed by apple with UNlTED STATES
securities and exchange commission.
From the above tabulation we can draw following conclusion:
l. Iphone controls more than 50% of total revenue generated by apple .
2. The number of units sold for iphone is almost twice that of ipad .
3. The growth rate both for iphone and ipad has reduced year on basis
4. The growth in revenue generated by ipad year on basis is quite small in
comparison with growth in revenue generated by iphone year on basis.
The above mentioned points should be read in conjunction with following facts as
mentioned in apple case study:
l. The ASP for lphone is 659USD against bill of materials of l88USD.
2. The ASP for lpad is 602USD. The gross margin for ipad is 25%, which mean bill
of material would be roughly close to 450USD. This was true for 20ll. However
subsequently for apple to maintain sales ASP was dropped to nearly 450USD,
with introduction of lower price models.
From above we can conclude that apple enjoys a gross margin of about 400US
from sale of one iphone and in comparison ipad gives gross margin of
roughly !50US from sale of one ipad.
The following exhibits show current and estimated market scenarios/demand both
for tablet and smartphone.
From the above exhibits the following could be arrived:
l. With the current technology and growth rate and as per market forecasts, the
demand for iphone will any"day will be appro#$ five times the demand of
ipad.
2. Overall the market growth-rate for both iphone and ipad is increasing at a
reduced rate. This leads us to conclusion that fall in growth rate of apple products
is partly attributed to fall in market growth rate and partly to other factors such as
demo"rapics# "eneral economic conditions# tecnolo"ical factors# social
forces# natural environment# political factors etc.
a) These factors effects both iphone and ipad alike wise. Apple since inception
has always priced its products higher than that of rivals. So economic
conditions play a very important part while choosing any apple product. This
high price policy also serves as a blessing in disguise as the product is
perceived as niche and consumer experience has indeed proved the same.
However in recent years apple has decreased the price of both iphone and
ipad. The reduction in price of iphone is approx. 4lUSD and price of lowest
model of ipad is close to 450USD. So in deed apple has responded to
economic conditions, but the price of the product are still notch higher than
those of product offered but nearest rivals.
b) Tecnolo"ical factors$ Apple has always been front runner when it comes to
expenditure on research and development. The unique features of apple
products such as magnetic cover of ipad which can also be used as stand for
ipad provides apple with technological advantage. But new developments in
technology come at a cost which is evident in apple pricing of products. The
latest operating system launched by apple has received good reviews from
app developers. The developers of apps are least bothered about the iphone
model for which they are building apps, which gives iphone competitive
advantage over its competitors.
c) The apple products are almost immune to suppliers bar"ainin" po%er as
apple does not disclose the supplier's names. The secrecy thus maintained
virtually reduces the impact of association of supplier with other apple
competitors.
d) The product remains difficult to imitate because of reluctance of apple to
disclose the name of suppliers and because of product patent.
e) Since apple was first to introduce both iphone and ipad in market, apple
enjoys sizeable lead in terms of market capitalization, innovation and
intellectual property rights. So apply is relatively immune to entry of ne%
producers&
'R()UCT )EMA!) I! )EVE*('E) C(U!TRIES$
It is clearly mentioned in case study that consumers in china are willing to
par appro#$ !000US for iphone$ Another view point in the developing
countries such as lndia is that in joint families each member of household will
hold a mobile phone but the no. of notebooks/tables will be lesser. So smart-
phone product demand in these developing countries will outstrip demand of
tablet any day. Why apple in developing countries? lt is because of social
prestige that comes will apple product. The costlier the product the better the
prestige value associated with it. A country obsessed with high standard of living
and high show-off will drive up the growth of apple. Besides this, apple too has
un-doubtedly proven its worth with the quality of product offered. The rising
middle class in these countries will give first preference to iphone instead of ipad
as iphone as product is quite easily visible (since mobile is a necessity and goes
along) where as for ipad it has to be carried for specific purposes only.
'R()UCT RE'*ACEME!T CYC*E$
The product replacement cycle is less than l2 months for iphone in comparison
to that of ipad. The upgrades in software are available every l2-l8 months and
new apps are introduced. The upgrades and new apps are common for both
iphone and ipad but the replacement cycle for ipad is close to l8 months. Further
it is found that if an iphone goes bad the consumer is most likely to get it
replaced or buy a new one the following day in comparison to ipad for which the
consumer is willing to wait for a couple of weeks to buy a new one. Also the
iphone is past its introduction stage and is now in growth phase in comparison to
ipad which is in introduction phase. Any product in its growth will generate
maximum revenues and so is the case with iphone. Consumer lntelligence
Research Partners, in a survey of some 2,000 consumers, noted that iPad tend
to be used in ways much more comparable to devices with longer replacement
cycles (PCs, TVs) rather than shorter ones (smart-phones). iPad owners take
their time replacing a lost or broken unit, and are much more likely to hand their
iPad down to a friend or family member.
Higher the product replacement cycle lower the product changeover.
'R()UCT USA+E$
ST%&% '()S (* I+,(*%
Every once in a while a revolutionary product comes along that changes everything.
Today we are introducing three revolutionary products of this class. First is wide screen
ipod with touch controls. The second is revolutionary mobile phone and third a
breakthrough internet communication device. These are not three separate devices but
a single device called iPHONE.
ST%&% '()S (* I+-
Even more intuitive and easier to use than a PC

Tis e,ibit is from iponeincanada&ca
The above exhibit shows the apps usage of ipad is closely matched by iphone.
Being handy is the biggest advantage that iphone can continue to enjoy over
ipad in terms of usage in ipod activities, internet experience and mobile
communication (as all these three activities are performed by ipad as well).
For as ipad to replace PC and be a major player in apple revenue generation, it
has to have the power of PC in terms of storage, processing speed, plug and
play peripherals for ease of use such as keypad and most importantly a large
expandable screen so to work on complex application requiring simultaneous
viewing in different windows. As shown in last product replacement cycle ipad is
in its introduction phase where the full capabilities of a product are not realized,
therefore it will require further spending or increased spending in research and
development.
T(TA* -(R)S$ ./00 Appro,&
RE1ERE!CES
l. Class case study on apple
2. Apple financial report for year 20l3 as filed with UNlTED STATES securities and
exchange commission.
3. Gartner research for worldwide tablet demand and sales
4. Emarketer research on digital media
5. lphoneinCanada.ca
6. lnternational data corporation