Market Segmentation and Decision Making in IT Industry

Question: Discuss about the Market Segmentation and Decision Making in IT Industry. Answer: Introduction Market segmentation is whereby you have a broad consumer market of both existing and potential consumers and subdivide it into small groups known as segments. The segments will, therefore, consist of a group of individuals with same characteristic and preferences for the good and service being offered. Day by day, the customer population and preferences are becoming wider. Ultimately, the competitive options are becoming more available, as the market segmentation become very critical in any business or marketing plan. Companies that launch products are considering market segmentation, and through the conceptualization of the market segment, rightful customers are targeted. Apparently, by targeting the right consumers, businesses probably utilizes the best sales and marketing channels that are capable to significantly influence consumers purchasing behavior. Apple is a global company that specializes in manufacturing and selling of information technology products. Apple Inc develops and sells computer software, electronics and offers online services (Lublin, 2014). This industry is characterized by creativity and innovation and the technology that work perfectly well today may not be the best if not improved. Hence, there is a robust advancement in the products and services offered by various companies in IT sector (Johnson et al., 2008). Apple Inc has to identify the potential customers that exist so that appropriate sales and marketing strategies are proactively applied. This report has firstly expounded on Apple growth, profitability and applied PESTLE to analyze business environment. Secondly, this paper has succinctly examined market segment for Apple Inc by identifying primary and secondary target market. Moreover, it has described the level of involvement of the primary segments likely have on this organization regarding decision making. Finally, this paper has discussed the nature of competition in this industry and further created a positioning map for the marketplace of this company. Business environmental audit: PESTLE analysis Political factors Political factors, considers the government placed policies. These policies positively and negatively affect IT companies. Because Apple manufactures most of its products in China, political instability could adversely affect the production. The growing anti-Americanism in China will probably affect manufacturing and sale of products in China. Additionally, the toughing environmental and labor laws in the U.S.A are probable challenges for Apple to retain its competitiveness. Economic factors There is an overall rise of middle-class disposable incomes. This has continually created the gap for computer hardware and software thus creating more opportunities for production of these. IT is saving time and energy for most business. Apple has been affected by economic crises that affected its markets (Cheney, 2010). Also, high unemployment rate affects its sales in some regions. Moreover, the strong American Dollar increases the exchange rates hence making Apple products expensive in developing countries, China, and other regions with a weak currency. Social factors The social factors look into employees right, language barriers, race, nationality, etc. Apple is keen in ensuring there is a minimal customer-product mismatch, and this could be a result of increased cultural diversity. The different social classes provide an opportunity to provide even high standard customers who are only for high-quality services and product that are similarly expensive. Apple has applied franchise in India and acquisition to enhance growth and further provide products that suit customer needs. For instance, Apple acquired Prime Sense and Embark as part of a strategy to strengthen its market position. Moreover, the ethical concern in China about the manufacturing of Apple products may affect the purchase of its product by ethical conscious consumers. Technological factors Technology is changing every day which acts as an opportunity for innovation. It is, perhaps, costly since changes are happening spontaneously and a company may come up with a product today, and tomorrow it is obsolete (Nerkar Shane, 2007). There is a daily increase in demand for mobile phones and tablets, and this is an opportunity for technology providing companies. Apple lead in innovation has enabled it to manufacture unique product hence retaining its large market share. However, frequent change in environment imperatively requires Apple to significantly invest in research and development to improve continuation in innovation (Shaughnessy, 2013). Legal factors There are regulations on electronic waste disposal, and this is one way to improve company image to the public by coming up with effective disposal and recycling programs. Also, the patents laws that aim to reduce software piracy are formulated which perhaps increases Apple exposure to litigation risks. The entrance of Apple into the provision of financial services through Apple Pay exposes it to more regulations and oversight by the government. On the other hand, there is increasing governmental support for automation which presents opportunities for increase computer technology sales via governmental clients. The increasing international trade agreements develop a remote or macro-environment that supports an increase in global sales. Information Technology Industry Analysis: Current trends in growth of IT industry Today, there has been a tremendous change in the IT industry which has been spurred by robust innovation and creativity. Perfect and effective technologies are being developed hence enhancing trade and industrialization (Johnson et al., 2012). As activities and processes get simplified in industries, the primary providers of these technologies are also ensuring that the current technologies are improved daily. Profitability The most important driver for profit increment remains the inspiration from the most government to achieve economic prosperity by customizing on technology hence increasing the demand for technologies. Ultimately, incremental charges like license renewal, servicing, and acquisition of spare parts keep impacting positively on the sales of IT providers companies (Adam, 2013). In other cases, profits earned by most innovative companies do not fall significantly but mostly improve. For instance, the gross profit for Apple Inc for 2013-2016 was $64,304,000, $70,537,000, $93,626,000 and $84, 263,000 respectively. Perhaps, the gross income has decreased but Apple has continually realized significant profits. Therefore, the profitability of businesses in this industry depends on the competitive scope of a company in providing innovative products (Thielen, 2012). Threats and opportunities of the industry Apple has the opportunity for business diversification where there is a new business development that includes sales of a range of products which is fundamental in increasing revenues. There is the increased adoption of mobile technology (Apple Inc, 2014). Everyone from the young to the old needs a phone, so there is the opportunity to design a mobile phone that are user-friendly and that have different qualities for each age group. However, weaknesses exist, such as vulnerability to cyber crime. It limits the attractiveness of Apple software (Tech, 2013). Competition in the Industry Despite Apple success in serving a large market share in the globe, it faces stiff competition from rivals. For instance, mobile computers face competition from Dell, Acer, Lenovo, and Hewlett-Packard. Smartphones face stiff competition from Samsung and Sony. Mobile payment faces competition from Pay Pal and Google. Simply, IT industry is very competitive hence increasing the rate of obsoleteness in the products manufactured and sold by companies. In as much as the tremendous change in technology may be perceived as a challenge for the key providers of IT services, however, the changes offer the opportunity to help come up with products and services that meet customers demands accordingly (Adam, 2013). The high pace of advancement in this industry is a major threat not only to Apple but also other companies. This is whereby fraud and identity theft is done via computer internets. Another threat is piracy, which is becoming too rampant in developing nations. Moreover, there is also strong rivalry in the industry. Such rivalry threatens Apple growth and development. Apple has diversified its operations to surmount the ever pressing competition (Fan Xiao, 2015). Many firms are in software and hardware business, and some are selling them cheaply because of the poor quality which makes Apple lower prices in spite of quality being high thus affecting the profits. Apple has a strong financial position which is derived from the overwhelming sales volume. High revenues are generated from the wide range of quality products sold globally (Porter, 2008). Apple sales are very high and keep increasing which has enabled it to have the funds for innovations and improving its products (Tan, 2013). These high revenues have been as a result of having a good image and properly positioning their products and services to customers (Murray, 2014). Customers are more encouraged to buy goods from Apple because its product can be trusted. Products are of high quality and do not easily break. Also having alliances with other companies in the IT industry through franchising has greatly helps it in developing best products that always meet customer expectation. Apple has a strong market for software, like above mentioned, customers like being identified with suppliers who are reliable. Therefore, Apple rigorously customizes on any available opportunity which has as sisted it to retain competitive advantages over rivals in IT sector. Consumer Targeting and Segmentation: Market segmentation Consumer targeting refers to the process of identifying the potential market for the product and applying the right marketing and promotional mix with the primary objective of increasing the company sales (James et al., 2009). As earlier discussed, a company must identify customers that should be given priority. The target market is determinable by firstly conducting research on the market. This, however, does not mean that the fewer priority consumers are left. Apple applies four types of market segmentation, that is, geographical, demographic, behavioral and psychographic segmentation. Every segment is profiled, and the attractiveness of each is evaluated so as to determine the most profitable market to the least profitable. Market Segmentation helps the business to precisely provide particular consumers with specific needs and wants (Grewal and Levy, 2010). Apple primarily uses demographic segmentation. This is whereby the business is targeting market based on age group. Different age group, for instance, has a preference for different type of mobile phones. Age between 18-35years is said to be using phones whose features are very high. This age group is an earning group and is in middle crisis so is the group likely to buy high-quality phones at a high price. Also on sales of OS and software, its target is gender-based, and for this case, male gender is more targeted (Michael and Todd, 2011). Additionally, Apple primarily uses geographic segmentation whereby, it is expanding its distributions and operations to developing countries. Apple is targeting developing nations because of the increased governmental support towards propelling economic development through the embrasure of technology. Secondary behavioral segmentation is used. In this type, the usage rate is looked into, and further brand loyalty. Apple has managed to provide reliable services, and therefore it has a clique of customer who always comes back to purchase products because of the loyalty created (YouSigma, 2008). Another secondary segment used is psychographic. Psychographic segmentation is whereby the product and services are usually offered to different society classes (lifestyle) and also based on the opinions. If a certain group believes a certain product is good, then that whole society should be marketed for that particular product they feel is good for them. The level of involvement the primary segment is likely to have on decision making. The primary segment helps in targeting the right customers. Segmenting makes it easier to target customers (Yue Tong, 2009). The segment, therefore, influences which customers are to be prioritized. It also determines the firm position. For instance, if it is advertising, segmentation helps the management to understand how the company can carry it out to reach the target customers. With the geographic segmenting it is wise to advertise the product on price and quality as well as how it is of benefit to the target customers (Sweeting, 2013). Consideration of primary segmenting also gives the full and clear picture of what the target customer wants. It is possible to make a decision if a company can meet all customers need and how to meet these needs. This segmentation is important because it gives ideas for growth and innovation. By bearing in mind that a market has different classes, primary segmentation aids in determining and noticing any arising opportunities as quickly as possib le (Ingram et al., 2009). positioning map Firstly, the determinant attributes are ascertained. These are the main factors that the consumer will rely on to make a purchase decision. The next step is to list the leading competitors in the market for all the products. Finally is to create scores for the chosen brands. With the behavioral segmentation, it is apparent that there are a high standard and middle standards customers. It is thus an opportunity to ensure both customer standards are met. This increases sales since the markets are well covered. Market positioning map ensures that the customer services offered as well are of high standard. Figure 1.1 Positioning map Conclusion In conclusion, the external factors will always be there, and it is the duty of the business to comply. In some instances, failing to comply may lead to heavy penalties, closure of the business or creating a bad image which will scare away existing and potential customers. Again, it is very important to conduct a SWOT analysis and identify the strengths so as to capitalize on them as well as the opportunities available. This will help in identifying the existing weaknesses that could compromise the overall working of the business and determine threats such as competitors so as to ensure the business has a competitive advantage in the market. Also for the business to have a clearly stated target market, it must segment, target and position its market. Segmenting, targeting and positioning generally increases the focus of the company to its market, improves its competitiveness, market expansion is possible especially with the geographic segment that provides an opportunity to go global , and further enhances customer retention. For the organization to thrive well in the environment its operating in or planning to launch a new product it must understand, the entire environment well starting with the political situation, the prevailing economic factors, the importance of culture, technological situation, the legislations regulating the environment and the environmental concerns of the industry. In the case of making decisions also, the company has to analyze internal factors and external factors that are likely to affect the business. Sometimes, it is hard to accurately map out a business future without first evaluating it from all angles. This mapping includes an exhaustive look into all internal and external sources of threats. 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