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1. Consider Example of Apple and explain how phenomena such as network effects, switching costs and complementary products & services contributed to their growth.

2. Changes in Business Model possible in Future and How it will affect in Future of Apple. 

3. How they can achieve this and sustain for long 

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In this competitive world, growth as well as sustainability is gained by developing a considerable number of strategies and conducting effective market research. Apple, despite being one of the costliest Smartphone and other digital device provider, has own hearts of trillions of customers and have been appreciated as the leading Smartphone, tablets and other such device providers. The following section would shed light on the factors facilitating success of Apple, the business model change and strategies to retain them.

1. Consider Example of Apple and explain how phenomena such as network effects, switching costs and complementary products & services contributed to their growth

Several reasons are there that helped Apple achieve the current success rate. Following section would shed light on the three such phenomenons that helped the firm gain success.

Network effects: The value that the increasing number of customers adds to a product is called as network effect. The popularity or value of some products and services grow with the number of customers users the product and service. People wants to be a part of trend, and by being part of a large customer group, they fulfill their psychological needs of feeling included. This phenomenon is called positive network effect. This is utilized by Apple in three ways. Firstly, it has created some applications and features like FaceTime, Game Centre and iMessage that is available on Apple devices only. So anyone willing to use theses app or communicate with them, has to have the ownership of an Apple device (David, 2018). Thus, with direct network effect apple increases customers. The 2sided network effect is perceptible in its app store, where high number of app developers invest to get customers, consequently building a relationship between Apple users and app developers. Lastly, Apple has connected all its devices like tablet, Smartphone and so on. The interpersonal network effect, that works in this case, has improved overall customer base as owner of one Apple device buys others due to the facilities, like icloud, they get.

Switching cost: There are three types of costs involved in switching from one brand to another, these are the cost for transaction, the search cost and the learning cost. Though, in case of Apple users, they do not face many issues with the search and transaction cost, however they do get issues with learning cost (Dzhain, 2014). The iOS is a way different from Android and therefore it may take months to get accustomed with Android is one switches from iOs. During, this whole tenure the device would remain valueless. Due to this reason, people who are accustomed with Apple, prefer to stick to it and buy the upgraded version of this only.

Complimentary products and services: Apple has this rare facility of "Complimentary Support". The firm provides both software support like installation, reinstallation, configurations, and hardware support like connectivity, setup and so on without any additional charges. This remains valid mainly within 90 days after purchase (Support.apple.com, 2019). There is also some other services like, the "The Plaza" , providing free internet, "The forum" and so on helps to retain customers (Christine Moorman, 2018). They are giving customers an experience that goes beyond just the use of devices. The relationship that it is creating with its customers is the key reason for retention of customers of the firm.

2. Changes in Business Model possible in Future and how it will affect in Future of Apple

In the wake of technological advancement, organizations have faced the challenge of making more innovation to its products and making them more cost effective (Rathore, 2013). Apple is known to be one of the costliest firms in its industry. Few people in places like India and other such third world nations can buy Apple products due to the high cost. Apple is considering a change in this area by developing and reconsidering its existing pricing strategy. The high price was considered to be one of the key features of this firm. The business model is based on this as the business could earn a huge profit from this, in fact when the sale is low. The company, has however made a new change by introducing a 20 % price drop in iPhone XR, Apple iPhone 8 plus and iPhone 8 (Joy, 2019).

The firm has adopted several strategies to retain its customer. It has introduced several additional new features that comes as complementary products and services and also could help to deal with reducing switching cost. It is considered that, due to the limitation of Apple features and the in ability to have features that are in Android, are major reasons people prefer to shift to other operating system based, specifically Android based devices. Due to the integration, people who use iOS may not need to shift to Android. The current generation of iPhone 8 and X has bought a major shift in silicon design that powers Apple's AAPL, +1.14% smartphones. The in house design processor is used almost exclusively in the new models (Shrout, 2017). From silicon buyer to silicon building, Apple is changing its models by developing, combining and integrating all its operating system, product implementation, hardware development, and application ecosystem. The Apple A11 Bionic feature is basically an Soc that does the role of integrating standard process cores, image process and graphics, along with motion process and neutral engine that can aid in features like face recognition.

The previous primary processor that was driven by a custom-built six-core design is based on the idea of using a common ARM architecture. This architecture is found to be present in most of the other Smartphone devices of this generation. The customization of its design beyond ARM provided options would and already is helping the firm to stand apart from others in the industry.

The business model of Apple of mostly focuses on integrating its own devices in order to use the network effect, however, in near future; this could be change by making the integration with other devices. The integration between the iOS and apple may help the firm to deal with factors like switching cost and so on. People, who are accustomed with using Android, would find it difficult to use iOS and therefore this switching cost may hinder the firm's growth as well. This blockage could be removed with the help of enhancing network effect by making the Apple services in other operating system. Search engine also helped to understand consumer behavior and therefore Apple could consider using its app downloading platforms and other sources to understand consumer behavior. The data network effect could be used to enhance customer base and understand consumer behavior.

The company can also proceeds towards adding new complementary products and services. Currently it provides additional tools like headphone charger and so on with its devices. The firm can provide some additional features in its devices, like connectivity with blue tooth devices and so on, in order to enhance customer base.

Apple is also making another change in its products and services. In order to achieve sustainability, the firm is introducing such models that can last longer than expected. Instead of changing the device the customers are encouraged to upgrade them in exchange of a small investment. Thus, the firm is focusing on sustainability.

This also has significant future implications. As the industry is affected due to lack of sustainable efforts, this plan can help the firm gain a stability in this industry. However, such decisions may have negative short term implications, like lowering down to the sale.

3. How they can achieve this and sustain for long

The changes can be sustained for a long term basis. For this it is essential to evaluate the loopholes in the decisions and remove them.
In the first case, the firm is considering price drop. This is certainly an appreciable step as this would widen the customer base which has so far been limited to the upper class people only. However, this may come with some major demerits. For example, a major percentage of revenue of the firm is generated due to its high price. Selling one model of iPhone is considered as selling more than 5-6 models of cheap phones. Therefore, this strategy may affect the revenue. Another major drawback is that, many people, especially in the developing nations, consider iPhone as a status symbol.

The data network effect in the case of the Google begins with the users. The customer could provide data to Apple the way searching habit provides data to Google. In order to sustain the network effect, the firm can use the searching habits of people and develop strategies accordingly. The data network effect could be retained by developing business relationship with some online service providers or software developers, chipmakers, PC makers.

In order to retain the growth that the company get from complementary services, it is essential to develop sustainable strategy. The firm provides both software and hardware support during the beginning months. It can extend the complementary service by helping customers to upgrade operating system. Along with that some products that are available in Android platforms, should be made available in the Apple devices in order to be in line with the fast growth in this industry. Integration of both Intel INTC, -1.17% along with the Qualcomm option as a back up plan may help to complement each other. Complementary services like OLED screen and Qi wireless charging could also help the changing model become sustainable or at least long term.

The company's integration process and provision of additional products, improves network effect. Along with that, it is also expected to lower down the rate of switching from Apple to other devices, as Apple itself is amalgamating most of the required features in-house. In order to retain this strategy, the company should keep developing new products and remain upgraded with the new lunches of competitors. By developing substitutes or better features it can retain growth and its customers.

Some other recommendations for future development are using price skimming strategy, that is changing the price based on market demand and developing effective marketing strategies that can help it retain the brand image(Dave Smith, 2019). Affecting profit margin shows inability to focus on one of the key pillars of sustainability that is economic pillar. Therefore, it should adopt such strategies that would help the firm be sustainable without hampering its growth. Such strategies could be tree plantation, encouraging customers to recycle default devices, give price discounts in exchange of old devices and so on (Anthony Bardaro, 2018).


The above section provides beneficial understanding regarding several aspects associate to strategies management of Apple. The study shows that Apple is using three type of network effect to enhance customer. The bigger the existing customer base, the more people wants to be a part of it. Along with that phenomenon like switching cost and others have also benefited the firm. The firm is considering several changes in its business model like greater focus to services, sustainability and so on. The study also provides some effective recommendation to get success from the changes it is considering for future.


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