The Making of Apple's iPod

            
 
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Case Details:

Case Code : OPER064
Case Length : 19 Pages
Period : 2001-07
Organization : Apple Inc.
Pub Date : 2007
Teaching Note :Not Available
Countries : US
Industry : Digital Music Player

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"It's cool across the board: everyone from my seven-year-old niece to my 60-year-old uncle has one. But as the leader, Apple needs to keep innovating, not resting on its laurels. We haven't seen a new product for a year."1

- James Beechinor-Collins, Editor-in-Chief, T3 Consumer Gadgets Magazine, in September 2006.

"The iPod is far and away the most popular tech gadget with our panelists. However, for the first time we are hearing negative feedback about the iPod from some panelists. Panelists cite that the batteries are not replaceable, so when they die the entire player must be replaced. We have heard from some conspiracy theorists that the batteries are made to die soon after the warranty ends."2

- Clara Avruch, Spokeswoman, Zandl Group3, in September 2006.

Introduction

On April 09, 2007, US based Apple Inc. (Apple) sold its one-hundred millionth iPod. With this, iPod emerged as the best selling product of all time in the digital music player industry (Refer Exhibit I for the growth of sales of iPod since its introduction). iPod was a highly successful product.

For the financial year ending September 2006, Apple reported revenues of US$ 19.32 billion and a net income of US $2 billion. The revenues from iPod for the same period were US$ 7.7 billion i.e. about 40% of the company's total revenues (Refer Exhibit II A and II B for detailed financials of Apple).

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

After the launch of iPod, Apple's stock price increased more than 700 percent between October 2001 and August 2007 (Refer Exhibit III for Apple's share price movements between 2003 and 2007). iPod was first introduced as a music player. iPod wasn't the first MP3 player to come into the market but it was the first one to engage the customer.

It overturned the weaknesses of earlier MP3 players such as bulky appearance, limited storage, etc. and was able to forge ahead. The product was developed in a year and was launched on October 23, 2001.

iPod users could download songs and videos from iTunes Store, Apple's online music store that was launched on April 29, 2003. As the market for the product increased, Apple kept adding many new features. In March 2002, Apple added limited PDA4 like functionality, where by text files could be displayed, while contacts and schedules could be viewed and synchronized using a computer terminal.

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1] David Smith, "Why the iPod is Losing its Cool", The Observer, September 10, 2006.

2] Randall Parker, "Apple iPod Losing Popularity? Sales Down," www.techiepundit.com, September 10, 2006.

3] Zandl Group is a New York-based trends forecaster which regularly interviews a panel of 3,000 consumers aged 25-35 to get a broad feedback and opinion about a product, technical or non-technical.

4] Personal Digital Assistants (PDAs), original designed as personal organizers have evolved to become hand held computers which are also known as pocket computers or palm top computers. They have many uses like use as calculators, alarm clocks, sending and receiving emails and access to the internet, address book, etc.

 

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