Strategic Management I

Assignment on Apple Pay and

Apple Watch

Submitted By:
Parul Jain
15P037
Section A

Apple Watch
The Apple Watch is an intense gadget, the result of a brand attempting to shake up a stammering smart-watch advertise
and demonstrate that, at the end of the day, it can make a specialty gadget cool and standard. The iPhone 4S-and-upgood smart-watch comes in 38 flavors, with various case materials, hues, sizes and compatible Apple Watch groups.
None are economical. Beginning at $349 (299, AU$499) and cresting at an excessive $17,000 (13,500, AU$24,000),
this lightweight wristwatch is implied for patient early adopters and boutique store regulars. The comfort is found in the
substantial number of applications as well. Registering with a flight on account of a wrist-mounted QR code beyond
any doubt beats scrambling for my telephone or paper ticket and not fetching my telephone for every single vibration in
my pocket is all that much a luxury as opposed to a need, but not each iPhone user needs it especially at the current
price. The square-shaped smart-watch is similar to a scaled down iPhone; it gives us a chance to read messages,
summon Siri and make and get telephone calls from the wrist. But there are numerous iPhone features that aren't
extended to the wrist. Apple Watch is not a full- fledged iPhone substitution. It makes calls, however it can't add new
contacts. It listens to messages and sends them as a sound message or translation, however it doesn't have any kind of
editing function. It tracks fundamental fitness goals, yet it is not GPS-enabled, doesn't track sleep and third party
workout applications require an iPhone close by. In like manner, it can name melodies through the Shazam application,
yet it listens with the iPhone receiver, not its own. But the bigger question is: Is it still worth the price and is it
fashionable enough to wear each day?
Competitors
The market for smart-watches is seeing a double-digit growth rate universally. North America is a promising and a
most noteworthy income creating geography for smart-watches. However in short time i.e. in near future, this market is
expected to see a tremendous growth in Asian region with China, being a low-cost smart-watch developer, developing
as popular hub. According to recent report of International Data Corporation published on 17 Dec, 2015, the
worldwide wearable device market will reach a total of 111.1 million units shipped in 2016, up a strong 44.4% from the
80 million units expected to ship shipped in 2015. By 2019, the final year of the forecast, total shipments will reach
214.6 million units, resulting in a five-year compound annual growth rate (CAGR) of 28%. Apple's watchOS will lead
the smart-watch market throughout our forecast, with a loyal fan-base of Apple product owners and a rapidly growing
application selection, including both native apps and Watch-designed apps. Very quickly, watchOS has become the
measuring stick against which other smart-watches and platforms are compared. While there is much room for
improvement and additional features, there is enough momentum to keep it ahead of the rest of the market. Over the
next three years Apple is expected to hold the top position but with Smart Glasses and other similar equipment starting
to make way in the market, there is a threat to the position of Apple Watch. Also with Android wear catching up fast
and third party application association problem, it is evident that Apple may loose market share to other competitors.
What can be derived from all the specified information given in the table below, however, is that the watch market has
turned out to be more focused and more divided. Fitbit and other wearable-creators blasted into the watch market with
their own items in the most recent five years and expected to create an impact. Indeed, even some time recently,
organizations like Samsung and Microsoft as of now offered and variety of smart-watches and electronic wristbands.

Buyers and Sellers

Consumers buying this product are likely to be people who already own Apple products and are new adopters to smartwatch. There's a case to be made that Apple doesn't discharge sales figures on the Apple Watch. Amid the last Holidays
with some fluffy math and fuzzy analysisthe anticipated projections of Apple Watch sales range from 3 million on
the low-end to 10 million on the other end. No one truly knows the sales of the electronic gadget, with the exception of
Tim Cook and his band of cheerful officials. There is rise in prevalence of smart-watches with the moderate breakdown
of customary Swiss watches (in light of information by Strategy Analytics). The information uncovers that smart-watch
shipments drastically expanded to 8.1 million units in the last quarter of 2015 contrasted with conventional Swiss
watches that transported 7.9 million units (down 5 percent from 2014).

Apple has started inviting developers to create various applications for the smart-watch since this is one of the major
issues Apple is facing due to lack of basic apps. This gives bargaining power to developers. On the other hand, Apple is
trying to develop the technology in-house in order to have complete authority of the sales revenue generated from
Apple Watch. Concerns are mainly from the third-party application producers for the software required in the watch
and from the factories where the raw material is manufactured. In recent reports from supply chain sources (via

DigiTimes), it is stated that Apple is searching for an additional supplier for Apple Watch 2. The company is talking
with Inventec, Wistron and Foxconn Electronics to join Quanta Computer in the assembling of the up and coming era
of the Apple Watch. The report refers to a "weaker than anticipated" benefit return for Quanta as to the original Apple
Watch, which is creating a couple of the focused on producers to voice worry about supporting the long-term
investment on the upcoming version. Such type of reports and issues are intended to create worries among suppliers.
Upcoming challenges and strategy
With upcoming smart devices in various other forms, the position of Apple Watch seems to have a huge threat for its
future market share.

As forecasted by IDC, smart eyewear and clothing also seems to capture enough market share to challenge Apple
Watch in the long run. But the challenge does not limit itself to this. One in ten US broadband family units plan to
purchase a smart-watch in 2015, be that as it may, but as indicated by recent wearable research, 84 percent of them
wouldnt spend over $250 on the gadget. The review, from Parks Associates, recommends that the value purpose of
$100 (65) to $250 (160) is generally identical to high-end fitness tracker. Likewise, the study uncovers that the
individuals w willing spend more than $500 (320) on a smart-watch will only purchase one if it works without a
smartphone. This is terrible news for Apple as it implies that not everybody will liable to buy an Apple Watch, in view
of its current fastened setup and most particularly due to its price, which starts at $349 (225).
As can be concluded from the above mentioned challenges that pricing is a major issue for Apple especially when
smart-watch is only compatible with one platform. So to increase the market share and enhance the product the
proposition would be to extend the product line downwards to make it more affordable to the masses. With the superior
functional characteristics and functional applications, the product might be able to overcome many challenges that are
mentioned above but regular efforts are required to be made to make it usable to the masses so that people is confident
about the Apple products and the company gains loyal customers in future.

Apple Pay
Pay, retrieved from http://www.apple.com/apple-pay/
Paying in stores or within apps has never been easier or safer. Gone are the days of searching for your wallet, the
moments that were wasted finding the right card. Now you can use your credit cards, store credit cards and reward
cards with just a touch. Apple pay is simple to use and work with the cards you already have on the devices you use
every day. And because your card details are never shared when you use Apple pay, in fact they arent even stored in
the device that is used for communication. Using Apple Pay on your iphone, Apple Watch or iPad is safer and more
private way to pay.
Convenience Vs Security
Apple without a doubt faces a definitive problem of any mobile payment provider in that the verification layers set up
to safely recognize a client must be adjusted against Apple Pay's USP, which is without a doubt the client experience.
It's another step towards a definitive in comfort, where online and offline installments in the long run get to be
consistent. You can pay for products or administrations by means of a protected web connection or portable application
while you're in-store, without having to re-enter subtle elements. Mobile payments have made it considerably less
problematic for individuals to pay for products and services, which means far less information is required to be entered
or submitted, however the truth is that extortion takes after the channel of selection, and banks are battling a consistent
fight.
Competitors
Innovation across industry retrieved from - https://www.bba.org.uk/news/press-releases/mobile-phone-apps-becomethe-uks-number-one-way-to-bank
As a matter of first importance, recollect that Apple is not really entering an untapped business market. In June 2015
the British Bankers' Association (BBA) uncovered that in the period April 2014 to April 2015, 73.8 million bank
exchanges were performed by clients utilizing a mobile banking application four times the 12 month period before
that. This demonstrates that mobile banking is already a big market and is continuing to grow and develop.
With major competitors like Samsung Pay, Android Pay and Google Wallet; Apple Pay has positioned itself as very
well in the market with One Touch Payment option.
Apple in China - http://www.apple.com/pr/library/2015/12/18Apple-China-UnionPay-to-Bring-Apple-Pay-to-China
Initially, Apple Pay just worked in the United States, yet Apple is keen on bringing the services to clients in numerous
nations. Australia, Canada, the U.K., and recently, China have all joined the rundown of nations where Apple Pay is
live. Hong Kong, Singapore, and Spain ought to likewise get the services soon.
Patents
Apple is always known for its innovation in different segments and it has published various patents in this industry as
well. Starting from its plans for Near Field communication, a wireless technology and contactless communication
between various electronic devices. This allows a user to share information with a NFC compatible with actually
require to touch the devices or going through various levels of security. Not only this, Apple also has a patent in Pairing
any mobile device with any Payment Terminal in a store which gives Apple a competitive advantage.
Suppliers and Buyers
The modern customer hopes to manage any problems quickly and to his/her utter satisfaction, without disrupting their
day. Numerous banks, and other financial service providers and payment platforms are ending up competing on this

level. The key is striking a parity; while consumer loyalty is of principal significance to any business, safety and
security can't be disregarded.
In fact, a recent report from InfoScout revealed that only 9% of iPhone 6 users have actually tried Apple Pay and
despite its hype within the tech community, Apple Pay still has a lot of ground to cover. Out of all Apple Pay-eligible
transactions on Black Friday, the new NFC-powered mobile payment method was used less than 5% of the time.

Major reason for the reluctance of people in using Apple Pay is because they are unaware whether their retailers
system is integrated with the required technology or not. Reports suggest that 87% of little traders still dont
acknowledge mobile transactions. Merchants are not being requested to pay much else than to carry Apple pay. In any
case, really they are. They require purpose of offer that acknowledges the services. They have to ensure that the devices
are incorporated with present technology. They have to prepare their representatives (and re-prepare new
representatives where turnover is noteworthy) how the procedure works. And if theyre going to offer mobile payments,
theyll likely need to have everything and get themselves prepared for Google Wallet, PayPal and others. This is
problematic for some low-margin retailers and restaurants, and super-disruptive for littler vendors who don't have room
schedule-wise to manage a cerebral pain that is not on their rundown of the main 100 migraines of the day. Especially
so when a hefty portion of these firm owners as of now abhor credit cards in the first place.
Upcoming challenges and strategy
Banks issuing credit card are paying 0.15% of an Apple Pay buy, for what amount Apple guarantees that there is
tokenized and biometrically verified transaction and it is a secure medium for transaction.
And thats an expense which is difficult to charge to their customers, so the incentive with the financial service
providers or credit card companies is not significant enough to promote the services of Apple. Also with intense
competition from Android Pay, Google Wallet offering similar kind of products and android smartphones having huge
market share, the future is does not look good for Apple Pay.

Currently, Apple should focus on increasing its market share through B2B communication with the banks and retailers.
Since it dramatically lowers hurdles of the payment system, it seems possible to visualize that it is going to be a gamechanger. Everybody realizes that the Touch ID system at Apple is interlaced with Apple Pay yet individuals may not
understand that it will assume a greater part later on of payments. In future, the individuals will utilize Touch ID
specifically on payments when their telephone stays in pockets because when it comes to money the only element a
customer is concerned about is security. The future doesnt seem certain for banks with such evolving system so it is
likely to understand that having tie-ups with commercial banks is going to prove to be a big hurdle but with the moving
of TouchID to the cloud will provide a convenience to use it over all the Apple devices. Since it is supposed to be a
challenge to traditional payment system, Apple Pay has to provide incentives for the retailer to use it in the form of
helping with providing necessary technology. Apple can partner with few key retailers to provide such system with
TouchID recognition and they will start having ultimate convenience in payment system. Other retailers then have to
follow the tradition, which will become necessity for them in the near future with Apple generating revenue out of the
subscription fees in the long run. Banks and other financial services companies will also be then forced to cut out of the
equation and seek assistance from Apple.

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