Shathish Final IMNPD AfterEdit

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INNOVATION MANAGEMENT AND NEW PRODUCT DEVELOPMENT (BM050-3-3-IMNPD)

INDIVIDUAL ASSIGNMENT Submitted By: SHATHISH CHALLAPPAN (TP031568) Submitted to: DR PUVANES WARAN A/L KUNASEKARAN Intake Code: UC3F1606 IT (NC) Hand-In Date: 14TH March 2017

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Executive Summary This report is prepared with the sole purpose of conducting a marketing analysis of the new type of Bluetooth earphones launched by the Apple industry which is known as the Apple Airpods. However, the Bluetooth earphones concept are not considered to be new in the current market where competitors such as Samsung, Motorola, Sony and many more are also within the same boat. But, even though with such strong competitors, Apple is well known to be able to compete with its competitors by applying various technologies and functions to increase the capabilities of its product. This same concept has been applied into its wireless earphones and thus improving its product-line promotion strategies for a successful product in the current technology market. In short, Apple Airpods are able to expand and grow its product within multinational market and also has been supplying new innovative products and also services to its multitudes of customers worldwide to make their lives easier.

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Table of Contents Executive Summary ...................................................................................................................................... 2 Introduction ................................................................................................................................................... 4 Apple Airpods ........................................................................................................................................... 4 Background of the case ................................................................................................................................. 6 Market Entry ............................................................................................................................................. 6 Launch Activities ...................................................................................................................................... 7 Brand Management Strategies .................................................................................................................. 8 Product Platform ................................................................................................................................... 8 Brand Extension .................................................................................................................................... 9 Market Evolution .................................................................................................................................... 10 Market Segment .................................................................................................................................. 10 Product Lifecycle ................................................................................................................................ 10 New Geographical Areas .................................................................................................................... 11 Brand Success ......................................................................................................................................... 12 Competitors ............................................................................................................................................. 13 Market positioning .............................................................................................................................. 13 SWOT Analysis .......................................................................................................................................... 15 Strengths ................................................................................................................................................. 15 Weaknesses ............................................................................................................................................. 16 Opportunities........................................................................................................................................... 16 Threats .................................................................................................................................................... 17 Ansoff Matrix.............................................................................................................................................. 18 Market Penetration .................................................................................................................................. 18 Product Development.............................................................................................................................. 18 Market Development .............................................................................................................................. 19 Diversification......................................................................................................................................... 19 Conclusion .................................................................................................................................................. 20 References ................................................................................................................................................... 21

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Introduction Apple Airpods In this current era, wireless earphones are becoming more and more common and furthermore the size of the wireless earphones are also becoming smaller. However, there are a few mobile companies which competes to produce the most innovative earphones instead of producing only mobile phones. Two of such leading companies (besides Apple) are the Samsung and Sony. These companies compete between each other and as well as with other companies such as Apple which is thriving to the top in terms of sales, innovation and creativity. However, Apple have been making efforts in thriving within the music industry as well. One of the devices created, besides from many other products, is the Apple Airpod wireless earphones. These earphones are considered to be unique in function as well as in the design itself. These earphones do not only perform the regular wireless earphones functions, but also is considered to be a smart earphone as well. On the month of December 13, 2016, Apple finally launched its Airpods earphone together with the iPhone 7 and iPhone 7Plus after the patents of the Airpods had been released during the mid-2015 (Campbell, 2017). Apple had revealed the Airpods as an effortless, user friendly and magical earphone with innovative features and hardware. Besides, the Airpods are said to be the best, compared to its wired counterpart which was plain and was without any additional features. Furthermore, the Airpods are also equipped with Apples W1 chip which improves and also enhances the functionality and as well as the features of the wireless earphone. The combination of simplicity and technology are capable of attracting wide variety of customers which intends to acquire the Airpods and furthermore, Tim Cook has claimed these earphones as a “runaway success” (Potuck, 2016). The figure in the next page / below displays the design of the Airpods.

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Figure 1: Apple Airpods (Carnoy, 2016)

Besides, coming back to the functionality of the Apple W1 chip, this chip is capable of producing an extremely efficient wireless connection compared to any other wireless earphones in the market. Furthermore, it also has an improved sound quality compared to its wired counterpart. Moreover, the chip is also capable of managing the battery life and thus providing a longer battery life up to 5 hours of continuous usage on a single charge. It is also equipped with smart features where it automatically connects to any Apple devices instantly without the hassle of turning on the Bluetooth and as well as connecting to Apple’s AI, the Siri, with just a tap on the earphone. Furthermore, it recognizes when the user is talking or listening due to the chip which in turn controls the music playback and also consist of the best microphone functionality in the market. (AppleAirpods, 2017). The figure on the next page explains the battery life of the Airpods.

Figure 2: Airpods Battery Life (Apple, 2017)

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Background of the case In this section of the report, both the market entry and also the launch activities of the Apple company are to be researched and the problems or issues that the Airpods face in the current market. However innovative a company gets towards the production of its products, there are still certain issues that will be faced by the product and thus may affect the sales of the product. Such issues that are faced in the Apple Airpod was the sound quality. As stated by Derek Scott (Scott, 2017), customers should not expect much from the perspective of sound quality or get a great sound experience and be prepared to lose one. This issue will be a disappointment to the customers as Apple (a company who owns Beats), should have been producing earphones with the highest quality of sound. The lack in sound quality or the incapability to reach the sound quality expected would affect the market and sales of the Airpod, as many other earphones do provide better sound quality with a cheaper price. Besides, according to Eric Limer, the design of the earphone also can be an issue as it is considered to be dorky (Limer, 2016). This may affect the aim of selling to a variety of customers and thus also affecting the sales of the product.

Market Entry Market Entry is considered to be a strategy or activity associated with bringing a certain product or services to a specific targeted market (Business Dictionary, 2017). This is a significant method used in entering into an international market by large or international companies. There are significantly many different methods in which a company can penetrate an international market. However, no one market entry strategy works for all international market (Trade Start.CA, 2017). Whereas, for the companies such as Apple, speculations usually arises on the product itself and how the Apple fans would be receiving it. This is due to the marketing strategies that Apple does where an image of the company as producing the best quality products in the market is formed. Furthermore, it is also well known as a company that has a very strong engineering, design and also technology base within all the products they design and thus arises the eagerness of each and every fan throughout the world after the company’s conference about the product that is to be released. Besides, in the market entry, there are two types which are Market First and Market

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Follower. According to Jess Bolluyt, Apple is considered to be a market follower as the Apple Airpods is not the first wireless Bluetooth earphones released into the market (Bolluyt, 2015). Companies such as Samsung, Sony, JBL and may more have already designed Bluetooth earphones way much earlier than Apple. The table below shows the Pros and Cons of Market Followers.

Table 1: Pros and Cons of Market Followers (Drive Your Success, 2017)

Launch Activities On September, 2016, Apple had announced the date of launch of the Apple Airpods which will be somewhere during the late October together with the iPhone 7 and also what can be expected from the devices making the fans and customers excited and eager. These Apple Airpods were made public by the Apple.Inc via marketing and advertising. However, Yoni Heisler has stated that there was then a delay on the launch date of the Apple Airpods, which was then postponed to the December 13th, 2016 due to certain technical hurdles (Heisler, 2016). Furthermore, these Apple Airpods are launched within Apple’s own stores worldwide. Apple has its own stores worldwide which is dedicated to the sales of Apple products only. Besides, they also have their own apple app store online as well. These stores that apple has, makes it easier for the customers to be able to download Apples software and music and as well as buying Apples new technologies or products which in turn makes the customers to get eager and also excited for what is going to be offered by Apple. Moreover, these store makes Apple customers to gain the Airpods easily and also find solutions for their Apple products without any hassle as Apple has opened their stores

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worldwide in almost most of the cities in every developed country. Therefore, this would then strengthen the customer’s loyalty towards the Apple’s products. Besides, these Apple Airpods are user-friendly as well as Apple has implemented simplicity within the architecture and designing of the Apple Airpods and therefore makes it easier to be used by the customers without any complicated processes (Apple, 2016).

Brand Management Strategies Product Platform Apple has only designed two types of earphones which can be used generally to all of its devices, except the wired earphones, for the iPhone 7. However, the only type that will be discussed is the Apple Airpods. Besides, the Apple Airpods are released with one type of color which is the white. This is because, only the white is capable of matching with all of Apple devices color which is either white, silver or black. These Airpods comes within a small case which stores the Airpods and as well as charges it. It is furthermore, driven by a custom-designed W1 chips which controls most of the earphones functions. Besides, according to Scott Stein, the casing the holds the Airpods is capable of providing more than 24 hours of battery life to the Airpods, whereas the Airpods, are capable of providing up to 5 hours of battery life with a single charge (Stein, 2016). The reason that Apple had designed the wireless Airpods id due to the current generations who are moving on from the wired to the wireless earphones. Therefore, Apple had to take the leap into the designing of the Airpods which are considered to be successful. Besides, the wireless Airpods performance are way much better compared to the Apple’s Earpods. In terms of features, quality and functions, Apple has improvised so much to suit the requirements of the customers and as well as providing them with the best product possible. Some of the extra features and technology that are added into the Airpods are, its wireless, connects to Siri with just as single tap, consist of a voice accelerometer (recognizes when user speaks), beamforming microphones (filters external noise and focuses on user voice), optical sensor and motion accelerometer, and the capability of

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auto connect to any of Apple devices instantly after syncing with iCloud (Apple, 2017). The image below shows the Airpods within its casing.

Figure 3: Apple Airpods (Apple, 2017)

Brand Extension Apple is a well-known company that designs the products with the best quality and also provides the best services in the current technological market. Apple does not only design the Apple Airpods, but it also has different varieties of products such as the iPhone (Smartphone), iPad (Tablet), iPod (Music player), Apple Watch (Smart watch), Mac (Desktop and Laptop), software’s such as the operating systems that runs within all these devices like the iOS and OS X, iCloud and also many accessories and services. Besides, Apple also provide application, Music, Videos and softwares downloading services such as the App Store, iBooks, iTunes, and also Mac App Store (Apple, 2017). However, the Apple Airpods that was designed mostly depends on the Apple only devices as it requires devices such as the iPhone, iPad, iPod and Mac to be able to unleash its maximum features and performance. Even though it is capable of connecting to other smartphones such as the Android smartphones, users will not be able to utilize the features that makes the Apple Airpods special such as the auto connect via opening casing, Siri and many more as these features are available only when the Airpods are connected to the Apple products (Dillet, 2017).

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Market Evolution Market Segment The Apple Airpods are designed for customers of all ages and lifestyles. However, it is specifically targeted towards the youngsters, young adults and adults up to the age of 35. The reason is because these age group are the one who mostly have an active lifestyle and are always connected online and they do require new technologies such as the Airpods to help them in their busy lifestyle. Besides, these Airpods are also suitable for sportsman who uses wireless earphones during their regular workout. These Airpods are also considered to be waterproof as it is able to withstand water test and therefore it can be used during rain and it would still function if it falls into a pool or 1 foot of water (Ibrahim, 2016). Therefore, the Apple Airpods are suitable for any group of users and therefore can be used by any age group or customers with any type of lifestyle.

Product Lifecycle Product lifecycle is known as the changes that happen in the consumers demand over time. Therefore, as this consumer demand changes over time, a certain product in demand will then not be in demand anymore. Besides, for the Airpods, the wireless earphones are considered to be the first that has been launched and as generally know, this Airpods will also become a product that is less demanded over time as apple will be designing and launching newer and better versions which meets the demand of the customers at that specific time in the future. Furthermore, according to Bert Markgraf, there are 3 different stages of the product life cycle within the market (Markgraf, 2017). The first would be the introduction stage. Here in this stage, the product is released within US to enable demand prediction and the pricing of the product is considered still high due to machinery, the market research and set up. This can be seen in the sales of the Airpods as it was sold for $159 which is considered to be quite expensive. The next would be the growth stage, where the Airpods becomes well known and advertisements are done by Apple to increase the anticipation and as well as to make high sales out of the product. The third would be the maturity 10 | P a g e

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stage, where Apple would gain the highest amount of sales and its maximum revenue. This can be seen when successfully captured one-fourth of the wireless headphones market (Matney, 2017). This can be seen in the Diagram below. Even though there were delays in the launching of the Airpods during the holidays season where the sales would be high, Apple were still able to gain high sales as Apple users are particularly loyal and willing to endure waiting instead of defecting to another brand (Niu, 2017). After that, the revenue would then start decreasing in time due to change in customers demand and Apple would then be required to upgrade the Airpods to a newer and better versions.

Table 2: Wireless Headphone market before and after launch (Owen, 2017)

New Geographical Areas Apple retailers started selling the Airpods with the stores in US which then was expanded to the Apple stores worldwide and thus causing the maturity stage to be able to last longer and furthermore the revenue would also increase (Brown, 2016). Furthermore, according to Kathryn Vargas, the number of Apple stores worldwide keeps increasing at fast rate (Vargas, 2014). The figure below shows an example the increase in number of Apple stores from 2001 to 2015.

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Figure 4: Number of Apple Retail Stores (Miglani, 2016)

Brand Success As this apple Airpods is a recently launched product, there is no exact yearly revenue that can be observed to estimate the brand success. Instead, according to Treffis Team, there is an estimation done from the current sales and reviews by Tim Cook himself. Apple has estimated a roughly about 22 million units to be shipped in the first year of its launch which is 2017. Furthermore, a rough estimation of $3.1 billion revenue is expected in the year 2017 depending on its current sales. Airpods are priced at $159 a pair, but it is assumed that Apple’s ASP would be lower as Apple plans to sell the Airpods via the third party stores in addition to apple retail stores and thus boosting the revenue in the year 2017 to $5.4 billion (Team, 2017). Furthermore, the device is basically made to be user-friendly and simple and therefore, users will not be facing any complications using this product. Besides, the functions are considered to be advanced in term of technology and still remains simple to use. This therefore make more customers to purchase it and also provides values to customers. Moreover, Apple’s ecosystem effect and the large base of affluent iPhone users could provide a sizable target market for the Airpods (Team, 2016). Besides, on the launch day of the Airpods, it has bring about a huge success for the company due to the spike in the number of sales as shown in the figure below.

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Figure 5: The day of Airpods launch (Stanton, 2017)

Competitors Market positioning

Figure 6: Market Positioning (Miglietta, 2016)

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Way before the launch of the Airpods by apple, many other different companies such as Sony, Philips and many more has launched the Bluetooth earphones earlier into the market. However, the top three companies only are compared with the apple earphones. In the figure 4 above, it can be seen that Beats earphones are the most dominant in terms of fashion ability and also the quality of the sound, followed by the apple Airpods, Sony earphones and the Philips earphones. As stated by David Pierce, this is because, Beats earphones produces earphones with the best quality of sound and is up to date on the current fashion ability among the customers (Pierce, 2016). However, apple does lack in terms of quality of sound and fashion ability compared to beats, but it is the best compared to other earphones such as Sony and Philips which lacks both fashion ability and the quality of sound. However, even though Beats is considered to be the best, according to Heidi Moore, Apple has however bought over this company and therefore many more improvement in terms of the sound quality can be expected (Moore, 2014). Furthermore, according to Barclay Ballard, Apple has brand loyal customers and the company mainly focuses on selling the Airpods to these category of customers in which it brings a huge profit to the company (Ballard, 2015).

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SWOT Analysis

STRENGTH Staying ahead of fast moving



WEAKNESS Negative feedback

technological curve

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High Pricing of product

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Strong Brand Image

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Very Proprietary and Controlling

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Good Customer Service

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Loyal user base

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OPPORTUNITIES

THREATS

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Loyal Customer Base

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Imitation of the product

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Well-deserved reputation for high

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Intense rival competition

quality product

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Rising manufacturing cost

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New wireless earphones Table 3: SWOT Analysis Table

Strengths

Apple has many strengths that has made the products launched to be quite successful within the market. Some of the strengths are, it is quite well known for staying ahead of fast moving technological curve (Ritchie, 2011). This can be seen within the Apple Airpods itself which consist of advanced features that no other wireless or wired earphones consist of, such as the sense touch, advanced pause and playback feature, smart auto-connect feature and many more (Mayo, 2016). Besides, Apple has also a strong brand image (Jones, 2012). Apple is well known as the developer of products which focuses towards the best quality and technology (Staff, 2012). This also has been displayed onto the premium design of the Apple Airpods with advanced technological features (Dawson, 2016). Moreover, the Apple has a very good customer service and also stores that provide these customers services worldwide (Heisler, 2015). Besides, Apple has a very loyal user base as it has gained the users trust in providing premium products with the best quality and never letting the customers down (Lynch, 2015).

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Weaknesses

Some of the weaknesses of the product within Apple is firstly the negative opinions or feedback by certain customers or sometimes rumors. Some of the customers who are unsatisfied or people who create rumors and provides negative feedbacks before the product is even launched and therefore makes certain loyal customers to fear buying the product (Broussard, 2016). Besides, another weakness would be the high pricing of the product (Blodget, 2013). Due to the premium quality and feature, Apple sadly is required to price the products at a high price with the purpose of satisfying the customer’s needs and requirements (Nielson, 2014). Therefore, due to the high price, certain category or group of customers are unable to buy the product. For example, this can be seen within the Apple Airpods. Due to the reason that it is priced at $159, which is quite high for a wireless earphone, customers tend to divert or prefer cheaper alternatives from rival companies (Ferron, 2016). Moreover, Apple is also known to be proprietary and controlling. This is true as Apple did not provide the access to all the features of the Apple Airpods to android users. Therefore, only through apple products like the iPhone 7, all the great features of the Apple Airpods can be utilized (Petrovan, 2016).

Opportunities Some of the opportunities of the Apple Corporation are, it has a loyal customer base and therefore, apple is able to sell the Airpods as its customers trust the product by Apple (Lynch, 2015). Another opportunity would be the well-deserved reputation for high quality product. Apple is very well known to be producing products with the best and highest quality and services. Therefore, Apple is able to use this recognition to be able to sell the Airpods and as well as other products within the market (Bajarin, 2012). Another one would be that apple has produced its first, new wireless earphones with the most advanced and innovative technology (Bajarin, 2016).

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Threats Some of the threats apple faces upon releasing its products into the market are, the imitation of the product. This is a threat as many other companies tend to imitate the Apple Airpods upon its release and then the recon product are sold at much more cheaper price but with a lower quality. Users may prefer this recon products as they provide the same features but with a much lesser quality (Airpods, 2016). Another threat would be the intense rival competitions. For example, many other companies such as Samsung and Sony are also competing with apple in producing products with better technology and functions (Snelling, 2017). Another threat would be the rising manufacturing cost, as this would therefore cause the rise in the price of the product and causes customers to choose a cheaper alternatives (Morris, 2015).

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Ansoff Matrix

Figure 7: Ansoff Matrix (E-draw Visualization, 2017)

Market Penetration Market Penetration is the method which usually focuses toward increasing market shares of an existing product or promoting a new product through different strategies (Business Dictionary, 2017).

Product Development Product development is a series of steps that involves conceptualization, design, development and marketing of newly created or rebranded products. The objective is to cultivate, maintain and increase the company market shares via satisfying customers’ demands and requirements (Rouse, 2017). This can be seen when the Apple Airpods were originally slated to be launched in October, but were then been delayed. This is due to Apple needing extra time before they are ready for 18 | P a g e

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customers and to satisfy the customer’s needs. Besides, additional features and technologies were added to fulfill the customer’s needs and as well as making their life easier (Dimitrov, 2016). This form of development is beneficial for the company as it was able to attract customers due to this new features. Besides, apple also required some time in developing a custom low-energy Bluetooth chip for the Airpods so that it fulfils the customer’s needs by providing the maximum amount of charge for the Airpods which is able to last for one whole day of usage (Mayo, 2016).

Market Development This is one of the four alternatives growth strategies in the Ansoff Matrix which involves selling existing into new market (Free management e-books, 2017). This is carried out by the company market research section the helps to figure out the new customer groups (Edward Lowe foundation, 2017).

Diversification

This is the practice of entering a new market with a completely new offering in which entails significant costs and risks, but can be extremely rewarding (ecornell, 2017). This is done by Apple as it entered the new market of wireless headphones by providing advanced technology unlike any other earphones and thus succeeding in the sales of the Apple Airpods (Rossman, 2017).

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Conclusion Therefore, it can be concluded that the Apple Airpods have been analyzed thoroughly. Besides, it is found that since its establishment, Apple has grown tremendously and successfully into a world recognized company and brand and also still continues to explore more innovative products. However, similarly as other products, Apple too faced ups and downs into producing its products and as well as making its product and brand a well-recognized and trusted. This can be seen in the profits and also the number of loyal customers Apple has each year which keeps increasing. Therefore, even though the Apple Airpods are a new product that is released into the market, Apple is able to launch and sell this product within the market successfully and also will continue selling it satisfied customers.

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Asia Pacific University

TP031568

Petrovan, B., 2016. Android Authority. [Online] Available at: http://www.androidauthority.com/apples-new-airpods-work-android-worth-715405/ [Accessed 18 February 2017]. Pierce, D., 2016. Wired. [Online] Available at: https://www.wired.com/2016/12/review-beats-powerbeats3-wireless-headphones/ [Accessed 9 February 2017]. Potuck, M., 2016. 9TO5MAC. [Online] Available at: https://9to5mac.com/guides/airpods/ [Accessed 29th December 2016]. Purely Branded, 2017. Purely Branded. [Online] Available at: http://www.purelybranded.com/insights/the-four-ps-of-marketing/ [Accessed 18 February 2017]. Ritchie, R., 2011. iMore. [Online] Available at: http://www.imore.com/apple-stays-years-competition-massive-amounts-money [Accessed 18 February 2017]. Rossman, J., 2017. Phys.Org. [Online] Available at: https://phys.org/news/2017-01-apple-airpods.html [Accessed 19 February 2017]. Rouse, M., 2017. SearchCIO. [Online] Available at: http://searchcio.techtarget.com/definition/product-development-or-new-productdevelopment-NPD [Accessed 19 February 2017]. Rowland, C., 2015. Panmore Institute. [Online] Available at: http://panmore.com/apple-mission-statement-vision-statement [Accessed 26 December 2016]. Scott, D., 2017. SoundGuys. [Online] Available at: http://www.soundguys.com/apple-airpods-review-good-11072/ [Accessed 13 January 2017]. Snelling, D., 2017. Sunday Express. [Online] Available at: http://www.express.co.uk/life-style/science-technology/750397/Apple-AirPods-could-facea-major-challenge-as-Sony-unveils-noise-cancelling-rival [Accessed 18 February 2017]. Staff, A. I., 2012. Apple Insider. [Online] Available at: http://appleinsider.com/articles/12/07/30/apple_focuses_quality_products_not_money_says_designer _jonathan_ive [Accessed 18 February 2017].

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Asia Pacific University

TP031568

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