This case is about Apple Inc.’s (Apple) foray into wearable technology with the launch of the Apple Watch, a smartwatch that introduces an entirely new way to receive information and interact with the world through third-party app experiences designed specifically for the wrist. The Apple Watch is the first new product category in Apple since the iPad and the first product to be developed under the leadership of CEO Tim Cook (Cook). Despite being a late arrival in the wearable market, Apple claimed the top spot in terms of device sales as it accounted for over 50% of smartwatch sales in 2015 and sales have nearly doubled since 2016. Even though the first-year sales of the Apple Watch eclipsed the first-year sales of both the iPod and the iPhone, the smartwatch has been dogged by unrealistic expectations, which positioned it as the next iPhone in terms of sales and popularity.
The product has not been living up to expectations as a large part of the Watch’s functionality is tied to that of an iPhone. Post two iterations, the Apple Watch had not proven to be as indispensable as the iPhone or even as profitable as the Mac or the iPad. The biggest challenge for Cook going forward would be to hold on to the Apple Watch’s massive market share in the fairly tepid global smartwatch market. It remains to be seen whether the Apple Watch can become a game-changing device that can transform the wearable tech market just like the iPhone changed the smartphone industry.
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The case is structured to achieve the following teaching objectives:
Understand the rationale behind Apple’s entry into the wearable devices market.
Understand the issues and constraints in entering a new market with a new product, and in this context understand how Apple successfully launched the Apple Watch.
Analyze the prospects of the global smartwatch industry.
Appreciate the difficulties in transforming a niche product into a mainstream product.
Explore future strategies that Apple can adopt to maintain its growth in the sales of the Apple Watch.