Reference no: EM131285086

Experts and consumers alike called it "revolutionary." Introduced in June 2007, the iPhone is Apple's Internet-enabled multimedia mobile phone. In the first six months after Steve Jobs announced the planned launch of the iPhone at the Macworld Expo in January 2007, the invention was the subject of 11,000 print articles and 69 million hits on Google. So why is the iPhone revolutionary? For starters, the iPhone is a quad-band mobile phone that uses GSM standard, thus having international calling capability. It is a portable media player or iPod and an Internet browser, thus accessing owners' e-mail.

It does text messaging, visual voice-mail, and has local Wi-Fi connectivity. It's sleek, slim, and is outfitted with a multitouch screen with virtual keyboard. The multitouch screen technique means the owner can expand or shrink the screen image by sliding her finger and thumb apart or together. The iPhone offers owners three types of radio: cellular, Wi-Fi, and Bluetooth. As an added benefit, one iPhone battery charge provides 8 hours of calls, 7 hours of video, or 24 hours of music. Indeed, the iPhone was the year's most desired gadget. Customers stood in line to be the first to own one.

In fact, some more entrepreneurially-minded customers bought more than one, convinced they could sell one at a profit and make enough to pay for the second! Apple made the iPhone available to U.S. consumers through an alliance that made AT&T the exclusive carrier and under which AT&T subsidized the cost of the iPhone. To use an iPhone, customers had to sign a two-year contract with AT&T for cellular and Internet service. The price of the phone itself was $499 for the four-gigabyte model or $599 for the eight-gig version. But consumers' love affair with the iPhone soon faced trouble. Just two months after the iPhone introduction, Apple dropped the price from $600 to $399, angering customers who had paid top dollar only two months before.

And those customers immediately let Apple know of their dissatisfaction by phone, by e-mail, and on blogs. In response, Steve Jobs admitted that the company had abused its core customers and offered a $100 store credit to early iPhone buyers. Furthermore, consumers were not happy that they were restricted to AT&T with their iPhones. Soon after the phone's introduction, hackers posted directions on the Internet for consumers to unlock the cellular service feature of their phone, allowing them to use the iPhone with any cellular service provider.

Even though Apple was quick to warn consumers that unlocking the phone might damage the iPhone software, eventually making downloading with upgraded software impossible, unlocked phones continued to be available. To make matters worse, various European countries have laws to protect consumers from being forced to buy something as a condition of buying a product, thus creating barriers for the global iPhone business. The courts in both France and Germany have refused to allow Apple to sell the iPhone locked to a longterm contract with a single cellular service supplier.

For Apple, the iPhone is the product of the future with plans for introducing software upgrades and newer versions to stimulate increased world sales. Steve Jobs is betting that the iPhone will enjoy the same success he has had with the iPod and with Apple computers. But for that success to materialize, Apple must carefully consider what long-term strategies are necessary to make the iPhone both popular and profitable. You Make the Call

1. What is the decision facing Apple?

2. What factors are important in understanding this decision situation?

3. What are the alternatives?

4. What decision(s) do you recommend?

5. What are some ways to implement your recommendation?