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Apple’s business strategy for its iPods is to differentiate themselves from their competitors. The primary essence of their strategy had remained the same over the years but has evolved in response to the changes in consumers’ preferences.

When Apple launched their first iPod in 2001, they shocked the market with its gigantic hard drive size, their impressive industrial design and their high pricing. Apple was able to incorporate the same storage capabilities into a much smaller hard drive mp3 player than its closest competitor - Creative’s Nomad Jukebox. The novelty idea of the mechanical scroll wheel also helped iPod stand out from its competitors. Its price penetration strategy was based on Apple’s confidence in this potent product .

In the next 2 years, Apple continued to differentiate iPods using innovation and functionality as their main drivers. IPod’s storage capabilities increased by 8 folds and had innovatively replaced their novelty mechanical scroll wheel with the pressure sensitive touch wheel.

In 2004, Apple redirected its differentiation strategy and turned its focus towards product design rather than functionalities. They launched their first generation of iPod mini which had a 10 fold decrease in their storage capabilities and were more light-weighted than its ancestors. Apple aimed to create a different consumer experience by emphasizing on its ultra-portability.

The height of market dominance for iPod was in 2005. Once again, Apple differentiated through its innovation and product design and introduced iPod nano. The sleekness, fragility and handiness of the iPod nano were more aesthetically aligned to the metallic colors introduced to iPod mini earlier on. Apple also innovated into added functionalities and introduced iPod classic which could play video.

Subsequently, Apple ventured into different dimensions of differentiation by introducing a portfolio of services – iTunes and iLounge, which complements its products. Moving...