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Apple Inc. is an international American company that produces computer software, cell phones,
personal computers and consumer electronic products. The well-known products of Apple
include: the iPod, the iPhone, the Macintosh line of computers and the iPad. 301 retail stores in
10 countries are operated by Apple in August 2010 and now they launch new product that hit the
market mass on April 2014. The software of Apple consist on the Mac OS X operating system,
iWork suite of productivity software, Final Cut Studio, Logic Studio a music production tools
suite, iOS; a mobile operating system, the iTunes media browser, the iLife suite of multimedia
and creativity s oftware, Aperture; a professional photography package, AirPlay, Airprint, etc
(Business Insider, 2013).
Apple Company was developed on 1 st April, 1976 by the co-founders named Steve Jobs and
Steve Wozniak in Cupertino, California. The first 30 years of the company was named Apple
Computer Inc. but later on January 9, 2007, the word Computer has removed (Business
Insider, 2013). They introduced Apple I computer in 1976 which was a failure but in 1980, they
launched Apple II which was successful. The IPO offered by the company in 1980 (Datamonitor,
2006).
The purpose of this assignment is to critically analyze the context within which the company
operates by analyzing the external and internal Factors. In order to achieve this different
analytical tools and models will be applied. Then the objectives and strategy of Apple will be
identified and evaluated. There will be examples of the implementation of the strategy at the end.
2. External Environment
The external factors can be evaluated using PEST because PEST analysis is valuable strategic tool for
identifying the business positions, size, growth, feasible route for operations and to classifying the market
development and decline (Kotler, n.d.).
Apple is defined as the leading digital asset Management Company and global smart phone
provider. It is the only one who generates and runs both soft-wares and hard-wares. It allows
consumers to buy and share contents (applications, music and movies) via Apple devices (iPad,
iPhone, Mac and iPod) by an exclusive selling media platform called iTunes (Digital Marketing,
2011).
In 2012, Apples CEO (Tim Cook) said that we are very excited with the sales of iPhone over 35
million and approximately 12 million sale of iPads in March quarter. He also said that the
innovative iPad is off to an immense beginning with new innovation that can deliver only by
Apple (Burns, 2012).
Moreover, the sales of iPad, Mac and iPhones have increased by 188% and 7%, correspondingly.
On the other hand, iPod sale was down by 15%. The numbers in Q2, 2012 are down as
compared to Q1, 2012 when Apple smashed all its previous records as you can see in Figure 1. In
that period Apple sold 5.2 million Macs, 15.43 million iPads and 37.04 million iPhones, even
iPod sold well with 15.4 million units (Burns, 2012).
Source:
TechChrunch
According to IDCs report (Q1 2012) that in a two horse race with Samsung, Apple was on the
second place in global with the notable growth of 8.8% of total cell phone market ( 4.6% up from
a year ago) and 24.2% of worldwide Smartphone market (18.3% up), as you can see in table 1
(Kahn, 2012).
Source: IDC
PEST Analysis
To gain an understanding of Apples business potential, direction of operation and to know situation of
future market, we will use PEST analysis.
Political Factors
There are many problems which cannot be controllable by the company such as; geopolitical
uncertainties, war against terrorism, authority to work and health issues which can affect the
sale of Apples product worldwide. As to reduce operating cost Apple has outsourced in
different countries like Ireland, China, Korea, Czech Republic and Cork. If these countries face
any political instability or any problem which causes to delay in manufacturing operations, will
led to spoil the Apple likeness in the eye of consumers and its dealers (CNetnews 2012).
Economic Factors
Purchasing power depends on the Worlds economic conditions. According to past few years,
unemployment rate is very high in many countries which cause to decrease the sale of Apple products.
Another reason was increase in oil prices which causes inflation in worlds economy. As a result of these
economic factors, purchasing power of people reduced which negatively affected the sale of Apple
products due to its higher price. But now worlds economic conditions are getting better and company
has purchased itself foreign currencies, so Apple revenue has increased in the global market (Apple Inc
2012).
Social Factors
Two factors always have been on forefront of Apple product throughout the history, the design and the
quality. The purchasing of luxury products have gone up because the purchasing power of consumers has
risen in different market across the world and people prefer to buy iPod, iPhones and latest technology
iPad. As music industry growth has increased which is the biggest social influence on Apple because the
main essential music store is iTunes. Therefore, Apple has gained so much from social factors because
its defining an individuals modern lifestyle.
Technological Factors
Apple always takes advantage because of its innovative and high technologies products. The large
amount has invested in research and development field by Apple, thats the reason Apple comes in top of
the new innovative products.
Competitor Analysis
As everyone knows that Apple is a big industry and it is running so many products. Here are some key
competitors of Apple, according to cell phone industry and other products are following: Google, HPQ
(Hewlett-Packard Company), RIM, Samsung, HTC and Nokia. As you can see smartphone competitors
in figure 2, and Apples revenue, gross profit margin, earning per share, price earnings and net income
with its direct competitors in table 2.
and they can switch to another retailer if the products are not differentiated (Smith, 2006).
Google provides the competition in overall Smartphone and tablet market because Blackberry
manufacturer (RIM), who was considered as a market leader of Smartphone, now, has only 1
percent of the American market (Travlos, 2012). Apple holds around 75% of profit in industry
so the chances of Apples customer to switch another brand are very less because of its strong
brand loyalty. Whereas, competition is very high now a days and competing companies trying to
attract new customers because this has been done by picking off RIM again, climb of nokia and
Androids rise
(Travlos, 2012).
Threat of new entrance
Entering more companies in the market means decreasing the market share of Apple (Hill and Jones,
2009). Company can maintain the market share and generate profit through differentiation of brand and
product as well as making strong marketing strategy like competitive advantage (Kurtz et al, 2007). As a
new company it is very difficult to compete a company like Apple which has a strong brand image,
innovation, perceived value and good customer services (Term Paper Warehouse).
Internal Analysis
. Financial Analysis
According to result of Apples 2012 Q1 continues to impress. The reason is
increased in revenue from $24,7 billion to $39,2 billion or by 59% as contrasted
with 2011 Q1. Quarterly Net income before depreciation increases from $6,4 billion
to $12,4 billion which is also caused by high revenue, as you can see in figure 4.
By geographically companies sales are improved, which is 1/3 rd of sales are from Asia and 1/3 rd is from
US. These regions have highest expected growth as compared to Europe who just accounted for 22%.
The market has grown in Asia because the sales from Asia have doubled from 2011 and most of the
revenue came from Apple iPhone which was 58%; it means iPhone sales ha increased by +85%.
Moreover, the iPad growth has increased by 17% which means the revenue has increased by +132%. On
the other hand, Mac and iPod were less in growth as shown in figure 5 (Financial Analysis, 2012).
Shares of Apple in mobile market and tablet market have increased from 48% to 60 %, which is far better
than its competitors (Google Android). Googles share has enlarged just from 15 to 19%. The result was
positive in general as shown in figure 6 (Financial Analysis, 2012)
Source: Financial
Analysis
Equity level did not affect the high return which was 45% and without effecting it has increased by 68%.
Companys equity should not be increase in future, since the company has announced the dividend and
share repurchases. Apples liquidity ratios is 1,6 which is good f or company and the cash surplus was
$110 billion which has improved from$97 billion from Q4 (Financial Analysis, 2012).
Source: Financial
Inventory and A/C receivable are nominal as liabilities, so no other changes happened at balance sheet. In
general, the structure of balance is strong.
Source: Financial
The basic share value of Apple Company was ~109$ and the market price was ~610$ in 2012. Earning
should be roughly $52 billion/year or $55,6 per share, if calculating Net income earlier than reduction
according to last quarter, which makes it ~9 year, however indicator was quit high (Financial Analysis,
2012).
SWOT Analysis
Apple Company intends, produces cell phones, personal computers, music
players and related services, networking solutions, peripherals and software.
The companys market position can be measured by its strong operating
performance, which has also increased the confidence of investors. On the
other hand, companys margins can be affected by extreme competition
(Data monitor, 2006).
Table 4: SWOT Analysis of Apple
Strengths
The major strength of Apple has its strong market position and consumer trustworthiness which
raises due to Apples ecosystem, which in turn to increases Companys competitive advantage.
Second, Apple has a full variety of software, products and apps which are interlinked and
maintain each other. Third, iTV and other new products will be released soon.
In 2012, 3rd time Apple chosen as the most innovative company in the world.
At the end of 2012, Apple holds approximately $10,000,000,000 in cash. Company has no debts
and the gross profit margin is also higher than its competitors.
Apple was the second valuable brand in 2012 and its brand value was at $76.5 billion.
High quality customer experience is a key of Apples retail store by providing a direct speak to
well-informed staff which increases brand awareness.
Weaknesses
High price is the major weakness of Apple because there is a strong completion in market now,
and the consumer of Apple products can easily obtain the similar function products by its
of Apple.
Apple Company is often blamed by other companies to disobeying their patents and also it has
lost some trials as well. Such type of things can damage Apples reputation in market.
In 2012, Tim Cook became a new CEO because of the death of Steve Jobs, which was the biggest
loss for Apple Company. After some time John Browett and Scott Forstall left the firm, this will
Opportunities
Apples market share will be increase due to high demand of iPad and iPad mini in tablet market
collecting damages from them will led to increase cash reserves as well.
The growth of mobile advertising is an opportunity and Apple allows advertising on iPod touch,
Threats
Rapid technological change is the biggest threat which Apple and its competitors are experiencing
now days. As customers are become more technology lover and they want more and more new
products in very short time due to this, companies are facing pressure. So competition is very
high and the one who cannot remain themselves with rivalry shortly be unsuccessful.
Increment in Tax in USA will affect the Apples growth.
Samsung is the only one who provides application processors to Apple and it has asked to pay
higher price for it. It should be asked Apple to pay more because there are no feasible substitutes
Differentiation
Apple is using a differentiation strategy by presenting an outstanding design of its products, personalized
services and high quality products. The easiness of product makes target market varying from beginner to
proficient users.
Ansoff Matrix
different alternate to reduce the risk as Apple buys application processor from Samsung which can create
a problem for it.
links for Q1
https://www.linkedin.com/pulse/apple-inc-smartwatch-economic-analysis-rossano
http://www.businessinsider.my/how-apple-watch-will-dominate-the-smartwatchmarket-2015-3/#Ik4KHxJszQovLvDq.97
http://www.travelweekly.com/Travel-News/Travel-Technology/Analysts-examineApple-Watch-long-term-industry-impact
http://mds.marshall.edu/cgi/viewcontent.cgi?article=1420&context=etd
q2
http://ijecm.co.uk/wp-content/uploads/2015/06/3660.pdf
http://www.anpad.org.br/diversos/trabalhos/3Es/3es_2009/2009_3ES493.pdf
http://panmore.com/apple-inc-swot-analysis-recommendations
http://writepass.com/journal/2012/12/strategic-analysis-swot-and-bcg-matrix-ofapple-inc/
http://www.bloomberg.com/news/articles/2015-04-24/apple-watch-debut-marks-anew-retail-strategy-for-apple