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CASE, MODULE:
MOD001127, SID: 1230580
Year 2013
SID Number: 1230580
Module Leader: Roger Jeynes
Apple Inc. Case
Word Count:
2,985
Table of content:
1. Introduction..............................................................................................................................4
2. External Environment...4
2.1. Basic Characteristics of the Environment - market definition, size, growth and share4
2.2. PEST Analysis..
..5
2.2.1. Political
Factors
6
2.2.2. Economic
Factors..
6
2.2.3. Social Factors......6
2.2.4.Technological Factors.........................6
2.3. Competitor Analysis..6
2.4. Analysis of industry competition..8
2.4.1. Intensity of rivalry within the industry...8
2.4.2. Bargaining power of suppliers....8
2.4.3. The bargaining power of buyer...8
2.4.4. Threat of new entrance.9
2.4.5. Threat of substitute
product......9
3.
Internal
Analysis..9
3.1.
Analysis.9
Financial
3.2.1. Strengths..12
3.2.2. Weaknesses13
3.2.3. Opportunities13
3.2.4. Threats13
4. Strategies used by Apple..14
4.1. Differentiation.14
4.2. Value Creation by Focus and Cost Leadership.14
5. Conclusion and Recommendation.14
6. Bibliography16
1. Introduction
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. 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 1st 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 environment. 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.).
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
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(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 earning and net income
with its direct competitors in table 2.
and other Apples product for upgradeability and stability which gives customer the
ability to transfer knowledge and apps among devices (Segan, 2012).
3. Internal Analysis
3.1. 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).
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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$97 billion from Q4 (Financial Analysis, 2012).
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Source: Financial
Inventory and A/C receivable are nominal as liabilities, so no other changes happened at balance sheet. In
general, the structure of balance is strong.
Source: Financial
The basic share value of Apple Company was ~109$ 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).
3.2.1. 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 pioneering 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.
3.2.2. 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
competitors in a lower price.
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Decreasing market share can be caused to less influence its customers to using closed ecosystem
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
have a negative impact on management.
In tech industry, Apples gross profit margin is highest but according to fear of forecasters that
Apples current margin will not be continued due to increasing in prices and tough competition.
3.2.3. Opportunities
Apples market share will be increase due to high demand of iPad and iPad mini in tablet market
and this will help company to use as competitive advantage.
Apple TV sales will be increased by the launch of iTV which will release soon.
Smartphone and tablet markets are growing which is a good opportunity for Apple to expand their
market share in these markets.
Collecting damages from competitors because companies sometimes violated Apples patent. So
such types of factors can be used by Apple as to damage the competitors image on market and
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,
iPhone and iPad by developing the platform named iAd advertising.
The requirement of cloud based services is increasing, so Apple can enlarge its services relate to
iCloud and software as well (Strategic Management Insight, 2013).
3.2.4. 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
who could provide Apple to application processors (jung, 2012).
The main competitor of iOS is Android OS in mobile market. The power of Apple iOS can be
dominated by Android OS.
Availability of wide range of music stores like Wal-Mart, Amazon and online music companies
like sound cloud and spotify will threat for Apple music store.
4.1. 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.
different alternate to reduce the risk as Apple buys application processor from Samsung which can create
a problem for it.
6. Bibliography
Anon, n.d. Apple Reports Second Quarter Results. [online] Available at:
http://www.apple.com/pr/library/2012/04/24Apple-Reports-Second-QuarterResults.html [Accessed 03 May 2013]
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Anon, n.d. Internal and external business environment of Apple. [online] Available at:
http://www.ukessays.com/essays/marketing/internal-and-external-businessenvironment-of-apple-marketing-essay.php [Accessed 30 April 2013]
Anon, n.d. Apple the most admired company. [online] Available at:
http://www.powerfulwords.co.uk/sample-assignments/marketing/apple-the-mostadmired-company.php [Accessed 07 May 2013]
Apple Insider, 2013. Apple's iPhone grew to 25.1% global market share in 2012. [online] Available
at: http://appleinsider.com/articles/13/01/25/apples-iphone-grew-to-251-globalmarket-share-in-2012 [Accessed 02 May 2013]
Business Insider, n.d. Apple. [online] Available at:
http://www.businessinsider.com/blackboard/apple [Accessed 29 April 2013]
Burns, M.., 2012. Apple Q2 2012: 35.1M iPhones, 11.8M iPads, 4M Macs, and 7.7M iPods. [online] Available at:
http://techcrunch.com/2012/04/24/apple-q2-2012-35-1m-iphones-11-8m-ipads-4mmacs-and-7-7m-ipods/ [Accessed 2 May 2013]
Datamonitor, 2006. Apple Computer, Inc. [online] Available at:
http://www.alacra.com/acm/2009_sample.pdf [Accessed 30 April 2013]
DeWitt, P.E., 2012. Whats eating Apple? The analysts weigh in. [online] Available at:
http://tech.fortune.cnn.com/2012/11/14/apple-shares-fallen-wall-street-analysts/ [Accessed 06 May
2013]
Financial Analysis, 2012. Apple 2012 1Q financial analysis. [online] Available at:
http://www.finanalys.com/apple-2012-1q-financial-analysis/ [Accessed 2 May 2013]
Jung, S., 2012. A little less Samsung in Apple sourcing. [online] Available at: http://blogs.ft.com/beyondbrics/2012/09/10/a-little-less-samsung-in-apple-sourcing/#axzz2THpqrqbe [Accessed 06 May 2013]
Kahn, J., 2012. IDC: Samsung takes top smartphone marketshare in Q1, as Apple hits 8.8-percent high of
total mobile phone market. [online] Available at: http://9to5mac.com/2012/05/01/idc-samsung-takes-topsmartphone-marketshare-in-q1-as-apple-hits-8-8-high-of-total-mobile-phone-market/ [Accessed 04 May
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Masi, B., 2009. Strategic Analysis of Apple Inc. [online] Available at:
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McGrath, D., 2012. Apple coming to dominate electronics supply chain.[online] available at:
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Reisinger, D., 2012. Samsung pulling away from Apple in smartphone market. [online] Available
at: http://news.cnet.com/8301-1035_3-57424779-94/samsung-pulling-away-fromapple-in-smartphone-market/ [Accessed 4 May 2013]
Strategic Mangement Insight, 2013. SWOT analysis of Apple. [online] Available at:
http://www.strategicmanagementinsight.com/swot-analyses/apple-swotanalysis.html [Accessed 4 May 2013]
Term Paper ware house, n.d. Apple and Porter's Five Factors. [online] Available at:
http://www.termpaperwarehouse.com/print/Apple-And-Porter-s-Five-Factors/134413
[Accessed 4 May 2013]
The Times of India, 2012. Apple once again crowned worlds most innovative company. [online] Available
at: http://timesofindia.indiatimes.com/topic/tech-enterprise-it-strategy-Apple-onceagain-crowned-worldsmost-innovative-company-articleshow-17217321 [Accessed 4 May 2013]
The Telegraph, 2012. Apple iPad manufacturer Foxconn 'plans US factories'. [online] Available
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