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Case Analysis
innovation with its award-winning desktop and notebook computers, OS X operating system,
iLife and its range of professional applications. Apple also spearheads the digital music
revolution with its iPod portable music players and iTunes online music store.
Apple played a major role in the introduction of the personal computer in the 1970s,
which eventually kicked off the personal computer revolution. It’s first big hit, the Apple II, was
introduced in 1977 and was a very popular with home consumers. Being the innovator that Apple
is, it introduced the first graphical user interface (GUI) to the commercial personal computer.
This technology is used on all of today’s major computer operating systems such as Windows
XP as well as Unix-like systems. Since then, the company has revolutionized the way people and
computer companies think about aesthetic design of computers and consumer electronics alike as
well as the security and operability of the operating system. In addition, Apple’s unmatchable
success with it’s iPod mp3 player and revolutionary iTunes music store has left many companies
struggling to keep up with the new wave of giving consumers the simplicity they desire in
technology.
The recent announcement along with the release of new Apple computers using the Intel
processor, rather than the faithful IBM PowerPc processor, has allowed the company to enter
into an entire new realm of needed compatibility with it’s desktop and portable computers. The
Intel chip allows the new machines to run the Windows Operating System natively as well as OS
X on the same drive. With the correct setup of virtualization software, these two operating
systems may even run at the same time, and a couple of key commands would be able to
instantly switch between operating systems. This development in technology now encourages
users to switch to the very desirable Macintosh community without completely sacrificing the
Strengths:
Apple Computer Inc. is one of the oldest hardware manufacturers that control over the
product by manufacturing both computers and their operation system. It is known that Apple has
a high Quality product which makes Apple different than its competitors. Apple creates its
product with unique designs to attract the consumer’s eyes and increase its market share because
Apple success is based on fulfilling customer’s desires. Apple has one of the top brand names
within the technology industry all over the world, and 54% of their profits are from foreign
markets. Apple is dedicated to develop new products which will make the use of technology
easier and more efficient. Apple always provides easy-use product to the hand of the consumers.
Most of its products are light, small, and easy to carry around which make them more
competitive. One of the great things about Apple is product diversification; Apple has a large
number of product lines to target everyone in the world. In addition, there are a huge number of
consumers who are loyal to Apple even though the prices of Apple products are higher
comparing to its competitors. The attractiveness of Apple’s products has created a brand of
computer industry. Apple is financed mostly by its equity. In fact Apple does not have any debt,
so investors would bear less risk by holding Apple’s stocks. The company is loaded with extra
cash that is ready to acquire any firm that could help enhance the value of the company.
Weaknesses
Apple had difficulties on some of its products quality control. Some consumers reported
faulty screens in the iPod Nano. When Apple first introduced the iPod, consumers faced
problems with faulty batteries. Apple is ranked fourth by sales of hardware, and it is focusing on
internal engineering more than the market. They must continue to impress the market with new
products. This puts huge pressure for Apple to maintain its position as one of the industry leader.
The computer industry is a fast-changing type industry where old products are constantly
replaced by newer and more improved innovations. For Apple to remain profitable, they must
invest huge amount of money in their product R&D which has been increasing steadily every
year.
Even though Apple may seem so financially strong, its lack of debt may just be a fatal
weakness. Apple is very vulnerable to a major stock acquisition by other groups or companies. In
addition to the debt/equity issue, Apple has not issued any dividends to its shareholders for many
years, which may cause the investors to lose their confidence in this company.
COMPUTER HARDWARE (US) RANKED BY SALES
Market
Opportunities
Apple is known for its innovative thinking. They have developed a product line that is
both functional and attractive. Their product line has recently expanded to another level. Their
iPods will soon be able to communicate with specially designed Nike running shoes where you
could receive data such as calories burned and distance ran. This project can benefit both
companies and boost the demand for iPods. Apple’s iPod line will have a clear advantage over
all the other mp3 players in the market. In addition to Apple’s integration with other products,
many cars models from all major automakers have equipped their new models with iPod
connectivity.
In regards to their desktop and notebook sectors, Apple has developed new lines that are
less expensive while maintaining its high quality standards. These less-expensive computers
should help increase sales in the future. Apple has also changed its chip supplier from IBM to
Intel. This change would make Apple more compatible with other systems. It enables Apple to
run the Windows operating system, which gives the user more flexibility.
Threats
Apple faces pressure from its competitors such as Dell and HP. Dell’s low budget
computers have given them the largest market share in personal computers. According to the
available data, HP leads the industry with gross revenue of 88.89 billion dollars but Dell has the
highest net income. Even though Apple’s stock price is higher than both Dell and HP, the
The substitution effect is another threat for the computer industry. Since technology
changes at such a rapid rate, the iPods and iMacs can possibly be replaced by other devices.
However, this change would not result in the collapse of the company but it would certainly
change the kind of role that Apple has in the industry. Apple will be forced to develop new
products to keep this from happening. If another company comes out with a better product,
Another threat for Apple would be the exchange rates which can cause shifts in supply
and demand. Since Apple has a huge international market, their revenues from foreign countries
are directly related to exchange rates. The depreciation of US dollars could cause a decrease in
their net receivables. On the other hand, an appreciation in US dollars would increase net
Apple can definitely expect a prosperous future especially in the near future. Over the
past five years, net sales have been steadily increasing with almost a 200% increase from 2004
and 2005. Correspondingly, net earnings have been increasing as well. Apple owns over 80% of
the market share with its iPod product. With such favorable trends, it is reasonable to assume that
Apple will continue to increase in its sales, earnings, and market share just as long as it keeps
developing and acquiring new strengths. For example, Apple has established its name as one of
the leading, innovative forces in the computer industry that has a much diversified, high quality
products that appeal to many markets. Competitors will find it difficult to compete against the
company if Apple continues to strive for innovation, as it is its mission, continuing its well-
developed marketing plan, further developing more high quality products, and taking advantage
of its opportunities. Thus, the threat of product substitution and high levels of competition
would be decreased.
However, although it seems that Apple is not in a position where its favorable future
outlook is threatened, it is best that Apple works on its weaknesses so as to further increase its
sales and decrease the possibility of losing its customers to its competitors. For example, Apple
is known for its high quality products, which puts them into a competitive advantage. However
some components of its products such as the iPod batteries and the iPod Nano screens are of
lesser quality. Apple must increase its R&D efforts to really minimize the number of products
with faulty components. Thus, customers would not be lost and customer loyalty would be
maintained.
Another weakness that must be addressed is the high prices of its products. For example,
the iPod nano ranges from $150 to $250 depending on the size, the iPod ranges from $300 to
$400, and a Mac desktop is at least $1300. Such high prices discourage potential customers from
purchasing Apple’s products. The solution to this weakness is to decrease the prices to the point
where profits are still increasing. Likewise, the cost of sales should be decreased but only to the
Another weakness that should be addressed is the lack of paying dividends. Although
other computer companies do not pay dividends, they will eventually start paying dividends.
Apple have not paid dividends since 1995 and because of its increasing earnings, the company
has the ability to pay off dividends. Starting as soon as possible will put Apple in a better
competitive advantage because it will definitely improve stockholder loyalty as well as allow for
an increase in shares.
With its already well-established name brand and its positive sales/market share growth,
Apple will without a doubt continue to increase their earnings and market share. However, by
working on at least some of its weaknesses through minimizing the number of faulty components
in its products, decreasing its prices, and paying dividends, Apple can tremendously gain a