There is no doubt that Apple, Inc. is one of the most outstanding and legendary companies nowadays. The business division of Apple deals with the production of the high-tech products. The main offerings of the company are iPhone, iPad, iTunes, Apple Watch and a separate line of MacBooks - its notebooks. They happen to be extremely popular and in a great demand all over the world. Consequently, Apple Inc. is financially prosperous. Taking into account the success of the company so far and its rapid development, there are assumptions that the Apple Company may become the first trillion-dollar organization.
Due to excellent performance of the firm and more than positive projections for the future, there are many discussions and analytics about Apple Corporation. There are many articles and studies written about the company and its success story. The case study of John Gamble and John Varlaro called Apple Inc. in 2015 reveals the analysis of the company’s stance in different markets. Thus, the case study is aiming the analysis of Apple Company’s strategic issues, the description of the external and internal environment, and providing the list of recommendations concerning the analyzed materials.
How it works
There is no doubt that any business has a complicated history of development. Due to different external and internal factors, the company’s management has to adopt the strategy and business model. As for the main issues of the Apple Company that are described in the case study, they characterize the time period of development from 2010 to 2014. The company faced considerable changes in the development when the CEO of Apple, Inc. Steve Jobs passed out. There were considerable doubts whether Tim Cook could manage to run the company as successfully the previous CEO. However, the main financial and business criteria improved and increased with the change of the director. The net sales managed to triple 2010 to 2014 (Gamble, Thompson, & Peteraf, 2014). In addition, the net income increased from 14,013 million dollars in 2010 to 39,510 million dollars in 2014 (Gamble et al., 2014). Moreover, the shareholder’s value increased in two times. Therefore, from a purely financial point of view, the corporation was able to demonstrate outstanding performance in the researched period.
There is another strategic point that needs to be taken into account. Apple Corporation is not focusing on one product. The company is targeting different types of offerings and different markets. Apple has a diverse line of products, namely iPhone, iPad, Mac, iWatch, iPod, iTunes, software, different services and accessories. Due to the fact that different markets have various peculiarities and conditions, the company management has to control and operate the business activity with different markets and products. As a result the main strategic issue is whether it is effective to focus on so many different markets? Moreover, it is critically important to determine which segment of the company is more effective and should be focused on?
There is no doubt that external economic conditions are critically important for any company. Apple, Inc. is a representative of the global technological industry. There are several sub industries that the Apple Company is operating in, namely personal computer industry, smart phone industry, personal media player industry and others. The circumstances of the technological personal appliances industry determine the conditions of work for the researched company. The most efficient way to analyze the external situation is the usage of Porter’s 5 Forces Model that is shown in the Appendixes A, key success factors determination and industry attractiveness analysis.
Porter’s 5 Forces Analysis
Bargaining power of suppliers. The bargaining power of suppliers is rather strong. Companies in the technological industry are very dependent on the spare parts and materials that are used in the manufacturing process. They have to cooperate with reliable suppliers in order to deliver high quality products to the final customers. As for the Apple Company, it is critical to lay the stress on the fact that many of the suppliers are willing to cooperate with such well-known company as a result the bargaining power of suppliers of Apple Company is moderate. In addition, many of the spare parts are produced by the company itself.
Bargaining power of buyers. Due to the highly competitive market environment, the bargaining power of buyers is very high. There is a great variety of smartphones, personal computers and laptops on the market, consequently, the customers have a varied choice when making a purchase. That is why the market of high technologies belongs to buyers not to sellers. On the contrary, it is important to lay the stress to the fact that the Apple Company is a large and well known company. The Apple Corporation has a great customers’ loyalty which makes it more attractive to the consumers and their bargaining power is weaker.
Threat of substitutes. Taking into account the fact that the technological development is very rapid nowadays, all the time the new developments are taking place. That is why the threat of substitutes is moderate.Even the products can be substituted within the industry. For example, some tablets have an option of calls that give them an opportunity to substitute the smart phone. Moreover, the smartwatch has a function of reading and replying to the messages the same as smartphone and tablet.
Threat of new entrants. In contrast to the previously listed criteria, the threat of new entrants is weak. It is caused by the fact that the participation in the technological industry requires substantial financial investments. In addition, the technological industry requires innovative approach and smart inventions that would give an opportunity to represent absolutely new product to the customers and take the free niche on the market of technological appliances.
Industry rivalry. Despite large barriers of entrance and other obstacles, the technological industry has rather high rivalry. There are many players on the market that offer the same products. Speaking about the personal computers market, the main competitors are Apple, HP, Dell, Lenovo, Acer, Toshiba and others (Gamble et al., 2014). The market of smartphones is represented by such global producers as Samsung, Apple, Huawei, Lenovo, LG and others (Gamble et al., 2014). All of the competitors are rather strong and have taken different market niches. The strategic group map of the industry is shown in the Appendixes B.
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Key Success Factors
There is no doubt that technological industry is rather hard to operate in. There are many peculiarities that should be taken into account in order to become successful. One of the most important success factors is innovative approach. The technological industry is developing rather rapidly. Every single day new inventions are presented. That is why the companies need to follow all the updates and new trends. Furthermore the customers have become more exacting and demanding. They are getting used to the existing factions and start seeking for new technologies in the technological devices. For example, wearable health trackers are becoming more and more popular. Consequently, the companies have to implement such development in the smartphones and smartwatches in order to satisfy the needs of the target audience. Logically then, the companies of the technological industry have to be innovative in order to be competitive within the industry.
Another key success factor of the technological industry deals with the service provided. Considering the fact that tech industry is characterized with high rivalry, its participants are competing not only in the design and quality provided, but in the services that are offered to the clients pre and after selling. For example, Apple is the only one technology devices seller that is making direct selling through own Apple Stores. There are only the products of Apple Company sold. High quality of services and much of attention is provided to the customers in the stores of the company.
The third industry success factor is promotion and advertisement. The customers have become very dependent on the fashion trends. They have a very powerful effect on the customer behavior. That is why effective advertisement and promotion have to be applied to the products. At the same time, public relations development is a very beneficial tool for the companies in the technological industry.
Industry Profile and Attractiveness
The technological industry is rather developed on the global scope. It has a high supplier dependence, because the raw materials and spare parts are critically important for the final product quality. The market of technological personal devices belongs to customers due to a large variety of producers. However, the barriers of entrance are rather high due to huge human and financial investments. On the contrary, it is important to say that the industry is very profitable due to increasing usage and popularity of personal technological appliances. Thus, it is important to summarize that the researched industry is extremely attractive, although the conditions of running are rather sever. Consequently, the new entrants can be successful for the company with innovative product for the market and available financial resource.
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The internal analysis of the company is one of the most important ones that give an opportunity to understand the real situation in the company and the reasons for it. The techniques of financial analysis and SWOT analysis is used in order to give the full and deep understanding of company situation.
From the financial point of view, the company is rather stable and sustainable. The profitability ratios show that the company is earning a rather profit net margin that is about 22% now (Morningstar, 2017). However, in 2012 it reached about 27% which is a very high number (Morningstar, 2017). The return on assets, equity and invested capital is also positive and rather high. It is important to make the conclusion of the profitability indexes that are shown in Table 1 in Appendixes C. As for the liquidity analysis, the current and quick ratios have decreased through the period from 2010 to 2016 (Table 2). At the same time , the financial leverage has increased from 1.57 to 2.51 point, which is a defiantly positive financial result for Apple Corporation (Morningstar, 2017). However, the activity ratios remain almost the same through the researched period (Table 3). It is important to summarize that the current financial state of Apple Corporation is rather sustainable and prospective. It gives an opportunity for the company for a constant development. As a result, due to good current financial situation, the company has good perspectives for a successful future development.
SWOT analysis is one of the basic techniques to provide deal internal analysis of the organization. It encompasses strengths, weaknesses, opportunities and threats (Appendixes D). There is no doubt that Apple Company has many strength characteristics that caused the company to become so successful. One of the key competitive advantages and strengths is the company’s management. There is no doubt that a person is a moving power. Steve Jobs who was the former CEO and Tim Cook, the nowadays CEO have managed to lead the company in the right direction. The company’s strategy turned out to be very successful and efficient. Additionally the company has a well-trained and professional team of workers that implement all strategic issues that are invented by the CEO. Thus, the business human resources make considerable positive impact to the company development and are the definite strength of Apple, Inc.
In addition, the company has managed to create a high goodwill level for Apple, Inc. The company is highly estimated and the brand is expensive. It gives the company an opportunity to apply the high price strategy and as a result receive high profit margins. Consequently, the company’s profitability is rather high. Moreover, strength of the company deals with the strong positing on the market of iPhone (Gamble et al., 2014). Among the Apple brands, iPhone takes the most considerable share and earns the highest profits. At the same time iPhone makes the company more sustainable and stable on the market.
As for the weaknesses of Apple, Inc., it is important to stress on the fact that the personal media player is declining. Consequently, the iPod sales are declining. In 2014, the diminished of iPod sales were 48% (Gamble et al., 2014). Taking into account the fact that the Apple Company is still spending money on its promotion and production, the considerable losses are suffered on the iPod part of business. Another weakness deals with the Apple Company’s operating system. OS is considered to be much weaker than Android or other types of operating systems. For example, the major part of the operating systems market is occupied by Android, namely 25% (Gamble et al., 2014).
Another part of the SWOT analysis is opportunities. The main opportunity deals with the developing market and increasing demand for the personal electronic appliances. Their usage is increasing all over the world. It is the reason why the company has an opportunity to increase the sales amount and, consequently, increase the profitability of the Apple Corporation. In addition, the constant technological development gives an opportunity to implement new ingestions in Apple products and improve the product quality. It will bump the interest and popularity from the customers. In such a way, the sales may go up as well.
The last part of SWOT analysis is threats. There is no doubt that the main threat for the Apple Company is the severe competition on the market of personal electronic devices. There are many existing and developing companies that are offering the same products as Apple, Inc. Usually they use the cost leadership strategy and take considerable market share. Therefore, the company is losing possible profits. Notably, another important threat deals with the changing financial market conditions. Currency rate and inflation fluctuations may negatively influence the Apple, Inc.
There are a number of measures that have to be adopted in order to improve the competitiveness of Apple Corporation. The company should be targeted at increasing the number of strengths and opportunities. At the same time, weaknesses and threats have to be eliminated. First of all, the investments in iPod ought to be diminished. It will give an opportunity to use the available financial resources more effectively. At the same time Apple Watch product has to be promoted more intensively. It is a promising segment for Apple, Inc. What is more, due to the fact that health trackers are becoming more and more popular, the corporation will be better off implementing more functions for health track usage. Moreover, considering the success of the iPhone, the product should be developed and diversified. It will give an opportunity for the firm to be successful in the long run, both financially and strategically market.
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Another important suggestion is related to the investment into the research and development process. Since the research and development process is a key success factor for the technology industry in general, the Apple Corporation should use the opportunity for inventing new products inventions and continue supporting existing initiatives. One of the considerable improvements could be the iOS improvement which is one of the weaknesses that have to be eliminated. Making iOS more effective and easy to use, the sales will increase considerably and the profitability of iOS segment should steadily move upwards. Implementing the recommendations above, the company will become more successful and stable for a long time.