Apple Inc

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Apple Inc.

2011

Contents

Introduction

Business Strategy

Products

Markets and Distribution

Competition

Research and Development

Employees

SWOT analysis

Financial Data

References

Introduction

Apple Inc. (NASDAQ: AAPL; NYSE: AAPL; previously Apple Computer, Inc.) is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company's best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad. Apple software includes the Mac OS X operating system; the iTunes media browser; the iLife suite of multimedia and creativity software; the iWork suite of productivity software; Aperture, a professional photography package; Final Cut Studio, a suite of professional audio and film-industry software products; Logic Studio, a suite of music production tools; the Safari internet browser; and iOS, a mobile operating system. As of August 2010[update], the company operates 301 retail stores[4] in ten countries, and an online store where hardware and software products are sold. As of May 2010[update], Apple is one of the largest companies in the world and the most valuable technology company in the world, having surpassed Microsoft.

Established on April 1, 1976 in Cupertino, California, and incorporated January 3, 1977, the company was previously named Apple Computer, Inc., for its first 30 years, but removed the word "Computer" on January 9, 2007, to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. As of September 2010[update], Apple had 46,600 full time employees and 2,800 temporary full time employees worldwide and had worldwide annual sales of $65.23 billion.

For reasons as various as its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. Fortune magazine named Apple the most admired company in the United States in 2008, and in the world in 2008, 2009, and 2010. The company has also received widespread criticism for its contractors' labor, environmental, and business practices.

Business Strategy

The Company is committed to bringing the best user experience to its customers through its innovative hardware, software, peripherals, services, and Internet offerings. The Company's business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design. The Company believes continual investment in research and development is critical to the development and enhancement of innovative products and technologies. In conjunction with its strategy, the Company continues to build and host a robust platform for the discovery and delivery of third-party digital content and applications through the iTunes Store. The iTunes Store includes the App Store and iBookstore, which allow customers to discover and download third-party applications and books through either a Mac or Windows-based computer or wirelessly through an iPhone, iPad or iPod touch. The Company also works to support a community for the development of third-party software and hardware products and digital content that complement the Company's offerings. Additionally, the Company's strategy includes expanding its distribution to effectively reach more customers and provide them with a high-quality sales and post-sales support experience. The Company is therefore uniquely positioned to offer superior and well-integrated digital lifestyle and productivity solutions.

Products

The Company offers a range of personal computing products, mobile communication and media devices, and portable digital music players, as well as a variety of related software, services, peripherals, networking solutions and various third-party hardware and software products. In addition, the Company offers its own software products, including Mac OS® X, the Company's proprietary operating system software for the Macintosh® (“Mac”); iOS, the Company's proprietary mobile operating system; server software and application software for consumer, education, and business customers. The Company's primary products are discussed below.

Markets and Distribution

The Company's customers are primarily in the consumer, SMB, education, enterprise, government and creative markets. The Company utilizes a variety of direct and indirect distribution channels, such as its retail stores, online stores, and direct sales force, and third-party cellular network carriers, wholesalers, retailers, and value-added resellers. The Company believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons who can convey the value of the hardware, software, and peripheral integration, demonstrate the unique digital lifestyle solutions that are available on its products, and demonstrate the compatibility of the Mac with the Windows platform and networks. The Company further believes providing direct contact with its targeted customers is an effective way to demonstrate the advantages of its products over those of its competitors and providing a high-quality sales and after-sales support experience is critical to attracting new and retaining existing customers. To ensure a high-quality buying experience for its products in which service and education are emphasized, the Company continues to expand and improve its distribution capabilities by expanding the number of its own retail stores worldwide. Additionally, the Company has invested in programs to enhance reseller sales by placing high quality Apple fixtures, merchandising materials and other resources within selected third-party reseller locations. Through the Apple Premium Reseller Program, certain third-party resellers focus on the Apple platform by providing a high level of integration and support services, and product expertise. One of the Company's customers accounted for 11% of net sales in 2009; there was no single customer that accounted for more than 10% of net sales in 2010 or 2008.

Competition

The Company is confronted by aggressive competition in all areas of its business. The markets for the Company's products and services are highly competitive. These markets are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of personal computers, mobile communication and media devices, and other digital electronic devices. The Company's competitors who sell personal computers based on other operating systems have aggressively cut prices and lowered their product margins to gain or maintain market share. The Company's financial condition and operating results can be adversely affected by these and other industry-wide downward pressures on gross margins. The principal competitive factors include price, product features, relative price/performance, product quality and reliability, design innovation, availability of software and peripherals, marketing and distribution capability, service and support, and corporate reputation.

The Company is focused on expanding its market opportunities related to mobile communication and media devices, including iPhone and iPad. The mobile communications and media device industries are highly competitive and include several large, well-funded and experienced participants. The Company expects competition in these industries to intensify significantly as competitors attempt to imitate some of the iPhone and iPad features and applications within their own products or, alternatively, collaborate with each other to offer solutions that are more competitive than those they currently offer. These industries are characterized by aggressive pricing practices, frequent product introductions, evolving design approaches and technologies, rapid adoption of technological and product advancements by competitors, and price sensitivity on the part of consumers and businesses.

The Company's iPod and digital content services have faced significant competition from other companies promoting their own digital music and content products and services, including those offering free peer-to-peer music and video services. The Company believes it offers superior innovation and integration of the entire solution including the hardware (personal computer, iPhone, iPad and iPod), software (iTunes), and distribution of digital content and applications (iTunes Store, App Store and iBookstore). Some of the Company's current and potential competitors have substantial resources and may be able to provide such products and services at little or no profit or even at a loss to compete with the Company's offerings. Alternatively, these competitors may collaborate with each other to offer solutions that are more integrated than those they currently offer.

The Company's future financial condition and operating results are substantially dependent on the Company's ability to continue to develop and offer new innovative products and services in each of the markets it competes in.

Research and Development

Because the industries in which the Company competes are characterized by rapid technological advances, the Company's ability to compete successfully is heavily dependent upon its ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace. The Company continues to develop new products and technologies and to enhance existing products that expand the range of its product offerings and intellectual property through licensing and acquisition of third-party business and technology. Total research and development expense was $1.8 billion, $1.3 billion and $1.1 billion in 2010, 2009 and 2008, respectively.

Employees

As of September 25, 2010, the Company had approximately 46,600 full-time equivalent employees and an additional 2,800 full-time equivalent temporary employees and contractors.

SWOT analysis

apple corporation product ipad

The following is a traditional SWOT analysis of Apple, Inc, an examination of significant internal strengths and weaknesses, and external opportunities and threats, currently facing the company today. The analysis indicates that although Apple has basically entered the consumer electronics industry in the last decade, however, they are still following the strategy dictated by their history as a niche market pc hardware and software manufacturer. This has proved immeasurably successful for them in recent years as they have revolutionized the industry through dynamic technological innovations. Technology consumers, however, easily switch from one product to another and it remains to be seen if Apple will be able to compete with the next major technological innovation or even if they will be able to hold onto their current status as the powerhouse in the industry considering the customer service problems they currently have and the price point for their products. Additionally, following the SWOT analysis are strategy recommendations for a competitor that are based upon the vulnerabilities as determined by this analysis.

STRENGTHS:

Factor 1. Brand

Millward Brown Optimor rated Apple the 3rd most valuable global brand in their 2010 top 100 list of most valuable global brands and estimates their brand value to be worth $83.2 billion, (2010). Apple's brand loyalty, often referred to as the “Cult of Apple”, is probably Apple's greatest asset and due to their intense loyalty their customer base tends to be very forgiving of product problems, (Bulik). Brands aspire to gain this type kind of a loyalty from their customers, as such, this is an obvious strength.

Factor 2. Demand

With over 160 million registered users secured by credit cards at Apple's iTunes store, (McGuire & Baker, 2010), Apple has an overwhelming share of the downloadable digital music and video market. One cannot ignore the “i” vernacular, iPhones, iPods, iPads, and their effect on consumers as “must have” devices. The popularity of innovative Apple entertainment and media products over the last decade and their apparent influence on American culture is another obvious strength.

Factor 3. Design & Innovation

Steve Jobs concentration on the importance of aesthetic values and user friendliness has allowed them to maintain a loyal following of consumers that have so far overlooked premium pricing and interoperability issues, (Hoovers). One of the primary motivations for Apple's design teams is to make intuitive products that allow users to be up and running without having to read instruction books, due to this standard they set the benchmark for design led hardware and software products, (Harris, 2009). This is a strength because through hardware and software design and innovation Apple has revolutionized both the pc and the media industry and their customers have become reliant upon their products.

Factor 4. Marketing

Advertising Age recently awarded Apple the title of Marketer of the Decade, the first time it has ever awarded any firm this title, in deference to the way that they have influenced advertising, media, their influence on popular culture, and their marketing strategies and also in recognition of the fact that they have consistently been a marketing powerhouse over the last decade, (Bulik).

Factor 5. Retail

In addition to their online iTunes store Apple has opened an additional online store called the App Store. These online stores are a strength in that they allow Apple to maintain a continual stream of revenue rather than to having to wait solely upon new product development. In addition to their online stores, Apple recently opened 200 retail locations throughout the US and 50 retail stores in other countries, these locations currently account for 20% of their total sales, (Hoovers). Apples brick and mortar presence represent another strength in that Apple provides free hardware and software workshops to users through them, which in turn increases customer loyalty, and allows them to achieve a nearly unprecedented sales ratio of $4,000.00/ square foot, (Srivastava, R.K. & Thomas, 2010).

WEAKNESSES:

Factor 1. Delays

iPads featuring different connectivity were released at separate times, several months apart; consumers were wait-listed to received these and there were significant delays in shipping the products and ultimately the tablets were shipped with significant problems. Consistently Apple makes its customers sign onto waiting lists to order their products where they are often besieged by further delays. The iPhone 4G has been available since June of 2010, but is still only available in black. Remarkably and for no apparent reason, Apple's trademark color, white, is still unavailable to consumers legally at this time. While Apple relies upon this strategy to generate hype over their products, these kind of significant delays along with problematic products being shipped is a weakness that can only lead to consumer dissatisfaction and infringement issues.

Factor 2. Denials

Although the iPhone 4G was the highest scoring smart phone they ever tested Consumer Reports does not recommend it due to its problems with its antenna and until Apple corrects it they advise their readers to stick with the 3G, (Smart phones, 2010). At first Apple blamed the way their clients were handling the phone and only later they sent a free rubber “bumper” that corrected the problem. Apple's reluctance to acknowledge or deal with this and other product defects are a real weakness as they appear to rely upon their customers to overlook these issues.

Factor 3. Compatibility

As a reaction to a perceived threat from Google, Apple recently loosened overly stringent restrictions for developers that sought to develop applications for the iPhone and now allows them to use a wider variety of computer languages with Apple's operating system iOS, (Driver & Valdes, 2010). As Apple makes 30% off of every application sold, their overly protective nature regarding compatibility issues, and their failure to respond to concerns in a timely enough fashion, are a weakness that have caused them to lose business partnerships and revenue in this and countless other instances.

Factor 4. Service

According to Forrester Research, of four PC manufacturers surveyed, Apple, Gateway, HP, and Dell, Apple rated the lowest, (-13) compared with Dell`s rating of (+38), in customer service, (Manning et al, 2007). Recent customer experiences with the iPhone 4G, including downloading and connection problems, indicate a weakness as Apple is still not reacting to customer complaints and delivering the superior service that should be expected.

Factor 5. In-sourcing

Apple recently purchased a processor company and a microchip company so that they can begin designing their own CPUs and microchips, as such fewer external sources will be involved in the development of their products, (Hoovers). Designing their own chips will allow them to obtain better microchips for their products and share fewer details with external manufactures, (David, 2011). Additionally, there may be tax and labor advantages to in-sourcing, however, the weakness in this approach lies that this behavior could lead to missed opportunities for improvements that their competitors will be sure to take advantage of.

OPPORTUNITIES:

Factor 1. Partnerships

Currently the only telecommunications carrier that Apple partners with in the US is ATT, while many competitor phones can be used with multiple carriers. Customers unwilling to switch to ATT from their current carrier are likely to forego owning an iPhone. Partnering with additional carriers could increase sales of the iPhone's which would in turn encourage consumers to try additional Apple products.

Factor 2. International sales

Currently the US accounts for more than half of Apple's sales, (Hoover). Increased expansion possibilities into foreign markets remains an opportunity that Apple has yet to take full advantage of.

Factor 3. Emerging products - AppleTV, iPad, Ping

Apple's iPad is driving demand for tablet computers; projections for tables for 2010 are 19.5 million units and by 2014 sales are expected to reach 208 million units. (McGuire & Baker, 2010). Apple has eliminated the hard drive on its AppleTV making it a fully streaming media box capable of interconnecting with the iPad, iPhone, and the iPod, (McGuire & Baker, 2010). Ping is software for iTunes that enables social networking by allowing users to share their music with one another, with links to the iTunes store so that users can purchase the music.

Factor 4. Apple Stores

Customers are generally happy with the service experience in Apple's brick and mortar stores. Apple's customer satisfaction score in this environment is an 84, while their closest competitor Dell, scored only a 74, (Srivastava & Thomas, 2010). Additional national and international locations could increase customer satisfaction with Apple products as generally customers that visit the Apple stores have a significantly better experience than those who deal with Apple online.

Factor 5. Acquisitions

Apple's corporate culture seems unlikely to consider a merger, however it has recently acquired other companies, and as they are relatively new to the consumer electronics industry and media, to further their success they might consider acquiring a company that has long term success in this environment. Although they have revolutionized this industry, they could still potentially benefit from the intellectual capital gained by such an acquisition.

THREATS:

Factor 1. Competitors

Despite market share gains in recent years Apple sales are still far behind competitors in the PC market like Dell and HP, (Hoovers). Additionally other smart phones which work with multiple carriers pose a significant threat as the only carrier approved by Apple for the iPhone is ATT, which Consumer Reports rates as the lowest scoring carrier for customer satisfaction, (Smart Phone, 2010). For one of Apple's flagship products, the iPhone, to remain associated solely with a partner that consumers have expressed so much dissatisfaction with can threaten Apple's marketing strategy of interoperability among their products as the iPhone serves as a major inroad for consumers to purchase these other products.

Factor 2. Pricing

Although Apple increased sales in 2009 this was due to portable computers and the iPhone with its related applications, in actuality sales of Apple desktop computers and iPods were down, (Hoovers). According to Forrester Research the percentage of customers who believe that better pricing outweighs brand loyalty has been steadily increasing, (Manning et al, 2007). Additionally, the recent economic crisis has accelerated this phenomenon. Apple needs to redesign some of its products to allow purchases of their pcs at a lower price point or there is a very real threat that they will continue to lose market share in this industry.

Factor 3. Counterfeiting

The New York Observer recently reported a news story on a 17 year old who made $130,000.00 manufacturing white iPhones using parts he purchase from Apple suppliers abroad, (Popper, 2010). In addition to this instance Apple has been besieged by bootleggers abroad. Continued delays in production capabilities and pricing will inevitably cause this behavior to continue and this threat will continue to erode Apple's market share.

Factor 4. Advances

As technology is constantly changing and as Apple becomes more and more cloistered it is likely to miss out on technological advances from which it might have otherwise benefitted. For years Apple trailed Microsoft, it is on top now only because it changed its focus in the last decade from the pc market to the consumer electronics market, and now Microsoft is struggling to keep up with them in this industry. Inevitably there will be another great shift in technology and a real threat to Apple is that they are likely to lose out on it if they shelter themselves too much from other companies in the technology sector.

Factor 5. Style

Apple white is the new black in consumer electronics. Although Apple's products are extremely stylish right now, they are only available in white, black, or a stainless metallic finish, which to some extent prevents consumers from expressing their individuality even at this point in time. In the past Apple has shown that they can experiment with color with boldly colored laptops. While competitors are offering a myriad of bold colors in every market that Apple competes in, only Apple's smallest products, the iPod Nano and the iPod Shuffle are available with any color choice and even then the selection is very limited. The threat to limiting consumer choices is that it could backfire if this strategy persists too long and Apple could potentially box itself into a corner if they change strategy too late to suit consumers.

Financial Data

According to the published information the net income and earnings of Apple are higher than it was projected by experts. The result is achieved by selling “iPhones” and MacBooks. And the digital content from the iTunes online store was of good popularity as well.

The first quarter showed that the company's net income has risen almost twice and is $3.07 billion that is $3.33 converting per stock. The previous year income was $1.62 billion ($1.79 per share). This year the company increased their sale for 49% (to $13.5 billion). Analysts were wrong in their forecasts about these indicators.

Steve Jobs says that users all over the world are going on switching to iPhones and Macs refusing the earlier devices. By the way the current quarterly report doesn't include iPad map-case sale, they started the sales in the second quarter where iPad will influence the financial indicators of the company.

According to cybercity.ru after the report data announce the Apple stock quotes rose for 8.3% to $265. Gross margin of the company comprises 41.7%.

During the reporting period the corporation has sold 8.75 million iPhones, 2.94 million Mac computers and 10.9 million Apple iPod players. Experts say that iPhone and iPod sales are much greater than they expected and the sale volumes of computers are lower. “The first calendar quarter was great for the company and iPhone sales were just incredible”, says Gene Munster, the analyst of Piper Jaffray Company. Apple has got $3.76 billion selling Macs and this is 27% more than last year and the demand of laptops is getting bigger than of desktops. Selling iPhones and iPods Apple has earned $5.45 and $1.86 billion.

Interesting that Apple published the indicators of their sales in China first. For the last 6 months the company has doubled its earnings in Chinese market; the indicator equals $1.3 billion.

During Q2 2010 these indices will rise due to iPad sales. For the first week there has been 500 000 devices sold only in USA.

(a) Includes iMac, Mac mini, Mac Pro and Xserve product lines.

(b) Includes MacBook, MacBook Air and MacBook Pro product lines.

(c) Includes iTunes Store sales, iPod services, and Apple-branded and third-party iPod accessories.

(d) Includes revenue recognized from iPhone sales, carrier agreements, services, and Apple-branded and third-party iPhone accessories.

(e) Includes revenue recognized from iPad sales, services and Apple-branded and third-party iPad accessories.

(f) Includes sales of displays, wireless connectivity and networking solutions, and other hardware accessories.

(g) Includes sales of Apple-branded operating system and application software, third-party software, Mac and Internet services.

(h) Derived by dividing total product-related net sales by total product-related unit sales.

NM = Not Meaningful

References

Bulik, B.S. (2010, October 18). Marketer of the year 2010, Marketer of the Decade: Apple. Advertising Age. Retrieved from http://adage.com/moy2010/article?article_id=146492

David, Fred R. (2011). Strategic management: concepts and cases (13th ed). Upper Saddle River, NJ: Pearson Prentice-Hall.

Driver, M. & Valdes, R. (2010, September 16). Apple loosens restrictions for iOS developers. Gartner Industry Research Group. Retrieved from http://my.gartner.com/portal/server.pt?open=512&objID=260&mode=2&PageID=3460702&resId=1436740&ref=QuickSearch&sthkw=apple

Harris, A. (2009, September 26). Design at the very core. Engineering & Technology, 4(16), 60-62. Retrieved from EBSCOhost Business Source Complete.

Hoovers, (n.d.). Apple Inc. Hoover's Company Records. Retrieved from http://premium.hoovers.com/subscribe/co/overview.xhtml?ID=ffffrtjccfjfkfckxf

Manning, H., Temkin, B., Bodine, K, Dorsey, M., & Geller, S. (2007, September 12). Topic overview: customer experience. Forrester Research. Retrieved from http://www.forrester.com/rb/Research/topic_overview_customer_experience/q/id/43140/t/2

McGuire, M. & Baker, V. L. (2010, September 24). Apple's iPod and iTunes updates keep pressure on competitors. Gartner Industry Research Group. Retrieved from http://my.gartner.com/portal/server.pt?open=512&objID=260&mode=2&PageID=3460702&resId=1440061&ref=QuickSearch&sthkw=apple

Popper, B. (2010, November 16). Will white iPhone 4 send New York teen to college ... or to jail? The New York Observer, Daily Transom. Retrieved from http://www.observer.com/2010/daily-transom/white-iphone-four-sending-kid-college

Schept, K. (2010). BrandZ top 100 most valuable global brands 2010. Millward Brown Optimor. Retrieved from http://c1547732.cdn.cloudfiles.rackspacecloud.com/BrandZ_Top100_2010.pdf

Smart phones. (2010, September), Consumer Reports, 75(9), 24-27. Retrieved from EBSCOhost MasterFile Premier.

Srivastava, R.K. & Thomas, G.M. (2010, June). Managing brand performance: aligning positioning, execution and experience. Journal of Brand Management, 17(7), 465-471. Retrieved from EBSCOhost Business Source Complete.

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