Apple inc swot analysis 2018

Company: Apple Inc.

Introduction

Apple Inc. is an American multinational technology company best known for designing, developing and selling consumer electronics including the iPhone, iPad, iPod, Apple TV, Apple watch, Mac books and the recently introduced HomePod smart speaker. The company is among the leading innovative companies that take pride in giving their customers the best user experience. This is illustrated by the way they have integrated their products into virtually all aspects of life, making the modern human being almost entirely dependent on their gadgets.

The company has also positioned its brand as an innovative company in a mature but growing market, allowing it to change premium prices for their largely differentiated products. It has also invested heavily on research and development which have spurred its growth by identifying customer preferences and assimilating them into their operations. Besides coming up with new products, this also enhances their existing products thereby generating a larger market share. As such, continued market share growth is expected in the future.

This paper intends to discuss the company in details, providing both internal and external factors that affect specific performance metrics as well as providing an analysis into its industry. Additionally, some of the key environmental factors that affect its operations will be analyzed in an attempt to understand the company better.

Internal Performance

Company Description

Apple Inc. was founded in 1976 as a computer company. With its headquarters located in Cupertino, California, the company spurred into light in 2001 with the release of the iPod, a music player device. After registering success with this product, the company began designing mobile phones and later integrated its other products into everyday life. The company now designs and manufacturers numerous electronic devices including mobile phones, personal computers, watches, portable digital music players, and other media devices. Two of its main products, i.e. iPhone and mac account for nearly three-fourths of the company’s revenue.

Source: Apple Inc. Form 10-K, 2017

Company Business Strategy

Apple Inc. is committed to ensuring that the customer gets the best user experience. This is achieved through its innovative hardware and software developed for its electronic products as well as through an ever-growing list of services that customers have access to. Through their unique iOS operating system, the company strives to ensure that all applications developed for iPhones, iPads and mac books can provide users with an easy-to-use graphical user interface and seamless integration. The company’s strategy is also to expand its operations to include as many digital platforms as their research team can discover for purposes of creating the best customer experience. All this is captured in their mission statement, which reads as:

"Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad."

From this statement, it can be seen that their strategy relies on the need to change the world through digitalization. On the other hand, their vision statement also represents their business strategy since it sensitizes on the importance of continued growth. It was introduced by its CEO, Tim Cook who believes that the company’s vision is to make the world better through the creation of great products that are simple, innovative in nature and excellent.

Company Business Organization

Performance Metric

To assess the company’s business organization, three performance metrics will be analyzed i.e. net sales, gross margin and price range per share.

Gross Margin

Apple Inc.’s gross margin over the last three years reveals that the company has had an average gross margin percentage of 39%. However, higher product costs in 2017 and 2016 led to a decrease from 2015. This can be attributed to weakness in foreign currencies relative to the U.S. This is provided for in the table below.

(In millions)

2017

2016

2015

Net sales

229,234

215,639

233,715

Cost of sales

141,048

131,376

140,089

Gross margin

88,186

84,263

93,626

Gross margin percentage

38.5%

39.1%

40.1%

Source: Apple Inc. Form 10-K, 2017

Net Sales

Apple Inc. is organized based on geographic location. It has been divided into segments i.e. Americas, Europe, Greater China, Japan and Rest of Asia Pacific. While the products that are designed and sold in these segments are the same. The company manages each on its own to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region. The Net Sales by operating segment over the last three years reveals that Americas earns the company the largest share of sales revenue, followed by Europe, then Greater China, Japan and finally Rest of Pacific Asia. This is represented in the bar chart below.

Source: Apple Inc. Form 10-K, 2017

Price range per share

Being a public traded company, Apply Inc.’s price range per share over the last three years is represented in the table below.

Price range/share

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

2017

$164.94 – $142.41

$156.65 – $140.06

$144.50 – $114.76

$118.69 – $104.08

2016

$116.18 – $91.50

$112.39 – $89.47

$109.43 – $92.39

$123.82 – $105.57

Source: Apple Inc. Form 10-K, 2017

Based on the above mentioned performance metric, it is easy to identify the organization’s internal performance.

Industry Perspective

Being an electronics designer, developer, and seller, Apple Inc. operates under the Technology industry. Its top three competitors include Hewlett-Packard Company, Google Inc. and Samsung Electronics (CIS Markets, 2018). The industry is a highly competitive one, with consumers coming from all parts of the world. This makes the competition very stiff. Samsung is the leading smartphone vendor in the world, having shipped more than 317.3 million smartphones worldwide while Apple shipped 215.8 million iPhones during the same period. As far as computers are concerned, Hewlett-Packard is the leading vendor in the world with 21% market share.

Source: Statista, 2017

Environmental Factors

There are certain environmental factors that influence the company’s performance. The main ones include interest rates and financial currency. As noted in the analysis of performance metrics, these factors contributed to a fall in gross margin percentage over the last three years. Interest rate swaps affect the company’s profits as well. It should be noted that a strong U.S dollar is a threat to the organization (Jurevicius, 2017). Lawsuits over patent infringements resulting in damaged brand reputation is also another external factor that can affect the organization’s performance.

The company’s large cash reserve has generated calls for increased taxation, especially in states where income inequality is an issue. The company’s dependence on Chinese labor has also come under heavy scrutiny, not forgetting the loss that could be incurred in the event that the country faces social and political unrest. However, since the cost of finding an alternative labor force is high, the company has no choice but to face the risk head on. Finally, the company also faces environmental factors such as the disposal of used or nonworking electronic devices, pollution and other environmental side effects from manufacturing facilities as well as increases in electricity costs because of its dependence on data centers and other Internet infrastructure (Smithson, 2016).

Conclusion

In conclusion, the above information provides an overview of Apple Inc. All the fundamentals of the organization have been presented, thereby presenting it as one of the leading technological companies in the world. Indeed, this is the case as it is ranked as the third company on the fortune 500 companies in the United States.

References

Apple Inc., (2017). Annual Report. Retrieved April 17, 2018 from http://investor.apple.com/secfiling.cfm?filingID=320193-17-70&CIK=320193

CIS Markets, (2018). Apple Inc.'s Comment on Competitors and Industry Peers. Retrieved April 17, 2018 from https://csimarket.com/stocks/compet_glance.php?code=AAPL

Jurevicius, O. (2017). SWOT analysis of Apple. Retrieved April 17, 2018 from https://www.strategicmanagementinsight.com/swot-analyses/apple-swot-analysis.html

Smithson, N. (2016). Apple Inc. SWOT Analysis & Recommendations. Retrieved April 17, 2018 from http://panmore.com/apple-inc-swot-analysis-recommendations

Statista, (2017). Global Market Share held by PC vendors. Retrieved April 17, 2018 from https://www.statista.com/statistics/267018/global-market-share-held-by-pc-vendors/

Statista, (2017). Global Market Share held by Smartphone vendors. Retrieved April 17, 2018 from https://www.statista.com/statistics/271496/global-market-share-held-by-smartphone-vendors-since-4th-quarter-2009/

Tar, A. (2013). Apple SWOT Analysis. GRIN Verlag.

Revenue per segment

Revenue per segment iphone Mac iPad Others 141319 25850 19222

Net Sales (millions) by Operating Segment

2017 Americas Europe Greater China Japan Rest of Asia Pacific 96600 54938 44764 17733 15199 2016 Americas Europe Greater China Japan Rest of Asia Pacific 86613 49952 48492 16928 13654 2015 Americas Europe Greater China Japan Rest of Asia Pacific 93864 50337 58715 15706 15093

Phone Shippments