Case Study Of Apple Inc.

A critical Analysis of Internal and External environment of Apple

Introduction

In the year 1976 Steve Jobs & co started a company dealing in computers, which later named Apple Inc. famous for its glamorous product design, updated technology and aggressive visionary pioneer Steve Jobs.

The aim of the report has been accomplished via critical analysis of Apple’s environmental through SWOT, PESTLE, STEEPLE, Porter’s industry competitive five forces model and porter’s diamond model.

Second, critical analysis of Apple product and services, markets, division, subdivision and how they impact they impact the overall corporate strategies, while bringing balance between shareholder value and enterprises social responsibilities and strategies.

BCG matrix of apple

Stars: Stars are products that have high market share and also a high potential for further market growth. In the BCG matrix of Apple, we can see that stars of the company are I phones. It has been the preferred mobile gadget for worldwide consumers for many years still, every time a new version is released, it still manages the top the previous version’s record in the terms of sales.

Question mark

Question marks in the BCG matrix with low market share but substantial growth potential. In Apple’s context. Smart TVs fit this category; having been recently launched, they are yet secure a significant market share.

Cash cows

Cash cows are products that have a high market share in the market share in a market that is not really seeing a lot of growth. In other words, these are the very stable high earners of company. In the case of Apple, the cash cows are MacBook, iTunes and iMacs.

Dogs

Dogs within the BCG matrix represent products that possess inherent quality but struggle to yield substantial revenue due to stagnant market growth. Examining Apple’s BCG matrix, iPods exemplify these dogs.

The 5-Forces Model of Competition

Rivalry Among Competing Firms

·      Competitive-Dell, HP, Microsoft

·      Disadvantage as a first mover

·      Other competitors also offer wide range of products

·      Do not offer others services

Potential Entry of New Competitors

·      Forces that shape competitive structure

·      Lead entrance of many competitors

·      High brand recognition

Potential Development of substitute Products

·      E.g. HP, DELL, HTC

·      Produce own substitute

·      Switching cost decreased due to cheaper price offered by other competitors

Bargaining Power of Suppliers

·      Determine by number of suppliers

·      Suppliers have more bargaining power

·      Backward integration  

Bargaining Power of Consumers

·      Developed high brand loyalty

·      Target customers who emphasize on quality

SWOT Analysis

Strengths

1.      First mover of innovative products

2.      No long-term debt

3.      Superior operating system, not as vulnerable to virus attack.

4.      Strong quarterly revenue growth of 82.7% exceeding industry average of 24.3%.

5.      Procure deals with major music labels.

6.      Store formats adapt to the demand in that specific market.

7.Employed knowledge workers to provide prod advice, service and training.

Weaknesses

1.      Its operating system is only available in Apple products.

2.      Mac software has limited to technology hardware and software.

3.      Products are limited to technology hardware and software.

4.      Low sales volume via website

OPPORTUNITIES

1.      Greater sales growth percentage in America compare to Europe.

2.      Greater profit in Europe compare to America.

3.      Highest revenue generating product is iPhone.

4.      Microsoft OS is more vulnerable to virus.

5.      Annual growth in revenue in Europe and Asia Pacific more than 50%.

6.      Increasing number of users using the internet.

Threats

1.     Dell utilizes JIT, internet, advantage in quality control, use direct sales.

2.     Microsoft OS is available in all computers, provides consulting services and business consulting services and business application.

3.     Financial risk of being a first mover.

4.     Replication of products/ illegal file sharing sites.

5.     Virus threats.

6.     Low demand for fee-based music services/uncertainties in demands of new products.

Swot Analysis(cont.)

·      Stock new products to Europe and Asia the same time as America (S1 O6)

·      Constant R&D to protect OS from viruses (S3 O4)

WO Strategies:

Priced at competitive prices in its top market.(W2 O6)

Space Matrix

The SPACE matrix which is also known as the strategic position and action evaluation framework that illustrates whether an organization’s strategies are forceful, conventional defensive or competitive. The SPACE matrix normally has two axes where one axis represents the two internal dimensions of an organization- financial and competitive position while the other axis represents two external dimension-stability and industry position.

Internal Analysis                                  External Analysis

Financial Position (FP)                      Environmental Stability  Position (SP)     

Return on investment (ROI).                    Risk Involved in Business

Return on Equity                                           Technological Changes

Liquidity                                                             Price Elasticity of Demand

Working capital.                                           Competitive Pressure

Inventory Turnover                                     Price Range of competing Products

Financial position (FP).                          Stability Position (SP) Average

Internal Analysis                                        External Analysis

Competitive Position (CP).                                              Industry Position (IP)

1.        Market share                                                            Business Stability

2.        Product Quality                                                      Extent Leveraged

3.        Customer Loyalty                                                 Ease of entry into Market

4.        Technological know-how                                 Product, capacity Utilization

5.        Control over Supplier and Distributors.   Profit Potential

Apple PESTEL Analysis: Apple is one of the most successful companies in the world, but it is not immune to the forces of the external environment. PESTLE ANALYSIS of Apple to identify the key political, economic, social, technological, environmental and legal factors that could impact the company’s future.

PESTLE ANAYSIS OF APPLE

Apple Political Factors

Government policies: Government policies can significantly impact Apple’s business. For example, change in tax laws can affect the company’s bottom line, and new regulations can make it more difficult for Apple to operate. Apple needs to closely monitor government policies in the countries where it operates to stay informed of any changes that could impact its business.

Political Stability: Political stability is also crucial for Apple. If there is political instability in a country where Apple operates,it could where Apple operates, it could lead to disruptions in the company’s supply chain or even the closure of its operations in that country. Apple needs to carefully asses the political climate in the countries where it operates to minimize the risk of political instability.

Trade Wars:

Trade wars between countries can also impact Apple’s business. If there are tariffs or other tarde restrictions imposed on Apple products, it could make the company’s products more expensive and less competitive. Apple needs to closley monitor trade relation between countries to prepared for any potential trade wars that could impact its business.

Government Subsidies: Government subsidies to competitiors can also give Apple’s competitiors an unfair advantage. For example, if a government subsidizes the production of smartphones by a competitor, it could make those smartphones more affordable and comeptitive. Apple needs to be aware of government subsidies to competitors to ensure it is not at a competitive disadvantage.

In addition to these four factors, many other political factors could impact Apple’s Business.

Apple Economic Factors

Economic Growth:

Economic growth in the countries where Apple operates is a positive factor for the company, as it lead to increased demand for Apple’s products. For example, if the economy of China is growing, there will likely be more people who can afford to buy apple products. However, economic growth can also lead to inflation, which can increase Apple’s costs.

Exchange Rates

Fluctuations in exchange rates can impact Apple’s profitability as the company’s products are sold in multiple currenices. For example, if the value of the US dollar falls against the euro, it will become more expensive for European consumers to buy Apple product.

Unemployment Rate

The employment rate is a factor that can affect Apple’s sales, as people with jobs are more likely to be able to afford Apple’s products. For example, if the unemployment rate in the united states rises, there will be likely be fewer people who can afford to buy Apple products.

Interest Rates

Changes in interest rates can impacts Apple’s business, as the company borrows money to finance its operations. For example, if interest rates rise, it will become more expensive for Apple to borrow money, which could impact the company profitabilty.

Consumer Spending

Consumer Spending is a key driver of economic growth, and a slowdown in consumer spending  can impact Apple’s sales. For example, If consumer spending in the United States slows down, Apple’s sales will like slow down.

In additon to these five factors, several other economic factors could impact Apple;

The importance of economic forecasting for Apple;

The risk associated with operating in countries with volatile economies.

The opportunities could arise from new economic policies, such as those promoting free trade or innovation;

Changes in government spending could affect the demand for Apple’s products;

Apple Social Factors

Changing Demographics:

The demographics of the countries where Apple operates are changing, with an increasing number of people living in urban areas. This is positive factor for Apple, as its products are more popular in urban areas. For example, the population of China is aging, and there is growing middle class in India.

Changing Consumer Preferences

Consumer preferences are also changing, with people becoming more interested in enviromental sustainbility and ethical products. This is challenge for Apple, as it needs to ensure that is products align with these changing preferences. For example, Apple has been criticized for using conflict minerals in its products. The company has responded by taking steps to reduce its use of these minerals.

Rise of Nationalism

The rise of nationalism in some countries is a challenges for Apple, as it can lead to restircitions on trade and investment. For example, the United States has imposed tariffs on Chineses goods, which has made Apple’s products more expensive in the United States. Apple has also been criticized for its manufacturing practices in China. The company has responded by investing in its manufacturing facilites in the United states.

Increasing Awareness of Mental Health

Increasing awareness of mental health is a challenge for Apple, as it needs to ensure that products are not contributing to mental health problems. For example, there have been concerns that using social media can lead to depression and anxiety.

·      For example, changes in how people communicate could affect the demand for Apple’s prodcuts;

·      Apple also need to be potential for social unrest, which could disrupt its business operations;

·      The risk associated with operating in countries with repressive government.

Apple Technological Factors

Technological factors heavily influence Apple’s business, as the company is a siginificant player in the technology industry. The following are some of the most important technological factors that can impact Apple’s business:

·      Technological Innovation:

Technological innovation is key driver of growth in the technology industry. Apple needs to keep up with the lastest technological innovations to stay ahead of competition.

For example, Apple was one of first companies to introduce a touchscreen smartphone, and the company has continued to innovate with its products, such as the Apple Watch and Airpods.

·      Cybersecuirty Threats:

Cybersecurity threats are growing challenges for businesses in all industries. Apple needs to invest in cybersecurity in order to protect its customers’s data. For example Apple has been the target of several cyberattacks in recent years. The company has responded by investing in its cybersecurity infrastraucture and by educating its customer about cybersecurity best practices.

·      Development of New Technologies:

The deveopment of new technologies, such as artifical intelligence and virtual reality, can create new create new opportutinties for Apple. For example, Apple is investing in artifical intelligence research, and the company has released several products that use AI, such as the siri voice assistant and the Face ID facial recongnition system.

·      Increase Regualtion of Technology

Increased regulation of technology is a challenge for Apple, as it can make it more difficult for company to innovate. For example, the European Union has recently passes a law that require companies to obtain consent for users before collecting their personal data. Apple has responded by updating its privacy policies to comply with the new law.

Apple Legislative Factors

Legal factors heavily influence Apple’s business, as the company is a global company with operations in many countries. The following are some of the most important legal factors that can impact Apple’s business:

Intellectual Property Protection: Intellectual property protection is important for Apple, as it allows the company to protect its products and innovations from being copied by competitors. Apple has a strong track record of protecting its intellectual property and the company has sucessfully sued competitors who have infringed on its patents and trademarks. However, Apple is also facing a number of lawsuits from competitors who allege that Apple has infringed on its intellectual property.

Data Privacy Regulation:Data privacy regualtions are becoming increasingly strict in many countries. Apple needs to comply with these regulations in order to protect its customers’ data.

For example, the European Union has recently passed a law that requires companies to obtain constent from users before collecting their personal data. Apple has responded by updating its privacy policies to comply with the new law;

Lawsuits: As mentioned, Apple is facing several lawsuits, which can impact the impact the company’s business and reputation. For example Apple is facing a class-action lawsuit in the United States alleging that the company has denied the allegations, but the lawsuit could significantly impact the company’s business if it is successful;

Data Protection Laws: Data protection laws are becoming increasely strict in many countires. Apple needs to comply with these regulations in order to protect its ability to collect and use customer data. For example, the European Union has recently passed a laws that gives users more control over their personal data. Apple has responded by updating its privacy policies to comply with the new law.

Apple Enviroment Factors

Enviromental factors heavily influence Apple’s business, as the company is a major consumer of resources and producer of waste. The following arre some of the most important enviromental factors that can impact Apple’s business:

·      Enviroment Sustainabilty

Enviromental sustainabilty is becoming increasely important to consumers. Apple needs to ensure that its products and operations are sustainable in order to meet the demands of these consumers. For example, Apple has commited to using 100% renewable energy in its operations by sustainabilty, such as reducing its carbon footprint and using recycled material in its products.

·      Waste Disposal

The disposal of electronic waste is growing enviroment challenge. Apple needs to find ways to dispose of its electronic waste in an envirommentaly friendly way. For example, Apple has partner with number of organizations to recycle its electronic waste. The company also has program that allows customer to trade in their old devices for credit toward new devices.

·      Climate change

Climate change is growing enviromental challenge, and Apple needs to take steps to reduce its carbon footprint. For example, Apple has commited to reducing its carbon emissions by 75% by 2030. The company has also made a number of other commitments to reduce its enviromental impact, such as using more energy-efficent products and facilities.

·      Water Scarity

Water scarcity is growing problem in some parts of the world, and Apple needs to ensure that is operations do not contribute to water scarcity. For example, Apple has commited to using water responsibly in its operations. The company has also made a number of other commitments to water conservation, such as installing water-efficient fixtures in its facilities.

Conclusion

In conclusion, the PESTLE analysis is valuable tool for businesses that want to understand the external enviroment and identify risks opportunites and challenges. By understand these factors, Apple can make informed decision about how to navigate the changing landscape and maintain its position as global leader.

Apple Anoff Matrix

Apple Anoff Matrix is marketing planning model that helps the multinational technology company to determine its product and market startegy. Ansoff Matrix illustrates four different startegy options avaiable for businesses. These are market penetration, product development and diversification.

Within the scope of Anoff Matrix, Apple uses all four growth startegies in an integrated manner:

1.      Market penetration

Market penetration refers to selling exsiting products to existing markets. Existing market for Apple consists of its global operations divided into five operating segments: Americas, Europe, Greater China, Japan, and Rest of Asian Pacific.

Apple engages in market penetration startegy via effective application of marketing startegy. Apple’s ecosystem of products and services alos plays an instrumental role in pursuing market penetration startegy with high level of efficiency. 

2.      Product development

This involves developing new products to sell to exisitng markets. New product development in regular manner is one of the core growth strategies pursued by Apple. Each new product or service by Apple nicley fits within its ecosystem and serves to furthure strenghten the company ecosystem.

Moreever, the multinational technology company regularly introduces totally new products. The company’s investments on research and development for new products has increased from USD 0.78 billion, in 2007 to USD 25,3 billion in 2023.

3.      Market development

Market development startegy is associated with finding new markets for existing products. This strategy has been adapted as the main growth strategy by Apple. Specifically, the world’s largest IT company by revenue focuses of emerging economies in Asia as attractive markets for long-term perspective. The multinational technology company appeals to local culture and sentiment when developing marketing startegies for new marketing strategies for new markets.

4.      Diversifiaction

Diversification invovles developing new products to sell to new markets and this is considered to be the riskiest startegy. Up to date, Apple has engaged in diversification business startegy occasionally. At the same time, not all diversification attempts by iphone maker have proved to be successful. For instance, despite pandemic-fuelled boom in video streaming industry Apple TV+ has ranked low, well below Netflix, Amazon Prime Video, Hulu and even NBC streamer Peacoc. Taking into account the global market saturation for iPhone, which is the largest sources of revenues for Apple, the company is expected to embrace diversification startegy in the short-to-medium term perspective.

 9  Cell GE Matrix of Apple

General Electric (USA) along with MacKinsey developed a matrix for portfolio analysis. This matrix consist of two main variables which are plotted on the X and Y-axis of the matrix. The variables are “Market Attaractiveness” and “Business unit strength”. Once each product is given a value for its market attractiveness and business unit strength, it is then plotted in the position on the graph. One a place for the product has been allocated, the management can decide the strategy for the product.

When it comes to business unit, if it is strong with a high market attractiveness(invest/grow), the company should protect the position which is to invest to grow at maximum, digestable rate and the concentration should be solely on maintain the strengh. If the bussines unit strength or market attratctiveness is medium the strengh.

If the business unit strength or market attractiveness is medium (selectively earn), the company selectively/manage for earning that is to protect the existing programme and to concentrate investments in segments where profitabilty is good, and risk are relatively low. Moreover, it is possible that the market is dropping in value, or that there is very high competition which would make it difficult for business to unit to catch up. In such case if the business unit or market has become   weak(harvest/divest), it is best that the company to protect and refocus that is to manage for current earnings, concentrate on attractive segments and to defend stregnths.

Growth/Invest for Apple

This is the best section for a company or business unit to be in. A company can reach this scenario if it is operating in moderate to highly attractive industry while having a moderate to highly competative position within that industry. In such a situation there is massive potential for growth. However, to be able to grow, a company needs resources such as assets and capital.

Growth/ Invest for Apple

This is the best section for a company or business unit to be in. A company can reach this scenrio if it is operating in a moderate to highly attractive industry while having a moderate to highly competative position within that industry. In such a situation there is is a massive potential for growth.

However, to be able to grow, a company needs resources such as assets and capital.

The growth/invest part of GE matrix consist of protect position, invest to build and build selectively.

For Apple, its Mac and iphone would come under this category as they have market share of 55% in the smartphone industry which is why Apple should invest more in this category.

Selectiviely Earn for Apple

This segment consist of build selectively, merge for earnings and protect and refocus. These companies are either with a low to moderate competitive position in an attractive industry or companies with an extermely high competition position in a less attractive industry. Deciding on whether to invest or not to investb largely depends on the outlook that is expected of either the improvement in competitive position or not to invest largely depends on the outlook that is expected of either the improvement in competitive position or the potential to shift to more interesting industries.

In the case of Apple, the Apple iPad leads in the tablet segment as it hold 31.9% market share which shows the business strength. However, global tablet market decreased by 1.5% perhaps due to its limited content offerings on Apple TV+ which show a decrease in market attractiveness as well as the competitive and leadership position of Apple’s iPad. Even though there were efforts to increase the sales bt vendors and they increased the sales from 4.1% to 4.7% they will still less than Amazon and Google.

Harvest/Divest for Apple

This category consist of limited expansion or harvest, manage for earnings and divest. These are companies or business units that either have a low competitive position, are active in an unattractive industry or combination of the two. These companies have no promising outlooks anymore, hence should not be invested.

In the case of Apple, its iPods comes under this category which turned Apple into one of the world’s biggest companies but is no longer found anywhere. The iPod Classic, Nano, and Shuffle are nowhere to be found either.iPod touch was relaunced in 2019 but was soon off the shelf as it was unable to keep up with the iPhone and the rise of music streaming services like Spotify, Soundcloud and Deezer hence Apple should not under any circumtances invest in such a product as it would only prove to be disastrous for the company. Hence this segment shows a decrease in business strength as well as attractiveness.

  A Financial Anaylsis and Valuation of Apple, Inc.

1.Introduction

Apple is quintessential symbol of innovation, financial acumen and market dominance in the tech industry. Since its founding in 1976, Apple has been reshaping  the landscape of consumers electronics, software development and digital services. The company’s relentless pursuit of excellence, coupled with its strategic financial management, has propelled it to the forefont of the global market, attracting consumers and investors alike.

At the heart of Apple’s financial narrative lies its unparalleled ability to align innovation with consumer needs, resulting in a prodcuts portfolio that transcedes today’s practicalities.

From the revolutionary launch of the Macintosh computer in 1984, to the groundbreaking launch of the iphone in 2007, and now with epochal products like the Apple Vision Pro, Apple has consistently demonstrate its amazing ability to predict and shape consumer preferences, thus ensuring its strong market position.

2.  Performance Evaluation

2.1.    Liquidity

Company Name	Current ratio	Quick ratio	Beta	Cash ratio	Debt/ Equity
Apple Inc.	1.07	1.02	1.14	0.5	145.8 %
NIVDIA	4.17	3.38	1.95	2.4	25.7%
Microsoft	1.22	1.20	0.97	0.7	46.7%

  Current Ratio: Apple current ratio is just over 1, indiacting that its current assets are able to roughly cover its current liability. However, this ratio is relatively low and may indicate a situation where its current assets are not sufficient to fully cover its current liabilites.

Quick Ratio: Apple’s Quick Ratio is also slightly above 1, indicating that current assets other than inventory cover its current liabilites. This rate is still not very high and may require further attention.

Cash Ratio: Apple has Cash Ratio of 0.5, meaning that its cash equivalents cover only half of its current liabilities. This ratio is relativley low and may require an incease in cash reserve to improve the ability to pay.

Debt/Equity ratio: Apple’s debt/equity ratio is an high as 145%, indicating a relatively high level of debt. This may mean that the company is taking o greater finacial risk and need more attention.

Profitability

Profitability ratio of Apple Inc, and its competitors.

Company name	ROA	ROE	ROI	EPS
Apple inc	29.39	156.04	57.94	6.43
NVIDIA	55.65	92.81	70.71	11.93
Microsoft	19.33	38.4	28.2	11.06

First of all, Apple’s ROA is as high as 29.39%, and its ROE is as 156.04%. These numbers underscore not only Apple’s remarkable ability to generate returns on assets and equity, but also its financial soundness and operational efficiency. In addition, Apple’s return on investment of 57.94% and EPS of 6.43 are further evidence that it provides strong returns for inventors.

Behind these results Apple’s pricing startegy, strong brand loyalty and global market presence have combined to enable the company to maintain high profits margins and thus achieve great finacial success.

For Apple, another important factor in it high profitability is its strong brand influnece and high-end market positioning worldwide. Apple’s product line covers mobiles phones, computers, tablets, headphones and other fields. Each product pays attention to design and user experience, which has won wide recongnization and love from consumers. This brand loyalty and market positiion gives Apple a greater say in pricing, resulting in high-margin growth.

3. Valuation

3.1  Forecast

Apple’s finacial performance has exhibited some volatility and flucations in recent years. In the first quarter of fiscal 2023. Apple reported a revenue of $117.15 billion, representing a year-over-year decline of 5.5%.

Moving to second quarter, Apple recorded a revenue of $94.8 billion, down 3% compared to previous year.

This quarter was regarded as one of Apple’s weakest performances in the past four year. Although iPhone revenue experience a modest increase of 2% year over year, overall services revenue fell slightly below expectations.

Third quarter, Apple generated a revenue of $81.8%, marking a 1% decrease from he corresponding period last year. These quaterly results signifly four consecutive quarter with declining revenues for Apple-its longest such streak in 22 years. As for the fourth quarter, Apple reported net income ranging between $22.9% billion and $23 billion on a revenue of $89.5 billion-reflecting an approximate decline of 1% to 4% compared to the previous year but still showing an impressive growth rate about 11%.

For the entire fiscal year, Apple services revenue has the potential to sustain growth in the upcoming years and is projected to reach an estimated $100 billion by fiscal 2025, reflecting an increase from $85 billion in fiscal 2023.

Apple has faced some challenges in its financial performance in recent years, particularly with revenue falling for several quarters. However, the company partially offset those declines with higher net income, and growth in the services segment reached $22.3 billion, up 16.3% year over year, record growth rate. Not only did that beat Wall Street’s estimates for services revenue, it actually beat it by nearly $1% billion. And services already account for nearly 25% of total revenue, making it the second-largest business iPhone sales.

Apple Inc. has adopted a series of innovative marketing strategies, such as “hunger marketing . Apple Inc’s has adopted a series of innovation is one of the key factors for its success, including the innovation of customer value proposition, profit model, key resources and key process.

“ Apple marketing startegy, the specific implementaion and effect evaluation of hunger marketing can be analyzed from multiple dimensions. First of all, the core of “hunger marketing” is to influence the terminal price by adjusting the quantity at both ends of supply demand, so as to achieve the purpose of high profits by selling at high price.

Specific to the implementation of Apple, it can be summarized from the following aspects:

Control of product release cycle: Apple maintains brand heat and market attention by releasing new products regularly, such as iPad. Every new product release will arouse great interest of comsumers. Resulting in the situation of short supply in the initial stage of new product launch.

Limited sale: Although Apple does not deliberately control the output of products to create the illusion that the market is in short supply, it increase the scarcity of products through limited sale, thus improving the value perception of products.

Information confidentiality: Apple Inc. will strictly control the disclosure of information before the release of new products. This strict information condfidentiality system creates a sense of mystery for iPhone and further stimulates consumers’ purchase desire.

Risks

U.S. Department of Justice and multi-state antitrust lawsuit against Apple :In March 2024, the U.S. Department of justice, together with attorney general from 15 states and District of Columbia, filed a lawsuit against Apple, alleging violations of section 2 of the Sherman Antitrust Act, primarily related to monopolistic market issues.

The lawsuit could force Apple to change its policies, business strategies, products and applications, and may even require it to divest some of its assets.

Conclusion

Apple’s brand value has been widely recognized around the world and has been the world’s most valuable brand for many times, which indicates that Apple has significant advantages in brand building and market value management. Apple’s finacial health and profitablity have always been higlhy valued by market.