Apple Performance Analysis - Essay Example

of the Management of the Concerned 22 July Apple Analysis Executive Summary In the last decade Apple has emerged tobe a household name that the consumers closely associate with high end, state of the art and innovative digital products. From being a firm focused on the manufacturing of personal computers, Apple has emerged to be a company that is credited with the manufacturing of many famous products like iPhone, iPad and iPod. Technological competitiveness and R&D have always stood to be the bulwarks that supported this immensely versatile company. However, the industry for digital goods is open to multiple pulls and pressures owing to the new technological inputs and ever altering consumer preferences. In that context Apple is not only endowed with multiple strengths, but the firm also faces many challenges ensuing from equally aggressive and market driven competitors. No wonder Apple has been able to register an impressive financial performance in the wake of the current economic meltdown. However, the firm always needs to be on its toes to avoid a dilution of market share at the hands of companies that are innovation driven and aggressive. Introduction It was Steve Jobs and Steve Wozniak who founded the Apple Computer Inc. in the year 1976. Apple started as a small company that manufactured computer software and hardware. In the current times it is certainly not wrong to say that Apple is a leading company that manufactures consumer goods like tablets, Smartphone and mp3 players. It owes only to the exclusiveness and start of the art nature of the Apple products that the firm today enjoys a large customer base all over the world and Apple products are known for their sophistication and innovation. It was in 2007 that the Apple Computer Inc changed its name to Apple and opted for expanding into the market for digital goods while retaining its traditional focus on computers and laptops. Since then Apple has successfully evolved from being an exclusively computer based company to being a company that is known for innovation and technological ingenuity. Thereby, the purpose of the paper is to analyze the position of Apple in an ever expanding market for digital products. Environmental/Industry Analysis There is no denying the fact that the demand in the industry of digital goods like computers, tablets and cell phones has been predominantly driven by innovation (Collins 5). Thereby the key focus of the organizations producing digital products is to use innovation to come out with innovative products and to cost effectively and efficiently produce digital gadgets (Collins 6). Hence, going by these demand drivers, Apple’s key thrust has been to introduce innovative products in a cost effective manner and that is why Apple has been playing a dominant role in the industry for digital goods. When it comes to the industry for digital goods like tablets and cell phones the other salient factors that determine the market success tend to be the designing of the product, speed, product utility and usability and memory. Thereby the market for computers is poised to pursue a mildly warm growth in the coming years owing to a highly developed market that has not been able to introduce more innovative products (Stone 48). Yet, when it comes to the portable music products, this sector has evinced tremendous growth and is expected to do well in the coming years (Binks 28). Hence, the organization that are innovation driven and have made tremendous R&D investments and that have the capability to learn from the past experiences will certainly do well in the future. In that context Apple has certainly done well when it comes to pursuing competitive strategies that assure the product success and organizational profitability. Not only Apple has managed to accrue a loyal customer pool, but, is also quiet known for producing innovative and differentiated products. Also when one takes into consideration the aura generated by the products like iPhone and iPod, Apple is not only expected to enhance its market share, but could also be expected to wrest a considerable market share of its competitors. Apple tends to invest heavily in R&D and hence has the advantage of being the first to introduce the new products in the markets (Todd & Mallin 34). Apple commands high gross profit margins in the industry for digital goods owing to its innovative products and the relatively high cost of its products. However, it is a known fact that the operating costs of Apple tend to be high and learning cost effective strategies from companies like HP and Dell could indeed help Apple to bring down its high operative costs. One thing that is peculiar for the market for digital goods like computers, tablets and cell phones is that it being an innovation driven industry, involves a high level of risk. The other thing that needs to be considered is that owing to the dilution of demand in the wake of the current economic meltdown and recessionary trends, they are bound to influence the demand for goods produced by Apple as the company is known for its costly products. Not to mention that the competitors of Apple are also facing this risk accruing from the dynamic nature of this industry. The companies dealing in digital goods like computers, tablets, cell phones and mp3 players need to be cautious and weary as innovation and competitive pricing is going to determine the state of the markets in the times to come. The market for the digital goods is notorious for its trend of perpetually redefining and altering its parameters. Apple has indeed been able to cull an increased market interest and reputation because of the introduction of new products like iPhone, iPad and iPod. Besides, the company deals in a wide range of other accessories like computers accessories, software products and networking solutions. Not to mention that Apple has always been successful in capturing the market attention by producing innovative and user friendly products with a generous smacking of creativity and aesthetic appeal. The two salient areas in the market of digital goods that are marked by competitiveness and an aggressive approach are the markets for portable music and computers (Binks 28). The other thing is that only a handful of brands like Dell, Apple, Gateway and HP tend to control these highly competitive markets by making huge capital investments. Apple particularly faces a high competition in the market for personal computers because there tend to be many other competitors that are selling quiet similar products at highly competitive prices. Thereby placing a high thrust on competitive pricing has diluted the profits in the markets for digital products. Hence, only those companies could be expected to do well in the coming years that have the capacity to introduce innovative products at highly competitive prices. Competitor Analysis The market for digital gadgets like laptops, mp3 players and cell phones at a global level tends to be a really dense market and thereby one could discern the presence of many technologically driven competitors in this market. Thereby, Apple simply does not afford to ignore these competitors. Till now Apple has been able to withstand the competition rendered by other competitors. However, today Apple faces an intense competition from the companies that are trying to build on and innovate on Apple’s original products. In the market for Cell phones and tablets, Samsung happens to be Apple’s biggest competitor. When Samsung realized that it cannot succeed simply by innovating Apple’s products, it decided to give a flip to its market share by coming out with products like Samsung Galaxy Note II, which had additional features like wider screens, and much smarter tablets. In the sphere of personal computers, Microsoft, Hewlett-Packard and Dell happen to be Apple’s biggest competitors. Microsoft exercises a tough control over 94 percent of the Operating Systems market. Besides, Microsoft commands a reputation for manufacturing simple but durable products. That is why it had been able to accord a tough competition to Apple. Also, HP tends to be Apple’s most important competitor in PC sales that has really specialized in the market for accessories and PCs. Though Dell is not such a strong competitor of Apple, still owing to the specialization of the company in the market for PCs and accessories, it does command a considerable share in the market. Apple SWOT Analysis Strengths Apple commands an immense loyalty of its customers in the market for digital gadgets. A closed an expanding ecosystem of Apple tends to be its salient success. Apple happens to be a real innovator in the market for mobile digital gadgets. Apple commands a reputation for introducing innovative products in the market that are aesthetically appealing and function well. Besides, Apple is poised to expand its market share in the future by introducing new products like iTV. Apple has at its command a wide range of apps and software that are intricately interlinked and happen to be supportive of each other. Apple commands a solid brand reputation. The retail stores opened by Apple facilitate a high quality customer experience. Strong and targeted marketing has been the real forte of Apple. The company has also evinced a positive financial performance in the last few years. Weaknesses The biggest weakness of Apple is the high price of its products. Competitors are selling many similar placed products at prices that are highly competitive. The products produced by Apple are not compatible with other Operating Systems (Sucov 42). Thereby, the consumers many a time opt for products they are more familiar with (Sucov 42). Owing to the introduction of new products in the market like Samsung’s Galaxy range, the market share of Apple is shrinking. The experts think that with the change in the management of Apple owing to the demise of Steve Jobs, Apple may face many organizational challenges. Besides the faults and defects found in some of the Apple’s latest products like iPad and iPhone are bound to impact Apple’s market share (Lean 10). The gross margin of Apple is also expected to decline owing to the emerging competition and the increase in the cost of varied components. Opportunities The market has evinced a high demand for some of the Apple products like iPhone and iPad. This is bound to strengthen the company’s market share. The launch of iTV in the future is poised to bolster Apple’s market competitiveness (The Independent 56). Considering the augmenting demand for Cloud services, Apple could gain much by expanding its range of software and iCloud services (Technology Management 60). Right now Apple’s biggest competitor Samsung stands to be the provider of application processors for many of the Apple products (Marketing 14). In the future, with a shift towards the new application providers, Apple will get less dependent on other firms. Right now Apple lacks some patents that are crucial to its market growth. Hence, by acquiring the firms that own these patents, Apple could quiet strengthen its market share. Apple has introduced an iAD platform dedicated to advertising (Luther 242). With the expected growth of the mobile advertising market in the future, Apple is bound to make profits (Luther 242). It is a known fact that Apple patents are often infringed by the competitors like the Samsung did recently. Claiming damages from such companies is bound to increase Apple revenues and weaken the firm’s competitors. Threats One thing that is peculiar about the market of digital goods is that it is exposed to rapid technological changes. Thereby this trend could place an immense pressure on Apple to churn out new products that are technologically savvy. A failure to timely respond to the augmenting consumer aspirations and preferences could jeopardize the market share of Apple. Right now Android Operating System tends to dominate the market of mobile phones. Thereby the high market preference for Android Operating systems could dilute the market for Apple Smartphone. The other thing is that the breaching of patent rights by Apple competitors may jeopardize the market share of Apple and it is really difficult to detect the breach of patent rights. The onus to pay a high price for the Samsung app processors could build pressure on Apple to further increase the price of its products. Apple Performance in the Last Five years Going by the panache for innovation and the ability to churn out new consumer products has endowed apple with a favorable financial performance. The total revenues of Apple increased from being $ 42,905 in September 2009 to being $ 156,508 in September 2012 (Bloomberg Business Week 1). The thing that is to be noticed is that Apple accrued these revenue gains irrespective of the looming economic meltdown and recession. The total turnover of Apple in September 2009 stood at $ 25,683 million. In that context Apple performed really well as its turnover in September 2012 augmented to $ 87,846 million (Bloomberg Business Week 1). The firm three fold increased its R&D expenses from being $ 1,333 million in September 2009, to being & 3,281 million in September 2012 (Bloomberg Business Week 1). This expanding expenses being accrued by Apple in the R&D are posed to bolster the market position of Apple in the times to come. Apple also evinced a mark increase in its net income. The net income of Apple that stood at $ 8,235 million in September 2012, impressively augmented to being $ 41,733 in September 2012 (Bloomberg Business Week 1). The gains made by Apple in the second quarter of the financial year 2013 are also impressive. The firm evinced quarterly revenue of $43.6 billion and its quarterly net profit stood at $ 9.5 billion (Apple 1). The company expects revenue amounting to $&33.5 billion to $ 35.5 in the third quarter of the fiscal year 2013 (Apple 1). Going by the expanding revenue of the firm, it would not be wrong to say that Apple seems to be really recession proof. Currency in Millions of US Dollars As of: Sep 26 2009 Restated Sep 25 2010 Sep 24 2011 Sep 29 2012 4 Year Trend Revenues 42,905.0 65,225.0 108,249.0 156,508.0 TOTAL REVENUES 42,905.0 65,225.0 108,249.0 156,508.0 Cost Of Goods Sold 25,683.0 39,541.0 64,431.0 87,846.0 GROSS PROFIT 17,222.0 25,684.0 43,818.0 68,662.0 Selling General & Admin Expenses, Total 4,149.0 5,517.0 7,599.0 10,040.0 R&D Expenses 1,333.0 1,782.0 2,429.0 3,381.0 OTHER OPERATING EXPENSES, TOTAL 5,482.0 7,299.0 10,028.0 13,421.0 OPERATING INCOME 11,740.0 18,385.0 33,790.0 55,241.0 Interest And Investment Income 407.0 311.0 519.0 1,088.0 Other Non-Operating Expenses, Total -81.0 -156.0 -214.0 -749.0 Other Non-Operating Income (Expenses) 52.0 -156.0 -2.0 -94.0 Gain (Loss) On Sale Of Investments -- -- 110.0 183.0 EBT, INCLUDING UNUSUAL ITEMS 12,066.0 18,540.0 34,205.0 55,763.0 Income Tax Expense 3,831.0 4,527.0 8,283.0 14,030.0 Earnings From Continuing Operations 8,235.0 14,013.0 25,922.0 41,733.0 NET INCOME 8,235.0 14,013.0 25,922.0 41,733.0 NET INCOME TO COMMON INCLUDING EXTRA ITEMS 8,235.0 14,013.0 25,922.0 41,733.0 NET INCOME TO COMMON EXCLUDING EXTRA ITEMS 8,235.0 14,013.0 25,922.0 41,733.0 (Bloomberg Business Week 1) Conclusion There is no denying the fact that Apple will always command a significant market share owing to being an innovation driven company that commands an immense customer loyalty. However, this is not a reason to be complacent about as the firm faces many unique opportunities and challenges. Innovation has always helped Apple be the first in introducing such products in the market that satisfy and appeal to consumer preferences. However, the company needs to retain its technological edge and competitiveness to continue to be a market leader. Works Cited “Apple Inc”. Bloomberg Business Week 23 July 2013. Web. 24 July 2013. “Apple on Course to Become Most Valuable Firm Ever”. The Independent 16 March 2012, 56. Print. “Apple Reports Second Quarter Results”. Apple Inc. 2013. Web. 24 July 2013. Binks, Adam. “Inside the Record Business”. Musical Opinion March/April 2011: 28. Print Collins, Luke. “Embedding Innovation into the Firm”. Technology Management 50.2 (2007): 5-7. Print. Lean, Geoffrey. “Legal Threat to Apple after Toxic Chemicals Discovered in iPhone”. The Independent 21 October 2007, 10. Print. Luther, William M. The Marketing Plan. New York: AMACOM, 2011. 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