Apple Strategic Managment - Case Study Example

Since inception, Apple was one of the most valuable and rapidly developing companies in the world up to a point where it encountered slow growth that is currently heading to stagnation. With declining stock values, Apple has planned to introduce a lower priced iPhone that will effectively compete in the smartphone market and rejuvenate the once giant of the iPhone industry (Apple Inc). This paper aims at evaluating the business and market aspects of the lower cost iPhone with respect to the target price, the target manufacturing cost, and the estimated gross profit.

Target priceWith the iPhone 5 retailing at USD 644 in 2012, Apple managed to sell over 125 million units. Although this was an improvement from the previous year’s 75 million units at USD 655, Apple has been experiencing a slowing growth in the iPhone market. The proposed lower priced iPhone will cost USD 350. This price is relatively lower than that of most iPhone models and so it will create more revenue by expanding the market share of Apple (United States Securities and Exchange Commission).

Target manufacturing costSince apple used over USD 150 million in designing and manufacturing the iPhone 5, the lower cost iPhone will not incorporate most of the smartphone apps that the iPhone 5 uses. For example, the lower cost phone will run on simple Android system with internet settings operating under the EDGE network. These will significantly reduce the initial manufacturing cost to just about USD 40 million with the first batch producing over 300,000 units of the iPhone. This will mean that the manufacturing cost of each unit of the lower cost iPhone will beUSD 217, which means that every unit of the lower cost iPhone sold will fetch in a gross of USD 133 (United States Securities and Exchange Commission).

Estimated gross profitFrom the figures above, it is clear that Apple will target an annual sale of USD 105 billion. Since gross profit is obtained by subtracting the cost of sales from the net sales, the estimated gross profit for the lower cost iPhone will be USD 65 billion. This strategic iPhone will definitely revive the declining profit margin in Apple’s iPhone market as well as stabilize its stock market (Apple Inc).Works CitedApple Inc. Investor Relations: Financial History, 31 Oct. 2012. Web. 24 June 2013.

United States Securities and Exchange Commission.Annual Report. Apple Inc., 31 Oct. 2012. Web. 24 June 2013.