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Financial Analysis of Apple inc

Technical Report · November 2017

DOI: 10.13140/RG.2.2.26022.96324

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Analysis of a NYSE listed company
Apple Inc. (AAPL)

Professor:

Elisa UGHETTO

Team members:
Viranch ANDIPARA

Emaad DURRANI

Sohail IQBAL

Mohamad Usama KUNNATHUR

Krunal VIRADIA
Table of Contents
1 Company Background ..........................................................................................................2
1.1 Company Structure ................................................................................................................... 3
1.1.1 APPLE'S ORGANISATIONAL WORKING AND MODULING ............................................................. 3
1.2 Apple’s Leadership.................................................................................................................... 4
1.3 APPLE'S CORPORATE CULTURES ................................................................................................ 4
1.3.1 Work Hard Play Hard ................................................................................................................... 5
1.3.2 Business Ethics ............................................................................................................................. 5
1.3.3 Secrecy ......................................................................................................................................... 6
1.3.4 Benefits and Reward .................................................................................................................... 6
1.4 Patents ..................................................................................................................................... 6
1.5 Apple’s Organizational Structure ............................................................................................... 8
1.5.1 Spoke-and-Wheel Hierarchy. ....................................................................................................... 8
1.5.2 Function-Based Grouping. ........................................................................................................... 8
1.5.3 Product-Based Grouping.............................................................................................................. 8
1.5.4 Apple’s Board of Directors ........................................................................................................... 9
1.6 Products ................................................................................................................................... 9
1.6.1 IPhone .......................................................................................................................................... 9
1.6.2 MacBook ...................................................................................................................................... 9
1.6.3 iPad ............................................................................................................................................ 10
2 MARKET............................................................................................................................. 11
2.1 Industry .................................................................................................................................. 11
2.2 What is next for Apple? .......................................................................................................... 12
2.3 Competitors for apple ............................................................................................................. 12
2.4 The Porter Five Forces Model .................................................................................................. 13
2.5 Apple in the Marketplace from a Five Forces Perspective ......................................................... 13
2.6 Industry Competition .............................................................................................................. 13
2.7 Bargaining Power of Buyers .................................................................................................... 14
2.8 Threat of New Entrants to the Marketplace ............................................................................. 14
2.9 Bargaining Power of Suppliers ................................................................................................. 14
2.10 Threat of Buyers Opting for Substitute Products ................................................................... 15
2.11 Desktop and Laptop Personal Computers ............................................................................. 15
2.12 Tablets ................................................................................................................................ 15
2.13 Smartphones ....................................................................................................................... 15
2.14 Future for apple .................................................................................................................. 16
3 Financials ........................................................................................................................... 17
3.1 Income ................................................................................................................................... 17
3.2.................................................................................................................................................... 17
3.3 Stock Price .............................................................................................................................. 18
3.4 Growth ................................................................................................................................... 18
3.5 Key ratios ............................................................................................................................... 19
3.5.1 Profitability ................................................................................................................................ 19
3.5.2 Liquidity and solvency................................................................................................................ 20
3.6 Assets Liabilities and Equity .................................................................................................... 20
3.6.1 Balance Sheet ............................................................................................................................ 20
3.7 Statement of Stockholder’s Equity .......................................................................................... 22
3.7.1 Cash Flow ................................................................................................................................... 23
 3.8 Apple Dividend Analysis .......................................................................................................... 23
3.8.1 Dividend Pay-out ....................................................................................................................... 23
3.8.2 Dividend Yield ............................................................................................................................ 24
3.8.3 Dividend Growth ........................................................................................................................ 24
4 COMPETITORS: .................................................................................................................. 25
4.1 Apple's Intangible Assets vs Samsung's Rise ............................................................................ 25
4.2 Statistical Comparison ............................................................................................................ 25
4.3 Market Share .......................................................................................................................... 26
4.3.1 Apple vs Industry ....................................................................................................................... 26
4.3.2 Operating system comparison ................................................................................................... 26
4.4 Direct face-off......................................................................................................................... 26
5 Future Perspective and Strategic Levers ............................................................................. 27
5.1 FUTURE PERSPECTIVE ............................................................................................................. 27
5.1.1 Augmented Reality .................................................................................................................... 27
5.1.2 Virtual Reality............................................................................................................................. 28
5.1.3 Homepod And Ambient Computing .......................................................................................... 29
5.2 STRATEGIC LEVERS OF APPLE .................................................................................................. 31
6 CONCLUSION ..................................................................................................................... 33
7 Bibliography ...................................................................................................................... 33
1 Company Background
The world is changing day by day, this world is comprised of Visionaries who work day and night tirelessly for the
better future and offer their services to deliver the best to the inhabitants of this world. Steve Jobs was one of the
visionaries who wanted to change the world by making use of technology. Steve Jobs was an unconventional leader
with a great vision of entrepreneurship and a lead his creation to be the most important creation in the history of
technological advancement. He was the chairman, Chief executive officer (CEO) and co-founder of Apple Inc.
Moreover, CEO and major shareholder of PIXAR. He was member of The Walt Disney Company’s board of directors
following its procurement of PIXAR. Jobs and Apple’s co-founder Steve Wozniak are recognized as the pioneers of
microcomputer revolution.

The two Steve Jobs and Wozniak were the main founders of Apple, but it would not be fair to continue with
mentioning their friend Ronald Wayne without him there might be no iPhone iPad or iMac today. Steve Jobs
convinced him to take 10% of the company stock and act as an authority should he and Wozniak come to misfortunes,
but Wayne quit out 12 days later, selling for just $500 a stock that would have future value of worth $72bn 40 years
later. The Company trades its products all-inclusive through its retail stores known as Apple store, online stores and
direct sales force, as well as through third-party cellular network sellers who have signed a patent with Apple,
wholesalers. Moreover, the Company retails a diversity of third-party Apple-compatible products, including
application software with reference to system software and numerous accessories through its sales and online stores.
The Company retails to clients, small and mid-sized businesses and education, initiative and management trades. The
Company’s financial year is the 52 or 53-week period that ends on the last Saturday of September. The Company is a
California corporation established in 1977.

Apple Computers, Inc. was founded on April 1, 1976, by college dropouts Steve Jobs and Steve Wozniak, who came up
with idea of new company a new vision of using the computers and ought to change the view of people towards
computers. They aimed to make computers small and portable enough for the people to use them easily at their
homes or offices the idea was based on two alphabets “PC” Personal Computer. They wanted to change the design
and construct a machine which is human friendly. Jobs and his friend Wozniak started out building Apple I and sold
the machine without keyboard, monitor. The response was not enough to make another machine but they worked
hard to meet the demands of customers and introduced Apple II which revolutionized the computer industry with the
introduction of first ever colour graphics PC sales jumped from $ 7.8 million to 1978 to $ 117 million in 1980 from this
point Apple went public

In the rest of 1980’s Apple was getting the maximum outputs from the consumers and in early 1990’s they posted
their highest profits. This was because of Job’s innovation and entrepreneur skills which gave the company a boast
and he signed a deal with a small company named “Adobe” creator of the Adobe Portable Document Format (PDF).
Together the two companies joined hands to create a new marvel of Desktop Publishing. By the invention of Windows

POLITECNICO DI TORINO | Company Background 2

Operating which comprised of a graphical interface similar to Apple. In 1990’s Apple’s share in the market suffered
slowly and many of the experts in the Apple thought that this would be the end of the company which aimed to
change the world. Microsoft Inc. became one of the biggest competitor of Apple Inc. This was the time when Apple
was in desperately need of an operating system so Apple Inc. decided to buy NEXT software which was Job’s
Company. Jobs was recognized as interim CEO he forgot all alliance with Microsoft and made the popular operating
system.

Jobs restored the decline company and introduced the concept if iBook which was a portable computer mostly known
as laptop. His visionary ideas were only the source which saved the company from being demolished by their
competitor so he started to branch out company into different regimes and making new products such as iPod (Mp3
player) and media software iTunes. This was Job’s best move to restore its strength in market, his move turned out to
be an asset for the company and now devices apart from computers such as iPod, iPad and iPhones and Apple TV have
become the most profitable sector of the company.

1.1 Company Structure

1.1.1 APPLE'S ORGANISATIONAL WORKING AND MODULING
In the early start of 1970’s when apple came into market it changed all the conventional corporate structure that was
being practiced in most of the companies in USA and started a new unique strategy of managing an organisation. The
company’s main strategy was based on the idea of informal corporate culture which unleashed the talent and gave
birth to innovation in that particular era, within technology industry which favoured hoc structure than a tall
organisational structure.

According to Mintzberg Prediction In 1938, administrative adhocracy happens when an organisation aims to be
innovative, because of growing competition and day by day increase in technological advancement. This is what Apple
opted for which boasted the aim to solve complex problem and can match its sophisticated innovative culture. Apple’s
organisational structure has been only suitable for Apple only, this is quite evident from the fact that many companies
failed to follow this ultimate league of adhocracy. Comparing it against traditional classical organisational culture it
seems that Apple’s ad hoc legacy of working is out of date. However, when measured with the post classic by
Hewelwtt et al. (2009) it was clear that Apple is in a very well state to meet its current and future obligations easily.

In the comparison of tall hierarchical structure with many stages and authorities, a flat organizational structure is
characterised by relatively less and efficient stages of management. Chain of command from top to bottom is linearly
aligned on the same pace which is the base of developing organisation. To keep growing in the never-ending
competition of technology the organisational effectiveness lies in the term of innovation and empowerment of
employees (Fayol 1949). Policies are designed in such a way to increase coordination which is the key to high level of
production with innovation. These phenomena explain why Apple Inc. is considered to be famous and distinctive
competence in product design and Innovation.

This adhocracy is totally dependent on the leadership, which seems to be the lead cause of damaging repercussion as
other strategic methodologies may not fit the organisational behaviour. This was the case when Jobs was dismissed
and all other successors struggled with organisation until he was later reinstated.

“The organisational structure in Apple is also a functional structure as the company is organised along functional line”

(Torrington et al. 2005).

Functional structure is comprised of teams on the basis of their common expertise, past experiences and resources
allotted. Employees hired within the functional divisions of an organisation perform a specialized set of tasks. The
results are comprised of operational efficiency within that particular group. However, there is a chance that it could
also lead to lack of communication between the groups in the organisation as is the case in Apple.

3 Company Background | POLITECNICO DI TORINO

1.2 Apple’s Leadership
Shackleton (1995, p. 2) suggests that 'leadership is the process in which an individual influence other group members
towards the attainment of group or organisational goals'. The component that characterises leadership as put forward
by Northouse (1997) is that leadership is a process that involves both influencing a group and attaining a goal. This
corresponds with Shackleton definition which suggests that leaders in some way motivate others to achieve group
goals.

Transformational leadership should be defined or based on the fact that how the leader influences or affects his
followers. Bass (1985) matches that magnetism alone is not enough to define a transformational leader, it requires to
be head strong emotion that will cause identification of the follower with the leader.

In this context Bass who perceives transformational leadership as unethical attributes transformational skills to
leaders such as Adolf Hitler, it has been linked to utmost values and believes that only moral leaders can be
transformational. Leadership must be in line with the aim to success of a particular objective. One of the main traits
about leadership is that it should be judged by the ability and influence to make social changes.

Apple’s CEO Steve Jobs is a charismatic leader who possessed a very strong passion and believed in creativity and
always boasted the confidence of employees by leading them with example, which turned out for him to be an
inspiration for the employees of Apple. Steve Jobs can be perfect example of transformational leader because of his
attributes and behaviour with employees his energetic charisma was to motivate employees to attain the highest
degree of creativity. It is believed that the rise of Apple was immensely aided by Jobs amazing energy, compelling
personality and persuasiveness.

Understanding the traits of being transformational leader they tend to use their authority and power to
fundamentally reform, thus they tend to change the old conventional methods of achieving goals by new strategic and
improved methods which are easily applied. This was the main theme of Job’s being analytical believe that he inspired
the employees at Apple to come up with unconventional regime of products by thinking differently. It is also said that
he inspired the employees to 'change the word' (Qumer 2009).

In the correspondence with attributed of transformational leaders’ characteristics as seen in the world models, Jobs
was able to attain the highest degree of efficiency by demanding commitment, determination, courage and
selflessness from his employees. It is said that when there are merits of a trait it also possesses some demerits. The
main problem with this kind of leadership style is that duty is preferred over personal consideration. It is evident by
Apple’s working environment it is seen as a club rather than a family. Apple aims task accomplishment more
importantly than the process or relationships in the work space. Furthermore, one of the main drawbacks to
transformational leadership style is the indispensability of the leader as it is a leader centric system. Leader is
considered solely as the centre of organisation or as the core of the integrated system. According to the analyst the
biggest challenge which Apple is facing is their strong attachment to charismatic leader, JOBS. A man who was
recognised for inspiring Apple to a great height.

1.3 APPLE'S CORPORATE CULTURES

'Theory Y'

'Theory X'

McGregor (1960) in his study of human based enterprise management style and leadership to motivate. He further
argued on the disparities among rigid people in management (Theory X) and a recent more modified style that is
based on human relationship idea (Theory Y). McGregor argues about the traits of effective leaders which states that
effective leaders tend not to give orders or discipline their staff. They have a unique ability to draw out of the best
from the people they manage through moral support, time to time encouragement and their personal charisma. He
states that if people are treated as responsible and self-motivated they tend to act in a more responsible and
motivated way.

POLITECNICO DI TORINO | Company Background 4

Based on McGregor's theory, it could be reasoned that Apple’s management style is a participative management style
based on the theory Y as it is able to motivate and draw out the best from its employees. However, it can also be
stated that Apple can also be using the threat of no rewards or even dismissal of labour force from work it
organisational objectives is not met. This is reflection of management style of theory X. Apple is in its own class and its
management role is well assembled in McGregor’s theory.

1.3.1 Work Hard Play Hard

the selection process of Apple is like skimming the cream of individuals from the market that are highly motivated and
goal oriented. This fact has enabled to increase the productivity of the company in last decade, which has now
become the symbol of dedication and hard work these phenomena is known as Apple’s “Work hard Play Hard” policy.
With the freedom of co working environment Apple encourages employees to enjoy work rather than to take stress
during the working hours. For the employees working at office is like relaxing their mind and dedicated themselves
towards one ambition that is to get the job done. The only problem is working late and overtime to meet his
obligations under certain period of time. The overtime policy doesn’t include any incentives by the company.

System composes of dual facial policy. On the one hand, it enhances the ability of company to maintain its hold in
financial market and the stakeholders as they are able to post a profit of US$ 1.23 Billion which is recorded as the
highest profit till now. On the other hand, employees who are not able to maintain a good work life balance.

The constructive aspect of Apple work ethics is that its working hours are very casual unlike strict corporate sectors in
which humans are working like machines. Jeffery (1998) argues that 'if you create a toxic or dysfunctional work
environment, you are going to get toxic behaviour from your employees'. This indicate that Apple has one aim and
that is to be productive and goal oriented, if you cannot give a good working environment to your employees your
productivity decreases sufficiently.

Work hard and play hard culture has been described by Deal & Kennedy (1982) in their model as a corporate culture in
which work is fun, risk is considerably low and much effective feedback on success. Apple being famous from the start
of its venture was because of its fun in working. The company gives parties after the working hours for the workers,
with new types of entertainment with playfulness at work. There is no need of official attire while you are working in
Apple, which indicates the freedom of choice. By all these incentives given by Apple to its employees in a corporate
culture differentiates it’s from its competitors. Employees own the company and have aim to get the job done with in
obligatory time. This has enhanced Apple’s productivity by giving the freedom of choice to its employees. In today’s
corporate world it is said that your appearance matters more than anything it is what that defines you, but on the
other hand Apple has proved that appearance is not as much important than the knowledge.

1.3.2 Business Ethics

Core of any corporate sector is a system of believes and cultural norms that organisation possesses. Business ethics
are set of believes or ideology of an organisation on which it firmly stands on. In general, it takes responsibility to its
shareholders, stockholders employees and the targeted customers. It may also face ups and down with the variation
of economic condition of the country.

The most important principle applied by Apple’s Business ethics is said to be “Use good Judgement”. Apple’s mission
statement states to be environmental friendly and ensures to provide health and safety incentives to employees over
the globe. Although this stated principle doesn’t reflect Apple’s policy in today’s world, it has been observed that it
hasn’t been successful in implementing the and has been reported non-ethical organisation culture towards it
employees. It seems unethical to increase Apple for maximizing the returns to its shareholders at a price which is
being paid it employees. Making money at the cost of disturbing personal life is not considered a way of ethical
organisation. But is the manner in which Apple tends to work by exploiting the rights of workers which is wrong.

Apple’s expendability policy of employees is comprised of “Great Merit”. Employees are timely realised that their
experience in Apple is a guarantee for employability but eventually they are laid back off. This indicates Apple’s simple
policy to increase shareholders by making employees into “willing slaves”.

5 Company Background | POLITECNICO DI TORINO

1.3.3 Secrecy
Secrecy in organisations which are totally based on technological aspects is very considered to core of its success.
Apple operates a closed business information policy. To maintain the culture of sole secrecy and harsh punishment for
the employees who share information and violets the set of imposed principles. It has been stated that Apple’s culture
of secrecy had led to suicide of an employee in china, at an event which occurred when he was suspected and
questioned for leaking company’s secret (Qumer 2009)

Apple’s policy of secrecy has subjected to peak criticism among market and analyst on their lack of transparency and
has raised some serious questions about their sincerity to its employees. Its growing obsession with maintaining high
security will hurt the company’s reputation in the modern era of transparency. It has also been noted that strict
secrecy policy of apple has boasted its working and productivity to its peak.

1.3.4 Benefits and Reward

organisations working spirit is solely depended on benefits that it gives to employees which burn midnight oil to
deliver the best and together as a team make it up to the top of highest. This trend of giving and uplifting the spirit of
people who are working in the company has been growing rapidly all over the world and is the token of appreciation
of efforts done by the employees. Wolf (1999) sums up the common view on pay for performance by stating that 'Pay
for performance is the holy grail of modern compensation administration'. The case in Apple is similar it prefers
performance based incentives system. Every employee in apple gives its best to get the incentives which has initiated
a race to deliver more and earn more. Apple being goal oriented organisation has even dismissed people of being
unproductive and not meeting the goals in the required period of time.

Pay system that is dependent on the performance benefits both the Company Apple Inc. and it’s working force. Apple
in this case may get increase in productivity and efficiency by the very high operative job done by work force.
Employees may also get benefit from the extra payment received as an appreciation of performing task very
effectively. This may lead to the factor of demotivation factor of other employees who don’t get these incentives.

Some employees who are goal oriented may want to work on the goals rather than the reward based system. The
concept of “be it or beat it” does not works for everyone. The rewards based income is only attractive to young
people who are working and to avoid any sort of carelessness in working. (Qumer 2009) being as the senior analyst
argues that Apples promotion policy is biased and was reported to only promote their favourite. Which is the main
cause of demotivation in the work force. If these kinds of issues continued to raise in the near future then no doubt
the employees will lose the charm of being part of such organisation, and may start to work against the organisation.

1.4 Patents
Steve job’s stepping down as a chief executive from apple also raised one of the important questions that will the
company be on the same streak on innovation without the teachings of father of this company. There are hundreds of
patents signed by Apple Inc. the following are some of the patents that have shaped the company’s future,

POLITECNICO DI TORINO | Company Background 6

 1. A way to change the channel or search for TV listings by using your voice.

Figure 1 Taken from United States Patent and trademark official Site.

Patent number: 9338493

Inventors: Marcel Van Os, Harry J. Saddler, Lia T. Napolitano,

Jonathan H. Russell, Patrick M. Lister,

and Rohit Dasari

Filed: September 26, 2014

2. A new kind of laptop keyboard in which the keys don't actually move, but rather sense that you press down

Figure 2 Taken from United States official site of Patents and Trademarks.

Application number: 20160098107

Inventors: John Morrell, Ron Hopkinson, Peter Arnold, Mikael Silvanto, William Leggett

7 Company Background | POLITECNICO DI TORINO

Filed: September 28, 2015

3. A motorized screen protector, which, Inspector Gadget-style, will deploy when the user accidentally drops
their phone or mobile device.

Figure 3 Taken from United States Patent and Trademark official site.

Application number: 20150301565

Inventor: Tyson Manullang, Stephen Lynch, Emery Sanford

Filed: April 18,2014

1.5 Apple’s Organizational Structure

Organisational structure enables the progress of a company rapidly. Apple’s organisational structure is goal oriented
and continuity in innovation. Creation of new products which is the utmost demand of targeted customer Apple not
only offers that but it gives with a package of innovation. The following are the most significant characteristics of
Apple’s Organisational Structure.

1. Spoke-and-wheel hierarchy
2. Function-based grouping
3. Product-based grouping

1.5.1 Spoke-and-Wheel Hierarchy.

A deep look in Apple’s structure shows the hierarchy of the company. In the past decade, it was Jobs who was solely
responsible for all the major decisions, but as now the administration is in the hands of Tim Cook, there are significant
changes in the hierarchy of Apple’s organisational structure. The level of collaborations has significantly increased
such as the collaboration among software and hardware teams. The Vice president of Apple has more autonomy
which was not so visible under Job’s leadership. Less rigidness in company’s organisational structure has been
observed but it still follows the wheel hierarchy in which Tim Cook is at the centre.

1.5.2 Function-Based Grouping.

The upper stage of Apple’s organisational Structure has been based on function based grouping, which is a part of
functional type of organizational structure. Each Vice President of the company reports to Tim Cook with a special
business function which is under that particular VP. Apple has devised a new strategy of Senior Vice President who is
most experienced individual in a particular field such as there a SVP for industrial design, an SVP for marketing and
management control. Apple’s top leaders report the necessary business needs in terms of vast functional areas.

1.5.3 Product-Based Grouping.

POLITECNICO DI TORINO | Company Background 8
The lower part of hierarchy is based on product based grouping which is a part of divisional type of organizational
structure. Under the supervision of Senior Vice Presidents there are many VP’s for the handling of different outputs
and designated products. For example, Apple has a VP for iOS apps, a VP for iPad, and another VP for consumer apps,
this enables apple to identify and address specific products or product components.

1.5.4 Apple’s Board of Directors

Apple’s Board of directors oversees the Chief Executive Officer and Senior management of the hierarchy. The
operations in the company day to day ensures the long-term interest of shareholders are being served well. To fulfil
the duties, Directors are advised to take focused goal oriented approach with accordance to their positions, and set
standards to maintain Apple is committed to business success through maintenance of standards of responsibility and
rules.

1.6 Products
Apple Inc. is considered as the worlds most advanced technological company which provides a vast variety of products
which are solely based to make life easy and enhance innovation through simplicity. Apple offers its technology in
every stage, following are the main products being offered by Apple.

1- IPhone
2- Mac
3- IPad

1.6.1 IPhone
iPhone is a smartphone made by Apple that combines a iPod, a tablet PC, a digital camera and a cellular phone. The
device includes Internet browsing and networking capabilities. The IPhone is known as “A complete phone”, due to its
speed and effectiveness all the users are too comfortable with its functionality and reliability. One of the most
important aspect in these phones is privacy Apple has ensured to safeguard the privacy of all customers through a
cloud which is usually known as iCloud.

iPhone's networking features include:

 Automatic detection of Wi-Fi networks.

 Support for the 802.11b and 802.11g standards.
 The use of quad band GSM and SIM cards to access cellular networks.
 EDGE support for high-speed data transfer where available.
 Bluetooth connectivity for short range networking with peripherals, other iPhones
and PCs.

1.6.2 MacBook
MacBook was a new dimension of using laptops by making them more portable and extended battery life which is
highly effective for Professionals, Content creators and Students. Its light weight and effective speed has increased its
demand throughout the world. MacBook is a powerful system with the simplest operating system that has been used in
the new technology till now.

9 Company Background | POLITECNICO DI TORINO

  Display. Retina display.
 Processor. 1.2GHz.
 Memory. 8GB of 1866MHz LPDDR3 on-board
memory.
 Storage. 256GB PCIe-based on-board SSD
 Size and Weight. Height: 0.14–0.52 inch (0.35–
1.31 cm)
 Graphics and Video Support. Intel HD Graphics
615.
 Wireless. Wi-Fi.
 Charging and Expansion with USB type C.

1.6.3 iPad
In the world of portability their stands no other product expect iPad, which is renowned for its effective portably and
acute functionality and accessibility to unlimited futures.

 Capacity: 32, 128 GB.

 Model number (on the back cover)
 White or black front bezel.
 9.7-inch Retina display
 Silver, gold, or space grey aluminium housing.
 Lightning connector.
 The Nano-SIM tray is on the right side on iPad (5th generation) Wi-Fi + Cellular.

iPad 2017

POLITECNICO DI TORINO | Company Background 10

2 MARKET
2.1 Industry
Apple Inc. previously called Apple Computer and known only as Apple, is a US company that produces operating
systems, computers and multimedia devices based in Cupertino, in the State of California. With its product, the iPhone
5s smartphone, the company holds the record of the best-selling smartphone in the world. Previously, from 1 April
1976 to 3 January 1977, was known as Apple Computer Company and from January 3, 1977 to 2007 as Apple
Computer Inc. The company was founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne, in Cupertino,
Silicon Valley, California.

As a well-established brand with a loyal following, Apple has continued to defy naysayers' expectations. For the time
being, the company seems well anchored as the world's most valuable company and is unlikely to be dethroned
anytime soon

Going from the verge of bankruptcy to the most profitable company in its industry, in 2012, Apple Inc. was said to be
the “most valuable company in the world”. This “value” that made Apple Inc. what it is today can be directly
attributed to its genius creator, founder, and previous CEO Steve Jobs. He was a visionary who revolutionized the way
people perceived technology. Yet his influence reached far beyond that. Through his innovations at Apple, Jobs was
able to change the future of entire industries, ranging from software and hardware to music, publishing and
communication. In 2007, Jobs’ focus on innovation and design built primarily around the consumer’s convenience was
one of the main strategies he used to rebuild the Apple empire back from ruins. Apple became the leader in the
industry with innovative products such as the iPod, iPhone and iPad at a time where competitors fell behind to catch
up to this rising giant. Apple’s leadership strategy was mainly based on both innovation and differentiation.
Unfortunately, these strategies may not be as sustainable as they seem.

The following analysis will demonstrate that Apple’s unprecedented success in the field of technological innovation
cannot fuel above-average profits (followed by high stock prices and increasing market share) if the company does not

11 MARKET | POLITECNICO DI TORINO

remain a leader and the first to introduce differentiated and innovative product. In addition, Tim Cook is facing a
challenge that requires him to pay more attention to cost leadership to pre-empt any potential losses in case of
setbacks in innovation that may occur as a result of the high degree of competition in the industry.

2.2 What is next for Apple?

During the early stages of the company, Apple was the drive behind the changes in the technology industry. In 1978,
the Apple II “sparked a revolution” that made the PC industry a multi-billion-dollar industry. (Yoffie and Rossano,
2012). During these stages, Apple was able to change the external environment rather than use it to its own
advantage. It was not until 2007 that Apple turned the tables and began to capitalize on the technological
opportunities present in this industry.

Apple did not take the external environment and twist it to its advantage but rather created a whole new external
environment on which a new industry was founded. Steve Jobs was the man behind this phenomenon, a man who did
not want to give people what they wanted, but wanted to give them innovations they don’t even know they want yet.

In order for Apple to remain ahead of the game however, it needs to be able to use its core competencies to be both a
cost and differentiation leader in this increasingly cost sensitive world. Furthermore, Apple should focus on new
strategies to block any new entry to the market and hamper current rivals who are up to speed on every innovation.
Apple’s innovative and differentiated strategy has turned the company into an industry leader, it did not however
stop competitors from coming up with similar products that offer similar value-added services at a lower cost. Apple’s
differentiation strategy might have kept its loyal customers insensitive to premium prices, it will not however be a
sustainable and long-lived strategy if it is outperformed at any point in time by a competitor.

2.3 Competitors for apple

Investors and market analysts often seek different perspectives for market analyses of companies to gain a more
complete picture of companies' positions and strengths within their particular industries. One tool for fundamental
analysis that goes beyond just examining financial metrics such as the price-to-book ratio (P/B) is Michael Porter's Five
Forces Model.

POLITECNICO DI TORINO | MARKET 12

2.4 The Porter Five Forces Model
Michael Porter developed the Five Forces method of analysis in 1979. The Five Forces model aims to examine five key
forces of competition within a given industry. The main force examined by Porter's model is the level of competition
within an industry. A person could even argue that Porter's model is essentially an analysis of the competitiveness or
no competitiveness of an industry. The other four forces considered in Porter's model all impact the level of
competition. They include the threat of new entrants to the marketplace, the threat of consumers opting for
substitute products, the bargaining power of suppliers within the industry, and the bargaining power of buyers or
consumers within the industry's marketplace.

2.5 Apple in the Marketplace from a Five Forces Perspective

Through its Macintosh computers and operating system, the iPad, iPhone and other products, has achieved massive
success as a company despite going through many up and down cycles since its founding in 1976. In 2014, Apple
achieved the notable distinction of being the first U.S. company to ever attain a market capitalization greater than
$700 billion. Apple's success is attributed largely to its ability to innovate and bring unique products to market that
have engendered substantial brand loyalty. Its product development and marketing strategies reveal an awareness of
the need to deal with the major marketplace forces that can impact Apple's market share and profitability.

A Five Forces analysis of Apple's position in the technology sector shows industry competition and the bargaining
power of buyers as the two strongest marketplace forces that can impact Apple's profitability. The bargaining power
of suppliers, the threat of buyers opting for substitute products, and the threat of new entrants to the marketplace
are all weaker elements among the key industry forces.

2.6 Industry Competition

The level of competition among the major companies that compete directly with Apple in the technology sector is
high. Apple is in direct competition with companies such as Google, Inc., the Hewlett-Packard Company, Samsung
Electronics Co., Ltd. and Amazon, Inc. All of these companies expend significant capital on research and
development (R&D) and marketing, just like Apple. Thus, the competitive force within the industry is strong. One thing
that makes the industry so highly competitive is the relatively low switching cost. It does not require a substantial
investment for a consumer to ditch Apple's iPad for an Amazon Kindle or other tablet computer. The threat of
marketplace competition is a key consideration for Apple, one it has dealt with primarily through continually
developing new and unique products to increase and strengthen its market share position.

13 MARKET | POLITECNICO DI TORINO

2.7 Bargaining Power of Buyers
The element of low switching cost referred to above strengthens the bargaining power of buyers as a key force for
Apple to consider. There are essentially two points of further analysis within this force: the individual bargaining
power of buyers and their collective bargaining power. For Apple, individual bargaining power is a weak force, since
the loss of any one customer represents a negligible amount of revenue for Apple. However, the collective
marketplace bargaining power of customers, the possibility of mass customer defections to a competitor is a strong
force. Apple counters this strong force by continuing to make substantial capital expenditures in R&D, enabling it to
keep developing new and unique products such as Apple Pay and the Apple Watch, and by building significant brand
loyalty. Apple has been very successful in this area of competition, establishing a large customer base that, basically,
would not consider abandoning its iPhones in favour of another smartphone competitor.

2.8 Threat of New Entrants to the Marketplace

The threat of a new entrant to the marketplace that could seriously threaten Apple's market share is relatively low.
This is primarily due to two factors: the extremely high cost of establishing a company within the industry and the
additional high cost of establishing brand name recognition. Any new entrant to the marketplace of personal
computing or smartphones needs to have a massive amount of capital just to spend on R&D and manufacturing to
develop and produce its own product portfolio prior to ever bringing its products to market and beginning to generate
revenue. Such an entrant faces the already identified strong competition within the industry that exists between
Apple and its major competitors, all of which are large, well-established firms. The secondary challenge is establishing
brand name recognition within an industry that already has several companies, such as Apple, Google and Amazon,
with very strong brand recognition.

Although it is possible some new company, perhaps a Chinese firm with financial backing from the government, might
eventually challenge Apple's position within the industry, for the immediate future, the likelihood of such a challenger
arising is remote. Nonetheless, it is important for Apple to continue strengthening its competitive position through
new product development and building brand loyalty to place any potential new entrants to the industry at a larger
competitive disadvantage.

2.9 Bargaining Power of Suppliers

The bargaining power of suppliers is a relatively weak force within the marketplace for Apple's products. The
bargaining position of suppliers is weakened by the high number of potential suppliers for Apple and the ample
POLITECNICO DI TORINO | MARKET 14
amount of supply. Apple is free to choose from among a large number of potential suppliers for component parts for
its products. The industries of its parts suppliers, such as the manufacturers of computer processors, are themselves
highly competitive. The switching cost for Apple to exchange one supplier for another is relatively low and not a
significant obstacle. Plus, Apple is a major customer for most of its parts suppliers, and, therefore, one its suppliers are
very reluctant to risk losing. This strengthens Apple's position in negotiating with suppliers, while conversely
weakening their positions. The bargaining power of component parts suppliers is not a major consideration for either
Apple or its major competitors.

2.10 Threat of Buyers Opting for Substitute Products

Substitute products, within the framework of Porter's Five Forces Model, are not products that directly compete with
a company's products but possible substitutes for them. In the case of Apple, an example of a substitute product is a
landline telephone that might be a substitute for owning an iPhone. This market force is relatively low for Apple due
to the fact that most potential substitute products have limited capabilities compared to Apple's products, as in the
example of a landline telephone compared to an iPhone that has the capability to do much more than just make
telephone calls.

The range of products and services offered by Apple, Inc. (AAPL) is broad, and the company is a fierce competitor in
several industries, ranging from personal computers to entertainment media to mobile payment systems. Here is a list
of the technology giant's main competitors by industry.

2.11 Desktop and Laptop Personal Computers

While the personal computer running on Microsoft operating systems has remained a favourite of consumers since
the 1980s, Apple has maintained a loyal following of users who report high satisfaction with the company's Macintosh
computers ("Macs") and MacOS operating system. Major competitors in this space include Dell, Acer, HP, Sony and
Toshiba.

2.12 Tablets
The iPad revolutionized the Apple business model and spurred an entire industry of mobile computing imitators.
Apple is by far the most profitable and biggest selling company in this field. Competitors include Alphabet Inc.
(GOOG), Samsung, Microsoft and Nokia.

2.13 Smartphones
The smartphone industry was once dominated by Canadian giant BlackBerry Limited (BBRY) (formerly Research in
Motion Limited). That changed with the introduction of the Apple iPhone. The iPhone has literally decimated
BlackBerry's business, forcing the company to restructure several times. Although it has over one-third of the U.S.
smartphone market, and its models regularly occupy the top-selling spots, Apple in turn now faces competition from
the Android operating system, produced by Alphabet Inc.'s Google, which is installed on most non-Apple phones
produced by Huawei, Samsung, Sony (SNE), HTC, Lenovo and others.

15 MARKET | POLITECNICO DI TORINO

2.14 Future for apple
Demand shouldn’t be a problem. Earth will contain 7.6 billion people by then; the United States 341 million. Lifestyles
will continue to change. Obesity and diabetes will still be problems, and healthful food like apples will be more
popular than ever, according to Steven Muro of Fusion Marketing.

Muro was one of the speakers for “Apples 2020 – The Future is Here!,” a presentation held during the U.S. Apple
Association’s Apple Crop Outlook & Marketing Conference in Chicago. With three other speakers, he predicted what
the apple industry might look like 10 years from now.

POLITECNICO DI TORINO | MARKET 16

3 Financials
Financial Analysis is a tool to evaluate a firm or organization taking consideration of various factors such as income,
stock price, cash flow statements etc.

3.1 Income
the income statement provides performance information about a time period. It begins with sales and works down to net
income and earnings per share (EPS). The income statement is divided into two parts: operating and non-operating. The
operating portion of the income statement discloses information about revenues and expenses that are a direct result of
regular business operations.

($ in millions) 2015 2016 2017

Revenue $233,715 $215,639 $229,234

Gross profit $93,626 $84,263 $88,186

Operating income $71,230 $60,024 $61,344

Income before taxes $72,515 $61,372 $64,089

Provision for income taxes $19,121 $15,685 $15,738

Net income $53,394 $45,687 $48,351

250.000

200.000

150.000

100.000

50.000

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Revenue

This statistic shows Apple's net income, also called net profit, generated in the company's financial years from 2008 to
2017. In the 2016 fiscal year (October 2016 to September 2017), Apple's net income amounted to approximately

17 Financials | POLITECNICO DI TORINO

45.69 billion U.S. dollars. In the first Quarter of 2017 Apple reported revenues of 54 million U.S. dollars from iPhone
sales alone. The minified income statement is given below

3.2 Stock Price

Apple Inc. current valuation of stock stands around 175$ in 2017 which has seen tremendous growth over the years
mainly because of innovative and bold decision by Apple in the competitive market to surge themselves above other.

200
180
160
140
120
100
80
60
40
20
0

Stock Price

The future of Apple Inc. shows no sign of degrading anytime soon according to the industry experts. The stock price
can surge over 200$ if the reports from economists are to be believed. Mainly because of:

• iPhone “super cycle”

• Tax reform

• Services revenue

• Enterprise spending

• Valuation

Growing high-margin services revenue which many critics believes a bold move, aggressive investment and
expenditure from enterprises on Apple services and product will ensure Apple stock surge further in 2018.

Apple’s biggest move or game changing factor is its premium smartphone which has played a crucial part in shaping
the stock price of Apple Inc.

Apple Inc. share have shrink just three times in the six-months period following an iPhone launch—44% following
iPhone 3G’s announcement in 2008 down 34% after the launch of the iPhone 5 in 2012—the second smartphone from
the company after the founder Steve Jobs’ death—whilst it reduced 8.19% in 2015 during the launch of iPhone 6S.

3.3 Growth
Growth is totally dependent of company’s stock and outstanding shares in the market. If the shares and profitability is
high the sales revenue is much greater. Growth is necessary for keep a pace in the market and to take over

POLITECNICO DI TORINO | Financials 18

competitors. Companies follow profitability ratios to increase their stock price in the market which is company’s
future.

70

60

50

40

30

20

10

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-10

-20
Year over Year 3-Year Average 5-Year Average 10-Year Average

3.4 Key ratios

3.4.1 Profitability
Profitability ratios are a class of financial tools that are used to assess a business's ability to generate earnings
compared to its expenses and other relevant cost incurred during a specific period of time. For most of these ratios,
having a higher value relative to a competitor's ratio or relative to the same ratio from a previous period indicates that
the company is doing well.
50
45
40
35
30
25
20
15
10
5
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tax Rate % Return on Equity % Return on Assets %

19 Financials | POLITECNICO DI TORINO

3.4.2 Liquidity and solvency
Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety through the calculation
of metrics including the current ratio, quick ratio and operating cash flow and current liabilities ratios are analysed in
relation to liquid assets to evaluate the coverage of short term debts in an emergency.

Solvency ratio is one of the various ratios used to measure the ability of a company to meet its long-term debts.
Moreover, the solvency ratio quantifies the size of a company's after-tax income, not counting non-cash depreciation
expenses, as contrasted to the total debt obligations of the firm.

2,5

1,5

0,5

0
2013 2014 2015 2016 2017
Current Ratio Quick Ratio Financial Leverage Debt/Equity

3.5 Assets Liabilities and Equity

3.5.1 Balance Sheet
A balance sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a
specific point in time. These three balance sheet segments give investors an idea as to what the company owns and
owes, as well as the amount invested by shareholders.

The balance sheet adheres to the following formula: Assets = Liabilities + Shareholders' Equity

($ in millions) 2015 2016 2017

Current Assets $89,378 $106,869 $128,645

Cash $41,601 $67,155 $74,181

Non-Current Assets $201,101 $214,817 $246,674

Liabilities $171,124 $193,437 $241,272

Stockholder’s Equity $119,355 $128,249 $134,047

Total Assets (Liabilities & Equity) $290,479 $321,686 $375,319

POLITECNICO DI TORINO | Financials 20

3.5.1.1 Assets

Things that are resources owned by a company and which have future economic value that can be measured and can
be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land, buildings,
equipment, and vehicles.

Assets
Other Long-Term
Assets Cash & Short-Term
55% Investments
20%
Other
34%
Accounts Receivable
9%
Inventory
1%

Other Current Assets

4%
Intangibles Net PP&E
2% 9%

3.5.1.2 Liabilities and Equity

A liability is a debt owed by a company that requires the entity to give up an economic benefit (cash, assets, etc.) to
settle past transactions or events

Whereas equity is the amount that has been invested by the owners in the company to increase the efficiency and
profitability of the company. The amount that has been reinvested in the business is known as retained earnings.

21 Financials | POLITECNICO DI TORINO

 Liabilities & Stockholder’s Equity
Total Stockholders'
Equity
36%
Accounts Payable
13%

Other
27% Short-Term Debt
5%
Other Long-Term
Liabilities Accrued Liabilities
11% 7%
Other Short-Term
Liabilities
2%

Long-Term Debt
26%

3.6 Statement of Stockholder’s Equity

This statement displays how equity changes from the beginning of an accounting period to the end. The statement of
stockholder's equity displays all equity accounts that affect the ending equity balance including common stock, net
income, paid in capital, and dividends

Accumulated
Common stock Total
Retained other
($ in millions) and additional Shareholder’s
Earnings comprehensive
Paid-In capital Equity
income/(loss)

Balances as of September 24, 2016 $31,251 $96,364 $634 $128,249

Net income ̶ $48,351 ̶ $48,351

Other comprehensive income/(loss) ̶ ̶ ($784) ($784)

Dividends and dividend equivalents

̶ ($12,803) ̶ ($12,803)
declared

Repurchase of common stock ̶ ($33,001) ̶ ($33,101)

Share-based compensation $4,909 ̶ ̶ $4,909

Common stock issued, net of shares

($913) ($581) ̶ ($1,494)
withheld for employee taxes

Tax benefit from equity awards, including

$620 ̶ ̶ $620
transfer pricing adjustments

Balances as of September 30, 2017 $35,867 $98,330 ($150) $134,047

POLITECNICO DI TORINO | Financials 22

Statement of Cash Flow shows the inflow and outflow of the cash from the company. It help to record the yearly
investment and finances, which are checked on the ending of financial year to check company’s liquidity and its
position in the market.

($ in millions) 2015 2016 2017

Cash Flows From Operating Activities $81,266 $65,824 $63,598

Cash Flows From Investing Activities ($56,274) ($45,977) ($46,446)

Cash Flows From Financing Activities ($17,716) ($20,483) ($17,347)

Net change in cash $7,276 ($636) ($195)

Cash at beginning of period $13,844 $21,120 $20,484

Cash at end of period $21,120 $20,484 $20,289

3.6.1 Cash Flow

90.000
80.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Operating Cash Flow

3.7 Apple Dividend Analysis

Apple Inc. resumed its dividend instalments in 2012 following a 17-year break. At the end of its financial year 2011, it
had collected, from its initial achievement of the iPhone and iPad, a colossal measure of money and other cash
comparable possessions of over $25 billion. From that point forward, Apple has been seen proceeded with ascend in
income and profit every year through 2015, enabling it to expand yearly profits for the three years following the
underlying quarterly profit instalment in 2012. For a half year from Dec. 27, 2015, to June 25, 2016, or the
organization's financial Quarter 2 (Q2) and Quarter 3 (Q3) of 2016, the AAPL profit kept on developing at a
considerably higher rate.

3.7.1 Dividend Pay-out

Apple's gross dividends totalled $5.996 billion for half a year that incorporated the organization's financial Q2 and Q3
of 2016, apparently outperforming past profit instalments from some other two nonstop quarters since it reinstituted
quarterly profits in 2012. The consolidated net salary for Q2 and Q3 of 2016 was $18.321 billion, which put the profit

23 Financials | POLITECNICO DI TORINO

pay-out proportion at 32.7% for those six months. This analyses to the normal profit pay-out proportion of 25.9% for
the three years in the vicinity of 2013 and 2015.

The higher dividend pay-out proportion for as far back as a half year lay on the way that Apple's income and profit
have been developing persistently for the past five years, with an aggregate gathered value capital of $119.4 billion as
recorded on Sept. 26, 2015, the end of Apple's financial year 2015. This contrasted with a holding of $41.6 billion in
real cash, cash counterparts and here and now ventures on a similar date. With the amount of ideal cash at 34.8% of
Apple's value capital, investors were without a doubt happier as Apple considered to return conceivably a greater
amount of its capital back to investors for their own uses in 2016.

3.7.2 Dividend Yield

35

30

25

20

15

10

5 1,63 1,81 1,98 2,18 2,4

0
2013 2014 2015 2016 2017
Earnings Per Share USD Dividends USD Payout Ratio % *

While dividend pay-out is a measure of budgetary quality regularly utilized as a part of principal examination of stock
speculations, profit yield is more valuable for speculators with a staggering objective of getting investment profits. For
dividend investors, a stock's capital appreciation is auxiliary to the profit salary that the stock can provide. A stock's
profit yield analyses the measure of yearly profit as a level of money markets' cost. For singular financial specialists,
their own buy costs on a stock may lift or lower their profit yields, given how much the stock pays in profits.

Apple's dividend on a trailing year premise was $2.13 per share every year as of June 25, 2016. Utilizing the stock's
end cost of $107.57 on Aug. 25, 2016, the profit yield from putting resources into Apple stock was 1.98%.

Despite the fact that the yearly AAPL profit has reliably expanded in the years after the organization's 2012 profit
reestablishment, Apple stock has on occasion ascended at considerably speedier rates, possibly bringing about its
profit yield being less focused for new financial specialists purchasing the stock at premium costs. In the event that
Apple is focused on a solid and developing profit approach, existing profit speculators will see advance upgrades in
their profit yields.

3.7.3 Dividend Growth

For most organizations, a dividend cut is a special case, as opposed to the standard. Organizations might want to
develop their dividends after some time, relying upon the development of their income and profit, and also income
from operations. The AAPL profit for half a year from Dec. 27, 2015, to June 25, 2016, totalled $5.996 billion, a slight
increment of 2.5% over the measure of profit paid prior the six months. Yearly profit development arrived at the
midpoint of 4.6% for the three years from 2013 to 2015, accepting annualized profit instalments of $10 billions of e
2012 in view of the quarterly profit of $2.5 billion, a halfway year instalment in that year. In examination, the dividend
growth rate for half a year that incorporated Apple's Q2 and Q3 of 2016 was marginally higher than the organization's
authentic dividend growth rate.
POLITECNICO DI TORINO | Financials 24
4 COMPETITORS:
 Samsung
 Google
 Oppo (Asia market)

4.1 Apple's Intangible Assets vs Samsung's Rise

From making and outlining PCs to conveying the iProducts, Apple has made considerable progress. It has put itself in
the most rethinking snapshot of our age; Apple is at the epicenter of the innovative time. The organization has an
elusive resource that places it in the cutting edge of the brains of customers and financial specialists alike. Be that as it
may, now, Apple faces its greatest danger as Samsung has gradually picked up piece of the overall industry. Almost 63
million units of the Samsung Galaxy were sold by Samsung and profit from it surge more than Google makes from
every one of its sector.

Regardless of this, Samsung is still no place close to Apple's capacity to generate revenue. Apple has sold amazing 201
million iPhone in 2016, and will most likely keep on outselling Samsung's Galaxy series for quite a while. In any case,
it's no longer safe to state that Apple will remain the pioneer in the cell phone division.

4.2 Statistical Comparison

Although high-end smartphones make up most of global smartphone sales by quantity, they provide the majority of
the profit. The reason why Apple makes staggering money off smartphones is because each iPhone it makes costs
approximately around $200 to make, and is sold for over $800-$1000. The overall revenue margins are much deviated
and influenced by premium smartphones than nearly any other product of particular sector firms, so Apple ends up
making more profit on an iPhone than any of its rival’s premium smartphone from Samsung or Google as Apple relies
mainly on its iPhone sale.

4.1 Apple vs Samsung market share

25 COMPETITORS: | POLITECNICO DI TORINO

As indicated by Counterpoint, it's extremely a fight for survival amongst Samsung and Apple. Their individual offers of
premium cell phone deals are a "zero-total amusement;" when one organization loses its offer of the productive
smartphone deals, alternate increases. Samsung's at a genuine low point after the Note 7 disaster, and it will consider
a major overhaul change in 2017-18 to compete with Apple once more.

4.3 Market Share

A 7 percent increase over the fourth quarter of 2015 was observed in same bracket of 2016 when worldwide sale of
smartphone to end users jumped to almost 432 million unit and also saw Apple surpassing Samsung to retain the No.
1 global smartphone company position.

4.3.1 Apple vs Industry

Most highlighting, quarter four of 2016 saw Samsung lose its number 1 position to Apple. In Q4 2016, Apple sold
around 77 million iPhones, up from 71.5 million when compared with the prior year. That development drove Apple
to 17.9 percent of the smartphone market, a 2 percent expansion year-over-year. Samsung, then again, saw
shipments tumble from 83.4 million to 76.7 million, in this way causing its piece of the overall industry to slide from
20.7 percent to 17.8 percent.

Samsung and Apple both lost market share to up and new comer Chinese giants such as Huawei and Oppo, both of
which saw an increase in their share year by year. This is a notable trend that has been seen for past few quarters
mainly because of dominance of market in Asia by Oppo and Huawei.

4.3.2 Operating system comparison

At least as far as operating system are concerned, Android clearly has the lead here. Google's working framework
Android holds 81.7 percent of the market, down 1 percent year-over-year. Whilst iOS, holds 17.9 percent, which is up
.2 percent contrasted with the prior year.

4.4 Direct face-off

Samsung is expected to narrowly push back the production of its high-end models in the fourth quarter of 2017 as the
company is visualizing the sales of its smartphones being hampered by the huge demand for Apple’s iPhone X devices.
Huffington Post estimates that Samsung’s fourth sector total volume will come to 77 million units, a 5% decrease from
the third sector.

Assumptions for iPhone X sales are driven by Apple’s own estimates for Q4 2017. The firm is expecting income of $84-
$87 billion, which would be an immense beat of the past record quarterly income of $78 billion, set in Q4 2016.
Samsung, by contrast, launched both of its flagship phones earlier this year, and at the moment is looking forwards to
the release of the Galaxy S9 in starting of 2018.

POLITECNICO DI TORINO | COMPETITORS: 26

5 Future Perspective and Strategic Levers
5.1 FUTURE PERSPECTIVE
5.1.1 Augmented Reality
Ask most tech organizations which item will supplant the smartphone and the appropriate response will presumably
rotate around a wearable gadget for "augmented reality," the tech that overlays advanced pictures on this present
world. Augmented reality improves one's present impression of reality, though conversely, virtual reality substitutes
the real world with a counterfeit one.

Over the past years, Microsoft has launched HoloLens. Google has already started working on project called project
Tango which is meant for android and maybe on one fine day we could have google glasses. Facebook reported its AR
desire a couple of months prior, and Mark Zuckerberg even said AR (Augmented Reality) glasses would substitute the
requirement for most screens throughout your life one day.

Apple's approach is unique. Apple didn’t organize any AR demos nor TED-talks to demonstrate about how a pair of
glasses will soon be the only computer you need. Instead it is starting with something known and that is iPhone/iPad.

After apple succeeds to make IOS 11 available in millions of phones, it will immediately fall the curtain on largest AR
platform. It’ll be much better in what people already use and not in revolutionary glasses or headsets. Apple will
launch it by a simple software update and hence it will give it a major advancement over its AR competitors.

That won't be a distinct advantage immediately obviously, and it unquestionably won't convey the sort of stunning
knowledge being launched by organizations like Magic Leap. AR empowered iPhones will certainly mean some games
and entertainment apps. You’ll be able to construct virtual characters by simply sitting on your coffee tables.

5.1 iPad demonstrating Augmented Reality

27 Future Perspective and Strategic Levers | POLITECNICO DI TORINO

Having AR enhanced iPhones will make apple prepared for a long run by building a base of designers effectively
devoted to the stage who need to influence stuff for the biggest number of clients they can. In the event that and
when Apple chooses to take AR to the upgraded level with a couple of crafty glasses or something unique, it'll be in a
superior position than organizations attempting to prevail upon designers.

5.2 iGlass

5.1.2 Virtual Reality

Apple is being indecisive for virtual reality since long while other major tech companies are heavily obsessed on
virtual reality in present. But now apple feels the time being right and is going to propose an advanced set of tools
which will be incorporated in the upcoming macOS sierra software which will let the developers connect the VR
headsets.

POLITECNICO DI TORINO | Future Perspective and Strategic Levers 28

 5.3 Apple VR Headset

This VR launch isn’t about tempting gamers and VR admirers to Mac. It is to make sure that apple’s wide number of
users have tools to create future contents. Apple has truly been the stage of decision for computerized craftsmen,
movie producers, and different experts, and including VR improvement apparatuses will ensure those clients have
what they require and don't leave Apple.

5.4 Apple VR Headset

5.1.3 Homepod And Ambient Computing

Despite the matter that Apple concentrated on HomePod's music abilities and pitched it as another sort of home
stereo, it undersold whatever remains of the genuine potential. Homepod is likewise Apple placing Siri in your house
recently and influencing a long term to play for the idea of ambient computing, in which all that you claim is
associated and powered by a basic counterfeit intelligence.

29 Future Perspective and Strategic Levers | POLITECNICO DI TORINO

 5.5 Apple Homepod (White)

5.6 Apple Homepod (Black)

HomePod is an approach to put Siri everywhere else when you're not taking a glance at your iPhone, writing on your
Mac, tuning in to your AirPods, or following your exercise on your Apple Watch. HomePod is Apple crawling into
remains of your life under the pretense of an extremely decent Wi-Fi stereo. Apple might concentrate on music now
with HomePod, but on contrary to that, it's sneaking in a lot of Amazon Echo-like highlights like controlling your
associated apparatuses and getting refreshes from Siri.

All things considered, it's really evident why Apple would need to cover the AI (Artificial Intelligence) highlights of
HomePod. Pitching it as a digital assistant rather than a music player will just expose Apple to extra assessment about
how it is collapsing behind in AI in comparison to Google and Amazon. Apple's Siri is still substantially less proficient as
POLITECNICO DI TORINO | Future Perspective and Strategic Levers 30
a virtual aide than the offerings from Amazon and Google, and Apple has significantly more work to do to get up to
speed. However, doubtlessly that AI is a major region of speculation for Apple, and HomePod will assume a vital part
in this procedure of Apple’s progress.

5.2 STRATEGIC LEVERS OF APPLE

Recently Apple declared that it will put $3.9bln in new sourcing contracts for prepaid stock and capital consumptions.
It would appear that prepayments for capex into LGD, TMD, Sharp. It starts to arrange the business into 2 noteworthy
camps: Samsung versus Apple. Additionally, there has been a claim that Apple has bolted up 60% of the business
anticipated capacitive touch limit. It shows the upper hand of a precisely organized vital supply contract – can prompt
enhanced financial matters and capacity to out move contenders.

LCDs speak to up to 85% of cost of item in some electrical products and corporates have started to wake up to the
reality key reactions should be made to guarantee a wellspring of upper hand

It is likewise certain that the show business is one of many-sided quality and vulnerability, with extensive variances in
valuing and evident moves in innovation headings. LTPS and AMOLED are as of now underscored.

Until further notice, key reactions to sourcing are in vogue, where the speculation stakes are higher yet as an end-
result of genuine upper hand. Apple has absolutely utilized its position and a deliberately made key supply technique
to bolt up its future business in little medium and wrong-foot contenders in the meantime.

It is worth pointing out that the economics of small panel and large panel LCD do differ.

5.7 Economics of Small & Large Panel of LCD

Financial aspects of the two markets vary

–   Flex circuits and driver IC assume a significantly more noteworthy part in little board cost structure; lighting models
diverse with more noteworthy emphasis on optical movies in little board

31 Future Perspective and Strategic Levers | POLITECNICO DI TORINO

–   Labor may be thought to be comparable, however just for little board players with back-end module get together
in minimal effort territories. China nowadays is starting to get costly

Key success factors also very different

–   For the little board space is the ability to manage monstrous many-sided quality given it is a multi-innovation,
multi-application showcase space. Capex and manufacturing plant arranging has not been a vital choice for various
years however might be so again since LTPS limit spent in spring 2011.

–   Large board choices are predominantly substrate size and capacity decisions, and all the more as of late coupled to
endeavors and co-area choices with clients to attempt to win long term guide arrangement.

As a result, commodity strategies need to differ for the two markets

5.8 Apple Sourcing Levers

POLITECNICO DI TORINO | Future Perspective and Strategic Levers 32

 6 CONCLUSION
Apple should replace its individualistic approach and should adopt a more inclusive and actively involved team
approach in which team are responsible for the job get done. In this way, whole team for working up to the mark will
get incentive by the company as a single unit.

This will create a friendly environment among the individuals who will now focus on more getting the job done
together as a team and reduce the factor of professional rivalry among employees. The team working will initiate the
post-industrial society and set of new norms in the co working place.

As discussed above Apple’s work hard culture is not sustainable as it imposes pro longed work hours for employees. A
new shift system or more flexible working hours system should be introduced in the company with keeping in
consideration of workers personal life with work life.

Organisational Culture, Leadership and Structure are the sole reason that how the employees will behave, their
attitude in work place and how they will act as individuals in the organisation business strategy. There is no doubt
Apple takes into account more entrepreneurial approach and it invest on its employees for the sake of increase in
their productivity. The optimistic approach of apple is no doubt the lead fact that it has been world no.1 company in
technological advancement. As long as the organisation is growing and developing branches worldwide it needs to
strengthen its core roots and eliminate it internal weakness which can be fatal for company’s future growth and
prosperity.

7 Bibliography

Investopedia. (n.d.). Retrieved from http//www.investopedia.com

Libby, R., Libby, P. A., & Short, D. G. (2011). Financial Accounting. McGraw-Hill.

Morning Star. (n.d.). Retrieved from http//www.morningstar.com

New York Stock Exchange. (n.d.). Retrieved from http//www.nyse.com

Ross, Westerfield, & Jaffe. (2003). Corporate Finance. McGraw Hill.

Wikipedia. (n.d.). Retrieved from http//www.wikipedia.com

33 CONCLUSION | POLITECNICO DI TORINO

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