Introduction

Apple Inc. is an American multinational technology company headquartered in Cupertino, California,

that designs, develops, and sells consumer electronics, computer software, and online services. The

company's hardware products include the iPhone smartphone, the iPad tablet computer, the Mac

personal computer, the iPod portable media player, the Apple Watch smartwatch, the Apple TV digital

media player, and the HomePod smart speaker. Apple's software includes the macOS and iOS operating

systems, the iTunes media player, the Safari web browser, and the iLife and iWork creativity and

productivity suites. Its online services include the iTunes Store, the iOS App Store and Mac App Store,

Apple Arcade, Apple Music, Apple TV+, iMessage, and iCloud.

In 2016, Apple became the first U.S. company to be valued at over US$700 billion. In 2018, Apple

became the first public U.S. company to be worth US$1 trillion. As of October 2020, Apple is the world's

most valuable company.

Context (C) – External environment

In order to assess the financial performance and position of Apple Inc., an analysis of the technological,

economic, social and political factors that have influenced the company over the past four years will be

conducted.

Technological

In terms of technological developments, Apple has been at the forefront of many new innovations and

has been quick to adopt new technologies in order to maintain its competitive advantage. In terms of

hardware, the company has released a number of new products in the past four years, including the

iPhone 6, 6 Plus and 6s, the iPad Air 2 and the iPad mini-3, as well as the Apple Watch. In terms of
software, the company has released a number of new operating systems, including iOS 8, 9 and 10, as

well as macOS Sierra. In terms of services, the company has launched Apple Music, Apple Pay and

iCloud.

In terms of future technological developments, Apple is rumored to be working on a number of new

products, including a new iPhone, a new iPad, a new Apple Watch and a new Apple TV. The company is

also rumored to be working on a number of new services, including a streaming TV service, a

subscription-based news service and a subscription-based gaming service.

Economic

The global economy has been relatively stable over the past four years, with GDP growth of 2.4% in

2014, 2.9% in 2015, 3.1% in 2016 and 3.0% in 2017. In terms of inflation, the CPI has remained relatively

stable, with an average rate of 2.1% over the past four years. In terms of unemployment, the rate has

remained relatively stable, with an average rate of 5.8% over the past four years.

In the US, the economy has been relatively strong, with GDP growth of 2.4% in 2014, 2.9% in 2015, 1.6%

in 2016 and 2.3% in 2017. In terms of inflation, the CPI has remained relatively stable, with an average

rate of 1.8% over the past four years. In terms of unemployment, the rate has remained relatively

stable, with an average rate of 5.3% over the past four years.

In China, the economy has been relatively strong, with GDP growth of 7.3% in 2014, 7.0% in 2015, 6.7%

in 2016 and 6.9% in 2017. In terms of inflation, the CPI has remained relatively stable, with an average

rate of 2.0% over the past four years. In terms of unemployment, the rate has remained relatively

stable, with an average rate of 4.1% over the past four years.

Social

There have been a number of social changes over the past four years that have impacted Apple. In terms

of demographics, the population of the world has continued to grow, reaching 7.6 billion in 2017. The
population of the US has also continued to grow, reaching 324 million in 2017. The population of China

has also continued to grow, reaching 1.4 billion in 2017.

In terms of lifestyle changes, there has been a continued trend towards health and fitness, with more

people looking to adopt healthy lifestyles. This has been driven by a number of factors, including the

increasing awareness of the importance of health and fitness, as well as the increasing availability of

health and fitness products and services.

In terms of technology usage, there has been a continued trend towards the use of mobile devices, with

more people using smartphones and tablets. This has been driven by a number of factors, including the

increasing affordability of mobile devices, as well as the increasing availability of mobile apps and

services.

Political

There have been a number of political changes over the past four years that have impacted Apple. In the

US, Barack Obama was elected as the 44th President in 2008 and was re-elected in 2012. In 2016,

Donald Trump was elected as the 45th President. In China, Xi Jinping was elected as the President in

2013 and was re-elected in 2017.

In terms of trade, the US and China have been engaged in a number of trade disputes, with the US

imposing tariffs on Chinese imports and China retaliating with tariffs on US imports.

In terms of taxation, the US corporate tax rate was reduced from 35% to 21% in 2018. The Chinese

corporate tax rate was reduced from 25% to 20% in 2018.

In terms of regulation, the US introduced a number of new regulations, including the Affordable Care Act

and the Dodd-Frank Wall Street Reform and Consumer Protection Act. In China, a number of new

regulations were introduced, including the Anti-Unfair Competition Law and the Cybersecurity Law.

Porter Five Forces – Micro environment

In order to analyze the financial performance and position of Apple Inc., an analysis of the Porter Five

Forces will be conducted.

Competitive rivalry

The competitive rivalry within the technology industry is intense, with a large number of companies

competing for market share. Apple competes with a number of companies, including Samsung, Sony, LG,

HTC, Huawei, Xiaomi and Oppo.

The intensity of competitive rivalry is high due to a number of factors, including the large number of

companies competing for market share, the high level of innovation within the industry, the high level of

advertising and marketing expenditure, and the high level of customer switching costs.

Bargaining power of suppliers

The bargaining power of suppliers is high due to a number of factors, including the large number of

suppliers within the industry, the high level of differentiation among suppliers, the high level of

switching costs, and the low level of integration within the supply chain.

The high bargaining power of suppliers is a result of the fact that there are a large number of suppliers

within the industry, and the products they supply are highly differentiated. This differentiation gives

suppliers a high degree of power when negotiating prices with buyers.

Bargaining power of buyers

The bargaining power of buyers is high due to a number of factors, including the large number of buyers

within the industry, the high level of differentiation among products, the high level of switching costs,

and the low level of integration within the supply chain.

The high bargaining power of buyers is a result of the fact that there are a large number of buyers within

the industry, and the products they purchase are highly differentiated. This differentiation gives buyers a

high degree of power when negotiating prices with suppliers.

Threat of new entrants

The threat of new entrants is high due to a number of factors, including the high level of capital

requirements, the high level of technological expertise required, the high level of brand recognition and

customer loyalty, and the high level of government regulation.

The high threat of new entrants is a result of the fact that there are a large number of companies within

the industry, and the products they offer are highly differentiated. This differentiation makes it difficult

for new entrants to compete with existing companies.

Threat of substitutes

The threat of substitutes is low due to a number of factors, including the high level of customer loyalty,

the high level of brand recognition, the high level of customer switching costs, and the low level of price

sensitivity.

The low threat of substitutes is a result of the fact that there are a large number of companies within

the industry, and the products they offer are highly differentiated. This differentiation makes it difficult

for substitutes to compete with existing products.

Context (C) – Internal environment

In order to assess the financial performance and position of Apple Inc., an analysis of the company’s

organizational structure, culture and financial statements will be conducted.

Organizational structure

Apple Inc. is organized into four main divisions: AppleCare, Hardware Engineering, Marketing, and Sales.

AppleCare provides customer service and support for Apple products. Hardware Engineering develops

and designs new Apple products. Marketing creates and executes marketing campaigns for Apple

products. Sales manages Apple’s retail stores and online store.

Culture

The culture at Apple is one of innovation and creativity. The company is known for its secretive and

innovative culture, which has been integral to its success. Apple employees are passionate about their

work and are known for their dedication to the company.

Financial statements

The financial statements of Apple Inc. for the years ended September 29, 2018 and September 28, 2019

show that the company had total revenue of $265.6 billion and $260.2 billion, respectively. The

company had net income of $59.5 billion and $54.3 billion, respectively. The company had total assets of

$382.3 billion and $427.2 billion, respectively. The company had total liabilities of $103.6 billion and

$120.5 billion, respectively.

Industry analysis – Porter’s Five Forces

In order to analyze the financial performance and position of Apple Inc., an analysis of the Porter Five

Forces will be conducted.

Competitive rivalry
The competitive rivalry within the technology industry is intense, with a large number of companies

competing for market share. Apple competes with a number of companies, including Samsung, Sony, LG,

HTC, Huawei, Xiaomi and Oppo.

The intensity of competitive rivalry is high due to a number of factors, including the large number of

companies competing for market share, the high level of innovation within the industry, the high level of

advertising and marketing expenditure, and the high level of customer switching costs.

Bargaining power of suppliers

The bargaining power of suppliers is high due to a number of factors, including the large number of

suppliers within the industry, the high level of differentiation among suppliers, the high level of

switching costs, and the low level of integration within the supply chain.

The high bargaining power of suppliers is a result of the fact that there are a large number of suppliers

within the industry, and the products they supply are highly differentiated. This differentiation gives

suppliers a high degree of power when negotiating prices with buyers.

Bargaining power of buyers

The bargaining power of buyers is high due to a number of factors, including the large number of buyers

within the industry, the high level of differentiation among products, the high level of switching costs,

and the low level of integration within the supply chain.

The high bargaining power of buyers is a result of the fact that there are a large number of buyers within

the industry, and the products they purchase are highly differentiated. This differentiation gives buyers a

high degree of power when negotiating prices with suppliers.

Threat of new entrants

The threat of new entrants is high due to a number of factors, including the high level of capital

requirements, the high level of technological expertise required, the high level of brand recognition and

customer loyalty, and the high level of government regulation. The high threat of new entrants is a

result of the fact that there are a large number of companies within the industry, and the products they

offer are highly differentiated. This differentiation makes it difficult for new entrants to compete with

existing companies.

SWOT analysis

In order to analyze the financial performance and position of Apple Inc., a SWOT analysis will be

conducted.

Strengths

Apple Inc.’s strengths include its strong brand recognition, its large customer base, its high level of

customer loyalty, its strong financial position, and its innovative culture.

Weaknesses

Apple Inc.’s weaknesses include its reliance on the iPhone, its high level of debt, and its high price point.

Opportunities

Apple Inc.’s opportunities include the continued growth of the smartphone market, the continued

growth of the tablet market, the growth of the wearable device market, and the growth of the services

market.

Threats

Apple Inc.’s threats include the intensifying competitive rivalry within the technology industry, the

increasing bargaining power of suppliers, the increasing bargaining power of buyers, the threat of new

entrants, and the threat of substitutes.

Horizontal Analysis – Income Statement and the Balance Sheet

In order to analyze the financial performance and position of Apple Inc., a horizontal analysis of the

company’s income statement and balance sheet will be conducted.

Evaluation (E) – Analysis