De La Salle University

Ramon V. del Rosario

College of Business

Apple.com

In Partial Fulfillment of the

Course Requirements for

ACCCOB3 K33
Term 1, AY 2023-2024

Submitted by:
BELLOSILLO, Dianne Althea A.
ESCARDA, Ivan Eric D.
NAGUIAT, Arianna Camille Q.
QUINTOS, Francesca Marie A.
SANTOS, Reshawn Kimi C.

Submitted to:
Mary Josephine Quitoriano

Submitted on:
September 25, 2023
 TABLE OF CONTENTS

I. Company Background 3
II. Apple’s Key Strategic Pillars for Market Success 3
III. Apple as a Manufacturer 4
IV. Apple’s Cost Objects 5
V. Apple’s Production Expenses 6
VI. Business risks faced by Apple Company 7
VII. Conclusion and Recommendation 9
VIII. References 10
IX. Peer Evaluation 12
 I. Company Background

According to the article by Richardson (2023), Apple Inc., previously known as Apple
Computer Inc., began due to the collaboration between Steve Jobs and Steve Wozniak on April
1, 1976, due to similar interests. The company was initially established to develop personal and
user-friendly computers that are accessible to individuals in their personal homes or offices.
Their first-ever breakthrough in the computer industry was the release of Apple II, wherein they
generated countless sales, making them the first company that was highly successful in
producing personal computers. As the years progressed, the company expanded its focus on
other modes of technology and began manufacturing its own software, tablets, smartphones,
smartwatches, and many more, which allowed its name, Apple, to be recognized as one of the
world’s most well-known brands.

II. Apple’s Key Strategic Pillars for Market Success

Throughout its history, Apple Inc. has employed a diverse set of strategies to ensure
success in the marketplace. However, relying solely on product excellence is not a viable
strategy, as there are cost-effective alternatives in the market. This is epitomized by the "Apple
Tax," reflecting the company's high-profit margins relative to its competitors. Apple also lags
behind in offering features like on-screen fingerprints and touchscreen laptops, which are
commonplace in other brands. (Ibrahim, 2022)

It would lead to Apple Inc.’s doom if they relied on product excellence alone, hence their
efforts in marketing. Apple marketed and sold its products at a premium, which was justified by
the design, image, and, ultimately, the status symbol brought by having an Apple or, as some
would call it, an “I-device.” Apple’s approach to marketing is strongly supported by an
understanding of consumer behavior and the environment, both of which are codependent with
each other. The “image” that Apple put on itself allowed it to cultivate a strong sense of brand
loyalty among its consumers. As well as their locked-in ecosystem wherein it would be difficult
for a consumer to purchase other products outside of Apple since they are already “too deep”
within Apple’s ecosystem. (Zoeller, 2023). Another factor that drives Apple’s marketing involves
its consumers, mainly through the “clout” or the status symbol of owning an Apple device. This
is followed by the idea that you are missing out when you don’t own an iPhone, creating a strong
sense that you should own any of their devices to maintain social inclusion and cultural
relevance. (Bloomberg, 2011)

Aside from product excellence and marketing, customer intimacy also allowed Apple to
hold onto its consumers indefinitely. With a very hands-on customer service and a user-friendly
environment within their ecosystem–a general idea of users not wanting to delve into other brand
ecosystems supported by their satisfactory experience in using their products arose. It is a
common sight to see a person using AirPods and an Apple watch to go with their iPhones,
MacBooks, and iPads. This is because Apple designed an ecosystem where each device has a
relationship with each other, promoting increased convenience and productivity (Reddy, 2021).

In hindsight, Apple’s comprehensive strategy, which includes product excellence,

marketing tactics, and a focus on customer intimacy, has not only enabled the company to thrive
and dominate the market but also to cultivate a loyal and steady customer base. This approach
caters to different facets of consumer behavior and environment, ultimately ensuring Apple’s
sustained success.

III. Apple as a Manufacturer

Apple is considered one of the most popular brands, producing various kinds of
technology. Aside from smartphones, tablets, laptops, and more, this provides evidence of being
deemed a manufacturer. To further support this statement, Form 10-K provided evidence that
says so. First, the word “manufacture” or “manufactures' consistently appeared within 10-K.
Speaking straight to the point, Apple has mentioned their manufacturing process, some of these
mentioned “manufacturing” in the company are as follows: Apple’s 10K directly states that “The
Company designs, manufactures and markets smartphones, personal computers, tablets,
wearables, and accessories, and sells a variety of related services. The Company’s fiscal year is
the 52- or 53-week period that ends on the last Saturday of September.” Apple also states where
their hardware has been manufactured “Substantially all of the Company’s hardware products are
manufactured by outsourcing partners that are located primarily in Asia, with some Mac
computers manufactured in the U.S. and Ireland.” They even mention the threats presented to
Apple’s manufacturing productivity during the COVID-19 pandemic “During the course of the
pandemic, certain of the Company’s component suppliers and manufacturing and logistical
service providers have experienced disruptions, resulting in supply shortages that affected sales
worldwide, and similar disruptions could occur in the future. Public safety measures can also
adversely impact consumer demand for the Company’s products and services in affected areas”.
As mentioned in Form 10-K, the COVID-19 pandemic and even global climate change are
factors that can easily disrupt manufacturers and the manufacturing process of Apple.

On the other hand, 10-K mentions the relation of outsourcing partners that can assist in
the final assemblies or subassemblies of the actual Apple products. Lastly, Apple mentions their
company’s purchase obligations, manufacturing being one of them “The Company had
manufacturing purchase obligations of $71.1 billion, with $68.4 billion payable within 12
months. The Company’s manufacturing purchase obligations are primarily noncancelable.” Thus,
all the statements mentioned in the given article prove and are pieces of evidence that Apple is
considered a manufacturer.

IV. Apple’s Cost Objects

The two unmistakable cost objects inside Apple Inc. operations will assist with showing
the ideas of immediate and backhanded costs. The primary expense object relates to iPhone
creation. Here, direct expenses incorporate costs straightforwardly attached to the creation cycle,
for example, the expense of natural substances, similar to the iPhone's glass screen. Then again,
circuitous expenses in a roundabout way add to creation, for example, the compensations of
value control reviewers at the iPhone fabricating office.
 The subsequent expense object connects with Apple's retail locations. For this situation,
direct expenses incorporate the pay rates and commissions of sales reps working in retail
locations since these costs are straightforwardly connected with the deal's capability. On the
other hand, backhanded costs for retail locations envelop costs like utilities, power, and warming
for the different retail location areas. These roundabout costs support the general situation of the
retail locations however are not straightforwardly attached to the business workforce's endeavors.
Understanding the qualification among immediate and circuitous expenses is urgent for cost
distribution and the executives inside a complicated association like Apple.

V. Apple’s Production Expenses

Apple incurs numerous expenses that are essential in conducting their business to meet
the demands of their consumers, especially in the production of multiple stocks of their products.
These expenses target maintaining their current operations, improving their products, developing
new products, and customer support. Henceforth, Apple incurs considerable expenses toward its
business operations, such as the introduction of new products and services, which causes an
impact on its cost of sales and operating expenses. To further elaborate, the cost of sales pertains
to the costs directly attributed to producing goods and services sold. In contrast, operating
expenses pertain to the everyday expenses incurred during regular business operations.
Furthermore, their expenses comprise their product and period costs, especially in their daily
operations. Given that product costs are incurred while producing the actual goods and services
they intend to sell. In contrast, period costs are expenses incurred during normal business
operations, and it is not directly tied to the production of goods and services; hence, it is the
opposite of product costs.

Apple’s 2022 Annual Report shows that its operating expenses, which are classified
under period costs, consist of Research and Development (R&D) and Selling, General, and
Administrative (SG&A) expenses. R&D for the year 2022 was comprised of engineering
program costs, whereas SG&A contained advertising and professional services. Moreover, it was
further added that headcount-related expenses were included in Apple’s R&D and SG&A
expenses. To further elaborate on the headcount-related expenses, these pertain to the employee’s
compensation, such as their salaries or benefits (CSIMarket, n.d.). As previously stated, these
accounts are not directly tied to producing a certain good expected to generate future economic
benefits beyond the current accounting period. Rather, these accounts are used to generate
revenue during the current accounting period.

VI. Business risks faced by Apple Company

Given that stakeholders highly expect stability and growth from companies, Apple’s
present risks threaten the ability to satisfy stakeholders’ expectations.

First, Apple Company faces the business risk of a possible slowdown and fluctuation in
the penetration within the smartphone market. Given that Apple offers high-quality technology
that is highly priced, these products can be deemed as a product that is not purchased every day
or regularly. Though it may be purchased every certain set of years, Apple can face a significant
decline at times wherein there is low demand for its products. According to BBC News (2023),
sales significantly declined by the end of 2022 due to increased cost of living and the economic
slowdown. Due to the effects of the war in Ukraine and the long-lasting impacts of the pandemic,
the decline of Apple’s profits resulted in a significant loss of 13% or the equivalent of $30B
(BBC News, 2023).

On the other hand, stimulating consistent consumer demand is difficult as technology

vastly evolves and changes. According to Wu and Mochizuki (2022) from Bloomberg, Apple has
even resulted in backing off the company’s plans due to a failed anticipated surge of demand.
With that being said, a change in demand for Apple’s products can affect the company’s annual
revenue and growth. Wilowski (2023) mentioned that “iPhone sales likely fell 3.2%
year-over-year to just under $49 billion, with iPad sales estimated to be down 12.5% to $6.69
billion.” The aforementioned statistics present the losses Apple will experience as sales
significantly drop. Though Apple can be considered a financially profitable and popular
company, the possibility of experiencing further slowdowns is highly likely.

Second, Apple has to endure the risks and long-term effects of the COVID-19 pandemic.
Given that the pandemic has drastically impacted the economic conditions and the market, Apple
must consistently bounce back from major losses and fluctuations. Apple must exert effort to
form a resilient supply chain. Currently, Apple is restructuring and de-risking its supply chains
by sourcing out different sources of components from all over the world (Phillips, 2023).
Although this may seem promising for the company, Apple must take greater measures to ensure
that future circumstances will not affect its supply chains. According to Hippold (2020),
nearshoring is one of the main strategies for supply chain resistance. Despite this being more
expensive than international sourcing, this will ensure the company has access to regional or
local suppliers and ultimately has control over inventory. This allows Apple to avoid supply
chain disruptions or delays in transporting raw materials/finished goods. By doing so, Apple can
anticipate and withstand the disruptions caused by future economic downfalls or crises.

On the other hand, Apple can venture into expanding into producing new products or
refining their pre-existing technology. Apple has the ability to partner up with sustainable
initiatives to attract consumers who dedicate themselves to caring for the environment.
Moreover, Apple can expand its technology and relate these products to health and wellness.
Products such as the pre-existing Apple watch can be products that can attract consumers who
are longing for technology that could help individuals monitor their everyday decisions that
affect one’s health.

Ultimately, stakeholders expect companies to be profitable and to have outcomes that are
beneficial to them. Thus, if Apple wants to remain appealing and satisfy stakeholders’
expectations, the company must learn to be prepared for any existing or profoundly new risks.
VII. Conclusion and Recommendation

As aforementioned above, Apple can endure the long-term effects of the COVID-19
pandemic and remain appealing to stakeholders by forming a resilient supply chain and
expanding its product list. These given recommendations are deemed relevant in assisting Apple
in achieving stability after the pandemic and experiencing growth in revenue for the company. To
be more specific, Apple should sign more contracts with preferably nearer factories such as
factories within the United States or any other country near it like Mexico or Brazil. This is in
order to de-risk their supply chains by having options lest they face another event such as
COVID-19, which imposed restrictions therefore disrupting Apple’s supply chain. Apart from
that, Apple needs to diversify its product line to include new categories of consumer electronics
and software services. Just adding micro improvements such as a better camera relative to the
preceding iPhone, a different charging port, and a new action button for the iPhone 15 does not
constitute diversifying their product line. Instead, Apple should either come up with an entirely
new piece of device to go along with their ecosystem or create a new software that will transform
their user’s experience for the better.

In doing so, Apple can measure the recommendation's success when the company’s
supply chain has improved and regulated. This can be seen when local and international
suppliers experience little to no miscommunications and errors within the supply chain. On the
other hand, when Apple decides to expand its product list, success can be measured if this
garners consumer attraction and expands the company’s brand identity. Therefore, Apple will not
only be seen as a company that offers technological devices but also as a company that utilizes
its platform for the greater good.

To consolidate, these recommendations are attainable as Apple has already been

applying these strategies. It is a matter of the company refining, improving, and branching out
their company’s supply chain and product list.
VIII. References

Apple Inc. (2022). FORM 10-K 2022. UNITED STATES SECURITIES AND EXCHANGE
COMMISSION.
https://s2.q4cdn.com/470004039/files/doc_financials/2022/q4/_10-K-2022-(As-Filed).pd
f

BBC News. (2023, February 3). Apple sales in biggest fall since 2019. BBC News.
https://www.bbc.com/news/business-64506940
Bloomberg. (2011, September 26). How Apple played it smart with the iPhone exclusivity -
Times of India. The Times of India.
https://timesofindia.indiatimes.com/it-services/how-apple-played-it-smart-with-the-iphon
e-exclusivity/articleshow/10129225.cms

CSIMarket. (n.d.). Headcount-Related Expense. CSIMarket.

https://csimarket.com/glossary/term_Headcount_Related_Expense.html#:~:text=Headcou
nt%2DRelated%20Expense%20is%20the,expenses%20related%20to%20employee%20c
ompensation.

Currie, A. (2023). The real cost of an iPhone. Population Matters.

https://populationmatters.org/news/2023/03/the-real-cost-of-an-iphone/

How Apple is restructuring its supply chain to reduce risk. (2023, January 9). Supply
Management.
https://www.cips.org/supply-management/news/2023/january/how-apple-is-restructuring-
its-supply-chain-to-reduce-risk/
Ibrahim, H. (2022, September 17). 7 reasons to not buy Apple products. MUO.
https://www.makeuseof.com/reasons-to-not-buy-apple-products/

Reddy, R. (2021, September 23). The Apple ecosystem explained. Medium.

https://medium.com/macoclock/the-apple-ecosystem-explained-c9dd6d00ec95

Richardson, A. (2023). The Founding of Apple Computer, Inc. Library of Congress.

https://guides.loc.gov/this-month-in-business-history/april/apple-computer-founded
Wilowski, M. (2023, May 2). Apple Earnings Likely Fell About 10% As iPad, Mac Sales Drag.
Investopedia.
https://www.investopedia.com/apple-to-report-lower-revenue-earnings-on-falling-sales-of
-flagship-products-7487929#:~:text=Demand%20for%20the%20company%E2%80%99s
%20flagship%20products%2C%20including%20iPhones%2C,estimated%20to%20be%2
0down%2012.5%25%20to%20%246.69%20billion.
Wu, D., & Mochizuki, T. (2022, September 28). Apple ditches iPhone 14 Pro production
increase after demand falters (AAPL). Bloomberg.com.
https://www.bloomberg.com/news/articles/2022-09-28/apple-iphone-14-sales-not-strong-
enough-to-trigger-production-boost#xj4y7vzkg
Zoeller, S. (2023, January 3). How Apple uses consumer behavior marketing to win. Stephen
Zoeller's Marketing Blog.
https://www.stephenzoeller.com/apple-consumer-behavior-marketing/

6 Strategies for a more resilient Supply chain. (n.d.). Gartner.

https://www.gartner.com/smarterwithgartner/6-strategies-for-a-more-resilient-supply-chai
n
IX. Peer Evaluation

EVALUATOR
ID No. Student Name AVE. BELLOSILLO ESCARDO NAGUIAT QUINTOS SANTOS
BELLOSILLO,
Dianne Althea
1 11913002 A. 100% - 100 100 100 100
ESCARDA,
2 12204935 Ivan Eric D. 100% 100 - 100 100 100
NAGUIAT,
Arianna Camille
3 12244643 Q. 100% 100 100 - 100 100
QUINTOS,
Francesca
4 12209220 Marie A. 100% 100 100 100 - 100
SANTOS,
Reshawn Kimi
5 12246670 C. 100% 100 100 100 100 -