You are on page 1of 8

Running Head: APPLE INC.

BUSINESS ANALYSIS

Apple Inc. Business Analysis MGT/521 January 23, 2012

Apple Inc. Business Analysis Arguably, Apple Incorporated is the leader in the invention of the most innovated products in information technology right now. It has been debated that Apple was founded in a

APPLE INC. BUSINESS ANALYSIS

garage by Stephen Gary Wozniak, Steven Paul Jobs and Ronald Gerald Wayne in 1976. It started out as a computer shop and now Apple is a multinational corporation which produces and sells consumer electronics, computer softwares and personal computers (Linzmayer, 1999). It is famous for its products the iPod, iPhone, iPad and its computers. Apple got its famous logo of a black and white apple with a byte taken of when Steven Paul Jobs realized that original logo was too complicated (Linzmayer, 1999). Apple runs more than 300 retail stores around the globe along with an online store (Spence, 2010). Apple Incorporation has also surpassed Microsoft to become the worlds most valuable technology company. Much of its success can be dedicated to sales of Apples smart phone. Apple is valued at $222.12 billion by Wall Street (Spence, 2010). In the year 2010 Apple Incorporation earned record revenue of $65.23 billion with net profit of 14.01 billion. Its major revenue was earned from sale of iPhone which showed an increase of 91 percent from the past year. Apple employs 49,000 employees worldwide. Apples current share price is an average of $346.750 (Home: Bloomberg). It can be analyzed that apple has taken over Microsoft as world leader in innovation and technology. All of its products are showing prospects. The sale of its major revenue earner iPhone increased by 91 percent, personal computers by 27 percent and the company sold 4.19 million iPads in the year 2010 (Home: Apple). It has also been analyzed that all major mobile companies which includes Nokia, Samsung, LG and Sony Ericsson has lost market share because of ever increasing smart phone demand. People are inclining more towards Apples iPhone and iPad and Nokia, Samsung, LG and Sony Ericsson are all losing sales. LG lost it 6.6 percent market share, while Nokia and Samsung slipped down to 29 percent and 19 percent respectively. With its iPhone and iPad Apple has captured major market share around the globe.

APPLE INC. BUSINESS ANALYSIS

Majority of the sales have taken place in developed regions and demand is growing in developing countries (Virki, 2011). Researchers have also confirmed that Apple has taken over Nokia as worlds largest vendor of mobile phones by revenue. In the latest results it has been identified that Apple earned $11.9 billion in the first quarter of year 2011 while Nokia earned $9.4 billion revenue from sale of handsets. The mobile phone users are really impressed by hardware, software and services of Apple which has proven to be really profitable for Apple. It is expected that more and more mobile phone users will want to experience Apples iPhone and iPad (Grundberg, 2011). Apple has also allowed other software developer earn a lot of revenue by its online software services, where Apple sells iPhone applications and music for its iPod owners on its website. The consumers who want to make the most of their iPhones choose from 250,000 applications and more than 6.5 billion downloads Apple helps software developers earn money via its website. This strategy allows Apple to encourage users to keep using their products (Home: Apple). Apples iPad is giving personal computer developing companies a great concern. It is argued that PC owners stick to the same PCs for a long time while making little up gradation after a year or two which is cutting down revenue for these companies. Moreover iPads are fast convenient and have lots of interesting applications as compared to a personal computer. The importance of a personal computer cannot be denied but with people holding on to their machines for longer and developments in smart phone are raising concerns for managements of these companies as well as their investors (Taulli, 2011).

APPLE INC. BUSINESS ANALYSIS

With favoring prospects its difficult to analyze that Apple would have any weaknesses. But there are certain things which the Apple management should consider. With huge demand Apple is failing to cope up with production. Moreover Apple is releasing the upgrade versions so fast it is starting a trend in Apple consumers to actually wait for the next release than to buy existing product in market. For instance Apple revealed that it was only able to ship 4.69 million iPads against expected numbers of 6 billion (Yarow, 2011). With all other Apple products on the rise it has been analyzed that its previous hit the iPod is on a decline with sales declining rapidly each year. In the last year it was estimated that iPod sales decline by 11 percent and it can be clearly analyzed that when other devices have so much to offer the concept of iPod would go further downward (James, 2011). The problem with most Apple products is that one has to plug in the device to a PC to get music or application into the phone. This is an area where other companies are doing better than Apple. Moreover Apples social networks are weak as compared to social networks of other mobile phone companies. Apple has also come out with a TV which has great graphics but it fails to deliver in gaming experience (Frommer, 2011). An analyst firm has also evaluated that Apple Macintosh computers have suffered a 12.4 percent decline and people are inclining more towards cheap PCs. Its market share in PC supplying has come down to 7.6 percent. Because of recent recession Apple has lost a lot of its sales because consumers just fail to buy its computers. This has allowed other computer production companies to increase their market share at the expense of Apple and other PC giants (Gonsalves, 2009).

APPLE INC. BUSINESS ANALYSIS

Apple has majority of its retail stores in developed countries of the world. If it decides to expand its target to developing countries such as India or Pakistan where it can also acquire a major market share in smart phone devices where users still prefer Nokia and other companies. Moreover with each product adding to revenue in billions of dollars there is no shortage of investors for Apple Incorporation. In addition to these plus points Apple products that have matured and are now in declining phase are compensated by new products. Apple Incorporation is continuously involved in research and development costs. This allows Apple to come up with a new product which allows it to acquire a substantial market share and promises revenues in billions for significant period of time. Therefore people looking to invest for longer term will achieve greater returns than those who are willing to trade Apple shares for quick profit. Apple also continues to make more revenue from its software services. It has made a significant contribution to music industry with iTunes and iPhone and iPad users just cant seem to get enough out of their smart phone and are continuously downloading more applications which make their phone more efficient. With Apples success other companies have increased their efforts to compete with Apple. Apple faces stiff competition from IT Giants such as Microsoft and Google, mobile phone companies such as Nokia and Samsung and small PC manufacturers such as Acer. Apple faces intense competition with Google with its iPhone competing with Googles Android and Apples TV facing intense competition from Google TV which provides more features than Apple TV. Nokia and Microsoft are combining their efforts to introduce mobile phones with Windows as it operating system (Vilpponen, 2011). This move will crush Apples iPhone and iPad revenues in developing and developed countries where Windows is the main operating system among users.

APPLE INC. BUSINESS ANALYSIS

Apples goodwill is also threatened by increasing number of lawsuits other mobile phone companies are filing against it on the basis of copyright infringement. If Apple loses any of these legal disputes the penalty will be in billions which raises concerns for investors. Moreover Samsung is also a major supplier of chips to Apple. If it chooses to withdraw its supply Apple could lose revenue worth billions (Yang, 2011). Apples major stakeholders are its investors, suppliers, employees and customers. With its ever increasing revenues Apple Incorporation keeps its investors satisfied with a yearly average return of 34 percent and an impressive Return on Equity of 35.284 (Home: Bloomberg). Apple serves the interest of its employees by a sense of accomplishment. Apple employees know that they are part of worlds most adored technology which keeps them motivated. Moreover Apple offers competitive compensation and offers careers to its employees. Customers also remain satisfied with Apple. Apple lives up to its claim of repairs and services. Moreover Apple believes in getting it right the first time, therefore the devices hardly require any repairs. Apple requires suppliers who share Apples viewpoint of better world. They want to strike deals with their suppliers which provide Apples customers with better goods and services (Home: Apple). Despite of its high standards it has got into conflict with its major suppliers of chips, Samsung. Apple sued Samsung for copyright infringement for which the Korean company has counter sued Apple on intellectual property. This has dampened its relationship with Samsung to which Apple and if Samsung reacts it can result in loss of billions of dollars to Apple. Therefore Apple should be considerate to these issues (Yang, 2011). References: Home: Apple. (n.d.). Retrieved January 21, 2012, from Apple Inc.: http://www.apple.com/

APPLE INC. BUSINESS ANALYSIS

Home: Bloomberg. (n.d.). Retrieved January 21, 2012, from Bloomberg L.P.: http://www.bloomberg.com/apps/quote?ticker=AAPL:US Frommer, D. (2011, April 7). Home: CNN Tech. Retrieved January 21, 2012, from Cable News Network: http://www.cnn.com/2011/TECH/innovation/04/07/apple.weakness/ Gonsalves, A. (2009, July 16). Home: Information week. Retrieved January 21, 2012, from Information Week: http://www.informationweek.com/news/hardware/mac/218501023 Grundberg, S. (2011, April 29). Home: NASDAQ. Retrieved January 21, 2012, from NASDAQ: http://www.nasdaq.com/aspx/company-news story.aspx?storyid=201104210846DOWJONESDJONLINE000412 James. (2011, April 21). Home: Mobile Computing News. Retrieved January 21, 2012, from Mobile Computing News: http://www.mobile-computing-news.co.uk/industry news/11289/apple-ipod-is-officially-over-the-hill.html Linzmayer, O. W. (1999). denverpost.com. Retrieved January 21, 2012, from The Denver Post: http://extras.denverpost.com/books/chap0411h.htm Spence, N. (2010, August 7). Home: MacWorld. Retrieved January 21, 2012, from MacWorld : http://www.macworld.co.uk/digitallifestyle/news/index.cfm?olo=rss&NewsID=3234571 Taulli, T. (2011, April 14). Home: Investor Place. Retrieved January 21, 2012, from InvestorPlace Media, LLC.: http://www.investorplace.com/37224/its-official-apples ipad-is-killing-pcs/

APPLE INC. BUSINESS ANALYSIS

Vilpponen, A. (2011, April 29). Home: Artic Startup. Retrieved January 21, 2012, from ArcticStartup Ltd.: http://www.arcticstartup.com/2011/04/29/some-more-on-the-nokia microsoft-partnership Virki, T. (2011, April 29). Home: Reuters. Retrieved January 21, 2012, from Reuter: http://www.reuters.com/article/2011/04/29/handsets-idUSLDE73S00I20110429 Yang, J. (2011, April 22). Home: Bloomberg. Retrieved January 21, 2012, from BLOOMBERG L.P. : http://www.bloomberg.com/news/2011-04-22/samsung-sues-apple-on-patent infringement-claims-as-legal-dispute-deepens.html Yarow, J. (2011, April 20). Home: Business Insider. January 21, 2012, 2011, from Business Insider, Inc.: http://www.businessinsider.com/ipad-sales-weak-2011-4