Apple incorporation is an electronic company that has been able to brand its self as a manufacturer of high quality, reliable, stylish, and modern consumer electronic products. Its products range from mobile phones, iPads, laptops, cloud computing services such as iTunes, and music electronic products such as iPods. This internal assessment of Apple Inc. will show if the company is still competitive in the electronic industry.
The recent financial performance of the company shows that it has continued to enjoy high profits. For instance, its gross profit margin were 29.102% in 2014 and 30.857% in 2015. This ratio shows that the company has been performing excellently. On the same note, the company also had a high net profit margin in both 2015 and 2014. Generally, this trend shows that despite the high growth rate in its performance, Apple Inc. has been able to maintain minimal growth on its operating costs. In 2014, the company had a net profit margin of 21.6% while in 2015 they were 22.72% (United States Security and Exchange Commission).
Apple Inc. also had a high return on equity in both 2014 and 2015 financial year. In 2014, the company had a return on equity of 0.3577, while in 2015 it was 0.3301. In both these years, the company’s shareholders earned more than 30 cents for every dollar they invested in the company. This performance is attractive for businesses in the electronic consumable industry. Apple Inc. quick ratios indicate that the company can comfortably pay its short term and long term liability. In 2014, Apple Inc. had a quick ratio of 1.0796, and in 2015 it had 1.0468 (United States Security and Exchange Commission). Since these ratios are greater than 1, the company covers all its liabilities adequately. However, since these figures are near 1, which is the minimum level for a good quick ratio, the company should minimize its liabilities.
Apple Inc. had an inventory turnover of 86. 59 in 2014 and 99.5 in 2015. The growth rate in this turnover shows that Apple’s prospects of continuing to enjoy huge profits are good in the short run, which is good for the company. In 2014, Apple had a debt to equity ratio of 1.08798, and in 2015 this figure had shot up to 1.4296 (United States Security and Exchange Commission). Generally, this shows that Apple relies heavily on debt, which is bad for the company.
Apple Inc. has a hierarchically structured system that has decentralized decision-making units. The decentralization of decision-making has enabled the company to be creative and to develop new and creative products (Kotler and Keller 76-84). The Structure of the company is as shown below:
This organization structure is good for consumer technology companies since it enables them to inspire creativity among workers, and ensure there is fast decision-making process.
Improved Organizational Chart
In my new organizational structure, I will add the position of the Chief Innovation Officer to the company. This new division will focus on the innovation of new and more sophisticated consumer electronics. In order to achieve its innovation objectives, this department will develop new consumer electronics or improve on the existing electronics. This structure will ensure that the company allocates ample time and resources in the development of new products (Stimpson 43-51).
Market Position Map
A market position gives a comparison of the company’s products in relation to those of its competitors in terms of quality and price.
Apple Inc. consumer electronics have a lot of unique and stylish features when compared to those of its competitors. However, HTC electronics are Apple’s strongest competitor in terms of design. Since HTC electronics are cheaper than Apple, it poses a significant threat on the company’s current market. Google Phone, although less stylish than Apple, has more features than Apple. Therefore, it may threaten Apple’s market, especially among individuals who are more concerned with features than style. Finally, Samsung has less stylish electronics, as well as electronics that have fewer features. However, its products are more durable and have higher performance than those from Apple Inc. Therefore, the company poses a serious threat to Apple’s current market, especially among consumers who simply want a functional phone, and are less concerned with style and features.
Marketing Strategy of Apple
Apple markets their phones as been innovative and having the latest technology. In order to portray this trend, Apple regularly introduces a new phone as its flagship carrier every year. Generally, this phone is usually made using the latest technology. Apple products are also marketed to portray a high-status quo of the owner. In fact, that is the reason why Apple phones are more expensive than most of their competitors. As a result, users of this phone are perceived as being innovative and aware of changes in technology. Finally, Apple phones are made in a sleek but simple design. Generally, this style of marketing enables these phones to stand out as being simple and functional.
On the contrary, Samsung phone are marketed as affordable yet trendy. In order to achieve this goal, the company normally develops a new brand of iPhone every year, which is normally cheaper than Apple phones (Apple and Samsung). These developments enable individuals to have an alternative for Apple products. In addition, the company uses an Android operating platform, which enables individuals to customize their phone. This enables Samsung to market their phones as being flexible. Samsung also markets their phones as been reliable and able to meet various needs of the customer.
Firms Location: Value Chain Analysis
In terms of procurement and development, the company’s electronics are manufactured in China. Accordingly, most of its suppliers are also located in China. Most of the research and development of the company are done in the US. Further, most of its high-level management are from the US. However, its low-level employees who are in its factories in China are foreigners (Apple, 2016). Generally, this is aimed at maximizing on the affordable labor in China. As for infrastructure, Apple phone stores are mostly located in the US, major cities in Europe, such as London, Munich, Paris, Hong Kong, Beijing, and Tokyo. However, its main manufacturing plant is in China. Given the rise in the cost of labor in China, the company’s overall manufacturing and operational costs may increase in future.
The company’s website is designed in a modern manner to portray its image of innovativeness and creativity. Basically, this design is easy to use. In addition, it is simple with clear directions on how to find various issues that an individual might be looking for. Generally, rival firms such as Samsung and HTC have developed an almost similar website, which is easy to use (HTC and Samsung). Moreover, they also have clear directions among its customers on various issues they may be looking searching.
Apples Firm Analysis
The firm will continue being profitable in the short run as indicated by its profitability ratios. However, in the long term, the company needs to change its competition strategy. To begin with, there have been complaints on its innovativeness, with some individuals saying that it has not developed significant changes in its recent phones. Further, the emergence of cheap but high-quality consumer electronic products is a major threat for the company. Moreover, the increased operational cost in China, due to increased cost of labor will reduce its profits. Finally, its court cases on tax charges may tarnish the company’s image in the long term.
Strengths and Weaknesses of Apple
|Stylish Design||Its designs can be modified or improved by rival companies.|
|High-quality products||Costly electronic products which make them unaffordable to most consumers.|
|Easy to use||Use of Apple IOS makes them impossible to customize into various customers tastes.|
|Presence of warranty and guarantee||Some of its phones have been faulty, such iPhone 7 touch system|
|Strong and respected brand||The company’s brand is now seen as show of status quo rather than quality, due to failure in performance of its products.|
|High profitability||The increased manufacturing costs may reduce its long-term profits.|
|Diversification of its products||It is only located in one industry, it should venture into other industries such as construction or automobile, like Samsung to spread risk.|
|Use of lock-in system, such as iTunes to make more income||The company’s lock-in system makes the phone unattractive since individuals have to buy most of its applications. On the contrary, android OS enables individuals to customize their products at no extra fee.|
|Innovation and creativity, in fact, it was the pioneer of touchscreen phones.||The company’s innovativeness has reduced in recent times since most of its new products are almost similar in terms of technology with their old products (Leary and Hill).|
|Non-bureaucratic management which ensures quick decision-making process||The company does not have a department dedicated to research and innovation. It should develop this department in order to ensure that it remains being innovative.|
|Key Internal Factors:||Weight:||Rating:||Weighted Score:|
|Market leadership for a range of products and services||0.05||3||0.15|
|Financial strength ( Cash flow from operations $77 Million)||0.05||3||0.15|
|Sophisticated supply-chain infrastructure||0.025||2||0.05|
|High profit margin (Revenue $567 Million)||0.05||3||0.15|
|Marketing and advertising capabilities||0.025||1||0.025|
|Amazing software and OS||0.05||1||0.05|
|Policy of exclusivity||0.1||4||0.4|
|Pricing strategy (High price- 16GB iPhone 6 costs $649, the 64GB handset costs $749 and 128GB costs as much as $849)||0.1||3||0.3|
|Not shareholder-friendly (Abused option granting and paying dividends)||0.0285||4||0.114|
|Restrictions on the phone||0.0285||1||0.0285|
|Occasional technical issues related to product functionality||0.0285||2||0.057|
|Incompatibility of Apple products and services with other products and services||0.0285||1||0.0285|
|Narrow product range||0.0285||3||0.0855|
|No major improvements in latest product versions||0.1||4||0.4|
|Patent infringement lawsuits
Internal Factor Evaluation Matrix
|Key Internal Factors:||Weight:||Rating:||Weighted Score:|
|Investments in research and development – on track to spend 10 Billion in 2016||0.04||4||0.16|
|Formation of strategic partnerships||0.1||4||0.4|
|Increasing compatibility of products||0.04||1||0.04|
|Continued technological advancement||0.0333||4||0.1332|
|Accessories market growth||0.04||2||0.08|
|Strong growth of mobile market||0.04||3||0.12|
|High demand of iPad mini and iPhone 6S||0.0333||3||0.0999|
|Rising demand for cloud services||0.04||4||0.16|
|Lack of market share (cloud infrastructure)||0.0666||4||0.2664|
|Lack of china market share growth – growth slumping to just 14% year over year||0.0375||4||0.15|
|Threat of low cost – highly efficient phone manufacturers in Asia – Samsung leading in India, only 20% share in china||0.0666||3||0.1998|
|Image Issues – 14.5$ billion owed for offshore tax evasion||0.05||2||0.1|
|Decreasing upgrade/replacement rates – forecasts predict upgrade rates down from low 30%’s to the mid 20%’s 2016-2017||0.0375||2||0.075|
|Facebook Chatbot – could reduce App Store rev.||0.0375||2||0.075|
|Loss of Steve Job’s innovative contribution||0.05||1||0.05|
|Rising labor costs in Asia||0.0666||3||0.1998|
|Increasing cyber security threats||0.0375||1||0.0375|
|New competitor startups could steal market share||0.05||2||0.1|
The internal factor evaluation matrix (IFEM) indicates that although Apple Inc. is currently enjoying a huge market share, its days of glory may be ending. To begin with, emerging competitor in some of Apple’s major market such as China are slowly penetrating into markets that are owned by Apple. In addition, manufacturers of high quality, affordable and recognized brands such as Apple already have a high presence in markets such as India, which Apple would love to have a share. Worse still, the rising labor costs in China have led to the increase in the cost of producing Apple products. Nonetheless, Apple has various opportunities such as an increase in demand for iPhone 6S and cloud services, which it can use to retain its market share in future. However since competition is now stronger than before, the company must constantly innovate and learn the behaviors of consumers in the consumer electronics industry.
Apple. Apple Retail Stores, United States. 2016. Web.
HTC. Smartphones. 2016. Web.
Kotler, P., and Keller, K. Marketing Management (15th Ed.). Upper Saddle River, NJ: Pearson Publishers. 2015. Print.
Leary, K., and Hill, S. Twelve iPhone 7 Problems and the Solutions you Need. 2016. Web.
Samsung. Samsung. 2016. Web.
Stimpson, P., and Smith, A. Business Management for the IB Diploma Coursebook (2nd Ed.). Cambridge, UK: Cambridge University Press. 2016. Print.
United States Security and Exchange Commission. Apple Inc. Form 10-K. For the Fiscal Year Ended September 26, 2015. 001-36743. Washington, DC: Security and Exchange Commission, 2015. Web.