Apple Inc. is a world-renowned company that deals in a variety of consumer technology devices. The company designs, manufactures, and sells cellphones, tablet computers, personal computers, and digital music players. Additionally, Apple deals in software, accessories, networking solutions, and third-party digital content. The company’s flagship products include “iPhone, iPad, Mac, iPod, Apple Watch, and Apple TV”. Among its consumer and professional software applications are “iOS, macOS, watchOS, tvOS, iCloud, and Apple Pay.” Apple sells digital content through it various online stores such as the iTunes store and the App Store. Since its incorporation in 1977, Apple has been a leader in technological innovation turning into one of the world’s most famous brands. Important contributions of Apple to the technology industry include introducing consumer-focused computers, touchscreen smartphones, graphic user interface, and popularizing the tablet computer.
The corporate headquarters of Apple is the newly-constructed Apple Park which is located in Cupertino, California. Besides its operations in the United States, Apple has a global presence through its operating segments. The geographical segments are “Americas, Europe, Greater China, Japan, and Rest of Asia Pacific.” As of 2018, Apple has 132,000 full-time employees with 80,000 of them based in the United States. The company’s CEO is Tim Cook. He assumed the position on August 24, 2011 after Steve Jobs resigned due to illness. Cook’s democratic leadership style has helped increase cooperation within the company hence fostering stability.
In today’s business world, firms are expected to show strong moral values and show economic, environmental, legal, ethical, and social responsibility. Initiatives regarding corporate social responsibility at Apple are under the purview of Lisa Jackson who is the Vice President of Environment, Policy, and Social Initiatives. Apple’s position on social responsibility is evident in supplier responsibility report. The statement is as follows: “Apple is committed to ensure the highest standards of social responsibility wherever our products are made. We insist that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes” (Klein). CSR initiatives by the company include supporting local communities, educating and empowering workers, enforcing a strict code of conduct for suppliers, and ensuring employee health and safety. In the 100 Best Corporate Citizens of 2018, Apple was ranked 90th
which is an improvement by two places as compared to the 2017 list (Sellers). Despite Apple’s attempts to build an ethical image, its global supply chain has been plagued with controversies regarding human rights and ethical issues. Supplier factories in China, for example, are constantly accused of poor working conditions and low pay.
Apple’s rise to the position of the biggest company in the world by market capitalization has been significantly influenced by globalized trade. Through strategic partnerships around the world, the company has created an intricate supply chain meant to maintain costs at a low level while producing large volumes of premium devices. Apple has used international trade to enrich millions around the world. While some politicians condemn unfair trade practices by a country like China, they fail to acknowledge the immense benefits the Americans and the American economy have derived from international trade by companies like Apple.
Apple has a hierarchical organizational structure which is spoke-and-wheel in nature. Tim Cook, who is at the center of the structure, is surrounded by senior vice presidents who report to him and handle various business functions. Apple’s board of directors includes “Arthur Levinson, Robert Iger, James Bell, Andrea Jung, Tim Cook, Ronald Sugar, Albert Gore Jr., and Susan Wagner” (Apple). The board members have roles in the company’s committees which are the Audit and Finance Committee, Compensation Committee, and the Nominating and Corporate Governance Committee. Apple, which was incorporated in 1977 and went public in 1980, has common stock valued at $40.2 billion and no preferred stock as of September 2018. Apple has tight control over its operations with all Apple stores being owned by the company. Therefore, the company has no franchises instead preferring direct control.
Apple’s uniqueness is attributable to the constant drive for innovation and creativity. Built in the image of Steve Jobs, the company has been associated with challenging the status quo. Apple changed the face of the personal computer, the smartphone look, and music distribution. By daring to think and be different, Apple has created an unbeatable brand. The company’s great design principles are also a point of distinction. Apple’s designs are often the indication of the direction of the world of technology. Designs such as ultra-thin laptops and the notch on smartphone screens have been adopted across the industry which illustrates Apple’s superiority.
Market Research
Industry analysis is an important tool when examining a company since it facilitates the understanding of a company’s position relative to other firms in the industry (Burns, Bush and Sinha 33). In this case, Porter’s 5 Forces Model will help analyze Apple’s position in the technology industry. Apple deals with consumer technology selling a wide range of products from smartphones to laptops. The level of competition in consumer technology is high since there are several major companies in direct competition with Apple. The companies referred to include Samsung, Hewlett-Packard, Google, and Amazon. In an industry shaped by frequent advancements, all players invest heavily on research and development. The highly competitive nature of the industry is also influenced by low switching cost. A consumer can easily replace an iPhone with the latest Galaxy flagship from Samsung. Apple has dealt with the high competition levels through the continuous development of new and unique products in order to strengthen its market share.
Since the technology industry features the element of low switching cost buyers have a relatively strong bargaining power. The collective bargaining power of customers in the marketplace is a strong force because there is always a possibility Apple’s customers defecting in mass to its competitors. However, individual bargaining power of customers is low since the loss of one customer has no significant impact on the company’s revenue. Investment in research and development is Apple’s way of tackling the strong force of its customers’ collective bargaining power. By developing unique and premium products, Apple builds brand loyalty. The strategy is successful since the company has loyal fans who religiously purchase its products.
The threat of new entrants to an industry is a strong determinant for ultimate success. In the case of Apple, the threat of new entrants that could challenge its position is low. The inference is due to the high cost of establishing a company in the consumer technology industry and the high cost of establishing a world-renowned brand. Companies like Apple spend millions of dollars each year on research and development. An entrant would need a massive capital outlay to achieve this. Major players in the industry also have very strong brand recognition which is difficult to attain. As long as Apple continues to strengthen its competitive position through innovation and brand loyalty, it will be difficult for a new company to challenge its position.
Apple’s suppliers have weak bargaining power. This position is because the company has a high number of potential suppliers. In addition, electronic components for Apple’s devices are in high supply. Apple can switch from one supplier to another without incurring any significant cost. Also worth considering is that Apple is a major customer for the companies that supply its components. The suppliers would, therefore, not risk losing such a customer. The threat of consumers opting for substitute products is also low in Apple’s case. The company’s products are superior to potential substitutes hence limiting their threat.
Apple is a premium brand which means that most of its products attract a premium price tag. The company’s products therefore target individuals from the middle and upper social classes who have enough disposable income to purchase its products. Apple’s best customers are hardcore loyalists who have previously owned the company’s products. Besides loyalists, the company also targets individuals looking to switch to the Apple ecosystem. Benefits sought by the company’s target market include a sense of achievement and belonging, advanced features, and speed of service.
Regulatory risks are a major concern in the technology industry. Apple has suffered considerably, both locally and abroad, due to various regulations. Working conditions are an important aspect of the regulatory environment. The company’s suppliers have been accused of human rights violations and overworking workers to meet Apple’s quotas. Strict labor regulations, in this context, would affect Apples business since it would change its cost structure leading to higher pricing of its products. Privacy regulation is also an important consideration for Apple. The company has recently been involved in confrontations with the government for its refusal to release data for customers during criminal investigations. The promise of privacy attracts many individuals to the company’s products. However, a regulation to allow access to customer data would destroy this reputation.
Management Overview
Apple’s executive leadership consists of CEO Tim Cook, senior vice presidents, and the chief operating officer. The senior vice presidents include the following: “Katherine Adams, Senior Vice President and General Counsel; Angela Ahrendts, Senior Vice President Retail; Eddy Cue, Senior Vice President Internet Software and Services; Craig Federighi, Senior Vice President Software Engineering; Luca Maestri, Senior Vice President and Chief Financial Officer; Dan Riccio, Senior Vice President Hardware Engineering; Phillip W. Schiller, Senior Vice President Worldwide Marketing; Johny Srouji, Senior Vice President Hardware Technologies; Jonathan Ive, Chief Design Officer, and Jeff Williams, Chief Operating Officer.” The company’s vice presidents include the following: “Steve Dowling, Vice President Communications; John Giannandrea, Chief of Machine Learning and AI Strategy; Lisa Jackson, Vice President Environment, Policy and Social Initiatives; Isabel Ge Mahe, Vice President and Managing Director of Greater China; Tor Myhren, Vice President Marketing Communications; and Deirdre O’Brien, Vice President People” (Apple).
Figure 1: Apple Organizational Chart. Retrieved from https://research-methodology.net/apple-organizational-structure-a-hierarchical-structure-that-may-change-in-near-future/
Apple’s organizational culture revolves around creativity and innovation. The company’s leadership encourages a mindset that challenges conventions. Another characteristic of Apple’s culture is top-notch excellence. The company recognizes and rewards excellence within the workforce. This culture has influenced the search for perfection which is illustrated by the company’s design process. Secrecy is another important feature of Apple’s culture. The approach ensures that does not lose proprietary information that is key to its competitive advantage.
Apple’s current mission statement is as follows: “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad” (Rowland). The statement focuses on the company’s outputs. The emphasis on online services reiterates the company’s direction since its early years. Apple’s vision statement, which was developed under Tim Cook’s leadership, is as follows: “We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well” (Rowland). The vision highlights the company’s direction with a particular emphasis on strategies such as vertical integration, specification, and a focus on excellence. Apple perceives itself as a market leader and the vision statements is an indication of its intention to maintain the position.
The foremost strategy of Apple’s human resource function is to attract and maintain the best employees. The company therefore employs a variety of strategies to achieve this aim. Apple is aware that human capital is necessary if the firm is to remain competitive in its industry. The company optimizes the efforts of its employees by investing in their skills. Apple’s recruitment and selection processes are key to its success. The process involves three to four rounds of interviews after a strict scrutiny of the candidates’ resumes. The long process ensures that Apple gets the right person. Apple is obsessed with creativity and innovation so its recruitment and selection process includes unorthodox questions meant to test the candidate’s initiative. Apple values diversity and it incorporates this belief in human resource management. The company has increased hires from underrepresented minorities such as women, the youth, and minority ethnicities. Diverse perspectives brought about by such initiatives foster creativity and innovation. Apples uses a variety of strategies to motivate its employees. The company offers great salaries and boasts incredible workplaces. Since the basic needs of employees are met, they are motivated to provide quality work. Apple extrinsic rewards such as recognition bonuses, product discounts, and vacations. By motivating employees, Apple ensures that they provide work of the highest quality since all their needs are fulfilled.
Product and/or Service Lines
Apple offers a variety of products and services targeting the consumer market. The company’s product lines are as follows: Mac desktops and laptops, iPad, iPhone, Apple Watch, the Entertainment product family- Apple TV, HomePod and iPod touch, and Accessories. The company also offers Apple Software which includes operating systems for its hardware, utility software, entertainment software, cloud services, and digital content. The product line today is relatively complex as the company looks to cater to the needs of its diverse customers. An example is the most recent iPhone launch which saw Tim Cook introduce three iterations of the iPhone X namely iPhone XR, iPhone XS, and iPhone XS Max. The complex line-up has caused confusion even among brand loyalists and the state has been reflected by disappointing sales.
Marketing
Apple’s product mix includes goods and services that revolve around information technology. The company’s main product lines include the following: “Mac, iPhone, iPad, iPod, Apple Watch, Apple TV, Digital content, Software, Accessories, and Cloud Services.” The product line illustrates that the company operates in consumer electronics. All products are easily recognizable due to the iconic Apple logo which is standard across all product lines. The product lines are the result of the product development growth strategy. It is also indicative of Apple’s efforts to diversify its business beyond the original computer technology business.
Apple avails its products to consumers through company-owned stores and third-party affiliates. The company’s distribution strategy includes the following places: Apple Store locations, Apple online store, authorized sellers, and mobile service provider companies. The company’s physical stores have proved popular due to the unique shopping experience. Online channels enable the company to market its products and services in the international market. The use of both online and offline distribution channels has maximized the company’s reach.
Apple adopts different strategies when promoting its products. Tactics used include advertising, sales promotion, personal selling, and public relations. The company advertises its products in digital platforms such as technology news websites. Personal selling involves employees of Apple Stores providing information on products to prospective buyers in order to convince them to make a purchase. Sales promotion, in this case, involves offering discounts for old models when bundled with newer, premium products. Apple’s pricing strategy revolves around the company offering high-quality, premium products. As a result, Apple products are high-priced. The company also uses freemium pricing especially with its software offerings. A product could be free but to access advanced features the customer is required to pay a subscription fee.
Finance and Accounting
Figure 2: Consolidated Statements of Comprehensive Income
Figure 3: Consolidated Balance Sheets
Figure 4: Consolidated Statement of Cash Flows
Financial Ratios
Liquidity Ratios
Current ratio 112%
Quick ratio 109%
Cash ratio 57%
Profitability Ratios
Gross margin 38%
Operating margin 27%
Pre-tax margin 27%
Profit margin 22%
Pre-tax ROE 68%
After tax ROE 56%
Recommendations and Conclusion
Apple has risen beyond fierce competition in the consumer electronic industry to be the most valuable company in the world. Based on this year’s finances, the company’s future is bright. The company’s product lines lead the market in innovation and quality. The evolution of the company’s product line to the complex version we have today could be the company’s undoing, however. Steve Jobs insisted on maintaining small number of core products and focusing on them. This strategy could help avoid disappointing product launches and help the company specialize in what it is best at. Based on the current financial projections I would not hesitate to invest in Apple. Its financials are solid and there is potential for further growth.
Works Cited
Apple. “Apple Leadership.” N.d. Web. 5 Dec. 2018.
Burns, Alvin C., Ronald F. Bush, and Nilanjana Sinha. Marketing research. Vol. 7. Harlow: Pearson, 2014.
Klein, Paul. “Where is Apple’s social purpose?” Forbes. 12 Aug. 2011. Web. 5 Dec. 2018.
Rowland, Christine. “Apple Inc.’s mission statement and vision statement.” Panmore Institute. 25 Aug. 2018. Web. 6 Dec. 2018.
Sellers, Dennis. “Apple among the 100 Best Corporate Citizens of 2018.” Apple World Today. 7 May 2018. Web. 5 Dec. 2018.
