Apple Inc Unit

Apple

AppleInc

Unit

Overthe years, Apple has launched a revolution after a revolution intechnology and innovation. On 23rdSeptember 2014, Apple officially rolled out the much anticipated 8thgeneration of the iPhone named iPhone 6. The phone was released intwo versions with one with 5.5 inch screen and the other a 4.7 inchscreen. Within days the phone was tested and reviewed widely byopinion leaders and other users on social media. These consumerreviews have been shown to have more influence on consumer decisionmaking than other conventional marketing efforts employed bymarketers all over the world. Two main issues that dominated thesereviews and previous reviews of past versions were easily brokenscreens and spills. Empirical observations have shown that spills,weak bodies and display breakages are the most common issues raised.To dominate the mobile market (smartphones and tablets) needs toaddress these issues. Can the firm’s current position allow it tohandle these issues that are threat to the brand?

ThePESTLE analysis

Political

  • Government is gradually moving towards initiating policies to attract foreign players including firms competing with Apple to set up plants in the US. This will mean more competition for Apple.

  • American government policies and court rulings on intellectual property suits against competitors have favored Apple. However, in China, Apple lost the first stage in intellectual lawsuit against Shanghai-based Zhizhen Network Technology and the State Intellectual Property Office over its flagship Siri based on voice recognition.

  • As a global company largely sourcing from Asian countries, the performance of the firm relies heavily on the political stability of these countries. Any political upheavals in such countries jeopardize the firm’s operations.

Economic

  • The performance of the American and global economy will influence how consumers purchase Apple products largely influenced by household income.

  • A dip in the American economy poses a threat to Apple especially among price sensitive consumers who might be forced to buy competing cheaper alternatives.

  • Fluctuations in prices of key components also influence how the firm performs. For instance, high inflation rates in Malaysia, a key sourcing company, can influence the price of key Apple products and its profitability.

Socio-cultural

AniPhone or an iPad is largely considered as an in-thing especiallyamong high end society and the youth. As long as the brand retainsthis perception among consumers as an object of status, Apple cancontinue to charge a premium price for their products. On the otherhand, any loss in the same perception can hurt the firm greatly. Inrecent months, the consumers have shown preference to larger screenphones which were readily provided by competitors more so Androidbased phones. In response, Apple has responded to this change albeitlate to the change in consumer preferences by releasing iPhone 6versions with larger screens.

Technological

  • Rapid changes in technology require massive investment as technologies become obsolete rapidly.

  • Investment in R&ampD in technology allows the firm pioneer and first mover advantage

  • However, investment in research and development implies added costs to the firm as it they seek to outdo competitors.

Environmental

  • The world is quickly moving toward green energy and green production and consumers prefer green firms

  • The change in energy sources implies added costs for firms and reorganization and reengineering some of their processes. In some cases, it requires training employees to understand better the green production.

SWOTanalysis

Strengths

  • Customer loyalty all through the various product ranges

  • Superior financial position with revenues of over $500 million and the highest market capitalization

  • Strong brand equity

  • Association with quality

Weaknesses

  • Declining fan base as a result of competition

  • Patent legal tussles with competitors

  • Decreased sales from iPods line and Apple TV set top boxes

  • Hacker attacks as has been witnessed this year

  • Some apps require internet connectivity always

  • Rampant consumer complaints on various issues such as poor batteries in iPhone 4 and Apple maps

Opportunities

  • High global demand for tablets and smart phones

  • High demand for cloud services

  • Vertical and horizontal integration

  • Rising demand and penetration of necessary infrastructure such as app development and internet penetration

Threats

  • Rapid changes in technology

  • Competition from android

  • Higher taxes and rising wage costs

  • Global economic fluctuations

Porter’sfive forces analysis

Threatof new entrants

  • The industry requires massive investments especially in R&ampD thus keeping off new players

  • High product differentiation through the OSX and iOS

  • Long term contracts with suppliers locks out new interested players

Threatof substitutes

  • Many new devices have been developed by competitors such as the Sony MP3 player which are more competitive priced.

  • There are many faked and cloned products in the market that imitate the Apple products

  • Alternative methods to share music such as torrents have eclipsed the paid for music from iTunes.

Buyersbargaining power

  • Apple operating systems are incompatible with other products which limit consumers to use only Apple products.

  • Buyers have numerous competing products to choose from at a more competitive price

  • Highly differentiated products give Apple the power to charge a premium price

Suppliersbargaining power

  • Apple has obligated its suppliers in the market to long term contracts

  • Competition among suppliers gives Apple options and diminishes their bargaining power

  • The firm is unable to develop its own brand of components to suit its brand thus over relies on some suppliers such Intel for microprocessors

Keysuccess factors

Reliabilityand usability

Thisis a key issue in choosing smart phones. Apple has made this a keypoint by humanizing their products from a simple user interface inboth their desktop and mobile OS. This concern led to Appledeveloping the first mass marketed touch screen phone with arelatively larger screen before other competitors could catch on. Thesame has been observed in developing the iPad to give consumers ahybrid of a smart phone and a laptop. For this reason, Apple hasdeveloped features and applications in their products that are easyto use and fit into the day to day activities of businesses and aregular person.

R&ampD

ThroughR&ampD, Apple has managed to develop unique products especially thetablet, iTunes, and the iPods that did not exist in the marketbefore. The proprietary OSX has also proved to be a major successfactor for them as it has allowed consumers to only consume Applecompatible products and thus drive sales of other products. It isthrough R&ampD that Apple can develop another line of products suchas apple TV to compete better in global market against other playerssuch as Samsung and Sony.

Positioningin the market

Applehas managed to their make products into status symbols, fashionstatements, and even purveyor of technology. Through this approach,Apple has managed to attract the higher income end of the marketthrough premium priced quality products and services. This is evidentin the fact that some of the competitors have developed some devicesrelatively superiors to Apple and marketed them at lower prices butstill fall short of Apple. It is this belief that same features in anApple product are superior to same features in another brand’sproduct that has been the hallmark of success for Apple.

Competitivestrength assessment

Key success factor &amp strength measure

Importance weight

Apple

Samsung

Sony

Strength rating

Weighted score

Strength rating

Weighted score

Strength rating

Weighted score

Innovation

0.2

7

1.4

7

1.4

6

1.2

Differentiation

0.1

4

0.4

2

0.2

2

0.2

Brand image and reputation

0.1

5

0.5

3

0.3

3

0.3

Reliability and usability

0.25

8

2

7

1.75

5

1.25

Design

0.1

3

0.3

3

0.3

5

0.5

Customer service/support

0.05

4

0.2

4

0.02

6

0.3

Financial resources

0.3

7

2.1

4

1.2

3

0.9

Sum of importance

1.00

Weighted overall weighting

6.8

5.17

4.65

It is clear that Apple holds the overall first position in the marketwhile some of the main competitors Samsung and Sony come is secondand third respectively. However, it must be noted that the twocompetitors assessed here do not match measure by measure to Applewell because they do not operate in all industries that Appleoperates. None of the two rivals operates a music store as Apple doeswhile the two are actively engaged in the television and DVD playersmarkets in which Apple is absent. Therefore, comparison was largelybased on smart phones, laptops and tablets.

Financialposition

Itis noted that the financial measure of is major measure of strengthin the industry. In an industry that largely relies on R&ampD, hugefinancial assets are needed.

Liquidity

Current Ratio1.68

Quick Ratio 1.64

Cash Ratio 0.93

ROA 15.20

ROC

Total Debt/Equity 25.67

Capital Structure

Total Debt to Total Equity 13.73

Total Debt to Total Capital 12.07

Total Debt to Total Assets 8.19

Long-Term Debt to Equity 13.73

Long-Term Debt to Total Capital 12.07

Conclusion

Applehas the fanatical muscle to invest further in R&ampD to create abetter screen than the current hardened glass used in display for itsdevices. This will handle the consumer complaints that the firm faceand also cushion the firm against growing uneasiness in the marketover Apple pricing of its products in light of growing competition.This financial strength is evident total debt/equity ratio of 25.67%(0.2567) against an industry average of 45.65% (0.4565). The firm canthus comfortably finance further R&ampD to develop a long lastingsolution to display breakages. Additionally, with fluids being aconstant concern, the firm needs to develop waterproof smartphoneswhich have already been rolled out by competitors such as Sony.

References

Bender,R. (2014). Apple, RIM Gain Ground in Handset Market. Retrieved onlineon 6thOct

2014fromhttp://online.wsj.com/articles/SB10001424052748703691804575253862699771880

Buinessweek(2014). Retrieved online on 6thOct 2014 from

http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=AAPL

Dilger,D. (2014). Samsung shipped 2x as many phones as Apple, earned half asmuch.

Retrievedonline on 6thOct 2014 fromhttp://appleinsider.com/articles/14/04/29/samsung-shipped-2x-more-phones-than-apple-earned-half-as-much-

Harjani,H. (2014). Apple manufacturing partner looks to build factory in theUS. Retrieved

onlineon 6thOct 2014 from http://www.cnbc.com/id/101364554#.

Marketwatch(2014). Retrieved online on 6thOct 2014 from

http://www.marketwatch.com/investing/stock/aapl/profile

Worstall,T. (2014). Apple`s Real Competitor Is Apple Itself And It`s JustBought That

Competition.Retrieved online on 6thOct 2014 from,http://www.forbes.com/sites/timworstall/2013/09/06/apples-real-competitor-is-apple-itself-and-its-just-bought-that-competition/

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