BriefHistory and IntroductionApple Inc. was founded in1976 by Steven Wozniak and Steven Jobs when they began to sell a crudelydesigned personal computer called Apple 1.
In 1983, the Board of Directorshired John Sculley as both CEO and president of Apple. Then in 1985, Steve Jobs(chairman) tried to convene the board to get rid of Sculley and failed. Heresigned afterwards. Later in 1993, the board decided to remove Sculley ascurrent CEO and put the current Chief Operating Officer, Michael Spindler, inthe president spot. Then in January of 1996, the board asked Spindler to resignand chose Gil Amelio to take his place. Then in 1997, the Apple boardterminated Amelio’s employment and hired Steve Jobs as interim CEO. In the nextfew years, Steve Jobs turned Apple around and made their quarters profitable.
The company’s share price reached a high of $70 under Steve Jobs leadership. InAugust of 2011, Steve Jobs resigned as CEO and became chairman of the board andsuggested Tim Cook (COO) to be the replacement. This case project on Appleis based on the most recent information available online (2013-2017) and thisis what our evaluations, ratios and SWOT analysis’ results will be based upon.
ProductInformation The 1976 Apple 1 was acrudely designed personal computer. Apple followed this model up to two yearslater with the Apple 2. Then in 1984, the Macintosh was introduced but lackedthe speed, power and software capability to compete. Three years later (1987)Apple introduced a new Macintosh. The Macintosh desktop line included the MacPro, iMac and Mac Mini, while the notebook line included the MacBook Pro,MacBook and MacBook Air. Despite this, most users preferred a PC that ranwindows 3.0 and Word.
In 1991 and 1994, the first-generation notebooks werereleased and were called the PowerBook and PowerMac family. In 1998, the iMacwas introduced and one year later an iBook line of notebook computers came out.Then in 2001, the iPod was released and had modest sales until the launch ofthe iTunes website in 2003. In 2010, the iPod line included the Shuffle, Nano,Classic, and the Touch. This helped Apple get a 70% market share among alllegal online music download services. The successes of the iPod helped Appleenter the market for smartphones in June 29, 2007 with the successful launch ofthe iPhone, which was named invention of the year by the Time magazine. In 2008and 2009, the iPhone 3G and the iPhone 3Gs were both introduced to the mobilephone market.
Then in June of 2010 the IPhone 4 was created. The iPhone 6 was introduced in September of2014 and the 6S in September of 2015. In addition, the development of the appstore helped developers build applications for current iPhones and sell themfor a small fee. In April of 2010, Apple introduced the tablet line to greatsuccess. The iPad line is now on the 4th generation and includes the Pro, Miniand Air. Apple, also recently made a jump into the watch industry by developingthe Apple watch in 2015.
MissionStatementApple’s mission statementis very specific, detailed, narrow and accurate when describing the company’ssituation and goals. It is also worth pointing out that this mission statementis a departure from Steve Jobs’ original mission for the company: “To make acontribution to the world by making tools for the mind that advance humankind.”Apple’s 2015 mission statement has changed from a broader picture towards aspecific reflection of what it wants to achieve in terms of products andservices: “Apple designs Macs, the best personal computers in the world, alongwith OS X, iLife, iWork and professional software. Apple leads the digitalmusic revolution with its iPods and iTunes online store. Apple has reinventedthe mobile phone with its revolutionary iPhone and App store, and is definingthe future of mobile media and computing devices with iPad.” (Farfan, 2017).External FactorEvaluation (EFE) MatrixThe EFE matrix, ExternalFactor Evaluation, is a tool for evaluating the business’ main opportunitiesand threats.
This evaluation allows people to understand how the company canreach a competitive advantage within the industry or what the company can do toprevail over its competitors. Also, by looking at the threats, the companyknows what the most important issues are and how to overcome these risks.OpportunitiesOpportunities areexternal improvements the company can make to increase profits. As far as theopportunities go, the company could take advantage of the following in order toconsolidate its market position:1) Invest significantlyin the Internet of Things (IoT). According to Wikipedia, the so-called IoT is afast-growing market since today machines, smartphones, air conditioners or anyother electronic devices are connected via Wi-Fi and/or Bluetooth. The Internetof Things is a highly lucrative market, where all the technology companiescompete to gain market shares. Nowadays, more than twenty billion devices areconnected to the Internet, and this number is expected to rise by 50% in 2020to 30 billion.
Apple, given the leadership position it currently enjoys, has anexcellent opportunity to invest in the growth of this market. The company, infact, has its own software platforms through which it can analyze allinformation deriving from its customers’ devices; this allows the company tosatisfy the problems presented by customers in a more prompt and resolutemanner.2) Market introduction ofadditional gadgets. In April 2015, Apple introduced the first smartwatch,called Apple Watch. This was the first step in the market of wearable gadgets,which is expected to grow by 35% per year until 2019. According to BusinessIntelligence (BI) analysts, the flow of these gadgets will reach 148 millionprototypes, of which 70% will be smartwatches. BI analysts also believe thatApple will capture a dominant market share in the market, around 47%. Thecompany, in the future, will have the opportunity to launch new gadgetsspecially created for the well-being and health of the client, for example bymonitoring the calories taken during the day, the level of sugar in the body oreven the level of hydration (Bhasin, 2018).
Furthermore, according to the WorldHealth Organization, 9% of adults suffer from diabetes; this could be a greatopportunity for the company as, investing in this field, Apple Inc. could havethe opportunity to enter into a new business, creating devices to monitor thedisease.3) Expansion in the”mobile payments” market.
In 2012, mobile payments facilitatedtransactions worth USD 12.8 billion. Some analysts say that this sector willgrow by 48% annually until 2019, reaching 90 billion dollars only in the UnitedStates. These numbers show how this market can become highly attractive andhighly competitive in the coming years. Many large international competitorsare offering special apps to facilitate the purchase of their products and / orservices through mobile payments, such as PayPal, Square, Softcard and GoogleWallet.
Many companies are interested in this type of payment, because in thisway they can bypass credit card companies, which receive a fee for eachtransaction. On the other hand, customers can take advantage of a fast andsecure service. Therefore, Apple’s mobile payments market will producebenefits, not only from a revenue growth point of view, but also through theimprovement of the user’s experience.ThreatsThreats can limit orreduce the financial performance of companies. The threats that could weakenApple’s economic and financial foundation are the following:1) Increase ofcompetition. Apple has faced strong competitive pressure from Microsoft, IBM,HP and Dell in the personal computer and smartphone industries when it decidedto launch the iPhone and iPad. The smartphones market is never saturated,indeed every year it is in continuous and constant growth, and this is the mainreason why this business is characterized by an increasingly higher competitionthanks to the continuous and rapid changes that technology innovations lead to.
In emerging countries, competition is based more on price, productcharacteristics and price/performance ratio rather than product quality andreliability (Bhasin, 2018). This means that Apple will probably lose the battleagainst Android in emerging countries, given the products’ high price. AndroidOS, with the help of Samsung, Huawei, Lenovo and LG, is growing rapidly and isthe best-selling smartphone in emerging markets.
The result of all this is thatapp downloads in Google Play have increased, generating a significant increasein revenues. This certainly represents a serious threat for a multinationalsuch as Apple, given that in 2015 Google saw its revenue increase by about 19.9billion dollars thanks to investments made in emerging countries.2) The increase of thedollar exchange rate could negatively affect the company’s revenues andprofits. In 2015, the company earned $ 151,983 billion, or 65% of its totalrevenue, outside the United States; this means that a large part of its revenuecomes in the form of other currencies. Usually the company, after makingvarious gains all over the world, converts the sums into dollars to calculatetotal revenues and profits.
Now, if the dollar exchange rate rises in value,this may represent a real threat to a multinational such as Apple, since, onceconverted into dollars, revenues and profits will have a lower value comparedto the level initially estimated.3) Increase of the causesof patent violation, which could damage brand reputation. As already mentioned,Apple operates in a highly competitive sector, where innovation is the key tosuccess. Innovation is usually patented in order to protect it from externalimitations. Compared to its closest rivals, Apple has a reduced number ofpatents and invests a little but well in R & D (Bhasil, 2018). Therefore,by patenting more, the company can not only better protect its innovations, butit can seek a better positioning in the market. However, given the complexityof the sector and the number of patents currently existing, it remains almostimpossible, even for a company like Apple, not to violate, at least once,existing patents belonging to its competitors. ExternalAudit – Competitive Profile Matrix (CPM)CPM, or the CPM Matrix,stands for Competitive Profile Matrix and is a powerful strategic analysistool.
CPM allows business owners, stockholders and other interested parties tosee the strengths and weaknesses of all major competitors in an industry on asingle page (David, 2015). The CPM table features a list of critical successfactors, and each of them is given a certain weight depending on the industrywe are in. Among the Apple’s strongest critical success factors, we find Financialprofit, Market penetration, and Market share which are rated 4, 3 and 2 respectively.Therefore, Apple Inc. scores 0.48, 0.33, and 0.
22 in these three areas. Among the success factors with a lighterweight, instead, we find E-commerce, Employee dedication, and Advertising whosescores are 0.24 for the first two and 0.21 for the last one. This informationshows how Apple is doing and the importance assigned to the main successfactors.
When we analyze its strongest competitors, we can see how Microsoft isthe only one that gets close to Apple’s final score. In fact, Microsoft’s scoreis 3.22, while Apple’s final score is 3.35 (when adding all the scorestogether). Dell, Samsung and Nokia are behind the two giants with a score below3.
0. These data will be shown in a table that I will integrate to this paperduring Phase 2. InternalAssessment – IFE MatrixThe IFE matrix, InternalFactor Evaluation, is a tool for the evaluation of the business’ main strengthsand weaknesses. Financial ratios are an important component for the internalevaluation.
The table below shows the main financial ratios for Apple Inc.: