Overview of the Apple company

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The Apple Company provides computer hardware and software in addition to creating and designing mobile phones, portable music players, and computer hardware. The business creates software that is embedded into each of their products. The ability of Apple to innovate in the telecommunications sector, as well as its potential to sell its products through its brand and marketing strategies, are well known on a global scale (Apple Inc).

Product Description

In contrast to its competitors, the company is known for selling high-quality products that are integrated across the entire sector in which it operates. As a result, it has been able to win over customers' love. The plan helps the company in connecting the consumer appeal to its name and thus helps in the creation of the loyalty, which keeps the company going. The company further sells its content to the online stores such as the iTunes and is globally known for the production of devices like iPad, iPhone, OS X and the iOS as well the iCloud (Apple Inc).

The products of the company are mixed with research and development (R&D) and have been proven to work efficiently but some ratios have shown that the company’s performance is decreasing slowly. Apple has several opportunities’ for growth, such as the creation of innovative devices like Apple T.V and iWatch, which are still under research, and once they have been developed they will be distributed in the market for consumer consumption. However, despite the tremendous growth enjoyed by the company, it faces several weaknesses and faces threats from its competitors resulting in competition from its rivals in the industry (Apple Inc).

Competitive Overview

Samsung is a digital agency that gives numerous products, starting from residence appliances, computers, mobile and domestic audio (Samsung.Com). Samsung merchandise is normally priced better than the everyday competition inside the electronic industry is known for its high satisfactory and reliable logo. The logo’s Smartphone, Galaxy s6 retail rate is $680, and $30 higher than the iPhone 6. Although Samsung is a global company founded in South Korea, it stocks similar distribution approach like apple having their personal retail stores, online retail store, and distributes its products to diverse retailers like Wal-Mart, Costco, first -class public phase, and different international retailers (Wright 23). Samsung’s marketing slogan “believe” stands proud as to asking its clients to envision what the brand can do for them. Since they offer a huge style of electronic merchandise, it is hard for purchasers to put Samsung as a Smartphone organization, so that they do no longer painting the same emblem vision as apple does.

Samsung has posed a greater threat to apple’s products in the market. Samsung sells superior products and at affordable prices of similar goods to those of Apple hence customers has started diverting their attention from Apple’s product to the Samsung in the market thus is a major blow to the Apple which has been for quite some for producing only super electronics items in the market. On the hand the company, also faces competition from the Microsoft, which is producing software’s that are compatible with Mac hardware’s (Apple Inc).

Microsoft is also collaborating with other companies in the industry to create alliances; therefore, for apple to remain competitive it needs to broaden its horizons so as to continue maintain financial stability. To remain competitive in the industry that is growing Apple needs to focus on lower end of the market that accounts for poor economic conditions. The company also needs to steer its market towards becoming the global market. The company should also enhance its devices compatibility so that consumers can install different software’s just as they do for windows devices. Innovation should be at their interest (DGSL).

b. Corporate Strategy

When covering Apple’s Strategic plan, it's far crucial to discover the corporation’s project and imaginative and prescient statement. Apple’s past and future corporate strategy is classified into the product design and differentiation. The company has focused in developing online stores in line with its third party distribution network to efficiently and effectively access more clients and offer them with high quality sales services and after sales’ services. The company continues to diverse its business platform through innovation and the delivery of the third party digital applications and content implications via iTunes online stores. Additionally the company also utilizes intensive global market growth as a corporate strategy (Apple Inc).

Past Strategy

Comparing the iPhone to its competitors, the iPhone is the only smartphone that has the Apple Pay capability. The ability to substitute any credit card and make a purchase on the phone itself satisfies many consumers because they can just simply leave the house with their phone to go shopping. With its iOS 8 operating system, the phone also records your health history and organizing your life seamlessly. The iPhone is marketed as “bigger than better” because there is more than just its size.

Pricing Strategy: Apple uses a market skimming strategy method for the iPhone 6 and 6 Plus. Currently, the iPhone 6 with the smallest memory capacity of 16 GB is priced at $650 and the iPhone 6 Plus with 16 GB is $750, which is $100-200 more than the previous iPhone generation. Although the product is priced higher than before, Apple consumers see the value behind the extra $100. The exterior design of the phone is extravagantly beautiful while simple and clean. The features of the iPhone improved and upgraded to be better than its previous generation. Because of the higher price, Apple has increased its market share along the way.

The iPhone offers memory storage in 16 GB, 64 GB, and 128 GB.As the memory storage capacity increase, the price increases by $100 each. That would be a value-added pricing method because of bigger size and better functionalities. However, once Apple announces a new release of its next upcoming iPhone, they would allow third party retailers to be able to sell their inventories for a discounted price to clear out the space for the new arrivals of the next iPhones.

Promotion strategy consists of the advertising strategy. With the iPhones, Apple advertises in simplest form describing that there are two different sizes of the iPhone 6 and 6 Plus. Although Apple does advertise, it is not necessary. It is called advertising through word of mouth, because there are many Apple fans throughout the entire world, Apple-lovers share the latest news and information to each other through social media and blogs about Apple’s latest updates and arrivals. Many Apply fans take it to themselves to help Apple advertise by explaining the new phone in a consumer’s perspective through social media and word of mouth thus increasing other consumers’ interests.

According to Dr. Debajani Sahoo, Apple’s advertising campaign has one goal in mind, which is to make consumers fall in love with their products by being entertaining and memorable (Sahoo p. 43). Apple advertises on magazines just simply with some beautiful pictures with captions stating it was taken with an iPhone 6 to display the crisp and HD quality with its iSight camera. Apple maintains its advertising motto of keeping things simple and allowing the consumers to think and imagine while wondering what more can the iPhone do. Apple also relies on social media like YouTube to share video advertisements while hoping it would become viral. The best sort of advertisement is product placement. In each Apple product package, there are two Apple logo stickers. Typically, consumers would stick them onto their car window or on their computers somewhere, displaying the brand to the public and bringing more brand awareness when others see the logo (Hertenstein 67).

Apple does not rely on personal sales let alone push or persuade their consumers to make a purchase through hard selling. They provide a relaxing and carefree space to roam around in its retail stores to build a lasting relationship. Consumers walking into an Apple store can also just simply ask questions about a new product without feeling pressured to make a purchase and even fix their broken products (Hitt 35). The Apple staffs are there mainly to answer questions and assist as needed. Through its retail stores, consumers are able to learn more about the Apple brand and true meaning behind it. Apple wants consumers to go through the entire experience from walking into the store to the purchasing and opening the box. Each activity should be an experience of its own while leaving a remarkable impression on the consumers’ minds.

Future strategy

Apple will also train its sales force, preparing them for the release of the iPhones, what are the advantages and disadvantages of the new features as well as what consumers should expect of the new iPhone. Official press release will be made to announce as well as promoting the new iPhones. Apple will release commercials and advertising the new iPhone, focusing on the beautiful design and features that iPhone 6 and 6 Plus have. Apple would allow the option of pre-ordering the iPhones before its release date so the Apple fans can get their hands on them as soon as possible.

Apple would redecorate their retail stores to display the new iPhones for their window ads. Third party retailers would have posters of the new iPhones on their walls to increase exposure the products to consumers. Apple would announce the new feature of Apple Pay, exclusively on iPhone 6 and 6 Plus, as well as Apple accessories compatible with the new iPhones sizes. Apple will begin to distribute the new iPhones globally, first targeting China and 68 more countries by the end of the month with the goal of over 100 countries by the end of the year.

c. Company Performance in the Previous Years

Apple Company has been performing well and it has been very efficient based on the market analysis. Apple debt ratio for many years it was maintained at 0.0 since the year 2014 (Reuters 23).The debt was below the average industry of 0.05. The return on assets of Apple company was kept at 24.9% above the industry average of 23.8% in the year 2012 (Reuters). This trend shows that Apple was very efficient in the marketing and production of its products. The company ratios were above the industry average; the return on assets was 24.18%, for the net profit and the return on sales were 25.35% (Reuters).

Considering the ratio analysis of the Apple Company from the previous fiscal years, the profit of the company was increasing progressively from the year 2003 to 2009 which was at 19.19%.Form the year 2009 the net profit increased from 19.19% to 25.35% in 2013 (Forbes). Despite the company performance remaining of the above the industry, Apple Company needs to drastically enhance its net profit in the coming subsequent years. To achieve the strategy Apple Company should maintain its top marking and innovation strategy. This promotes the company’s quest for increase in growth and remains ahead from its competitors (Burrows and Satariano 25).

Additionally, in line with the company’s efficiency, it has been reported to previously to higher than that of its competitors. Apple’s financial and strategic analysis review indicated that the company’s revenue rose by 16% from the fiscal year 2010 to 2011 (Apple Inc).This revenue were than that of its competitor Microsoft which increased by 12% in the same fiscal year (Apple Inc SWOT Analysis). However, Apple’s revenues decreased from the fiscal year 2011 to 2012 by 12% making the company to report 45% increase in revenue (Apple Inc).

The above trend confirms that Apple Company has some room for improvement since its growth decreased. Apple Company incurred a lot of expenses in carrying the research and development for its improvement in its technology and products this eventually increased the company’s innovativeness in the industry.

d. F Annual Income Statement (values in 000's)

Item

FYR 2014(000)

%

FYR 2015(000)

%

FYR 2016(000)

%

Revenues

182,795

100%

233,715

100%

215,639

100%

Cost of revenues

112,258

1.68%

140,089

11.67%%

131,376

1.64%

Gross Profit

70,537

2.59%

93,626

2.49%

84,263

2.56%

Operating Expenses

R&D

6,041

30.25%

8,067

28.97%

10,045

21.47%

Sales ,General And Administration

11,993

15.24%

14,329

16.31%

14,194

15.19%

Operating Income

52,503

3.48

71,230

3.28%

60,024

3.59%

Expense Items

980

186.5%

1,285

181.90%

1,348

160%

EBIT

53,483

3.42%

72,515

3.22%

61,372

3.51%

Ebt

53,483

3.42%

72,515

3.22%

61,372

3.51%

Income Tax

13,973

13%

19,127

12.22%

15,685

13.75%

Income from operations

39,510

1.95%

53,394

4.38%

45,687

4.72%

Net Income

39,510

1.95%

53,394

4.38%

45,687

4.72%

Income distributable to shareholders

39,510

1.95%

53,394

4.38%

45,687

4.72%

Nasdaq.com (2017)

Financial Statement Analysis

Analysis of Apple Income statement from 2014 to 2016

The company’s gross profit increased from 70.5M in 2014 to 93.6M in 2015 these increase could be attributed to the absence of the stiff competition in the market and that the company used suitable strategies that increased sales hence increase in the gross profit . However, there was a drop of gross profit from 93.6M in 2015 to 84.2 M in 2016. The decrease in gross profit in the fiscal year 2016 is due to the increased competition from Samsung and Microsoft Company that has gone away with some customers (Ginsante 344).

The operational income and net income followed the similar suit with the gross profit as they both increased from fiscal year 2014 to 2015 and then decreased from 2015 to 2016. The computer industry is facing stiff competition, Microsoft is becoming greater competition to Apple as it manufactures similar product and at the lower cost hence luring customers to their products(Forbes 89).

Trend Analysis

Gross profit decreased from 2.59 % in 2014 to 2.49% in 2015.However there was a significance increase to 2.56% in 2016.Income tax decreased from 13% to 12.22% in 2014 and 2015 respectively. However, there was slight increase in 2016 to 13.75%.Apple’s income tax increased across the three years from 1.95% in 2014 to 4.38% and 4.72% in 2015 and 2016 respectively.

i.Cash flow Statements

Item

FYR 2014(000)

FYR 2015 (000)

FYR 2016(000)

Net Income

39,510

53,394

45,687

Cash Flow From Operation Activities

Depreciation

7,946

11,257

10,505

Net Income Adjustment

5,210

4,968

9,148

Changes In Operating Activities

Accounts Receivables

(6,452)

(3124)

(1044)

Changes In Inventory

(76)

(238)

217

Other Operating Activities

167

179

1090

Liabilities

13,408

15,188

(1,867)

Net Cash Flow Operations

59,713

81,266

65,824

Cash Flow From Investing Activities

Capital Expenditures

(9571)

(11,247)

(12,734)

Investments

(9,027)

(44,417)

(32,022)

Other Investing Activities

(3,981)

(610)

(1,221)

Net Cash Flows From Investing

(22,579)

(56,274)

(45,977)

Cash Flows From Financing Activities

Purchase and sale of inventory

(44270)

(34710)

(29,277)

Net loans

18266

29305

22,057

Financing Activities

(1158)

(1,499)

(1,570)

Net Cash Flows Financing

(37,549)

(17,716)

(20,483)

Net Cash Flow

(415,000)

(7,276)

(636)

Nasdaq.com (2017)

Analysis of the cash flow from 2014 to 2016

The above cash flow shows that Apple’s business operations generated cash to run and sustain the company. Apple’s net income in 2016 were valued at 45,687M.Cashflow from operating activities were estimated o be 65,824M(Nasdaq.com).However, from the above cash flow it’s typical that there were no additional funds to cater for additional purchase of property plant and equipment, since the company’s net cash flow were deficient. The company’s plant property and equipment (PPE) were estimated at 25,448 M in 2016 while the cash generated in that financial year was at a deficit of 636M (Nasdaq.com)

iii. Stock Price Trend (Graph)

Figure 1: A graph showing Apple’s Stock price.www.nasdaq.com, Aug 2 2017.

Figure 1: A graph showing Apple’s Stock price.www.nasdaq.com, Aug 2 2017. http://www.nasdaq.com/symbol/aapl/stock-chart.

The company stock price will continue to rise as it continues to roll out new digital content devices that are attracting many customers. Investors should buy Apple stock since they will be able to gain more as the company continues to expand its business, more profits will be ploughed back into the business.

Ratio Analysis

Financial ratio analysis is an important tool in assessing the various aspects of the company’s financial and operational performance .Ratio analysis helps in evaluating company’s liquidity, solvency, profitability and marketing prospects. Therefore, the trend that is shown by computing above analysis helps in determining whether the company is either improving or decreasing. Hence can help investors in deciding whether to invest in their money or not.

Apple Ratio Analysis for the Last Three Years

Apple Ratio Analysis - 3 Year Average

Ratio

Company Ratio

Industry Ratio

Interpretation

1.LIQUIDITY RATIO

Current Ratio

1.39

1.77

Apple company has a lower current ratio than the industry averages this shows that the company is operating below other companies profit.

Acid Test Ratio

1.35

1.68

Apple company has lower acid test ratio than the industry it calls therefore for Apple to increase its business operations.

2.SOLVENCY RATIO

Debt To Equity Ratio

73.48%

53.27%

The company has higher debt to equity ratio compared to other companies in the same industry. This shows that it has higher solvency then other companies in the industry.

Debt Ratio

63.04%

46.96%

The company has higher debt compared to other companies in the same industry. This shows that it has higher solvency then other companies in the industry.

3.PROFITABILITY RATIO

Return On Equity

37.8%

29.44%

The ratio shows that the company has higher return on shareholders’ funds compared to other company in the same industry. This shows that those shareholders are getting value for their money.

Net Profit Margin

22.65%

12.96%

The ratio shows that the company has higher profitability as compared to other companies in the same industry

4.MARKET PROSPECTS

Price Earnings Ratio

17.97

15.31

In regard to price / earnings ratio the company has higher return compared to the industry as shown in the ratio.

Dividend Yield

1.69%

2.5%

Regarding the dividend yield the shareholders obtains less yields from their investments compared to other companies from other companies in the same industry.

Source: Investing .com Apple Inc (2017)

Conclusion

The above chart suggests the ratio analysis of the Apple organization in opposition to the industry figures. Therefore, from the analysis, it is clear that Apple is extra profitable than other agencies inside the industry. For Apple to continue being competitive, I propose that Apple has to reveal high quality of the product, preserving brand consciousness, and strictly emphasizing customer delight and value. Manufacturing satisfactory is essential and needs to be managed through the producing system by way of improving the requirements of hard work and great inspections. It is important to maintain excellent product because the value of the brand relies on the nice products (Burrows 32). Apple wishes to keep emblem focus via client remarks all through private income and surveys. Consequently, in respect to this, I’m able to advise my institution to invest their cash in this organization due to the fact they are guaranteed of income and recouping back their capital.

Works Cited

Sahoo, Debajani. "Strategic Change of Campaign at Apple Inc." Vidwat 5.2 (2012): 38.

Burrows, P. &Satariano, A. (2013, February 12). Apple said to have the team developing wristwatch computer. Bloomberg; 20 – 30.

Forbes. (2013, January 31). Is Apple finally going to announce the apple TV in 2013? Forbes Magazine,

Giansante, Joseph E. "Interactive parameter driven iterative financial spreadsheet analysis with context and layout sensitive help screen." U.S. Patent No. 5,471,575. 28 Nov. 2005.

Hertenstein, Julie H., Marjorie B. Platt, and Robert W. Veryzer. "The impact of industrial design effectiveness on corporate financial performance." Journal of Product Innovation Management 22.1 (2005): 3-21.

Hitt, Michael A., R. Duane Ireland, and Robert E. Hoskisson. Strategic management cases: competitiveness and globalization. Cengage Learning, 2012.

Wright, William F., et al. "Information technology, process reengineering, and performance measurement: a balanced scorecard analysis of Compaq computer corporation." Communications of the AIS 1.2es (2009): 2.

Apple Inc. SWOT Analysis. (2012). Apple Computer, Inc. SWOT Analysis, 1-9.

Apple, Inc. (2012). Apple Inc. - Financial and Strategic Analysis Review. 1-5. Retrieved from http://callisto.ggsrv.com/imgsrv/FastFetch/UBER1/300559_GDTC27353FSA

February 09, 2023
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