apple case question

answer APPLE case for those questions Your answer should be found in apple’s newest 10K. All the information you write must be the lately information. first: must for apple newest 10-k item 1,1A, and 7. and apple inc. Financial and Strategic Analysis Review (those document i will give you) second: use simple English. do not copy the questions on the paper. it is for oral panel, so be simple and easy words to explain the answer which you give me on each questions. finally: must give the key points, and explain the why. and give me page number which page you find the each answer and which paragraph, i need specific. follow those questions: Panel Research & Preparation What is the management structure? Who are the important players? Their respective roles? How are specific individuals ties to the company’s success? What is unique about their management structure? What are the problems in their management structure?What other lines of business does this company have? How important are they to their overall success? What impact do they have on their bottom line?How much market-share does this company have? What is the trend?What significant Strengths, Weaknesses, Opportunities, or Threats does this company face? What are they doing to mitigate Weaknesses or Threats? Capitalize upon Strengths or Opportunities?What barriers to entry exist in this company’s industry? How weak or strong are they?Can this company’s products be easily replaced?Do suppliers to this company have strong bargaining power or not? How does this impact the company’s success? Strategic decisions?What are the company’s current sales figures? Trends?In which markets is your company most successful? Least successful? Why?Is this a solvent company? The trend?Would you buy stock in this company? Why or why not?What are your strategic recommendations for this company? What should they do in the future to gain amore competitive edge?Who are the key rivals for this company? Direct competitors? Indirect competitors? How much market-share are they capable of taking?
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Apple Inc
Apple Inc – Financial and Strategic Analysis Review
Reference Code: GDTC27353FSA
Publication Date: Nov-2017
Company Snapshot
Company Overview
Key Information
Apple Inc. (Apple or “the company”) designs,
manufactures, and markets mobile communication and
media devices, personal computers (PCs), and portable
digital music players, and sells a variety of related
software, services, accessories, networking solutions, and
third-party digital content and applications. Apple’s product
portfolio includes iPhone, iPad, Mac, iPod, Apple Watch,
Apple TV. Its portfolio of consumer and professional
software applications include iOS, macOS, watchOS and
tvOS operating systems, iCloud, Apple Pay and a variety
of accessory, service and support offerings.
Apple Inc, Key Information
Web Address
Financial year-end
Number of Employees
NASD
www.apple.com
September
116,000
AAPL
Source : GlobalData
Key Ratios
Apple Inc, Key Ratios
P/E
NA
EV/EBITDA
NA
Return on Equity (%)
NA
Debt/Equity
NA
Operating profit margin (%)
NA
Dividend Yield
NA
SWOT Analysis
Apple Inc, SWOT Analysis
Strengths
Formidable Competitive
Advantages through
Horizontal and Vertical
Integration
Weaknesses
High Dependence on iPhone
and iPad Product Lines
High Average Selling Prices
(ASPs)
Source : GlobalData
Strong Research and
Development Capabilities
Share Data
Apple Inc, Share Data
EPS (USD)
NA
Book value per share (USD)
NA
Shares Outstanding (in million)
Source : GlobalData
Performance Chart
Apple Inc, Performance Chart (2013 – 2017)
5,251.69
Opportunities
Threats
Positive Outlook for the Global Premium Pricing Could Limit
Smartphone Market
Growth in Emerging Markets
Smart Wearable Devices
Market Offers Robust Growth
Opportunities
Operating in Complex and
Challenging Environment
Could Impact Market Position
Rising Adoption of Apple
Products in the Enterprise
Market
Lawsuits and Litigations
Source : GlobalData
Financial Performance
Source : GlobalData
Apple Inc- Financial and Strategic Analysis Review
The company reported revenues of (US Dollars)
US$215,639 million for the fiscal year ended September
2016 (FY2016), a decrease of 7.7% over FY2015. In
FY2016, the company’s operating margin was 27.8%,
compared to an operating margin of 30.5% in FY2015.
In FY2016, the company recorded a net margin of
21.2%, compared to a net margin of 22.8% in FY2015.
Reference Code: GDTC27353FSA
Page 1
Apple Inc
Key Information
Apple Inc, Key Information
Corporate Address
1 Infinite Loop, Cupertino, CA,
95014, United States
Telephone
Fax
URL
Industry
+1 4089961010
Locations
www.apple.com
Ticker Symbol, Stock
Exchange
No. of Employees
Fiscal Year End
Revenue (in USD Million)
AAPL [NASDAQ]
116,000
September
215,639.0
Clean Technology, Financial
Services, Retailing, Technology
and Telecommunication,
Telecommunications
Argentina, Australia, Brazil, Canada, China, Denmark, France, Germany, Hong Kong, Hungary, India,
Indonesia, Ireland, Italy, Japan, Mexico, New Zealand, Peru, Philippines, Poland, Portugal, Russia,
Singapore, South Africa, South Korea, Spain, Sweden, Taiwan, Thailand, Turkey, United Arab
Emirates, United Kingdom, United States
Source : GlobalData
Company Overview
Apple Inc. (Apple or “the company”) designs, manufactures, and markets mobile communication and media devices, personal
computers (PCs), and portable digital music players, and sells a variety of related software, services, accessories, networking
solutions, and third-party digital content and applications. Apple’s product portfolio includes iPhone, iPad, Mac, iPod, Apple
Watch, Apple TV. Its portfolio of consumer and professional software applications include iOS, macOS, watchOS and tvOS
operating systems, iCloud, Apple Pay and a variety of accessory, service and support offerings. Apple sells and delivers digital
content and applications through the iTunes Store, App Store, Mac App Store, TV App Store, iBooks Store and Apple Music. The
company operates globally across the US, Europe and Asia Pacific. It is headquartered in Cupertino, California.
Apple Inc- Financial and Strategic Analysis Review
Reference Code: GDTC27353FSA
Page 2
Apple Inc
Apple Inc – SWOT Analysis
SWOT Analysis – Overview
Apple Inc. (Apple or “the company”) designs, manufactures, and markets mobile communication and media devices,
personal computers (PCs), and portable digital music players, and sells a variety of related software, services, accessories,
networking solutions, and third-party digital content and applications. The company was able to build non replicable and
sustainable competitive advantages, through horizontal and vertical integration. However, operating in complex and
challenging environment could have a negative impact on the market shares and growth rates of Apple.
Apple Inc – Strengths
Strength – Formidable Competitive Advantages through Horizontal and Vertical Integration
Apple has over the years followed integration both horizontally and vertically and as a result emerged as a formidable
competitor. The company’s multiple devices provide horizontal integration. Apple has presence across main digital media
devices of computing and mobile communications. Through PCs, tablets, smartphones and other devices, Apple aimed at
offering a whole range of associate products and devices. Apple through vertical integration connected the user experience
across the devices. The company offers hardware, software, content, services and also retails its products creating vertical
integration. In addition, the company built strong software and content business which equipped Apple with several
competitive advantages. The company’s operating system spans across multiple devices and includes content and
application. Consequently, switching to a competitor becomes difficult due to the dependence on iOS. Another key
integration aspect that has enabled Apple to gain competitive advantage is the content offering. The company’s iTunes
Store, App Store, iBooks Store and Apple Music enables users to purchase, organize and share digital content and apps.
In addition to the above, the company has a strong retail presence. This helps Apple to have control over successfully
positioning its products to the end user.
Apple has followed a vertical integration strategy to build a formidable competitive advantage. The company’s business
strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and
services. The vertical integration provides control over the entire user experience or process from hardware to software
which facilitates higher customer loyalty and provides lock-in. The vertical integration that Apple achieved is difficult to
replicate as evidenced in recent times. None of the company’s competitors were able to replicate this model with resonating
success as Apple. This provides Apple with significant competitive advantages. Apple’s customized in-house chip design,
well integrated hardware, software, applications and service equips the company with an ability to create high quality
products that are unmatched in the industry. Apple’s vertical integration strategy enabled it to create products which are
providing the customers with what it calls a good product experience.
Apple enjoys a favorable competitive environment provided by the user dependence on iOS which enables it to earn
incremental earnings by offering all associated devices. In the era of convergence this is a sustainable competitive
advantage. Apple’s sustainability of market share stems from the fact that it was able to successfully connect its devices
with each other and one generation of devices with the next. Through these integration models, Apple built sustainable
competitive advantages that are hard to replicate.
Strength – High Average Selling Prices (ASPs)
Apple has launched several successful products and follows a strategy of catering to high value customer base. Apple’s
products ASPs continued to remain stable while rest of the industry witnessed declining ASPs. The Apple iPhone which
was initially launched at $600 remained immune to the decline in ASPs in the smartphone category. The estimates indicate
that Apple’s iPhones sold at an ASP of $645.2 in FY2016, suggesting a fairly healthy demand for the iPhone in 2016. Also
during the quarter ending December 2016, the company sold 78.3 million units. The average iPhone price was $695, an
increases of $4 over the same quarter last year.
Apple’s ability to command high ASPs and defend the same highlights the superiority of the company’s products. Moreover,
Apple’s products were able to maintain high ASPs despite entry in to the developing economies where ASPs of consumer
goods are usually pressurized. This once again highlights that Apple was able to gain from its product strategy which
enabled it to defy many industry downtrends.
Strength – Strong Research and Development Capabilities
The company has strong research and development (R&D) capabilities. Apple has been consistently spending on the R&D
functions. It devotes significant resources and attention to develop consumer-preferred products. The company’s ability to
compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products,
services and technologies to the marketplace. Apple continues to develop new technologies to enhance existing products
Apple Inc- Financial and Strategic Analysis Review
Reference Code: GDTC27353FSA
Page 3
Apple Inc
and to expand the range of its product offerings through R&D, licensing of intellectual property and acquisition of third-party
businesses and technology. The company spent $10 billion, $8.1 billion and $6 billion on R&D in FY2016, FY2015 and
FY2014, respectively on R&D. The strong R&D capabilities allowed the company to introduce new products. For instance in
2016, Apple introduced TV app, which offers access to TV shows and movies from multiple apps on Apple TV, iPhone and
iPad and helps discover new content to watch. Further, the company introduced MacBook Pro which replaces row of
function keys with a Retina-quality Multi-Touch display called the Touch Bar. Also in the same year, Apple introduced
AirPods, a wireless headphone with advanced technology, and smartwatch Apple Watch Series 2.
Strong R&D capabilities provide a competitive advantage to the company by enabling it to launch new products that
effectively enhance revenues and market share.
Strength – Robust and Extensive Distribution Channels
The company has robust and extensive distribution channels. It uses both direct and indirect distribution channels to
effectively reach its customers primarily in the consumer, small and mid-sized business, education, enterprise, and
government markets. The company sells its products and resells third-party products in most of its major markets directly to
consumers and small and mid-sized businesses through its retail and online stores and its direct sales force. The company
has been continuously improving its distribution capabilities by expanding the number of its own retail stores worldwide.
The company’s retail stores are typically located at high-traffic locations in quality shopping malls and urban shopping
districts. By operating its own stores and locating them in desirable high-traffic locations the company is better positioned to
ensure a high quality customer buying experience and attract new customers. The stores are designed to simplify and
enhance the presentation and marketing of the company’s products and related solutions. Few of its rivals have their own
physical retail stores and none have such a vast network of them.
Apple also employs a variety of indirect distribution channels, such as third-party cellular network carriers, wholesalers,
retailers and value-added resellers. Apple has invested extensively in programs to enhance reseller sales by placing quality
Apple fixtures, merchandising materials and other resources within selected third-party reseller locations. Through the
Apple Premium Reseller Program, certain third-party resellers focus on the Apple platform by providing a high level of
product expertise, integration and support services. The company also supports mobile learning and real-time distribution
of, and access to, education related materials through iTunes U, a platform that allows students and teachers to share and
distribute educational media online. The company also sells its hardware and software products to enterprise and
government customers in each of its reportable operating segments.
Thus, the robust and extensive distribution capabilities of Apple enhance its customer reach and provides incremental
growth opportunities.
Apple Inc – Weaknesses
Weakness – High Dependence on iPhone and iPad Product Lines
The company’s revenues and growth rates are largely dependent on iPhone and iPad product lines. The iPhone and iPad
product lines together accounted for 73% of the total revenues in FY2016. Although, these product lines have been the
growth drivers for the company, any future decline in the growth rates could impact the company’s performance.
Dependence on few product lines increases the business risk, especially in an industry characterized by fast paced
technological changes. The market share losses of key products could have a material adverse impact on the company’s
growth prospects.
Apple Inc – Opportunities
Opportunity – Positive Outlook for the Global Smartphone Market
The global smartphones market has been growing robustly over the past few years and is expected to grow consistently in
the coming periods. According to industry estimates, the worldwide smartphone shipments are expected to reach 1,530
million units in 2017. Furthermore, the shipments are expected to grow at a compound annual growth rate (CAGR) of 4%
during 2017-21 periods to reach 1,770 million units by 2021. Apple is well poisoned to benefit from the growing end
markets. The company’s iPhone is one of the leading smartphone products globally. In FY2016, Apple sold approximately
211.8 million iPhones. Robust outlook for the smartphone market will increase the company’s sales in the coming years.
Opportunity – Smart Wearable Devices Market Offers Robust Growth Opportunities
The market for wearable devices has been growing strongly over the past few years. According to industry estimates, the
Apple Inc- Financial and Strategic Analysis Review
Reference Code: GDTC27353FSA
Page 4
Apple Inc
wearable devices market size is expected to reach a value of $12 billion by 2023 growing at a CAGR of over 24% during
2016-23 periods.
Apple is keen to benefit from the growth opportunities offered by these end markets. The company launched Apple Watch
in 2014. Apple Watch is a personal electronic device that combines a watch technology with an iOS-based user interface
created specifically for a smaller device. Apple Watch features Digital Crown, a navigation tool that allows users to scroll,
zoom and navigate. It enables customers to communicate in new ways from their wrist and features Force Touch, a
technology that senses the difference between a tap and a press and allows users to access controls within apps.
The company has been enhancing its Watch devices over the years. For instance, in 2015, Apple and Hermes introduced
Apple Watch Hermes, a new collection of Apple Watch and also introduced watchOS 2. In 2016, Apple introduced Apple
Watch Series 2, a smartwatch which helps user access third-party apps, receive and respond to notifications and use Apple
Pay. Further in 2016, Apple collaborated with Nike to launch Apple Watch Nike+, which features GPS, a dual-core
processor and watchOS 3. It also includes exclusive Siri commands and Nike watch faces along with Nike+ Run Club app.
Apple is well positioned to tap the growing markets and enable revenue growth in the future.
Opportunity – Rising Adoption of Apple Products in the Enterprise Market
The company has been focusing on the enterprise markets over the past few years as part of its strategy to enhance its
revenues in the wake of the growing adoption of bring your own device (BYOD) across enterprises. Adoption of BYOD has
been robust in the recent times. Firms are using smartphones, laptops, and wireless solutions to save on building a
dedicated network. According to industry estimates, the global market for BYOD and enterprise mobility was valued at $35
billion in 2016. Further, the market is expected to grow at a CAGR of 16% during 2016-21 periods to reach a value of
approximately $73.3 billion by 2021.
As BYOD trends starts making inroads in the enterprise sector, Apple will be able to effectively sell into this space. The
popularity of the iPhone and iPad with consumers is spilling over into the business world, as mobile users increasingly use
their personal devices for business purposes. In recent times, companies are opening up their mobility strategies to allow
for more choice, which has benefitted Apple. In addition, to further enhance its enterprise adoption, the company
announced an exclusive partnership with IBM to launch business apps, to bring IBM’s big data and analytics capabilities to
iPhone and iPad, in 2016. The partnership aims to launch more than 100 industry-specific enterprise solutions including
native apps, developed exclusively from the ground up, for iPhone and iPad. Further in 2016, Apple and Deloitte
announced a partnership, under which Deloitte will open a new practice to help corporate clients work with Apple products.
Apple has also entered into a partnership with Cisco for optimizing Cisco networks for iOS devices and apps, and
integrating iPhone with Cisco enterprise environments. Additionally Apple and SAP entered into a partnership to deliver a
new iOS software development kit (SDK) and training academy for developers, partners and customers to build native iOS
apps as per their business needs.
The positive outlook for the BYOD and enterprise mobility market provides a robust growth opportunity for the company to
increase its revenues and market share in the coming years.
Opportunity – Apple Pay Provides Robust Growth Opportunity
Apple Pay is expected to provide incremental growth opportunities for the company. Apple Pay, the company’s mobile
payment services works with iPhone, Apple Watch, iPad or Mac through a Near Field Communications (NFC) antenna
design, a dedicated chip called the secure element, and the Touch ID. Apple Pay does not require Apple Pay-specific
contactless payment terminals, and can work with existing contactless terminals. Apple Pay allows users to add their credit
or debit card on file from their iTunes Store account. Apple Pay also works with the Apple Watch. It was initially launched in
the US and the UK. Currently Apple Pay is available in 12 countries, including the US, UK, China, Australia, Canada,
Singapore, France, Russia, Japan, among others.
The Apple Pay is expected to provide new growth opportunities for the company in the medium to long term. According to
industry estimates, the mobile pay market was valued at approximately $21 billion in 2016. Furthermore, the market is
expected to grow at a CAGR of approximately 40% during the 2016-21 periods to reach a value of $112 billion by 2021.
Apple Pay is an extension of the company’s iOS ecosystem, which makes it a disruptive player in the fast growing mobile
payments industry. The strong outlook for the end market coupled with Apple’s robust smartphone market share and
iTunes accounts provides incremental growth opportunities to enhance revenues and market share.
Apple Inc- Financial and Strategic Analysis Review
Reference Code: GDTC27353FSA
Page 5
Apple Inc
Apple Inc – Threats
Threat – Premium Pricing Could Limit Growth in Emerging Markets
Price can be one of the key competitive disadvantages of Apple that the competitors can effectively use to gain …
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