S.W.O.T.

Analysis

Strength

Apple Inc. has the unique ability to design and develop proprietary hardware, software,

applications, and services. Competitors have tired and currently are trying to imitate the

successes of the Apple product ecosystem but have fallen short due to not having strong

capabilities in designing, developing, and manufacturing both hardware and software,

applications, and services. Apple's brand is exclusive, with a highly regarded image around the

world, and its products reap high revenue margins compared to others in the market.

Weakness

Significant revenue source reliance on iPhone sales. Since the iPhone launched in 2007, the

iPhone has begun to define Apple with almost 70% of 2016 revenue (Cunningham, 2017).

Apple concentrates on a specific group of people (high income). Its prices are on the high end,

exclusive and limited compared to its competitors offering the same specification at half the cost.

Opportunity

Apple's development of new products has a rising demand from its consumer segment by

creating new products that grab customers' attention while maintaining its lead in the market.

Augmented Reality markets will be well worth over $.165 billion market industry by 2024.

Also, another opportunity is the expansion of Apple's distribution network, which is already

limited.

Threats
Laptops, smartphones, and tablets are a commodity due to competitors such as Samsung,

Google, Microsoft, and Amazon, amongst other fierce competition, have impacted Apple's gross

margins. Counterfeit products at lower prices, expansion labor costs have increased in foreign

operating companies, and product customized limitations are hurting Apple's bottom line.

P.E.S.T.E.L. Analysis

Political

The bulk of Apple's sales and manufacturing generates from outside of America. Political

instability in countries where it outsources can be affected, like the rising tensions between

America and China's tax policy and import restrictions issues.

Economic

The economy can affect Apple directly and indirectly, i.e., climate (recession/financial crisis) in

the market, inflation rate, interest rate, as well as, foreign currency exchange rates. Also, due to

the high cost of Apple's products, customer incomes can affect sales.

Sociocultural

Apple's design and quality are made with the consumer and customer in mind (satisfaction).

Apple has become a staple in education, lifestyles, and expensive buying habits (brand and

quality); Apple products speak for itself. Apple is socially responsible for formulating strategies

to open franchises and investing in the development of in-need countries. Apple's market is

booming in the U.S.

Technological
Technology is a significant source for Apple Inc. Recent trends within smartphones and gadgets

being hot commodities, the market has exploded. Changes in technology affect Apple

significantly, requiring more research, especially when it comes to cybercrimes. Apple's top

priority is keeping up with technology, designing and creating new inventions, a mist of its

competitors.

Ecological

Apple takes environmental responsibility seriously by taking a comprehensive approach to

reducing ecological issues. Creating products that significantly decrease negative environmental

impact, i.e., reducing the use of toxins.

Legal

Apple deals with legislation always due to the high potential of legal concerns. Knowing laws

and regulations help mitigate potential legal concerns. Apple deals with advance technology,

which requires the knowledge of patent laws, health and safety laws, intellectual property rights,

and many more.

Resources

- Human resources including designers, programmers, engineers, marketers, senior and

management members

- Hardware

- Software

- Distribution

- Financial

Capabilities
 - The ability to launch other service lines such as Apple Pay, Apple T.V., and Apple Car

- Financial capacity

- Marketing capability

- Strong branding

- Ability to adapt

Core Competencies (Rothaermel, p. 111)

- Superior industrial design in the integration of hardware and software

- Excellent marketing and retailing experience

- Establishing an ecosystem of products and services that reinforce one another in a

virtuous fashion

Four Findings of Facts

Management

Apple's traditional management structure is organized around functions and not products that

keep employees from working on their own inventions (MGMT, p. 3). Quality management is a

holistic approach ensuring quality is addressed in the decision area of operations management,

high-quality standards is a must. Apple's top management was also critical in the effort to nurture

an innovative organization because employees needed to know that they would not be

reprimanded for making risky choices when attempting a creative project (MGMT, p. 3). Apple's

H.R.M. strategies capitalize on the workforce capacity for product development and design.

Apple has challenges with maintaining a management team and continuing to release innovative

products, something in which many high-end companies struggle.

Apple's marketing strategy is straightforward, and to the point evolving around is first-class

branding and cult-like marketing. The profitability of Apple's products yields high margins,

pricing its products to customer segments and consumer expectations. Apple always keeps its

eyes to the future, continuously launching innovative products, raising the bar. In 2015, for

example, Apple entered the market for computer wearables by introducing the Apple Watch

(Rothaermel, p. 226). In 2017, Apple released the 10th anniversary model of its original iPhone,

introduced in 2007 (Rothaermel, p. 226).

Finance

Apple leads its industry in revenue and profits by keeping the global and regional economic

trends in foresight. Financial strategy within new markets, the pricing of products, and

investments are essential. In 2016, Tim Cook had been Apple's C.E.O. for over five years and,

and from a financial standpoint, he has been a definite success with Apple's revenue, profits, and

stock price, all doubling (MGMT, p. 6). Due to innovation Apple always has investors willing to

put invest in the firm because of high returns.

Accounting

Apple Inc., gross profit margin calculation, comparison to benchmarks (Dybek, 2019)

2019 Calculation

Gross profit margin = 100 × Gross margin ÷ Net sales

= 100 × 98,392 ÷ 260,174 = 37.82%

2019 Calculation

Operating profit margin = 100 × Operating income ÷ Net sales

= 100 × 63,930 ÷ 260,174 = 24.57%

Apple Inc., net profit margin calculation, comparison to benchmarks (Dybek, 2019)

2019 Calculation

Net profit margin = 100 × Net income ÷ Net sales

= 100 × 55,256 ÷ 260,174 = 21.24%

Apple Inc., ROE calculation, comparison to benchmarks (Dybek, 2019)

2019 Calculation

R.O.E. = 100 × Net income ÷ Shareholders' equity

= 100 × 55,256 ÷ 90,488 = 61.06%

Apple Inc., ROA calculation, comparison to benchmarks (Dybek, 2019

2019 Calculation

ROA = 100 × Net income ÷ Total assets

= 100 × 55,256 ÷ 338,516 = 16.32%

Ars Technica, 31 Jan. 2017, https://arstechnica.com/apple/2017/01/apple-sets-revenue-and-

iphone-sales-records-in-q1-of-2017/.

Dybek, Martin. "Apple, Inc. (A.A.P.L.): Analysis of Profitability Ratios." Stock Analysis

on Net, Stock Analysis on Net, 1 Nov. 2019, www.stock-analysis-

on.net/NASDAQ/Company/Apple-Inc/Ratios/Profitability#Ratios-Summary.

MGMT. [Columbia College].

Rothaermel, Frank. Strategic Management: Concepts. 4th ed, New York: McGraw-Hill,

2018.  eText