Posted: December 1st, 2022

Apple Inc. Peer review assignment

Apple Inc.

Section I: Table of Contents

Executive Summary……………………………………………………………………………………

Introduction to Apple Inc…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

External Analysis……………………………………………………………………………………………………………………………………………………

Financial Analysis………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….

Internal Analysis……………………………………………………………………………………………………………………………………………………….

Strategic Recommendations and Action Plan………………………………………………..

References………………………………………………………………………………………………………………………

Apple Inc. Overview

Apple Inc. is a publicly traded multi-trillion-dollar Fortune 500 firm. Apple Inc., founded in 1976 by Steve Jobs and Steve Wozniak, is one of the world’s largest technological businesses. Apple Inc. initially simply offered computers to its consumers, rather than all of the goods that we know them for today. Apple Inc. presently sells iPhones, AirPods, iPods, iPads, Apple Watches, MacBook laptops, and MacBook desktop computers. Apple Inc. has developed various products and followed current trends such as updating software and giving customers with updated versions of current gadgets over the years.

Strategic Positioning and Financial Analysis

The Financial Statement:

As 2022 comes to a close, it’s tough to claim that Apple’s future estimates will be anything but challenging. With the Covid-19 epidemic still present in the worldwide population and marketplace, Apple’s supply chain capabilities with suppliers remain stretched as vendors look for ways to compensate for lost worker capacity owing to worker illnesses and stay-at-home orders. Coupled with Russia’s new and evolving battle against Ukraine, our supply chain operations have been further curtailed, and our worldwide market capitalization has plummeted, as Apple had a moral and ethical commitment to suspend all business within Russia in support of the Ukrainian people. While this is by no means an entire list of the future difficulties that Apple will face and overcome, they are the ones that pose the most danger to Apple’s future growth and global supply chain operations.

Given the global economy’s supply chain challenges, Apple remains above par and proactive when compared to their immediate market, sector, and industry competition. Throughout the Covid-19 outbreak and now the current conflict between Russia and Ukraine, as well as the tightening of global markets and economies, Apple’s intellectual competitive advantage(s) with vendors, worldwide suppliers, and customers has been jeopardized. As Apple products have become the “gold standard” for trend, security, and performance, it has not been without growing pains as Apple attempts to navigate the ever-present risk of defaulting on their exponential sales orders of Apple products, which may further exacerbate the issue of getting “newly” released products into the hands of their consumers, and where those consumers, who are now more connected globally than ever-before, may lose out to competitors such as: Microsof The team will narrow in and focus on Apple’s direct competitors in the categories of Consumer Discretionary Spending as the cornerstone of this strategic financial audit of Apple. While the number of “tech” firms based only on ticker symbol appears to be endless, for the sake of this strategic Financial Analysis, we will study Apple’s financial position and forecast our findings with: Microsoft, HP, and Lenovo.

The first level of our Apple Financial Analysis begins with the company’s financial health and longevity as reported on the balance sheet. Account Receivables, Inventory, and Accumulated Depreciation are the benchmarks used in Apple’s financial analysis, as well as its closest competitors. Currently, we can see Apple, Microsoft, and HP all maintained their respective appreciated Accounts Receivables over the last decade, adjusted for the Covid-19 pandemic; however, Apple in fiscal year ’21 saw a 63% increase over the previous year, beating out their respective competitors, Microsoft, HP, and Lenovo. Which takes us to the first strategic financial competitive advantage Apple bestows on our team. As the pandemic rages on over the world, Apple has taken the tough stance of raising their inventory capacity in order to reduce Covid-19 Pandemic limitations and worker lockdowns in their primary production and manufacturing sites throughout China. However, positioning for maximum market cap has its own set of strategic analytical issues. We can see that Apple’s inventory increased by 62% in fiscal year ’21, which is partly due to the previous Presidential administration and their tariff war, which was exacerbated by the Covid-19 Pandemic, the Russian War in Ukraine, and a global economy that was beginning to show signs of excess and exhaustion. As inventory began to pile up on ships, docks, trucks, and warehouses, Apple was able to match current global demand by replenishing inventory levels with frozen transit inventories. Again, Apple has a strategic advantage since they can supply demand without jeopardizing revenue, manufacturing predictions, or cash flows. Because of detained inventory at points of entry, Apple can still rely on their other intangible assets, which have been growing YoY since their strategic inception the previous decade, and have continued to produce value via market share, revenue, and new subscribers. As inventory sat idle outside of the country, Apple leaned significantly on their “service” sectors to make up for the revenue drop caused by the external global pressures discussed above. Apple TV, the App Store, and iTunes have provided Apple with much-needed revenue sources, which can be observed as dropping and diminishing according to Accounts Receivables from 2019 to the present. Seeing the future value and ROE (Return on equity) on this strategic position, not with the intention of more of the global population staying at home as a result of the Covid-19 pandemic, but more of the global population leaving their current socio-economic position(s) and advancing into higher tax-brackets and income levels, who are now afforded the opportunity to take in more Consumer Discretionary vs. being heavily reliant and dependent on Consumer Staples.

This financial strategy has paid dividends, despite the fact that the initial cost of these investments was deemed unfavorable; however, having access to “free” money in the market at the time, combined with historically low interest rates and a greater number of individuals globally climbing the income ladder, has allowed Apple to build up these intangible enterprise value positions, as seen in Apple’s balance sheet. These similar positions are not given to Apple’s direct competitors, and even if they were, it would take Microsoft, Lenovo, and HP decades to develop a solid strategic stance on how to join these intangible markets, create income, and gain market share from Apple. Apple has been able to diversify its revenue streams just as the global economy begins to cool and contract with significant amounts of volatility, and even though consumers are not flocking to their flagship stores around the world, Apple is still able to capitalize on ongoing trends in the global economy and not just Apple’s primary industry and sector operations.

The Profit and Loss Statement:

The financial analysis of Apple’s income statement in comparison to its sector competitors and benchmarked against the S&P500 demonstrates how Apple is constantly capable of increasing their market share through innovation and effective asset allocation. The income statements of Apple and its three closest competitors, HP, Microsoft, and Lenovo, show an increase in net cash available year over year; however, as Apple’s cash position has increased year over year, it is also important to note that Apple’s short-term liabilities have increased as well, out positioning Apple’s cash flow position year over year. While Apple’s cashflows have stayed in the range of 30% of total current liabilities, which is higher than the industry and Graham’s standards of 25%, Apple has been able to meet shareholder expectations by efficiently employing investors’ capital for short-term and long-term goals and commitments. When comparing Apple to Microsoft in terms of cashflow, we can see that both firms chose to invest surplus revenue in short-term investment plans, which aided in the payment of Apple’s increasing short-term liabilities as well as R&D (*Source Microsoft, Apple, Lenovo, HP). Three statements The final submission will comprise income statement, balance sheet, and cash flow statement analysis). This method of properly utilizing short-term finance allows Apple to maintain its market share, capitalisation, and shareholder value. This strategy, however, has not severed HP and Lenovo’s “novice” organizations, where a late strategic analysis of their immediate environment shows these businesses deciding to invest in short-term investments, only to see the value and competitive financial advantages diminish to the point where HP and Lenovo were suffering losses from the late entry into an increasingly volatile market and their cash flow reserves were required to “cover” their short-term liabilities.

The Statement of Cash Flows:

When compared to the stated competitors (Microsoft, Lenovo, and HP), an analysis of Apple’s Cash Flow Statement reveals a fundamental tool Apple has chosen to implement in their efforts to attract and retain top talent, which can help facilitate Apple’s enterprise value and increase their intangible assets. According to the cashflow statements of the four businesses, Apple and Microsoft opt to offer attractive stock-based incentive plans for their workers. This is yet another strategic advantage that Apple has received as a result of a solid financial foundation plan that has been developed and invested in since Apple’s beginnings. However, when compared to HP and Lenovo, we can see that both companies offer stock-based compensation plans to their employees. What distinguishes these two businesses from Apple and, to a lesser extent, Microsoft is the frequency of fluctuations in their stock-based compensations, which the market may interpret as volatile, with a disjointed management team, and/or a depreciating or diminishing strategic competitive advantage. At the heart of Apple lies a strong belief in the firm’s underlying structure and the message Apple wishes to send. Using a bottom-up analysis, we may read HP and Lenovo’s oscillations as a company in financial crisis or a corporation experiencing growth or identity challenges. Investors and stockholders may have a hesitant reaction because management or the organization do not believe the organization is as valuable as the market says it is.

SWOT Assessment

A SWOT analysis is a precise, practical method of analyzing firm conditions and determining the factors that enable an organization to prosper. SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal firm conditions, whereas opportunities and dangers are external environmental variables.

• Strengths: The business’s favorable internal markers, business procedures with competitive advantages.

• Weaknesses: The difficulties that a corporation must overcome in order to compete with its competitors.

• Opportunities: External aspects in the company’s conditions that can be beneficial to the business and aid in product sales.

• Threats: These are external variables that can impede the Company’s growth.

1. Strengths

• Brand Recognition

Apple’s brand worth has fluctuated throughout the last decade, but it will stand at an astonishing 947 billion US dollars in 2022. Apple topped a list of the most valuable brands in the world, beating out Amazon, Google, and Microsoft. Statista Research Department, Statista 17, 2022). Apple products offer innovative functions and distinctive designs, earning them a worldwide reputation.

• The introduction of new, innovative products

Apple creates, manufactures, and sells smartphones, computers, tablets, wearables, and accessories, as well as a variety of connected services. iPhone; Mac; iPad; and Wearables, Home, and Accessories, which includes Air Pods®, Apple TV®, Apple Watch®, Beats® devices, Home Pod® mini, and accessories. Advertising is one of Co.’s services.

AppleCare, which includes fee-based service and support products under the AppleCare® brand; cloud services; digital content (App Store®, Apple Arcade®, Apple Fitness®, Apple Music®, Apple News+®, and Apple TV+®); and payment services (Apple Card® and Apple Pay®, a cashless payment service). (2)

The promise of Apple manufacturing its own hardware, software, and other items propels the company to the top of the food chain. Apple’s capacity to compete with rivals is dependent on its ability to introduce innovative and competitive products, services, and technology on a continual and timely basis. R&D facilities that are active in-house continue to develop new technologies, enhance existing goods and services, and expand their offers through R&D.

• Customers, Sales, and Marketing

Apple effectively reaches its clients in the consumer, small and medium-sized company, education, enterprise, and government markets through direct and indirect distribution channels. In most of its major markets, the Company sells its own products and resells third-party items directly to consumers and small and medium-sized enterprises via its retail and online stores and direct sales force. Net sales through the Company’s direct and indirect distribution channels amounted for 30% and 70% of total net sales, respectively. (3)

Apple’s retail shops guarantee a high-quality consumer experience and provide opportunities for direct engagement with skilled employees. With such great consumer service, an increasing number of people would pick Apple due to its individualized care. The retail stores of the Company are located in high-traffic areas of excellent shopping malls and urban shopping districts. The Company is better positioned to offer an improved consumer buying experience and attract new customers by running its stores and locating them in desired high-traffic regions. The design of the store simplifies and improves the presentation and promotion of the Company’s products and related solutions. Apple also uses third-party cellular network operators, distributors, retailers, and value-added resellers as indirect distribution channels. In its reportable operating segments, Apple sells hardware and software to enterprise and government customers. (3) (The performance of Apple Inc’s customers)

2. Deficiency

• Lawsuits

Apple is facing multiple lawsuits after admitting to slowing down iPhones to preserve their batteries. In its defense, it claimed that it did so to reduce power consumption, preventing them from shutting down abruptly. The update is intended for the iPhone 6, iPhone 6S, iPhone SE, and iPhone 7. One of the lawsuits is worth nearly $1 trillion. Simultaneously, Apple offered to reduce the cost of purchasing a new phone to $29.

Proview Electronics of China filed a trademark infringement claim against Apple for the term “iPad.” According to the company, even though Apple purchased the brand from them, they did not pay for it when written in Chinese. The out-of-court settlements are estimated to be worth more than $1 billion, with Apple paying $60 million and purchasing the trademark. (4) Parker (2020)

• Products that are only compatible with Apple software

People must create an Apple ID whenever they purchase an Apple device. Once that id is created, their device will only function with that Apple id. Users are inconvenienced because Apple products are incompatible with any other software. Because their operating systems are incompatible with other devices, it is difficult for people to switch to iOS-based devices because they must be more user-friendly, which takes some time to get used to.

3. Possibility

• Rising interest in cloud-based services

The use of cloud services by businesses and individual users to collect data quickly has increased dramatically. The market for cloud-based services is expanding, and Apple can broaden the scope of its iCloud services and applications. Apple may offer Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS).

• Repeat Customers

Customers are influenced to purchase the latest iPhone by Apple’s product announcements and releases. Globally, it is the iPhone that drives Apple’s sales revenue. Customer loyalty underpins the phenomenon of the Company’s long-term success. Customers keep coming back for more because Apple has managed to create an aura of exclusivity and luxury around their products. The promise of joining an exclusive club of iPhone, iPad, and Mac owners also entices new users. This trend can be seen in the increasing market share of iOS smartphone sales. As a result, the premium pricing serves as bait and hook rather than a deterrent. Apple’s annual financial results reflect the company’s growing success, with global revenue expected to exceed 274.5 billion US dollars in 2020. (5) (Statista Research Department and 17, Apple: Brand Value 2022 2022)

4. Dangers

• Fierce Competition

Apple’s products and services compete in highly competitive global markets marked by aggressive price cuts and resulting downward pressure on gross margins, continuous improvement in product price/performance characteristics, and frequent product introductions. Furthermore, the competition is characterized by evolving industry standards, competitors’ rapid adoption of technological and product advancements, short product life cycles, and consumer price sensitivity. (6) (Johansson, 2022). Competitors selling mobile devices and personal computers compete with aggressive pricing and extremely low-cost structures. Product price, features, relative price and performance, quality and reliability of product and service, design innovation, and third-party accessories are all important competitive factors for the company.

• Pandemic COVID-19

With its high-end new smartphones, the iPhone 14 Pro and Pro Max, it encountered supply chain issues. The Company explained that slow shipment of those new products had been slowed due to COVID-19 restrictions that remained in place in China. Foxconn manufactures 70% of iPhones in Zhengzhou; authorities have locked down an industrial park where Foxconn is located. (7) (Kika, 2022)

Porter’s Five Forces Model

Apple in the Market: A Five Forces Analysis

Apple, Inc. (NASDAQ: AAPL) has achieved massive success as a company through its Macintosh computers and operating system, the iPad, iPhone, and other products, despite going through several up and down cycles since its founding in 1976.

2(8) (This month in business history: Apple Computers, Inc. is founded.)

Apple’s product expansion and marketing techniques demonstrate an understanding of demand in order to deal with the significant market demand that can have an impact on Apple’s demand allocation.

Michel E Porter’s “Five Forces” model indicates the subsequent powers or intensities of outer aspects in Apple Inc.’s competitive industry environment.

A Five Forces analysis of Apple’s position in the technology sector identifies buyer bargaining power, the threat of buyer substitution, and industry competitors as the three most important marketplace forces that can influence Apple’s profitability. Supplier bargaining power and the threat of new market entrants are all weaker components of the fundamental forces.

1. The possibility of new entrants

The threat of new entrants is low in Porter’s five forces model. Launching a large company in the industry is extremely costly, requiring finance, human resources, infrastructure, and marketing. Making a name for yourself in personal computing and gadgets necessitates brand recognition, which is an additional cost.

• High asset requirements are a weak force.

• The cost of brand growth is another weak force.

Building a strong brand to compete with large corporations such as Apple is extremely expensive. External factors make new entrants vulnerable. Large corporations, on the other hand, can enter the market.

2. Buyers’ bargaining power

Individual and collective bargaining power are the factors responsible for customers’ bargaining power in Porter’s five forces for Apple. Because losing a single buyer has no effect on Apple’s earnings, unique bargaining power is limited.

• A powerful force with a low switching cost.

• A weak individual bargaining power.

Customers switching brands gives Apple more leverage to ensure customer satisfaction. On the other hand, each buyer’s purchase is insignificant in comparison to the Company’s total revenues, which collectively have a significant impact. Customers can switch from one provider to another because detailed relative data about the features of competing products is available.

3. Suppliers’ bargaining power

Apple has a large number of suppliers who can provide parts, packaging, and anything else associated with Apple products. Furthermore, Apple enjoys economies of scale, and suppliers want to keep the Business. Apple Inc. can access multiple suppliers worldwide due to the international scope of its supply chain.

• A large number of suppliers is a weak force.

4. The possibility of substitute products or services

A moderate threat of substitute products, according to Porter’s five forces

• The abundance of substitutes is a powerful force.

• Substitutes that are counterproductive are a weak force.

Some Apple product substitutes are readily available on the market. According to Porter’s Five Forces model, this external factor wields considerable power. Regardless, these replacements have lower performance due to fewer components. Many buyers would rather use Apple services for their convenience and advanced features. This circumstance pushes substitution as a moderate force influencing the Company’s business.

5. The level of competition in the industry

According to Apple competitors analysis, many companies compete directly with Apple, including Google, HP, and Samsung. Alphabet Inc, Microsoft Corp, Samsung Electronics Co Ltd, Dell Technologies Inc, and HP Inc are its main competitors.

• The competitive hostility in R&D and invention is a powerful force.

• Because consumers can buy a new product without making significant investments, the low switching cost is another powerful force.

Some competitors have more financial, marketing, and other resources, allowing them to engage in more aggressive marketing and development activities. Every company conducts outstanding research and development in order to present the most innovative products and gain market share. Switching devices are typically low to moderately priced, and customers do not require significant investment.

Internal Analysis of Apple Inc.

Apple Inc.’s internal analysis will discuss the business model that they use to conduct business on a daily basis. The internal environment of Apple Inc. will be subjected to a SWOT analysis.

Business Model of Apple Inc.

Apple Inc.’s business model is one that is focused on pushing their products and services. “Apple Business Model focuses primarily on selling its products and offering services through subscriptions,” writes Pereira. The business model is Helping Apple Inc. in releasing new products and services to their customers. Every year, Apple Inc. releases new products that are better than the products released the previous year. Apple Inc.’s business model is working for them, and they are generating above-average profits with it. With Apple Inc. producing these newer products, they are raising their prices, allowing them to earn above-average profits. Apple Inc. not only manufactures products, but also offers subscription services (Apple Music, Apple TV, and so on) to their customers. These subscriptions also Help Apple Inc. in generating revenue.

SWOT Analysis of Apple Inc.

Apple Inc. is a household name around the world, and most people own or have owned an Apple device at some point in their lives. In this section, we will examine the strengths, weaknesses, opportunities, and threats that Apple Inc. faces in the modern world.

Strengths

Apple Inc. has many market advantages, but only a few will be discussed. The following strengths will be discussed: brand reputation and customer loyalty. Apple Inc. is a well-known company with a strong brand reputation. “Apple, for example, was named the World’s Most Admired Company for the 14th year in a row,” writes Aten. Apple Inc.’s name indicates that they have a good reputation. I know people who have had an Apple device fail on them and contacted Apple, who worked with them to get the device working properly. Apple Inc.’s customer loyalty has aided them in their current position. Most people, once they have an Apple device, continue to buy Apple devices rather than switching.

Weaknesses

Apple Inc.’s pricing for their devices and services to customers is one of their weaknesses. Apple Inc. charges higher prices for their products and services than their competitors. Every year when Apple releases a new device, the price of the product skyrockets in comparison to the previous year. Apple Inc. subscription prices have recently risen slightly above their usual levels.

Opportunities

Apple Inc. has numerous opportunities, but only a few will be covered in this section. Wearable technology and customer growth will be the topic (sample nursing essay examples by the best nursing assignment writing service)s of discussion. Apple is growing alongside the wearable technology industry. Apple provides customers with Apple Watches and AirPods, and their inventory is growing. Apple Inc.’s customer base is expanding in tandem with the introduction of new devices. The more products Apple offers, the more customers it will gain.

Threats

The most significant threat to Apple Inc. is its competitor Android, which is expanding in line with current trends. Android is producing more products in order to keep up with Apple trends after falling behind. Android, like Apple, is now offering watches for its customers to wear. Customers can now purchase an Android phone that converts into a larger phone with a larger screen.

References

1. Statista Research Department published & 17, J. Apple: 2022 brand value Statista. https://www.statista.com/statistics/326052/apple-brand-value/ (accessed November 19, 2022).

2. Request for Shibboleth authentication. https://www-mergentonline-com.proxy.longwood.edu/companydetail.php?compnumber=12161 (accessed November 19, 2022).

3. The customer satisfaction of Apple Inc. The CSI Market. https://csimarket.com/stocks/markets glance.php?code=AAPL Retrieved November 19, 2022

4. G. Parker The five most significant lawsuits Apple has ever faced. Money Corp. https://moneyinc.com/biggest-apple-lawsuits-in-history/ (accessed November 20, 2022).

& 17, J. Statista Research Department, & 5, J. Statista Research Department, & Statista Research Department, & Stat Apple: 2022 brand value Statista. https://www.statista.com/statistics/326052/apple-brand-value/ (accessed November 19, 2022).

6. E. Johansson Apple will not discuss the following issues at its April event. Verdict. Retrieved November 19, 2022, from https://www.verdict.co.uk/5-issues-with-the-Apple-April-Event/.

7. Kika, T. Apple has a Covid issue. Newsweek. https://www.newsweek.com/apple-has-covid-problem-1757524 (accessed November 19, 2022).

8. This Month in Business History: Apple Computers, Inc. Research Guides Retrieved from https://guides.loc.gov/this-month-in-business-history/april/apple-computers-founded on November 19, 2022.

G. Dess, G. MacNamara, A. Eisner, S.-H. Lee, and S. Sauer Wald. Text and case studies on strategic management Education from McGraw Hill.

“Apple Business Model,” Daniel Pereira. Business Model Analyst, https://businessmodelanalyst.com/apple-business-model/, 18 July 2022.

Jason, aten. For the 14th year in a row, Apple is the world’s most admired company… https://www.inc.com/jason-aten/apple-is-worlds-most-admired-company-for-14th-year-in-a-row-facebook-isnt-even-on-list.html, 6 Feb. 2021.

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