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Apple, Inc. Business Analysis

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    Apple is one of the most successful modern companies and is the focus of many industry professionals inquiries into how a company can retain profitability for so long. This sample business analysis, from a professional writer at Ultius, explores Apple and the ways in which the company operates to maintain itself over time, as well as other factors that are important and impact the industries in which Apple competes.  

    Apple Inc. Business Analysis

    Apple, Inc., is one of the world’s leading providers of consumer electronics, personal computers, and related software along with Samsung and Sony.  The consumer electronics and information technology industry has its roots in the initial popularity and spread of basic household items starting in the early 20th century. The founding of many public and private radio stations in the 1920s went hand in hand with the urbanization of much of the United States.

    The ensuing demand for radios and, in later years, television sets, spurred the popularity of home electronics and set the stage for the development of further products in that field. By the 1980s, the increasing capabilities of personal computers and the popularity that the technology maintained in the general public meant that many in society assumed the automation of the American household would soon be complete.

    Impact of the internet on the computing industry

    Personal computing technology remained inaccessible and effectively useless for those without internet access, and the internet itself only became popularized by the end of 1996. Companies like Apple, Inc., Microsoft, and Intel led the charge with the development of software, hardware, and consumer applications for a variety of different platforms. Video games, long since in decline since the crash of 1983, experienced a significant resurgence in popularity and accessibility.

    The consumer electronics industry witnesses another massive surge in popularity with the birth of the portable MP3 player in the mid-1990s, and by 1998 the industry saw sales exceeding $75 billion on an annual basis. By the end of the 20th century, internet access and consumer electronics were prevalent and nearly guaranteed in most American homes. Companies like Apple, Sony, Samsung, Motorola, and others spurred development and distribution of portable music players, personal computers, household appliances, and entertainment systems all in an effort to guarantee market share and profitable exploitation of the rapidly expanding industry. 

    History of Apple Inc. 

    Apple, Inc., was founded on April 1, 1976. Led by Steve Jobs, Ronald Wayne, and Steven Wozniak. Though Wayne quickly exited the company, the success of the Apple I personal computer kit quickly catapulted the company into the spotlight. According to Cusumano (2008):

    the creation of the “graphical user interface” in 1984 with the development of the Mac, as well as the invention of the PowerBook in 1991 which “set the design standard for laptops”, were all technological innovations that helped to continue Apple’s success in the consumer electronics market (pg. 22). 

    Incorporated on January 3rd, 1977, Apple’s flagship Apple II product and its accompanying business software secured a place as the industry standard for spreadsheet automation and documentation in the workplace. The development of Mac-specific software that enabled companies and corporations to quickly perform advanced mathematical calculations and statistical analysis ensured that Apple would maintain a niche market at the very least, and the growing popularity of their desktop line ensured that sufficient market share versus that held by Microsoft would be acquired to continue development and growth. Ewards (2012) states that the creation of the Macintosh II

    “was a particularly glorious thing, because not only could the new system display color, but it also supported a color depth of up to 32 bits per pixel” (pg. 1).

    Thus, Apple’s continued research and development of innovative technologies contributed to its meteoric rise to the forefront of the industry. 

    Success beyond personal computing

    However, Apple’s true success came in 2001, when the company released the first model of the iPod, and later in 2007, with the release of the iPhone. These two product lines completely revolutionized the markets in which they reside, helping to drive and mold product research and design for years to come. By 2013, Apple had become one of the most well-run and popular consumer electronics providers in the market. The introduction of new technological innovations into the market has spurred growth, with the CEA expecting upwards of thirty-five billion worth of sales to come from smartphones alone (2013). Thus, the consumer electronics industry represents a significant and important sector of the United States economy, with Apple alone employing 80,000 individuals, and creating jobs for another 600,000 in the United States specifically (Apple, 2013). 

    Current status of the industry

    The consumer electronics industry is projected to grow upwards of three percent in 2013. The Consumer Electronics Association (2013) reports that it expects a

    “new record-high of $209.6 billion, up from $204 billion in 2012”.

    This growth is not unexpected, as the consumer electronics industry has experienced steady growth due to the popularity of cellular phones and tablets. Smith (2011) states that the consumer electronics industry has “rebounded and consumers rallied in 2010”, despite the downturn in the economy starting in 2009 (pg. 14). 

    A highly competitive market.

    Contrary to common expectations, Apple’s market share is hardly dominant, though it shows significant staying power in particular areas of the consumer electronics market. In the first quarter of 2012, Apple’s market share of tablet computing, for example, sat at 11.8 million units sold, whereas competitors sold only 8 million units. By the end of the first quarter of 2013, Apple had sold 19.5 million units, whereas competitors had sold 37 million. This represents a significant technical loss of market share, yet the overall industry is expanding at an incredible rate. Even with the relative reduction in market share as compared to the previous fiscal year, the tablet computing market is a clear example of the potency of the market as well as the capability of Apple to ensure continued growth in the face of staunch competition.

    Apple and the consumer electronics industry

    The Gross Domestic Product (GDP) of the United States and its respective growth rate 2010—2012 experienced shifts and variations, though overall growth remained at least positive in the years 2010-2013. US real GDP value:

    • 2010 stood at $13.18 trillion dollars
    • 2011 saw an increase to $13.44 trillion
    • 2012 ended with another slight increase in $13.67 trillion

    During the same period, Apple witnessed a growth of net income and the value of goods produced from:

    • $14,013 in 2010
    • $25,922 in 2011
    • $41,733 in 2012 stated value of  (prices in $ millions).

    Apple’s nearly twenty percent growth in value per year is incredible and is representative of the value on which the recovering United States and global economy places on consumer electronics, as well as the importance of marketing successful and endearing products to the consumer market. Compared to the Apple stock price shift, the overall growth in Apple’s price per stock, though noting the decreasing value in the past fiscal year, nonetheless again belies the CPI index and represents a market trend that once again proves Apple’s ability to maintain stock value growth in the face of an adverse market.

    US unemployment and Apple

    However, the unemployment rate of the United States in 2010 stood at 9.7%; 2011, 9.0%, 2012, 8.3%. Apple reports an increase of 35, 25, and 30 percent in the past three years, largely due to expanded retail outlets (2013, Apple Three Year Financial Report) Thus, we see that the trends in company data as compared to the national macroeconomic indicators seem to indicate a preference on behalf of Apple that responds favorably to national trends, with growth in all sectors exceeding national benchmarks and standards. 

    Apple Inc. fiscal and monetary policy 

    Apple’s fiscal and monetary policy is centered around the core concept of competitive price marketing based on its particular niche within the industry. It is not a company that attempts to undercut its competitors; instead, Apple focuses on providing product to a dedicated clientele that returns often for repeat business and upgrades. Fiscally, the federal government’s policies have offered the opportunity for growth in recent years, as the expansion and guarantee of federal aid over the consumer loan industry ensures sufficient assurance of credit boons to the consumer. In essence, the government’s change in monetary policy to spur further growth has had the effect of extending credit to more individuals, enabling the purchase of Apple’s comparatively higher priced products. The New York Times (2013) reports that the

    “nominal record high of 13.4% gained by the Standard & Poor's 500-stock index (S.& P.) in 2013, is attributed to Apple’s rise of shares as a result of the monetary stimulus policy of the U.S. Reserve” (pg. 1).  

    Thus, government policy has played an important role in establishing fiscal opportunities for continued growth. 

    Opportunities and challenges for Apple

    Thus far, Apple has shown a remarkable tendency to defy national macroeconomic trends and establish itself as a provider of quality consumer electronics and personal computer devices.

    • Opportunities--Apple’s ability to establish and retain a large client base, in addition to maintaining an innovative and easily accessible approach to new technology, means that Apple will remain at the forefront of personal consumer electronics for years to come.
    • Challenges--Apple’s aggressive pricing model alienates customers that may otherwise purchase Apple goods, and tends to drive away customers who are not as loyal to the brand name as others. Thus, Apple faces the challenge of opening itself to more liberal pricing models that enable it to attract consumers who are otherwise unwilling to pay the high price of Apple goods. Moreover, it is important to note that continued federal laxation and stimulus policies will continue to stress the availability of credit.

    Thus, the federal monetary policy will ensure that Apple faces both continued opportunities, but also threats from other sectors of the personal computing market where Apple’s market share is falling drastically. Though the Android operating system and its parent Google are significant competitors, it is clear that Apple retains a significant ability to continue operating at a profitable margin, with room for expansion in several key markets. 

    References

    "Apple Inc. - Financial History." Apple Inc. - Overview. N.p., n.d. Web. 28 June 2013. <http://investor.apple.com/financials.cfm>

    Crawford-Franklin, C., & Robinson, L. (2013). "Even in an age of wonders": radio as an information resource in 1920s America. Journal of Documentation, 69(3), 417-434. doi: 10.1108/JD-08-2012-0108

    Cusumano, M. (2008). Technology Strategy and Management: The Puzzle of Apple. Communications of the ACM, 51(9), 22-24. 

    Edwards, B. (2012). The Macintosh II: Celebrating 25 Years. Macworld, 29(10), 16-16. 

    S.&P. 500 Hits Record in Quiet Trading. (2013). New York Times, 162(56129), B6-B6. 

    Smith, S. (2011). CEA: U.S. CE Sales To Reach Record In 2011. TWICE: This Week in Consumer Electronics, 26(2), 14-15.

     
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