This multinational corporation operates in the U.S. the company designs and manufactures computer electronics, computer software and personal computers. Some of the manufactured products of the company include Macintosh computers, ipod, iphones, Mac OS X operating system among many other products. The company was established in 1976 in California. The company changed its name from Apple computer Inc. in 2007 to Apple Inc. to reflect the growth and expansion undergone by the company in the electronics industry. The company focused traditionally on personal computers. The company has employees of about 37,000, both permanent and temporary. The employee turnover in the company is about 20%.
Apple Inc. has a very good reputation established over time in conjunction with its philosophy of comprehensive aesthetic design. The good reputation has led to increased loyal customers of the company who are devoted to the brand of the company. In 2008, Apple Inc. was named by fortune magazine as the most admired company in the U.S (Apple, 2010).
Apple, Inc. Financial Trend analysis
The quarterly analysis of the performance of Apple, Inc shows that the company has been improving its performance over time. Working capital per share increased significantly from 22.28 in the third quarter of 2009 to 22.88 in the third quarter of 2010 though in the subsequent quarter, it declined slightly. The sales per employee increased leading to the increase in the increase in the return on invested capital (ROCI). Despite this increase, the price/cash flow ratio and the price/free cash flow ratios reduced. The ratios on capital structure showed a significant increase with the most significant increases coming from current liabilities per share that increased gradually from 12.79 in the third quarter of 2009 to 22.62 in the third quarter of 2010. Additionally, the current ratio also gradually declined over the subsequent quarters liabilities per share and the cash per share. Revenue per share also increased together with the current assets per share. However, working capital as a percentage of equity declined (Apple, 2010).
The profitability ratios did not show significant increase. The gross profit margin remained fairly the same over the five quarters with little fluctuations. The net profit margin increased from 19.2 in the third quarter of 2009 to 21.5 in the third quarter of 2010. However, it fluctuated in the other quarters with slight increases and declines. Income per employee increased significantly implying that company costs on employees increased. From the solvency ratios, it is clear that quick ratio of the company gradually decreased over the quarters from a high of 2.5 in the third quarter of 2009 to 1.7 in the third quarter of 2010. Even as efficiency ratios increased over the various quarters gradually, efficiency ratios declined gradually over the same period.
The percentage of sales against the industry shows the market share of Apple. It is evident that the company enjoys a dominant market share with the market share that increased over the five quarters. This is seen in the increase in the percentage of sales to the industry. Earning of the company in compared on to the earning of the industry remained fairly the same with only little gradual increase of the subsequent quarters. Moreover, they show that the company earning are almost equivalent to those of the industry. This only strengthens the fact that the company is dominant in the industry (Apple, 2010).
SWOT Analysis for Apple Inc.
- Technical savvy – Product lines are easy to use and stable. Recent integration with Microsoft products lines and Intel processors demonstrate ability and willingness to adapt to a diverse customer base. (Mossberg) Such innovation, however, would not be sustainable without a learning environment tolerant of mistakes. While the pure technical expertise alone is not a valuable or rare resource, it becomes very costly to imitate when it exists within the socially complex, entrepreneurial culture of Apple.
- Financial vitality – Cash reserves remained robust and stable despite stagnant market share growth in the computer hardware and software arenas. Apple exploited this by resisting market pressures to reduce costs, tightly integrating product packages, and forming strategic alliances (i.e. securing the backing of all major music distributors in the support of iTunes).
- Brand loyalty – The only way that Apple could maintain the financial vitality described above is via a fanatical, almost cult-like, affair with its customer base. Such brand loyalty is extremely costly and time-consuming to imitate.
- Steve Jobs – Jobs proved to be a vital component to Apple’s success. During his absence (1985-1996), Apple experienced the most turbulent (financial and innovative) timeline in its history. Immediately upon his return, he replaced most of the Board of Directors, pruned and focused the new product ideas, and delivered seven consecutive quarters of positive earnings to shareholders. (Farrell, 2009) As such, Jobs is certainly a valuable, rare, and hard to imitate resource that Apple fully exploits.
- Market share – Apple has historically been strongest in the US geographical and educational vertical markets. With the educational market facing tightening budget constraints and the US approaching a PC saturation point, Apple may need to burn cash more quickly and succumb to market cost pressures on its products without a strategic innovation, integration, or divesture (Huzefa, Deepti and Harmanjeet, 2009).
- Steve Jobs – For virtually the same reasons Jobs is a strength, he is simultaneously a weakness. The aggressive drive to bring innovative visions to life was noticeably absent and painfully felt (especially by shareholders) during his departure. The apparent absence of succession planning coupled with a lust for the limelight positioned Jobs as Apple’s single consciousness in the eyes of consumers and shareholders.
- Consumer electronics – With the startling success of the iPod and iTunes, Apple entered the consumer electronics market. By expanding the iTunes concept to downloadable mobile phone features and movies (podcasts), the door is now open to develop new and potentially profitable strategic alliances with peripheral component manufacturers (speaker, home stereo, etc.) and media transmission giants (Disney, TBS, Verizon, etc.).
- PC hardware and software market growth – With cross licensing of operating system platforms in place, Apple entered the high-volume business environment traditionally dominated by Windows-based PCs. The introduction of Intel-based processors prompted businesses to replace PCs with iMacs. They did this to gain a level of stability and reliability in their business applications that PCs failed to provide. An example is Japan’s Aozora Bank Ltd., who is replacing 2,300 PCs with iMacs. (Farrell, 2009) Apple must establish themselves as a credible player in business desktop applications to overcome the “desktop publishing” stereotype (Huzefa, Deepti and Harmanjeet, 2009).
- Legal risks – In a market that literally changes at the speed of thought, patent and copyright infringement risks remain high. As long as operating systems and support software packages continue to converge and remain relatively easy to imitate, present and future lawsuits are inevitable. The Apple records claim against iTunes remains unresolved.
- Competition – This threat occurs primarily on two fronts: PC hardware/software and consumer electronics. For the same reasons discussed in the opportunities section, the threat of being imitated (cloning, pirating, etc.) increases. As relative newcomers to the consumer electronics arena, will Apple retain a competitive advantage as they diversify their offerings (speakers, home entertainment systems, etc.)?
Organizational culture of Apple, Inc.
Apple has a very strong management team that is headed by its CEO and founder Steve Jobs. Through its management, the corporation has a strong team that ensures that the organizational culture is maintained. The team ensures redesigned packaging for many of its popular products to be more lightweight and take up less space in shipment. This means reduced emissions during transportation and results in a savings for the firm. Apple has also made moves to reduce the number of harmful chemicals used in the production of its products (Deutschman, 2000).
The Human Resources Management culture follows selective hiring practices to recruit and hire talented individuals. The company offers a variety of attractive employee benefits to complement direct wages. The benefits system is used to entice, and retain industry-leading talent to benefit Apple. The culture of the organization also involves innovation. The organization sets aside substantial amount of funds every financial year to steers innovation. According to Masi (2009), the amount set aside for innovation was increased by 66% in 2009 with the corporation spending about $1.33 billion on research and development. Apple works closely with its key suppliers to benefit all parties involved. Additionally, the organization has been able to increase the number of outlet stores for the distribution of the products of the organization. In this regard, the corporation should involve the following strategies to maintain a high operational culture and market dominance:
- Implement first-party quality checks in OEM factories: Despite working closely with OEM partners, Apple must always protect its image of quality. Implementing random quality check sampling and ‘quality audits’ in OEM facilities will ensure issues are caught early and that Apple’s OEM partners stay honest with their own quality control processes.
- Make productive use of unused cash: While having a large cash buffer is important to Apple, idle cash is not being used effectively. During the yearly capital budgeting process, Apple should set aside a sizeable portion of unused cash for investment. Unused cash does not create value for Apple, investing it in the near-term will provide benefits in the future to finance expansion and large capital purchases.
Continue a wise expansion of Apple Stores: Apple’s retail stores have been massively successful, that success can be furthered in new locations within the United States and abroad. During the expansion process, Apple must practice extreme caution to avoid over-saturation, the Starbucks effect, to retain the halo surrounding the stores and maintain their status as a destination.
Given the external environment and socio-cultural and technological trends and Apple’s unique strengths including the firm’s resources and capabilities, including unmatched industrial design teams, talented device engineers, patents and innovation dealing with user interface and usability a logical next step for Apple is to develop a market defining convergence device. These innovations have led to the strong financial performance of the company that is desirable by any investor. Therefore, it is possible to invest over $1,000,000 in the company stocks that are traded publicly. Additionally, investment in the bonds of the company with over $500,000 is still possible due to the strong expected future performance of the company. The positive performance of the company that is indicated by the positive balances on the balance sheet are enough to enable the company obtain any form of credit from any financial institution. If I were a member of the board of directors of a financial institution or the Federal Reserve, I would grant the company a credit of over $1,000,000.