Apple Swot Analysis 1

Apple: Business Analysis II
MGT 521
August 22, 2011

Apple: Business Analysis II As of May 2010, “Apple, the maker of iPods, iPhones and iPads, shot past Microsoft, the computer giant, to become the world’s most valuable technology company” (Heft & Ashlee, 2010). Apple’s expansion in consumer electronics has garnered them a reputation as a powerhouse in this industry also. In this paper, I will review, analyze and summarize Apple Inc. financial health, technological advantages against its competitors, the affects of globalization and conduct a benchmark analysis. Income statements are reports used to show expenses and revenue for a specified time period. Balance sheets are used to report a company’s financial position on a particular day. A cash flow statement/report shows money coming in and going out during a specific time period. All are used to make the best and necessary decisions to determine a company’s profitability. In reviewing Apple’s financial statements in a year’s time, they beat last year’s net income quarterly results by 125%, which was their best quarter to date. With the sale of the iPhone up 142% to last year, the iPad sales up 183% to last year and the upcoming launch of the iOS 5 (iPhone 5) and iCloud this fall, sales are expected to produce strong double digit increases to those of last year during the holiday season. Year to date Apple’s business is up 82% to last year’s numbers overall. The sale of the iPod unfortunately declined in the third quarter by 20% to last year sales. Apple’s balance sheet and cash flow both indicate the company is financially sound and have ample cash reserves. In a recent statement from Apple’s CFO, Peter Oppenheimer, “We are pleased with our performance which drove quarterly cash flow from operations of $11.1 billion, an increase of 131 percent year-over-year” (Apple - Press Info, 2011). The concerning information is the declining sales of the iPod. The iPod sales have slowly declined since the introduction of the iPhone. This is primarily due to the iPhone having a dual purpose, serving as both an iPod and a phone all-in-one. Another concern that is not listed on Apple’s financial statements is that of Steve Jobs taking an indefinite leave of absence to focus on his undisclosed health issue. This is cause for concern because, this leave unlike previously, is indefinite. This also comes at a time when competition has become increasingly fierce, to stay on top or ahead of your competitor in the tech industry, which may also be a concern for Apple’s investors. In comparing Apple’s financial health to those of its competitors; IBM, Dell and HP, Apple has the strongest results thus far. Below is a graph that outlines each company third or second quarter results for year 2011.
| |Apple Q3, 2011 |HP Q3, 2011 |Dell Q2, 2011 |IBM Q2, 2011 |
|Revenue |$28.57B |$31.2B |$15.7B |$26.7B |
|Net Income |$7.31B |$1.9B |$1.1B |$3.7B |
|Gross Margin |41.7% |8.1% |7.3% |46.4% |

(Apple - Press Info, 2011; HP, 2011; IBM, 2011; Dell, 2011)
In comparing the financial results of the four companies, Apple has the strongest net income. This amount represents their income after all expenses. This number has thoroughly surpassed those of its competitors. This further indicates the strong financial health of Apple Inc. in comparison to its industry rivals. Management can best use this information to make the best decisions in the best interest of their respective companies. In thoroughly examining their balance sheets and income statements, areas of opportunities/improvement can be identified by lack luster sales or slow growth in the particular areas. Management will use this information to make well informed decisions regarding the financial health of the company. This information can be analyzed to determine if a product should continue in production, if the company is growing at a faster or slower rate than anticipated. The information can determine if the business should continue to operate, if the business should restructure or even close its doors. This information serves as a blueprint to the company’s success or a blueprint to its demise. Apple Inc. is a globally recognized product and brand. Sixty-two percent of Apple’s total business is in international markets. Apple operates 317 stores in 10 different countries (Apple, 2011). Apple sells more products overseas than in the U.S., because of this Apple have to ensure their product is easily adaptable to the country of where it is being sold. Apple has to ensure that its program and applications are country/territory/region specific. Apple has to design products that cater to international buyers. Apple has changed people’s expectations in cell phone capabilities with the introduction of the iPhone. It has changed the way people listen to and buy music with the introduction of the iPod and the launch of iTunes. Apple also has a large affect on how people want to receive or receive information, with applications that are accessible thru your phone or through their revolutionary tablet the iPad. Apple is the leader of the pack when it comes to their marketing strategy in comparison to that of their competitors. Apple’s technologically advances their competitors with their innovations. For example, with the release of the iPhone, the touch screen was not new, but Apple made it better. They made the touch screen better than before by giving it more functionality, than seen in other models made by competitors. In an article found in technewsworld.com, Rob Enderle states “Apple’s design are, well, elegant. There is no better word for it…Apple has the best-designed hardware from an aesthetics point of view of any vendor…no one has been able to design a better hard-drive based MP3 player than Apple did with the iPod” (Enderle, 2004). While Dell was a powerhouse and they rose to that because of their ability to keep pricing under control, Apple has skyrocketed passed them with their ability stay one step ahead of consumer’s expectations. Apple has somehow developed the ability to introduce a product that the average consumer did not know they wanted, now they can’t live without now and it has raised the consumer’s expectations to accept nothing less. While IBM has remained a steadfast competitor of Apple, they do not compare to the Apples advances into the consumer electronics industry with their introduction of the iPod and iPhone. The IBM ThinkPad is a powerful machine that is light and compact and was a strong competitor until Apple introduced its Mac Air. Comparing Apple’s best practices, operational practices and procedures and products and services to those of its competitors, Dell, IBM and HP, each company are somewhat similar in how they conduct business. A best practice of Apple is to create a product that is easy to own, learn and use in everyday life (Apple, 2011). Apple keeps its customer happy with their products through their customer services. Apple stores have representative that are easily accessible to assist the customer with any type of need. Dell was one of the first companies where a potential customer could call and talk to a representative and they would assist them in building the perfect computer that would fit their needs. Without the worry of buying something you did not need or want. IBM, HP and Dell empower their employees and others to serve in their communities. Each of the four companies also employs green initiatives to reduce their carbon footprint in the world. Products and services of the four companies are virtually the same with the exception of IBM and HP they have more established relationships to small, medium and large businesses, while Apple and Dell are still growing that sector of their business. IBM has maintained the strongest relationship as a tech supplier of small to large businesses. Apple’s operational process has become so advanced where they have created thousands of suppliers, for one buyer, Apple. This is why thus far; they have not had any major glitches in shipping and getting their products in stores and to their customers. Each company has their own procedures in place to get their products to the consumers and none of them are without flaws. What matters is how these companies handle the situations when they arise.

References
Apple - Press Info. (2011, July 19). Apple Reports Third Quarter Results. Retrieved from http://www.apple.com
Apple. (2011). Jobs at Apple. Retrieved from http://www.apple.com
Dell. (2011, August 16). Financial Reporting Dell. Retrieved from http://www.dell.com
Enderle, R. (2004, March 8). Apple 's Competitive Advantage. Retrieved from http://www.technewsworld.com
HP. (2011, August 18). Q3 Quarterly Results. Retrieved from http://www.hp.com
Heft, M., & Ashlee, V. (2010, May 26). Apple Passes Microsoft as No. 1 in Tech. Retrieved from http://www.NYTimes.com
IBM. (2011, July 18). 2Q Investor Relations. Retrieved from http://www.ibm.com

References: Apple - Press Info. (2011, July 19). Apple Reports Third Quarter Results. Retrieved from http://www.apple.com Apple. (2011). Jobs at Apple. Retrieved from http://www.apple.com Dell. (2011, August 16). Financial Reporting Dell. Retrieved from http://www.dell.com Enderle, R. (2004, March 8). Apple 's Competitive Advantage. Retrieved from http://www.technewsworld.com HP. (2011, August 18). Q3 Quarterly Results. Retrieved from http://www.hp.com Heft, M., & Ashlee, V. (2010, May 26). Apple Passes Microsoft as No. 1 in Tech. Retrieved from http://www.NYTimes.com IBM. (2011, July 18). 2Q Investor Relations. Retrieved from http://www.ibm.com