Business Analysis: Apple Inc.

Apple Inc. Business Analysis
MGT/521
October 4, 2011
Apple Inc. Business Analysis
Part I
Apple Inc. is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company 's best-known hardware products include the Macintosh computers, iPod, iPhone and iPad. As of August 2010, the company operates 301 retail stores in ten countries, and an online store. In September of 2010, Apple had 46,600 full time employees and 2,800 temporary full time employees worldwide and had worldwide annual sales of $65.23 billion. Fortune magazine named Apple the most admired company in the United States in 2008 and in the world in 2008, 2009, and 2010 (Yarow, J., & Frommer, D., 2011).
Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand. When Apple went public, it made more capital than any IPO since the Ford Motor Company in 1956 and created more millionaires than any company in history. Between 2003 and 2006, the price of Apple 's stock increased from $6 per share to over $80. In May 2010, Apple 's share price passed the $100 mark and with that their market cap exceeded Microsoft for the first time since 1989 (Business Insider Inc., 2011).
Apple was one of several highly successful companies founded in the 1970s. Apple was not considered a traditional company by any means. CEO, Steve Jobs often walked around the office barefoot even after Apple was a Fortune 500 company. Apple has a reputation for fostering individuality and excellence. To recognize the best of its employees, Apple created the Apple Fellows program, awarding individuals who made extraordinary technical or leadership contributions to personal computing while at the company (Business Insider Inc., 2011).
With this broad overview, the following SWOT analysis displays the pros and cons of Apple Inc. to best see as a mutual fund manager if this corporation would be a good investment.
Strengths
* Product development, does not invent the market rather raises the bar. * Design is sleek, innovative and attractive. * Products are easy to use. * Good marketing strategies. * Brand name. * CEO Steve Jobs has been an essential piece of the puzzle. A good leader.
Weaknesses
* Profits are dependent on the global economy. If the economy is not in a place where there are funds to spend on entertainment, this will surely impact Apple’s market. * Apple is only dedicated to Apple which prevents mass adaption of the hardware. * CEO Steve Jobs has recently resigned. * Not shareholder-friendly. Refuses to pay a dividend despite a huge cash level and no debt.

Opportunities * Apple is expected to introduce a new mobile advertising platform for the iPhone, iPod touch, and iPad, which could be an opportunity for new revenue sources. * Very loyal customer base, which has expanded with the iPod and the iPhone. The iPad has had a very successful launch. This seems to be leading to more sales of computers. * High-quality products that work smoothly. New products are generally well received. * Continue to re-define the standards for current products.
Threats
* Apple is involved in several legal actions, including lawsuits alleging patent infringement and antitrust violations. These lawsuits present a threat because of the possibility of ongoing legal costs. * Big ideas are easy to copy. The touch-screen is being used in other phones .Apps are being developed for other smart phones and devices. * High-priced products. Other smart-phones that are very similar to the iPhone cost less.
(Mueller, J., 2010)
The following financial statements from Apple are a very good display of why investing in the Apple Corporation is a good decision. Year over year their revenue has increased by over 80 percent.
July 19, 2011—Apple® announced financial results for its fiscal 2011 third quarter ended June 25, 2011. The Company posted record quarterly revenue of $28.57 billion… …“We’re thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent,” said Steve Jobs, Apple’s CEO. “Right now, we’re very focused and excited about bringing iOS 5 and iCloud to our users this fall.”…“We are extremely pleased with our performance which drove quarterly cash flow from operations of $11.1 billion, an increase of 131 percent year-over-year,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the fourth fiscal quarter of 2011, we expect revenue of about $25 billion and we expect diluted earnings per share of about $5.50” (Apple, 2011).
Apple Inc. is currently rated as having average Accounting & Governance Risk (AGR). This places them in the 50th percentile among all companies in North America, indicating higher accounting and governance risk than 50% of companies (Business Insider Inc., 2011).
Internal stakeholders to include employees and stockholders want Apple to become the market leader in consumer electronics. They would like their products to drive demand, thus driving the value of their business and stock up. On the other end, external stakeholders such as vendors and consumers demand the top of the line product. For vendors to offer Apple products, means revenue. For consumers to purchase Apple products means comfort and technology. On all fronts, Apple is currently delivering to include sales, products and vision for the future. The AGR is rated at average, which alleviates some of the stress associated with the risk of investment. Currently, even with the threats and weakness as all companies have, the pros outweigh the cons. Apple is a company worth investing in. The question we all have now is how long will it last?

Part II
Apple’s current financial health appears to be great! So great in fact that financially Apple is soaring into numbers the company has never experienced before. Apple is succeeding all fronts. The annual gross profit listed on Yahoo!’s finance page for Apple is $26 Billion which is a growth of at least 34% year over year since September 2008 (Yahoo!, 2011). Currently, Apple 's revenue growth is 83%. The annual balance sheet for Apple has also improved, as there was a dip in current assets, specifically cash and cash equivalents in 2009. Currently all assets are at a peak and so are the total liabilities from the past three years. Inventory has more than doubled to reach over $1 million as of September 2010. Cash flow due to extraordinary performance from operations at $11.1 billion is an increase of 131 percent year-over-year (Apple, 2011). The cash pile is now $65.8 billion, which is attributed to the 71 million people who visited the Apple 's retail stores during the March quarter. Apple 's revenue from China was $5 billion in last two quarters, a 400% increase, and it only has 4 stores in China (Yarow J., Frommer D., 2011).
So, how does Apple compare to competitors? It is now difficult to isolate Apple competitors as Apple Inc. has branched out into almost every technological field they can reach with a wide range of products. Most PC manufacturers are considered rivals like Dell, Gateway and Microsoft. Online media competitors (iTunes, MobileMe, iPhone) would include Napster and other legal music download sites, Hotmail and Gmail, Nokia, Samsung and Blackberry. Apple has also dived into server markets competing with HP, Sun, SGI and IBM with regards to high performance computing, web-serving and centralized storage.

In the PC market, Apple Mac has outgrown the PC for 20 quarters in a row. Apple Inc. is the leader when it comes to Market Capitalization at $374.8 B and when compared to Dell Inc.’s $26.3 B, there is simply no comparison. Even Google at $169.68 B and Hewlett Packard at 44.35B do not come close. Management should definitely leverage this momentum by continuing to offer dynamic forward thinking products as the iPad and iCloud to come.
Apple’s technology speaks for itself with a tremendous increase of revenue and sales. The iPad accounts for 17% of Apple’s profits although it is only in the first year of sales. It nearly doubled in sales between Q4 2010 and Q1 2011, going from 4.19 million sales to 7.33 million. Despite being outpaced in revenue by the iPad, the Mac still broke a sales record, hitting 4.19 million in the quarter. Laptops however, continued to grow to 2.9 million sales another record-breaking number for Apple, turning laptops into 70% of all Mac sales (Spencer, 2011).
Not only is the iPad devastating the competition, Apple is now the biggest phone maker, measured by revenue. iPhone sales continue to grow year over year and quarter to quarter as sales reached a record 16.2 million in Apple’s latest quarter, which year over year is an 86% increase. This is amazing for Apple considering this product launched only four years ago. iPhone revenue of $12.3 billion was 50% of the company 's revenue for the quarter. $660, the average selling price for an iPhone blows out the nearest competitor. Baird analyst William Power says the HTC is the second closes to Apple with a $364 average selling price.
We all want to know Apple’s secret for recent success. Apple Inc. is the most admired company in the world. It has been the most admired, according to Fortune magazine, for four straight years. Apple is the most competitive and the fastest changing markets pace (Strategy-Keys, 2011). In the computer industry, the core best practices focus on improving technologies that allow computers to do more. Instead, Apple made best practices that were unique to its business by redesigning the product packaging and service.
Apple is what it is today because of the fire it went through and persistence. The key to future success will depend upon how well Apple can maintain its fundamental principles. When Apple focused on providing the best value possible to others, it excelled. When the focus was on profits first, it flourished for a period but then began to descend quickly. When Apple concentrated on their passions at the expense of the practical needs and of the customer, they failed. It is when Apple benchmarked success against itself that it found best practices in making customers their passion (Strategy-Keys, 2011). * Continually invest in your passion and talents * Thinking deeply about the desired future experience of the customer * Don 't be confined. Innovate beyond today 's realities * Focus on both your customers ' functional AND emotional needs * Use mockups extensively so you can visualize * Create simplicity, elegance and beauty
The goal of Apple is to “…obtain stellar products and services within tight timeframes, at a cost that represents the best possible value to our customers and shareholders.” (Apple Inc., 2011). With the iMac, Apple demonstrated that computers do not have to be beige and gray boxes. With the introduction of the iPod and iMusic service, Apple demonstrated that product companies can develop long-term relationships with consumers and over the years, Apple has developed a host of suppliers who support their business operations (Dr. Sullivan, n.d.). Apple has redefined not only itself as a company, but also reinvented the benchmark for industry standards worldwide.
Part III Today’s economy could not be much more desirable for Apple. Although worldwide we are all working hard to improve our income, resources and employment, the desire to have a good life is still there. The desire to escape the complexity and economic hardship we face on a daily basis is high globally. The ease of keeping in touch worldwide and keeping our own lives in sync with a touch of a button could not be a more perfect market of Apple. Apple caught on to this quickly and changed their strategy. Despite Apple’s reputation for making the world 's finest PCs, very little software or add-on gear worked with the Mac. Apple was becoming too isolated. The Apple strategy turned when CEO, Jobs stated "Apple lives in an ecosystem, and it needs help from other partners…And it needs to help other partners." Jobs and Bill Gates of Microsoft, then teamed up to announce details of a deal to forget any patent claims in exchange for $150 million, and a promise by Microsoft Corporation to continue making a Mac-compatible version of its Office software. Today, Apple Inc. has turned into a global empire (Bloomberg, 2007).
More than 200,000 companies have signed on to create Apple-compatible products. This includes software makers such as game-maker Electronic Arts Inc. and corporate supplier VMware, as Mac is growing three times faster than the overall PC market. Some 70% of new U.S.-model cars have iPod connectors built in, and about 100,000 airline seats have the same. Apple 's online iTunes Music Store has become the world 's third-largest music retailer after Wal-Mart Stores Inc. and Best Buy Co. Now leading providers of everything from silicon chips to movies feel pressure to partner with Apple. Apple imposes a new focus on more consumer-friendly parts, software, and services. However to take advantage of the Apple market, companies must give up a certain amount of independence on everything from design to identity to pricing (Bloomberg, 2007).
Apple 's strategy is simple: Focus on making the best product, and rewards will follow. Apple picks favorites—such as Google for building mapping and video applications for the iPhone and focuses on attracting the best partners, thus capturing the heart of the mainstream consumer. Apple’s tactic is to approach the market from a device perspective: If it can control the gadget you use to connect with all those other platforms, it increases its control over what you do, and how much you pay (Bloomberg, 2007).
Job’s strategic decision to make Apple more compatible has been a turning point. In 2003 a Windows-compatible version of iTunes opened iPod sales by making the device usable by the 98% of computer users who ran Windows. Another milestone came when the company switched from PowerPC processors made by IBM to Intel 's more popular chips. This made it possible for Macs to run Windows and made it easier for software developers to adapt their programs for Apple 's products.
Today’s consumers want a great experience and demand simplicity and reliability, characteristics that Apple consistently delivers. This comes from the extensive work the human resource management must perform as they select employees, with the proper job skills and attitude to fill specific job functions, ultimately laying the foundation of the company. There are numerous steps to weed through when Apple is selecting a potential candidate. Applicants are accepted or rejected on the basis of their qualifications and experience in the field. A reference check, background check and a fitness assessment test must all be cleared. The physical test is used to determine whether the applicant is fit to perform work (Shetty, 2011).
Apple’s induction program provides a planned introduction of the job, organization and the environment. It provides familiarity with the roles and responsibilities within the rules and norms of the organization`s culture. This program contributes to improved socialization and increase of organizational commitment, helping to reduce new employees’ stress levels and assist them to settle into their new role more quickly (Shetty, 2011).
Apple also has one of the most well balanced remuneration policies in the corporate world today. Remuneration refers to the pay packet given to any staff member for the work done by them, their efforts and services (Shetty, 2011). Apple has been well established as an employees` company, where good salary packages, insurance and a well -structured superannuation program have established it as a fair and balanced organization for its employees.
The human resource management of Apple strengthens the business strategic standards and principals and the coveted system of operating within the establishment. Apple delivers character and quality from the inside out. The overall health of this corporation is good and improving with each quarter as their strategy and tactics grow to fit today’s ever changing economy. From the increase of stock shares, products, media and markets Apple has proved it is a company worth investing in.

References Apple Inc. (2011, July 19). Apple reports third quarter results. Copyright © 2011 Retrieved from http://www.apple.com/about/ Bloomberg BusinessWeek (2007, July 9). Welcome to planet apple. Retrieved from http://www.businessweek.com/magazine/content/07_28/b4042058.htm Business Insider, Inc. (2011, August 29). Apple - blackboard. Copyright © 2011 Retrieved from http://www.businessinsider.com/blackboard/apple Dr. Sullivan, J. (n.d.). Next generation of best practices. Retrieved from http://www.globalhrnews.com/story.asp?sid=855 Spencer, G. (2011, January 19). Graphical analysis of apple’s q1 2011 financial report. Retrieved from http://www.macstories.net/news/graphical-analysis-of-apples-q1-2011-financial-report/ Mueller, J. (2010, June 7). Apple: strengths, weaknesses, opportunities, threats. Retrieved from http://www.fool.com/investing/general/2010/06/07/apple-strengths-weaknesses-opportunities-threats.aspx Shetty, N. (2011, January 22). Human resource management of apple inc. Retrieved from http://www.managementparadise.com/forums/human-resources-management-h-r/213861-human-resource-management-apple-inc.html Strategy-Keys.com (2011). Apple strategy – pg -1. Retrieved from http://www.strategy-keys.com/Apple-Strategy---pg-1.html Yahoo! Inc. (2011). Apple inc. aapl income statement. Copyright © 2011Retrieved from http://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual Yarow, J., & Frommer, D. (2011, April 21). Facts about apple’s business that will blow your noggin. Retrieved from http://www.businessinsider.com/apple-business-2011-4

References: Apple Inc. (2011, July 19). Apple reports third quarter results. Copyright © 2011 Retrieved from http://www.apple.com/about/ Bloomberg BusinessWeek (2007, July 9) Mueller, J. (2010, June 7). Apple: strengths, weaknesses, opportunities, threats. Retrieved from http://www.fool.com/investing/general/2010/06/07/apple-strengths-weaknesses-opportunities-threats.aspx Shetty, N http://www.managementparadise.com/forums/human-resources-management-h-r/213861-human-resource-management-apple-inc.html Strategy-Keys.com (2011) Yarow, J., & Frommer, D. (2011, April 21). Facts about apple’s business that will blow your noggin. Retrieved from http://www.businessinsider.com/apple-business-2011-4