Apple Inc Financial Industry Overview Marketing Essay

Published Date: 23 Mar 2015

Apple Inc. (Apple), incorporated on January 3, 1977, designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, and sells a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. In addition, the Company sells a variety of third-party Macintosh (Mac), iPhone and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content and applications through the iTunes Store. The Company sells to consumer, small and mid-sized business, education, enterprise, government, and creative customers (Reuters, 2010).

As it relates to the history of the company, the company has come a long way. From the beginning Apple Inc. ignited the personal computer revolution. In the 1970s with the Apple II, Apple also reinvented the personal computer in the 1980s with the Macintosh. Over the years, it has been found that Apple is committed to bringing the best personal computing experience to students, educators, creative professionals, and consumers around the world through its innovative hardware, software, and Internet offerings. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system, iLife, and professional applications. Apple is also spearheading the digital media revolution with its iPod a portable music and video player; along with Apple's iTunes online store. Apple has more recently entered the mobile phone market with its revolutionary iPhone.

Apple Inc. is very much committed to meeting government and authentication regulations. It is committed to accessibility, environmental protection and export compliance (Apple, 2010.) One example of another regulation, relates to a story back in 2007 just before Apple Inc. launched the iPhone. Initially Steven Jobs tried to keep the phone a secret, however, in the end, he had to reveal the iPhone several months ahead of its official June launch because Apple is required to file with the Federal Communications Commission (FCC) for the permits needed to operate the iPhone; and once those public filings are made, Apple has no control over the release of that information. Therefore, Jobs made the decision to have Apple tell the world about its new phone, rather than the FCC (CNN Money, 2007).

Overall Apple Inc. financials appear to be very excellent. Apple almost double each year in revenue and earnings.

REVENUE

EARNINGS PER SHARE

Periods

2008

2009

2010

 

Periods

2008

2009

December

10430

11880

15683

 

December

1.82211

2.5014

March

7980

9084

13499

 

March

1.22425

1.79403

June

7561

9734

15700

 

June

1.25226

2.01065

September

11520

12207

 

 

September

2.48346

2.76911

Note: Units in Millions of U.S. Dollars

Note: Units in U.S. Dollars

(Bloom Berg, 2010)

Apple Inc. has revolutionized the computer industry. The computer industry itself has also grown exponentially over the years and it impacts every aspect of our daily lives. It is therefore a vital organization/ industry. Because of Apple's innovation and creativity they have become the leader in the computer industry, forcing other companies to catch up.

Current Market Conditions and Investment Strategies

a. Market structure: 

The market structure for Apple Inc.'s products like iPhone, iPad or iPod or even Mac computers can be termed as monopolistically competitive as a large number of players compete with each other in these product group and try to differentiate their offerings from each other. The market for such consumer electronics and computing products is extremely competitive as existing and new players come up with revolutionary products on a regular basis and thus, companies like Apple have to be on the forefront of innovation to retain their sales growth and market share. 

b. Impact of new companies entering the market: 

There is relatively low barriers to entry in a monopolistically market as numerous companies enter and exit this competitive consumer electronics and computing industry all over the globe. Apple, being a global powerhouse in this industry with a strong market share and leadership position does not have to worry too much about new entrants, especially the smaller ones as they will be unable to compete with the scale of operations, reach and market share of Apple. However, company has to worry about existing large players and their new introductions in the marketplace. 

c. Prices 

Although Apple has been known for its unique technology, high quality revolutionary products, the price premium cannot be always commanded by Apple as new introductions by competitors forces the company to rationalize its pricing for its super seller products like iPhone. Even though Apple can command a premium initially for its revolutionary introductions, it has to bring down its pricing in light of the competitive offerings that are sold at lower prices. Price war is inevitable in consumer electronics and computing industry and even technology and innovation leaders like Apple have to succumb to pricing pressure for maintaining revenue growth and market share. 

d. Technology 

Technology is one of the most crucial factors of success for Apple as innovation, R&D and technological leadership has been the single most important factor of success for Apple till now. The company has revolutionized the electronics and computing industry with its world class products that has not been matched by other players. However, as competitive pressure keeps on increasing, Apple has to introduce new product with improved or new technologies on a much faster scale as compared to previous times as lifecycles for such technology products has really shrunk in today's timeframe. 

e. Productivity (consider the law of diminishing marginal productivity) 

Apple's growing sales volume across the globe ensures that productivity is on the rise for the company. Apple has always been one of the most efficient companies in the computing industry and its growing sales due to blockbuster products over the last few years have ensured higher productivity of the company, as evident in its growing profit margins. 

f. Cost structure 

1) Wages and benefits 

According to AppleInside Apple announced "starting in January 2010, part-time Apple employees who have been with the company for one year will receive full medical insurance coverage, as part of their compensation" (para. 1). It will have a considerable impact on thousands of part-time employees that work at Apple stores.

Wages and benefits have not been a major issue or problem for apple as the company has always been one of the most efficient and rising sales and profitability have allowed the company to manage any pressure related to rising wages and benefits. 

2) Fixed and variable costs 

The company has been able to maintain strong control over its cost structure as visible via its surging bottom line profits over the last few years. The company's strong sales growths across the globe surely help the company in reaping economies of scale and thus, earn healthy profit margins. The company has one of the healthiest operating margins in the computer hardware industry. 

g. Price elasticity of demand 

As mentioned above, consumer electronics, especially in developing nations across the world, is a fairly price sensitive market and thus, Apple has to be sensitive about pricing for its products. Even though there are Apple loyalists across the world that can be termed as less price sensitive and thus depict low price elasticity for Apple's products, consumers in price sensitive emerging markets like India can still display a relatively higher price elasticity of demand for Apple's products. As a new product is introduced, the price elasticity is relatively low as people are crazy about trying Apple's new technology. However, as time progresses and close substitutes are launched in the marketplace, price elasticity becomes higher. 

h. Competitors 

Competition is increasing and is already cut throat in various product segments of Apple. For example, Apple has to compete closely with Androids and Blackberries in its Smartphone division. New models are being launched by Smartphone manufacturers on a regular basis, forcing Apple to come out with newer versions of its iPhone. Similarly, newly launched tablet pc iPad faces tough competition from numerous manufacturers like Dell. As time progresses the product lifecycle for such products will keep on shrinking due to increasing competition. 

I. Supply and demand analysis 

The company's new introductions over the last few years have ensured that Apple has turned extremely profitable and demand for its products is robust. Take the case of recently launched iPad which is already making strong waves in the market and is posing threat to regular PC's. Similarly, iPhone's success is already proven. According to Wikinvest (2010), "Apple reported $15.7 billion in revenue in 3Q10, a 61% increase over the previous year's quarter, as well as a 78% surge in its quarterly profit, buoyed by strong iPad and iPhone 4 demand" (Business and Financial Metrics, para. 1).

It shows that demand for its products is fairly robust and the company is able to meet strong demand for its product via efficient supplies from its manufacturing units. 

j. Impact of government regulations 

Government regulations have little impact on Apple's operations as Apple is already an ethical corporation that ensures compliance with local laws and regulations in numerous countries across the world. Even though the company always faces a risk with changing government regulations in its global operations, its high quality products and ethical operations ensures that impact of government regulations on company's operations is minimal. 

Recommendation and Market Trends

a. Market structure 

The current market structure for Apple is an oligopoly and going forward, the market will continue to remain extremely competitive with new smaller players entering this market. It does not appear that consolidation will happen in this marketplace and the competition is going to become more extreme in the future. Existing players will become stronger and larger and new entrants, both small as well as medium sized, will continue to threaten the leadership of players like Apple. As there are low barriers to entry in the market, it is easier for new entrants to enter the consumer electronics and computing industry. 

b. Impact of new companies entering the market: 

In the future, only those new entrants that will enter with revolutionary new products/technology will threaten supremacy of established giants like Apple. Smaller entrants will only have impact in limited geographic territories that they will operate in. Otherwise, it does not look like that new entrants will pose too much of a problem for players like Apple. 

c. Prices 

Price will continue to get intense in the future as well, as companies will look out for ways to reduce cost of products and offer better quality products at lower costs to consumers. Consumers will continue to get more informed and demanding and companies will respond with lower prices to retain their market share. Apple will be able to command premium in the initial stages of launch of its product and will be able to retain its premium status only if continues to launch world class, unique and technologically superior products like iPhone and iPods. 

d. Technology 

Technology is a rapidly changing phenomenon in today's world and the trend will be the same in the future. Product lifecycle will become shorter as new technologies will be emerge in a shorter time frame than ever before, thereby making existing products obsolete and less attractive for consumers. Technological advances will make devices smarter as well as cheaper. Apple is expected to continue on its technological leadership via extensive focus on research and development. 

Global Competition Impact

Apple runs in an extremely aggressive market that is continually taking into account as well as making various different advancements. If they are incapable of living up to these changes, then a very large share of the apple's market is lost. The threat of obsolescence is a most important concern as far as the whole industry is concerned.

Claims for Apple's stuff have been unconstructively impacted by the deterioration in global economic conditions. A number of the company's learning customers come out to be delaying technology purchases due to uneasiness concerning generally the impact of the weaker economy on their available funding. Progressing ambiguity about potential economic conditions continues to make it hard to estimate potential operating results (Reuters, 2010, ¶5).

Apple's capability to contend successfully and maintain smart gross margins is profoundly dependent upon its aptitude to make sure a progressing and timely course of inventive and competitive commodities and expertise to the marketplace. As a consequence, the Company sustains an upper research and development costs as a proportion of revenue than its competitors who vend Windows-based private computers. If Apple is not capable to persist to in the development and marketing of novel new products with striking gross margins, its results of operation may be substantially and adversely affected by its operating costs structure.

Even though Apple has had some achievement in their internal operation comparative to acting in response to their weakness, they have to not be content with being normal in this extremely aggressive business environment. Each company's major objective is to institute a competitive benefit over other firms, and Apple has ample of room for upgrading. Apple needs to make out ways to develop their operations to gain this economical advantage.

Conclusion

In the precedent, it may have been harder to establish an Apple dealer in dissimilarity to a PC dealer. Through the use of internet and retail outlets, Apple has strived to make that change. Apple has of late adopted Dell Computers' method of using the Internet to trade their product. This may be considered advantageous since it reaches an extremely wider market as well as reducing on inventory costs. An additional tactic Apple has used to get to a new market is by submitting some of their goods to locally recognized retailers. This process exposes people who were not recognizable with Apple before to seize a "hands-on" look. In addition, Apple is also looking at opening more Apple stores. The quick progression in expertise is a current and burly tendency in the global marketplace right now and it is generating an opportunity for Apple. Apple's Macintosh sales in Europe and Japan have improved considerably during the past year for the reason that increases in worldwide consumer sales and expenditure.