Analysis on Apple Inc. Strengths Apple has a very strong and well recognised brand. All of Apple’s products have a very high level of brand awareness and are recognised in all of the markets in which it operates. The evidence of this high brand recognition and awareness can be found by taking a look at the at the sales figure and revenue that Apple generates, For example, the iPad managed to gross in about $5 billion and unit sales of about 7. 5 million in 2010, going on to sell a further 7. 33 million units in the first quarter of 2011. Another example is the 93% rise in the net sales of the iPhone to generate revenue of about $25. billion in the year 2010. Apple’s brand recognition and awareness enables the company to set premium prices and generate major demand for its range of products. Industry sources place Apple as the fourth largest company in the global mobile phone market and third in the smartphone market with market shares of 5% and 18. 5% respectively. Apple’s unprecedented success with every product it has launched is the reason why the company had an upward drive in market share over the past few years. In the years 2004 and 2005, Apple’s iPod held a 48% mp3 player market share with its closest competitor being SanDisk’s Sansa occupying about 8%.
In 2011, the iPod held about 75% market share with about 300 million units sold since its launch. The first iPhone launch showed Apple’s relative obscurity in the smartphone market with only about 3. 4% market share in the beginning of 2007 to about 19% at the end of 2011. Apple was able to capture 75% of the profits in the smartphone industry with only a rise of 9% market share from the previous year highlighting the company’s pricing power. Apple’s entry into the tablets market saw them selling 14. 8 million units in 2010, 75% of global tablet PC sales, going on to control 70% of the tablets markets in the United States.
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The success of its products enabled the company to continue to grow while commanding premium pricing. The company’s success would be very hard for companies to emulate leaving Apple in a very strong place with outstanding brand position. Apple’s pursuit of both horizontal and vertical integration has enabled the company to become an intimidating competitor. The width in the range of products it offers is nothing short of impressive as they cover a lot of markets such as digital media, personal computers, tablets and smartphones to name but a few. Also, hrough the use of vertical integration, Apple has managed to offer hardware, software, content all the way down to retailing enabling it control its supply chain as well as making the customer dependant on only their operating systems making it hard to switch to competitors. An example of how Apple tie down their customers with horizontal integration can be seen with products such as iTunes and iCloud which essentially allow the customer to share media and documents across its range of products. This gives the company a considerable amount of competitive advantage.
Apple prides itself on innovation and has a very strong emphasis on persistent investment in research and development which is vital in the development and augmentation of an innovative product range. In order to capitalize on the merging of various technologies such as the personal computer, mobile communication and digital electronics, Apple has developed a unique ability to design and make its own, hardware, operating systems, software and services to create innovative, exciting products that have its users in mind, providing them with top quality, easy to use devices that integrate seamlessly with each other.
Apple has spent significant amounts on research and developments as they look to further develop the Mac range of Personal computers, the operating systems Mac OS X and the iOS, application software for their range of products as well as the development of new products. Research and development has enabled the company to launch new products as well as enhancing present ones.
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For example, the iPad 2 was launched in March 2011 with a completely new design which was 15% lighter and 33% thinner than the previous version. Apple’s keen involvement in research and development has earned Apple the status of innovative market leader, continuously launching products that enhance its brand image, safeguarding its position in their operating markets. Weaknesses The 2011 financial year figures show that 62. 3% of the Apple’s revenue was from two products namely the iPhone and iPad.
These two products have been the reason why there has been a surge in growth, revenue and market share for the company and even though figures show that they are on the rise, its constitutes a major business risk for a company like Apple to rely on two products to provide a major part of its revenue in a very volatile and fast-paced technological market. Another weakness of Apple is that it does not have different products at different price points which limits it from targeting a larger market compared to its competitors such as Samsung and LG.
The competition has products at different price points allowing it to target bigger market base as well as price sensitive consumers. Price, at the moment is the only advantage that the competitors have on Apple. There is also the issue of Apple only providing smartphones while its competitors provide both smartphones and normal mobile handsets meaning that Apple is restricted to the 5% market share it holds in the overall mobile handset market. Apple products as well as services have experienced quality problems occasionally.
Apple offers a complicated range of software and hardware products and services that might have faults developed in the manufacturing or design stage, or sometimes due to deficient components acquired from third parties which apple has no control over. This can cost the company a lot in warranty and exchange costs as it did in 2010 with the failure of the antenna in the iPhone 4 as well as the ultra-compact power adapter in 2008. These defects can very well harm the company’s reputation and incur significant financial harm.
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Apple’s close competitors Nokia and Motorola have currently filed complaints to the US International Trade Commission and US District Courts of Florida, Illinois and Delaware for patent infringement. Nokia alleges that there are infringements on its patents for mobile phones, music players as well as computers. Any verdict that does not favour Apple might affect the company and harm their financial situation and operational capabilities, as well brand positioning and market share stability. Opportunities The forecasts made show considerable growth for the worldwide smartphones market in the future.
The number of expected smartphone shipments is estimated to be around 850 million by the end of 2013. As Apple is the third largest firm in the smartphone market, there are a lot of opportunities for the company to grow even further in the smartphone sector. The tablet market is apparently also on the rise with experts estimating demand at the end of 2013 to be at around 150 million units. Apple is currently the strongest company in the mobile applications market, with applications numbering at about 350 000, a hundred thousand over its closest competitor, the android arket. Apple will be in a very good position as it is estimated that the applications market will be worth $9 billion by 2014. With the innovative products range that Apple possesses, it is in an enviable position where it can easily increase its market share in the smartphone and tablet markets which it operates in. Apple has considerable opportunities to utilise enterprise, governments and the education markets. A survey in 2011 showed that about 96% of businesses in the US have at least one iPad in use.
The popularity that Apple products enjoy is inevitably spilling more into the business environment as well as government agencies as more businesses and agencies are giving employees more freedom on which devices to use. Market estimates show that there will be considerable annual growth of 50% in the enterprise market for tablets in the years 2011-2016, increasing sales figures from about 13 million units in 2011 to about 97 million units in 2016 while enterprise smartphone sales will rise from 20 million units in 2010 to 54 million units in 2016.
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This shows that enterprise will become one of Apple’s key customer groups and drive the company’s growth. Another market where Apple have the opportunity to generate more revenue is the global mobile advertising market which is forecasted to be worth about $25 billion globally, boosted by the increase in use of smartphones in developed as well as emerging nations. After acquiring ad platform Quattro wireless to gain some traction in the ad market, Apple launched iAd in April 2010. Ad combines the sensation of traditional Television advertising with the interactivity of the internet to give advertisers an innovative, vibrant and effective way to advertise to mobile consumers. iAd has already launched campaigns for various big firms and the future looks secure as there is a very good growth opportunity. Due to price sensitive customers and other issues such as lack of carrier subsidies, Apple has not yet achieved its full potential for growth in emerging markets.
With smartphone penetration in countries such as China and India at about 20-30% compared to the developed countries’ 60%, it is obvious that Apple has the opportunity to realise its full potentials. Factors that will help Apple in its quest to grow in emerging countries are the popularity of the company, the improvement in the standard of living in emerging countries and also the market forecast that shows that there will be an increase in the emerging market from 36% to 46% of the worldwide shipment of tablets.
This will mean that there is considerable growth opportunities for Apple in the emerging markets. The launch of the Apple TV is predicted to penetrate the unexploited potential for linked devices providing another opportunity for Apple. There is a growing customer need for connected devices and this will likely boost the demand for the Apple TV. Estimates indicate that 20% of Televisions sold in 2012 would be smart televisions with the figure expected to rise to 40% the following year.
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As the product is close to its launch date, demand is said to be quite high especially in the high end TV market. The success of Apple’ s previous product launches have driven growth in the past and there is every indication it will be the same with the Apple TV and there is a potential for it to drive the company’s growth in the near term. Threats The Google Android operating system is growing in status and approval, becoming the iOS’s closest rival. Google claim that about 350 000 android phones are activated everyday compared to the 150 000 iPhones activated per day.
This threat to the iOS’s market share is also coupled with the fact that a number of Apple’s competitors such as Samsung, HTC, Sony and Motorola use the Android operating system. Although the Android OS came in very late into the market, it is proving to be a very good rival for the iOS and this can affect Apple’s market share. There is also a threat to Apple’s revenues and profitability as affluent as well as seasoned competitors like Google and Microsoft launch successful products, earning market share while decreasing Apple’s market share and revenue.
With the android operating system already threatening to match the iOS in terms of popularity as well as Google’s take-over of Motorola in order to replicate Apple’s vertical integration, the company faces daunting competition from all angles which could stall market shares, revenues and profitability. Another threat to Apple is the dependence on third parties to provide certain important components for its products and occasionally, these components are exposed to industry wide scarcities which makes the company susceptible to certain risk that may harm the company’s operations.
The impact of the death of Steve Jobs has been challenging at Apple as he is the creative and enigmatic founder who led Apple to its current state. An example of how important he was to the company could be the period after it was announced he was leaving on a prolonged medical leave in 2008, company share prices fell about 8%. Apple may need more active innovation if it wants to continue expanding in the absence of Steve Jobs.