I chose to talk about Apple Inc. This company has been around since the late 70's. It has had its ups and downs just like every other company. However, Apple Inc. was a big part of the revolution of computers and other electronics like the MP3 player, phones, laptops, and media software. Every year Apple releases something new to its customers, whether it be a phone or laptop. This company is in the electronics industry, and their products consist of computers, phones, and tablets. Apple got their start in the computer industry at first making the Apple I and II. The Apple II is what brought notice to Apple Inc. as they revolutionized the industry. The challenges facing Apple technologically is keeping up with technology and staying ahead of the competition.
Apple's main competition is Microsoft when it comes to computers and Samsung when discussing phones. Apple's challenge with Microsoft is always trying to make a better product than Microsoft. Having to develop better and faster technology than another company can be hard on a company. Their challenges with Samsung are along the same lines. They have to continually develop phones that operate faster, look nicer, and have different accessories that add flare to the phone.
"Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad."
Apple's mission statement doesn't really provide any guidance for their organizational activities. It's more of a boast statement then anything. It speaks on their accomplishments as an organization. When it comes to the four questions from the Hull article Apple's mission statement only addresses one of the questions, “What do we do”. Their mission statement doesn't state how they do it, who they do it for, or the value they are bringing. Based of the Fortune 500 list I would give Apple's mission statement a 2.1. The reason for this is because they are only telling people what they do. They are very descriptive with this, that is why I gave them a 2.0.
Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad. We do this by listening to our customers and give them what they want. The products we make are made for our customers to ensure that they have great product to make staying in touch with their family is easier. The value we are bringing to our products is ensuring that humankind is always advancing learning or whatever use you may get from our products.
In the realm of technology Apple Inc. is doing very well. Their tablets are higher rated than any other company when it comes to customer satisfaction (Johnson & Li & Phan & Singer & Trinh, 2012). Last holiday season Apple beat out Samsung when it came to holiday sales. They shipped a little over a million more phones. Apples performance in the technological realm will continue to prosper. They just released the iPhone XS Max which has the biggest screen yet at 6.5 inches (Apple.com, 2018). Samsung has the Note which would be comparative to the XS Max, but its screen is only a 6.3. Yes, it's .2 inches bigger but that just goes to show that Apple will always be trying to make the more appetizing product to the customer.
One advantage Apple Inc. has is their brand itself. Apple is the first company to be worth $1 trillion. Also, they have a very dedicated fan base that will buy anything that Apple sells. Innovation is something Apple does well and they are known for. Apple has a robot named Daisy that is their disassembly robot. It helps Apple to recover certain metals to help make their other products. A strength that other people see for Apple is their ability to design their products. The company of Apple could improve by offering a cheaper phone for the people who can't afford the expensive ones. When it comes to what Apple does badly, answering issues that customers have with their products would be one. Recently there was an issue with them slowing down older iPhones and instead of apologizing they told them how they know better and how it was the right thing to do. Apple should avoid getting their selves involved with politics. Getting involved could cause them to lose customers. They could partner with companies that are inexpensive and could push their watch at a cheaper price. A trend that Apple is aware of is a feature that would disable their phones while the consumer is in motion. Obstacles Apple faces is the phone market isn't changing and their competition. When it comes to the tablet market Apples competition is Microsoft and Amazon. Amazon has the Kindle and Microsoft has the surface and surface pro. Changing technology isn't really threatening Apple. It's actually the lack of change that could hurt them. The weaknesses could cause potential damage to the company, but nothing super threatening to Apple.
Environmental Scan and Porter's 5 Forces
In the realm of technology Apple Inc. is doing very well. Their tablets are higher rated than any other company when it comes to customer satisfaction (Johnson & Li & Phan & Singer & Trinh, 2012). Last holiday season Apple beat out Samsung when it came to holiday sales. They shipped a little over a million more phones. Apples performance in the technological realm will continue to prosper. They just released the iPhone XS Max which has the biggest screen yet at 6.5 inches. Samsung has the Note which would be comparative to the XS Max, but its screen is only a 6.3. Yes, it's .2 inches bigger but that just goes to show that Apple will always be trying to make the more appetizing product to the customer. Utilizing the Porter's Five Forces Analysis in order to do this research. According to Abraham, Porter's Five Force is a model used to determine the five forces of a competitive industry (2012).
Apple is a very popular company and known for their tech products. They were the first billion-dollar company and they are at the top of their market. Porter's Five Forces take a look at the threats that a company could encounter over time. The first threat looked at is, new entrants.
At this moment, there are no current new entrants. But, you could look at Amazon when they came out with the Kindle. At the time the only two companies with tablets were Microsoft and Apple. With the invention of the Kindle brought Amazon into the mix and a threat to Microsoft and Apple. Moving onto the threat of substitutes, hard-wired home phones would be considered. This threat is also low as these types of phones don't have the capabilities that Apple's iPhones have. The third force to be discussed is, industry competition. Apple has lots of competition; HP, Samsung, Amazon, Google, and Microsoft. The threat level for this force is high. The reason for this is because it doesn't cost the consumer any amount of money to go from one product to the next. The only thing that could save Apple from the other companies is, loyalty. Another way they battle their competition is with constant research and development. Bargaining power of buyers will be the fourth force discussed. With this company, they really don't have the power of bargaining as the customers can just go to another product if they didn't like what Apple had to offer. The last force to be discussed is bargaining power of suppliers. This force is low as there are a great deal of suppliers out there willing to sell to Apple. Also, Apple wouldn't have to pay a fee to move from one supplier to the other. The only thing they could give the supplier power is if they made a more superior product than another company.
In 2014 Apple was negatively affected by the monetary exchange rates. In order to counter the weakened foreign dollar, they unfortunately had to raise their prices. At one point, they had to report non-GAAP earnings on a constant currency basis because of the currency shifts that were out of their control. Apple hasn't let the advantage of having the stronger dollar go to waste. They have used the profits to establish larger infrastructures overseas. In China, they have opened multiple stores, in London they opened Battersea Power Station, and a string of research and development facilities being built around the world.
Apple Inc. is a world-renowned name and they operate on every continent except Antarctica. The biggest moves they have made are in China and India. They established production facilities in China and a development office in India. One issue that has reared its head was in India with the Indian employees. They are not huge fans of confrontation when deadlines are not met. Apple has had had to deal with this issue with no real fix. The cultural barrier they are dealing with involves the Indian's not really having an answer for their work ethic. They don't feel the need to answer why they don't achieve the goals that Apple is setting out for them. This issue can be hurtful to that region internationally. If Apple continually sets deadlines for this office and they are never met they are wasting resources with the lack of productivity. In order to fix this issue Apple needs to be more proactive in getting across to the Indians. Apple needs to write in language that discusses ways to address foreign workers, and their lack of drive. One way they could do this is to make the meeting of their goals incentive based. This way the foreign workers have some motivation to meet the deadlines Apple is requesting.
When looking at Apple's income statement, there were more positive trends in comparison to the negative trends. 2016 was the only year where the company experienced negative changes except additional income/expense items. In fact, the only line items that were positive that year were research and development and additional income/expense items. This could be due to the research and development having more funds was because the lack of development that went into the new phone for 2016, which was the iPhone SE. CNN reported that "Apple's latest iPhone is a dead ringer for the previous two models, eliminating some of the desire to upgrade"(Fiegerman,2016).
Apple's gross profit went down 10% from 2015, which probably leads back to what was previously stated about how the iPhone sales were declining in 2016. Also, another possible factor you could look at is the company was making their phones more reliable, causing fewer people to upgrade to newer/bigger and better phones, which would bring down their profit as well. In 2016 Apple also had less operating income than they did in 2017 and 2015. They spent $14.1 million dollars on sales, general and admin in 2016 possibly because they opened three stores in India that year (Hackett, 2016).
When looking at the positives in Apple Inc.'s income statement, the first thing you would notice is the 104% rise in additional income/expense items for 2017. In 2015 Apple Inc., had their highest gross profit, at $93.6 million. It did drop to $84.2 million in 2016 but rose back up to $88.1 million; this positive jump could be from the successful sale of the iPhone 7 and 7 plus. All the line items were higher than they were the year before. This could have resulted from the release of the Apple watch 3, iPhone X, iPad Pro 2, and the MacBook Pro 2014, just to name a few.
Operational Budget and Assessment
When doing the ratio analysis, the first ratio that will be done is the current ratio. Apple Inc.'s current ratio in 2017 is 1.27:1 and 1.35:1 in 2016, this means that they are using their money wisely. If their ratio was a 3 or 4, then you could start questioning whether or not they were using their funds properly (Kennon, 2016). This indicates Apple manages its business well and is in an excellent financial position. The company has enough current assets on hand to cover its current liabilities. The company is not currently over-leveraged and has breathing room if it were to run into financial trouble.
The next ratio analysis that can be done to measure a company's liquidity is the quick ratio. Apple Inc.'s quick ratio for 2017 is .38:1 and .46:1 in 2016. This tells us that they had .38 cents for every $1 in liabilities and .46 cents for every $1 in liabilities in 2016. Using this ratio, which is more stringent than the current ratio, Apple Inc., is a little shy of being able to cover their liabilities with their assets.
The last ratio completed was the Cash to Liabilities Ratio, otherwise known as the cash ratio. "This ratio takes the cash and cash equivalents divided by the current liabilities" (Nguyen, 2017). This ratio tells the investor whether or not the company can pay off its liabilities with just the cash they have or with their highly liquid investments. Their cash ratio for 2017 was .74 cents, and 2016 was .85 cents to every $1 of their liabilities. This like the quick ratio tells us that Apple Inc. isn't in a perfect spot when it comes to their liquidity of their cash and marketable securities.
When looking at Apple Inc.'s liquidity compared to Microsoft's you can see that Microsoft is slightly more liquid. Microsoft's liquidity ratio is at 2.5:1 which is a little higher than Apple Inc.'s. This just means that Microsoft can pay off their liabilities and not have to put up all their assets to do so. Microsoft has $63 million more than Apple. By these numbers, it can easily be said that Microsoft has way more liquidity than Apple Inc.
Strategic Goals: Core Strategies and Tactics
One area that Apple Inc. needs to change is their threats. They could do somethings that would help build a better reputation with their customers. One of the threats that was mentioned was, Apple was found to be slowing down phones that were older. When customers found out about this and they were outraged. Apples answer to this was that they know better, but there was no apology. Which made customers furious because they made it seem like they didn't care that this was happening. Giving the customers the idea that Apple cares more about money than their customers.
Another area where Apple could improve is with the price of their phones. If they want to sell phones at the price they are at now, they will still sell. Apple also could offer another iPhone that is cheaper than all the others. With this marketing plan Apple could make a little more money by getting into a market that can't usually afford their iPhones. In order for them to not take any kind of loss, the phone that they offer at the lower price can have less functionality. This will show that Apple is trying to make a product that anyone can afford and enjoy the Apple product's just like everyone else.
The last area where Apple needs to change is anything that deals with politics. Including themselves with politics can turn out very badly for them, staying neutral is the best bet for them or any other company. If some of their customers do not agree with their political viewing they could decide to go another company to get their products from. Politics can be dangerous for any company to get their selves involved with. Getting involved could cause a company to go out of business depending on how bad the issue gets.
Prioritized Core Strategies
The core strategies of Apple Inc. are corporate, business, and function. With the corporate strategy, they should focus on growth. Trying to build new markets and explore other business opportunities. An example of this was when they purchased Beats by Dre. This brought them into a new market and business opportunity. They already had in the ear headphones, but with the purchase of Beats they now were in the over and in ear headphone market. This was an excellent choice as it took no research and development to expand to this market. All they get is pure profits besides the slight expenditures the come with the making of more product. With the business strategy, the main focus here would be to avoid risk with the suppliers and the costs would be lower. The function strategy is where they can start multiplying the channels at which they are distributing their products. This also gives the company a chance of lower costs. With this strategy comes a negative, because of all the stores at which they are distributing products could see a downfall in customer service.
Recommended Organizational Structure
The organizational structure that would work best for Apple Inc. would be a hierarchical. The reason for type of structure is because of how big they are. There are so many moving parts going on with Apple Inc. that they need to have lots of top coverage to cover all the divisions that are involved with Apple Inc. With the growth of their products spreading out or adding a new manager can easily be done with this type of structure. Also, this type of structure will allow young leaders to move up through the hierarchy after gaining the experience needed.
Recommended Marketing Positions
Apple is already the best company in their market as they are the first one to be worth $1 trillion. To continue their trend of being on top Apple could change some things up. One objective they could try to accomplish is coming up with a new product that no other company has developed. Doing this will make consumers think that Apple is the better company because they are developing new products before other companies. Also, if they were to do this it would allow more time for them to work the kinks out and come out with a product that other companies will struggle competing with.
I believe the company is well managed, and I would recommend to any investor that Apple Inc., would be a good addition to their portfolio. Yes, they have some negative trends, however, the company is highly profitable. Their revenue hasn't been lower than $180 million in the last three years. Another point to make this recommendation is that a majority of Apple Inc.'s line items are trending up. Also, keep in mind that if Apple ever got into any financial trouble in regards to their liabilities and needing to pay creditors off, they would be able to do so because they are not over-leveraged.
Apple Inc. can measure their success it lots of different ways. One way of measuring their success is, return on investment. This type of measurement allows them to measure their success when it comes to their business investments, whether or not they are choosing the right ones or not. Another success measure would be their operating cash flow and free cash flow. This allows them to judge how they are doing based off of the money they are generating with the operation of their business. The free cash flow aspect allows them to see how much money they have after spending money on buildings or equipment. They can utilize these funds on dividends, expansion, or they can use it to pay off other outstanding debt they have.
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