Custom «Apple Inc Financial» Essay Paper Sample
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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).
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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.
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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).
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.
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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.
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.
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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.
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f. Cost structure
1) Wages and benefitsÿ
According toÿAppleInside 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.
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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.
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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.
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.