Apple Inc. - An Analysis

PESTEL analysis, Porter’s 5 Forces analysis, SWOT analysis, Comprehensive analysis of financial ratios, and Comprehensive analysis of share performance of Apple Inc.

(2012, 3300 words)

This paper looks at Apple Inc., which primarily operates in U.S. and involves in development, design, and marketing of computers, portable digital music players, and media devices. It evaluates the macro environment in which Apple Inc. is operating with the help of the PESTLE analysis. Next, it studies the strength and competitive positions of Apple Inc with the help of Porter’s five forces analysis. Later, a SWOT analysis is conducted to understand the micro environment of Apple Inc. Finally, Comprehensive analyses of financial ratios and share performance are conducted to understand the financial condition and the stock performance of Apple Inc.

Apple Inc., SWOT; PESTAL; Porter’s Five Forces; Comprehensive Analysis of Financial Ratios; Comprehensive Analysis of Share Performance.

Introduction:

Apple Inc. is involved in development, design, and marketing of computers, portable digital music players, and media devices. Moreover, this company sells various related services, software, networking solutions, and third party applications and digital content. Furthermore, it primarily operates in the US. Headquarter of Apple Inc. is situated in Cupertino, California and 63,300 employees are working by the end of the September 1, 2011(Data monitor, 2012).

The recorded revenue of Apple Inc. was $108,249 million during the fiscal year ended September 2011 (Yahoo! UK & Ireland Finance, 2012). Therefore, the revenue of apple during fiscal year 2011 was an increase of 66% over fiscal year 2010. Moreover, the operating profit of the company was $ 33,790 million during fiscal year 2011, which was an increase of 83.8% over fiscal year 2010. The net profit was $25,922 million in FY2011, which was an increase of 85% over fiscal year 2010 (Data monitor, 2012).

Comprehensive PESTEL analysis:

Figure 1: PASTLE Framework for Apple Inc.

illustration not visible in this excerpt

1) Political:

According to Datamonitor (2012), 38.6% of the total revenues of Apple Inc. were from US during FY 2011. Therefore, 61.4 % of sales of Apple Inc. were from outside America. Bad global relations, wars, and terrorism can affect the business of Apple Inc. Apple Inc also manages its business in the Middle East . During Iraq war, this company was affected by uncertainty in terms of currency volatility, shipping cost and insurance cost. In addition, U.S. has withdrawn its combat forces from Iraq by the end of 2011. However, there are still conflicts in northern Iraq and these conflicts between Arab and Kurdish communities create potential risk for Apple’s business in these regions (Hanauer,Martini, Al-Shahery,2011). Furthermore, Apple Inc manufactures many of its products and parts outside the U.S. like Czech Republic, Korea, Ireland, Cork, and China. Recently, China is preparing for its leadership transition later this year, which may influence the business of the Apple Inc (Carnegie Endowment website, 2012).

2) Economical:

The global recession might have influence on Apple Inc. The inflation rate is high, while consumer’s earning did not have significant changes; moreover, the unemployment rate has amplified, affecting consumers to spend less, especially on ‘Luxury products’. However, Apple’s revenue is not affected by this economic recession although most of the products of this company are luxury. Apple made it possible by designing different unique products from its competitors, which has increased the demand of Apple’s products (Apple website, 2012).

In addition, Apple Inc has used financial instrument like foreign currency forward and option contracts, to hedge certain exposures in foreign currency exchange rates (Apple annual report, 2009). Apple spreads financial assets across several currencies. For example, Apple could be protected from dollar devaluation if it carried enough Taiwan dollars to pay the metal component suppliers for the IPod cases. Additionally, the U.S. dollar depreciation has amplified Apple’s sales in the international market (Yahoo Uk & Ireland finance, 2012).

3) Social:

Nowadays, our social life is influenced by technology and Apple Inc, is considered as the king of technology because of its quality and design. Another big social impact is the music industry, which has become virtual and established its market to the cyberspace. Apple Inc. has created the largest virtual media store of digital music which is known as iTunes.

In addition, the average age of world’s population is growing because of a decline in fertility and a 20-year increase in during the second half of the 20th century. These factors will increase the number of persons aged > 65 years during 2010 to 2030 (Cdc gov website, 2012). However, Apple Inc. targeted music enthusiasts and fans of ages between 12 to 35 years old. Therefore, it may be a challenge for Apple Inc as > 65 aged population is increasing in the recent years. Moreover, the recent trend of using social network like Face Book, Twitter, Linked In etc has also influenced the business of Apple. The use of iPhone app is increasing due to the increasing use of social network site. Thus, modern social life style influences positively the business of Apple Inc.

4) Technological:

One of the biggest mobile wireless developments in 2008 was the increased availability of 3G mobile phones, such as Apple’s iPhone 3G. Moreover, Sprint is planning to offer a Wimax based 4G services by 2009. Other mobile providers (including AT &T, Verizon wireless, and T-mobile) are currently supporting new Long Term Evolution (LTE) 4G technology based on the UMTS cellular standard. Chips are already developed that support both types of 4G networks and are expected to be included in Notebook computers, mobile phones, digital cameras and other consumer devices (Morley, 2009). Moreover, the mobile cloud is the recent trend, which includes not only giant carriers ( Verizon, AT&T) and Mobile device makers (Apple, Samsung), but also a full convergent of internet based companies and software giants (Amazon, Google, Face book, Microsoft and more) (4G TrendsWebsite,2012). Apple launched iCloud in October 2011 and this new service stores music, applications, photos, calendars, contacts, and documents and wirelessly pushes them to multiple iOS devices, Macs and Windows-based computers (Apple Annual Report, 2011).Apple Inc. is on top of the market because of investing highly in research and product development. Moreover, innovation has shown big portion of this brand and has shown to pay out (Apple website, 2012).

5) Legal:

Apple Inc is the participant in various legal proceedings and its competitors and peers are also engaged in litigation in its normal course of business for various reasons. Moreover, Apple Inc’s success depends on the intellectual property rights. Intellectual property right claims may increase against Apple Inc. as the company has grown (Apple website, 2012).Recently. Apple has won the lawsuit against Samsung. The jury ordered Samsung to pay Apple Inc. $ 1.05 billion and Apple Inc filed its patent infringement lawsuit in April 2011 (Yahoo Finance, 2012).

In addition, Apple’s business is subject to a variety of U.S. and international rules, laws, policies, and other obligations. Therefore, any unfavourable changes in laws of U.S. and other international countries can adversely affect this company (Apple Annual Report, 2011).

6) Environmental:

New U.S. laws and regulations are making manufacturers responsible for recycling, and Apple Inc. introduces domestic recycling facilities instead of shipping waste overseas. Moreover, Apple Inc. has enhanced their expectation about green production. Furthermore, Apple operates in a way that conserves the environment and protects the health and safety of their employees (Apple Annual Report, 2011).

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