Case Analysis Apple Inc. Unit

CASE _ANALYSIS _APPLE INC 1

CaseAnalysis: Apple Inc.

Unit

Lecturer

StevenHolmes seeks to determine the competitive advantages of Apple Inc. Heseeks to also realize where the company’s capabilities andresources can be used to reduce threats and exploit opportunities.After the analysis of these factors, a recommendation will bepresented specifically in reference to MP3, tablets, smartphones, andcomputers.

Analysis

Market

Therehave been positive reports in the profits that Apple Inc. has beenmaking. By the year 2006 up to around 2008, the company’s sales hadgrown by 95%. This was from around %19.3 billion to around $37.5billion. During this period, the company netted an income of $6.1billion (see Exhibit 1). It is apparent that Research and Development(R&ampD) is important for the development of the company, the ratioof R&ampD to the total sales needs to be rational especially whencompared to the competitors. This can give the company a competitiveadvantage. The recommended average of sales to R&ampD is between1-3% (See Exhibit 2). Between year 2008 and the year 2011, more thanhalf the total sales of the company were made of iPod, iPad, iPhoneand the computers. Most of the sales in the year 2002 were from thesale of computers (79% of the sales). However, this dropped to around20% by the year 2011. Most of the company’s sales in the year 2011were made from the sale of iPhones. Through-out the year 2011, iPhonesales increased to almost 8.4% (see Exhibit 3)

Computers

AsApple acquires the computer industry, there are indications thatthere will be more and more competition. In the year 2002, 79% of thetotal sales were made from computers. In this sector, the companyprojected a return on investment (ROI) of about 80% by the first halfof the year (see Exhibit 4). In comparison to other manufacturers,Apple would have to increase its research and development budget byaround 3% to beat competitors like HP in the rate at which they areinnovating new products. By the year 2011, Apple had only taken up4.7% of the computers market. Nevertheless, by the year 2011, itindicated that its sales were about 85% of what HP was making. Thiswas a significant increase in its sales by around 52% of year 2010sales.

iPod

Thiswas a success in the implementation of an integrated model. Theintegration of the software with the desktop applications hasincreased its efficiency as well as competitiveness. The use andapplication of the iPod in the market made things easier for theusers as it became easy to download and listen to music from thegadget. This was especially realized after the software that allowedthe linking and connection of the iPod to the computer desktops andlaptops to be possible. Now people can copy music from computers andupdate their lists on their iPods.

iPhone

Thecompany has competitive advantage over other players in the industrylike Samsung (see Exhibit 5). However, the sales made by Samsung ascompared to those of Apple were 15% higher. Although researchindicates that there are other major players in the industry, AndroidOS is a major competitor (see Exhibit 6). Matter of fact, the iOS isa major player in the industry and as so many clients and customers(see Exhibit 7).

Inthe smartphone sector, the iPhone has major shareholding. Accordingto research, the phone has taken up more than 27% of the sector.However, with time there have been increases in the market share.This increase has been roughly between 1 and 3% especially in theyear 2011.

Tablets:

Bythe year 2011 Android and iOS had garnered a majority share of 97.3%of the total tablets in the market. Although Apple Inc. had goodmargins of around 20.5% in the market, this changed as Android closedthe gap narrowing it to just 10.5%. Currently, there is very littlecompetition in the labor market. Apparently, there is stillopportunity for the entry of new rivals in the market. This isespecially so if the environment does not change. Another factor thatenables this is the low barriers which if they do not rise then itwill be easier to enter the industry.

Accordingto analysis, there is a possibility to have competitive advantageover other players in your industry. In this case, although themajority of the smartphones and computers category market share isnot Apple Inc.’s, the company can boast of having premium productsthat are quite profitable to it (see Exhibit 8).

Recommendations

AppleInc. should see to it that they maintain a product pricing anddifferentiating strategy. Research and development should be investedin heavily and should be focused on the creation of highlycompetitive products that will complement the current offerings. Thisshould be in terms of the integrated user experiences.

Appendices

Exhibit1: Net Income and Net Sales along Apple History Timeline (1996-2011)

Exhibit2: Net Margin, Gross Margin, R&ampD/Sales (1996-2011)

Exhibit3: Changes in Net Sales per Unit Sold (202 – 2011)

Net Sale/Unit Sold

2002-2004

2004-2006

2006-2008

2008-2009

2009-2010

2010-2011

March 2011-2012

Computers

-7.5%

0.5%

6.3%

-9.8%

-4.1%

1.8%

-2.0%

iPads

-5.6%

-4.1%

iPods

-31.8%

-3.5%

-14.4%

-10.8%

10.1%

6.7%

-5.1%

iPhones

8.4%

8.4%

3.3%

0.2%

Exhibit4: ROI Developing on OS.

$ 2,500,000,000

Cost of Windows 7

$ 55,555,556

Units needed to cover costs at $45/copy

$ 100,000,000

Units sold in the first 6 months

$ 4, 500,000,000

Expected 6 months Revenue

80%

ROI

Exhibit5: Competition in the Mobile OS Sector

iOS

Apple

585,000

47%

19%

Android

Google

450,000

36%

46%

Windos

Microsoft

80,000

6%

2%

Blackberry

RIM

70,000

6%

11%

Symbian

Nokia

70,000

6%

19%

Exhibit6: Android VS iOS Market Share (2007 to 2011)

2007

2008

2009

2010

2011

iOS

2.7%

8.2%

14.4%

15/.7%

18.9%

iOS MS Gain

6%

6%

1%

3%

Android

0.5%

3.9%

22.7%

46.4%

Android MS Gain

3%

19%

24%

Exhibit7: Financial Comparison Apple and Samsung (2006 to 2011)

2006

2008

2009

2010

2011

Samsung

Revenue

72,778

102,844

115,587

131,109

139,903

COGS

50,921

76,109

80,206

87,050

95,087

R&ampD

6,263

7,715

8,462

Return on Sales

8%

4%

8%

11%

9%

Apple

Revenue

19315

37491

65225

108249

COGS

13717

24292

39541

64431

R&ampD

712

1109

1782

2429

Return on Sales

10%

16%

22%

24%

Exhibit8: Market Share by Technology Category (Year 2011)

Computer

HP

17.70%

Dell

12.60%

Lenovo

12.50%

Acer

10.60%

Apple

4.70%

Smartphone

Android

46%

iOS

19%

Symbian

19%

Blackberry

11%

Windows

2%

OS – Smartphone Apps

iOS

47%

Android

36%

Symbian

6%

Blackberry

6%

Windows

6%

Tablet

iOS

59.90%

Android

38.40%

RIM

1.30%