The purpose of this report is to analyse Apple’s business model and advice whether it is going to remain strong in the future. Moreover, the objective is to evaluate current strategies organisation is adopting and recommend a future strategic business unit (SBU) or corporate strategy. In order to examine current Apple’s strategies internal and external analysis will be performed. The company’s reporting currency is USD. Steve Jobs was a co-founder of Apple Inc which was established in 1976 and became incorporated in 1977. The company trades on NASDAQ stock market and is the largest company in the world by market capitalisation1. A company is highly vertically integrated including product design, marketing and retail across 357 Apple stores in 11 countries and online sales in 89 countries around the globe. Apple also makes money from foreign exchange hedging. There are 8 SBUs and 5 operating segments within Apple.
Americas2 Europe3 Japan Asia-Pacific Retail5
Portables iPod Other music related products and services iPhone and related products and services iPad and related products and services Peripherals and other hardware Software, service and other sales
Very good you have understood how large Apple is in terms of capitalisation, answered how they have made their money and correctly identified SBUs.
Apple with its market capitalisation of $330.8bn has overtaken Exxon Mobil in August 2011 North and South Americas 3 European countries, Middle East and Africa 4 Australia and Asian countries excluding Japan 5 Apple retail sores
2. FINANCIAL ANALYSIS Key conclusions based on financial ratio analysis (Appendix A/B). Year ended 30 September 2007-2011 The main revenue is generated by iPhone and iPad SBUs which accounts for 43% and 19% respectively of total sales in 2011 Americas and Europe were the leading operational segments that accounted for 35% and 26% accordingly of total revenue in 2011 However the only segment that experienced Y o Y growth was Asia-Pacific, with 8% increase comparing to 20106 (Strength) Profitability analysis Sales soared by 340.43% from 2007-2011, whereas Net profit grew by a massive 641.69%7 (Strength) Look in the notes to the accounts for detail of why? GP% has a tendency to increase being 33.2% and 40.5% in 2007 and 2011 respectively8, with an exception of 0.8% decrease in 2009-20109 (Strength) GP% and OP% is higher than HP, however lower than Google and Microsoft10 ROCE was boosted by 13.12% in 2010-2011 due to overall NPBIT increase of 84%11 and opening of 40 new stores which attracted more sales, whereas in 2008-2009 ROCE declined by 2.82% due to a significantly slower growth in NPBIT12 and additional 26 store opening that required substantial investment in assets Good detail of why Liquidity and efficiency analysis Current and Quick ratios improved from 2.4 to 2.7 times in 2007 and 2009 correspondingly, due to a lower increase in Current Liabilities, however ratio has deteriorated to 2.013 and 1.6 times14 in 2010 and 2011 respectively.
Due to high demand for iPhone 4, iPads and Macs Due to a successful entering into consumer electronics market with a successful introduction of iPhone in 2007, its constant update and significantly popular iPhone 4 in 2010 and iPad launch in 2010; 110 new Apple stores opened between 2008- 2011, entering new markets – Asia; higher profit margins 8 Due to lower commodity costs, favourable sale mix of more profitable products, product price reductions 9 GP% dropped because of higher costing product (iPhone 4 and iPad) launch in 2010 10 GP%: HP-23.35%, Google-64.47%, Microsoft-77.73%; OP%: HP-5.56%, Google-29.01%, Microsoft-33.1% (Source: Google finance) 11 Down to sales growth across all SBUs, especially of 311% and 87% increase in sales for iPad and iPhone respectively in 2010-2011 12 Lower demand for iPods, iPhones and Macs 13 81% increase in Current...
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