Group Assignment 1
We chose to research Apple Incorporated, one of the most innovative companies of our generation. It is safe to say that nearly every one in the US and many foreign countries have used or at least heard of Apple products. We will be looking at the macroeconomic variables that impact Apple’s business as well as how the current developments in the industry have impacted Apple’s financials and we will also look at how Apple competes with other firms in the same industry.
The first macroeconomic variable that we believe will affect Apple, Incorporated is the global forecast for Gross Domestic Product for 2013. The global forecast for GDP is 3.3% for 2013 according to Global Macroeconomic Outlook. This is relatively slow growth because the 10-year average was 3.8%. Usually slow growth is followed by a fall in demand of goods and services. Since Apple makes and sells more cyclical items, this could lead to a decrease demand for Apple products. To continue making the revenue that the company needs, it could force them to lower their prices, which will also result in lower profits. Although, Apple products are more of a luxury item, there is a trend of dependence on smart phones and other technology that Apple produces so they may not be affected as much as other companies that produce luxury products.
Apple, Inc. has a strong presence in the United States of America and Japan so another factor to look at would be the GDPs for those countries. The GDP in America is supposed to be 0.02% higher than the 10-year average and almost double (0.9% as the 10-year average to 1.6%) in Japan. Using these numbers we can guess that Apple, Inc. will probably continue to grow since those GDP’s are larger than the past average but at a very slow rate since the growth is minimal.
The profit margin for Apple, Inc. has increased from 21.5% in 2010 to 23.9% in 2011. Using these numbers we could estimate that the profit margin for the company will probably increase only a couple percentages between 2011 and the end of the 2013 fiscal year. This would make the profit margin around 25.5% in our estimations. With this growth rate we believe that Apple will be able to outperform many of their competitors such as Microsoft for personal computers and Sony for cellphones.
The second macroeconomic factor that our group has decided will probably affect Apple, Inc. is the exchange rates. According to U.S. Dollar Currency Exchange Rate Forecast, the U.S. dollar is expected to decline in comparison to world currencies in the next four years. This is good for foreign demand because it will cause international pricing to decrease parallel to the decrease in the U.S. dollar value. One reason for this is because a weaker dollar also means less expensive export fees. Hopefully the results to these decreased prices would be an increase in foreign demand for Apple products. Although the demand would be increased, the drop in prices could also lead to slightly lower earnings.
Another downfall to the U.S. dollar decreasing in value would be that the cost of supplies from foreign suppliers would increase. Apple, Inc. is very dependent on these foreign imports of parts so the increase in those prices could cause a significant loss in gross margins as well. On a positive note, other PC and smart phone manufacturers will also be in this same predicament because many technological products have foreign-produced parts so if Apple can combat these hurdles more efficiently then they can have an advantage in the industry. The weakening of the U.S. dollar as I mentioned before as increase the prices of imports which should eliminate foreign competitors who are trying to sell their electronics in the United States as well.
From 2007 to 2011 we have seen an overall decrease in the market value for PC’s and it its forecasted to continue to decline through 2016 as show on figures below. Despite the decrease in the industry’s...
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US Dollar Currency Exchange Rate Forecast. (n.d.). Interest Rate, Stock Index, Real
Estate Price & Exchange Forecasts. Retrieved October 8, 2013, from http://forecast-chart.com/usd-trade-weighted.html
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