SWOT & BUSINESS INTELEGENT ANALYSIS ON APPLE

MANAGEMENT INFORMATION SYSTEM

BILINGUAL CLASS

MID TEST - BUILDING CASE

SWOT & BUSINESS INTELEGENT ANALYSIS ON APPLE

BASED ON CHAPTER 6

BY :

FELICIA MONIKA

1511011032

S1 MANAGEMENT

ECONOMICS AND BUSINESS FACULTY

UNIVERSITY OF LAMPUNG

2016/2017

ANALYSIS

STRENGTHS

Strengths in the SWOT analysis of Apple

1. Innovative products

One of the key strengths of Apple over the years has been its innovative product line up. Apple has presented hit products after hit products and that’s been the major strength of Apple. Initially it came with the MacBook, then the iPod, the Iphone, the Ipad, the Iwatch. In short, Apple has covered almost everything that an individual “desires”.

2. Leadership position

As per Wikipedia, Apple is the leading technology company in the world with regards to revenue generated. It is also the second largest mobile phone manufacturer. It become the first US company to cross 700 billion dollars and in 2014 was the largest publicly traded company in the world. If that does not define leadership, then nothing else can. Apple is far ahead in the leadership game.

Apple is one of the global market leaders with its globally popular products such as iPhone®, iPad®, and Mac®, and services such as the iOS and OS X® operating systems and iCloud®. These products and services have proved to be sources of solid revenues for the company and are likely to remain so in the foreseeable future. The company has a strong international presence and in 2016 Apple’s domestic and international net sales accounted for 35 per cent and 65 per cent of total net sales respectively.

3. Brand equity

Naturally, being in the leadership position requires that your brand equity be high. The brand Apple is the number 1 valued brand amongst all the companies in the world as of 2016. The brand value in 2015 was estimated to be 118.9 Billion dollars.

The company has a strong brand image and Apple brand value has been estimated as USD 154.1 billion by Forbes. Although the most recent assessment by Brand Finance estimated Apple brand value as USD 107.1 billion, behind Google’s USD 109.5 billion, nevertheless it is still a considerable value benefiting the business in multiple levels. Strength of Apple’s brand image and value is effectively reinforced by uncompromised customer loyalty serving as a solid base of competitive advantage.

4. Design & Technology

The best part of Apple, and the reason for its fantastic brand equity is its design as well as the technology it uses. Apple has always been suave and elegant in its design. And at the same time, beneath this exquisite design is a machine powered to give ultimate performance. All this runs on the MacOS which is another software known for its efficiency.

5. Distribution

Apple has 470 of its own stores across 17 countries. Besides these stores, it sells through trade partners, online channels as well as through other premium retail stores. Entering an Apple owned retail store is a fantastic experience. Additionally, Apple also launched the Apple genius bar to directly solve customer issues within the retail store itself. Thus, the concentration of Apple on its sales and service distribution is legendary.

6. Steve jobs

One of the key factors and the leader of Apple is also a loved person in the technology Industry. He is an inspiration to all marketers in the way that he led his own people and the way he carried his life and the brand Apple along with him. Since 2011, his departure from this world, Apple has been led by Tim cook who is also showing his genius in growing Apple as a company.

7. Margins

One of the core advantages of Apple as a company is the margins that it commands over its products. Being a technological leader with a top brand equity, Apple keeps a hefty margin for itself to invest in R&D and brand building. Furthermore, its pricing strategy is such that the price does not break in the market and you will always find Apple selling at the same price in various retail stores.

Apple maintains an exceptionally high profit margin compared to industry average and this fact provides advantages for the business at multiple levels. High profit margin can allow the business to maintain its operations in times of economic uncertainties thanks to cash reserves and Apple is also able to commit to vast investments for research and development. Industry analysts note that “Apple isn’t here to sell the most of anything; its overarching goal is simply to generate the greatest possible profit”.

8. Consumer focus

Apple always designs its products with a focus on consumers while keeping their mind in the future. They always try to imagine the things which even the consumer has not imagined yet. As per Steve jobs “if you ask the consumer what he wants, by the time you give him the same thing, he will want something else”. This ideology is the reason of success for Apple.

9.      Brand awareness and reputation

Forbes and Interbrand have both listed Apple’s brand as the most valuable in the world in 2015. They valued the brand at US$145.3 billion and US$170.3 billion respectively, and recognized it as a significantly growing brand in terms of value.

This means that the company’s brand is the most reputable and recognizable in the world. Apple’s leading position in the smartphone marketplace, its excellent advertising and marketing capabilities, and the wide ecosystem of its products has led to a brand awareness that cannot be matched by any other technology company in the world.

10.  Advertising capabilities, which increase brand awareness and create stronger demand for the company’s products

Apple’s annual advertising budget reached US$1.8 billion in 2015, almost doubling from US$933 million in 2011. The company’s advertising budget is certainly not the largest when compared to its competitors’ budgets, but Apple uses it the most effectively.

Apple’s advertising expenses started to climb in 2010 when its new iPhone and iPad products were launched. However, overall spending on advertising never climbed higher than 1% of total company sales. In 2015, Apple spent only 0.77% of its total sales on advertising, compared to Samsung Electronics’ (Samsung) 1.86%.

Figure 1. Yearly advertising budget spending by Apple and Samsung (in US$ billions)
Company	2012	2013	2014	2015
Apple	1	1.1	1.2	1.8
Samsung Electronics	4.3	3.8	3.6	3.4

Source: The respective companies’ financial reports

Even though Apple spends less on advertising, it still achieves greater brand recognition and more revenue for the money spent than Samsung.

11. Apple’s supply-chain

Apple’s supply-chain operations have been ranked by research firm Gartner as the best in the world for the past four years. Apple supply chain best practices include data synchronization between the central warehouse and its own stores and customers, and outsourcing manufacturing and as a result reducing the manufacturing cycle time. Sophisticated supply-chain management practices allow the company to facilitate its complex global operations with no or least disruptions.

12.  Strong and extensive U.S. distribution channels

Apple’s strength in the U.S. is its extensive distribution channels. Apple is well-known for employing multiple channels to deliver its products to customers. The company uses direct distribution channels such as its online stores, direct sales force, and most notably, retail stores. Few of its rivals have their own physical retail stores and none have such a vast network of them.

Apple also has an extensive indirect distribution network, which includes third-party cellular network carriers (AT&T, Verizon, Sprint, T-Mobile), wholesalers, retailers (Best Buy, Amazon Marketplace, Walmart, Target, Staples), and value-added resellers. In the smartphone and tablet markets, only Samsung can match Apple’s indirect distribution network size.

13.  Vertical integration

Apple is a vertically integrated company that manages four separate businesses as one. The company has a hardware business, a software business and it is also a service-provider and a retailer as well – all integrated into one entity. Apple controls almost the entire supply chain for its devices. No other competitor manages, or is capable of managing, all four areas of the supply chain.

14.  Sound financial performance with one of the strongest cash flows

Apple’s revenue grew on average by 16.44% from 2012 to 2015. During the same period, the company’s profit grew by 27.94%. This is a very successful growth, considering the company’s huge size and its total revenues, which reached US$233 billion in 2015. The company was also able to maintain a high profit margin of 22.84% in 2015, which is unusual for a company experiencing such a fast growth period. Both its revenue growth and high profit margin indicate Apple’s ability to efficiently manage its operations.

Apple’s robust cash flow and huge cash reserves are additional financial strengths. The company had US$205.6 billion in cash reserves and only US$56 billion in long-term debt in 2015.

Figure 2. Apple’s cash growth (in US$ billions)
	2012	2013	2014	2015
Cash	121.251	146.761	155.239	205.666

Source: Apple financial report

The company’s growth, net income, cash reserves and low debt provide it with enough resources to invest in acquisitions, R&D, marketing and other cash-draining activities without significantly threatening its financial situation.

WEAKNESSES

Weaknesses in the SWOT analysis of Apple

With a company which is a market leader and innovative, we can expect very few weaknesses. Here is the weaknesses which Apple might be facing:

1. Matching Customer expectations

Being a leading company since 1980’s Apple has a major market share and the consumer expectation is going through the roof. People expect great things from apple year after year and maintaining these expectation levels is not easy for anyone.

2. Incompatibility

A key issue in Apple as a company is that many of its products are incompatible with third-party software / accessories. So overall, when you buy a product of Apple, you enter the Apple universe and you have to continue with Apple only. That makes a huge impact on consumer decision-making.

3. Dependency on few products

Apple has only 7-8 products in its portfolio in comparison to the various products that its closest competitors Microsoft and Google have. Hence the dependency of Apple on each of its products is very high. If one product fails, then that is a 10% loss to Apple. Hence, there is a common demand from Apple to increase its product portfolio.

4.      Prices

Apple products and services are priced in much higher level compared to competition. For example, 16GB iPhone 6 costs £539/USD649, the 64GB handset costs £619/USD749 and 128GB costs as much as £699/USD849. By comparison, its direct competitor, Samsung Galaxy S5 with additional 128GB microSD card costs only £510/USD670 which is cheaper £190/USD280 than top spec iPhone 6

5.      Declining in net sales

Net sales declined 8 per cent or USD18.1 billion during 2016 compared to 2015, primarily driven by a year-over-year decrease in iPhone net. Specifically, total sales and unit sales of iPhones declined to 12 per cent and 8 per cent respectively in 2016 compared to the previous year.[9] Similarly, the net sales of iPads and Mac products declined by 11 per cent and 10 per cent respectively during the same period

6.      Low expenditure on research and development compared to other companies leads to fewer innovations and products introduced to the market

In the past, Apple has been recognized as one of the most innovative companies in the world due to the introduction of new product types into the market and the breakthrough technology used in those products. Yet, for the last few years, Apple hasn’t introduced anything completely new that would disrupt the market and allow the company to grow significantly.

7.      Incompatibility with other OS

Apple’s proprietary operating systems iOS and OS X are quite different from the OS of both their Android and Windows rivals. In addition, Apple uses its own design hardware that is often incompatible with the other manufacturers’ hardware. Sometimes, this difference in software and hardware adversely affects Apple. Users who are accustomed to using the Microsoft OS may find it hard to get used to the completely different OS X. Android users face the same problem when an app that is only available on Google ‘Play’ is not available in the iTunes store.

OPPORTUNITIES

Opportunities in the SWOT analysis of Apple

1.      The Internet of Things (IoT) market is expected to grow significantly over the next decade

Currently, more than 20 billion devices are connected to the Internet and this number is expected to grow by 50% to 30 billion by 2020.^[5] International Data Corporation (IDC) forecasts that the worldwide market for the IoT will grow from US$655.8 billion in 2014 to US$1.7 trillion by 2020.^[6]

Apple has a unique position to take advantage of the growing IoT market. The company has its own software platform that is the key to managing information from connected devices. Apple also offers smartphones, wearable gadgets, tablets, computers and many other hardware products that can be integrated into one ecosystem and controlled via an Internet connection. Apple could introduce a new OS system, like Google’s Brillo, designed specifically for the IoT.

2.      Product Innovation

Apple cars-Naturally, with Facebook expanding with Instagram, Occulus rift, Whatsapp and others and Google expanding in 10 different ways, Apple wanted to find out some new products which Apple could launch. Apple is now fixated on Apple Car which is supposed to be launched in 2020. Like any other product of Apple, we can expect great things from the Apple car as well.

Iwatch and Apple TV – Two products which can increase the presence even further are the Iwatch and Apple TV, both of which are aimed at the future, for when the digital presence increases. Apple Iwatch already has a 50% market share of Smart watches in US.

3.      Technological advancement

In the technology industry, technological advancement is always an opportunity. And the one brand we can expect to leverage technology to its best is Apple. We can expect even more advanced MacBook’s, Iphones, Ipads and Iwatches in the coming years.

4. The growing market

Apple is a growing company in a growing market. Equally important to the company is the rising GDP of developing countries, thereby increasing consumption of such premium brands like Apple. Any company which is growing needs a larger market base and the market base is slowly being built via territory expansion for Apple.

THREATS

Threats in the SWOT analysis of Apple

1. Market penetration in Smartphones

One of the key threats to Apple is the market penetration by other brands in the Smartphone market. Android is eating market share like anything and currently has 47.5% of the market share whereas Iphone is at 42% market share. Android is being used by Samsung, HTC, Lenovo and practically everyone who wants to enter the smart phone market. Naturally Android being of Google (2nd most valued brand), Apple has to be ready for Smartphone competition.

2. Laptop competition

MacBook is obviously the best there is. But so is Dell, and so is Sony and so is Lenovo. The competition is ever-increasing in the laptop segments. Dell has introduced some beautiful models over the years including the Alienware model. So, although Apple as a brand is loved by everyone, MacBook is facing stiff competition from other brands as well.

3.      Intensifying competition puts pressure on Apple’s market share, revenue and profits

Apple has always faced strong competition from Microsoft, IBM, HP and Dell in the personal computing sector and since the launch of the iPhone and iPad, that competition has increased significantly. Now Apple’s main rivals are Google and Samsung, both well-funded and experienced competitors which work together to provide the best possible offerings to compete with Apple’s devices.

Apple with its high-end but overpriced devices is likely to lose the battle for emerging markets to cheaper Android devices.

The constantly growing Android market share also puts pressure on iOS, iTunes, Apple Music and the iBook Store. Android OS usage, with help from Samsung, Huawei, Lenovo and LG devices sales, is growing rapidly and is the main smartphone OS in emerging markets. As a result, app downloads and the associated revenue generated has increased significantly in Google Play. Google Play will soon become the most important app market to compete in and developers will favor it more than the iTunes market.

4.      Strong U.S. dollar

Currency exchange rates affect every multinational company, including Apple. The company earns over 65% of its revenue outside of the U.S.

Current forecasts indicate that the U.S. dollar exchange rate is going to rise further against other currencies over the next few years. This therefore means that Apple’s revenue and profits generated outside of the U.S. are likely to decrease when converted to U.S. dollars.

5.      Lawsuits over patent infringements resulting in damaged brand reputation

Lawsuits over patent infringements happen often in the market, especially in the technology sector where devices are made of multiple parts and use software with thousands of lines of code that may have already been patented by another company.

Apple is not immune to infringement itself as well. Although not willingly, the company has infringed other companies’ patents numerous times over the years and will likely continue to do so due to the complexity of its products and the fact that there are so many existing patents in hardware and software design. According to Unified Patents, Apple is the most targeted company for patent infringements.

6.      Risk of data breaches

Apple’s business requires it to collect, store and use customer, employee and its business partners’ personally identifiable information (“PII”). PII information includes names, addresses, emails, phones, ID numbers, credit/debit card and other personal information that is safely stored and protected from outside parties. Nonetheless, data breaches occur and stakeholder data does get stolen and exposed from time to time.

Some of the biggest information thefts have affected Amazon.com, eBay and even Google. All of these companies have lost customers and sales because of it. With the growing number of data breaches, there is always a potential risk of Apple being breached in 2016.

BUSINESS INTELLIGENCE

It has become very common to see customers in long lines waiting for Apple’s new products for many hours.  People have become addicted to Apple’s products and gadgets because of its advanced features and easy to use applications. However, this is not a break of chance or a coincidence; it is part of a well-organized plan to create an Apple culture.  

Apple’s smart and customers’ based sales strategies attract millions of users around the world. Apple gains business intelligence through the implementation of customer relationship management by extracting and analyzing customers’ data.  Apple knew the importance of customers and understood that the marketplace today is customer focused and not sales focused.  Apple gathers many information about its customers in every transaction or interaction with it; and through different channels of communication: email, surveys, catalogs, store, etc.

Apple is always focusing on the customers’ needs and wants in order to develop products that match those needs and wants and even exceed them.  Customer relationship management allows Apple to increase the loyalty of customers and maintain profitability.  In addition, Apple’s CRM enable it to track the buying and shopping behavior of customers and provide them with the right information based on their preferences that were previously recorded in the customer relationship management system. 

For example: Apple can know what channel of communication is best and most reachable for a customer just by getting back to the customer relationship system management.  Apple also uses customer relationship management to design advertising campaigns targeting each customer individually and making him/her spend money on buying Apple’s products.  Furthermore, Apple uses customer relationship management system to gain customers’ loyalty to the brand.  Customers’ loyalty to Apple brand is unquestionable.  Apple attracts many customers every day, customers that they have never been interested in technology before but happened to be fascinated about Apple’s complete, innovated, and smart products.

BIBLIOGRAPHY

https://www.strategicmanagementinsight.com/swot-analyses/apple-swot-analysis.html

http://research-methodology.net/apple-swot-analysis/

http://www.marketing91.com/swot-analysis-apple/

https://iloveapple1.wordpress.com/2012/04/18/apples-business-intelligence-using-crm/



I just want to share some information that might help you. Please enjoy my blog! Subscribe my youtube channel www.youtube.com/c/feliciamonika13 and follow my instagram account www.instagram.com/feliciamonika