From its modest start in the childhood home of Steve Jobs in 1976, Apple is now one of the most profitable corporations in the world. It was the first company to have a market cap of over $2 trillion, and has shaped our world. Identifiable by modern, sleek products with intuitive user interfaces, Apple has become exceptionally popular around the world.
In this article, we dissect the Strengths, Weaknesses within the Apple Corporation, as well as the Opportunities and Threats that continue to present themselves.
1. Apple is one of the most recognizable brands in the world.
Its brand identity is so tightly woven into the design language of its products that you are able to identify an Apple product through its design DNA. This identification encompasses values of cutting-edge technology, quality, luxury, and sturdiness. The company has managed to turn its electronic products into fashion statements and a symbol of success. Apple’s brand has become one of the strongest worldwide.
Apple’s brand valuation is pegged at $263.4 billion. (Brand Finance)
2. Apple has expanded its portfolio into services, as well as hardware and software.
Apple’s services and non-hardware revenue now accounts for two-thirds of Apple’s revenue, successfully diversifying its portfolio. This is essential to mitigate risks that generally present themselves to hardware producers, like many of its competitors. This diversification has presented itself in Apple competing in industries such as Music Streaming, Video Streaming, Software sales, and autonomous vehicles.
On New Year’s Day alone, consumers spent $540 million on digital goods and services in the Apple app store. (Brand Finance)
3. Apple has one of the strongest financial positions.
With one of the highest gross margins in the industry, Apple’s ability to generate cash is exemplary. This places Apple in a position to focus on the future, to be bold with its brand image and its industrial design, and to properly invest in innovative developments in the various industries in which it is a stakeholder. Furthermore, this strong financial position offers risk mitigation during times of economic uncertainty.
Apple is the first company to reach a market capitalization of $2 trillion. (Brand Finance)
4. Apple’s retail footprint extends across the globe and is synonymous with high street retail.
A strong brick-and-motor presence in some of the world’s most iconic real estate has reinforced Apple’s brand image as cutting edge and on-trend. These retail outlets are placed in high-value, high foot traffic areas, and subscribe to a defined stylistic of clean, slick shop spaces serviced by professional, young, and hip sales staff makes the retail experience an attraction on its own. This shopping experience allows consumers to idolize the Apple ecosystem, reinforcing its premium price point.
Apple operates over 500 retail stores in 25 regions. (MacRumors.com, LLC)
5. Apple fans are extremely loyal.
Apple enjoys some of the highest retention rates within the consumer technology industry. Its consumer experience encourages loyalty, with Apple products working seamlessly across devices. Although the company’s products are priced at a premium, an Apple iPhone owner will more than likely have their other technological devices under the same brand in order for them to work in the same “ecosystem.”
Apple leads the consumer technology space, with a customer satisfaction rate of 82%. (The Motley Fool)
6. Due to the luxury nature of Apple’s products, it enjoys a high gross margin.
With the incorporation of high-end materials and tight supply chain policies, Apple has found a way to develop a market for its products where it enjoys some of the highest margins. Although the company enjoys about a 20% market share, it has about 40% of the market’s profits. Apple will need to ensure that it reinforces the consumer belief that Apple products are worth the investment in order for it to retain this position.
Apple’s gross margin is 38% (Statista).
7. Apple manufactures five of the world’s top ten selling handsets.
The iPhone redefined what a cell phone was when it was introduced, creating a fan base that is unwavering. Apple has managed to diversify its products enough to capture different levels of the market, with its flagship models often becoming the most expensive mainstream devices available. To capture consumers who cannot afford those devices or want a lower-end device, it has less expensive models available so these consumers can still be part of the Apple ecosystem.
Apple held five of the top ten spots in smartphone sales. (HT Digital Streams Limited)
1. Apple has slowed down its innovation in the last few years.
Although Apple has become synonymous with cutting-edge technology, promising electronic products that feature the latest and greatest that the market has to offer, in reality, this has been less and less so over the years. Innovations have presented themselves mainly in the camera capabilities of smartphones and the materials that the products are made out of. However, truly innovative features have been less and less prevalent in product releases.
Apple spends only 2.2% of its sales revenue on innovation, where its competitors are spending up to 10% of their sales revenues on innovation. (Dow Jones & Company, Inc.)
2. Apple continues to sell its products at a premium price.
Although innovation is not a big feature in technology releases, Apple continues to market its products at a price point above its competitors, even if its competitors’ devices are technologically superior to Apple’s products. Although in the short term this strategy can yield greater returns, in the long run, Apple will find it hard to retain its hard-won consumers.
Apple’s flagship iPhone cost 56% more in 2019 than it did in 2016. (Insider Inc.)
3. Apple relies on a high-end market.
Considering the premium price tag on most Apple products, with very little market segment diversification, Apple relies heavily on the upper end of the market. This position comes with great expectations from consumers. The market needs to feel that it is consistently receiving the best products for its hard-earned cash.
The average consumer spending in the Apple app store is $138 per year. (What’s Next Media and Analytics)
4. Apple has been accused of unfair business practices.
A problem with ensuring that you continually develop quality products with cutting-edge technology is that your products end up lasting a long time. This is fantastic for the consumer, but not as good for sales volumes, as ideally, you’d like your customers to be replacing their devices frequently from your stores. Through updates that Apple periodically executes, it intentionally slowed down devices that were over a certain age and decreased the device’s battery life, making an upgrade seem worthwhile. This encouraged consumers to unnecessarily upgrade their devices, leading to higher sales volumes.
Apple agreed to pay a $500 million fine for deliberately decreasing the performance of handsets to encourage consumers to upgrade to newer models. (Reuters)
5. Accusations of patent infringement continue to damage the reputation of Apple.
Apple has had a number of patent lawsuits filed against it since 2015. Patent protection in the digital world is exceptionally important, as it encourages companies to innovate to ensure that the gains from their innovation are secured. Apple was found infringing these rights by using patented technology belonging to various companies without the companies’ commercial rights being upheld.
Apple was ordered to pay $308.5 million for a patent infringement lawsuit. (Entrepreneur Media, Inc.)
6. Apple has experienced a drop in sales in China, one of its core markets.
Economic slowdown, economic welfare, and concerns of job security have decreased consumers’ spending on high-end electronic products, such as those offered by Apple. The company’s lower-cost SE line helped pick up sales somewhat. However, sales volume remains low and may be an indication of future demand.
Apple experienced a 60% drop in year-on-year sales in China in 2020. (CNBC)
1. Apple can develop products to compete in more cost-effective markets.
Now in its second generation, Apple’s SE range of iPhones has proven to be a resilient phone during an economic downturn. This line has offered a break from a decrease in spending on high-end consumer goods. While the SE line is thriving, Apple still derives most of its hardware revenue from high-end products. There is an opportunity to further developing its cost-effective products.
Offering cheaper handsets gives Apple a $133 billion opportunity. (Forbes)
2. Green technology is proving to be more viable and more marketable.
An eco-imperative is becoming more of a driving force within most companies’ operations. However, Apple has been slow to the starting block in rolling out eco-friendly initiatives in its processes. The materials that the company utilizes, as well as the manufacturing process, are yet to change to be more environmentally responsible.
74% of Apple’s carbon emissions are a result of manufacturing 19% of Apple’s products. (Compare and Recycle)
3. Further inroads into the wearable tech space offer opportunities.
Apple has a small offering of consumer technology in its popular Apple watch and its Apple Airpods. However, consumer technology is set to have a massive increase in the near future. Technology such as Artificial Reality (AR) and Virtual Reality (VR) is being woven into products that Apple’s competitors are rapidly developing. There is a great opportunity for Apple to start to develop its technology in the wearable space.
Wearable sales grew by 28.4%. (ZDnet)
4. Self-driving vehicles are a logical move for Apple’s market direction.
Considering the large existing consumer base, Apple’s access to market data, and its financial position in the consumer electronics market, the company is exceptionally well-positioned to become a market leader in autonomous vehicles. It is currently seeking strategic partners to join in order to develop autonomous vehicles and formally enter the automotive and mobility industry. While innovation in its current technological lineup is limited, innovation in the space of mobility has great potential.
The global automotive and mobility market is valued at $10 billion. (CNBC)
5. There is the opportunity for diversification into other technology and online services.
Apple’s core markets of high-end mobile handsets, wearables, tablets, laptops, desktop computers, and associated accessories offer the company an opportunity to further develop its technological offerings. Where other companies offer a full range of electronic options, such as Samsung’s consumer electronic range and Amazon’s online products, the opportunity for growth for Apple is considerable.
Revenue from Apple’s services brought in $15.7 billion. (Soko Media Limited)
6. With further research and innovation in its existing markets, Apple can once again be an innovation leader.
While Apple is still synonymous with cutting-edge technology, its deployment of innovative technology is no longer a differentiating strategy. Its differentiation strategy has thus far focused on the size of its devices, aesthetics and camera capabilities. Research and development leading to innovative technology in the consumer tech environment still offer a good opportunity to win over more customers.
Apple claimed 2,761 patents during 2020, the eighth-most patents for a company in the United States. (Statista)
1. The consumer technology industry is one of the most competitive industries.
The industry is characterized by innovation and technological development, and can somewhat be driven by the major market participants, such as Apple. But disruption is widespread. Apple has to ensure that it operates at the most efficient levels and delivers innovative products of a certain quality consistently, with zero defects.
Apple maintains 20.8% of the global smartphone market. (Statista)
2. Labor costs have a big impact on Apple’s profits.
Considering Apple’s quest to deliver high-end products at a rate that offers its shareholders the greatest value, it requires its input costs to be as low as possible and its processes to operate at incredible levels of efficiency. For this reason, its manufacturing process are outsourced to regions of the world with cheaper labor. Any fluctuation in the costs of labor, whether driven by exchange rates or human rights lobbying for example, will negatively impact the company’s profitability.
The starting wage for a factory worker in a plant that makes iPhones is $3.15 per hour. (Dotdash Publishing)
3. Any supply chain shocks negatively impact Apple’s performance.
Considering the levels of efficiencies required to develop consumer electronics, any shocks that present themselves in the supply chain of these lines will impact deliveries of the product and, ultimately, the bottom line. The security of the supply of a manufacturing input is exceptionally important in the manufacturing process for consumer electronics to ensure that expensive and cumbersome unforeseen stoppages have a limited chance of occurring.
Apple accounts for just 1% of smartphone shipments. (Reuters)
4. As a multinational corporation, a trade war poses a significant risk to Apple’s operations and markets.
With Apple producing its products in Asia and its largest market being in North America, any trade war between these two regions would have a large impact on Apple. Such a trade war would affect both the demand side and supply side of Apple’s operational model, posing a significant risk.
The Chinese Market, including Hong Kong and Taiwan, makes up 15% of Apple’s revenue. (Forbes)
5. With Apple’s international operational nature, tax structures and compliance have proven to be a significant risk.
Having sizable operations in most regions around the world, Apple needs to ensure that it keeps tight control on its tax liabilities, ensuring that its tax position is optimized for each region in which it operates. Any default or tax incident will not only lead to a costly exercise to fix, but damages the reputation of the company in the region where the mishap occurred.
Apple succeeded in overturning a $16.86 billion lawsuit in Ireland. (The Guardian News & Media Limited)
6. The rate of change of technology will continue to offer significant risk to a company that relies so heavily on user turnover.
Changes in manufacturing technology, supply chains, market technology, and consumer trends pose a significant risk to all players in the consumer technology industry. Disruption happens without notice and swiftly, with enough impact to completely change the status quo in an industry. For this reason alone, Apple needs to ensure that its innovation and research guide the development of the sector.
51% of the world’s population is online. (Axios Media)
With the rate of change of technology, as well as the marketplace becoming an increasingly fickle and cut-throat environment, Apple needs to continue to evolve to remain relevant. With its world defined by changes in tastes and styles, its leadership position will help it dictate where the world goes with its technology consumption.
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