Company Analysis: Apple Computer

Abstract

This paper is about the analysis of the Apple Computer Company. The company overview has been given and the SWOT analysis of the company has been carried out. In addition, focus has been put on the application of behavioral sciences and theories in regard to Apple Computer.

Company Overview

The main activities that Apple Computer carries out include designing, manufacturing as well as marketing of the personal computers and also the related software. It also provides related services, peripherals as well as the networking solutions. In addition, apple computer engages in the designing, developing and marketing “a line of portable digital players along with related accessories and services including the online distribution of third-party music, audio books, music videos, short films and television shows” (Datamonitor, 2006, p.5).

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The selling of the company’s products is carried out globally and the company does this through the company’s retail stores, “direct sales force”, online stores, as well as, as pointed out, “third-party wholesalers and resellers and carries out the management of its businesses basically on a geographic basis” (Datamonitor, 2006, p.5).. The company’s operations are carried out via 5 operating segments. These segments include; “Europe, Japan, Americas, retail and others” (Datamonitor, 2006, p.5).

The reportable segments which include Japan, Europe and the Americas do not encompass those activities that are linked to the retail segment. Considering the Americas segment, this consists of South as well as North America. More so, the European segment consists of countries in Europe and also those countries in Africa and the Middle East. “Each reportable geographic operating segment provides similar hardware and software products and similar services” (Datamonitor, 2006, p.5).

Looking at the retail segment, this one carries out operations of the retail stores that are under the ownership of the company in the United Kingdom, the United Sates, Japan and Canada. The company’s retail stores that are located in the United States are more than 233in number and there are more than 84 international stores.

It has also been found out that “the ‘others’ operating segment focuses on Asian-Pacific, which includes Australia and Asia except Japan; and the company’s subsidiary, FileMaker” (Datamonitor, 2006, p.5).FileMaker carries out the development, publishing and distribution of “desktop-based database management application software for Mac Os and Windows-based systems” (Datamonitor, 2006, p.5).

The company’s headquarters are located in California (in Cupertino). The total number of employees is over fourteen thousand. The company’s revenue that was recorded in the year 2005 (end September) was 13,931 million U.S dollars and this was a 68.3 percent increase as compared to the previous year (2004).

The increase was attributed to the raise of the iPod sales that went up by 409 percent. The company’s net profit during the fiscal year 2005 was 1335 million dollars and the fiscal year 2004, the net profit was 276 million U.S dollars.

SWOT Analysis

Strengths

One of the strengths that this company has is the global presence. It is present in the Americas, the Asia Pacific and EMEA. More than half of the income comes from the markets that are set up outside the United States which is its home market. It is reported that “a balanced presence in mature as well as emerging markets has enabled the company to record a steady revenue growth” (Datamonitor, 2006, p. 18). In the course of the last ten years, the company has realized a strong growth.

The margins of Apple Computer in the period between 2001 and 2005 were greater than the industry average and this were boosted by strong growth in all its markets (Datamonitor, 2006). It has been established that “the company’s operating performance makes its market position strong and it raises the level of investor confidence as well” Datamonitor, 2006, p.18).

The other strength of this company is the brand image. The company’s brand image is well regarded among a large number of consumers. It controls the brand image it has in order to ensure differentiating its product offerings and boosts sales.

The strong brand of Apple Computer “enables it to set up entry barriers in the market and this also makes it possible for the company to command a premium pricing for its products such as iMac and iPod, giving it a competitive edge over regional as well as other global competitors such as IBM and Sony” (Datamonitor, 2006, p.19).

The third strength of Apple Computer is synergistic portfolio. This portfolio is “a portfolio that is highly synergic in nature” (Datamonitor, 2006, p.19). The broad portfolio brings down the level of the company’s reliance on any single product line and following this, it brings down the level of the company’s business risks. Moreover, it as well boosts the company’s “cross-selling opportunities” (Datamonitor, 2006, p.19).

The fourth strength of the company is the strong media content. Some of the company’s products such as the iPod and iTunes turned out to be a big success story of the company. For instance, as it is pointed out, in 2006 during the month of February, “iTunes downloads topped one billion songs” (Datamonitor, 2006, p.19).

The “iTunes Music Store” makes it possible for the users to buy, in a legal manner, and download music as well as videos online. “The iTunes Store features over 3500 music videos, Pixar and Disney short films, a variety of hit TV shows, 35,000 podcasts, 16,000 audiobooks and more than two million songs from the major music companies and independent record labels” (Datamonitor, 2006, p.19).

Weaknesses

One of the company’s weaknesses are the low returns. It realized weak returns on assets as well as on investment in course of that few years. For instance, it is reported that in the course of between the year 2001 and 2005, the company recorded average RoA of about 4.7 percent which represents a figure that is lower than the industry average (5.8 percent. In the course of the same period the average RoI stood at 6.7 percent which also below the industry average (13.8 Percent).

A similar trend was followed by the “return on Equity” (RoE) during the same period and it stood at 7.4 percent and this was below the industry average (18.5 percent). Having a weak RoA as well as a weak RoE can wash away the confidence of the investors and can paralyze the growth plans that the company has put in place.

The second weakness is the dependency for key components .The company is prone to a supply danger for the key components. In a market in which speed to market is crucial, the Apple Computer Company’s dependency for key components could expose the company to a competitive disadvantage.

Opportunities

The possibility that there will be an increase in demand for “connectivity and networking” products in the future offers an opportunity. The company is inclined to capitalize on this opportunity for the reason that it has already been giving out several offerings in the same area. An example is given of the AirPort which is the Apple Computer’s “wireless technology network” which enables the users to set up a computer network and carry out connection to the internet without using cables, networking or extra phone lines (Datamonitor, 2006).

It is pointed out that, “based on the IEEE 802.11b wireless standard and Wi-Fi certified, AirPort allows high-speed wireless communications within a radius of approximately 150 feet from an AirPort base station” (Datamonitor, 2006, p.20). Raising the level of “wireless hi-speed internet” taking on would serve to augment the top line development of the corporation.

The other opportunity is offered by the new digital platform. The Apple Computer Company is putting focus on the transformation of the company’s Mac platform in to a “digital hub that combines iTunes video content to customers’ television screens and portable devices”( (Datamonitor, 2006, p.20). This stage would boost the company’s “digital content” business that is on the increase at a higher speed. owth in the long run.

The third opportunity results from the MP3 player market. In the United States, the MP3 market share of the company went up to 78 percent in the month of December, the year 2006 from 71 percent at the end of the year 2005 (December). Yet, the market share of this company in the international markets stays below the level of market share in the United States. This implies that the penetration of the company outside the United Sates has a great potential for growth.

Threats

One of the threats that the company faces is the presence of strong competition in the industry in which it carries out its operations. This industry goes on to be characterized by “fast advancement in technology in software and hardware development, which has remarkably raised the level of applications and capabilities of the products, and have resulted in the frequent introduction of new products and significant price, feature, and performance competition” (Datamonitor, 2006, p.21).

In the course of a number of years that have passed, there has been stiff competition in the industry on the basis of price. The competitors of the Apple Company have been cutting down prices to increase their market share. Unless appropriate measures are taken by the company, this may go on affecting the company negatively in the future.

The third weakness follows the slow Eurozone economy. Such a slow down took place in the year 2005 and this went hand in hand with increased oil prices as well as higher levels of lack of employment. Europe is among the main markets of the Apple Company and if the slowdown goes on in the Eurozone, it could bring down the level of spending on the It products and negatively affect the company’s revenues.

The fourth threat is linked to the lawsuits. The company is subject to particular legal proceedings. It is reported that “Apple faces several lawsuits related to patent infringement, false advertising, and unfair business practices” (Datamonitor, 2006, p.21). Such issues can have a material on the company’s financial situation on top of the company’s brand image.

Apple’s approach towards employee behavior

The company makes use of personal control as it has expectations of its employees to carry out their activities in an efficient manner, not hiding any information, and sharing experiences. Apple thus targets at influencing as well as shaping the employee behavior through promoting its objectives and values in the daily face to face interaction and also through the great eagerness and motivation skills of the company’s management which is supposed to influence all the employees.

In addition, the company is also “engaged in terms of behavior control, as the firm aims at generally directing the actions and behavior of its employees through certain rules like the code of business ethics” (Hill & Jones, 2004, p.410). However, it is supposed to be pointed out that this form of strategic control, in general terms, plays a small role and this is for the reason that the Apple Company has preference for innovation and creativity rather than for standardized procedures.

Motivation in Apple Company

For this company to capitalize on the positive effects that are brought in by employee motivation, it has set up a number of employee benefits such as “employee stock option grants, employee stock purchase plans, and an employee savings plan” (Hill & Jones, 2004, p.395).

These financial incentives are in line with the motivation theory that was presented by Taylor in which he stated that the employees are motivated by pay. However, it came to e established that workers are not only motivated by the financial incentives because they are only forced to carry out boring repetitive tasks and they are not offered a chance to be creative to make their work interesting. Apple Company has come to realize this.

Following this, in addition to the financial incentives that are offered by the company, the company also has taken an initiative to set up an incentive for its employees to remain in the company by offering them an opportunity for them to be creative and innovative and this enables them to convert the technological ideas they have in to a reality (Hill & Jones, 2004).

This is in line with the Herzberg’s theory. Herzberg believed that organizations are supposed to motivate their workers by taking up a democratic approach to management by raising the level of the nature as well as the content of the actual job through particular methods and one of these methods is empowerment which implies giving more powers to the employees in order for them to come up with their own decisions in their working life fields.

Dimensions of the organizational structure

Apple’s management uses a functional structure because the company is organized along “functional lines”. Such a structure categorizes people basing on the common experience or expertise they have as well as resources.

It makes it possible for the functions of the company to learn from each other and to turn out to be productive and also specialized. In addition, such a structure makes it possible to have effective monitoring as well as efficient activities and as a result, this brings down the level of costs and raises flexibility in the operations (Hill & Jones, 2004, p422).

It is pointed out that, “by decentralizing authority and responsibility and through a relatively flat hierarchical structure, Apple encourages its low-level managers and employees to take the initiative and foster the company’s strengths” (BusinessWeek, 2004, p.1). In addition, by decentralizing, this boosts the organization’s planning as well as decision making processes and this is because of the availability of better information (Morden, 1993, p.228).

Political and legal forces

The political and legal forces are products of the changes that are carried out in regard to the law and regulations. The environment within which the Apple Company carries out its operations can be manipulated by the legal decisions as well the political judgments (Dickel, 1994).

Such bodies as CARP or RIAA can have a great impact through imposition of new laws that limit the “digital music” industry in its attempts to expand. One of the negative influences was felt by the Apple Company in the year 2002 when the U.S government became very active in the regulation of the industry through the means of the “Music online competition act” so that it could ‘tweak’ several aspects of the “U.S Copyright Act” with updates.

Apple ethical position in the market place

In considering Apple’s ethical position in the marketplace, the company has been criticized by several parties of engaging in business practices that are not ethical. This can be verified in the observation that “Apple faces several lawsuits related to patent infringement, false advertising, and unfair business practices” (Datamonitor, 2006, p.21).

Cultural behavior within Apple Computer

Within the Apple Company, ‘internationalization, adapting to local tastes and preferences, being able to deal with the different infrastructure and altered traditional practices becomes more decisive abroad to acquire customers” (Iliev, Lindinger & Poettler, 2004, p.149).

Even if this company does not vary its product and the marketing message from one country to the other, it has strategies that were developed early enough in order to offer a response to pressures in “local acceptance by adapting” (Iliev, Lindinger & Poettler, 2004, p.149). By Apple setting up intercultural communications skills when they are carrying out business activities assisted them to avoid problems that are associated with internationalization.

Change and organizational development

Over time, the Apple Company has been known to be innovative. While technology advances, the company has been able to capitalize on this and developed new products in order for them to meet the customer needs in the global context. It has been putting in place the appropriate organizational structure in order to realize this goal.

Incorporation of team building, motivation, leadership and accommodation for personality types in Apple’s infrastructure

The values as well as the norms that are incorporated in the company’s corporate culture offers support to the company’s organizational structure by promoting, initiative, motivation, leadership, innovation and creativity all through the company which can be taken as being central elements of the company’s strategy.

In general terms, “organizational structure, control, and culture shape the way people behave, their values and attitudes, and determine the way they will implement an organization’s business model and strategies” (Hill, 2004, p.405).

Therefore, through the steady interaction of the structure of Apple as well as its control and culture and also through the coordination and motivation that follows on of the employees, it is made possible for the company to carry out the implantation of its policies effectively at different strategy levels.

References

BusinessWeek, (2004, February 2). Steve Jobs – It feels good. BusinessWeek, p.1

Datamonitor, (2006). Apple Computer, Inc. Retrieved on 2 September 2011 from, http://www.alacra.com/acm/2009_sample.pdf

Dickel, K. E. et al. (1994). Strategic management – a methodological approach. New York: Addison-Wesley Publishing.

Hill, C. W. & Jones, G. R. (2004). Strategic management – An integrated approach. Boston and New York: Houghton Mifflin Company.

Iliev, V., Lindinger, A & Poettler, G. (2004). Apple Computer Inc. strategic audit. Retrieved on 3 September 2011 from, http://www.andreaslindinger.net/downloads/strategicmgmts-lindingeretal.pdf

Morden, T. (1993). Business strategy and planning – Text and cases. London: McGraw-Hill.