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- 1. Apple Analysis Lauren Brown | Brandie Reynolds | Jamon Gonzales | Jordan Walker
- 2. Introduction Founded by Steve Jobs and Steve Wozniak in 1976, Apple Inc. is the world’s first trillion-dollar company. The company offers a wide range of products and services including smartphones, personal computers, tablets, wearables, accessories, and a variety of other related services. Headquartered in Cupertino, CA, Apple serves a global marketplace.
- 4. Top Competitors Samsung Galaxy Ultra 5G Dell XPS 13 Laptop
- 7. Competition Structure • Oligopoly • Small number of firms • Restricted output and/or fixed prices
- 8. Demand: Consumer’s Income • Current average consumer annual income: $85k • Current median price for an iPhone: $800 • Current median price for a MacBook Pro: $1500
- 9. Demand: Related Goods Substitute Product: • Landline: $400 / month Complimentary Products: • Apple TV: $200 • Apple Music: $100 / year • Apple Movies: $5.00 - $25.00 / purchase
- 10. Demand: Tastes Within Market Broad Differentiation • ‘Unique’ products create customer loyalty • Sleek designs feel elite • User-friendly products • High-end branding
- 11. Demand: Expectations • Uncertainty due to COVID-19 • Potential slow in willingness to purchase non-essentials • Consumers hesitant to purchase large-ticket items
- 12. Demand: Number of Buyers • Hardware sales down • Software updates contribute to longevity of hardware • Shifting focus to subscription services
- 13. Demand: Elasticity • Millennials with disposable income • Fear of ‘missing out’ stronger than desire to save money • Seamless interaction between product lines encourages brand loyalty
- 14. Supply: Input Prices • Cost to manufacture MacBook Air: $718 • Cost to manufacture iPhone: $490 • Current Chinese minimum wage: $3.15 / hour
- 15. Supply: Technology • Improvements to MacBook Pro in response to criticisms • AirPods to include noise cancellation • Augmented Reality / Virtual Reality headsets
- 16. Supply: Expectations • Stock expected to increase 18.72% in the next 12 months • Need to successfully offset slow-down in hardware purchases • Positive outlook for future growth
- 17. Supply: Entry / Exit Entry • Ability to develop innovative products • Strong integrated supply chain • Premium pricing strategy Exit • Products not appealing • Poor product placement • Pricing wars
- 18. Supply: Establishments • US Retail Stores: 271 • US Corporate Offices: 10 • Total Employees: 147,000
- 19. Effect of COVID-19 • Work from home increased sales of hardware • Apple TV and Apple Music turned to as means of safe entertainment • Vertically integrated business model proved beneficial
- 20. References: Apple. (n.d.). Forbes. Retrieved October 8, 2021, from https://www.forbes.com/companies/apple/?sh=3c451ac75355 Apple Inc. (2021, September 24). MarketLine Company Profile: Apple Inc. EBSCO HOST. https://web-b-ebscohost-com.oclc.fullsail.edu/ehost/detail/detail?vid=5&sid=f9939f91-ffdf-4021-a065-68 Brown, R. (2021, May 19). The cost of making an iphone. Investopedia. Retrieved October 9, 2021, from https://www.investopedia.com/financial-edge/0912/the-cost-of-making-an-iphone.aspx. Cable News Network. (n.d.). AAPL. CNNMoney. Retrieved October 9, 2021, from https://money.cnn.com/quote/forecast/forecast.html?symb=AAPL. Clover, J. (2021, October 7). Apple's 2021 event plans: New Products and software coming in 2021. MacRumors. Retrieved October 9, 2021, from https://www.macrumors.com/guide/apple-even Comscore.(2014) iPhone Users Earn Higher Income, Engage More on Apps than Android Users./ https://www.comscore.com/ita/Public-Relations/Infographics/iPhone-Users-Earn-Higher-Incom Downey, L. (2021, August 20). How COVID Affects Apple. Investopedia. https://www.investopedia.com/how-covid-affects-apple-aapl-5198334 Gurman, M. (2021, September 22). Apple Store Workers to Get Bonuses of Up to $1,000 in Rare Move. Bloomberg. https://web-b-ebscohost-com.oclc.fullsail.edu/ehost/detail/detail?vid=7&sid=f Hayes, A. (2021, September 27). What are current examples of oligopolies? Investopedia. Retrieved October 10, 2021, from https://www.investopedia.com/ask/answers/121514/what-are-some-cu Jones, C. (2021, January 27). Expectations are running high for Apple. Forbes. Retrieved October 9, 2021, from https://www.forbes.com/sites/chuckjones/2021/01/27/expectations-are-running-h Josephson,A. (2020, December 15). The Average Salary by Age for Americans. https://www.comscore.com/ita/Public-Relations/Infographics/iPhone-Users-Earn-Higher-Income-Engage-More-on
- 21. References, cont.: Linton, I. (2019, February 11). What is Apple's competitive advantage in its industry? Bizfluent. Retrieved October 9, 2021, from https://bizfluent.com/info-8734236-apples-competitive-advantage Lovejoy.B (2018). Apple’s iPhone X Strategy Has Been A Huge Success. https://9to5mac.com/2018/08/01/average-selling-price-iphone-x/ Martin,A. (2020). How Much Does An iPhone Cost To Make. https://www.itpro.com/mobile/34617/how-much-does-an-iphone-cost-to-make Meyer,P.(2019, June 5). Apple Inc.’s Generic Strategy & Intensive Growth Strategies. http://panmore.com/apple-inc-generic-strategy-intensive-growth-strategie McCarthy, N. (2021, May 14). 20 Years On: The Global Apple Store Empire. Forbes. https://www.forbes.com/sites/niallmccarthy/2021/05/14/20-years-on-the-global-apple-store-empire-infographic RamptonView full profile ›, A. J., Rampton, A. J., More by this author:How to Save Money for a New BusinessWinning Strategy for Your MoneyUnderstanding Annuities and Taxes: Mistakes Pe Taylor,N. (2019, January 13). Apple’s new services stratagey. Apple is commoditizing (some) of its compliments: music, movies, TV. https://praxtime.com/2019/01/13/apples-new-services-strate The 10 best iphone alternatives. HiConsumption. (2021, October 5). Retrieved October 10, 2021, from https://hiconsumption.com/best-iphone-alternatives/. This Month in business history: The founding of Apple Computers, inc.. Research Guides. (n.d.). Retrieved October 10, 2021, from https://guides.loc.gov/this-month-in-business-history/april/ap Vailshery, L. S. (2021, August 11). Apple revenue streams/segments by quarter 2021. Statista. Retrieved October 10, 2021, from https://www.statista.com/statistics/382136/quarterly-segments-re
Editor's Notes
- In 1976, Apple was founded by Steve Jobs and Steve Wozniak in the Jobs family garage. Since then, the company has brought a variety of innovations to the market. In 2001, the company unveiled the iMac and opened their first retail store. 2001 also saw the launch fo the iPod and Apple Music, forever changing the way the world purchases and consumes music. In 2007 they unveiled the first iPhone which to this day continues to provide main revenue stream for the company. Three years later, they brought tablet computers into the main stream with iPad. Since then they have also unveiled innovations in the realm of wearables and accessories with the Apple Watch in 2013 and AirPods in 2016.
- While there are multitude of laptops, smartphones, and wearables. Apple’s top competitors for 2021 are Dell and Samsung. The Dell XPS 13 is considered the top alternative for the MacBook Pro. Apple and Samsung have been long time competitors for the smartphone market. This rivalry continues with the Samsung Galaxy Ultra 5G and the iPhone 12.
- Apple’s revenue streams come from a variety of sources including hardware such as the iPhone, Mac, iPad, and a variety of wearables and accessories such as the Apple Watch. They also provide services like as Apple Music, a subscription streaming service. Their main source of revenue comes from the iPhone.
- Apple’s revenue streams come from a variety of sources including hardware such as the iPhone, Mac, iPad, and a variety of wearables and accessories such as the Apple Watch. They also provide services like as Apple Music, a subscription streaming service. Their main source of revenue comes from the iPhone.
- Apple operates is a prime example of an oligopoly. They operate in a market with a small number of companies that seem to almost collude rather than compete. Prices are relatively fixed across competition. The best example of this is the iPhone and the iPhone’s main competitor the Android constantly holding the top spots in the smartphone market.
- If Apple were to see financial growth in its customers’ income, IOS users would buy products more rapidly (Average Apple Consumer income is $85,000 a year). They would also be able to increase the average price of their products (Median price of an apple product is an iPhone for $800). On the other hand, if the average Apple product consumers’ income were to drop, Apple could face a problem where they would have to potentially lower their prices or risk losing a mass number of customers.
- The only real substitute product for Apple would be a Landline instead of a smartphone. Landlines range in price but average at about $400.00 (Paid monthly). Unfortunately for landlines, there’s not much that they can do to acquire more customers unless they drop their prices extremely. Even then, a price change to landlines would not affect Apple’s products and services positively or negatively. Complementary products of Apple include Apple T.V (approximately $200.00), music (approximately $100.00/year), and movies (between $5.00 and $25.00). Whether the change of price of these compliments are increased or decreased, the demand for the products will be increased.
- Apple’s strategy is known as broad differentiation. This focuses on features on their products to separate them from competitors. Apple focuses on product design and features of their competitors so they can create designs and features that, not only compete, but makes Apple stand out among their competitors.
- Due to the Pandemic and shutdown of 2020, consumers are now more reserved and a little less likely to spend large sums of money on anything that is considered non-essential. Because of this, their buying decisions are more calculated and may not spend a large amount of money on any products and services in fear of the COVID-19 affecting the consumers financially again. This could potentially slow sales.
- The increasing quality of Apple phones and iOS will ultimately lead to less sales on hardware (iPhones, Macs, iPads, etc). In the case of the iPhone, sales have gone down steadily over the past 5 years. While the number of iPhone users have gone up, this is partially due to people holding onto their iPhones for longer. Instead of upgrading every year, consumers are waiting 2-3 years before their next iPhone. They are able to do this because of the IOS updates, which they support onto models up to 7 years old. However, this does increase long term customers, which is why Apple has started to focus more on their subscription services and increasing the overall user experience of their devices. Due to this Apple subscription services have been increasing in revenue over the past couple years and are continuing to ascend.
- Increasing the price of Apple products would have minimal effect on the business. One of Apple’s biggest target markets is millennials with above-average and disposable incomes, the fear of missing out would drive them to the stores. At the same time Apple boasts one of the most loyal consumer bases in the market and they will pay for anything that has Apple on it. Even if they know they can get a cheaper alternative elsewhere. A lot of that is due Apple doing a great job in marrying their products and having them connect and build on one another, while simultaneously making them easy to use. Not many companies can say that their products connect and interact with each other as seamlessly as Apple products.
- Apple products are currently manufactured in China by a company called Foxconn. While the current minimum wage in China is only $3.15 an hour, Apple is currently looking at options for moving operations to even cheaper markets. Locations such as India or Vietnam provide even cheaper labor. This move likely wouldn’t lower the cost of Apple product as much as it would prevent a rise in costs for consumers.
- Apple is currently working on several new products and upgrades to respond to market expectations. In response to the complaints over lack of ports, Apple is currently working on 14-16 inch MacBook Pro models with more ports and a return to fully functioning keys rather than a touch bar. The AirPod 3 will be the first AirPod to offer noice cancellation. Finally, in response to the current trends in AR (Augmented Reality and VR (Virtual Reality) they are working on a AR/VR headset expected to launch in 2022 or 2023.
- The expectation is that Apple stock will continue to increase. The company is expecting an 18.72% increase in stock prices within the next 12 months. Historically Apple has crushed Wall Street’s projection and will continue to as long as they can offset the slowing of the purchase of hardware.
- When entering this market as a competitor a company would need the ability to develop innovative products that appeal to customers, have a strong and integrated supply chain, as well as have a premium pricing strategy. Factors that would make a company exit this market include; products that don’t appeal to customers, poor product placement, and pricing wars. Any company going head-to-head with Apple will require a very unique product to compete with their brand loyalty.
- Apple employs 147,000 people worldwide while having 271 retail stores and 10 corporate offices in the United States.
- Overall, COVID proved to be good for Apple. COVID did force the slowing down in services being provided in the retail stores, and in turn some jobs were lost. As well, the process in which products were created and released to the consumer was hindered due to a lot of manufacturing happening in China. Despite all of this, iPads and Macs saw an increase in sales. And revenue from the various subscription services increased significantly. With more people working from home and creating home offices the ease of use with Apple products proved invaluable. And with all the extra down time being stuck in the house, Apple TV and Apple Music started to look a lot more and more appealing. COVID allowed the vertically integrated business model of Apple to thrive.