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StratetgicRetailingRedesignGroupProject (1)

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StratetgicRetailingRedesignGroupProject (1)

  1. 1. Strategic Retailing Redesign for Apple Inc. Leena Aman Pol Dhutikraikriang Symone Hines Brianna Massey Brandon Morris University of North Texas
  2. 2. I. Executive Summary Apple Inc. was originated by two mutual interests’ friends, Steve Jobs and Steve Wozniak, and ever since the company has been a step ahead in the computer devices. Now, Apple Inc. is an American multinational eco-friendly corporations that is headquartered in Cupertino, California. This company designs, creates and sells consumer electronics, computer software, online services, and personal computers. The company also sells digital devices like Apple TV, iPhones, iPad, iPods, and Mac computers. The key marketing strategy that Apple has incorporated is Simplicity. The three goal of the “simplicity” strategy is to: 1. Help your customer trust your information 2. Help your customers learn about your product 3. Help your customers weigh their options Using this strategy, Apple Inc. was able to rise their stock prices and cause a rising in the company’s value to $624 billion, a world record. Apple Inc. has known for setting their own rules for designing and creating products, even for advertisement, and for being a step ahead of their competitors. II. Business Analysis A. Environmental Forces & Consumption Patterns 1. Company Background The first ever Apple computer was created by Steve Jobs and Steve Wozniak which was produced in 1976. Wozniak built the first Apple and Jobs pushed for him to sell it. After many successes, the Apple company itself became incorporated in 1977 in California (Reference for Business). Apple started off to a great start and became the lead manufacturer of personal computers, however, in the 1980s it took a turn for the worse and was forced to lay off employees. During the 1980’s Jobs was no longer working for the company and Wozniak was on a leave of absence due to an injury.The market became extremely saturated and made the competition for selling fierce. In the year of 1996 Steve Jobs reunited with Apple and started as the interim CEO eventually becoming the actual CEO. As soon as Jobs came in as CEO he changed the entire philosophy of the company as well as many of the products. Jobs created the Apple we all know now. 2. Current Competition The current competition for Apple is very vast considering all the products Apple has to offer. Apple has it all from computers, phones, tablets, and music players. The IMacs main competitor is Windows computers. Iphones are currently in the spotlight because of the new IPhone 6 that was just recently released and is competing with many other android phones. The IPad is competing with many other tablets such as the Samsung, Kindle, Google nexus, Amazon fire, and Microsoft. The IPod has competitors such as Samsung Galaxy player. Apple has progressed to be fast paced when it comes to keeping up with other companies. Throughout the years Apple has not given up even during their times of struggle in the 80s. Apple appeals to the majority of Americans including middle to high income families, their kids of all ages and adults. Their technology and design remain simple making it really easy for anyone to use their products. Although Apple did lose some shares to Samsung, given the release of their new products there is no doubt that those shares will be retracted back to Apple (Jones, C. (2014, February 3)).
  3. 3. 3. Environmental Influences As the world is turning to making products more eco-friendly in hopes of reducing the carbon footprint, Apple has also stepped in to make more eco-friendly products. Their products have advanced throughout the years and have become more and more environment friendly. Originally, the first IMac would use about thirty-five watts of energy in sleep mode and today the IMac uses a mere .9 watt of energy (Apple). Apple also refrains from using harmful toxins in their products and even hold their suppliers responsible. Apple continues to progress and tries to make the best eco-friendly products possible. Apple is the only company in their line of work that uses renewable energy for their data centers and not only meets the Energy Star guidelines but exceeds them an infinite amount. As the company continues to flourish, they have made a promise to their consumers to do the best in their ability to help our environment. 4. Economic influences In modern day the economy relies heavily on Apple. Apple has many different products that appeal to different people given their needs. Even with all the bankruptcies filed and the job layoffs Apple products are still being purchased and are still contributing to the economy. The recession did not stop Apple from producing revenue and actually allowed the company to boom. The iOS App development team itself has created two hundred and ten thousand jobs and that amount is still growing daily (Bajarin B., 2012). According to B. Bajarin, Apple has give the S&P 500 a boost causing the companies to grow at 6%; analyst state that if Apple had not been in the picture the percentage would actual drop to 3%- nearly half (2012). It is evident that Apple has done a lot for the US economy. 5. Changing Consumer patterns that affect the firm Consumers in our generation rely heavily on technology. We are becoming so technology dependent that not a single day goes by when one does not use a form of technology. Most American’s have smart phones including children below the age of ten. The need for things to be at one’s fingertip is a need that everyone posses. Apple provides for its consumers the most new and cutting edge devices out there. Many complain about how fast Apple releases certain products such as the Iphones but their reasoning for that is so they can always be ahead of other retailers in terms of technological advances. Apple does an excellent job in providing for their consumers with the most up to date technology. B. Competitive Analysis 1. SWOT Analysis Apples strengths are their marketing and advertising capabilities, vertical integration, great marketing and advertising capabilities, they create brand awareness and have a great reputation. Apples weaknesses include weak direct distribution channels in China and India, heavily depend on IPhone and Ipad sales, incompatibility with other OS, and lack of innovation. Apple products cost much more than their competitors, and many deem that the price is not justifiable. Also, there have been a handful of defects of their new products, causing them to be recalled within months of a new product release. Opportunities: This includes creating wearable gadgets and acquisitions of valuable companies. There is high demand for each new product that Apple releases: including the Iphone 6,
  4. 4. and Iphone 6 Plus, and has strengthen the firms competitive advantage. They hugely depend on Samsung, Apple’s main competitor, to provide the application processors for Apple products. They have an opportunity to obtain patents that they currently lack, and sustain its growth. Apple patents are often infringed by its competitors, thus collecting the damages from those companies. They have developed iAd advertising platform, which allows advertising on Apple products, so they could also capitalize on the mobile advertising market. Threats: competition, lawsuits over patent infringements (the firm has been accused of infringing other companies’ patents, which is very damaging to the Apple brand. With the loss of Steve Jobs, the company is under new management, which may be a huge threat to the company. Their long-term gross margin might decline due to their components increasing prices and competition, current margins will not be sustained. Technology is rapidly changing, which is one of the most severe threats, and new products may lack new innovations to keep up with competition.Foxconn is the main manufacturer of Apple products and the rising pay level for Foxconn workers will inevitably raise the prices of Apple products. 2. Who are the company’s competitors (indirect and direct)? Android OS is the main competitor for iOS in mobile device market. The domination of Android decreases iOS power over influencing consumers to join Apple. Apple indirectly faces a threat from online music stores, such as Amazon, Walmart, and online music subscription companies such as Pandora and Spotify 3. What is the company’s strength? Their advertising budget $501 million in 2009, and increased to $1.1 million in 2013. Their advertising money is spent more effectively than its rivals and provides greater returns in terms of revenue, brand value and recognition. They have a competitive advantage that no other company can match. 4. Who are their competitive threats? The biggest threat to IT companies such as Apple is the very high level of competition in the technology markets. Even though, Apple works very hard on research and development and marketing in order to retain its competitive position, technology might be completely different in the next year. C. Target Customer Profile Analysis 1. Target Audience The current competition for Apple is very vast considering all the products Apple has to offer; anywhere from computers, phones, tablets, to music players. The company’s advertisements focuses more on middle to upper income families, families with children of all ages, and adults. Middle to Upper wage income families are one of the company’s target audience. This target audience are willing to pay more for better user experience. Everyone knows that Apple Inc. products are not cheap. You have to be willing to pay for $299 plus a cellular plan for an iPhone, pay $399 plus wi-fi plan for the iPad, or pay $899 plus extra hardware and accessories for the Mac; and middle to upper wage income families are more willing to pay for this experience. Of course, the company does provide a special financing plan for thoses who can not pay that much up-front, but you still need financial history to be approve for this plan.
  5. 5. Families with children of all ages who are looking for one device that pretty much does everything. With the unlimited to a number of different features and applications, this is just For young children to adults, Apple Inc. targets these users by supplying certain apps, free and paid, for them. For young children, having an easy to use touch-screen on iPhones and iPads, parents could purchase fun learning app to stimulate their brains. For pre-teens to teenagers, they could use Apple Inc.’s products for a number of reasons. Apple inc.’s marketing focuses more on how easy it is to listen to music, socialize with your friends, and connecting to social media apps like Facebook, Twitter, etc. For College Students, Apple inc. provides an easier and lighter device to carry, ability to keep notes organized and neat, and provides media and graphic design apps that you may need for their college courses. For adults, or their parents, Apple Inc. provides a device that is easy to use for everyday calls, map directions, ability to connect to the internet, create and send documents, a camera, and many more add-ons. To sum it up, who doesn’t Apple Inc. target their products to. Apple Inc. doesn’t seem to target markets in the way other companies do. It targets people of all ages, sex, lifestyles, religious beliefs, and buying behaviors. The company mainly focuses on the possible user for their products. Apple Inc. lets the users decide how and where they’ll use its products. The marketing strategies just show customers a few ways that they could use their products to make life just a little bit easier. The ways to use Apple Inc. products are unlimited as updates are being made and apps are being created. 2. Buyers Motivation The one mistake made by many business owners is focusing on the features of their products or services when advertising (Truex, 2013). When focusing on advertisements, businesses need to focus on how these features could help customers in their everyday lives. Apple is known for doing this exceptionally well. By providing a solution to people everyday problems, latest innovations, and the apps available for their products. Solving people problems is one of the most common reason people buy (Truex, 2013). Apple is able to provide a solution to almost everyone digital problems, which is a motivation for people to buy their solution. If people want a simple and high tech phone, people will not care about warranty or how many GB it has as much as finding a simple and high tech phone. Apple understands that and focuses on this in their advertisement. Ever since Apple has made its comeback in the late 1990’s and early 2000’s, they have been able to put out products with the latest innovations. They listen to their audience and create products to help them in their everyday life. Not only do they provide the latest innovations in products, but they also provide the latest innovations in service and store experience. Notice that when you go into an Apple store and are greeted by one of the sales staff, you’re not asked, “How can I help you?” Instead they ask, “What would you like to do today?” They go right to the heart of any technology user’s question, a question that’s always related to what they want to do with the technology the user is interested in (Bajarin T., 2012). Also providing applications for their devices, is another motivation for buyers. They have been able to make simple and easy to use apps for their devices. Communicating with their customers, allowed them to understand their problems and create solutions for the problem. There are several millions (maybe even billions) applications that are provided for the Apple's product and all the them help with a problem, both little and larger problems. 3. Industry trends / Consumer trends
  6. 6. Apple has taken upon themselves to provide their customers with the latest innovations every year. Apple onlys create a product if they know they can do it better. As Apple designer, Jonathan Ive said “Our goals are very simple — to design and make better products. If we can’t make something that is better, we won’t do it.” Clearly, Apple applied that thinking first to iPods, then smart phones and more recently, to the iPad (Bajarin T., 2012). Also Apple Inc. comes out with the design and the features of their product and signs off on it two years before the actual product comes out. The company is already working on the latest feature for the fall of 2017. The company continually works the products to make sure that not only the customers would want it but themselves. They made sure that everyone, including themselves, could not live without owning this product. These company-wide trend creates a strong brand loyalty. Once people get their hands on one of the products they tend to want them all. Not only that, but people have lined up around the stores wanting to have the latest and greatest gadget. There are plenty of other gadgets these people can own, but they spend hours, maybe even days in line for Apple products (Truex, 2013). III. Strategy Recommendations A. Tactical Execution Plan 1. Retail Marketing Strategy: Apple has quite a few competitive advantages. They are known for their use of simplicity not only in their products, but also in their advertisements. People like things simple. Let us take a look at the Iphone for example. If you ask some Samsung/android users about their phones, chances are they will complain about how their phones have too many options and settings. They would also likely complain about how their phones can get viruses and other threats. That is another advantage about apple; the chances of their products catching a virus and other things PCs can catch are slim to none. On top of that, Apple has multiple patents that obviously only they use which gives them a great competitive advantage (i.e. their Retina Displays). In addition, Apple maintains a loyal customer base by having employees who know their products and are willing to help out customers in need. This also ties into their brand image. 2. Overall Consumer Value Proposition: In order to have an outstanding customer relationship, it is necessary to establish a relationship with your customers. This can be accomplished through the use of surveys, incentives to complete those surveys and sending out frequent emails regarding new products and/or accessories coming out. Customer loyalty is enhanced through the use of a strong brand image. If there is a strong brand image, the company’s market position should be in the front of the consumer’s mind. The macbook and iPhone being an example. Two other elements of customer loyalty is Apple’s unique merchandise. They didn’t have the first mp3 player but they paved the road with the introduction of the iPod. Another element is customer service. That is not only accomplished through Apple itself, but also through carrier stores such as Best Buy, At&t, Verizon, etc. 3. Merchandise Variety & Assortment Planning A good plan for merchandise variety is to offer different options of their products (Memory size, product speed, color), and different accessories (basic protective and designer cases, etc). A very important variety plan is making sure that when they release a product, that it has measurable differences then the last product. For example, when Apple released the iPhone 5s it had very
  7. 7. minimal differences between it and the iPhone 5.The only differences that it had were the camera quality, processor speed and thumb print security (which was a nightmare at the first release). 4. Price Strategy This strategy is very important because with the wrong price, the customer will not buy the product or the company would not make enough return on investment. At beginning, Apple sold their 8GB devices for around $599 and now sells it around $399 now. Apple realized the price of their device was a really steep and they fixed that problem so they could widen their potential target market. The two basic basic strategies are high/low pricing (which include discounts) and Every day low pricing which is a low price guaranteed policy which is everyday low prices. Apple does not follow either of those strategies. They have a firm stance on their prices and rarely change them. It would be wise to incorporate one of those pricing strategies. 5. Location Strategy Apple’s strategy involves not only opening new locations, but closing existing ones and replacing them with larger outlets, which should make for an even higher visitor-to-store ratio in the future if trends continue (Etherington, 2013). Apple has their physical stores, carrier stores and in addition they have added Target, Walmart and Best Buy. By expanding their products into different stores/branches, Apple is increasing the possibility of a higher revenue. 6. Customer Service Levels/Offerings Customer service is provided at their retail stores and online. The plan for evaluating customer service has to be provided by the company in order to ascertain that their employees are providing the service in a congenial manner. Several methods could be utilized by the company such as secret shoppers, surveys, complaint/email feedback. 7. The company’s retail customer communications strategy Apple floods the market via Television advertisements, the internet, signs at stores, full paper newspaper ads, emails, etc. They hit every advertising channel possible. That is basically a teaser for getting the consumer hopped up on the new product. Apple is known to be a forerunner of new products. 8. Store Layout & Atmospherics Apple is an unique company that breaks down the company and gives each individual lines of business and view them as distinct from the whole. In many ways, this was very successful across the board. Apple’s physical retail presence shows such steady upwards growth that it could be the site of the company’s greatest innovation over the next few years (Etherington, 2013). The store design meets the needs of the target market, creates huge competitive advantage, and displays the company’s image/brand positively. The design creates, both, utilitarian and hedonic benefits. With the free-form layout, it provides an utilitarian benefits that lets the customers easily locate and purchase the product. Hedonic benefits becomes noticed by the fact that you could actually use the products, making it an entertaining experience for the customers.
  8. 8. B. Financial Goals 1. From the Strategy recommendations as mentioned earlier, Apple should focus on a definitive product differentiation as well as changing their pricing strategy. Apple seems to be on the higher end of product pricing. 2. Apple is the forerunner in the communications industry.  They have the name brand,  customer loyalty and product innovations that have set the standard for other brands to  copy.  Their channels of marketing have also set the standard by teasing the market place  with their new products before they hit production.  People wait in line, sometimes  overnight, to purchase the products at what ever price they set.  Now Apple is facing a  stronger level of competition in the marketplace.  They can no longer set a price because  the competition is setting a lower price for the same (or nearly same) product.  Their  strategy should be altered in pricing, product excellence, and customer loyalty.  They can  no longer rely on their founder, Steve Jobs, to provide innovations and charisma for the  Apple brand.  Apple is losing market share due to competition's products, and pricing  strategies.  More focus should be on consumer feedback via emails, surveys or innovative  discounts to drive the Apple brand back to the level when the company first hit the  marketplace.    3. An analysis of financial ratios of the company reveal some areas of positive growth and  some critical areas of concern.  The profit margin ratio is 21.61%.  This indicates the  company is doing good.  ROE measures efficiency of the company in generating profit  from the amount of money shareholders have invested.  This includes net margin, asset  turnover and financial leverage.  Their ROE for this year is up to 35.24 which is profitable.    Inventory turnover ratio is really high (57.94) which means that Apple can sell their  product very fast.  On the other hand,  debt to equity ratio is high, signifying that Apple is relying on  creditor financing (bank) than its own financing.  This mean the company is financing its growth  with this debt and may not be able to pay it back if sales decrease.    Another troublesome ratio is ROA, which is return on asset.  This year is lower than last  year; signifying  Apple's efficiency in generating profit from its asset has declined from last year.  The quick ratio is 1.05 which shows that Apple does not have enough cash on hand to pay  short­term liabilities.  This could be adjusted by reducing labor costs (retirement packages,  executive perks, etc).    The current ratio  is also low, meaning Apple's ability to pay short­term  debt by using current assets (cash and some securities).    Again, their use of outside debt can grossly affect their profit margin and ultimately  company profitability.  GRMOI is an approach to reduce the level of inventory or increase sales.  Apple's GRMOI is high because they are able to move their inventory quickly and their sales are  high.
  9. 9. 1 1
  10. 10. Apple Inc. (AAPL) Statement of Income - Two-Year Comparison (In millions, except number of shares which are reflected in thousands and per share amounts) QUARTER ENDING Variance Variance Variance Variance ($) (%) ($) (%) Net sale 4,651 12.40% 11,885 7% Cost of sales 2,531 10.10% 5,652 5.30% Gross margin 2,138 15.40% 6,233 9.70% Operating expense: Research and development 518 44.30% 1,566 35% Selling, general and administrative 485 18.10% 1,630 15.10% Total operating expense 1,003 26.10% 2,729 17.80% Operating income 1,135 11.30% 3,504 7.20% Other income/(expense), net 194 171.70% -176 -15.20% Income before provision for income taxes 1,329 13.10% 3,328 6.60% Provision for income taxes 374 14.20% 855 6.50% Net income 955 12.70% 2,473 6.70%
  11. 11. Apple Inc. (AAPL) Balance Sheet - Two-Year Comparison (In millions, except number of shares which are reflected in thousands and par value) 2 2
  12. 12. Apple Inc. (AAPL) Balance Sheet - Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) QUARTER ENDING  Variance  ($)  Variance  (%)    Variance ($)  Variance (%)  ASSET      Liability      Cash & Equivalents  ­415  ­2.9%  Account payable  7,829  35%  Short Term securities  ­15,054  ­57.3%  Accrued Expenses  4,597  33.2%  Accounts Receivable  4,358  33.3%  Deferred revenue  1,056  14.2%  Inventories  347  19.7%  Commercial paper  6,308  0%  Deferred Tax Assets  865  25.1%  Total Current Liabilities  19,790  45.3  Vendor non­trade  receivable  2,220  29.4%  Deferred revenue(non-current) 406  15.5  Other Current Assets  2,924  42.5%  Long Term Debt  12,027  70.9%  Total Current Assets  ­4,755  ­6.5%  Other non­current  liabilities  4,681  22.9%  Long term marketable  securities  23,947  22.5%  Total Liabilities  36,841  44.1%  Property, Plant & Equipment  4,027  24.3%  Total shareholder’s equity  ­12,002  9.7%  Goodwill & Intangibles  3,039  192.7%  Total liabilities and  shareholder’s equity  24,839  12%  Intangibles  ­37  ­0.9%        Other​ Assets  ­1,382  ­26.9%        Total Assets  24,839  12%        Apple Inc. (AAPL)
  13. 13. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) Current Ratio​ ​Current year​(2014) ​Prior year​(2013) Current Assets/Current liabilities 68,531/63,448 = 1.08 73,286/43,658 = 1.68 This ratio measures the company’s ability to pay back the short-term debt obligation by using current asset as an indicator whether it can cover all the current liability or not. The higher the number of current ratio, the higher the capability of the company in paying back its obligation. The current ratio of Apple Inc. is 1.08 means that the current asset can cover all the current liabilities or the company has 8% excess in current asset to pay for its current liability which considered to be a good sign for the company, but if compared to the baseline(current ratio of the prior year) of 1.68 indicates that company’s ability to payback the obligation has dropped by 0.6 or 60% which results from increasing of current liability and decreasing of current asset. Decreasing in current ratio is not necessary bad, it might also indicate the efficiency in using the asset in investing. Quick ratio ​​Current year​(2014) ​Prior year​(2013) (​Current asset - inventory​) ​66,420​ = 1.05 ​71,522​= 1.64 Current liabilities 63,448 43,658 Apple Inc. (AAPL)
  14. 14. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) This ratio measures the company’s ability to pay the short-term obligation with the liquid assets by excluding inventory and other current assets which has less liquidity or more difficult to turn into cash because if retailers need cash to pay the short-term obligation in order to do that the inventories have to be sold very quickly and because they are less liquid asset they would be sold at the lower price than their book value so retailer cannot rely on inventory or other current asset(less liquid) as an immediate source of cash. Quick ratio is also known as acid test ratio. Therefore,The higher number of quick ratio, the better liquidity position of the company. The quick ratio of Apple Inc. is 1.05 means that there is $1.05 current asset to cover the $1 current liabilities. By looking at this number solely, it indicates that the company does have enough cash on hand to pay the short-term obligation but it is considered to be low when compared to the baseline( prior year quick ratio) of 1.64. The lower quick ratio, the worse of the company’s liquidity position, so it is necessary for the company to take action to improve the company’s liquidity, but lower quick ratio is not always bad. This might indicate that the company is using its asset efficiently. Therefore, Apple Inc. is managing asset more efficiently than prior year and also involving in a risky debt obligation than prior year. Apple Inc. (AAPL)
  15. 15. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) Return on Asset (ROA) ​Current year​(2014) ​Prior year​(2013) Net Income / Total Asset 39,510/231,839 = 0.17 37,037/207,000 = 0.179 This ratio is the profitability ratio that measures the profit that company can generate with the amount of asset they have. This ratio helps many investor to know more about company of how efficiently a company is in converting asset they have into profit. Lower ROA indicates that a company is not very efficient in generating profit from its asset. The Return on asset (ROA) of Apple Inc. is 0.17 or 17% which mean that every 100$ of the asset Apple Inc. will be able to generate 17$ profit from that asset. While Comparing to the baseline (prior year ROA) of 0.179 or 17.9%, there is a slightly difference about 1%. Therefore, Apple Inc. efficiency in generating profit from its asset is less than the prior year. Apple Inc. (AAPL)
  16. 16. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) Return on Equity (ROE) ​Current year​(2014) ​Prior year​(2013) Net income/ Shareholder’s equity 39,510/111,547 = 0.3524 37,037/123,549 = 0.2998 This ratio measures the efficiency of the company in generating profit from the amount of money shareholder have invested(equity). According to DUPont formula, ROE can break down into 3 importants parts including net margin, asset turnover and financial leverage. If these three increase ROE will increase too. The Return on equity of Apple Inc. is 0.3524 or 35.24% means that for every 100$ the company has in equity it makes 35.24$ in profit, which compared to the baseline ( prior year ROE) of 0.2998 or 29.98% indicates that the company is generating more profit from the equity and be able to give more profit to the company’s owner. Therefore, higher in ROE is considered to be better for the company. Apple Inc. (AAPL)
  17. 17. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) Profit Margin ratio ​Current year​(2014) ​Prior year​(2013) Net income/ Net Sale 39,510/182,795 = 0.2161 37,037/170,910 = 0.2167 This ratio measures the profitability the company can generate from every dollar of sale. High profit margin ratio ensure investor and creditor that company has enough profit to pay the dividend and pay back its debt while low profit margin ratio reflects badly on company. The profit margin ratio of Apple Inc. is 21.61% or 0.2161, which compared to the baseline(prior year profit margin ratio) of 21.67% or 0.2167 indicates that the company is doing good. This number means every 100$ the company makes on sale, it generates 21.61$ in profit which considered being a high number. Apple Inc. (AAPL)
  18. 18. Ratio Analysis (In millions, except number of shares which are reflected in thousands and par value) Total Asset Turnover ratio = ​Net Sales (sept 14)/ Average total asset = 182,795/[(231,839+207,000)]/2 = 182,795/219,419.5 = 0.833 or 83.3% This ratio measures the efficiently of the company in generating revenue from its asset. This distinct difference between Asset turnover and return on asset(ROA) is ROA considers about the profit that can generate from asset that is why ROA using Net income as a numerator while Asset turnover focuses on only revenue. Total Asset turnover of Apple Inc. is 0.833 or 83.3% which mean for every 100$ of its asset, Apple can generate revenue about 83$. The higher total asset turnover, the better the company is and this number is high which mean Apple Inc. is managing its asset efficiently. The comparison of this ratio must be used to compare only companies within the same industry because each industry has different asset turnover ratio. ​Inventory turnover ratio ​= Cost of good sales/Average inventory = 112,258/[(2,111 + 1,764)]/2 = 112,258/1,937.5 = 57.94 This ratio measures how many times, on average, a company’s inventory is sold or turned during a period of time. The high inventory turnover is good for company because since inventory is being sold in a short period (fast) then company can reduce some spending on managing this inventory such as storage cost and other holding cost, but if the inventory is too high or it is sold too fast then company will not have enough good to meet this high demand. Therefore, a company must manage its inventory carefully. The inventory turnover ratio of Apple Inc. is 57.94 which is really high. This means Apple can sell its product very fast. This indicates a good sign for the company because the electronic products are developing so fast and if the ratio is not high enough some of the product would be left in the stock and become obsolete. Apple Inc. (AAPL)
  19. 19. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) Debt to Equity ​ ​Current year​(2014) ​Prior year​(2013) Total liabilities/Total equity 120,292/111,547 = 1.08 83,451/123,549 = 0.68 This ratio measures the proportion amount of equity and debt the company used in financing its asset. The high debt to equity ratio indicates that company is relied more in financing its asset from outside (debt) than its own financing(shareholder). The debt-to-equity ratio of Apple Inc. is 1.08, which compared to the baseline(prior year debt-to-equity ratio) of 0.68 indicates that the company is relying more on creditor financing(bank) than its own financing (shareholder). This mean the company is financing its growth with the debt; It is good if the earning from this operation is higher than the debt (interest expense) , but if the amount that the company have to pay for the debt is higher than the earning they can generate then the company would have a higher risk of not be able to pay back the debt. Apple Inc. (AAPL)
  20. 20. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) Gross margin ratio ​​Current year (2014)​ ​Prior year (2013) Gross margin/Net sales 70,537/182,793 = 0.386 64,304/170,910 = 0.376 This ratio measures the profitability of the company obtained from selling its inventory after subtracted the cost associated in producing that product. The higher the number, the higher profit the company can make from selling inventory. ​The gross margin ratio of Apple Inc. is 0.386 or 38.6% which compared to the baseline(prior year’s gross margin ratio) of 0.376 or 37.6% indicates that the company is doing better. In order to obtain higher gross margin ratio, the company should buy inventory at cheap price which can be done by buying in large amount to get the discount, have some vendor relationship with the seller or sell inventory at higher price, but this has to be done carefully (consider many factors; whether that product has high price-elasticity or not, etc) or else customer will turn to another brand instead. Apple Inc. (AAPL)
  21. 21. Ratio Analysis​- Two-Year Com​parison (In millions, except number of shares which are reflected in thousands and par value) Operating Margin ​Current year (2014)​ ​Prior year (2013) Operating Income/ Net Sale 52,503/182,795 = 0.2872 48,999/170,910 = 0.2866 This ratio measures the revenue from the operating income or when all variable costs and other cost have been paid. It also reflects the efficiency of the company on generating revenue from each dollar of sales. The Operating margin of Apple Inc. is 0.2872 or 28.72%, which compared to the baseline(prior year operating margin) of 0.2866 or 28.66% indicates that the company revenue after deducting the costs is increasing. Referring to Statement of Operating, Even Though cost is increasing in 2014, the operating margin is still increasing. Therefore, Apple Inc. is doing better in managing all cost and sale.
  22. 22. Citation Apple - Environmental Responsibility. (n.d.). Retrieved December 2, 2014, from Bajarin, B. (2012, April 4). Why America Needs Apple. Retrieved December 2, 2014, from Bajarin, T. (2012, May 7). 6 Reasons Why Apple Is Successful. Retrieved November 10, 2014, from Etherington, D. (2013, February 14). Apple’s Retail Strategy Proves That If They Build It, You Will Come (And Spend). Retrieved November 4, 2014, from Jones, C. (2014, February 3). Apple's iPad Losing Share To Samsung And Lenovo. Retrieved December 2, 2014, from Reference for Business. (n.d.). Retrieved December 2, 2014, from Truex, L. (2013, October 12). Focus on Benefits and Buyer Motivation to Make Sales. Retrieved November 10, 2014, from