|Case Study #3: “Apple Vs. Samsung” |
|Anna Cunningham ...view middle of the document...
Apple Inc. is a technology-based company whose main profits stem from producing gadgets such as laptops, desktop computers, music players, and services such as iTunes. The majority of Apple’s profits come from selling devices such as the iPhone, which accounts for two out of every three dollars Apple earns, putting gross margins near 55%. Along with a reliable and dedicated consumer base, Apple has about 255 phone-carrier partners in 114 countries and has the potential to reach 1.8 billion subscribers worldwide. Apple also has the world’s biggest stock market value.
Apple peaked during mid-September with its stock price above $702 but experienced a loss after the death of Steve Jobs in 2011. Other factors contributing to the decrease in stock value was the decision to drop Google maps from the iPhone, as well as the inability to meet demands for new iPhones. This year, Apple reported that revenue grew 27% and profit expanded 24%. Although these numbers appear positive, Apple’s management reported that per-share earnings are around $11.75 this quarter, which dropped over two dollars from last year. They also cut projected gross margins from 40% to 36%.
Apple has many strengths and opportunities available, which can account for their success over the years. The strengths of Apple include a high ROE, high profit margins, and a strong consumer base. Apple attracts loyal customers that will not only continue to buy Apple products in the future, but will also want to own new products or technologies they release. Apple has great control over their ecosystem and their pool of consumers, which lets them charge premium prices. This is shown in its high operating income, composed of 68% of all smartphone income. The company also has an opportunity to grow in the market, having only penetrated about 10% of its addressable market, as well as supply consistent demand.
Like strengths and opportunity, Apple also has weaknesses as well as threats. One of Apple’s weaknesses is its inability to meet demands, which currently is setting them back financially. Some of the threats that struck Apple with difficulty include the death of Steve Job’s, and the firing of Scott Forstall, who was responsible for their software development. Along with the challenges mentioned, Apple is also feeling pressure because of their frontloaded business model, as well as the pressure to stay competitive while developing new and innovative products.
Although Apple has weaknesses and facing threats from outside companies, a major factor that contributes to its success is its undeniable control over its ecosystem and user experience, both of which allows them to have a strong control over setting prices. Although this is true, Apple prices its products relatively low in order to be competitive and attractive, with the hopes of gaining a large portion of the market share. Apple also hopes to increase their market share in the...