Introduction
In 1976, Steve Jobs co-founded Apple Computer with Steve Wozniak. However, Jobs was fired by the company’s board of directors, 10 years later. Steve Jobs was able to create two more companies. While Apple, Inc. went under a series of different CEOs and dropped the stock price to $2 a share. This situation led them to re-invite Jobs to join. By 2007, Jobs rejuvenate and flourished Apple. He was able to succeed in growing the stock price to around $200 a share. But unfortunately, in 2008, due to the recession around the world, Apple’s stock price had dropped to around $90. In late 2008, the co-founder, Chairman, and CEO of Apple, Inc. Steve Jobs, issued a statement saying that “We are in the worst economic environment since the Great Depression. However, we are determined to continue to make Apple the most innovative company in the world” (Finkle, 2010). From that year, Apple was known as one of the few companies that operated with virtually no dept (Finkle, 2010). Its operation makes it an interesting company to look at; its different strategies to maintain developing at a steady rate, that is why we will be looking at the SWOT analysis of Apple in 2019 and the nine-building blocks that summarize Apple’s way of operation.
SWOT Analysis in Review
Strengths
Discussing the strengths points of Apple in 2019 is as easy as identifying them, as this company makes sure to maximize its strength points at a range of different platforms. Firstly, one of the leading strengths in Apple is its “Brand image and equity”. Since 1976, Apple gained popularity and its customer’s trust by focusing on research, product quality, and innovation (Pratap, 2019). The company has been working on those factors for providing a better customer experience year after year, that is why the company built good relationships with loyal customers worldwide. Secondly, Apple continues to grow its “Product Portfolio”, the company started with producing a core hardware and software then it produced a set of products like iPhone, iPad, Mac, Apple Watch, AirPods, Apple TV, and developed compatible softwares with their products like iOS, macOS, watchOS and tvOS operating systems, iCloud, Apple Pay. They also provided a range of other accessories, services and support offers (Pratap, 2019).
Moreover, the company is still managing to innovate and produce a new set of products each year. Thirdly, Apple spreads its physical and online stores all around the world. Furthermore, it utilized third-party merchandisers, and this all added to its “International presence” and popularity (Pratap, 2019). Fourthly, being “one of the most innovative brands on the earth”, Apple’s primary focus is its “research and development programs” where its R&D expenditure grew to reach 14.24 billion in 2018 (Pratap, 2019). Fifthly, “Profit margins” is considered one of the most critical strengths as no other competitive to Apple enjoys such profit from its products, especially the iPhone (Pratap, 2019). Apple sells only “premium products”, a factor that affects many decisions taken by the customers.
Moving to the sixth point, marketing helped Apple earn a special place among its competitors as Steve Jobs was a great marketer who made sure “to create products that everyone could fall in love with” (Pratap, 2019). In 2018, Apple invested $16.7 billion on advertising (Annual report, 2018 qtd. as cited in Pratap, 2019) and raised its “focus upon corporate social responsibility” (Pratap, 2019).
Weakness
Even though Apple is one of the leading companies in the computing and smartphone industry across the world, it still can face financial problems like any other company due to technological changes in the market. The sales of Apple products like the iPhone have fallen in 2019 as it fell “from $61 billion in the first quarter of 2018 to around $52 billion in 2019”. “Fluctuating sales of iPhone” is a significant weakness Apple is facing as it is “the leading source of revenue for the brand,” meanwhile the sales of Mac have remained stable (Pratap, 2019). Of course, this fluctuation did not affect Apple’s products as their loyal customers prefer it over any other brand, and Apple also has the customers that manage to afford some of its products for that fact of possessing an Apple product. Those prices played a role in allowing competitors like Samsung and Huawei to get their customers. As a piece of evidence to this, the “Premium Prices” is a weakness mentioned in the swot analysis of Apple Inc. 2019 article, “Apple sales could have been higher with lower prices,” but the company does not want to “risk dilution” (Pratap, 2019).
Moving toward an unexpected weakness, which is the “Failure to seize several important opportunities” (Pratap, 2019). It is surprising to find out that if a company does not expand to cover a range of different products and integrate vertically is considered a weakness; as for so many years, we feel that the company that specializes succeed much more than those who try to have a hand in each industry. But, in Apple’s condition, focusing on its “core products” did not benefit them. Much of the competitors like Microsoft and Amazon worked on many opportunities like “cloud technology,” which Apple is slow in approaching it. Even though Apple’s revenue from services has grown and is still growing, but its decision of not moving away from its products and seizing the opportunities created by “emerging technologies,” will affect its position among competitors (Pratap, 2019).
Opportunities
Mentioned above is one of the company’s weaknesses from a misused chance, but Apple has many opportunities to seize ahead, such as “Growing services portfolio.” Due to the lower sales of the iPhone in 2019, the company should find a way to manage its revenues again so paying attention to providing services will be a “profitable area” and a way for the company to “reduce its dependence on other sources” (Pratap, 2019). This opportunity is a major one for Apple as all their loyal customers would like to receive many easy to access services from the same retailers they get the physical product from. Moreover, another opportunity is available to Apple like “AI and IoT.” Many emerging technological areas will help Apple raise its profits just by taking the opportunity and working on it. “Sources say Apple is working on autonomous driving technology and about the release of an iCar in the near future” (Pratap, 2019). This invention will boost Apple’s revenues and its customer’s loyalty.
Threats
In the twenty-first century, many information technology jobs required the usage of “affordable computing products”, this led to high demand for such products from sources like HP, Dell, and Lenovo that made sure to develop products able to compete with Apple products. So, an “ever-intensifying competition” (Pratap, 2019), should encourage Apple to work on designing special programs that only Apple products can handle, and grow partnerships with leading companies that people use and limit them to Apple users.
Moving away from the battle Apple face in the market share, “trade wars” are among the most prominent threats as “Tim Cook attributed the decline in revenue and sales during the first quarter of 2019 to the trade war and rising tariffs which led to lower sales in China” (Pratap, 2019). As we have seen, the wars between the United States and China have been “intensifying” and increasing the pressure on all the technological firms. Also, “Economic fluctuations” played a role in affecting “the business of international technology brands” like Apple. The revenue will be affected negatively and the profit if the economic activity declines in any of its leading markets, this will lead to lower demand and lower sales (Pratap, 2019).
Being one of the big four players in the technology industry, Apple faces several “regulatory pressures” just like Google, Microsoft, Amazon, and Facebook, as the governments around the world started taking stricter measures in recent years to secure the privacy of its citizens. Those regulations led to posing barriers in the market expansion of international tech brands (Pratap, 2019).
The Nine-Building Blocks
Customer Segments
Throughout the years of production, Apple has made sure to produce a range of products that suits most of the different segments in the markets worldwide. Apple’s devices offered for the different segments of customers, devices that match the needs of their usage, for example, business people (“Business Model Canvas of Apple”), Apple products helped those who need an easy way of communication with their clients to enhance the production of their company while reducing the costs. Teenagers are Apple’s second customer segment, as a huge percentage of products are bought to be used by teenagers who listen to music and use them to communicate among friends. Students at different levels, use the iPhones, MacBooks, iPads, and tools to study and submit assignments. Also, children of this century use many of the products as easy as any adult (“Business Model Canvas of Apple”). As well as, Apple could be useful to large markets and various enterprises all around the world ("APPLE BUSINESS MODEL...", 2018). Those segments are from the main categories, Apple still has specialized segments like editors, movie makers, musicians, and professional designers that see their products as a necessity to specialize in their fields.
The Value Proposition produced by Apple
Since Apple’s first series of products are released to the public, Apple made sure to attract customers to purchase its products. In 2010, when the iPhone 4 came out, many rushed to buy it (Junyuandeng, 2013). Why is that and why is Apple that popular? First, Apple was the first company to introduce “a powerful and convenient smartphone with touch screens” (Junyuandeng, 2013). For customers, this appeal is really important as it considered the first-mover advantage, which gives the company a better position than any of its competitors. Secondly, the design of the apps and the IOS operating system is so unique compared to all who developed similar products (Junyuandeng, 2013). The uniqueness is highlighted by the use of luxury-looking materials and programs which will attract many in this era.
Moreover, Apple appealed and became a recognizable brand when Steve Jobs released the “Think Different” Tv ad which made sure to picture Apple as a brand for cool people “creatives”, this affected advertising agencies decision of choosing the types of equipment, as “In the case of Apple, they weren’t interested in the laggards.” (Ternay, 2019) This value led then to offering a “tech that works,” to provide the customer with a seamless experience. However, recently Apple has been working on the value proposition of “Your privacy is safe with us” (Ternay, 2019), as many consumers are facing problems with other known media companies. Apple is trying to increase its customer share by making sure that they feel safe while using their products.
Channel
Since day one, Apple has used many strategies to enhance their selling; that is why Apple worked hard to diversify its channels to get customers to buy their products with the prices the company chooses. Starting with Apple’s first channel is the Apple stores that sell its products and services ("APPLE BUSINESS MODEL...", 2018). Apple's store will never make discounts on holidays or any other day as they will make sure to keep the prices stable at all times (Maynard & Chu, 2015). With its store, Apple also has an official website, to sell all its products with online stores like the “IOS App store” to purchase premium advancement of apps. Moreover, Apple strategies to increase their market share do not stop on actual purchase stores, the company runs a series of campaigns, programs, events, iBeacon and promotional offers through email or gift cards ("APPLE BUSINESS MODEL...", 2018). Moving towards different channels, Apple offers its products at a stable price on all their reseller’s and retailer’s stores; they do that by making sure that they limit the amount of money for the retailers so that they do not change prices and make discounts. Apple also obliges all its retail and online storefronts to be unique as they make sure to give educational advice and support without approaching the customers as sales to advertise the products and let customers buy more. With that, Apple makes sure to let all its products be positioned uniquely away from its products. Apple products are never placed next to its competitors ("APPLE BUSINESS MODEL...", 2018). Those various channels allowed Apple to gain strong brand recognition. Apple knew how to position itself among others and to be special products presented to the public. This is why we feel that Apple is a luxurious brand among all its competitors and it will always sell a valuable product.
The following diagram has a list of retailers that sells Apple’s products.
Title: Apple Product Sales by Channel and Outlet
Sourced from (Maynard & Chu, 2015).
Customer Relationship
Between its different customers, Apple was able to maintain a strong relationship with its worldwide customers. Apple will always innovate something to let all users gain their trust and see them as an effective brand to invest in. “Complete solutions,” is a leading factor in Apple’s products as they complement and complete each other, and this is done through controlling an entire user process from proving the hardwares with compatible softwares just for Apple users. “Varied products,” are also an important way to get to users as Apple presents low-cost gadgets that will allow users to buy them for a try. Then, if they liked it they might decide to purchase an Apple Mac and pay a high price for it ("11 Effective Strategies Apple Uses to Create Loyal Customers"). This proves that Apple products are user-friendly and the relationship between Apple products and people are on good terms. ("APPLE BUSINESS MODEL...", 2018). “Educational sales,” the company has made sure to equip most of the schools and universities with Apple products like Macs and iPads which allowed them to capture those students as customers without they even know. Moreover, Apple products are easy to use which makes customers happy and satisfied to purchase more and more products in the future.”Outsourcing Unpleasantness,” is also one of the main things, Apple considered while releasing its products ("11 Effective Strategies Apple Uses to Create Loyal Customers"). Apple products won’t require any contact with the customer service representative as Apple produces good quality products, letting AT&T handle the service. The last but not least, consistency, new innovations, and attractiveness are the most popular ways Apple use to connect with their customers ("11 Effective Strategies Apple Uses to Create Loyal Customers"). Without all those strategies Apple won't be able to get to a position no other company got too, as well as, it will lose the luxury of being the first mover in the market.
Revenue Stream
As Apple diversified its platforms to release their products, Apple’s revenue is collected from the following: ("APPLE BUSINESS MODEL...", 2018).
Those platforms are the ways that Apple concentrates on to collect revenue but of course, they are not the only as Apple collects revenue from its partnership and authorization to the other media companies.
Furthermore; Apple has many products to offer and services and each has its own percentage of sales. iPhone is the main product for increasing their profits while the Macs are considered a much more risky product to purchase for non-loyal new customers.
The following diagram shows the sales of some Apple products in the past years:
Title: Apple Inc., Income Statement, Revenues
Sourced by: (Dybek, 2019)
Key Resources
Resources are the most prominent factors that companies need to succeed, that is why an excellent working environment with a culture of innovation and launching different products are crucial for organizing any company ("APPLE BUSINESS MODEL...", 2018). Being part of a very successful company that allows its employees to innovate and work on new, up to date projects will always add to its fame and success, as the customer won't forget the release date of a product to get another one on the store’s shelves.
Moreover, staying away ahead of its competitors which is seen by customers as Apple is the inventor and other companies are followers to produce a less expensive similar item. Finally, Apple also makes sure to partner and have different shares in the market ("APPLE BUSINESS MODEL...", 2018).
Adding to that, the brand equity, product quality, research and innovation - to become ahead of its competitors - Global presence, marketing, customer loyalty, and supply chain - Apple managed a number of supply chains located in Asia; which resulted in the availability of good quality raw material to produce the high-end products (Pratap, "Apple Resources and Capabilities", 2019).
Key activities
Apple undertook many activities to guarantee their success in different markets worldwide, as Apple’s group researched hard to develop their hardwares and softwares. They also provided support to customers and offered consultations to whoever needed from companies to consumers. Apple also worked on logistics, networking among peers, training, sales, and many charitable activities ("APPLE BUSINESS MODEL...", 2018). Those factors increased the trust between the company and its clients as well as its partners that helped Apple put a benchmark on many different aspects of the market. From technology to gadgets to programs and many more.
Key Partnership
Since day one, and until reaching major successes, Apple partnered with many to enhance their products. The following are the most significant partners based on a study presented in CNBC
Sourced by: (Naidu-Ghelani, 2012)
In Apple’s official site, IBM is one of its partners as it is considered a “powerhouse for enterprise solutions” ("Business - Partners"). This partnership offers developers the ability to combine machine learning with AI and cloud for a new generation of “dynamic apps” that will get smarter. Apple and GE are working together to increase efficiency across different aspects like energy, transportation, manufacturing, and healthcare. Partnering with Salesforce, Apple tries to engage with customers by letting the Salesforce app and the Salesforce Mobile SDK to optimize the IOS. ("Business - Partners")
Cost Structure
In the market, Apple is considered a price making brand. As it determines its market prices for its stores and its retailers. Sometimes, Apple is forced to adjust prices because of a shortage of most components and stiff competition among the smartphone industry as Samsung and Sony were able to directly affect its cost structure. The cost structure adopted by Apple changes according to the product portfolio. Apple sets its product prices based on the premium value proposition it gains from its key products (iPhone, iPad, Mac, iPod). One major strategy Apple pursues is mass production which will allow them to benefit from economies of scale. The company pursues mass production to take advantage of economies of scale. Without this strategy, the company would not be able to charge reasonable prices for its products. (“Business Model Canvas of Apple”)
To divide Apple’s cost structure to fixed and variable costs. Apple’s Stores are considered one of the fixed costs of the company. However, the company’s variable costs are all based on external forces that might force them to change the percentage they put for The expenses of this certain department. Advertising and designs, research and development, manufacturing and outsourcing costs, and employees and operations are all the variable costs that Apple manages them year after year ("APPLE BUSINESS MODEL...", 2018).
The Following Diagram shows the “Total Operating Expenses of Apple”
Sourced from: ("Total Operating Expenses for Apple Inc.")
Conclusion
In the final analysis, Apple’s strengths helped it maintain a position no other company was able to reach in a short period of time. It was able to prove itself as a reliable product for the huge media production in the twenty-first era. In an article, it has been said that they would rule the smartphone market for as long as they can innovate. Apple’s innovation has not been predicted, especially after the changes in the iPhone X ("APPLE BUSINESS MODEL...", 2018). As a company, Apple always put an effort to satisfy their customers. They make sure that customers receive an easy to access assistance through its different platforms. Finally, Apple’s “brand equity” is supported by its advertising and promotional campaigns in launching a new product. (Bhasin, 2019)
Work Cited
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Business - Partners. (n.d.). Retrieved from https://www.apple.com/ae/business/partners/.
(n.d.). Retrieved from https://universitywriting911.com/uploads/2017Nov/821/Business_Model_Canvas_of_Apple_Inc_.docx.
Dybek, M. (2019, November 1). Apple Inc. (AAPL): Revenues. Retrieved from https://www.stock-analysis-on.net/NASDAQ/Company/Apple-Inc/Analysis/Revenues.
Finkle, T. A., & Mallin, M. L. (2010). Steve Jobs and Apple, Inc. Journal of the International Academy for Case Studies, 16(7), 31.
Inside-CRM. (n.d.). 11 Effective Strategies Apple Uses to Create Loyal Customers. Retrieved from https://it.toolbox.com/blogs/inside-crm/11-effective-strategies-apple-uses-to-create-loyal-customers-100109.
Junyuandeng. (2013, September 29). Junyuan Deng's Blog. Retrieved from https://blogs.ubc.ca/junyuandeng/2013/09/29/apples-value-proposition/.
Maynard, S., & Chu, N. C. P. (2015, May 16). Apple's Sales and channel strategy – key to it's success. Retrieved from https://mpk732.wordpress.com/2015/05/16/apples-sales-and-channel-strategy-key-to-its-success/.
Naidu-Ghelani, R. (2012, February 3). 10 Significant Apple Business Partners. Retrieved from https://www.cnbc.com/2011/08/25/10-Significant-Apple-Business-Partners.html.
Pratap, A. (2019, September 22). SWOT Analysis of Apple Inc 2019. Retrieved from https://notesmatic.com/2019/07/apple-swot-analysis/.
Pratap, A. (2019, July 10). Apple Resources and Capabilities. Retrieved from https://notesmatic.com/2019/04/apple-resources-and-capabilities/.
Ternay, G. de. (2019, November 3). Apple Value Proposition In A Nutshell. Retrieved from https://fourweekmba.com/apple-value-proposition/.
Total Operating Expenses for Apple Inc. (n.d.). Retrieved from https://finbox.com/AAPL/explorer/oper_exp.
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