Apple Inc

Team 5 Kristen Hodge Monica Longer Katelyn Reed Venessa Rodriguez

History
Stephen Wozniak was a member of Homebrew Computer Club Joined with Steve Jobs and built the Apple I Then built Apple II Apple Computer founded in 1976
a company

Tech savvy people exchanging ideas

Had fewer ships, high resolution graphics Became popular, was used in schools

Jobs had to convince Wozniak to turn Apple into Ronald Wayne was 3rd founder of Apple Computer designed first logo-resigned a year later Apple became incorporated in 1977, agency designed colorful logo
and

History Continued
In 1985 Wozniak left Apple and pursued other interests 1997 Jobs officially returned to the CEO position
Also serves as a director of Disney Co-Founded Pixar Animation Studios

History Continued
In 2002 Apple formed an alliance with Ericsson and Sun Microsystems to develop a way to deliver multimedia content to wireless devices like smart phones and PDAs.
Apples QuickTime video creation software, Suns distribution software & hardware, & Ericssons mobile infrastructure

In 2003 iTunes launched iPod introduced in 2004 In 2005-2006 made agreements with car manufacturers to incorporate iPod accessibility into their new models.
Acura, Audi, Chrysler, Honda, Volkswagen, Ford, General Motors, and Mazda

In 2007 Apple Computer was renamed Apple Inc.

The iPhone was also introduced to the market

History Continued
In 2008 Apple introduced Time Capsule, Mac Pro, MacBook Air, MobileMe, iPod touch, iTunes 8, the new iPod nano, and the new iPod touch In 2009 iWork '09 and iLife '09, and upgrades of iPhoto, iMovie, GarageBand, iDVD, and iWeb were launched.
Apple also revealed the new 17-inch MacBook Pro

Mission
" Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone."

Employees
The success of the company rests largely on the service, loyalty, and availability of key personnel. As of September 2009, Apple has approximately 34,300 full-time employees, and 25,000 temporary employees and contractors.

Products
Personal Computers
MacBook Pro MacBook MacBook Air Mac Pro iMac Mac mini Xserve iPhone iPhone3G iPhone 3GS

Portable Digital Music and Video Players

iPod shuffle iPod nano iPod classic iPod touch

Other Products & Services

iTunes 9 Apple TV iLife 09 iWork 09 Final Cut Studio Logic Studio FileMaker Pro Safari: QuickTime MobileMe AppleCare

Mobile Devices

Share Profile
Trades common shares on NAS with tag AAPL Current Price 199.92 per share Apple has 900,678,473 shares outstanding, 7,183,823 closely held shares Profit margin is 15.60% Return on Equity of 20.50 Return on Assets of 10.60 Return on Investment of 20.50

Organizational Life Style

Apple believes its unique ability to create its own stateof-the art products gives it leverage on the competition. To do this continued investment in research and development of these products is crucial.
Apple spent $1.3 billion in research and development expenditures in 2009 Apple supports third-party products that compliment its offerings through developer programs. Apple's strategy includes growing its distribution network to reach more customers and to provide them with highquality products and post sale support.

Organizational Life Style

Apple manages its business mainly on a geographic basis.
Segments in the Americas (North & South Americas), Europe (European countries, the Middle East, and Africa), Japan, and Retail. The U.S. is Apple's largest geographic marketplace, approximately 54% net sales to customers in 2009

Apple distributes its products by wholesalers, resellers, national and regional retailers and catalogers.

Organizational Life Style

Apple has noticed that historically sales in the first and fourth quarters are substantially higher than the other two quarters in the fiscal year. Compliance with federal, state, local, and foreign laws for the protection of the environment has no material effect on Apple's capital expenditures, competitive position, or earnings. However, in the future it could become material.
An instance of how this may become material is customers having the ability to return the product at the end of its useful life, making Apple responsible for environmentally safe disposal or recycling of the products. Some laws of this nature have been passed in countries in Europe and Asia, and certain states and provinces in North America.

Organizational Life Style

Apples business markets are characterized by rapid technological advances, and as of recent years price competition has gained momentum. It understands that it is in a highly unstable

Financial Analysis
To breakdown the companys financial statements into numbers that can be easily understood The goal of the financial analysis is to be able to evaluate the performance of a company through these ratios and then put side by side with its competitors These ratios are used to accurately evaluate a companys overall financial health, profitability and growth Ratios can be separated into three sections: liquidity, profitability, and capital structure

Liquidity Ratio Analysis

The liquidity ratio analysis is the measure of a companys capability to meet short term financial obligations. Includes: current ratio, quick ratio, accounts receivable turnover, inventory turnover, and cash to cash cycle. When analyzing liquidity ratios it is ideal to have as high of a number as possible because that will demonstrate that the company has the adequate resources to pay all of their financial responsibilities

Current Ratio
3.5 3 2.5 2 1.5 1 0.5 0 2005 2006 2007 2008 2009 Apple HP Dell Microsoft

Quick Asset Ratio

3 2.5 2 1.5 1 0.5 0 2005 2006 2007 2008 2009 Apple HP Dell Microsoft

Accounts Receiveable Turnover

18 16 14 12 10 8 6 4 2 0 2005 2006 2007 2008 2009 Apple HP Dell Microsoft

Inventory Turnover
100 90 80 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 Apple HP Dell Microsoft

Cash to Cash Cycle

120 100 80 Apple 60 40 20 0 2005 2006 2007 2008 2009 HP Dell Microsoft

Profitability Ratio Analysis

The profitability ratio analysis shows the effectiveness of a firms ability to produce profits. Include: net profit margin, return on assets, and return on equity.

Net Profit Margin

0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2005 2006 2007 2008 2009 Apple HP Dell Microsoft

Return on Assets
0.3 0.25 0.2 Apple 0.15 0.1 0.05 0 2005 2006 2007 2008 2009 HP Dell Microsoft

Return on Equity
1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005 2006 2007 2008 2009 Apple HP Dell Microsoft

Capital Structure Analysis

A capital structure analysis is used to show how well a company can finance itself through the use of their own assets which are show by the debt and equity of the firm The most important capital structure ratio is the debt to equity ratio which is shown below

Debt to Equity
3 2.5 2 Apple 1.5 1 0.5 0 2005 2006 2007 2008 2009 HP Dell Microsoft

Industry Analysis
Personal computer, mobile device, computer software and portable MP3 player industries
Rapid Changes
Improving technology Customer demand

Highly profitable

Five Forces Model

Threat of New Entrants
Not a significant threat in personal computer industry, the others it is more likely Enormous amounts of capital required to be able to compete Struggle to keep up with the ever-changing technology Overcome economies of scale that the larger companies have Brand equity Patents protecting design and technological processes Complementary products

Five Forces Model Continued

Bargaining power of customers
Very little power Products differ from competitors Business customers have some but it is minimized because of retail stores and online sales.

Bargaining power of suppliers

Supplier Diversity Program Apple has multiple suppliers for most products bought 10K lists 48 suppliers that could affect their profitability.

Five Forces Model Continued

Substitute Products and Services
Personal Computers iPod
Dell, HP and Sony along with many others Operating system and computer software differentiates Apple Rio, iRiver, Sandisk, Sony, Phillips and many others Louder Hard-drive based Complementary products Blackberry, LG, Samsung, Motorola, Palm, etc. Full browser iPod Only AT&T

iPhone

Five Forces Model Continued

Rivalry among participants Fierce competition Apples marketshare is growing Dell, HP and Microsoft

Other Forces
Complementary products
Whole package
Computer hardware Computer software Digital media distribution MP3 player Phone Apple TV

iPod docks and stereo adapters Applications

Environmental Factors
Focus on processes Removed toxic materials from new products and reduced amount of materials Smart Power Management Recycling programs

Political Factors
Patents Trademarks
Designs Technological processes Apple logo
Brand recognition

Piracy prevention on iTunes Counterfeit products Government sales and foreign trade policies Government cell phone regulations Political events, natural disasters, terrorism, public health issues could affect Apple, its suppliers or its customers
Reputation

Economic Factors
Despite the economic downturn in 2008 Apple reported an increase of 35.3% over 2007s revenues. And, $36,537 million for net income in 2009. Higher revenues in first and fourth quarters
Christmas Back to school

Social Factors
34,300 full-time employees and 2,500 temporary employees and contractors as of September 2009 Top executives that range in ages of 40-70 years old. With an average of 54 years old. Retail Stores USA Japan Canada UK Operations USA Asia Africa Middle East Australia Europe Canada South America

Apple Strategies
Controlling Software
Software only compatible with Apple products Other companies are not allowed to make Apple compatible computers
Example: Franklin computers

Cannot copy software and it is difficult for hackers to make viruses or other malicious software for software

Controlling software creates loyal customers

Apple Strategies
Innovative products
Macintosh was first computer with a mouse iPod, iPhone

Donated computers to schools/ made computers easy for students to use

The Apple II computer had many applications The Mac was student friendly

SWOT Analysis
Strengths Strong brand image Robust financial performance Focus on research and development Very few viruses and other malicious software Opportunities Smartphones New retail stores Weaknesses Product recalls Patent infringement Not much free or inexpensive software on the market Threats Intense competition Uncertain global economic conditions Declining PC sales Dependence on specific suppliers

SWOT Analysis
The high brand recognition make Retail stores possible and they are now a competitive advantage Smartphones cannot compete with the iPhone The focus on R & D has given Apple the edge in innovation

Top Three Competitors

Microsoft
Controls about 94% of Operating Systems Makes products that last a long time, although not hip OS is compatible with everything Top competitor in PC sales Controls large segment of business market Does not offer other products other than PCs and accessories Weakest competitor of top 3 Provides computers for businesses, schools Behind HP in PC sales Does not offer other products other than PCs and accessories

Hewlett-Packard

Dell

Do the strategies work?

The strategy of controlling the software has worked well in retaining loyal customers as well as protecting the software. Relying on new hit products has given Apple a competitive advantage. However, if the company is ever in the follower position a new strategy would need to be formed. Apple could lower prices on products. Ex. PCs are expensive. Apple could gain noncustomers by offering an $800 PC.