FAM II Roll Number 87 & 35

APPLE
INC.
S.Y. I

Arpit Jain 87
Akash Mehta 35

ACKNOWLEDGEMENT
It is not possible to prepare a project report without
the assistance & encouragement of other people. This
one is certainly no exception.
On the very outset of this report, I would like to extend
my sincere & heartfelt obligation towards all the
personages who have helped me in this endeavour.
Without their active guidance, help, cooperation &
encouragement, I would not have made headway in the
project.
I am ineffably indebted to them for conscientious
guidance and encouragement to accomplish this
assignment. I am extremely thankful and pay my
gratitude to the
management faculties- Darshana
Padia, Zalak Shah, Monaz Parekh, Nupur Shah &
Kartikeya Tanna for their valuable guidance and support
on completion of this project in its presently.
I extend my gratitude to HLIC-Ahmedabad University
for giving me this opportunity.
I also acknowledge with a deep sense of reverence, my
gratitude towards my parents and members of my
family, who has always supported me morally as well
as economically.

At last but not least gratitude goes to all of my friends

who directly or indirectly helped me to complete this
project report.
Any omission in this brief acknowledgement does not
mean lack of gratitude.
Thanking You
Contents
ABSTRACT.............................................................................................................. 4
INTRODUCTION...................................................................................................... 5
SWOT ANALYSIS..................................................................................................... 6
BCG Matrix........................................................................................................... 10
PEST Analysis....................................................................................................... 12
Ratio Analysis...................................................................................................... 14
Liquidity Ratios................................................................................................. 14
Profitability Ratios............................................................................................. 15
Return on Investment.................................................................................... 15
Profit Margin.................................................................................................. 16
Observations........................................................................................................ 17
Suggestions......................................................................................................... 18
STRATEGY RECOMMENDATIONS...........................................................................21
CONCLUSION....................................................................................................... 22
Annexure............................................................................................................. 24
Annexure I Cash Flow Statement......................................................................24
Annexure II Balance Sheet................................................................................25
Annexure III Income Statement........................................................................26
Bibliography......................................................................................................... 27

ABSTRACT
This report is a Financial Report of Apple Inc. The
study will help us to find out about the overall
performance of the company. It will also help us
to learn about the way of management of finance
of Apple, Inc. By analysing the different financial
ratios, we can know about the performance and
the position of the company in the market. Apple
brand's strengths, weaknesses, opportunities and
threats can be known by using SWOT analysis
tool. We can know how to segment the market,
target the customers and position the products.
Therefore, since the competition in the
technology industry is increasing, BCG Matrix is a
technique to classify products as low or high
performers depending upon their market growth
rate and relative market share. It is very useful
tool to identify the product line of an

organization. A PEST analysis tool will help in

knowing about the different political, economic,
social and technological factors affecting the
performance of the company, to gain competitive
edge, to attain goals set by the company, to
make improvements for the future related to
products, etc. Therefore, it will help us to
evaluate whether the financial management will
affect Apple Inc.s success rate or not.

INTRODUCTION
Apple Inc., is an American manufacturer of personal
computers, computer peripherals, mobile phones and
computer software. It was the first successful personal
computer company and the populariser of the graphical
user interface. Its headquarters are located in
Cupertino, California. Apple was founded by Steve
Jobs, Steve Wozniak, and Ronald Wayne on April 1,
1976, to develop and sell personal computers. Apple is
the world's second-largest information technology
company by revenue after Samsung Electronics, and
the world's third-largest mobile phone maker.
The companys worldwide annual revenue in 2013
totalled $170 billion. As of Q1 2014, Apple's five-year
growth average is 39% for top line growth and 45%
for bottom line growth. In May 2013, Apple entered the
top ten of the Fortune 500 list of companies for the first
time to take the sixth position.
In its fiscal year ending in September 2011, Apple Inc.
reported a total of $108 billion in annual revenues a

significant increase from its 2010 revenues of $65

billion and nearly $82 billion in cash reserves. Apple
achieved these results while losing market share in
certain product categories. On March 19, 2012, Apple
announced plans for a $2.65-per-share dividend
beginning in fourth quarter of 2012, per approval by
their board of directors.
On September 2012, Apple reached a record share
price of more than $705 and closed at above 700. With
936,596,000 outstanding shares, it had a market
capitalization of about $660 billion. At the time, this
was the highest nominal market capitalization reached
by a publicly traded company ever.

SWOT ANALYSIS (Strategic Management Insight, 2014)

STRENGTHS
Customer loyalty combined with expanding closed
ecosystem. While at first Apples closed ecosystem was a weakness
for the business, this has now changed. First, Apple now has a full
range of apps, software and products that are interlinked and support
each other. Second, new products and supplements will be released
soon (iTV), hence expanding the ecosystem. Third, Apple has a strong
customer loyalty, which increases due to Apples closed ecosystem,
which, in turn, is supported by customer loyalty. So the combination
of Apples expanding closed ecosystem and customers loyalty
increases firms competitive advantage.
Apple is a leading innovator in mobile device technology. Apple
has been chosen as the most innovative business in the world for the

3rd time in 2012. Companys core competency of producing

innovative products is the strength the company builds upon and is
able to bring the most innovative products to the market. (The Times
of India, 2012)
Strong financial performance ($10,000,000,000 cash, gross
profit margin 43.9% and no debt). Apples financial performance is
one of the best among many companies. Company currently (end of
2012) holds about $10,000,000,000 in cash, which can be used for
acquisitions, buying back company shares and other matters. It also
has higher gross profit margin than its main competitors, which is
equal to 43.9%. Company has no debt and is not directly affected by
interest rates or credit markets.
Brand reputation. Apple has a reputation of highly innovative,
well designed, and well-functioning products and sound business
performance. Apple brand is valued at $76.5 billion and was the
second most valuable brand in the world in 2012.

WEAKNESSES
High

price. Apples products cost much more than its competitors

devices. Some critics argue that the price is not justified. When theres
such a fierce competition, Apple products price becomes a weakness
because consumers can easily opt for similar quality but lower price
products.
Incompatibility with different OS. The iOS and OS X are quite
different from other OS and uses software that is unlike the software
used in Microsoft OS. Due to such differences, both in software and
hardware, users often choose to stay with their accustomed software
and hardware (Microsoft OS and Intel hardware).
Decreasing market share. The less market share Apple has, the
less it can influence its potential customers and persuade them to

jump into using Apples closed ecosystem products. (CNN Money ,

2012)
Patent infringements. The firm is often accused of infringing
other companies patents and has even lost some trials. This damages
Apple brand and its financial situation.

OPPORTUNITIES

High demand of iPad mini and iPhone 5. IPad mini sales will
increase Apples market share in the tablet market and, will
strengthen firms competitive advantage.

iTV launch. iTV launch will support Apple TV sales and the
products ecosystem.

Emergence of the new provider of application

processors. Samsung, the main Apples competitor, is also the only
provider of application processors for Apples products. Apple has
to find a new source for the component but could not find a suitable
one yet. Nonetheless, new manufacturers with superior engineering
capabilities are arising and its just a matter of time, when Apple
will seize upon the opportunity of being less dependent on its direct
competitors.

Growth of tablet and smartphone markets. Growth of tablet

and smartphone markets is a good opportunity to expand firms
share in these markets.

THREATS
Rapid technological change. One of the most severe threats
Apple and the other tech companies are facing is rapid technological
change. Companies are under the pressure to release new products
faster and faster. The one that cannot keep up with the competition
soon fails. This is especially hard when a business wants to introduce
something new, innovative and successful. Apple was able to bring
very innovative products to the market so far but for the moment,
even Apple hasnt unveiled any plans for the new products (except
iTV) and may lack new introductions to keep up with competition.
Rising pay levels for Foxconn workers. Pay levels for Foxconns
workers already rose 3 times from 2010 to 2012. Foxconn is the main
manufacturer of Apple products and the rising pay level for Foxconns
workers will likely raise the prices for Apple products. (The
Telegraph, 2012)
Price pressure from Samsung over key components. Samsung
has already asked Apple to pay higher price for its application
processors. Due to intense competition and no viable substitutes,
Apple may be asked to pay even more. (The Financial Times, 2012)

BCG Matrix (Luke R. A., 2013)

Question Mark- Apple TV makes a bit of money, but
its not reaching its potential. If Apple can solve a few
ecosystem problems, they could really own the TV
space. There are tons of rumours of an Apple TV
product that might just maybe dominate like the
iPod/iPhone/IPad (Singleton, 2014)
Rising Star -The iPhone and IPad are rising stars. They
cant make enough of them. These products are so
successful that their growth potential is really
unknown. (Sullivan, 2011)
Cash Cows-The Mac Books are the portables of choice
right now. The all-in-one I Mac is in that cash cow place.
They make a lot of them, but computing is quickly
shifting to portable and mobile so they are also in the
dog section. (Dougherty, 2012)
Dogs- The big multi-part desktop is fading away. Hard
drive based iPods peaked a while ago as well and there
are just so may competitors that can create a simple
product such as an ipod now. Apple's Macs could be
considered in the dog category as Apple is not a market
leader in this market segment as their competitors
have the desktop market in a monopoly. (Kim, 2012)

BCG MATRIX
(Luke R. a., 2013)

PEST Analysis (Luke R. A., 2013)

Political
In 2005, 52% of sales were outside of America. Apple has no control
over relations with other countries due to America's war on Terrorism.
Apple produces many of their products outside of the USA. This
includes a list such as Ireland, China, Czech Republic, and Korea.
Political conflicts with any of these countries will have terrible effects
on Apple INC. Once again, Apple has no control of the wars, and lack
of communication or failed public relations with corresponding
countries to the USA. (Jamalov, 2014)

Economic
The Economic depression may have a serious impact on Apple sales
and improvements in the company. Apple's products may be viewed
by some as "luxury" products and the inflation rate is high, while
income is low and unemployment rates are increased the company
could risk a severe loss in sales. As the U.S.D (us dollar) has lost
some value the Apple corporation does not risk economic breakdown
as they have purchased foreign currency. In fact, the decrease in the
U.S.D has actually increased Apple's revenue on the market. (Fadaei,
2013)

Socio-Cultural
The people's interactions from around the world has to do with
globalization. Today's world is the way it is due to technology and a
lot of it is due to Apple. It is the leader in computers, software, and
cell phones and this is due to the quality and designs of the products.
Another large factor is the music industry, it has grown into the cyber
world. iTunes is ahead of any other competitor in its class. Web piracy
is a threat but most countries punish and have laws against this.
Apple's image displays the modern person's lifestyle, they are the
leader in their class and are known around the world. Therefore
sociological effects benefit the company. (Isaacson, 2011)

Technological Environment

The technological environment for Apple's market has grown

substantially over past years. Most specifically, phones and computers
have become a hot commodity. Apple is on top of the market for
innovating products and the main thing about these products is that
their life cycles are very short, making it inevitable for more products
to be sold later. The increase in technology is encouraging
competitors to improve, which then keeps Apple improving. (Belic,
2012)
Overall, Apple is a very well established company with
a firm grasp on all sections in a PEST analysis. They are
established politically by having a "plan B' in case
something that they cannot control happens and it is
still maintaining success while the depression is
prevalent, they are knowledgeable in economics. Apple
uses the modern person to depict their product as well
as create new ingenuity and design. They seem to have
all bases covered and will always be a leader in
technology.

Ratio Analysis
Liquidity Ratios1

Liquidity Ratios
2.5
2
1.5
1
0.5
0
2010

2011
Current Ratio

2012
Quick Ratio

2013
Cash Ratio

(Google Finance, 2014)

Ratio

Description

The company

Curre
nt
ratio

A liquidity ratio calculated as

current assets divided by current
liabilities.

Apple Inc.'s current ratio

deteriorated from 2011 to 2012
but then improved from 2012 to
2013 exceeding 2011 level.

Quick
ratio

A liquidity ratio calculated as

(cash plus short-term marketable
investments plus receivables)
divided by current liabilities.

Apple Inc.'s quick ratio

deteriorated from 2011 to 2012
but then improved from 2012 to
2013 exceeding 2011 level.

Cash
ratio

A liquidity ratio calculated as

(cash plus short-term marketable
investments) divided by current
liabilities.

Apple Inc.'s cash ratio deteriorated

from 2011 to 2012 but then
improved from 2012 to 2013
exceeding 2011 level.

1 Annexure I Cash Flow Statement

Profitability Ratios2
Return on Investment

Return on Investment
40
35
30
25
Percentage 20
15
10
5
0
2008

2009

2010

2011

2012

2013

Year
ROA

ROE

(Apple Investors, 2014)

Rati
o

Description

The company

ROE

A profitability ratio calculated as net

income divided by shareholders'
equity.

Apple Inc.'s ROE improved from 2011 to

2012 but then deteriorated significantly from
2012 to 2013.

ROA

A profitability ratio calculated as net

income divided by total assets.

Apple Inc.'s ROA improved from 2011 to

2012 but then deteriorated significantly from

2 Annexure II Balance Sheet

2012 to 2013.

Profit Margin3

Profitability
50
40
30

Percentage

20
10
0
2008

2009

2010

2011

2012

2013

Year
Gross Profit Margin

Net Profit Margin

(Yahoo Finance, 2014)

Ratio

Description

The company

Gross
profit
margin

Gross profit margin indicates the

percentage of revenue available to
cover operating and other
expenditures.

Apple Inc.'s gross profit margin

improved from 2011 to 2012 but then
deteriorated significantly from 2012
to 2013.

Net profit
margin

An indicator of profitability,
calculated as net income divided by
revenue.

Apple Inc.'s net profit margin

improved from 2011 to 2012 but then
deteriorated significantly from 2012

3 Annexure III Income Statement

to 2013.

Observations
Based on the findings in the trend and common
size analysis, Apples overall performance is above
average.
Analysis of companys Balance Sheet showed that
Apples growth in Total Assets, Common Equity,
and Retained Earnings was above industry
average.
Analysis of companys Income Statement showed
that Apples growth in Net Sales, and Gross Income
was above its competitors.
Analysis of companys Cash Flow Statement
showed that Apples Net Cash Flow from Operating
Activities was above the industry average, and that
resulted in a positive Net Change in Cash.

Suggestions
For Company
Lowering the cost of products and maintaining the same quality
standards.
Can form joint ventures.
Knowledge Management.
More number of retail stores for easy access.
Continuous innovation to expand.

For Others
Do not compromise on price for quality.
Choose the products based on individual needs.
Be unique and different.

 Scale up its production capabilities. Every time Apple releases a

hot new gadget, customers can't get it. This is a consequence of Apple's
legendarily precise just-in-time manufacturing system. Apple never wants
to make more devices than it will sell, so it ramps up manufacturing in
lock step with demand. That reduces its inventory costs and thus boosts
its profit, but Apple's production is still too slow to keep up with instant
spikes in demand. Is it possible for Apple to build products any faster
than it does now? If money is no object, sure: It could set up factories in
many different countries and it could invest in next-generation production
capabilities that might pump out iPhones even faster (for instance, robotic
assembly lines, which have the added benefit of not raising any concerns
about factory conditions).

Build or buy a cellular carrier. The iPhone is Apple's biggest

product, but Apple sells almost all of its phones in partnership with
carriers whose prices it doesn't control. Those costs are the biggest piece
of a smartphone purchase, and, in the U.S. and many other places around
the world, they have remained relatively stable for years. Your cellular
carrier's technology and customer service also leave a lot to be desired.
Steve Jobs once said that Apple's goal is to "own and control the primary
technology in everything we do." Cellular data service is a key such
technology, and Apple should make it a goal to own and improve that
service. It could start small, building infrastructure that boosts iPhone

service in congested cities, but with enough investments it could build a

network of its own, thus improving current carriers' service and prices
through competition.

High demand of iPad mini and iPhone 5. iPad mini sales will
increase Apples market share in the tablet market and,
will strengthen firms competitive advantage.
iTV launch. iTV launch will support Apple TV sales and the
products ecosystem.
Growth of tablet and smartphone markets. Growth of
tablet and smartphone markets is a good opportunity to
expand firms share in these markets.
Provide value for the products offered-If a perception is
created that Apple is offering its customers with fine
products with premium quality in the industry, which is not
being offered by others; than Apple should be able to
differentiate themselves from their competitors in order to
still keep premium pricing for their products.
Conduct more aggressive promotion-Increasing promotional
programs never proves to be damaging for any firm, but
only proves to be beneficial, it not only helps to attract
potential customers, but also new customers boosting
customer traffic and sales. Apple should also start creating
'TV commercials', in such a way that educate the
customers about the latest technological product, making
it seem more appealing. Also, they should start focusing
on advertising all products not only new products in order
to meet the sales target for all products.
Make maximum innovations-Technology market is a highly
competitive market, its very easy for competitors to clone
your products and sell as new products by making small

innovations. Therefore, it has become very important to

keep making constant innovations in design, features and
specifications in order to differentiate your product from
competitive brands and to be able to dominate the
market.
Offer price reduction offers from time to time-Instead of not
charging premium, price reductions, free gifts, vouchers,
VIP cards, etc. can be made for a limited period of time, to
allow customers to buy from Apple more often. Thus, this
may help Apple to attract new target group customers
increasing its fan base, along with sky rocketing its brand
loyalty and sales.
Open more Apple outlets in different areas-Since Apple
relies on online, direct and retail distribution methods, its
important for Apple to expand its direct reach through its
own stores and retail stores by locating stores in a more
reachable district, like residential areas so that people can
have an easy access to the stores.

STRATEGY RECOMMENDATIONS
Strategy 1
Open six computer retail stores (not just peripheral and accessories). Apple
currently has stores opened throughout the United States with only peripheral
and accessories for their computers. Adding the hardware should generate more
hands-on awareness and use already established locations. This will increase
product accessibility for those who wish to view items other than just
accessories and increase awareness of the originality of Apples products. 2
percent increase over the next 2 years in sales representatives for the computer
hardware.

Strategy 2
Contract music spokesperson to attract the upcoming generation who are
attending high school and college. This will invoke a sense of style and linking

apple with a distinctive and memorable top 10 hit. This will stay in the
customers awareness and influence future purchase decisions. Contracting one
music spokesperson estimated $6 million.

Strategy 3
Add more features to current products for greater Wintel compatibility. Features
such as iTunes software compatible with windows based computers, Office
programs loadable from PC installation disk (This would require a software
agreement with Microsoft). In late October 2003 Apple released an iTunes
software package that is PC ready. It will increase the United States market
share at least 30 percent for the next 2-3 years. $50 million is the estimated cost
for Research and Development.

CONCLUSION
It is concluded from the strategic management analysis at
APPLE Inc. that technological industries are never easy to
compete with. They have a lot invest at R&D and have to be
proactive in order to compete with their competitors in the
industry. As for APPLE is concerned they have been working so
well as it is shown form their products. As Apple Inc. is
increasing also, those other businesses are increasing and
trying to do something interesting for their own good. APPLE
needs to make a drastic change. They dont need to wait for
people buy their products only when they are on sale but they
need to focus more on the customer support and improve the
areas they already have problems.
Based on the performed analysis, Apple Inc. is financially
healthy and strong. The companys growth has been
extraordinary during the past five years. Apple is able to
finance its operations by current liabilities only. Its financial
structure is outstanding with 100% Equity. Apple Inc. does not
have any long-term debt, which makes the company very
financially independent. Revenues and Net Income are
increasing each year. Retained Earnings reached $9.101 billion
in 2007, which is an indicator for the financial power of Apple.
Due to the fact that sales are constantly increasing, and backed
by $9.352 billion (2007) in Cash and equivalents, the company
can afford future acquisitions.

During the years, Apple has substantially improved in its key

measures of profitability. In terms of ROA, ROE, and profit
margins, Apple strengthened financially and now has better
ratios than its competitors and the overall computer hardware
industry.
Based on the facts presented above, it may be concluded that
Apple Inc. is performing better than the industry average,
including Dell, and HP. This dramatic success in performance is
primarily due to the increase in sales from iPod product line,
and most recently from iPhone sales.
(O'grady, 2009)

I feel that Apple must focus on several key aspects to continue

to grow and succeed. They must continue a stable commitment
to licensing, push for economies of scope between media and
computers, and become a learning organization.
Although it should continue, Apple may want to consider other
forms of strategic alliances. An equity strategic alliance may
offer Apple the opportunity to obtain additional competencies.
An effective way for a company like Apple to accomplish this
would be in the form of a joint venture.
Apple should continue pushing the new line of media-centric
products. Meanwhile, Apple should not lose focus on its
computers. Macintosh computers were 59% of Apples sales in
2012. (Burrows)This very innovative company exploits its
second-mover position. In the future, they will need to continue

innovating

to

expand

the

boundaries

of

both

media

and computers.
Apple apparently made a commitment to licensing. Although it
should continue, Apple may want to consider other forms of
strategic alliances. An equity strategic alliance may offer Apple
the opportunity to obtain additional competencies. An effective
way for a company like Apple to accomplish this would be in
the form of a joint venture. Apple should continue push for
economies of scope between media and computers, and
become a learning organization, pushing the new line of mediacentric products.

This very innovative company exploits its

second-mover position. In the future, they will need to continue

innovating to expand the boundaries of both media and
computers. This will allow the company to withstand a
departure by Jobs. Based on the actions of the organization, we
feel that the mid-term performance of Apple will be strong. This
period allows Apple time to overcome their challenges if they
move swiftly. For this reason, we feel that they will continue to
succeed and will continue to outperform their peers.

Annexure
Annexure I Cash Flow Statement

Annexure II Balance Sheet

Annexure III Income Statement

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Word Count
Abstract 201 Words
Report 3800 Words (Approximate)