APPLE CASE STUDY ANALYSIS

TEAM:
KALYAN GUGGILAM
SWETHA BOLUSANI
ABHISHEK
SRIHARI
MOHIT
ROHIT
PAWAN SHARMA
PRODUCT WISE REVENUE FOR THE YEAR 2018

REVENUE(265BN$)

Other
I-Phone- I Pad- Mac – Services-
products-
(166.7bn$) (18.8 bn$) (25.5 bn$) (37.2bn$)
(17.4 bn$)
KEY OPERATING RATIOS
Ratio 2012 2013 2014 2015 2016 2017 2018
Current Ratio 1.50 1.68 1.08 1.11 1.35 1.28 1.12
Total Asset Turnover 0.89 0.83 0.79 0.81 0.67 0.61 0.73
Debt/Equity 0.13 0.31 0.54 0.68 0.86 1.06
Gross Profit Margin 43.87% 37.62% 38.59% 40.05% 39.07% 38.47% 38.34%
Net Profit Margin 26.67% 21.67% 21.61% 22.84% 21.18% 21.09% 22.41%
ROA (NI/TA) 23.70% 17.89% 17.04% 18.39% 14.20% 12.88% 16.27%
ROE (NI/TE) 35.30% 29.98% 35.42% 44.74% 35.62% 36.07% 55.56%
ROI 35.30% 26.35% 28.11% 30.92% 22.43% 20.91% 29.63%
Price/Earnings Ratio 13.34 10.88 14.48 11.24 13.13 16.38 18.87

• GP Margin ratio, Net Margin ratio, ROA and ROI is being reduced over years
• Company is not able to use its and Assets and Equity efficiently
IPHONES THRIVING IN THE TWO MOST IMPORTANT
MARKETS - US AND CHINA
IPHONE DRIVING STRONG REVENUE GROWTH
• iPhone sales are strong in developed markets as the high
price premium limited its reach to consumers in lower-
income groups in emerging markets.
• Telcos are willing to offer subsidies on iPhones to their post-
paid subscribers as iPhone users tend to spend more than
Android users on data usage and paying for services.
• The iPhone range in 2018 marked the first time that Apple
launched three models together - iPhone XR being the
affordable model and iPhone XS and iPhone XS Max being
pitched as flagship models.
• Despite its aggressive launch, sales of iPhones failed to
ignite the highly saturated flagship market. iPhones remained
flat indicating that Apple failed to lure new users.
• While iPhone sales were lacklustre in 2018, iPhone remained
the company’s key revenue contributor. Revenues from
iPhone grew an impressive 18% in FY2018 over the previous
year.
• As Apple’s installed based continues to grow, its users will
consume more digital content and services, using Apple Pay
to pay for products and services and buying extended
warranties, and subscribe to streaming services such as
Apple Music or Apple TV.
APPLE HOLDING STEADY DESPITE THE RISE OF HUAWEI
IPAD SALES CANNIBALIZED BY IPHONE AND MAC
• Sales of iPads and tablets, in general, are badly affected by the
growing popularity of large screen size smartphones such as
Apple’s own iPhone XR and iPhone XS Max.

• Apple tried to adopt the same approach as iPhone by adding more

features and larger screen (iPad Pro) with the hope that its
revenues from iPad sales will increase despite declining volume
sales.

• Smartphones are typically bundled with mobile data plans which

mask the real cost of ownership. By comparison, consumers have
to fork out more money (upfront) when purchasing an iPad.

• The reason why iPads (and tablets) were popular in the past was
because tablets were the cheapest computing device. Consumers
were reluctant to pay for iPad Pro, which cost almost as much as
MacBook Air.

• The other factor hindering iPad sales is that Apple has been rolling
out OS updates on older iPads and these OS updates are keeping
the older iPads fresh.

• The build quality of iPad also meant that older iPads were still
running well, giving existing iPad owners another reason not to
buy a newer (and more expensive) iPad.
MAC IS STILL HOLDING ON STRONG
• The new MacBook Air was launched in October 2018, a little
too late to help arrest Apple’s declining Mac sales.

• The MacBook Air occupies the lowest spectrum of MacBook in

terms of pricing and should boost sales of Mac for its new
financial year (FY2019).

• Sales of Mac dropped 5% to 18 million units in FY2018 but

Apple managed to maintain its Mac revenues to USD25.4
billion, only a slight decline of 1% over the previous year.
Mac Revenues FY2015-2018
• Apple had been refreshing its product line-up to ensure that
30
they are equipped with the latest processors and higher
25
resolution displays.
USD billion

20

15 • Apple does not need to spend too much development effort on

10 Mac as the market is mature and there is very little competition
5 (Mac vs PC/windows).
0
FY2015 FY2016 FY2017 FY2018 • Mac users are extremely loyal to the ecosystem and the brand
Source: Apple
(Mac) and do not switch to Windows. Apple can continue to milk
the Mac market and also enjoy additional revenues from
complementary products and services such as cables,
headphones and Apple Care.
APPLE WATCH AND OTHER PRODUCTS VITAL TO APPLE’S ECOSYSTEM

• Apple Watch dominated smart wearables despite their

relatively high prices. Buyers of Apple Watch are
iPhone users as the smart wearable does not support
Android.

• Users can use Apple Pay to pay for their purchases

which is an added advantage over other smart
wearables from other manufacturers.

• Apple Watch, Apple TV and Apple Homepod are not

massive revenue generators on their own. These
products are a vital cog to Apple’s ecosystem and help
drive sales of Apple’s services.
PROBLEMS AND SOLUTIONS

Decrease in STOP IPOD MAC

IPOD and IPAD books/Desktops Make the more
product Sales completely accessible
struggle

Competition in Product and Can’t Sync

smart phone products with Allow
industry price variation compatibility
other brands

Launch streaming
Competition in service like No Presence Get into
music store Netflix in Services services
SUGGESTIONS

 Macintosh should be freely available and Apple should start licensing model
 Crate new company and launch Budget mobiles
 Penetrate developing countries through JV or Franchise model
 IPOD has to be stopped with immediate effect
 Launch complimentary products like Television segment, Music system etc.,
 Explore Apple search engine.
 Made Apply pay compatible which can be used in any phone and exploit opportunity across the globe

 Operation expense %age is increasing which needs to be relooked

 Go for Franchise model and reduce investment on Fixed assets as it is not given good return.
OTHER RECOMMENDATIONS

Apple should start Explore Apple search

01 licensing model for
Mac software
02 engine along with
Apple maps

Make Apply pay

Penetrate developing compatible which can be
03 countries through JV 04 used in any phone and
exploit opportunity across
or Franchise model
the globe

Launch complimentary Operation expense

products like %age is increasing
05 Television segment, 06 which needs to be
Music system etc relooked

Reduce investment on Stop products which

07 Fixed Assets and
explore leasing model
08 doesn’t give enough
rate of return
THANK YOU