SWOT Analysis

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SWOT Analysis
Apple Company intends, produces cell phones, personal
computers, music players and related services, networking solutions,
peripherals and software. The company’s market position can be measured
by its strong operating performance, which has also increased the confidence
of investors. On the other hand, company’s margins can be affected by
extreme competition

Strengths
1.

Customer loyalty combined with expanding closed
ecosystem.
While at first Apple’s 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 Apple’s closed ecosystem, which, in turn, is supported by

customer loyalty. So the combination of Apple’s expanding closed ecosystem
and customers’ loyalty increases firm’s competitive advantage.

2.

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. Company’s 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.

3.

Strong financial performance ($10,000,000,000 cash,
gross profit margin 43.9% and no debt).
Apple’s 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.

4.

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.

5.

Retail stores.
Apple’s retail stores ensure high quality customer experience;
provide direct contact with knowledgeable staff and increases brand
awareness. Besides, Apple’s stores are one of the most profitable in terms of
sales/ft2.

6.

Strong marketing and advertising teams.
Marketing is one of the strongest functional areas Apple has. It
can sell pricier products, build superior stores (they are more or less built to
achieve marketing goals) and advertise their products in a compelling
manner.

Weaknesses
1.

High price
Some critics argue that the price is not justified. When there’s
such a fierce competition, Apple products price becomes a weakness
because consumers can easily opt for similar quality but lower price
products.

2.

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).

3.

Decreasing market share.
The less market share Apple has, the less it can influence its
potential customers and persuades them to jump into using Apple’s closed
ecosystem products.

4.

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.

5.

Further changes in management.
Apple has lost Steve Jobs in 2012 and Tim Cook became the
new CEO. Scott Forstall and John Browett (chief of retail) left the company
too and this will have an impact on company’s management, which, as many
think, will be negative.

6.

Defects of new products.
This is not current Apple weakness but one that jumps out time
to time. Some of Apple’s iPod and iPhone releases had clear faults and thus
disturbed sales of the products and firm’s reputation of superior product
performance.

7.

Long-term gross margin decline.
Current Apple’s gross margin is one of the highest in the tech
industry but analysts fear that due to increasing component prices and
competition current margins will not be sustained. Hence, glooming firm’s
future financial performance.

Opportunities
1.

Emergence of the new provider of application
processors.
Samsung, the main Apple’s competitor, is also the only
provider of application processors for Apple’s 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 it’s just a matter of time, when Apple will seize upon the
opportunity of being less depended on its direct competitors.

2.

Growth of tablet and smartphone markets.
Growth of tablet and smartphone markets is a good
opportunity to expand firm’s share in these markets.

3.

Obtaining patents through acquisitions.
Apple lacks of some patents to sustain its growth and the best
way to acquire those patents is to acquire the firms holding them. In
addition, Apple could develop new skills and competencies.

4.

Damages from patent infringements.
Apple patents are often infringed by its competitors. Thus,
collecting the damages from the companies that do so is a viable opportunity
to not only increase the cash reserves but to damage the competitor’s
reputation and sales as well.

5.

Strong growth of mobile advertising market.

Apple has developed iAd advertising platform, which allows
advertising on Apple iPhone, iPad and iPod touch. The growth of mobile
advertising market is an opportunity which could be further seized upon.

6.

Increasing demand for cloud based services.
Apple could expand its range of ICloud services and software as
the demand for cloud-based services is expanding.

Threats
1. 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 hasn’t unveiled any plans for the new products
(except iTV) and may lack new introductions to keep up with competition.

2.2013 tax increases.
Tax increases in USA in 2013 will negatively affect Apple.

3. Rising pay levels for Foxconn workers.
Pay levels for Foxconn’s workers already rose 3 times from
2010 to 2012. Foxconn is the main manufacturer of Apple products and the
rising pay level for Foxconn’s workers will likely raise the prices for Apple
products.

4. Breached IP rights.
The companies that breach Apple patents might not be
discovered soon and may benefit from it, while weakening Apple at the same
time.

5. 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.

6. Strong dollar.
Apple earned more than half of its revenues from outside US.
Dollar appreciation against other currencies reduces potential profits from
those countries.

7. Android OS growth.
Android OS is the main competitor for iOS in mobile device
market. The domination of Android decreases iOS power over influencing
consumers to join Apple.

8. Competitors’ moves in online music market.
Apple faces threat from online music stores, such as Amazon,
Wal-Mart and online music subscription companies, such as Spotify.

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