Apple Company’s Strengths and Weaknesses

Apple SWOT Analysis

Strengths
  • Spent 1.8 billion dollars on intensive advertising for their products in 2015 lower than extravagant spending by Samsung, which was higher by 1.8%
  • Balances expenses vs. incomes diligently, spending only 1% of the income on marketing.
  • Independent surveys show that the company is a globally valued brand at 170.3 billion, with net earnings of 35.9 billion.
  • Innovative iPhone design and messaging applications like Door Dash and Donald Duck, unlike customary emojis on Android phones.
Weaknesses
  • High retail prices for their 128GB, retailing at 699 Euros or 849 Dollars, unlike Samsung’s 128GB micro-SD card phone, which retails for 190 Euros or 280 Dollars.
  • Over relies on the iPhone for 70% or two-thirds of the total sales, which affect overall company performance.
  • Apple iOS 9.3 software was faulty and of compromised quality. This has affected customer loyalty and Apple product reliability.
Opportunities
  • High demand for smartphones by the middle class in China will increase global sales by 2017.
  • The strategic alliance with Did Chuxing Technology Company will offer a platform to the Chinese market and increase revenues by 2017.
Threats
  • Competition from Samsung and Huawei has reduced sales by 7.1 million in the first quarter of 2016,from 47.5 million to 40.4 million
  • Patent limitation in China and injunction Shenzhen Baili limiting the sale of iPhones. This is likely to limit projected market expansion by 2017 in the region.

Internal Strengths

The Apple Company has capable of marketing and advertising abilities. Apple has invested highly in advertising their products with an estimated budget of 1.8 billion US dollars in 2015, compared to 933 million US dollars in 2011 (Rasheed, Nawaz, Abbas, 2014). While this budget is not as high as its competitors, its catch is in its effective use. Typically, the company’s marketing expenses started to escalate in 2010 when it launched the iPad and iPhone in the market.

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However, the company spends very diligently in advertising, making sure that their expense does not exceed 1% of the total sales they make (Rasheed et al., 2014). For instance, in 2015, Apple Company spent 0.77% of its total sales income on marketing, as compared to 1.86% spent by Samsung in marketing. This implies that the company is keen on maximizing returns for money, ensuring an excellent expense vs. revenue balance.

Apple Company enjoys a high consumer brand loyalty evident from its valuation growth in 2014. According to research by Interbrand and Forbes, Apple is the world’s valuable brand at 145.3 billion and 170.3 billion (Rasheed et al., 2014). It is by its customers’ loyalty that Apple is the most dominant brand in the world.

The company boasts of a strong financial performance making about 182.7 billion US dollars and net earnings of 39.5 billion. This position signifies a 7% increase in the company’s earnings compared to the previous year, with the United States contributing 38% of the sales and the global market responsible for the remaining 62% (Rasheed et al., 2014). The financial capacity of the company allows it to engage in research and development, meaning that this is the main promoter of its innovativeness and superiority in the market, in matters design (Khan, Alam & Alam, 2015).

Amidst high competition, Apple has managed to remain relevant owing to its excellent innovation and design capabilities. Apple is known for its innovation skill following the introduction of the IPhone (JinJin, 2013). After this, the company has endeavored to introduce a superior iPhone product every consecutive year. Each new iPhone carries a superior design with significant hardware and software improvements. Presently, the company has introduced a new operating system in messages, including a host of emojis like the Donald Duck laughing sticker and Door Dash, which enables users to order lunch without deviating from chat (Stern, 2016).

Also, Apple seeks to break this cycle and only make subtle changes to its IPhone models. Among the key design changes that the company seeks to implement is the removal of the headset plug, make the phones water-resistant, make the lightning connector a double duty application for both charging and headphone use, among others (Wakabayashi, 2015).

Internal Weaknesses

Extravagant pricing of the company products limits its market share. Most of the company’s products cost relatively higher as compared to those of competitors. For instance, the 16GB iPhone 6 retails for 649 dollars or 536 Euros; its 64GB handset retails at 619 Euros or 749 Dollars and 699 Euros or 849 Dollars for their 128GB. On the other hand, Samsung, also a direct competitor to the company, charges 510 Euros or 670 US Dollars for the 128GB micro-SD card phone, which is far cheaper than Apple’s phone of the same capacity by 190 Euros or 280 Dollars.

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A key weakness of the company is its over-reliance on one product, the iPhone. Even though the company has a range of other products like the Ipad, its main source of income is generated by iPhone sales. In fact, this product constitutes about two-thirds of the company’s total sales (Wakayabashi, 2015). For instance, about 70% of the company’s incomes arise from the sale of iPhone as of 2007. This has a repercussion on the company’s total sales meaning that when the iPhone sales dwindle, the total revenues also fall. For example, the company’s total fall in quarterly profits is attributed to the IPhone’s first major slump since its introduction in 2007. Even though the smaller IPhone SE that was launched in March has had strong sales, this cannot be compared to the sales of the large screen iPhones of the same models.

Faulty software issues are forcing consumers to reconsider Apple products. The apple company has been so keen on releasing new software back to back that it has compromised on the quality of these applications. One such application is the Apple iOS 9.3 software (Gibbs, 2016). Ideally, most iPads and iPhone users have since been affected by numerous bugs causing their devices to lock or crash following the launch of this new software. For most users, they were required to enter their Apple IDs which most people had since forgotten. In effect, most devices became unstable and inaccessible Gibbs (2016). Such inconveniences arising from the company’s poor quality checks and test runs only mean that most of their loyal customers are slowly looking for other reliable alternatives.

External Opportunities

Market expansion is a key opportunity for the organization, and a means to increase the company’s sales. There is presently a high demand for iPhones in the Chinese market, more than in the domestic market. In fact, there is a surge of a rise in middle-class people that are fascinated with Apple products. In effect, the region is likely to become one of the biggest market platforms for Apple products like the iPhone, IPads, and Macs. Being that Apple is a global company, most of its future growth is likely to arise from the international markets that have barely been touched at the moment.

Another opportunity is the imminent merger with Did Chuxing Technology Company. Apple has declared that it will invest an approximate of a billion dollars in the Chinese company. This merger offers an opportunity to reach out to the Chinese target market, as the company has probably noticed that doing this alone will be difficult following the numerous legal suits it faces in China. Further, the company’s CEO Tim Cooks is tirelessly visiting the country to ensure goodwill with the government and other key stakeholders. This is to ensure that the company’s desire to tap into the Chinese market will be well received.

The Apple Company is at the center of competitive pressures. In particular, the company is facing a growing threat from companies like Samsung, Nokia and Google as they offer reprisal services and products. For instance, Product releases from Nokia are meant to curb Apple’s smartphone domination. Further, Samsung is offering quite similar products as that of Apple at relatively low prices, with a bid to capture a big market share. Moreover, Huawei, Apple’s Chinese rival is continually gaining ground in the smartphone market. The company is seeking to increase its supply of smartphones to 140 million a 30% increase in the smartphone shipment that was done in 2015.

This adds to the competitive pressures that the IPhone is facing as the company sees no need to challenge low price makers of smartphones. In the long run, such brands like Huawei that are successful with fairly priced phones are likely to challenge Apple with premium models. Overall, this is hurting the company’s sales, evidenced by the decline in revenues from 47.5 million in 2015 for Jan-march, to 40.4 million in 2016 for the same period (Wakayabashi, 2015).

Second is the imminent patent limitation in China. Chinese companies are taking advantage of their now maturing patent system seeking to lay claims to patents, even though they are not the first to develop a wide range of technologies. In effect, a small start-up company in China, Shenzhen Baili sought an injunction against Apple seeking to prohibit its sales of iPhone 6 and IPhone 6 plus in Beijing, owing to a patent that seeks to cover smartphone designs (Dou & Wakabayashi, 2016b). The injunction was successful and to Apple’s detriment. Such are the challenges that hinder the global expansion of Western companies.

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In conclusion, Apple’s strengths and weaknesses emanate from their internal excellences and misdoings. The company’s proper financial management and innovation are the key resources that foster marketing abilities, research and design, as well as innovation. Further, their ability to innovate and design quality products have led to an expansive market base as well as customer loyalty, making Apple the number one global brand. On the other hand, these are the same factors that also contribute to the company’s weaknesses.

For instance, faulty software is as a result of the constant innovation. Other issues are like high prices for their products and over-reliance on the company’s main brand, the iPhone. Further, the operations of the company are hindered by threats like competition, patent issues in the global markets and so on. Nonetheless, there are key opportunities for emerging global markets and mergers that the company can tap into to neutralize the apparent threats.

References

Dou, E., & Wakabayashi, D. (2016a). Apple unlikely to make big changes for next iPhone. The Wall Street Journal. Web.

Dou, E., & Wakabayashi, D. (2016b). Apple’s challenges in china underlined by patent dispute. The Wall Street Journal. Web.

Gibbs, S. (2016). Apple iOS 9.3: activation lock and web link crashes plague users. The Guardian. Web.

Jinjin, T. A. N. (2013). Strategic analysis of Apple Computer Inc. & recommendations for the future direction. Management Science and Engineering, 7(2), 94.

Khan, U. A., Alam, M. N., & Alam, S. (2015). A critical analysis of internal and external environment of Apple Inc. International Journal of Economics, Commerce and Management, 3(6), 955-961.

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Rasheed, R., Nawaz, R., & Abbas, Y. (2014). Samsung Electronics and Apple, Inc.: A Study in Contrast in competitive analysis in 21st century. Industrial Engineering Letters, 4(12).1-8.

Wakabayashi, D. (2015). Apple’s Market Cap Loses $60 Billion After iPhone Sales Disappoint. The Wall Street Journal. Web.

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