SWOT Analysis of Apple 2018
Apple is an innovative technology brand that enjoys very high level of popularity globally. It is a major player in the laptop as well as smartphone industry. While the laptop industry saw a slowdown in the recent years, the smartphone industry has kept growing faster. The newest release from Apple, iPhone X has also been highly popular and Apple is seeing higher sales and growth. The release of Macbook Pro has also brought laptop sales back on track. Even if it was not able to touch the level of laptop sales, it enjoyed once, the brand has been able to control some of the fall. However, HP and Dell are still ahead of Apple in terms of market share. Apple has seen several strategic changes happening since the departure of Steve Jobs. Under the leadership of Tim Cook, its performance has risen sharply in the global market. Apple is already known for a great marketing strategy and it is also a source of competitive advantage for the brand. Another is its its unique technological capability. Sales of the brand have risen fast from 170 Billion dollars 2013 to 229 Billion dollars in 2017. Headquartered in Cupertino CA, the brand currently employs 123000 full time employees. This is a SWOT analysis highlighting the strengths, weaknesses, opportunities and threat before Apple in 2018.
Brand image and equity:
Any large brand’s most critical strength is its image and equity and in terms of equity, Apple ranks somewhere at the top. It is known as a reliable and smart brand that consumers trust and love. The reason is its focus on innovation and great consumer experience. Someone has rightly said that Apple does not make products but exclusive experiences. Its consumer orientation is a factor that is never going to change about Apple because it has always remained at the brand’s core. Being a customer centric organization, it has always brought products that customers can fall in love with. This is also a reason behind the high level trust and popularity Apple enjoys.
Apple products are popular in a very large part of the world and are well known in most corners of the globe. The brand notes in its annual report that its “reportable segments include the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas include North and South America and Europe includes European countries, as well as India, the Middle East and Africa”. Greater China includes China, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments. Apple manages its business segments on a geographical basis and each one separately. This is done in order to maintain a better alignment between customer demand and supply and to cater to the varying market dynamics and demand patterns in each of the reportable segments.
Apple features at the top of the list of Forbes’ most valuable brands in the world. Its 2017 revenue reached 229 Billion dollars and it reached the highest in 2015 at 233 Billion dollars. Its market capitalisation is at 940 Billion dollars roughly. Growth in the sales of iPhones and Macs has resulted in fast growth of the brand.
High profit margins:
Another critical strength of Apple is the high profit margins on its products. On several of its products the profit margins can be higher than 60%. It achieved the sales of 216 million iPhones in 2017. Time Money noted in an article that an Apple iPhone that is sold for $649 dollars is produced for a cost of only $225. It shows that the MRP of an Apple product can be thrice its production costs. So, the conclusion is that if a brand enjoys such high margins then it is bound to enjoy very high profits on sales of its products. If Apple is a rich brand then apart from the high sales of Apple products, its high profit margins have also played a critical role in it.
Another major strength the Apple brand is the high level customer loyalty that the brand enjoys. The number of fans and customers that Apple has worldwide is very high. There is always a very high level of excitement and frenzy around every new released Apple products because each one of its products is a celebrity in its class. Moreover, most of its consumers are loyal consumers that buy more than one product by Apple like smartphone apart from laptop. However, such a high level of customer loyalty cannot be achieved without investing in customer engagement. It has engaged its customers very well and keeps releasing new products to keep them engaged. The unique and enriching experience that Apple provides is also a reason that Apple has kept growing popular around the world.
Focus on innovation:
Apple is a distinct brand that has set itself apart from the huge crowd of brands in the world. Its products can be easily distinguished from others and apart from aesthetic beauty they are know for their distinctly different technology. Since its inception Apple has remained synonymous with technological innovation. It is like a trend at Apple that it has always focused on bringing the best to the market. From iTunes to iPods and iPads as well as Macs what sets these products apart from the others is the level of technological innovation. Its produces are known to provide a seamless experience ad it is made possible through huge investment in research and development. Its 2017 expenditure on R&D equalled 11.6 Billion dollars and in 2016 it was a ten billion dollars which shows that its investment in R&D is rising fast every year. However, this is essential in this era of high competition. The brand has continued to invest in technological innovation to maintain its popularity globally and to remain competitive.
While Apple’s premium image and pricing strategy is an important strength, on the other hand it is also a weakness. Apple’s premium image is related to the enriching experience it provides but it also leads to higher pressure related to innovation in product design and quality. Customers always wish the brand to surpass its own standards and any minor deficiency leads to very high frustration among its customers and fans. High cost of products also means fall in market share. It leads to difficulties when the economic activity is low.
Limited product portfolio:
Apple has limited portfolio when compared to most of its competitors. It has an ecosystem of intercompatible products but still the total number of products in its portfolio when compared with several of its competitors is low. The most popular products in Apple’s portfolio include iPhone, iPad and Mac apart from which, the others enjoy low level of sales and popularity.
Low/No compatibility with other brands:
Apple products are not fully compatible with those made by the other brands. It has created an ecosystem of interoperable and intercompatible products. Mac laptops and Operating systems as well as IPhones are designed in a manner that they do not have to depend on software or hardware made by the other brands. Apple brands have limited inter compatibility with the products made by Google or Microsoft and apart from that it is also trying to reduce the presence of these brands in its ecosystems. Since the Facebook data scandal happened, the brand is trying to make its system even foolproof against such leakages and to provide better security to its users against such breaches. This all is done to provide its consumers a securer and seamless experience.
Launch New products:
Apple’s product portfolio is limited as compared to its competitors. So, the brand can introduce new products to increase the size of its product portfolio as well as market share and customer base. A lot is always going on behind the scenes at Apple and talks are always on regarding new products and exploring new possibilities in the realms of technology. There have been talks about the possibility of Apple making an iCar or introducing new autonomous technology. 21st century has seen technological innovation happening at a very fast rate and there are several areas open for investment including sustainability.
Apple has made several acquisitions in its long journey including Beats, Siri and Shazam. The brand can make more similar acquisitions to expand its market and customer base and to strengthen its ecosystem.
Invest in green technology:
Sustainability is not just a fad and the way its importance has grown in this century is well known and in several areas the popularity of sustainable technology has grown from power to transport. Apple can also invest in these areas to find faster growth and to grow its popularity.
Heavy competition in the laptop and smartphone industry:
Competition in the laptop and smartphone industry has kept intensifying and Apple has retained its popularity despite the rising competition. However, despite the popularity it is not at the top in terms of PC sales. The competitive pressure from PC brands like HP, Dell, Asus and Lenovo has kept rising. HP’s market share is largest of all the PC brands followed by Lenovo and Dell. Following the release of Mac Pro, the popularity of Apple laptops has increased again. However, still Apple is not a seeing the kind of sales the other top brands do. Prices can be the main factor affecting its sales. If Apple products were priced somewhat lower, the competitive challenge would have been smaller. However, its premium products have premium price tags and this is why its customer base is limited to the higher end mostly. The price factor therefore limits its customer base. There are some factors like technology, brand image and customer experience that have helped it moderate this treat but yet the level of competition is so intense and each player so aggressive that Apple has to focus extra efforts and resources to sustain its sales.
Economic fluctuations keep happening in the global industry and that can lead to losses for the international brands. Economic activity has returned in US and it has led to rising sales and profits there. However, several of the regions globally are still seeing economic fluctuations and this is affecting sales and profits.
Worldwide the dollar has kept growing stronger and this has led to reduced profits for major international brands including Apple. Volatility in the currency exchange rates can also affect income and revenue worldwide and can impact brands’ profitability.
Legal and regulatory pressures:
The legal and regulatory pressures in the technology industry have also kept rising in this century. From labor to product safety and data, in all these areas, there are several laws which can vary from region to region. Compliance costs are adding to the operational costs of brands and causing pressures and losses. Apple is also feeling the rising pressure of compliance. The US market has mostly been known to be more pen than other markets globally. However, even in US the large technology brands are feeling the pinch of legal and regulatory pressures. It does not just limit their ability to compete but to expand internationally as well.
Apple has seen fast growth during the recent years owing to rising sales of smartphones and Macbooks. The brand is leading the Forbes list of most powerful brands. However, to find faster growth Apple can release new products as well as invest in new technology areas. Its newest release iPhone X has seen very high level of popularity and rising sales and also driving profits of the brand higher. However, a stronger dollar and tight regulatory framework is creating pressures on the business. Apple is still a market leading brand and can find faster growth through acquisitions and investment in green technology. Its focus on technological innovation is an important source of competitive advantage for the brand and will continue to provide it with growth and success.
Apple Annual Report 2017