- CONTENTS
- Apple Inc an introduction
- Apple Inc SWOT Analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
- A few last words
Apple Inc: An Introduction
With a market capitalization of around $2.5 Trillion, Apple (NASDAQ: AAPL) is the largest company in the world.
Known as one of the most innovative technology brands, Apple has experienced sharp growth over the past several years driven by the success of the iPhone line up and a growing range of services.
Founded by Steve Jobs and Steve Wojniak, Apple is the largest tech company in the world.
2020 was an excellent year for the company in terms of revenue growth.
However, in 2021, Apple is again set to break all records as the company has experienced a strong rise in net revenues during the first three quarters driven mainly by the success of its iPhone 12 range and growth in net sales of services, wearables and Mac.
iPhone’s popularity continues to increase, which is visible in the growth of the number of active iPhone devices worldwide. The number of active Apple devices in 2021 has also surged to past 1.65 billion.
Overall, Apple continues to rule the tech industry and based on its performance in the first three quarters of 2021, it has taken a big jump this year.
Apple Inc SWOT Analysis 2021
In this swot analysis, we will take a look at the leading strengths of Apple that have helped it sustain its leadership position in the tech industry, apart from the weaknesses, the company needs to overcome and the growth opportunities it can exploit for faster growth.
STRENGTHS:
- Popular tech brand:
Apple is the largest tech brand globally based on market capitalization. It is also among the most popular tech brands worldwide. The company has a large base of fiercely loyal consumers globally. The tech leader’s popularity has continued to grow worldwide driven by a heavy focus on technological innovation, product quality and customer experience.
- Strong brand equity:
Brand equity is a critical factor that defines the success of any business. As a leading tech brand and the largest company globally, Apple enjoys very strong brand equity.
Companies that want to maximize their brand equity focus on customer experience at every step across all the customer touchpoints. Apart from customer experience, Apple’s focus has also remained on product quality, innovation and maintaining a strong brand image.
Over the previous three or four years, Apple has proved that shaking its market position is next to impossible for the rivals.
According to reports, while the rival smartphone brands including Samsung have experienced a decline in customer loyalty, Apple is enjoying higher customer loyalty than ever.
According to iMore, Apple is enjoying 92% brand loyalty in 2021 compared to 90.5% in 2019. One of its biggest rivals Samsung is enjoying only 74% loyalty (having dropped from 85.7% in 2019).
The strong brand loyalty is a result of the company’s consistent focus on customer experience and user privacy (which is the strongest reason for users to switch to iPhone) and the resulting growth in brand equity.
- Growing net revenues:
After having declined slightly in 2019, Apple’s net revenues have continued to surge again year on year. Its net revenues in 2020 rose to $274.5 billion from $260.2 billion in 2019.
The company is enjoying even stronger revenue growth in 2021 compared to the previous year. Its net income has also surged to $57.4 billion in 2020 compared to $55.26 billion in 2019.
However, in 2021, Apple’s net revenues for the first three quarters are already higher than the entire fiscal 2020. It has generated $282.5 billion in net revenues during the first three quarters of 2021 compared to $209.8 billion during the same period previous fiscal (YoY change of 34.5%).
Its revenues in the third quarter of the latest fiscal grew by 36% compared to the same period in the previous year. The company has enjoyed stronger sales across all the product categories and especially iPhones followed by services, wearables and Mac.
- Strong focus on innovation:
Apple has maintained a strong reputation as a highly innovative brand.
The company has maintained a strong focus on innovation since its inception, which has remained one of the primary drivers of its strong growth rate and market position.
While the company is not the biggest R&D spender in the entire industry (that credit goes to Amazon), it has always ensured that each R&D dollar it spends yields the best results.
The success of R&D efforts also depends on the company’s knowhow and people. Innovation is a central pillar of Apple’s organizational culture.
However, Apple has also continued to increase its R&D development expenses each year. Its R&D expenses during the first three quarters of 2021 remained $16.14 billion compared to $13.8 billion during the same period in the previous fiscal.
If the company is enjoying stronger growth in net sales of iPhones, services, Mac and wearables in 2021, the reason is its continued focus on industry leading innovation.
- Large base of installed active devices:
The company’s base of installed active devices has continued to grow each year. As the company’s consumer base globally continues to grow stronger, it is reflecting in the brand’s balance sheet.
According to a January article in Reuters, the company has a base of 1.65 billion active installed devices, compared to 1.5 billion in 2020. Its base of active iPhone devices also grew to 1 billion in 2021, compared to 900 million in 2019.
This has led to strong growth in revenues since with a growing customer base, the sales of services have also been boosted.
- Success of iphone 12 range:
Apple’s iPhone 12 range has seen excellent success, matched by only one or two previous models of the smartphone.
As in the case of iPhone 12, previously Apple had seen this kind of success only with iPhone 6.
Within 7 months of its introduction, the iPhone 12 model had sold more than 100 million units, according to Counterpoint Research. Its 5G capability and the fully OLED screens particularly attracted the customers worldwide.
- Financially strong brand:
Apple is a financially strong brand. Its cash position is an important strength for the brand.
According to a 2020 article by Investopedia, the company held cash and cash equivalents of $50.5 billion, apart from $44.08 billion in marketable securities.
In this way, the company has a strong cash position. It also had several billions of dollars in the form of property, plants and equipment. The company’s net sales and revenues have also jumped sharply during the latest fiscal.
- Increasing sales of services:
In recent years, Apple’s net revenues from the sales of services has also grown a lot.
The company’s revenues from services in 2021 during the first three quarters was $50.15 billion compared to $39.2 billion in 2019. Apple’s services category includes the App store, Apple Music, AppleCare, Apple Pay, and several more.
As the number of Apple devices worldwide has continued to grow, the company’s services segment is also enjoying incredible growth in revenues.
- Strong growth in China sales:
Apple’s position in China has continued to strengthen, driven by the growing popularity of the brand and its products.
The company has experienced around 57% net increase in its sales in China during the holiday season.
The demand has sharply surged in China with the release of the iPhone 12 model.
Weaknesses:
- Highly dependent on iPhone sales:
Apple’s core product is the iPhone. However, it is also the largest source of the company’s revenue.
It is experiencing a sharp rise in the demand for iPhones globally apart from the net revenues from iPhone sales.
While the company’s share of revenues from services has increased over time, the company mainly depends on the iPhone for a large part of its net revenues.
During the first three quarters of 2021, the company generated $153.1 billion in net revenues from the sales of iPhones. Its net revenues during the same period remained $282.5 billion.
iPhones accounted for around 54% of the company’s net sales during the period.
Apple will need to focus on growing its sales of services, wearables and other products to reduce its dependence on iPhones.
- Allegations of staff harassment:-
Recently, allegations related to harassment of female staff inside the organization surfaced in the media.
A female senior program manager who was recently fired by the company alleged that Apple had retaliated when she complained against things like sexual harassment and pay gap.
The senior program manager Ashley Gjovik had been tweeting about harassment and intimidation through her twitter account. Such events taint Apple’s image as a good employer and cast a doubt on its inclusion and diversity policy.
- Premium pricing and increasing prices of iPhone and other hardware:
The premium pricing strategy employed by Apple is also a barrier to growth in various ways.
Premium prices mean that only affluent customers can buy the Apple products.
This limits the customer base of the brand. Apart from that the prices of iPhones, Macs, wearables and other Apple products have continued to grow.
The prices of various iPhone 12 models are much higher compared to the previous models.
- Charges of monopolistic behavior:
Apple has been charged with monopolistic behavior several times. In the previous year, Facebook CEO Mark Zuckerberg spoke about Apple’s monopolistic behavior.
According to him, its app store blocks innovation and competition and also allows the company to charge monopolistic rents. Apple is already being scrutinized for monopolistic behavior in the United States and some other regions.
The app store charges a 30% fee from app developers. Recently, a judge gave a mixed decision in that regard in Apple’s fight with Epic games, the maker of Fortnite.
The court allowed game makers to route customers to alternative payment channels. Following it, Apple also experienced a drop of $84 billion in its market value.
Opportunities:
- Expand physical distribution network:
Apple employs a mixed distribution channel for sales and services across the globe. It utilizes both physical and online sales and services channels in various market regions.
However, its physical presence is limited to only some markets. Apple has more than 500 stores operating globally. However, more than half of these stores are located inside the United States only.
Apart from the three leading markets including the US, China, and the UK, Apple’s physical distribution network has a limited presence in most other markets.
The company needs to expand its physical distribution network in emerging markets like India.
- AI and other emerging technologies:
Focusing on Artificial Intelligence and the other latest technologies can help the company drive faster growth in terms of sales and revenues.
Apart from helping the company further differentiate its products and services from the rivals, it also helps it provide a superior customer experience.
Apple’s sales growth in recent years can also be attributed to increased focus on the latest technologies. 5G capabilities have remained the primary driver of growth in sales of iPhone 12 models across the United States, China, India and several more markets.
- Self Driving car project:
Apple’s autonomous vehicle project could also help the company tap into new market segments and build superior growth.
While its self-driving car project has been talked about for quite some time, it has caught momentum in the recent period.
According to sources, Apple has asked its head of smartwatches Kevin Lynch to lead its self-driving car project.
The Wall Street Journal had published an article in February 2021, according to which Kia Motors (a subsidiary of Hyundai Motors based in South Korea) had approached potential partners to begin the production of Apple cars in Georgia.
- Emerging economies:
The emerging economies like India are full of opportunities for Apple. In 2020, India, Brazil and mainland China remained the most critical drivers of sales growth for the company.
Expanding its sales and distribution networks in these markets will help the company drive faster sales growth.
The other emerging markets that yielded superior results in 2020 included Mexico, Turkey, Poland, Thailand, Malaysia, Philippines and Vietnam.
- Apple services expanding to additional markets:
Expanding Apple services to more market regions will also drive faster revenue growth for the company apart from strengthening its customer base.
In April 2021, Apple announced that even more customers around the world would be able to enjoy Apple services.
The App Store, Apple Arcade, Apple Music, Apple Podcasts, and iCloud are available in 20 more countries from April 2021, and Apple Music in 52 additional countries.
Oliver Schusser, Apple’s Vice President of Apple Music and International Content, said,
“We’re delighted to bring many of Apple’s most beloved Services to users in more countries than ever before. We hope our customers can discover their new favorite apps, games, music, and podcasts as we continue to celebrate the world’s best creators, artists, and developers.”
- Acquisitions:
Despite the allegations of Monopolistic behavior, Apple continues to cement its position in the global market.
Acquisitions have played an important role in helping the company strengthen its competitive edge and build superior growth momentum.
According to BBC, the company has acquired more than 100 businesses over the past six years.
Over the last decade, its largest acquisition was that of Beats worth over $3 billion. In August 2021, Apple announced that it had acquired Primephonic, the renowned classical music streaming service.
Threats:
- Availability of cheaper substitutes:
Global end user spending on wearable technologies is expected to be around $81.5 billion in 2021, an 18.1% increase from $68 billion in 2020, according to Gartner.
According to Statista, Apple is the leader in wearable devices with more than 28% market share in the first quarter of 2021. Apple’s smartwatch has gained strong popularity.
However, the market is full of several substitutes made by brands like Xiaomi that come at a much cheaper price compared to Apple Watch. The presence of cheaper substitutes affects the sales of Apple’s wearable devices.
- Increasing competition from smartphone brands:
Apple is facing heavier competition from the other leading smartphone brands including Samsung, Huawei and several more Chinese and Korean smartphone brands.
While the company is enjoying stronger brand loyalty in 2021, the level of competition in the smartphone industry has continued to intensify demanding higher focus and spending on research and development as well as marketing.
- Legal and regulatory issues:
There are a large number of legal and regulatory issues currently affecting Apple’s business.
Apart from antitrust issues raised against Apple by the federal government, the company is also engaged in several more legal battles in the US as well as international markets.
Recently, the company has been hit by antitrust charges in India.
The European Union is also investigating antitrust cases against Apple Inc.
According to Mark MacCarthy,
Epic Games’ private antitrust lawsuit that concluded last week revealed the extent of Apple’s power over its own mobile app infrastructure. The company controls the mobile operating system that runs apps on iPhones and iPads and operates the only store where users can obtain apps that work on their Apple devices. The 30% cut Apple takes for apps purchased through its App Store is only one manifestation of its durable control over this mobile app infrastructure.
- Coronavirus impact on supply chain and distribution network:
The Covid-19 pandemic had a devastating effect on supply chains globally. It also affected the production and sales of the iPhone. According to sources, mass production of Apple’s iPhone 12 model was delayed due to the restrictions imposed by the Coronavirus pandemic.
According to a recent report by Reuters, Apple’s production facility in India experienced a decline in production due to the growth in the number of coronavirus cases in India.
Overall, Covid-19 has hurt supply chains globally.
It has driven production costs higher for brands like Apple and also forced them to delay production in various regions of the world.
A few last words:
Apple is the largest tech company in the world.
Its strong competitive position is driven by its intense focus on technological innovation.
The company has experienced robust growth in its market capitalization over the past few years.
It has also experienced solid growth in its financial position driven by growing sales of iPhones and services.
Apple’s popularity and customer loyalty have continued to surge over the past year.
Even during the pandemic, the company experienced solid improvement in its performance.
The smartphone industry is marked by intense competition.
There are other challenges before Apple too including legal challenges.
However, its consistent focus on innovation has helped the brand drive solid results and continuously grow its customer base.