Analysis of Apple Inc.s Challenges and Problems essay

Apple Inc. is an American multinational corporation that operates on markets of consumer electronics, software and personal computers. The companys product portfolio includes the best lines of Macintosh computers, iPod, iPhone, and iPad. Apples software includes an operating system Mac OS X, a media browser iTunes, a set of software designed for the multimedia and creativity purposes iLife, a collection of office programs iWork, a professional photography package Aperture, a kit of professional audio and film-making software offering products Final Cut Studio, a collection of music recording tools Logic Studio, the Internet search engine Safari, and a mobile executive system iOS. Apple Inc. is one of the largest and the most valuable technology companies in the world. Despite this fact, Apple Inc. has specific problems and challenges that can significantly affect its annual sales, competitiveness on the market and reliability among the clients.

Get a Price Quote
 
 
 

Apple Inc. Background

The company Apple Computer was founded by Steve Wozniak, Steve Jobs, and Ronald Wayne after their joint successful experience in creating a personal computer. Their first computer was assembled on the basis of the MOS Technology 6502 processor. Having sold several dozens of such computers, young entrepreneurs managed to achieve financing and officially registered the firm on Apr 1, 1976. The company name is Apple and the apple image is used in the logo. According to one of the versions, it was chosen in honor of the apple farm where Steve Jobs had worked previously.

The Altair 8800, which was created by Ed Robers and distributed through catalogs in 1974 1975, is considered the first assembled computer. At the same time, Altair could not be called a personal computer because it did not give the opportunity to solve more or less serious problems. After that, Steve Jobs and Ron Wayne designed and introduced to the society Apple I in 1976. However, the first mass personal computer produced in millions of copies was Apple II, which was an improved version of the first computer. After that, the company was producing various models from the 8 series, later 8/16 series, of Apple II computers from 1977 to 1993. In the late 1970s and early 1980s, Apple II systems were the worlds most widely used personal computers. More than five million of Apple II were sold worldwide. It is believed that it was Apple II that started the era of personal computers.

In 1980, the company failed because of the Apple III project but held the largest public offering at the same time. In 1981, Apple Computer experienced sales problems of Apple III when Steve Wozniak left the company after the plane crash for a while, and Jobs had to lay off forty employees. Later, he invited John Scully as the president of the company, who started to work in 1983. In 1984, Apple Inc. introduced a new 32-bit Macintosh computer in the first time, which later became the company main business. These computers were manufactured twenty years ago based on the Motorola processors and equipped with a proprietary operating system. Apple Inc. is famous for the fact that it introduced a graphical user interface and a computer mouse earlier than other technology companies.

In 1985, the US President Ronald Reagan awarded Jobs and Wozniak with medals for the development of the technical progress. Steve Jobs temporarily left the company the same year. By the end of the 1990s, the company suffered losses, which were amounted to $1,86 million by 1997. After Steve Jobs return in 1997, Apple Computer began to discover new markets related not only to computer hardware.Thus, the company introduced the iPod player in 2001 and the smartphone iPhone in 2007. On January 9, 2007, the official name of the corporation became Apple instead of Apple Computer, which existed for more than thirty years. Apple organized an exhibition MacWorld annually until 2009 including, which represented its new products and updates. In 2010, the company released a PC tablet iPad. The innovations radically improved the companys financial position and brought it a record profit. In early August 2011, Apple became the worlds most expensive company by market capitalization, which was $338.8 billion on August 10, 2011.

In January 2011, Steve Jobs, who by that time had a maligant blastema of the pancreatic gland, was forced to be granted a leave and on August 24, 2011 he left the occupation of Apple Inc.s chairman of the Board. His place was taken by Timothy Cook while Jobs became the chairman of the Board of Directors. Steve Jobs died on October 5, 2011. Arthur Levinson who had had an officer of the top management team since 2000 was elected a new chairman of the companys Board of Directors. After the annoncemnet of Jobs death, Apple Incs stocks dropped down in price by 2.5%.

Read more about Useful Tips for Effective Revision

Accomplishments To-Date

Apple Inc.s products occupy their niche and, therefore, the company does not have a direct competition at price on the market. A low level of debts makes the corporation more maneuverable. The sales beat records after every release of the new iPhone or iPad. For example, Apple Inc. managed to obtain more than $150 billion of profit over 2007 2012. Strong research and development of iTunes Music Store departments is an excellent source of revenue, especially with the introduction of iPod and compatibility with the Windows operating system. Apple Inc. has become the expert in developing of personal software and hardware.

Market Trend & Alanysis

iPhone

Apple Inc. continues recording a slowdown in the revenue growth in recent years. The sales of iPhones accounted more than 63% of the profit for the fiscal 2016 year while it was 66% of Apple Inc.s total profit in 2015 years. It supports the fact that this product is the enterprises main feature to obtain revenue. Thus, it was sold 211 million iPhones in 2016, which is 8% below the record sales of the 2015 year when it was sold 231 million units. The revenue from iPhone sales declined in 12% to $136,700 million in 2016 while it was $155,041 million in 2015.

The difference of four percent between the two figures is explained by the release of the iPhone SE in 2016, which has become a simplified and cheaper version of iPhone 7. The new model was released to meet the demand of buyers who want to use Apple products but cannot afford to purchase a smartphone at a price of the flagship model. The price for iPhone SE starts at $399 while the price for iPhone 7 starts at $649. Although a new and cheaper iPhone model allowed reducing the overall decrease in the number of iPhone sales in 2016, the average selling price has changed because of it. This explains the difference between the decline by 12% of sales revenue and the decline in 8% of the number of sales in 2016 compared to 2015.

Services

Against the backdrop of declining sales of iPhone, profits are growing from such Apples services as App Store, Apple device insurance programs, Apple Play mobile payment systems and accessories licensing. Thus, Apples revenue grew to $24.3 billion in 2016, which was the increase in 22%, compared to 2015 when the revenue became $19.9 billion. Although Apple did not show a breakthrough in terms of revenue, the profit of App Store grew by 60% in 2016, in particular, to $5.4 billion.

This segment of Apples business is becoming increasingly important and already provides about 11% of the companys total profits, which has already exceeded the revenue from sales of iPad and Mac combined. Consumers spend more time online. Therefore, applications and services are becoming an unmistakable choice for Apple in the way of successful profit from a huge client base, regardless of the level of iPhone sales. Apple Inc. occupies about 43.5% of the mobile device market in the United States, which is more than enough for the companys customers to attack the system of interconnected devices and services.

iPad and Mac

The revenue and sales of iPad devices have been declining for many years and it is not clear to where this tendency will lead Apple Inc. It is also not clear whether users are no longer attracted by the iPads large screen or not as the sales for these devices have fallen sharply in the last two years. Thus, Apple Inc. sold 86 million units in 2014 while it managed to sell only 64 million units in 2016, which shows a 26% decrease in sales.

However, there is nothing unexpected about it. Everything is logical. In 2014, Apples flagship device was iPhone 5S with a screen diagonal of 4 inches. In 2016, the company released iPhone 6S Plus with the screen size of 5.5 inches. iPad was a unique device when it appears on the market. A modern model of iPad with a screen diagonal of 9.47 inches no longer seems such attractive novelty and smartphone screens continue to grow to dimensions that iPad has. iPhone screen size increases with each next generation. Thus, Apple Inc. is the one that promotes the reduction of the sales of iPad devices. If Apple Inc. wants to keep its tablet competitive and in demand at the market, it needs to make it unlike not only competing for devices but also iPhone.

Sales of Mac computers fell against the background of the general trend of decline in sales of computers. According to various estimates, computer shipments decreased by 6% in 2016. According to the general trend, Mac sales dropped down by 10%. Indeed, smartphones are gradually replacing computers for entertainment options such as browsing the web on the Internet and playing music. Computers are used mainly to perform work tasks these days. Unlike iPad, computers offer significant advantages over smartphones. They have been used for entertainment purposes and work for many years. However, this usage is becoming less popular these days.

Market Share

As Apple, Inc.s main income depends on the sale of iPhones, it is relevant to study the enterprises market share in this niche. Thus, Apples main rivals in the global market of smartphones are Samsung Group, Huawei Technologies Co. Ltd., OPPO Electronics Corporation, BBK Communication Equipment Corp. Ltd. and others. According to the latest estimates, Samsung Groups market share of smartphones was 20.50% while Apple Inc. took 14.40% of the market in 2016. Additionally, the companies compeitors were Huawei Technologies Co. Ltd., OPPO Electronics Corporation, BBK Communication Equipment Corp. Ltd. and others with 8.90%, 5.70%, 4.80% and 45.60% of the global market share.

Comparing Apple Inc.s annual sales results with the sales results of its main rival Samsung Group, it is relevant to note that Samsung Groups annual sales also decreased in 2016 compared to 2015. However, Samsung Group managed to take the leading position in the global market even with the decline of sales of smartphones from 320 million units in 2015 to 306 million units in 2016. At the same time, Apple Inc. has set a very expensive price for the software and products compared to its rivals. As a result, consumers have started looking for cheaper alternatives. Thus, BBK Communication Equipment Corp. Ltd., OPPO Electronics Corporation and Huawei Technologies Co. Ltd. managed to increase the annual sales in 2016 compared to 2015 by offering smartphones with an average quality and features similar to those implemented in iPhones. As a result, Huawei Technologies Co. Ltd. sold 132 million of units in 2016 compared to 104 millions of units in 2015 while OPPO Electronics Corporation sold 85 million of units in 2016 compared to 39 millions of units in 2015. BBK Communication Equipment Corp. Ltd. sold 72 million of units in 2016 compared to 35 millions of units in 2015.

Our features

300 words

Discount System

Vip Services

Free Revisions
(on demand)

Affiliate Program

Free plagiarism report (on demand)

Problems Outstanding

The first problem that Apple Inc. faces these days is the emergence of the Chinese competing brands of smartphones, such as Xiaomi and Huawei. In particular, this factor has had impact on the sales in China, which dropped down by 17% in 2016 after a dizzying take-off by 84% in 2015. It is worth noting that the Chinese market was the most promising for Apple Inc. However, it has become a geographical region with the strongest decline in sales of Apple products now. Apple Inc. recorded 17% of the decline in China in 2016 financial year.

Second is the sale of Cooks 90 thousand shares for about $11 million in January 2017, which can have a negative impact on the companys performance and reliability. This is due to the fact that usually CEO of such large and powerful companies do not sell their shares in companies where they operate but only purchase more shares. The purchase of extra shares is a good investment of money and has a beneficial effect on the market. Additionally, people do not ordinary sell stocks of any growing company because it is not profitable. Therefore, Cooks actions inform about the companys losses rather than the growth.

The third problem is that Apple Inc. does not have personal production facilities and is forced to purchase accessories from third-party entities, as well as assemble final products at the Foxconn factories in China. This feature plays a great impact on the corporations logistic and products supply. In particular, customers are not always satisfied with limited Apples products or accessories, as well as accessories that are released in a rush or offered with a delay compared to the expected time of delivery. Of course, the issue has occurred not only because of the issues with the production facilities, but due to not accurate predictions of customers expectations and the decline in profitability compared to the forecasted one. However, it is believed that the main problem that affects logistic and products supply is related to the issue with the production facility and improvements of the marketing analysis.

Finally, the US President Trump has developed a strong activity since the inauguration during which his actions touched on production abroad and immigration issues. These two areas could potentially have a negative effect on Apple Inc.s performance. 39% of Apple Inc.s profitability is related to low labor costs in the companys production units in China. Regardless of whether Apple will have to transfer the production to the US or pay a border tax on its goods, it will lead to a decrease in profits. In addition, Apple Inc. has become a sponsor for the provision of H1B visas over the past year. Any change in this program, which Trump constantly criticized during the election campaign, will affect Apple Inc.s ability to hire talented employees from other countries. At the same time, a developed future US tax reform can serve the benefit for Apple Inc. and its financial resources abroad.

Recommendations

There already has no place left in the world where Apple Inc. could increase the demand for its products. Therefore, the profit growth will come to the end eventually. Additionally, demand for flagship smartphones is rapidly falling in all countries these days while Apple Inc. does not have other phones. Thus, it is possible to provide several recommendations for Apple Inc. of how to increase the demand for offered products and improve annual sales in the future, which are the following:

  • To reassure the society that the enterprise does not have any financial issues and is reliable more than ever. The society can experience frustrations because of Cooks recent sale of stock at the market and may believe that the action has been made because of financial issues and the decline in sales in recent years. The reassurance of the companys stability will help Apple Inc. to maintain the reliability and avoid the decline in stock price at the market.
  • Improve the logistic and products supply system at Apple Inc. This strategy can be achieved improving the quality of offered products and provided services. To do it, Apple Inc. will need to start evaluating and obtaining companies with personal production capacity. It will help the corporation to improve the issue with
  • Cometitors ousting from the market. This strategy will help Apple Inc. to maintain its competitive position, increase it along with annual sales and outlive Chinese rivals, which offer smartphones with similar features as iPhone has but for a much smaller price.
  • The final recommendation is the development of a strategic program in order to protect Apple Inc. from possible changes in the future US tax reform. This strategy will allow Apple Inc. to resits the changeable nature of the US taxation.

Action Plan

The first thing that Apple Inc. should make to successfully implement discussed above recommendations and strengthen its position in the market is to respond to the recent Cooks sale of stocks, which happened at the beginning of 2017. To do it, it will be oferred to conduct a non-official media release with the information that the sale of Apples stocks was Cooks desire to gain profit from the selling because his salary was cut by 15% in 2016 compared to 2015 because of a mismatch between the companys financial performance and set goals. This information cannot be offcial because large companies cannot publicly admit such things so a non-official release will become a good solution to divert the publics attention from Apples financial and operating issues.

Apple Inc. must pay attention to the creation of several joint ventures related to the improvement of the production capacity. As the company has already established a partnership relationship with Chinese companies, which assemble Apples products, the estimation of these companies capacities and design of the plan of a cooperative interaction will be reasonable as it will allow the firm to prepare for an acquisition or a merger of one of the Chinese counterparts and not to spend extra costs on the improvement of the facilities. Additionally, Apples management will need to study Samsung Groups strategy as this company remains the leader in the industry for many years. Thus, rival produces a fair amount of components, which together allows Samsung Group to benefit from the scale of production and standardization.

In order to displace a competitor from the market it will be conducted a comprehensive marketing analysis of the global market and outlined the firms weaknesses, which promote the increase of popularity of the Chinese devices. Once it is done, the Apples management will need to cordinate the process of the strategy design and implemention. It will help to enrich Apple products and accessories with innovations and make them unique in the market.

To develop a strategic program on protection of Apple Inc. from possible changes in the US taxation in the future, it will be required to create a crisis-management team, whose aim will be monitoring of the future US tax reform, as well as the evaluation of possible risks that the company can experience in case of any change in the program. This step will allow the corporation to react quickly regardless any changes in the US taxation system.

sample_baner

Analysis of Apple Inc.s Challenges and Problems essay

Related essays

  1. Brad Shingleton at Ophthalmic Consultants of Boston
  2. Human Trafficking
  3. Intelligence Community Agencies
  4. Real Estate Market