Jim Harrer

STARTUPS, TURNAROUNDS, APPDEV, AGILE & LIFE...

Apple SWOT

Apple SWOTClick here if you want to read the most recent, Apple SWOT Analysis, June 2015

I was talking to someone about Apple today. Yes, they appear unstoppable and blew the doors off their most recent quarter. I decided to do a SWOT (Strength, Weaknesses, Opportunities and Threats) Analysis for my blog. Please comment below and let me know if you agree or disagree with any of my bullet points. I had a tough time coming up with more weaknesses. I would really like to review this post in two years and see what we got right, and what we may have missed. So please, comment today!

Apple Inc. designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players. The company also sells various related software, services, peripherals, and networking solutions.

The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells various third-party Macintosh, iPhone, and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content and applications through the iTunes Store.

The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative customers. As of March 1, 2012, it had 361 retail stores, including 246 stores in the United States and 115 stores internationally. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.

 

Apple’s Strengths

  • iTunes Online Store is an excellent source of revenue derived from sales of music and applications for Apple’s iPhone, iPad and iPod touch devices.
  • Excellent brand loyalty by its customers. Many own multiple products (Mac, iPhone, etc.)
  • No debt, excellent cash flow. $13bn Net Income in most recent quarter. (Dec 2011).
  • Excellent Research & Development division that is able to deliver (premium) products that customers will stand in line to buy.
  • Global reach, Apple’s brand is strong around the globe.
  • They own their own Operating System (iOS), which is used across their entire product line allowing them to sell a complete product without paying large royalty payments to their competitors.
  • Apple is an innovator and technology leader.
  • Apple’s first time customers, buying iPhone, iPods and iPads, are buying other Apple products, including Apple’s desktop and laptop computers based on the most recent quarter.

Apple’s Weaknesses

  • Weak integration with Microsoft Office makes their product line less attractive to business enterprises.
  • Google’s Android Operating system is slowing Apple’s growth rate in the mobile phone market.
  • High price. Apple’s products are typically higher in price than its competitors. Price sensitive consumers tend to not consider Apple in buying decisions.
  • Apple tends to lead innovation and then watch other companies control the market once it has reached the tipping point and wider consumer adoption.

Apple’s Opportunities

  • iTunes will continue to generate sales from music and applications, however I believe in the next two years Applications for the iPhone, iPod touch and iPad will generate more revenue than music downloads. Apple receives a 40% gross margin on all application sales.
  • Cross product sales will continue to increase as more and more people choose Apple.
  • Product development cycles have shortened in the mobile phone market, giving Apple a bigger opportunity in upgrade sales. Excellent iPhone 4 sales are an excellent example. Consumers are willing to update their phone hardware every two years.
  • A new release of Apple’s iPod touch, featuring video chat, will likely be a huge revenue generator.
  • A new release of Apple’s iPad, featuring video chat, will also likely be a huge revenue generator.
  • Apple’s direct online sales channel will continue to grow, helping improve their already impressive gross margins.
  • Apple new iAd advertising platform for Applications designed for the iPhone, iPad and iPod touch could be a significant revenue generator.

Apple’s Threats

  • Mobile Phones based on Google’s Android Operating System.
  • Mobile Phones based on Microsoft’s new Mobile 7 Operating System.
  • Cheaper laptop computers from Dell, Toshiba, HP, Sony and IBM.
  • New Tablet computers based on Kingle Fire or Google’s Android Operating System could hurt their iPad sales.
  • Online Music Stores from Amazon, Yahoo! and Wal-Mart offering music cheaper.
  • New online music models that including renting the entire music library for a low monthly rate could change how consumers pay for music.
  • Technology moves quickly, new threats from new startups are likely.

So there you have it.  If you're a student, using this blog for your research, I would appreciate it if you would support our bloy by mentioning us on Facebook or Reddit before you leave the page. Your support will encourage me to update this post each Fall.  For the June 2015 update, click here.

Finally, I would love to hear from you.  Go on record now, use the comment below (on my blog) and we’ll see how we did in a year or so.

…Jim

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Comments 7

 
Jim Harrer on Thursday, March 01 2012 13:19
Good details

This is a great analysis!

S - Apple's consumers deliver the best marketing you could ask for: Word of Mouth
W - Every day Apple doesn't leap into the subscription music market they lose and weaken their footing as the world's dominant music supplier. Spotify and their integration with Facebook is an iTunes killer. Ask any music lover or trendsetter on Facebook. Having Spotify premium on your mobile device and the ability to listen nearly any track in the world at any time is priceless. The intuitive sharing of playlists and the discovery of new music will spread like wildfire.
O - Apple TV (that one is easy) :p
T - 2 year cycle for mobile phones. The rise and fall of mobile devices are dictated by the contracts with the providers. Unlike personal computers that can function for 5, even 10 years, consumers have been trained to look forward to "something" new when their contract comes up for renewal.

This is a [b]great[/b] analysis! [b]S[/b] - Apple's consumers deliver the best marketing you could ask for: Word of Mouth [b]W[/b] - Every day Apple doesn't leap into the subscription music market they lose and weaken their footing as the world's dominant music supplier. Spotify and their integration with Facebook is an iTunes killer. Ask any music lover or trendsetter on Facebook. Having Spotify premium on your mobile device and the ability to listen nearly any track in the world at any time is priceless. The intuitive sharing of playlists and the discovery of new music will spread like wildfire. [b]O[/b] - Apple TV (that one is easy) :p [b]T[/b] - 2 year cycle for mobile phones. The rise and fall of mobile devices are dictated by the contracts with the providers. Unlike personal computers that can function for 5, even 10 years, consumers have been trained to look forward to "something" new when their contract comes up for renewal.
Jim Harrer on Thursday, March 08 2012 09:13
Excellent Post

S- Relatively closed ecosystem - Uses "sticky" iTunes hooks to capture, hold consumers. Keeps current users coming back and buying Apple products because their media is quasi-locked in that IT ecosystem.
W- Relatively closed ecosystem - Those consumers that are not already part of that ecosystem, are wary of doing so as it requires, to some extent, a wholesale commitment going forward that this will be your media provider as integrating non-iTunes media into iTunes can be very difficult to many users.
O - Agree with Apple TV as posted above and would add further cloud/push integration and more and more Siri, of course.
T - Android, Windows 8 in the mobile phone/tablet space. Windows 8, Chrome OS in laptop and desktop. Loss of visionary leader or "company Shaman" could be devastating, regardless of preparations. Still early in Mr. Cook's eign and latest Ipad launch was underwhelming. Unforseen disruptive technology that strikes at their business model, increasing malware vulnerability as security in obscurity advanage wanes in direct proportion to market share.

S- Relatively closed ecosystem - Uses "sticky" iTunes hooks to capture, hold consumers. Keeps current users coming back and buying Apple products because their media is quasi-locked in that IT ecosystem. W- Relatively closed ecosystem - Those consumers that are not already part of that ecosystem, are wary of doing so as it requires, to some extent, a wholesale commitment going forward that this will be your media provider as integrating non-iTunes media into iTunes can be very difficult to many users. O - Agree with Apple TV as posted above and would add further cloud/push integration and more and more Siri, of course. T - Android, Windows 8 in the mobile phone/tablet space. Windows 8, Chrome OS in laptop and desktop. Loss of visionary leader or "company Shaman" could be devastating, regardless of preparations. Still early in Mr. Cook's eign and latest Ipad launch was underwhelming. Unforseen disruptive technology that strikes at their business model, increasing malware vulnerability as security in obscurity advanage wanes in direct proportion to market share.
Jim Harrer on Tuesday, March 20 2012 18:16

Thanks guys. Yeah, not sure how I missed Apple TV. What do you think of the dividend they just announced? I would rather they use the money to expand their market, but that's me. I would love to have a clock radio that would wake me up with Siri, that I could say "Give me 10 more minutes" or a thermostat on my wall that I monitor from my browser and see how often it cycles and the power usage. Stuff like that.

...Jim

Thanks guys. Yeah, not sure how I missed Apple TV. What do you think of the dividend they just announced? I would rather they use the money to expand their market, but that's me. I would love to have a clock radio that would wake me up with Siri, that I could say "Give me 10 more minutes" or a thermostat on my wall that I monitor from my browser and see how often it cycles and the power usage. Stuff like that. ...Jim
Guest - Severn Anderson on Wednesday, March 21 2012 11:55

Personally, I would have liked to see them plow some of that $$$ into further tech aquisitions to bolster their product portfolio. But who knows? Maybe they are at their institutional capacity in regards to integrating what they already have gobbled up. After all, as AOL/TW showed us, a horribly executed M&A can do far more long term damage to a company than a lack of aquisitions or the missed opportunity cost for not following through with the action. Apple's decision to go with a dividend indicates one of two things to me: 1) They lack or cannot agree on a bold vision going forward in regards to the desired future technology of their devices beyond what Mssr. Jobs laid out before his passing, 2) They are unsure of the macro-economic climate of their market segment going forward and conservatively chose to return cash to investors and buy back shares to gird themselves for a possible downturn in their market. Who knows,though, maybe I'm wrong and they've got it all figured out and are executing according to an already established plan. I just doubt it, myself...

Personally, I would have liked to see them plow some of that $$$ into further tech aquisitions to bolster their product portfolio. But who knows? Maybe they are at their institutional capacity in regards to integrating what they already have gobbled up. After all, as AOL/TW showed us, a horribly executed M&A can do far more long term damage to a company than a lack of aquisitions or the missed opportunity cost for not following through with the action. Apple's decision to go with a dividend indicates one of two things to me: 1) They lack or cannot agree on a bold vision going forward in regards to the desired future technology of their devices beyond what Mssr. Jobs laid out before his passing, 2) They are unsure of the macro-economic climate of their market segment going forward and conservatively chose to return cash to investors and buy back shares to gird themselves for a possible downturn in their market. Who knows,though, maybe I'm wrong and they've got it all figured out and are executing according to an already established plan. I just doubt it, myself...
Jim Harrer on Monday, April 09 2012 16:47
Thoughtful

Very thought out swot analysis on Apple. I think by far the key threat to Apple is competition and the fact that the products are no copied virtually instantaneously. Certainly, the closed platform that Apple has a big weakness that will make the threat of competition even higher in the future.

Very thought out swot analysis on Apple. I think by far the key threat to Apple is competition and the fact that the products are no copied virtually instantaneously. Certainly, the closed platform that Apple has a big weakness that will make the threat of competition even higher in the future.
Guest - nick on Wednesday, October 10 2012 08:42

Thanks for this fantastic post. I'm currently writing my own SWOT analysis of Apple and I've added quite a few things to this list.

I think the most subtle yet important one is a huge threat to the companies core philosophy of maintaining an unparalleled user experience.

Here is what I wrote for my paper.

"A threat that I see is with the iAd platform. Sure, there may be huge revenue streams from this although it may be the first compromise in the quality of user experience and thus, bring the experience of certain apple products closer to that of it’s competitors. "

I don't think Steve would have approved of this unless he knew about it before he died. It's what Facebook has been battling to get perfected and what annoy the crap out of myspace users. Ads always weaken the integrity of the user experience. It sort of cheapens it. This is the entire reason people would prefer to pay for services like spotify instead of having to deal with looking at the ads. This is the same model used by pandora and grooveshark and tons of other software.

That just seems more like an effort to realize more capital gains where they aren't needed instead of focusing on producing incredible user experience in their products. I guess everything I've said comes to this point: Sticking ads in their products goes directly against Steve Job's philosophy of creating great products.

And this is, for me at least, a telltale sign of decline for Apple.

Thanks for this fantastic post. I'm currently writing my own SWOT analysis of Apple and I've added quite a few things to this list. I think the most subtle yet important one is a huge threat to the companies core philosophy of maintaining an unparalleled user experience. Here is what I wrote for my paper. "A threat that I see is with the iAd platform. Sure, there may be huge revenue streams from this although it may be the first compromise in the quality of user experience and thus, bring the experience of certain apple products closer to that of it’s competitors. " I don't think Steve would have approved of this unless he knew about it before he died. It's what Facebook has been battling to get perfected and what annoy the crap out of myspace users. Ads always weaken the integrity of the user experience. It sort of cheapens it. This is the entire reason people would prefer to pay for services like spotify instead of having to deal with looking at the ads. This is the same model used by pandora and grooveshark and tons of other software. That just seems more like an effort to realize more capital gains where they aren't needed instead of focusing on producing incredible user experience in their products. I guess everything I've said comes to this point: Sticking ads in their products goes directly against Steve Job's philosophy of creating great products. And this is, for me at least, a telltale sign of decline for Apple.
Guest - Hillary on Tuesday, November 27 2012 18:26
Thank you!

Thank you for your insight to Apple. College students, like myself, love seeing other's insights into the topics that they are researching. I appreciate it!

Thank you for your insight to Apple. College students, like myself, love seeing other's insights into the topics that they are researching. I appreciate it!
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