Executive Summary
Apple Inc is one of the leading manufacturers of electronic products globally. Besides the production of computers and other electronic products, this firm is also known for the production of phones. IPhone 5 and iPad are some of the newest series of products that this firm has produced in the market.
This is one of the Apple’s products, which have been very successful in the market today. This firm was able to sell 2 million pieces of iPhone within 24 hours after the launch.
On the third day after launching this product, the sale of this product hit five million. The purchase of this new product within the initial stages was in the United States markets.
There is a need to take this product to other parts of the world. It has been a success in the home market. It must be taken to the global market. The management must therefore come up with a supply chain strategy that will ensure that this product reaches the world market using the least possible costs.
The supply chain strategy that this firm should apply must enable the firm to distribute its products efficiently and at the least cost possible. The management should try to predict, and determine the markets where these products are popular.
The management should then assess the purchasing power of the market before determining the volume of the products that should be taken to the market. This will ensure that products are distributed successfully in the global market. It should also embrace the modern technologies as a way of reducing costs of operations.
Introduction
Apple Inc. is one of the most prosperous electronic firms in the world. Two scientists, Steve Jobs and Steve Wozniak, started this firm on April 1, 1976. These two individuals were electronic enthusiasts. They were interested in turning their skills in electronics into a large business unit.
Steve Wozniak, popularly known as Woz, was an astute electrician with a keen interest in computers. It was during this time that computers were started. Steve Jobs on the other hand was a shrewd businessman.
Although Woz was more knowledgeable than Jobs in the art of designing computer hardware, Jobs was smatter in entrepreneurship.
While Woz considered his skills in making computers as a hobby, Jobs saw a huge potential of stating a computer firm that would rival the then leading computer firm, the IBM. Jobs managed to convince Woz of the importance of commercializing their skills, and together, they started this company.
They later incorporated Ronald Wayne, a rich businessperson who came in to help the two financially. The trio formed a formidable force, which culminated into a company that is prosperous and very profitable.
Although this company had various challenges that saw it eliminate its Chief Executive Officer, who was one of the founder members, in 1985, the firm was able to overcome these challenges using a number of strategies.
Steve Jobs, having been forced out of the firm in 1985 as the chief executive, made a came-back in 1997 with strategies that transformed this firm to what it is currently.
Lafuente (2005) says that Apple is one of the firms that were able to overcome the wave of.com crisis of the early twentieth century that brought down many firm, especially those that were computer based.
This firm has a number of electronic products that have received a lot of acceptance in the market. IPhone 5 is one of the most recent products that this firm has introduced into the market. This product has received a huge success in the American market.
Within the first three days that this product was introduced into the market, the firm was able to sell 5 million pieces majorly in the American market. The management had to find the best approach of making this product reach other parts of the world.
It has to develop a strategy would make it possible to distribute the product globally using the least cost possible, and at the fastest speed ever. The management must determine the market size and purchasing power before releasing the products.
It must also determine other factors that may hinder successful operations in all the markets it targets before releasing the products. This research paper focuses on the operations of Apple Inc in the global market, and how this firm can ensure that the costs are minimized in order to increase its profitability.
Evaluation of the Financial Condition of Apple and its Ability to Achieve its Strategic Objectives as Discussed in the Annual Report
In order to understand the financial position of this firm, it is important to look at the financial statements of this firm for the last three years. Below are the income statement, cash flow and the balance sheet of this firm for the last three years.
The financial reports above show that this firm has had a consistent growth in its asset for the last three years. The net tangible asset of this firm has grown by about three times within the last three years. The Total Stockholders’ equity has also expanded by about 150% within the last three.
This is a clear sign that the firm has had a stable financial growth for the last three years. This firm has a capacity to meet its objectives given the growth of the firm’s asset base. The income statement and the cash flow statement show that this firm has a capacity to meet its short term financial obligations.
This firm can achieve both the long term and the short term financial obligations given the fact that it has been able to maintain a healthy cash flow into the firm. With its financial strength, this firm can easily undertake various activities that would help it realize its dream.
The Company’s Profitability Trends and Recommended Strategies to Improve or Capitalize on These Trends
The financial status of this firm shown above is a clear demonstration that this firm has been successful in its operations for three years. The firm has been very profitable and this explains the massive growth it has had within the three years.
This firm uses various competitive strategies in the market in order to manage competition that is very rife in this industry.
First, the firm has employed two of the porter’s competitive strategy of low cost and differentiation. The firm moved its production from US to China in order to cut the cost of production.
China, unlike the US, has cheap labor that would eventually translate to lower cost of production. This makes it easy for this firm to sell its products at lower prices but still make profits (Helfert, 2001). Other than the cost strategy, the other strategy that this firm has employed is the differentiation strategy.
This firm has made their products unique. Some of its present products are differentiated from other conventional products in the market, making it acquire a special niche within the industry. The iPhone 5 is a product that is yet to find its rival in its special niche.
The timing tactic of this firm in launching new products has also been superb. This firm always come with a new product at such times that the market feels that they need a better product to serve their current needs. It introduced the iPhone when the market needed a better phone with so many integrated features.
This has seen their new products receive huge acceptance in various markets when introduced. The firm has also been keen to employ cooperation strategy whenever needed.
During its early years, it formed a joint venture with Microsoft when it realized that its computer languages were not efficient enough to make competitive products in the market. This strategic alliance saw it gain market share both in the home markets and abroad. It also enhanced its distribution process.
This firm has also been able to implement Porters five forces. To tackle the threat of new competition, the firm has been keen on producing new products to rival those of new competitors.
To manage the threat of substitute products, Apple has developed different lines of products to satisfy different markets so that it may not be adversely affected if one line is invaded by substitute products.
To increase its bargaining power with the buyers, it has continued to produce high end products with qualities that make it easy for the customers to appreciate their high prices (Gill & Chatton, 2001). To increase their bargaining power with the suppliers, it has created a scenario where it is a single buyer with various sellers.
This makes it able to dictate the terms of buying the products. To counter the intensity of competition, it has been able to acquire a special niche in this market, rendering its competitors irrelevant as their products are turned into mere substitutes of this company’s products.
The Strategic Moves to Capitalize on its Profitability Trends
This firm should be able to capitalize on its profitability trend in the market despite the intense competition that exists. It must come up with strategic moves that will enable it make the most out of its success in the market currently.
In the current competitive market, Apple should employ a series of strategies that would ensure that it remains relevantly competitive in this market. The first strategy it has used is the marketing strategy. In this strategy, this firm has tried to sell its products at prices that would bring in as many of the customers as possible.
Although the company has some of its products sold at premium prices, it has a number of its products sold at fair prices that can be afforded by the middle class members of the society.
Under this strategy, this firm has ensured that its distribution of the products is efficient and effective to further cut down the cost of delivering the products to the customer.
Another strategy used by this firm to manage competition is market development strategy. In this strategy, the firm has struggled to ensure that it increases its market share in the world market. This has been done through market penetration in the new markets where this firm had not make entries into.
The firm has also developed new markets and new users for its products. It created new users by developing the machines that could be used in the airports and other sensitive places for security check-ups.
It also developed new markets by developing cheaper products that could be afforded by new markets at the lower niche of the market.
Taking the product strategy, this firm has ensured that most of their products are up to the market expected standards. This firm has been keen to ensure that most of its products are not only of good quality but also of the right specifications in terms of size.
In its research and extension unit, this firm has been very creative. It has been voted as one of the most innovative firms in the world for a number of years. It has been keen to introduce new products into the market at regular intervals.
Evaluation of the Company’s Cash Position and its Ability to Invest in Capital Projects In Future Years
According to Lee (2009), for a firm to be able to maintain a competitive edge over others in the market, there is always need to ensure that it invests in capital projects in a regular manner.
The market has very stiff competition, and the firm has the responsibility of coming up with creative projects that can enable it meet its customers’ demand. This scholar says that the market has remained very dynamic, and this dynamism has forced firms to come up with new projects quite often.
These projects would enable a firm to present new and innovative products in the market at regular intervals. This scholar emphasizes the fact that electronic industry is one of the most affected industries in the world with the emerging technologies.
Apple has been able to be one of the market leaders in this industry because of its regular innovative projects.
In order to be able to invest in capital projects in future years, there should be a solid financial base. This will help the firm sponsor these projects in a way that will make them profitable. To sustain a project from its inception to completion requires a lot of money.
This can only come from successful operational activities of the firm in the market. It is clear, from the company’s financial statements given above, that there is enough financial power to enable this firm support these projects successfully.
The Effectiveness of the Company’s Inventory or Service Costing Method and Recommendations to Improve this Area
The inventory service of this company has been very effective. It is clear that this firm has been able to expand its inventory massively within the last three years. Given the figures on the financial statements given above, this firm has been able to come up with strategies that has enabled it expand its asset base.
There are only a few adjustments that may be recommended for this firm in expanding its inventory. The management should consider having permanent presence with its own assets in various parts of the world instead of using the agents. This is because the agents by be used by other competitors against the firm.
The Adequacy or Risks of the Internal Control Environment Noted In the Annual Report by Management, and Internal and External Auditors
The financial statements given above were given by external auditors, with the support of the internal auditors of the firm. There are some risks that these auditors bring out that the management should be careful to manage properly.
According to Riahi (2005), managing of risks is one of the most important ways through which a firm can increase its profitability and success within an industry. As stated above, risks come with various penalties that a firm should be ready to pay. These penalties may have adverse effect on the firm.
Apple Inc should therefore, find mechanism through which it can transfer the risks, or manage them in a way that it may not be affected. The risk posed by uncertainties can be transferred to insurance companies. This way, the firm will be able to operate without fear of adverse effect of environmental uncertainties.
The economic risks should be managed by having other alternative projects for the firm in case its clients are not ready to award it tenders.
In dealing with the political environment, it will be important for the firm to understand the political environment of any country, and evaluate its effect on the normal operations (Shim & Siegel, 2007).
The firm should also make an effort to develop a close relationship with governments in new countries that it plans to start new investment in.
In managing the risk of poor performance, this firm should ensure that it employs highly skilled employees who are self motivated, and determined to achieve the best result in the market.
When contracting other firms, Apple Inc should clearly state to them that any consequences that will arise due to their failure to perform as expected will be carried by the contracted firm.
This will help this firm avoid bearing fines that are not associated with it. When dealing with the risks of physical injury of its employees, the firm should ensure that all the employees wear protective gear while on site.
They should also have the right instruments when performing various functions within the firm. It will also be important for the management to ensure that all its employees have insurance scheme that will cover any injury during the process of working within the firm.
The Risk to the Company Related To Foreign Currency Translations, Foreign Economic Events, and International Financial Reporting Standard Requirements and the Risk Tolerance Level for the Company
Apple operates globally. As was stated above, most of the production activities of this firm are done in China. The manufactured products would then move to the United States, the European market, Asia, Africa, and other markets around the globe.
One of the main challenges that this firm has faced in its global operations is foreign currency translation, foreign economic events, among other issues. Apple has to pay its employees in Chinese Yuan.
It will be paid for its products in Japan using Japanese Yen, in Britain using British Pound, in Canada using Canadian Dollar, and in India using Indian Rupee. These currencies do fluctuate in the financial market quite often.
When a budget is made in its Chinese plant, there may be need to readjust the budget in case there is a fluctuation of the Chinese Yuan. The socio-economic and political environment of the countries where this firm operates also affects its success.
Determination of Where the Company Appears Vulnerable For Displaying Unethical Behavior
Ethics is very important for the general success of a firm. Apple has been very keen to ensure that all its operations in the market are ethical. The financial audit of the firm by external auditors shows that this firm has been ethical in stating its financial position, and its returns to the government.
This is very important to ensure that this firm develops a cordial relationship with the government and the public in general. In the international markets outside the United States, European markets and in China, this firm operates through agents. This firm has been very clear on the ethical issues it expects of them.
In those countries where it operates through subsidiaries, it has maintained truthfulness and other ethical business values. The main ethical challenge that this firm has faced is the issue relating to patents of some of its products. Some have blamed the firm of overstretching the patent rights of most of its products.
Prediction of Where This Company Will Be Financially In Five (5) Years
Apple has had a consistent growth in its financial base over the last three years. The financial statements shown above demonstrate that this firm may have a continued growth in the next five years.
There are some factors that may arise within the five years that may act for or against this continued growth (Jones & Henley, 2009). Therefore in five years, the figures estimated may not actually be the case because of these variables.
Given the rate of growth given in the financial statements above, the five may have about 600% after a period of three years.
References
Gill, J. & Chatton, M. (2001). Financial analysis: The next step. Menlo Park: Crisp Publications.
Helfert, E. A. (2001). Financial analysis: tools and techniques: A guide for managers. Boston: McGraw-Hill.
Jones, L. & Henley, G. (2009). Training needs analysis. Oxfordshire: Henley Distance Learning.
Lafuente, A. M. (2005). Fuzzy logic in financial analysis. Berlin: Springer.
Lee, A. (2009). Financial analysis, planning & forecasting: Theory and application. Singapore: World Scientific.
Riahi, A. (2005). Financial analysis and the predictability of important economic events. Westport: Quorum Books.
Shim, J. & Siegel, J. (2007). Handbook of financial analysis, forecasting, and modeling. Chicago: Wolters Kluwer.