Background
Apple Inc. is a global giant in electronics and software. The company was established in 1976 to design, manufacture, and market consumer-oriented electronic devices and software. It has positioned itself as a leading provider of computers, mobile devices, computer software, and other web-based services and development (Lessambo, 2022). Its vision of being a leader in technological innovation drives the company’s success.
The company also has a customer-focused mission statement. The company’s mission statement explains that Apple Inc. aims to “bring the best user experience to its customers through its innovative hardware, software, and services” (Schaap & Schaap, 2020). In line with this goal, the company believes that by incorporating simple strategies, it will be able to create a lasting impact on the technology industry, as opposed to developing and utilizing complex plans that would divert the company’s focus from its important projects.
The firm has developed four critical processes and embedded them into its core business operations to ensure it achieves its goals. These key processes by the company include its commitment to improving people’s lives through technology, enhancing user experiences with user-friendly devices, and inventing new products that empower the masses. Ultimately, the company relies on its ability to develop high-quality products to achieve its goal as stated in the organization’s mission statement.
Organizational Structure
The features of organizational structure are equally important in the context of analyzing companies. The organizational structure has a profound impact on the variety of the organization’s processes, employees, and performance (Pathiranage, 2019). Therefore, to understand the nature of a company’s governance, it is necessary to start specifically with the type of structure. Apple is known for its functional organizational structure, in which the roles and responsibilities of the business units are divided into design, development, marketing, manufacturing, and other areas (Tien et al., 2019).
This structure allows Apple to focus on every aspect of producing and selling its products. However, it is worth noting that Apple is distinguished by strong centralization in strategic decision-making (Table 1). Judgments are made at a higher management level, especially under the leadership of the CEO. Under the CEO, Apple has a Senior Leadership Team (SLT) comprising the senior vice president, vice president, chief design officer, and chief operating officer. These key employees of the company are responsible for managing various aspects of the firm (Tien et al., 2019).
Table 1. Personnel Structures: Apple and Samsung
The mentioned officer reports directly to Tim Cook, the company’s Chief Executive Officer. The top officers are important to the company as they shape Apple’s product strategy and overall operations. Through this kind of management, the company has consistently maintained its products in terms of style and quality standards. However, this kind of management style can also be detrimental to the firm, as it can slow down the company’s innovation and responsiveness to changes in industry demands.
Apple and Samsung have divergent approaches to management, as Samsung relies on a matrix management structure, while Apple, as mentioned above, employs a functional management structure. Samsung is divided into different divisions and units, each managed independently and has its own functions and goals (Podolny & Hansen, 2020). These workers have significant autonomy within their respective divisions, allowing Samsung to operate as a conglomerate with diverse business interests, including electronics, semiconductors, construction, and more (Munir & Putra, 2019).
Table 2. Key Leader Organizational Structures: Apple and Samsung
Samsung’s organizational structure promotes innovation and a diverse product portfolio. However, it may lead to less control over quality and brand identity, as Apple does. Both approaches have their advantages and disadvantages, and the success of companies largely depends on their ability to adapt to a rapidly changing market and meet consumer needs.
Human Resource Issues
Human Resource problems in a firm usually take various forms. They also vary in seriousness and complexity depending on the company’s environment. Some human resources challenges Apple Inc. faced include employee compensation, issues associated with workplace safety, and employee retention. Apple is known for its organization, ensuring it operates with many secrets (Nicas & Browning, 2021).
Despite the secretive culture, recently, the company came under criticism from its former employees, who complained about constant sexual harassment and issues related to pay equity. According to a report by the New York Times, over 500 company employees have complained through the media about workplace safety, citing constant verbal abuse, sexual harassment by their seniors, pay inequity, and discrimination (Nicas & Browning, 2021).
Some employees also complained about workplace conditions, which they claimed had been exacerbated by the organization’s secretive nature, which had discouraged them from publicly speaking about their concerns. The employees further assert that their complaints about their managers and colleagues are often dismissed, which has created a work environment filled with fear; thus, most employees fear criticizing the firm.
Long- and Short-Term Goals
Apple Inc. has set various short-term and long-term goals that it targets to achieve. Goals are critical to any firm as they make it easier for the organization to succeed in its business. One of Apple’s long-term goals is to become carbon neutral within its supply chain by 2030. The company also targets to increase its commitment to the environment by investing in green technology globally as a long-term goal.
Apart from its long-term goal, the company has established some short-term objectives. In 2018, the company set a goal to expand its operations in the United States. The firm aimed to create at least 20,000 jobs in the country by 2023 (Panwar et al., 2022).
Apple Inc. also set a goal to deliver the best user experience to its clients and provide the best hardware and services for its products. Compared to Samsung, the two companies share similar goals, albeit with some differences. Samsung focuses on creating a better environment by achieving net-zero emissions by 2030 (Almeida et al., 2021). This goal intermarries with Apple’s goal of becoming carbon neutral by the same year. While Apple focuses on creating more jobs by 2023, Samsung partners with other organizations, such as the UN, to help fight hunger and inequality.
Diversity and Inclusion
Apple has been able to hire minority groups to increase their representation in the company. The company recently revealed its workforce demographics, and according to the report, the workforce is predominantly white, at 55%, followed by Asians at 15%, Hispanics at 11%, and blacks at 7% (Luckerson, 2014). According to the company’s 2021 diversity and inclusion report, since 2014, the firm has made significant strides in building a diverse workforce. In 2021, the company had 34% female and 66% male employees globally.
In 2014, the company had 30% female and 70% male employees. The increase in 2021 is equivalent to an 87% rise in the number of female employees at firms globally from previous years (Peterson, 2022). Based on race, the company is also striving to achieve a diverse workforce. According to the company report, Apple gave 25% of its leadership roles in the United States to Hispanic and Black people. Based on job types in the retail leadership section in 2021, 41% of these positions were held by minority groups in the U.S. (Peterson, 2022). Based on tech jobs, the gender disparity is huge, as 80% of employees under this section are male, with females representing 20%.
Porter’s Five Forces Analysis
Porter’s Five Forces is a business analytic model that companies widely use to analyze the structure of their industry and its business strategies. The model helps business owners understand why various industries have different levels of profitability (Maverick, 2022). Porter’s framework is therefore used to determine the intensity of competition in the industry, attractiveness of the market, and profitability. The five forces that Michael Porter identified include competition within the industry, the threat of new entrants, the bargaining power of buyers and suppliers, and the threat of substitute products.
Industry Competition
Apple’s industry segment has become very competitive, with major players investing heavily. The company operates in a market dominated by large companies such as Amazon, Google Inc., Samsung, and Microsoft (Maverick, 2022). This competition directly influences the company’s operation as it directly impacts its profitability. Most industry players continuously innovate new products due to their constant investment in research and development, which makes the competitive force within the market strong.
Another contributing factor to high competition in the sector is the low switching cost. The products manufactured by players in the sector do not require consumers to make a significant investment to switch from one company’s product to another. Thus, marketplace competition is a crucial consideration for the company to address (Maverick, 2022). Despite the competition, Apple has increased its market share, thus maintaining a leading position in the tech industry. This has been made possible by the company’s continuous funding of research, which enables it to develop unique devices and software that stand out in the market.
Bargaining Power of Buyers
The increased bargaining power of the buyers as a force in Porter’s model further challenges Apple. The increased bargaining power of buyers is brought about by the low switching costs of products, which essentially strengthen the customers’ bargaining power. The bargaining power of the client can take two forms: collective or individual bargaining power. Individual bargaining power can be seen as a weak force for a big company like Apple (Maverick, 2022).
This implies that a loss of a single client by the company translates to a negligible loss of revenue. However, collective bargaining power by clients, for instance, the possibility of a mass defection of company clients to a rival, is a strong force. The company has always been keen to respond to this strong force by investing heavily in research and development. This has enabled it to continue developing new, unique, and appealing products for clients.
Threat of New Entrants
Another force in the Porter model is the threat of new entrants in the industry. This force is very weak in the technology sector where Apple operates. This is because the sector is capital-intensive, and any company that intends to invest in the segment will need to invest heavily in machinery and establish a recognizable brand name, similar to Apple, Amazon, and Google (Maverick, 2022).
Any company that wants to invest in one of the sectors Apple operates in, such as the smartphone or computing segment, will have to allocate a significant amount of capital to research and development and manufacturing to create its product line, even before introducing it to the market. This will enable the company to keep that potential new entrant in a disadvantaged position.
Bargaining Power of Suppliers
Like the threat of new entrants, the bargaining power of suppliers in the industry is equally a weak force for Apple products. This occurs due to a high number of potential suppliers who are willing to work with the company. This allows the organization to choose freely from a pool of suppliers for the components of its products. The industries dealing with components, such as those involved in the development of computer processors and smartphone screens, are equally highly competitive (Maverick, 2022).
The company has a relatively low switching cost when exchanging suppliers, making it a minimal obstacle. Additionally, the organization is a major client of its suppliers; thus, they are reluctant to lose such a valuable client, strengthening Apple’s position at the negotiation table. In the industry, therefore, the bargaining power of suppliers for the components is not a major problem for the company and its competitors.
Threats of Substitute Products
According to Porter’s Five Forces framework, substitute products are defined as items that do not directly compete with the company’s products but are potential substitutes for them. For instance, in this case, the substitute product for Apple’s Smartphone, iPhone, is a landline telephone (Maverick, 2022). This industry force is relatively low because the available substitute products for Apple brands have limited capabilities compared to their powerful devices.
Marketing Strategies
The marketing mix is not a new strategy in the tech industry. It has been applied by various players in the sector to reach their potential clients. Like other companies, Apple employs this marketing strategy to enhance its brand visibility. The marketing mix consists of 4 key elements commonly known as the 4 Ps: product, place, promotion, and price (Xia, 2023). Apple incorporates these elements into its marketing activities to effectively reach its target market. For instance, Apple products are designed to provide customers with a user-friendly interface and aesthetic appearance that appeals to many, thus enjoying a competitive advantage over its competitors.
Additionally, the company’s powerful devices have also helped mitigate the threats posed by less sophisticated substitute products (Xia, 2023). Apart from the product, the company uses a pricing strategy to meet its potential clients. Most of the company’s products are priced highly in the market. The company uses this premium pricing technique to convey the quality and classiness of its products.
The company also employs a promotional strategy to establish its brand image. Most of the company advertisements emphasize its philosophy, unique product designs, and innovative products (Xia, 2023). Another element of the marketing mix that Apple uses to market its product is place. The company has invested a significant amount of money in operating its retail stores across various cities globally. Apart from running its stores, the company has also sought partnerships with other retailers in the industry to ensure that its products reach a wider audience.
Financial Analysis
Company financial analysis is crucial for evaluating a firm’s performance within its industry and economic environment, thereby assisting management in informed decision-making. Financial accounting is regulated by the Financial Accounting Standards Board (FASB) (Office of Justice Programs, n.d.) in the U.S. This organization was involved in developing the Statement of Financial Accounting Standards, which aimed to offer a guide to companies in accounting.
However, these standards do not have any implication for Apple as it subscribes to a different standard set by FASB and the Governmental Accounting Standards Board (GASB), known as the Generally Accepted Accounting Principles (GAAP), which sets standardized accounting practice in the U.S (Office of Justice Programs, n.d.). GAAP has enabled the company to build trust with investors and shareholders through the preparation of accurate and reliable financial statements, which in turn has contributed to its long-term success.
Financial analysis often involves scrutinizing the company’s financial statements. Cash flow from operations is a major section of the cash flow statement, one of the three main financial statements required in any standard financial reporting. It refers to the amount of money the company generates or incurs while conducting business operations over a specified period. According to data obtained from Macrotrends, Apple’s operating capital has been on an upward trajectory from 2010 to 2022.
According to the cash flow statement, in 2020, the company experienced an increase in its cash flow from operating activities, which totaled $80.674 billion, representing an estimated 16.26% increase from 2019. Similarly, between 2020 and 2021 and 2021 and 2022, the company experienced positive growth, with its operating cash flow increasing by 28.96% and 17.41%, respectively (Macrotrends, n.d.). A positive cash flow, as experienced by the firm during this period, indicates that more cash is coming into the company than is going out. This indicates that the company is in a stronger financial position and does not require external funding to operate its business.
Besides the financial statement, EBITDA is another key ratio that can help determine a company’s profitability. The data obtained from Macrotrends indicates that the firm had an EBITDA of $32.6 billion in the 3rd quarter of 2023 (Macrotrends, n.d.). This is a positive sign that the company’s key business areas generate sufficient revenue to cover all its operating costs.
Apart from the EBITDA cash flow statement, the contribution margin ratio is another metric that can be used to determine the company’s net loss or profit. This metric is equally important to Apple’s financial analysis as it indicates the amount of money produced by each unit of a product sold (Team, 2023). This value is calculated by subtracting the variable cost per unit from the sale price of each unit. Apple’s contribution margin is not public, making it difficult for scrutiny and analysis.
Recommendations
Despite no direct threat from new entrants to the company in the tech industry where Apple operates, there is a remote possibility that such companies may join the industry, with some receiving financial backing from the government. Therefore, Apple must continue investing in research and development to continuously innovate new products that will keep it competitive even among its peers like Samsung. To address issues related to human resources, the company should encourage its employees to report any harassment that may occur within the organization. The company can achieve this by constantly reviewing its policies, which has led to the development of a company culture that even affects employees’ safety.
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