Success in Business: Apple Inc. Case

Success in Business: Apple Inc. Case
[By:]
[Presented To:]
[Name of Institution:]
[Date:]
Success in Business: Apple Inc. Case
a) Introduction: Company profile
Apple Inc. is an American Big Tech company founded in 1976 as Apple Computer Inc. Its headquarters are in Cupertino, California, and is listed in the common stock market as AAPL. It develops, designs, and sells consumer software, electronics, and online services. Apple products are popular globally due to their uniqueness, giving the company a significant competitive edge against other Big Tech firms. The Macintosh computers, iPad, iPhone, and iTunes are the firm's bestselling products and have earned it lucrative business over the years. For Apple Inc., real wealth does not come from launching a single big product but different revenue streams tapped to bring revenues to the company (Yoffie and Rossano, 2012).
b) Market structure
Apple Inc. operates in an oligopolistic market structure. Oligopoly is a market structure characterized by a few large firms producing differentiated or homogeneous products competing aggressively with each other (Mazzeo 2002). This market structure relies on interdependence to make their pricing decisions. The market structure has forced Apple Inc. to maintain their prices since they are afraid of the rivals' reactions if price increases or decreases. The price rigidity helps to control price wars with other global brands such as Samsung and Huawei.
The Big Tech oligopoly market structure is not highly competitive since a few firms dominate the market, mostly concentrated. Apple Inc.'s market decision making is dependent on the anticipated move by competitors. An increase in the price of Apple's products and services may be taken as an advantage by rivals. The main competitors of Apple Inc. are Samsung and Huawei. Samsung's investment in research and development has resulted in the company having a wide range of product portfolio than other industry players. Competitive pricing has helped Huawei and Samsung maintain their market while targeting new customers compared to Apple Inc.
c) Company growth, market share, brand and marketing
The market share of Apple Inc. has continued to grow due to the increased online and offline distribution and sustained brand loyalty. Apple has been registering low sales in some places due to lack of direct distribution channels, but this has improved and boosted their sales with time. Apple's market capitalization has managed to reach new heights due to the brand's growth, which translates into revenue. According to Forbes (2020), Apple revenues grew from $14 billion in 2017 to $142 billion in 2019 due to goodwill arising from the brand positioning. Apart from America and Europe, where Apple enjoys the largest market, aggressive marketing by the company over recent years has helped the penetration of Apple products in the Asian continent that has turned out to be a significant market segment for Apple Inc.
d) The financial statements
(i) Statement of Financial Position
The statement of financial position reports the financial assets, liabilities, and shareholders' equity of a firm (including capital) at a particular point in time. Any investor considering investing in Apple Inc. should be in a position to evaluate their financial performance represented in the financial statement to consider if it's worth investing in or not.
Assets
Apple Inc. relies on the assets to operate the company. The company assets have been divided into fixed and current assets. There has been an increase of current assets by $31,480 million from 2018to 2019. As indicated by Apple Inc.'s financial position statement, an increase in current assets shows that the company is in a position to meet its short-term obligations. Current assets can be converted easily into cash in case Apple Inc. faces financial challenges. There is a decrease of $58,609 million from 2018 to 2019 long-term assets, which can be attributed to the disposal of marketable securities and depreciation charge for the year.
Liabilities
Any monies that Apple Inc. owes the suppliers, bank lenders, and lenders can be classified as liabilities. The decrease of long-term liabilities and current liabilities from 2018 to 2019 by $10,550 and $10,211 indicates a cash outflow. It is a positive sign that Apple Inc. has paid most of its suppliers and creditors.
Shareholders' equity
Shareholders' equity is made up of retained earnings and the common stock. The shareholders' equity of Apple Inc. in 2019 stands at $90,488 that represents the equity base. A decrease in retained earnings in 2019 indicates Apple Inc. has used earnings to pay dividends to common stock shareholders as well as for investment.
(ii) Income statement
The income statement of a company shows revenue and expenses for a particular period. Apple Inc.'s operational profitability can be understood through analyses of the profit and loss statement. The income statement comprises revenues, cost of goods sold, and subtracted expenses (Profit-Expenses) to arrive at the profits.
Revenues
There is a decrease in gross profit by $3,447 in the year 2019 from 2018. A decrease in gross margin can be attributed to a reduction in net sales compared to the year 2018. Product sales declined sharply by $3,168 million, while service sales went up marginally by $1,194, which can be linked to the decline in gross profit.
Cost of sales
The total cost of sales for Apple Inc. decreased by a margin of $1,974 million from 2018 to 2019. A decrease in the cost of sales for products in 2019 indicates reduced direct costs, while a higher cost of sales for services in the same year suggests increasing direct costs for services. It also shows that Apple Inc. has decreased their inventories, reducing the risks associated with holding stocks.
Operating Expenses
Apple Inc. generally has been experiencing an increase in operating expenses. Research and development expenses have increased from $14,236 million in 2018 to $16,217 million in 2019. An increase in research expenses shows how the company is dedicated to producing goods and services re-engineered to match the current technology. It also indicates how Apple Inc. is committed to the continuous improvement of its products through research insights. Selling and administrative expenses have also increased by a margin of $1,540 million in the year 2019. An increase in administrative costs indicates that the company's managerial expenses and costs incurred to make sales have increased.
e) Financial analysis key numbers
Apple Inc. Financial analysis key numbers that will be used for analysis are from the statement of financial position and income statement. Statement of financial position will offer the most critical numbers in the calculation of various ratios. Current assets, current liabilities, and cost of goods sold figures will be used to calculate liquidity ratios. Long-term and short-term borrowing together with shareholders' equity key figures will be used for solvency ratios. A combination of financial statement and balance sheet key figures will be used for profitability, efficiency, and performance ratios.
f) Calculations of Financial ratios
Financial ratios are numerical figures obtained by dividing or multiplying two or more figures taken from a company's financial statements. The use of these ratios can evaluate the overall financial situation and the future course of action. Strengths and the weakness of the company's financial performance can be assessed through financial ratios.
g) Strengths and weaknesses of financial position through financial ratios
Financial statement weaknesses and strengths for Apple Inc. can be analyzed through calculations of financial ratios. The ratios will help the company evaluate its performance in the short term and long term.
Liquidity ratios
Liquidity ratios help the company determine if it's in a position to pay the short-term debts obligations when and as they fall due (Bogdan et al., 2012). The ratios help determine if Apple Inc. can use its liquid or current assets to cover its current liabilities. Current ratios value above 1, as indicated by Apple, show that the company can pay its current liabilities with its current asset. The current ratio of Apple increased from...