Internet and Global Finance Strategies Research Paper
- Length: 20 pages
- Sources: 10
- Subject: Education - Computers
- Type: Research Paper
- Paper: #17580218
Excerpt from Research Paper :
Internet and Global Finance Strategies
Within the present competitive business environment, firms are continuously looking for various strategies to be ahead of their competitors and achieve competitive market advantages. Many firms have identified that internet technology is a powerful tool to enhance competitive market advantages. The traditional organizations have identified that internet is a powerful tool to deliver value to customer and presently, the internet technology has enabled firms to coordinate and interact their value chain activities to customer with the objective of improving financial performances. These changes generally refer to as NBT (Net-based business transformation). The net-based business transformation is the substitution of traditional business operations from paper, fax and telephone-based communication into electronic business transactions with the objective to enhance tighter coordination with customer and suppliers, increase inventory turnover, enhance customer satisfaction, and improve time-to-market. Despite the potential benefits of internet to the improvement of firms' financial performances, there is still lack of systematic evidence regarding the process through which the internet contributes to the financial performances of Apple Inc.
Objective of this study is to investigate the impact of internet on the revenue and profitability of Apple Inc. within 5-year span between 2008 and 2012.
The model of financial performance and digitalization argues that the major goal that makes firms to engage in net-based business is to improve their financial performances. Typically, firms' objective to engage in the internet based investment is to improve firms business value, which include profitability, market share, ROA (return on assets), ROE (return on equity), and gross margin. According to the model, the driving force that makes firms to engage in the net-based business is to enhance financial performances. The model further reveals that the strategy to evaluate a company financial performances is to use financial ratio tools which include ROA, ROE, gross profit margin, price-earning ratio, current ratio, quick ratio, gearing ratio, and evaluation of firm's balance sheet and comprehensive income statements. (The Irish Times). The study uses the model of financial performances and digitalization to investigate the impact of internet on the revenue and profitability of Apple Inc.
Apple Inc., formerly known as Apple Computer Inc., is a multinational Hi- tech company that designs, develops and sells computer software, personal computer and computer electronics. The company is the second largest IT (information technology) company by revenue. In 2012, Fortune listed Apple as the most admired company in the United States. The best-known company products are iPhone, iPad, and iPod music player. The company software includes iTunes media browser, iOS operating systems, and the Safari web browser. Apple Inc. has been the major Hi-Tech company that takes advantage of internet to boost its profitability within the last 5 years. Apple sells its product globally through online stores, third part cellular carriers, retail stores and direct sale forces. (Apple 2012 Annual Report).
The paper provides the comprehensive impact of internet on Apple Inc. financial performance between 2008 and 2012. The paper uses the 5-year financial records of Apple Inc. To evaluate the impact of internet on the company financial performances.
Impact of Internet on the Apple Inc. Financial Performances
Bughin, et al. argue that internet has changed the way million of organizations transact businesses globally. Essentially, internet has become an essential component for billion of people and businesses around the world.
"The adoption and use of ICTs such as the Internet makes it cheaper and easier for firms to extend their markets, manage their operations, and coordinate value chains across borders. By lowering the costs of transactions and information, technology has reduced market frictions and provided signi-can't impetus to the process of broadening world markets. ICT fosters globalization by declining coordination and transaction costs and creating new and expanded markets with economies of scale." (Kraemer, Gibbs, and Dedrick, 323-324)
Apple Inc. has used the internet to revolutionize the method the company offers its product and services to customer. Typically, iTune is one of the unique Apple's products. iTunes is a free application that allows Apple consumer to download different applications into their smart phone, personal computer, iPod, iPhone, and Apple TV. With internet technologies, it is possible for consumer globally to download the applications, organize music, and browse movies and TV shows. Moreover, Apple Inc. also introduces iCloud, which assists consumer to instantly access the iTune library on their iPhones or personal computers. With the power of internet technologies, Apple has tremendously increased its profitability in the last 10 years. For example, the iTune contents have reached one billion people in February 2013. Apart from individual consumers who download iTune contents for personal enjoyment through the internet, educators in 30 countries create iTune U. courses to deliver educational materials to their students. More than 155 countries could access these education courses via iTune.
Moreover, Apple has used network of internet-online store to reach its customer worldwide. Since Apple operates in multiple countries, the company creates different online stores in all the countries that the company operates. Using internet technology, Apple has been able to reach its customer globally and the company has been able to its online store to sell varieties of its product and services, which include Apple iPhone, Mac, iPod, iPad, iTunes and other products.
Laudon & Marakas argue that Apple has taken the advantages of internet technology to launch the iTunes Music Store that creates a marketplace for the downloadable music. Apple also sells its products and services on the web and manages music digitally. The business solution assists the company to increase sales within the last 5 years. Thus, Apple uses the digital technology to gain competitive advantages within a market environment. Using the internet technologies to deliver superior sale performances, Apple has been able to improve the company financial performances between 2008 and 2012.
Analysis of Apple Sales
The internet technology that Apple integrated in its business operations made the company to record superior financial performances between 2008 and 2012. Since 2008, Apple has recorded a tremendous increase in the net sales. Net sales between 2011 and 2012 increased by 45% ($48.3 billion). Several factors contributed to the increase during the period. First, the company used the internet technology to boost the sales of iPhone using its online stores. For example, the iPhone net sales in 2012 was $80.5 Billion revealing the increase of 71% between 2011 and 2012 while the iPhone unit sales totaled 125 million in 2012 representing 71% increase between 2011 and 2012.
Between 2009 and 2010, Apple net sales increased by $22.3 Billion, which was 52% increased during the period. Typically, the company recorded net sales of $25.2 billion in 2010, which represented the increase of $22.3 Billion or 52% between 2009 and 2010. Between 2008 and 2009, the company net sales increased by 14%. Similarly, the company was able to record an increase in the net sales during the period because the company has used the internet technology to boost the sales of iPhone. The iPhone revenue between 2008 and 2009 was $13 billion revealing an increase of $6.3 billion (93%) between 2008 and 2009.
Moreover, the company takes the advantage of the internet technologies to sale other music related products between 2008 and 2012. Net sales of other music related product and services was $8.5 billion in 2012 revealing the increase of $2.2 Billion, 35% between 2011 and 2012. The increase was primarily due to the increase in the sales of iTune, which generated the total of sales of $7.5 billion in 2012 compared to $5.4 Billion net sales of iTune in 2011. The internet also increased the net sales of the music related products of Apple between 2008 and 2010. The company recorded the increase of $912 million in the music related sales in 2010 revealing an increase of 23% between 2009 and 2010. Moreover, the iTunes generated the total sales of $4.1 billion in 2010.
The Table 1 reveals the net sales and the net income of Apple Inc. between 2008 and 2012. Overview of the company financial records reveal that the company net income was $6.1 billion in 2008 and increased to $41.7 Billion in 2012 revealing the $35.6 billion or 583% increase in the net increase between 2008 and 2012.
Table 1: Apple Inc. Net sales and Net Income between 2008 and 2012 ($ Million)
Earnings per share:
Cash dividends declared per share (a)
Shares used in computing earnings per share:
Total cash, cash equivalents and marketable securities
Total long-term obligations (b)
Total shareholders' equity
The growth of internet technology around the world primarily contributes to…