Apple Company

APPLE COMPANY ON EDUCATION SECTOR

Apple Company on Education Sector

Financial Analysis

In essence, the financial analysis of Apple would come in handy in efforts to assess its performance over time. Data for the analysis will be sourced from the Form 10K statements the company has filed over the last 5 years. Table 1 captures the key metrics that were used in the analysis of the performance of Apple.

From the onset, it is clear from Table 1 that Apple’s net sales have been on an upward trend over the last 5 years – i.e. from $ 229,234 million in 2017 to $ 365,817 million in 2021 (Apple, 2022). This represents a 59.6% growth in net sales over the 5 year period. The company’s net income has also exhibited a similar trend – with an impressive 95.8% growth in net income having been registered between 2017 and 2021 (Apple, 2022). The company’s operating expenses over the last 5 years increased by 63.5%.

The return on equity (ROE) ratio happens to be a crucial profitability ratio. This is more so the case given that as Brigham and Houston (2015) points out, it could be considered “the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firm’s stock” (193). It is clear that Apple has been effective in the conversion of its equity financing into profits. This is more so the case given that as can be seen in table 1, this key ratio has been on an upward trend over the last 5 years – i.e. from a ROE of 0.36 in 2017 to a ROE of 1.50 in 2021. Thus, in essence, for every dollar invested by shareholders in Apple in 2017, the company was able to generate 0.36 dollars of net income. On the other hand, for every dollar invested by shareholders in Apple in 2021, the company was able to generate an impressive $1.50 of net income. When it comes to return on assets (ROA), the sustained increase in the same over the 5-year period demonstrates that Apple has further enhanced its ability to effectively utilize its assets to generate profits.

Item

Net sales

Operating expenses

Net income

Return on equity

Return on assets

Table 1

NB: Figures in millions except financial ratio results

Internal Strengths and Weaknesses

a) Strengths

i. Innovativeness: Apple happens to be one of the most innovative enterprises in operation today. As a matter of fact, the company has in the past been named the most innovative enterprise in various surveys (Markander, 2020). Thanks to the said innovativeness, Apple has continued to benefit in as far as enhanced competitiveness is concerned.

ii. Customer focus: The ability of the company to align its processes with not only the expectations of customers, but also their needs could be considered a unique capability on the part of Apple. The company has been able to achieve this feat by investing in market research as well as development.

iii. Competent employees: Employees happen to be a key resource for any enterprise. Over time, Apple has put systems in place to ensure that it is able to attract, hire and retain the most skillful and competent employees. The company’s CEO has in the past indicated that some of key traits the company seeks out are: expertise, curiosity, creativity, and ability to collaborate (Taylor, 2022).

b) Weaknesses

i. Premium pricing: All of Apple’s products happen to be priced at relatively high price in comparison to the competition. This could have a negative impact on the company’s sales in the event of a sustained and widespread downturn in economic activity. In such a case, the decrease in disposable incomes could see people slash their spending on items or products they consider highly priced.

ii. Compatibility issues: To a large extent, Apple makes products that largely rely on in-house technologies as well as software. This essentially means that customers who are dissatisfied with certain Apple tools, i.e. apps, may be forced to reconsider their utilization of Apple devices.

iii. Overreliance on iPhone Sale: On the basis of financial data presented in the company’s Form 10k, Apple happens to derive most of its revenue from a single product, i.e. the iPhone. As a matter of fact, in the year 2021, iPhone category net sales were captured as $191,973 million. This accounted for more than half of total net sales - with sales in other product categories, i.e. Mac, iPad, and wearables and accessories being $35,190 million, 31,862 million, and 38,367million respectively (Apple, 2022).

Assessment of Competitive Advantages: VRIO Framework

In essence, the VRIO framework – as Hiller, Ross, and Westerfield (2020) indicate, is a key “strategic planning tool designed to help organizations uncover and protect the resources and capabilities that give them a long-term competitive advantage” (211). The table below highlights three competitive advantages of Apple using the VRIO framework.

Competitive advantages

Value (V)

Rarity (R)

Imitability (I)

Organization (O)

Innovativeness

Product quality

Brand recognition

Table 2

When it comes to innovativeness, it should be noted that there is no doubt that Apple is a hugely innovative enterprise. This gives the company a unique competitive advantage. Podolny and Hansen (2020) indicate that the company is organized for innovation on multiple fronts and it is for this reason that it manages to maintain a high innovation rate across multiple product categories – which is in itself a rare feat.

The company also strives to ensure that it offers the market premium products and services. To a large extent, this happens to be one of the most outstanding property of the company’s products. This could be viewed from the perspective of one of Porter’s generic strategies, i.e. differentiation. Essentially, Apple’s products are more exclusive in comparison to similar products from the company’s competitors. Apple’s commitment to product quality has been part and parcel of the company’s manifesto from the onset.