Profitability
Essays

Apple (NASDAQ: AAPL) has emerged as one of the most profitable and prolific companies in the world, generating a market capitalization rate of $623B as of this writing in late August, 2012, delivering $148B in Revenues in their latest fiscal year and $40B in Net Income (Apple Investor Relations, 2012). One of Apple's greatest strengths is its ability to quickly translate innovative product concepts and designs into state-of-the-art products that deliver exceptional customer experiences. Apple has honed this through decades of disciplined execution and a continual focus on creating a highly synchronized supply chain, highly collaborative product design and development workflows, and the ability to take concepts to completed products in a fraction of the time of their competitors (Murray, Goode, Muro, 2010). Apple is credited with creating the smartphone market, tablet PC, cloud-based music buying and delivery service (iTunes), centralized document and image storage (iCloud) and more innovations in operating systems in the last five years than Microsoft (Apple Investor Relations, 2012). All of these accomplishments taken together have led to Apple creating a catalyst of growth in the tablet PC market, fueling a 100%+ increase in iPad sales (13% year over year) and iPhone sales that have increased 152% over the last eighteen months as well (Apple Investor Relations, 2012). Apple continues to accelerate the sales of their iPad, iPhone, iTouch devices in addition to its mainstream laptops and systems. Apple is able to accomplish these significant results by concentrating on the execution of its value chain, a decades-only concept that Dr. Michael Porter originally created to illustrate how the functional departments of a company all must be synchronized to deliver profitability (Porter, 2008). Apple's value chain is exceptionally effective in managing the coordinating of supply chain, sourcing, quality management, production, product design, marketing services, logistics and retailing operations. As long as two decades ago Apple had been concentrating on how to create this level of synchronization across their entire enterprise (Larson, 1994). As the business model of Apple has continually become more complex, the ability of the organization to stay agile and quick to respond has increasingly become more difficult. This is a common problem companies have as they grow in size and complexity of their business models. For Apple, the environmental factors in the areas of economic, social, technological and political change have challenged their ability to grow, and also forced them to create a more market-driven organizational structure, abandoning the highly successful product divisions of the 1990s and early 2000 timeframe (Apple Investor Relations, 2012). The intent of this analysis is to evaluate how Apple is managing to continually grow despite economic, social, technological and political environmental forces impacting their business. In addition, an analysis of their market environment, response to the turbulent economic environment they operate in, the nature of their product strategies, an assessment of their strategic direction and strategic options are all included in this analysis. A separate section is included for each of these areas throughout the analysis. The Porter Fives Forces Model is used for analyzing these market dynamics (Porter, 2008).

The automotive industry is characterized with low margins and high fixed asset ratios. Plants, property, equipment and inventory are relatively fixed in the long run which creates problems in regards to profits margins. Nissan, as the case indicates, had the unique problem of culture which also plagued the growth of the company. Worker, in particular, those in Japan, worked with the expectation of having a position until retirement. This is in stark contrast to many of Nissan's American rivals who will cut employment during periods of economic pessimism.

The leadership style of Carl-Henric Svanberg can be explained in terms of the context of the leadership situation. Svanberg's appointment as CEO of Erikson was an unprecedented move in the history of the company because he was the first CEO to be brought in from outside the industry. This created some discomfort to people within the organization. But most external to the company also felt optimistic about his taking control of the affairs of the company. The company itself was passing through a historic crisis in the form of declining profitability and a shrinking market. Network operators had ceased expanding their infrastructure which was a big blow to the growth Erikson had been experiencing for almost a decade.

Verizon Communications (NYSE: VZ) is one of the world's leading providers of wireless and wireline-based communication services including broadband, data, network access and global internet protocol (IP) Services. In their latest full fiscal year the company reported revenues of $110, 875 million with an operating profit of $12,880 million during FY2011 (Verizon Investor Relations, 2012). At present the company has 192,000 employees and operates in 150 nations both in a franchised and direct selling model (Verizon Investor Relations, 2012). The strengths, weaknesses, opportunities and threats (SWOT) of Verizon are the basis of this analysis. Strengths Verizon continues to have a commanding market presence globally with one of the most profitable brands in the telecommunications industry (Brown, 2010). The strength of their brand has given the company the ability to manage customer churn more effectively than competitors, reducing the relative churn rate of customers by 56% over the last three years while competitors have seen churn rates increase by over 67% (Verizon Investor Relations, 2012). The combination of the Verizon brand stability and customer loyalty has given the company a unique level of stability in a very turbulent global telecommunications market (Zoakos, 2002). Another significant strength of Verizon is their ability to orchestrate and complete alliances, mergers and questions quickly. They have also been one of the few telecommunications companies to pioneer the development of effective shared-risk mergers that drastically reduce the downside risk of being an industry consolidator, a role they continue to take on globally (Peaks, Arbogast, O'Keefe, 2009). The well orchestrated acquisition of Alltel by AT&T that Verizon played a central role in is a case in point (Seidenberg, 2002). Verizon also is moving aggressively into new markets including cloud computing using their core strengths in mergers and acquisitions. An example of this strength is the company's recent $1.4B acquisition of Terremark (Ya, 2011). Verizon continues to aggressively and successfully pursue an inorganic growth strategy by concentrating on mergers and acquisitions to bring greater cloud-based innovations to their customers (Gorski, 2005). Verizon continues to also seek out opportunities to define advanced e-commerce encryption standards globally, looking to become the global e-commerce platform at the infrastructure level for enterprises (Everett, 2012).

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