Apple

Daniela Yovanov
BAM 479 Siena Height University
April 5, 2016

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Case Statement
Apple is the worlds leading retailer of computer hardware. The largest threats to
Apples competitive edge happen to be innovation and competitors drive to unseat Apple from
the number one spot.
Mission Statement
Apples Mission Statement is:
Apple Computer is committed to protecting the environment, health and safety
of our employees, customers and the global communities where we operate. We
recognize that by integrating sound environmental, health and safety
management practices into all aspects of our business, we can offer
technologically innovative products and services while conserving and enhancing
recourses for future generations. Apple strives for continuous improvement in
our environmental, health and safety management systems and in the
environmental quality of our products, processes and services (David, 2013, p.
263).

Component

Component

Customer

Products/
Services

yes

yes

Component

Component

Component

Component

Component

Component

Component

Markets

Technology

Concern for
Survival,
growth,
profitability

Philosophy

SelfConcept

Concern for
Public image

Concern for
employees

yes

yes

yes

yes

no

yes

yes

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This mission statement clearly hits eight out of the nine essential components of a
mission statement. Technology obviously is a key component of this mission statement due to
Apple being a major force in the technology industry; this is clearly stated by offering
technological innovation with products and services and enhancing these resources and
products for many generations to come. The market has broadly stated that they are involved
in global communities. It is interpreted as saying that no matter how rich or poor the country
one lives in Apple will be there in one way or another, either through technology or protecting
the environment. Even though this mission statement does not clearly define its products and
services it has to offer, it just states it will offer them and that they will be innovative. Not
clearly defining a product or service gives Apple the opportunity to branch out and become
whatever they need at any given point in time. Apple is very concerned for the wellbeing, not
only of its employees, but also with their customers and the environment. This shows that
there philosophy is about the concern for all three of those things and also ways to help each
persons health, safety and the planet for future generations. Public image is at the forefront of
Apples mission statement. The very first concern is to protecting the environment, by which
shows how strongly Apple take this matter to the heart of their business. Lastly the concern for
growth is evitable by stating that Apple is striving for continuous improvement.
The one component Apple has left out is self-concept. They do not perpetuate that they
have a superior competitive advantage over others in the same industry, because it does not
need to be said.
Vision Statement

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Apple vision statement says a lot without clearly defining anything, here it is Apple is
committed to bringing the best personal computing experience to students, educators, creative
professionals and consumers around the world through its innovative hardware, software and
Internet offerings (David, 2013, p. 263). Apples vision statement is everything they want to be
as a business and the promise that they will do it and be the absolute best at it.
Milestones
Apple has always been about the next best thing. Coming up with products that surpass
the old ones and nudging customers to buy the newest and greatest thing they are offering.
Also Apple is always about innovation making things more hand held and lighter, which has
been a driving force to some of these milestones. Apples key mile stones are:
1978 Apple became one of the most rapid growing companies in the United
States
1980s Apple Launch Macintosh
1985 Steve Jobs fired
1996 Steve Jobs comes back as CEO
2001 IPod is launched
2007 Apple introduces IPhone
2010 Apple launches IPad
2011 Apple became the most valuable company in the world.
2015 Apple launches Apple watch
* Apple Press Info
External Assessments
Below are the key external factors facing Apples business. Some are great strengths to
the company and some show how weak Apple truly is.

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Key External Factors

Weight

Rating

Weighted
Score

Strengths
1.

Online Presence

.06

.12

2.

Retail stores

.07

.07

3.

Customer Loyalty

.12

.48

4.

International sales

.08

.24

5.

Brand recognition

.11

.44

6.

Virus and worms threats on systems

.09

.18

Weaknesses
1.

Phone Competitors

.08

.08

2.

Computer Hardware Competitors

.08

.16

3.

Recession (cost of products)

.09

.18

4.

Operating systems compatibility

.08

.32

5.

Rivals quickly duplicating products

.11

.44

6.

Cloud based music

.03

.03

TOTAL

1.00

2.74

A strength that Apple has over the industry is its brand recognition. Everyone knows
what an IPhone or IPad are. IPhones are used all over the world as cell phones on television
shows and commercial. This helps Apple out tremendously by marketing the product without
ever having to say a word.
The other great strength that Apple has over other competitors in the industry is the
amount of brand loyalty they have. Other hardware and software providers gain and lose

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people based on the newest product out there. Since most devices are universal people switch
brands all the time. But not Apple users once they get hooked they remain loyal to the brand.
Every time a new product comes out they want it because the new product can do something
amazing that their current product cant, so they upgrade and buy a new device. This is not
always the case for the other competitors products.
A weakness that Apple suffers from that other competitors dont is the economic
recession. Apples products cost a great deal to produce and are rarely on sale. There is no way
for the product cost to go down for apple as it does with other competitors, because they dont
own the manufacturing process they use third party vendors for that (David, 2013).
Another weakness that apple suffers from is that their products get replicated. Apple is
always on the forefront of new and improved products. With Apple always being on the
forefront of innovation, they would never attempt to copy another companys ideas and
products.
Overall Apple is doing very well on the External Factor Evaluation (EFE) with an average
score of 2.74. This however does leave room for some growth and improvements within the
industry.
Internal Assessments

When doing an internal assessment of a company you have to focus on the strengths
and weakness of a company compared to what others are doing. Since Apple is part of the

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technology/ hardware sector and is a very competitive industry; getting a competitive
advantage can be difficult, but Apple does have some advantages.
Key Internal Factors

Weight

Rating

Weighted
Score

Strengths
1.

First- Mover company

.11

.44

Gaining strength in selling to businesses

internal network systems
3.
Hands on Marketing

.08

.24

.08

.24

4.

Experienced employees

.09

.36

5.

Increased Europe sales by 58%

.06

.24

6.

Updated stores

.07

.28

7.

Quality products

.07

.21

2.

Weaknesses
1.

High cost of production

.08

.08

2.

38% of Business is driven by the IPhone

.07

.14

3.

High Marketing expense

.07

.14

Japan and Asia Markets are week verse

volume of people
5.
Cost to outfit all employees with devices

.06

.06

.05

.10

6.

No new products just up grades

.06

.06

7.

Selling price for computers is high

.05

.10

4.

TOTAL

1.00

2.69

*Cited in David, 2013

On the internal side the most important strength Apple has is that it is a First-Mover
company, which means that it is always on the forefront of any new product. They are willing

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to be the first so that they can capitalize on it and wait for the rest of the technology sector to
catch up. This is a very important part of all Apple products. Apple likes to do a big show off of
their new products in a release, so that consumers have to get on waiting lists to have the next
generation item.
One of the other high scoring items on the IFE Matrix is experienced employees. Apple
demands that all the employees know and use their products. Because someone who uses the
product can sell it to a customer better than someone who just reads about it. The experience
that the employees create for the potential customer is extremely important to Apples brand.
The last highest score is on the weakness side of IEF Matrix. It has to do with the high
production cost associated with all products. Since the products are proprietary and not just
any vendor can make it, Apple is at the mercy of the producer and its factory. This means that
they have no cost break in any production line which other competitors do.
The overall score for Apples IEF Matrix is 2.69. This tells Apples management that they
are above the average midpoint. Apple is using its strengths really well while continuing to
struggle with weakness internationally. Being able to bring down cost would really help Apple
bring that number above a 3.00. Since the highest score a company can get is a 4.00 Apple is on
the higher end, but all companies should aim to be above a 2.50 to just show that the strengths
are greater than their weakness.
SWOT Analysis
When completing a SWOT Analysis you look at the greatest strengths, weakness,
opportunities and threats of your business. You do this to get an idea of different strategies
you can complete and the obstacles that stand in your way

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Apples strength is its customers. People love the brand and are really loyal to the
product. This aspect is what most companies are looking to achieve in their business and Apple
has done it and done it very well. It is not easy to keep customers because people can be fickle
so whatever the strategy Apple is using they should keep it up.
Another weakness that Apple has is that people are always duplicating their product.
Sure they get the initial sales, but consumers know that if Apple is doing something amazing
just wait a year and another company will have something comparable. Now Apple really
hopes that those people wont wait and just join the team and become a loyal Apple user, but
that does not always work. Apple users know that the knock off will never be as great as the
Apple product, but those other users have no idea what they are missing out on.
The best opportunity that Apple has is to bring down the cost of production. They have
to find a better way to produce products where the cost is not so extreme. Apple computers
cost soar way above its competitors (David, 2013). So if they can get some of that cost down
then maybe they will have better sales and be comparable to other companies on that front.
Apples threats are really low when it comes to competitors. The only real threat to
Apple at this stage is its self. Apple has seen down falls and times without innovation and new
products. So the real threat is to see if Apple can keep it up or will they suffer due to over
exposure.

Industry Analysis
Porters Five Forces model to asses Apple Inc. outlines who and what the competitors
are. The five forces are as follows:

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1. Rivalry among competing firms
2. Potential entry of new competitors
3. Potential development of substitute products
4. Bargaining power of suppliers
5. Bargaining power of consumers

First, rivalry is very vast in the technology/computer hardware sector. Every major
company wishes that they could get a competitive advantage over Apple by launching a new
product that blows iPhones and hand held computers out of the water. The largest and most
notable rivalry is with Microsoft. Microsofts operating system is on most computers
worldwide (David, 2013, p 262-271). This rivalry started many years ago in the race to get the
first computer to the public and has never died. At one point Microsoft offered Apple to help
configure iOS operating system to be compatible with windows, but that was turned down by
Steve Jobs.
The potential of new competitors comes in a very surprising place. Google has thrown
its hat into the digital cloud based music arena (David, 2013, p 262-271). Besides that there
really is no other company that can compete with Apple. The way that Apple has strived to be
at the forefront of technology has really scared away any new potential competitors.
Potential development of substitute products category of Porters Five Forces is really
the down fall of Apple at this stage. Companies are always waiting for Apple to show off its
latest product so that they can start to create a knock off of it. There are numerous substitute
products, but one company that is doing a great job when it comes to creating these knock-

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off products is Samsung. They have everything from touch screen app driven phones to hand
held computers. They unveil these new products months after Apple releases its latest
updates.
The power of suppliers is great for apple. As stated previously the suppliers have Apple
over a barrel, they are the only facilities capable to produce the products. This in turn has given
Apple more of an advantage, because what else would these manufactures produce if not for
Apple. Because they know that Apple is not going anywhere and they will be in business for
many years together. So the fight for power goes back and forth between the suppliers and
Apple. To help insure quality products Apple is very strict with their suppliers/manufactures
Our Supplier Code of Conduct is one of the strictest in the industry. But we do more than just
hold our suppliers accountable to these standards we work with them and provide the
support they need to operate responsibly (Accountability - Supplier Responsibility). This is an
example of how Apple has some bargaining power, because of this code and the
suppliers/manufactures are compensated very well from Apple as well.
Consumers have a unique bargaining power. There are two types one is where they are
die hard Apple fans so that they in turn have no bargaining power. People are always looking
for the latest and greatest from Apple and they are willing to pay top dollar for it. This is due to
great marketing and the annual convention that Apple puts on to show its newest features and
products. Apple really drives up the need for the new product by announcing it months in
advance and allowing the consumer to pre-order. But it doesnt stop at that, Apple relies on
people wanting to keep up with their friends and what they see in movies and TV by having the
newest products as soon as they are available.

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The second type of bargaining power is where the customer controls it all. You dont
have to have an Apple product; you can go with and android or windows device. These types of
people dont care about what type of devices they are using they just want one that works well
and that they can afford.

Competitive Strategies
SWOT Matrix
Below is the SWOT Matrix for Apple. It shows the main Strengths, Weakness,
Opportunities and Threats that face Apple. This tool helps managers to come up with strategies
to utilize the key internal and external factors (David, 2013, p 262-271). These strategies are to
help management come up with plans to execute the changes needed to help the business
grow and change.

Opportunities
1. Getting into the
Business sector with
products
2. Brand Loyalty
3. New Products
4.

Strengths
1. Customer Loyalty
2. Products( IPhone,
IPad, Apple
Computers
3. Innovation
4. Revenues

Weaknesses
1. Operating System not
widely used
2. Incompatibility with
some apps
3. Bugs in new IOS
4. Cost

SO Strategies
1. Accruing new
companies to
eliminate startups and
purchase new
products.
(S1,S2,S3,O1,O3)
2. Increasing
opportunities for
business by having
networking

WO Strategies
1. Find a way to comingle
operating systems to run
together.(W1,W2,W4,O1
,O3)
2. More testing before
launching new
IOS.(W3,O2)

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Threats
1. Competing
Companys
replications
2. Apple
3. Online/ Cloud Based
music

capabilities.(O1, O2,
S3, S4)
ST Strategies
1. Creating and
patenting more
intellectual
property.(S3,S2,S4,T1,
T3)
2. Standing in the way of
itself( T2, S1, S2)

WT Strategies
1. Creating a more diverse
portfolio of products to
deal with replication and
new competitors.
(T1,T3,W1,W2)
2. Making Customers Happy
(W4,T2)

The table above has brought some great missed opportunities and other important key
strategies for Apples upper management to look over. Below is an explanation of each cell in
the chart.

Strengths
The strengths listed are key items in Apple business plan. By creating customer loyalty
and creating great products this helps to make Apple the business it is. All of these innovations
help to create a great deal of revenue for Apple. It is easy to see why they are leaps and
bounds ahead of other Technology Business (David, 2013, p 262-271).

Opportunities
Apple like any other technology business has nothing but the future to look at, since
these types of companies control how fast technology changes. As always there are going to be
new products and this is a great place for Apple to focus on since they have only had updates
and few new products since the IPad came out. A great place for them to start is to get into the
business sector and offer companies networking solutions and management software.

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As always every company wants brand loyalty and Apple is no different. This is a place
that Apple needs to refocus its efforts. They have customer loyalty with buying certain
products over and over, but they have not reached the height of consumers becoming
completely outfitted with Apple. To do this they need a person to have a phone, hand held
computer and a laptop or a desktop. But for this to happen Apple needs to be able to integrate
its operating system with other operating systems people are more familiar with using in their
day to day world.

Weakness
As stated in the above paragraph having a compatible operating system has really
created a loss for Apple. Also being unable to be compatible with Android apps has caused
problems for a lot of consumers. These customers dont care that there is a war between
android and Apple that they just want to have that cool app their friend has. Another weakness
that is causing problems is that after every IOS update there has to be an update to fix bugs
that it created. And lastly all companies in the tech world struggle to keep the cost of producing
their products and Apple is no different.

Threats
The major threats seem to be coming from outside sources. There are other businesses
ridding on the coattails of new Apple products by knocking them off. Then other companies are
just trying to make their product portfolio more expansive by trying to move into the territory

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that Apple has monopolized for years. Lastly consumer opinion of how the companies handle
outside forces in the media can threat its reputation.

SO Strategies
Obviously Apples main SO strategy is to acquire new companies by eliminating startups
and purchasing new products. The reason for purchasing new products from existing
businesses is to help cut down on the cost of starting all over and creating similar products on a
platform that already exist. Now this strategy seems a bit out of the ordinary, but Apple has
done this many times in the past and it has worked well for their company. Now this strategy is
not easy to pursue with the current state of technology. Apple needs to be very careful of the
businesses it acquires so that other competitors do not attempt to acquire them as well. Since
the tech industry is all about trade secrets and finding the best ways of creating the newest
products that consumers will want, Apple has to do this in secret. With Apples current
financial situation they are able to purchase new startups with ease. They also want to be on
the forefront of any new possible programming and added features for any mobile or handheld
device, because they have purchased so many startups that have had amazing ideas or coding
that has helped Apple stay ahead of the game. When purchasing startups or existing products
Apple has to remember that some of the greatest inventions have come out of failures.
The second strategy is Apple increasing opportunities for businesses by having
networking capabilities. Businesses are tired of relying on Microsoft with all of their virus
problems and are looking for a better solution (David, 2013, p 262-271). Apple has to move
into the business sector. The business sector is going to be hard for Apple to break into due to

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the fact that most businesses want a tried and trusted network. These businesses do not want
to be beta testing and run into problems that could affect their day-to-day processes. They
way around people being unsure of the potential of Apples networking ability is to get some
big business beta testing along with current network so they can see and give testimonials to
other companies on how great it is. Also this will help Apple in the background to better offer
assistance when problems arise with trouble shooting.

ST Strategies
Apples products getting replicated really puts the business in a sore spot. Every
company is coming out with something similar because there are no patents or intellectual
property rights. They need to change this. Now patents are a tricky subject, keeping your
employees happy and not working them to death so they leave is important. Apple struggled
with this when Steve Jobs was in control, but it seems they are trying to change this mentality.
But once a business has a problem like that it is hard to change their reputation (1).
Apple needs to get out of its own way. There have been times in Apples history that
they have been just riding the wave of its success (David, 2013, p 262-271). They cant do that
if they want to stay on top. They need to create new products, cut cost and realize that they
can diversify into other markets and other sectors of the technology sector.

WO Strategies
Looking at the weakness and the opportunities Apple has several great potential
strategies to choose from, one being a way to make the operating system integrate and

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comingle with other operating systems. Apple had this opportunity a long time ago and
declined the offer to work with Microsoft (David, 2013, p 262-271). This was a great mistake,
but all companies have at least one and now Apple has to find a way to work around it now.
The problem will be changing the operating system to work with Microsoft all on Apples side
since there is no indication that Microsoft will help Apple out. Once that is figure out, it will
take time, but eventually it will be well worth all the effort to have an integrated system
platform
Brand loyalty comes at a cost when working with the public, because they feel like they
have a say in your business. In this day and age there are so many avenues for someone to
voice complaints about any product. Apple just needs to do some more beta testing before
launching their updates and products. Apple controls all apps that are put into the app store,
so one would think that they would know if it was going to cause a problem or not when they
do an iOS update. In order to keep people happy Apple really needs to take a look at its length
in testing time and the number of testers. Since apple has so many generations of products you
never really know how it is going to work, which drives consumers crazy!

WT Strategies
This last strategy combines both the negatives of the SWOT matrix. The first strategy to
come out is one that all companies struggle with every day that there business has been open.
Which is how do you make the customer happy? The answer is simple do what they want you
to do. But for a large international company that is not so easy. With Apple struggling in the
Asia market they really need to focus more on helping that demographic without upsetting its

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already happy customers with change (David, 2013, p 262-271). Now this will take time and a
great deal of effort on Apples part, but in the end will definitely justify the means if they can
increase the Asia market without hurting other markets.
Most people know Apple as the creators of personal handheld technology, but they
need to diversify their portfolio. Creating other technology hardware and software will bring
them into a whole new market of people who need these products. HP does a great job of this
because it manufactures its own products so it keeps down product cost (David, 2013, p 262271). Apple needs to look into doing something similar. Now whether it be buying a startup or
adding partners they need to stay relevant not only to consumers, but to the business and
governmental sectors as well.

Financial Analysis
Growth Rate (%)
Sales (Revenue)
Q/Q (Last Year)
Net Income
YTD/YTD (Last Year)
Net Income
Q/Q (Last year)
Sales (Revenue)
5-Year Annual Average
Net Income
5-Year Annual Average

Company
1.70

Industry
1.52

35.10

21.18

1.90

1.87

29.08

107.75

30.70

23.96

Price Ratios
Current P/E Ratio
P/E Ratio 5-Year High
P/E Ratio 5-Year Low
Price/Sales Ratio
Price/Book Value

Company
11.30
14.33
4.72
2.58
4.59

Industry
11.93
24.10
12.23
1.80
3.49

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Profit Margins (%)
Gross Margin
Pre-Tax Margin
Net Profit Margin
Average Gross Margin
5-Year Annual Average
Average Pre-Tax Margin
5-Year Annual Average

Company
40.13
30.93
22.87
40.10

Industry
39.97
30.93
22.46
39.89

31.40

30.89

Financial Ratios
Debt/Equity Ratio
Current Ratio
Quick Ratio
Interest Coverage
Leverage Ratio

Company
.41
1.00
.82
83.77
2.29

Industry
.41
1.00
.82
82.36
2.32

Investment Returns
Return on equity %
( 5 year average)
Return on assets %
(5 year average)
Return on capital %
(5 year average)

Company
42.71
(39.00)
19.36
(22.70)
29.64
(33.30)

Industry
42.15
(37.37)
18.80
(20.90)
30.18
(32.81)

Management Efficiency
Income/ Employee
Inventory Turnover

Company
488.46k
59.43

Industry
164.49k
49.80

*Figures retrieved from http://www.msn.com/enus/money/stockdetails/analysis/fi126.1.AAPL.NAS?ocid=INSFIST10

Growth Rate
When you compare the growth rate of Apple Inc. to the rest of the industry the
numbers shows that Apple does better in all aspects except for the sales revenue for the five
year average. This figure is dramatically showing a, wide gap with Apple showing 29.08 and the
industry as a whole showing 107.75. This number can be a bit surprising when considering that
Apple is on the forefront of devices in the American market, but this is however not true

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overseas and this data helps to support that they are struggling when it comes to the point of
being a global company.

Price Ratios
The price ratios section shows the data of what an investor can expect to receive in
returns for every dollar put in, stock prices verses the revenue and market price of shares over
asset value. The data in this category is all over the place.
The P/E Ratio is very comparable to the industry with Apple having 11.30 and the
industry being at 11.93, which shows that right now Apple is as good as investment as any
other tech company out there and that you will be compensated for every dollar you put in.
However that is not the case when you look at the five year high and low of the P/E Ratio.
Apple has really struggled over the last five years with a low of 4.72 and a high of just 14.33.
The industry numbers have been significantly higher than apple with a low of just 12.23 and the
high of almost double that of 24.10. But in comparing the data you can see that the industry is
going down with the current year and apple is on the rise.
The Price/Sales Ratio and Price/Book Value show a very different story for Apple. Both
of them are higher than the industry with price/sales at 2.58 and price/ book at 4.59 and the
industry at 1.80 and 3.49 respectively.

Profit Margins
Profit margins shows the varying degrees of how profitable a company is in selling the
product or merchandise at varying stages of the income level. As stated in the chart Apple is

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slightly higher in every stage of profit margins. Which speaks volumes to the fact that apple is
making money and paying dividends even after taking out all the expense necessary to run the
company and complete production. Not only are they currently doing this but they have been
doing it very effectively for the past five years as well.

Financial Ratios
Financial Ratios is where we get into the meat and potatoes of the fact whether a
company can raise capital or has excessive debt that needs to be paid back. The data supports
the fact that apple is right on par with the industry. Apple and the industry use very little stock
holder equity to finance the companys assets with both of them being under 1 with a .41. This
leads right into the current ratio which shows if the firm can pay off all the debt in the next year
and they can both the industry and Apple are at 1.00.
The next ratio shows the companys liquidity. Which in turn means how fast can the
company raise short term capital and both Apple and the industry are at .82.

Investment Returns
There are three major areas when talking about the return of financial investments they
are return on equity, return on assets and return on capital. All three deal with the dollar
amount you receive in return for every dollar. The return on equity, which is the profits from
stockholder investments, is at 42.71 with a five year average of 39.00. This is above the
industry standards, which means that investors stockholders are receiving money back from
their investments and then some. The next figure of return on assets, which is the ability to

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earn a return on invested assets, is at 19.36 and 22.70 for the five year average this number is
not very high, but at least Apples numbers are better than the industry which is at 18.80 and
20.90. The last category is return on capital, which is profit from capital. This number
currently is not as high as the industry with 29.64 for Apple and 30.18 for the industry. Now the
5 year number is much better for Apple than for the industry by .49 but the key to the last
figure is showing how well Apple uses long term financing strategies and also capital.

Management Efficiency
The numbers for inventory turnover and income/employee show why Apple is a leader
in the tech industry. The inventory turnover is how many times in a year does apple sell its
entire inventory throughout the year. Apple does it almost 60 times compared to the industry
at almost 50. The next figure is crazy when you actually think about it. Each employee at apple
generates revenue for the company in an amount of $488,460.00 which is almost three times
more than the industry standard of $164,490.00.

Five Year Summary

Over the past 5 years apple has had some ups and downs. Most of them came in terms
of Price/Earnings ratios. But overall the company is right within the industry standards or
leading them. The company seems to be on the right track in terms of asset size versus the
liabilities. Every year Apple seems to grow and expand, so the next five years should be an
interesting time for all technology based companies since technology is advancing at such a
rapid pace. Something just five years old is out of date now and really cannot be used in

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compatibility with other products. So Apple is no different, as long as they keep inventing and
being innovative like they have done in the past, they will be around for many years to come.

Finance/ Accounting Checklist

Where is the firm financially strong and weak as indicated by financial ratio analyses?
o Apples financial strength really shows through when looking at Management
Efficiency. The way they sell their products and how much revenue each
employee generates really helps Apples bottom line.
o Apples greatest weakness as shown in all the data that has a five year average
seems to be the consistency of how they are doing compared to their
competitors. Apple really needs to stay close to them to have a fight chance
since production costs are so high.

Can the firm raise needed short-term capital?

o Based on the Quick Ratio Apple can raise any short term capital needed. The
industry and Apple are both well below 1.00 at 0.82. So yes they can raise any
short-term capital needed.

Can the firm raise needed long-term capital through debt and/or equity?
o Yes Apple can raise any long-term capital through either debt or equity. The
figure that best showcases this is the Return on Capital and Return on Equity.
The figures are both very competitive to the industry standards in some cases
even better than them. Also since the leverage ratio is lower than the industry
standards helps to show that they can finance a project through acquiring debt.

Yovanov-24

Does the firm have sufficient working capital?

o Yes based on the Return of Capital figure being higher than the industry
standards over the last 5 years. Showing that the return has been positive.

Are capital budgeting procedures effective?

o Since basing it on the current figures and the past five year averages Apple
seems to have excellent procedures since they are producing returns steadily.

Are dividend-payout policies reasonable?

o It seems that they do base on the Price to Book Values and the Price to Sales
Value. Both these number show that stockholders are receiving great returns
and dividends compared to the industry as a whole which makes Apple a sound
investment.

Does the firm have good relations with its investors and stockholders?
o Yes since both investors and stockholders are earning more money than they
have put in. This should make any person happy and have a great relationship
with the company.

Are the firms financial managers experienced and well trained?

o Based on all the figures of with a five year average Apple is on an upswing, so it
can be determined that management has something to do with the success of
the company.

QSPM
The Quantitative Strategic Planning Matrix below helps to determine how attractive one
of the potential strategies is to the company. What it does is takes all the EFE Matrix and the

Yovanov-25
IFE matrix and combines them. You next add your potential key alternative strategies and give
each one of the EFE and IFE an assigned weight under that strategy to determine how
important they are to the strategy. Then you take the assigned weight times the weight you
gave it in the other matrixes and come up with a total attractiveness score. Then you add them
up under each alternative strategy and you come up with a sum. The one with the highest sum
is the most attractive.
QSPM

STRATEGIC ALTERNATIVES
Working on
running
Microsoft
operating
systems
together

Key Factors
Opportunities

Weight
1.

Online Presence

2.
3.

Retail stores
Customer Loyalty

4.
5.

International sales
Brand recognition

6.

Virus and worms threats on systems

AS

TAS

.06
.07

Increasing
prescience
into the
business
sector

AS

TAS

Acquiring
new
companies
to eliminate
startups
and
purchase
new
products.
AS
TAS

.07

2
3

.12
.21
.36
.32

.12
.08

4
3

.48
.24

.32

3
4

.11

.22

.33

.11

.09

.36

.36

.08
.08
.09
.09

4
2
4

.32
.18
.36

2
4
1
1

.16
.32
.09
.09

3
3
1

.24
.24
.09

.44

.22

Threats
1.
2.
3.
4.
5.

Phone Competitors
Computer Hardware Competitors
Recession (cost of products)
Operating systems compatibility
Rivals quickly duplicating products

6.

Cloud based music

.11
.03

Strengths
1.

First- Mover company

.11

.11

.33

Yovanov-26
2.
3.
4.
5.
6.
7.

Gaining strength in selling to businesses

internal network systems
Hands on Marketing
Experienced employees
Increased Europe sales by 58%*
Updated stores
Quality products

.08
.08
.09
.06
.07

.32

.12

.07

.07

.08
.07
.07

.24

.06

.12

.05
.06

.18

.15
3.47

.32

.06

1
1
3

.08
.09
.18

.14

.28

2
2

.16
.14

1
2

.08
.14

.18

.06

.24

.10
3.01

.05
3.67

Weakness
1.
2.
3.
4.
5.

High cost of production

38% of Business is driven by the IPhone
High Marketing expense
Japan and Asia Markets are week verse
volume of people
Cost to outfit all employees with devices

6.
7.

No new products just upgrades

Selling price for computers is high

.05
TOTAL

The three strategies used are working on integrating and running Microsoft operating
systems together, increasing prescience into the business sector and acquiring new companies
to eliminate startups and purchase new products. Each one of the potential strategies has a
way to help Apple grow and improve as a company, but one in particular has a more
attractiveness to really help Apple improve their business.

Recommended Solution
The strategy that has the highest total attractiveness for Apple is to go out and buy out
startups and purchase new products for its portfolio. Now apple has been doing this for years.
Starting back in 1988 when they purchased Network Innovations to help make their computers
friendlier so that they could be networked together and not solely work independently (Apple
Press Info). Up to their most recent purchase of Augmented Reality, this allows a person to

Yovanov-27
have augmented or computer generated elements with live pictures (IPad - Life on iPad - New
eyes for hands-on surgery). The most recent purchase is also going to give Google glasses a run
for its money. Now it is being used to help in medical procedures.
The reason this evaluation had the highest score was because it hit on some of Apples
greatest strengths, weakness, opportunities and threats. The opportunities it hits on are retail
stores, customer loyalty, international sales and brand recognition. With buying up smaller
tech startups and purchasing new products it is going to really help out the retail store and
international sales because they will have new products and add on to help sell. With customer
loyalty and brand recognition, any time you can make your products better and have more
products available to purchase in your portfolio, it will help to keep people coming back time
and time again to purchase products from Apple.
The threats to this strategy are phone competitors, computer hardware competitors,
rivals quickly duplicating products and recession (cost of production). The main reason behind
Apple purchasing smaller companies is to make their products the best they can be and to help
be comparable to other business producing the same type of products. Now if Apple can buy
up these smaller companies who are just focusing on one item before their competitors can
then that will help them create a product that is potentially unreproducible.
Along with threats comes the weakness. The ones that effect this the most are high cost
of production, 38% of business is driven by the IPhone, Japan and Asia markets are weak verse
volume of people, no new products just upgrades and selling price for computers is high (David,
2013, p 262-271). Now most of these weakness will hopeful be overcome by adding new
products such as the Augmented Reality, but that is a long way off. These weaknesses are

Yovanov-28
always in the back of the mind at Apple and every solution needs to hit on a possible way to
change the weakness into strengths.
Lastly the strengths for the strategy are hands on marketing, increased Europe sales by
58%, First- Mover company, experienced employees and quality products (David, 2013, p
262-271). All these strengths will help Apple acquire new startup based on what they are
already doing and for Apple to know that they will continue to do the same thing with their
product as well.
Now Apple has purchased roughly 35 companies since 1988 and will continue to do so
but here are some of the options out there right now that people are whispering about. The
main ones have to do with Apple buying several big companies in a merger/ buyout (Apple
Press Info). Since Apple has a lot capital there has been speculations that they might purchase
a product from Telsa Motors for a smart car or purchase a social media platform so that they
can compete with Twitter (Gibson, 2015). There have also been talks over many years about
purchasing Yelp to help with Apples maps to keep it on par with google (Gibson, 2015). But the
option I like the best is to purchase GoPro. GoPro has had a disappointing last few quarters and
Apple is looking to get into the wearable cameras and it would be easier to acquire them then
to start from fresh (Booton, 2015). Also as most articles state the GoPro platform could help
with more video streaming applications for Apple. The possibilities are endless. No one truly
knows what Apple is going to do until they do it. No one ever thought they were going to
purchase Beats, but they did and it was out of nowhere.

Strategy Implementation

Yovanov-29
To go ahead with an accusation of this size several key things need to happen from
human resources, marketing, research and development and financing.

Human Resources

Getting the necessary people in place to handle a new project

Deciding on employ from GoPro

Marketing

Getting GoPro and Apple to agree on the acquisition

Research and Development

Figuring out how to adapt GoPro to Apple

Converting it

Maximizing GoPro Platform

Deciding to continue use or convert into something else

Financing

Figuring out how much to offer GoPro

Not over spending current Capital

Getting the necessary people on board to vote to finance the acquisition

Getting additional space for the new product

The most difficult part of this acquisition or any other is the research and development

portion. Since most possible products are intellectual property or patent Apple has no real idea
how it is going to work in their operating system. Lots of time and money are going to be spent
on converting it to IOS operating system and then to make sure everything works properly and

Yovanov-30
that they can successfully launch it out to the public. This will take lots of time and effort, but
Apple is up for the job.
The actual acquisition will only be about the money and if GoPro is willing to be bought
out. Apple has plenty of capital to purchase any company it is just a matter of if that company
fits into Apples philosophy and vision for the future of the company.
Ethical/Social Responsibility
Apple is a company that is very concerned about all types of ethical initiatives and social
issue. By purchasing GoPro Apple has to be concerned with keeping the integrity of the
company and its employees well-being in the front of the decision-making process. Apple also
has to be socially responsible about the production of the new product to not cause undue
harm to the people who work for GoPro or the surrounding towns where the manufacturing
takes place. For Apple the decision is not just about what place can save the most money but
about what will cause the greatest amount of undue-harm for the location of the
manufacturing center.
Implementation of the Plan

The cost to purchase GoPro for Apple would be around $2.5 billion, because GoPro is
going public (Booton, 2015). The cost is not absorbingly high, but that amount would mean
that Apple would have to do some financing to purchase GoPro. Now the implementation plan
for this is really easy since it would only take a matter of months before Apple could actually
launch the new product of a hybrid between an iPhone and GoPro (Booton, 2015). The steps

Yovanov-31
for achieving this plan is first; to purchase GoPro, second; decide on where GoPro is going to be
produced, whether it is in its current location or develop a new location, lastly; figure out the
integration with iPhones and for launching the new highbred product.
Marketing
Apple already has an extensive marketing plan in place for all devices so adding a new
product will not be any problem for Apple. If Apple and GoPro merge Apples markets remain
exactly the same as it has with all the other devices. Apple will launch it during its quarterly
gathering and also having an extensive marketing plan by having print ads commercials and
product placements just like any other product. The cost of marketing will be no different than
any other new Product. Apple heavily saturates consumers with multiple avenues of marketing
so that its product gets in peoples minds before the launch date.
Research and Development
Research and development will have a high cost with integrating the platform of GoPro
with Apples current iOS operating system. Now it will take current Apple employees and also
the existing GoPro employees to help make this successful. Not only will the cost be in paying
the actual employees to work on the integration but its deciding on where to house the
product and employees. Moving the production of a product to a facility that Apple approves of
could get expensive. This has to be a decision for upper management to decide on whether or
not to continue producing the product at its current location or to move it.

Yovanov-32
Human Resources
If Apple decides to leave GoPro and its headquarters where is currently located then it
will have to do some additional human resource management activities. Either way both
solutions work it just depends on what Apple thinks is best for watching the new product and
their corporate mentality. Obviously the most cost-efficient would be to use the current HR
department and house GoPro at its current location instead of moving it and creating a new
location to produce the hybrids. This can easily be done by the current HR department or
Apple can bring in a new human resource management professional.
Management Information Security

Apples management information system is already stellar. Adding GoPro to its online
and in-store products will be an easy. Since the system already exists it will be no problem to
add another product to it.

Financials
Apple will have to conduct an EPS/EBIT Analysis to see which solution is best to raise the
capital needed to purchase GoPro. The amount to purchase GoPro is 2.5 Billion. Now the plan
suggested does not include offering GoPro stock options to make up some of the purchase
price.

Amount Required - $2.5 Billion

Yovanov-33

EBIT Range $24,849- 73,550

Interest Rate 3.5%

Tax Rate 36%

Stock Price $105.00per share

#of shares 5.54B

EPS/EBIT Analysis (In Billions)

Common Stock Financing

Recession
Normal
Boom
EBIT
44,849
59,200
73,550
Interest 0
0
0
EBT
44,849
59,200
73,550
Taxes
16,146
21,312
26,478
EAT
28,703
37,888
47,072
Shares 5,608
5,608
5,608
EPS
5.12
6.76
8.39

Recession
44,849
1,570
43,279
15,581
27,698
5,540
5.00

70% Stock - 30% Debt

Normal
Boom
59,200
73,550
651
809
58,549
72,741
21,078
26,187
37,471
49,554
5,588
5,588
6.71
8.87

Recession
44,849
1,121
43,728
15,742
27,986
5,560
5.04

Recession
EBIT
44,849
Interest 493
EBT
44,356
Taxes
15,969
EAT
28,387
Shares 5,588
EPS
5.08

Debt Financing
Normal
59,200
2,072
57,128
20,566
36,562
5,540
6.60

Boom
73,550
2574
70,976
25,552
45,424
5,540
8.20

70% Debt - 30% Stock

Normal
Boom
59,200
73,550
1,480
1,839
57,720
71,711
20,780
25,816
36,940
45,895
5,560
5,560
6.65
8.26

EPS/EBIT Analysis data in the above charts shows that the best option to finance the purchase
of GoPro is through 70% Stock and 30% Debt. This is interpreted with the EPS stating that it will
create more capital faster than the other 3 options. The next best option is to issue all common
stocks to finance the purchase. These figures agree highly with the Debt/Equity Ratio stated

Yovanov-34
early of .42 which shows that Apple does not like to have much debt compared to its equity.
Which in turns show that the chart above agrees with Apples mentality.

Projected Financial Statement

(Figures in thousands)
Year
Sales Revenues
Cost of Goods
Sold
Selling, General &
Administrative
Expenses
Operating
Expense
Taxes
Net Profit

Current(both)
1
235,334,971 250,443,476
141,035,757

144,209,062

2
266,521,947

3
283,632,656

4
301,841,873

146,011,675

147,836,821

149,684,781

21,787,248.27

24,837,463.03

11,058,876

12,164,763

14,705,772

16,764,580

19,111,621.29

8,308,697

9,139,567

10,053,523

19,137,454
53,430,131

26,026,937

35,396,634

48,139,422

65,469,614

54,303,330

55,948,494

54,810,289

49,685,251.97

The above projection of the financial statement shows that an increase of sales revenue will be
6.42%. The tax will remain at 36%, Cost of goods sold increasing by 2.25%, SAG will increase
14%, operating expense will increase 10%.

Conclusion
Overall the plan is very easy. The most time will be figuring out when to launch the new
hybrid product, because of apples iOS updates the new product should be ready to go in a
matter of months, but to have a fully operational highbred phone will take creating a new
device which means an iPhone eight. So as soon as the buyout is complete Apple could launch

Yovanov-35
a new operating system including the GoPro platform by next year. This projected plan will
help Apple to stay ahead of competitors without having to put forth tons of effort. Keeping a
competitive advantage is the case stamen of this project and Apple is going to keep that goal
for many years to come by purchasing new products and software from startups and other
larger business ventures.

Yovanov-36
Work Cited
AAPL Income Statement | Apple Inc. Stock - Yahoo! Finance. (n.d.). Retrieved April 01, 2016,
from http://finance.yahoo.com/q/is?s=AAPL
Accountability - Supplier Responsibility - Apple. (n.d.). Retrieved March 24, 2016, from
http://www.apple.com/supplier-responsibility/accountability/
Apple Inc. (n.d.). Retrieved March 17, 2016, from http://www.msn.com/enus/money/stockdetails/analysis/fi-126.1.AAPL.NAS?ocid=INSFIST10
Apple Press Info. (n.d.). Retrieved March 12, 2016, from https://www.apple.com/pr/products/
Booton, J. (2015, December 10). GoPro stock surges on talk Apple may buy the whole company.
Retrieved March 7, 2016, from http://www.marketwatch.com/story/gopro-stocksurges-on-talk-apple-may-buy-the-whole-company-2015-12-10
David, F. R. (2013). Strategic management concepts: A competitive advantage approach.
Boston: Pearson.
Gibson, K. (2015, March 09). What could Apple buy next? Retrieved March 07, 2016, from
http://www.cnbc.com/2015/03/09/a-watch-on-where-apple-may-need-to-buy-notbuild.html
GPRO Balance Sheet | GoPro, Inc. Stock - Yahoo! Finance. (n.d.). Retrieved April 01, 2016, from
http://finance.yahoo.com/q/bs?s=GPRO
IPad - Life on iPad - New eyes for hands-on surgery - Apple. (n.d.). Retrieved March 05, 2016,
from http://www.apple.com/ipad/life-on-ipad/new-eyes-for-hands-on-surgery/

Yovanov-37
Appendix A
Income Statement For Apple
View: Annual Data |
Period Ending
Total Revenue
Cost of Revenue
Gross Profit
Operating Expenses
Research Development
Selling General and Administrative
Non Recurring
Others

All numbers in thousands

Sep 26, 2015 Sep 27, 2014 Sep 28, 2013
233,715,000 182,795,000 170,910,000
140,089,000 112,258,000 106,606,000
93,626,000

70,537,000

64,304,000

8,067,000
14,329,000
-

6,041,000
11,993,000
-

4,475,000
10,830,000
-

71,230,000

52,503,000

48,999,000

Income from Continuing Operations

Total Other Income/Expenses Net
Earnings Before Interest And Taxes
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest

1,285,000
72,515,000
72,515,000
19,121,000
-

980,000
53,483,000
53,483,000
13,973,000
-

1,156,000
50,155,000
50,155,000
13,118,000
-

Net Income From Continuing Ops

53,394,000

39,510,000

37,037,000

Net Income
Preferred Stock And Other Adjustments

53,394,000
-

39,510,000
-

37,037,000
-

Net Income Applicable To Common Shares

53,394,000

39,510,000

37,037,000

Total Operating Expenses

Operating Income or Loss

Non-recurring Events
Discontinued Operations
Extraordinary Items
Effect Of Accounting Changes
Other Items

Yovanov-38
Appendix A
GoPro

Yovanov-39

Appendix B
Balance sheet

View: Annual Data |

All numbers in thousands

Period Ending
Assets
Current Assets
Cash And Cash Equivalents
Short Term Investments
Net Receivables
Inventory
Other Current Assets

Sep 26, 2015

Sep 27, 2014

Sep 28, 2013

21,120,000
20,481,000
35,889,000
2,349,000
9,539,000

13,844,000
11,233,000
31,537,000
2,111,000
9,806,000

14,259,000
26,287,000
24,094,000
1,764,000
6,882,000

Total Current Assets

Long Term Investments
Property Plant and Equipment
Goodwill
Intangible Assets
Accumulated Amortization
Other Assets
Deferred Long Term Asset Charges

89,378,000
164,065,000
22,471,000
5,116,000
3,893,000
5,556,000
-

68,531,000
130,162,000
20,624,000
4,616,000
4,142,000
3,764,000
-

73,286,000
106,215,000
16,597,000
1,577,000
4,179,000
5,146,000
-

Total Assets
Liabilities
Current Liabilities
Accounts Payable
Short/Current Long Term Debt
Other Current Liabilities

290,479,000

231,839,000

207,000,000

60,671,000
10,999,000
8,940,000

48,649,000
6,308,000
8,491,000

36,223,000
7,435,000

80,610,000
53,463,000
33,427,000
3,624,000
-

63,448,000
28,987,000
24,826,000
3,031,000
-

43,658,000
16,960,000
20,208,000
2,625,000
-

171,124,000

120,292,000

83,451,000

Total Current Liabilities

Long Term Debt
Other Liabilities
Deferred Long Term Liability Charges
Minority Interest
Negative Goodwill
Total Liabilities
Stockholders' Equity

Yovanov-40
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stock
Capital Surplus
Other Stockholder Equity

27,416,000
92,284,000
(345,000)

23,313,000
87,152,000
1,082,000

19,764,000
104,256,000
(471,000)

Total Stockholder Equity

119,355,000

111,547,000

123,549,000

Net Tangible Assets

110,346,000

102,789,000

117,793,000

Yovanov-41
Appendix B
GoPro