apple inc. 2015, using your own knowledge, given notes and the help from internet sources make a detailed SWOT analysis.

Internal Issues Vision/Mission Neither at its corporate website nor in its Form IOK does Apple provide a written vision or mis- sion statement labeled as such. There are statements such as the following, howeverthat perhaps serve as Apple's vision and/or mission: 1. "We strive to provide users of Apple products the best experience possible though innova- tive product designs and software." 2. "Apple designs Macs, the best personal computers in the world, along with OS X. iLife, Work and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary Phone and App Store, and is defining the future of mobile media and computing devices with iPad. Organizational Structure As indicated in Exhibit 1. Apple appears to operate from a divisional-by-process design, but absent of any presidents of divisions. However. Apple does report revenues by both region and product. Some analysts suggest that titles of Apple's executives more closely mirror how the firm reports sales, and many expect to see a COO with divisional presidents reporting to that position Strategy Apple was late in producing a larger vereen smartphone, but did so with the launch of the iPhone 6 and 6+ in October 2014. Apple prides itself on simplicity. Apple products are generally more user friendly than those of Windows, Android, and other operating systems, but at the sacrifice of the user being able to customize or tailor the device for their specific needs. Apple's overrid- ing strategy always has been to produce elegant, easy-to-use products, often at a premium price point. In a November 2014 interview. CEO Cook reiterated this when asked if having just 15 percent of the global smartphone market share is a concern, by responding. "Not all market share is equal, and Apple has never been about the most; we are about being the best." Apple also has a culture of not collecting every detail about its users. For example, Apple does not read or store iMessages or FaceTime. Even if a government were to ask for these data, Apple could not provide it, for the company simply does not keep it on file. The latest version of iOS 8 is more encrypted than ever. CEO Cook compares Apple to designing to an electronic Fort Knox With the release of the new iPhone 6 line, Apple introduced Apple Pay, a mobile app that enables Apple customers to use their existing Master Card, Visa, of American Express card to make mobile payments at retail stores. Apple Pay's fingerprint technology is more convenient for consumers and also more secure for credit card companies such as Visa, American Express, and MasterCard. However, competitors such as Samsung currently have a similar technology on some of their phones, and all phones will likely have a similar technology moving forward. Using Apple Pay, merchants are charged the same fee as normally charged by a credit card com- pany, which is an average of 2 percent in the United States. Transactions in the United States annually produce more credit card fees than everywhere else in the world combined, leaving open the door for Apple to possibly transition away from credit card companies in the future. Apple could offer its own in-house credit system at much lower cost to merchants, in essence becoming a financial institution Keeping in line with its user-friendly products strategy. Apple must approve all third-party digital content through the iTunes Store of the App Store and iBooks store. Competitors, such * Android-based phones, tend to have less control over upps offered to their customers than does Apple Apple peides itself on well-trained and knowledgeable salespersons with excellent customer service. Apple invests heavily in R&D, over $6 billion in 2014 alone, up nearly 100 percent from 2012. In addition, Apple is expanding its retail stores around the world During 2014, Apple acquired several fins, including Beats Music and Beats headphones Apple obtained a subscription streaming music service and a headphone firm in the process Apple's acquisitions in 2014, however, increased the firm's goodwill from 51.5 to $16 billion To keep costs low, almost all Apple hardware products are manufactured in Asia and many of these are manufactured of a single location, except for a few Macs that are manufactured in EXHIBIT 1 Apple's Organizational Structure Tim Cook-CEO Angel Ald Seni VP Retailed Online Bruce Eddy Cue Senior VP Internet Software and Service Craig Federighl - Senior VP Software Engineering Jonathan Ive Senior VP Design Luca Maestri Senior VP and CRO Dun Riccio Senior VP Haribware Engineering let Williams Philip Schiller- Senior VP Worldwide Marketing Senior VP and General Cound Operation Source: Based on company documents STRATEGIC MANAGEMENT CASES EXHIBIT 2 Apple Revenues by Region (in millions of USD) Revenues 2014 2013 2012 Americas Europe China Japan Rest of Asia Pacific Retail Net Sales 563.232 40.929 29.846 14.982 10.144 21,462 182.795 $62.739 37.63 25.417 13452 11.11 30028 171910 557312 36.323 22.533 10:371 10,741 18.628 156,505 Ser: Based on Apple's 2014 Aw Report 27 the United States. While able to better maintain quality control, this does put Apple at risk over strikes, poor management, or other disruptive activities at a single location facility. To counter this problem. Apple tends to stock enough supply to cover its demand for up to 150 days, but dur- ing a new issue of an iPhone, for example, there can be supply shortages, where customers wait wecks or even months to receive their prodots Apple has sued Samsung twice in the last couple of years for patient infringements in the lypercompetitive smartphone industry. Apple was awarded $120 million of a $2.2 billion claim for Samsung violating three patenting infringements. However, Apple was unable to prove that Samsung's action caused significant dumage to its product line. To date, Samsung has been op dered to pay Apple over S1 billion in dommages, and both cases have been appealed, and Apple has yet to receive any compensation. More important for Apple than the S1 billion was the desire for the legal actions to impair Samsung from being able to sell certain products. To date, this outcome does not appear likely for Apple. Segment Data Exhibit 2 reveals that Apple's sales increased 7 percent in 2014, following a 9 percent increase the prior year. Fiscal 2014 sales were boosted by strong iPhone 5s and Se sales, and also ac count for initial sales of the iPhone 6 and iPhone 6 released in October 2014 in the United States, one month before Apple's fiscal year ended. However, some preorder sales of iPhone 6 and 6+ are included in Apple's 2014 fiscal year. With the iPhone 6 and 6+ also comes Apple Pay, which allows customers to pay by scanning their phones at selected retail stores. As of late 2014,83 percent of all credit card transactions in the United States were compatible with Apple Pay, with banks not offering compatible products quickly but rather coming to agreement with Apple. The company reported sales increases in all regions in fiscal 2014, except in the Rest of Asia Pacific region, which experienced a small decline. The largest percent growth came from China and Japan Apple's iPhone accounted for 55 percent of total 2014 nove, up Il percent from fiscal 2011, as indicated in Exhibit 3. Apple's iPad sales have been seady but have not increased since 2012. Apple's new iPad Air 2 hopes to reverse this trend. However, with the larger iPhone dis plays with the 6 und 6+ products, many customers may opt only for having one device. In a bit of a surprise for analysts. Apple's Mac sales were up 12 percent in fiscal 2014, from stronger than expected back-to-school sales on Mars. The back-to-school cales were strong enough to boost Mac revenues to $6.6 billion in 24 of fiscal 2014, more than iPad's revenge of $5.3 billion. Mac now owns over 6 percent of the globalPC market, its largest market share since 1995. Mae has gained market share on windows machines in 33 of the last 4 quartos iTunes, Software and Services also continues to grow up 12 percent from fiscal 2013. This segment includes the Apple Store, iCloud. Life, Work AppleCare and apps that many users pay to download and use on their iPhones and iPads. Apple iPod, once the bellwether for the firm before the release of the iPhone, has been in cost decline with sales down 61 percent from 2012 to 2014. In summer 2014. Apple discontinued making its classic iPod 160gb device o claims they could no longer get the parts. Apple's cores segment includes headphones Apple TV, cases and Apple Watch Apple Watch will be compatible only with iPhone 5 and newex products running los 2.0 or how EXHIBIT 3 Apple Revenues by Product (in millions of USD) $120.000 $100.000 50.000 540.000 1. Revenue 2014 320.000 Reverse 2013 30 Revenue 2012 Mac Pod Accessories Source: Based on Apple's 2014 Aral Report, p. 27. iTunes & Other Finance For years Apple had no long-term debt on its balance sheet. But in 2013, the firm, for the first time since 1994, used debt to finance operations, and reported 517 billion in long-term debt. and then reported $29 billion in long-term-debt in fiscal 2014, with varying maturity dates out as far as 2044. Apple is aggressively looking at financing further by debt and also for the first time with bonds backed in Euros as well. The firm reported in April 2014 that a $90 billion stock repurchase had been authorized and also raised the dividend to 80.47 per share for a 30 percent increase. Assuming $100 average stock price on the repurchases, Apple will need to purchase 900 million shares back, or around 15 percent of current shares outstanding. Apple's current income statement and balance sheet are provided in Exhibits 4 and 5. re- spectively. Much of the cash on Apple's balance sheet is kept in foreign banks. In this way. Apple avoids paying U.S. corporate taxes on those earnings EXHIBIT 4 Income Statement (in millions of USD) Report Date September 27, 2014 September 28, 2013 Revenues 5182,795 SI70.910 Cost of revenge 112,258 106,606 Grose profit 70.537 60304 Operating expenses 18.034 15.305 ERIT 52,503 48.999 Interest addition 980 1.156 EBT 53483 30.155 Thus 13.973 13,118 Net Income 39,510 37,037 Source Based on company document Competitors Apple competes is a highly competitive and rapidly changing industry that is often associated with strong customer loyalty. Apple and rival firms typically roll out new smartphones, com puiens, and tablets annually. Many of Apple's rivals have prices 50 to 70 percent lower on com- purable products. However, in the tablet and phone market, top rival Samsung prices its top products in line with Apple prices. Competition for Apple should only increase in the future stivalims are better able to duplicate Apple's products or even better able to persuade cus- tomers their products are just as pood but significantly cheaper in price. Top competitors for Apple are Samsung und Love in the smartphone, tablet, and PC markets. However, Apple faces significant competition from various other PC providers such as Dell. Sony, and Toshiba 50 STRATEGIC MANAGEMENT CASES September 28, 2013 $14,239 26,287 13,102 1.764 EXHIBIT S Balance Sheet (in millions of USD) Heport Date September 27, 2014 Cash $13.844 Short-term securities 11,233 Accounts receivable 17460 Investors Other 23,883 Toul curent 68.531 Long-term murable securities 130,162 Property, plant & equipment 20,624 Goodwill 4,616 Intangible assets 4.142 Others 3.764 Total 231.8.39 Accounts payable 30,196 Other current liabilities 33.252 Tocal current liabilities 63.44 Long-term det 28.987 Deferred income taxes 20.239 Deferred 3,031 Other liabilities 4,567 Total liabilities 120,292 Common Mock 23313 Retained earnings 87.152 Treasury Mock Paid in capital and other 102 Total equity 111,347 Total abilities & equity 231.8.99 Source: Based on company documents 17,874 73.286 106,215 16,597 1.577 4,179 5.146 207.000 22.367 21.291 43.658 16,960 16489 2,625 3,719 83,451 19,764 104.256 (471) 1234549 207.000 EXHIBIT 6 2014 Percent Market Share of Key Global Players Apple Android Windows Smart Phones 19 Tablets 515 Watches 09 679 08 Source Based on company documents and a variety of other Exhibit 6 provides a comparative analysis of Apple with some of its rival firms in terms of market share. Note that Apple products trail Android products substantially in market share Apple projects to take a 35 percent market share in watches in 2015, reducing Android's share to 42 percent. In 2014, the total watch market was less than 10 million, but is expected to expand to 35 million units by year end 2015. Exhibit 7 provides additional comparative competitive info mation for Apple and rival firms Samsung Founded in 1938 in South Korea, Samsung specializes in semiconductors and electronic ap- plans. The firm did not enter the mobile communications arena until the late 1990s, but by OneDrive of Bu EXHIBIT 7 Apple versus Rival Firms Apple Samsung Employee 92.000 96.900 5 Net Income 39.58 27.78 Revenue 123 208 B Revenue Employee 2M 2 M SEP5 Ratio 7.19 180 MarketCap 692.71 Sw: Based on company documents and a variety of other sources Lenovo 54,000 817M 38,707 M 716,796 7.88 2010 it was producing half of its mobile phones in China. Samsung has five R&D centers in China, Samsung was 2 years behind first-mover Apple into the smartphone market with its launch in 2009 using the Bada operating system. In 2010, Samsung provided an Android- powered smartphone. In 2013, Samsung smartphones were 21 percent of the global smart- phone market making Samsung the industry leader. In addition to smartphones, Samsung also today produces tablets, televisions, Blu-rays, DVD players, camera, refrigerators, air conditioners, washing machines, ovens, PC notebooks, printers, storage devices, and more. In addition, Samsung is engaged in providing select medical equipment such as X-rays, ultra sound, and other items In popular products, Samsung competes with Apple directly on the Samsung Galaxy and Nole smartphones Galaxy Tablet. TVs, watches, and laptop computers. Samsung reported rev. enues of over 5208 billion in 2013 Lenovo Founded in 1984 in Beijing and headquartered in both Beijing and New York City, Lenovo quired IBM's ThinkPad laptops and more recently IBM's lower-end servers. Lenovo did not enter the smartphone market until 2010, het is LePhone is popular in China and increasing its market share in the entry-level market space. Lenovo is also rapidly introducing the LePhone in Russia, Indian, Indonesia, and other neighboring Asian nations that also have developing con mies Lenovo competes with Apple primarily on PC since the firm has positioned itself in a lower demographic market for its smartphones. Lenovo's 2014 revenues are expected to be in excess of 337 billion--the same as in 2013 With Lenovo's $2.9 billion acquisition of Motorola in 2014, the firm is now the world's third- largest smartphone maker, behind Samsung and Apple. Lenovo trades on the Hong Kong Stock Exchange and currently employs 54.000 people worldwide. External Issues In 2014, there were 234 million smartphone Internet connections in the United States. The growth rate was approximately 35 percent from 2009 to 2014, with a forecast of 313 million connections by 2019. China Most of the world's smartphones are manufactured in China, and the Chinese smartphone market well increased nearly 35 percent from 2010 to 2014. Less than 1.5 million units were produced 200). Increasing to over 500 million units in 2015. The top four smartphone manufacturers Is Chim Samsung Lenovo Apple, and HTC accounting for over half of the total industry revenue in 2014. There is a powing fragmentation in the market as new entrants enter and now comprise 50 percent overall market. Saartphone industry revenue will increase about 30 percent way to 180 billion by 2020, with over 1.3 billion units produced annually. Worldwide mobile phone shall phones included) were just under 2 billion in 2014 with about 70 percent of whipped phones considered smartphones. By 2018, however, 2.2 billion mobile phones will be pod and I but 400 million are projected to be smartphones 552 Computer Manufacturing and Tablets Computer manufacturing is a $14 billion industry in the United States alone, but sales fell over 17 percent per year between 2009 and 2014. About 62 percent of all computers manufactured in the United States are laptops, but this still leaves 38 percent of the computers manufactured being desktops. Overall projections are 5 percent declines moving forward through 2020. Tablets are projected to further make inroads into personal computers in U.S. manufacturing. However, it is important to note that at least for Apple's Q4 of 2014. Mac sales exceeded iPad sales. Most tablets are manufactured in China, with Apple holding 27 percent of the market share, followed by Samsung and Lenovo with 12 and 8 percent, respectively, on tablets made in China. The largest players in the U.S.computer manufacturing business, which also includes servers, are HP, Dell, and IBM, with 25, 19, and 18 percent market shares, respectively. Two relative new areas that may help boost laptop sales are the new ultrabooks, extra thin laptops with no battery sacrifice. and laptops with tooch glass where the user can touch the screen much like on a smartphone or tablet. Worldwide PC sales are expected to be $190 billion in 2015, tapering down to S160 billion by 2018. In 2014, PC shipments alone accounted for 56 percent of the device (PC and Tablets) shipments, but this number is expected to be reduced to 45 percent by 2018, as tablets make further inroads on PCX (Tablets are expected to grow 9 percent a year through 2018.) Currently, Android- based phones account for just over 60 percent of smartphone operating systems, withios picking up much of the balance. Through 2018, the outlook is projected to remain the same. Operating Systems Operating systems are another large market in the United States with 2013 revenues of $45 bil- lion expected to grow to 557 billion by 2019. Major firms by market share include Microsoft and Apple, with 62 and 20 percent of the total market. Microsoft's prominent product continues to be Windows, while Apple is the owner of iOS Geographic Outlook Most smartphone markets in developed countries are expected to see growth rates subside moving forward. However, with the current culture of customers being trained to update their phones at least every 2 years, the long-term outlook for smartphone providers looks promising. The real er ponential growth, though, moving forward should come from developing markets such as Brazil, India, and China. Tablet sales in the United States are projected to increase from $55 billion in 2014 10 63 billion in 2018, ora 15 percent total increase. In the Asia Pacific (not including Japan) region, tablet sales are expected to increase from $65 to 893 billion over the same time frame, or 43 percent Sales for smarphones are expected to show similar results with respect to the major growth being in China, India, and Brazil During its first month in operation (July 2015). Apple Music obtained 11 million trial men bers, giving the App Store a record-breaking month. The streaming service costs users $9.99 per month with the first 3 months free. But 2 million of those subscribers opted for the more expensive family plan costing $14.99 per month. Despite some bugs and glitches in the service, which Apple is scrumbling to fix, Apple Music is a popular hit so far. If all the trial uses convert to paying monthly customers. Apple will surpass most competitors. For example, 10-year-old Spotify only has 20 million paying customers, but boasts 75 million active users, Pandora has 3.3 million paid subscribers from its 79 million active user base, and Deezer has 6 million paid subscribers out of its 16 million active users. During July 2015. Apple App Store did a record-breaking 51.7 billion in transactions. Interestingly, 23 percent of the digital music market is made up of paid subscrib ers, who generated a collective 51.6 billion in calendar year 2014 Future Apple announced record financial results for 2015 fincal first quarter that ended in December 2014. Total Revenues and profits were 5746 and SiS billion respectively, up from $57.6 and 513.1 billion in first quarter 2014. In addition, internationales counted for 65 percent of total revenue as the iPhone is now the most popular phone in China International sales would have been significantly higher if not for a significant rally in the US dollar against other foreign currencies over much of 2014 CASE 17 - APPLE INC. 2015 55 Apple began shipping its Apple watch in April 2015. iPhone and Mae revenues were 551 and 57 billion, respectively, for the first quarter 2015, up 57 and 9 percent from first quarter 2014. However, iPad sales were down 22 percent over the same time frame due to people not opdating their tablets as frequently, less demand than for phones, and also the new iPhone 6+ has cannibali med iPad sales Develop a 3 year strategic plan for CEO Tim Cook that will enable Apple to continue to compete with rivals Samsung and Lenovo Use the template at the www.strategyclub.com web site to prepare matrices and analyses. Impress Mr. Cook with your work because, according to Financial Times, CEO Cook was the business "Person of the Year" for 2014. In 2015, at Apple's shareholder meeting when someone questioned the profitability of Apple's environmental initis tives, Mt. Cook responded: "We do things for other reasons than a profit motive, we do things be cause they are right and just. If that's a hard line for you. then you should get out of the stock