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Abg Case Study
Abg Case Study
DETAILED REPORT
ON
“APPLE INC”
SUBMITTED BY
AKANKSHA ANGRE
MBA I DIV C
Company Background
Logo
Over the course of a few years, Apple's market share suffered slowly after its
peak in 1990 and by 1996, experts believed the company to be doomed. It was
not until 1997, when Apple was desperately in need of an operating system, that
it bought out NeXT Software (Jobs' company) and the board of directors
decided to ask for some help from an old friend: Steve Jobs. Jobs became an
interim CEO, or iCEO as he called himself (Jobs was not officially the CEO
until 2000). Jobs decided to make some changes around Apple. He forged an
alliance with Microsoft to create a Mac version of its popular office software.
Not long after this decision was the turning point for the company. Jobs
revamped the computers and introduced the iBook (a personal laptop). He also
started branching out into mp3 players (iPod) and media player software
(iTunes). This was Jobs' best move yet. While computers are still an important
part of Apple, its music related products (i.e. iPod and iTunes) have become the
company's most profitable sector. Apple has also recently released the iPhone, a
cellular phone, and the Apple TV. While Steve Jobs died October 5, 2011,
Apple continues on with his legacy.
Apple Inc. has pioneered its way through the computer industry—not once, but
multiple times throughout its existence. It believes in pushing the limits of
creativity in order to produce interesting and valuable products for society.
After more than 30 years, it is undeniable that Apple "has had a profound
impact on technology, innovating and influencing not only how we use
computers but the activities for which what we use them.
Organization Structure of the Enterprise
Apple’s organizational structure is one of the factors contributing to the
company’s successful innovation. A firm’s organizational structure can create
opportunities for business growth. However, it can also impose limits on how
the firm develops. In Apple’s case, the organizational structure is mainly a
traditional hierarchy, with some key elements from other types of organizational
structure. The success of the company is linked to innovation and the leadership
of Steve Jobs, but its organizational structure is partly responsible for ensuring
support for such leadership. Now, under Tim Cook’s leadership, Apple has
made some small changes in its organizational structure to suit market and
industry demands.
Apple’s organizational structure is effective in supporting business performance
to ensure leadership in the industry. However, further changes in this
organizational structure can help improve Apple’s capabilities, especially in the
area of rapid and creative innovation and design.
1. Spoke-and-wheel hierarchy
2. Function-based grouping
3. Product-based grouping
Gross Margin
Apple, the maker of the popular iPhone, does not actually make the device
itself. The company contracts other electronics manufacturing companies to
assemble all the parts for the iPhone, while providing hardware specifications
and written software for the finished product. Manufacturing is capital-intensive
and cost-laden, usually with low profit margins. Apple has managed to avoid
having to build its own manufacturing facilities by putting in place an effective
supply chain channel that serves to build its end devices, even though tens of
millions of devices come to market every quarter.
Price-to-Earnings Ratio
The rise of Apple stock since the iPhone's inception in 2007 is mostly attributed
to the company's continued earnings growth, as opposed to speculative, jacked-
up valuation multiples by the market. This means that even with a constant
valuation multiple, Apple stock would rise over time in proportion to the
company's earnings growth. Using earnings for its most recent fiscal year, from
Sept. 27, 2014 to Sept. 26, 2015, Apple's price-to-earnings (P/E) ratio was a
modest 12.5, which is much lower than that of its peers and the industry
average.
On one hand, the market is content with the rate of Apple stock's gain over time
as supported by earnings growth. On the other hand, the market may be
unwilling to tag on an additional valuation premium to its existing price
multiple out of concern that Apple cannot keep rolling its iPhone-fuelled growth
indefinitely. This is seemingly a rational valuation approach. These are
important valuation prospects to consider for existing investors and potential
Apple investors. Because of how conservatively Apple stock is being valued by
the market, shareholders should have less concern about any potential,
significant drop in their share price. The absence of an overvaluation makes
Apple stock most likely a safer bet.
Apple corporate social responsibility (CSR) programs and initiatives are led by
Lisa Jackson, Vice President of Environmental Initiatives, reporting directly to
CEO Tim Cook. It has to be noted that “Steve Jobs wasn’t known for
philanthropy. Some wondered if he made anonymous donations to charity,
some criticized him for his lack of public giving, while others defended
him”[1]. However, with Tim Cook assuming Apple leadership in 2011, the
focus on CSR aspect of the business was increased to a considerable extent. Tim
Cook is a member of Paulson Institute’s CEO Council for Sustainable
Urbanization, working with other CEOs of top Chinese and Western companies
to advance sustainability in China.
The program has been revised in March 2015 to grant employees the right to
choose the projects in their local communities they would like to contribute.
Apple enforces The Supplier Code of Conduct that is claimed to be the toughest
in the electronics industry
Company has achieved an average 95per cent compliance among suppliers to
maximum 60-hour workweek
Apple has investigated cases of abuses of foreign workers and the company has
required suppliers to reimburse affected “foreign contract workers USD3.9
million in excessive fees paid to labour brokers, bringing our total reimbursements
since 2008 to USD16.9 million”
Apple is often praised for its environmental records that include decrease of
total power consumption of Apple products by 57per cent , introduction of Mac
mini as the world’s most energy-efficient desktop computer and exceeding
ENERGY STAR guidelines
Apple emerges as the only company that has been awarded with a Clean Energy
Index of 100per cent, according to Greenpeace’s Clicking Clean Report.
Apple Inc. is sourcing or generating enough renewable energy to cover 93 per
cent of the electricity used at its facilities worldwide.
The company is now 100 per cent renewable energy in 23 countries.
Each Apple data centre around the world runs on 100 per cent renewable
energy.
The company launched Clean Water Program in 2013 and in 2015, 73 supplier
facilities joined the program to increase the efficiency of their water usage
Cooling systems in company’s date centres can reuse water up to 35 times
In 2015 the company converted about 120,000 square feet of previously grass
lawns to drought-tolerant landscape, translating to estimated water savings of up
to 6 million gallons per year
Despite the initiatives above, water usage by Apple data centres, retail and
corporate facilities have been consistently increasing during the last three years, as
illustrated in Figure 1 below.
Figure 1 Water usage by Apple Inc.[7]
Apple has caused 34.2 million metric tons of greenhouse gas emissions during
the financial year of 2014. Although the company is working towards reducing
carbon intensity associated with manufacturing and using its products, overall
increase of the numbers of products manufactured and sold has decreased the
level of Apple’s carbon efficiency.
In 2014, employees took more than 110,312 trips on shared bikes, a 55 percent
increase over 2013.
The company offers employees more than 550 electric vehicle charging ports
for free, an increase of 67 percent compared to the previous year to encourage the
usage of electric vehicles
As it is illustrated in Figure 2 below, the company’s CO2 emissions per product
has been consistently decreasing during the last four years to reach 114.2 kg in
2015.
In 2015 more than 60 per cent of paper used in packaging was prepared from
recycled wood fibre.
The company partnered with The Conservation Fund to protect 36,000 acres of
sustainable forest in North Carolina and Maine and more than 13,000 metric tons
of wood was harvested responsibly.
Apple aims to contribute to transition up to 1 million acres of forest, across five
southern provinces, into responsible management by 2020.
SWOT Analysis:
1. Strengths
• Apple’s niche audience provides the company with some lagging from the
direct price competition.
• Web technology can be used to improve product awareness and sales.
2. Weaknesses
• The product life cycle of Apple products are very small for that reasons
revenues are more depend on launch of new products and services.
• Apples market share is far behind from major competitor Microsoft.
• In past the relationship between Steve jobs and employee were not good
which result in reputation loss.
3. Opportunities
• Increase in worms and viruses on PCs so the antivirus solution can be
developed by Apple
• Large population (Gen X&Y) which are extremely individualistic and name
brand conscious.
• The ties of apple other companies are weak; Apple can develop good
relationship for joint ventures.
• The online sales of computer are increasing with rapid speed.
• The laptop market growth is high; Apple Computers should focus to develop
new models to cater the need of customers.
4. Threats
• Apple facing strong competition from Dell, HP, Sony and Toshiba in laptop
segment.
• Downloading free music from other online source without paying cost is
common it may impact the iTunes sales.
• Apple software, Cell phone and hardware are expensive as compared to
other competitors such as Dell.
• The long lasting recession may impact the sales of the company due to
higher prices of the products and services