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Apple Management Faculty:: Maria Evelyn Jucunda
Apple Management Faculty:: Maria Evelyn Jucunda
GROUP MEMBERS:
1. ARVIND BHASKARAN 13BME1050
2. A.KISHOR BABU 13BCE1026
3. Y.VEDAVYAS REDDY 13BME1192
4.DHANUMJAYA.D 13BME1071
5.KUSHAl PS 13BME1092
INTRODUCTION:
Strong Control.
• The hierarchy in Apple’s organizational structure supports strong control over the organization.
• Theoretically, hierarchy empowers top leaders like Tim Cook to control everything that goes on in the organization.
• Through the hierarchy, function-based grouping and product-based grouping in this organizational structure, Apple
ensures that Cook and the senior VPs control all organizational processes
Limited Flexibility.
• Apple Computer, Inc., is an American multinational corporation with a focus on designing and manufacturing consumer
electronics and closely related software products
• As of September 2015, the company operates 475 retail stores in the United States, and more in the United Kingdom,
Japan, Canada, and Italy
• For a variety of reasons, ranging from its philosophy of comprehensive aesthetic design to their advertising campaigns,
Apple has engendered a distinct reputation in the consumer electronics industry and has cultivated a customer base
that is unusually devoted to the company and its brand, particularly in the United States.
• The company's best-known products include the Macintosh line of computers, the iPod, the iPhone and the iPad.
• Its software includes the OS X & iOS operating system; the iTunes media browser; the iLife & iWork creativity and
production suites.
• Fortune magazine named Apple the most admired company in the United States in 2008, and in the world from 2008
to 2012
Key Statistics
• As of March 2016, the company operates 475 retail stores in 17 countries, and an online store where
hardware and software products are sold.
• It is the largest publicly-traded corporation in the world by market capitalization, with an estimated value
of US$800 billion as of February 2013.
• It is furthermore the largest technology company in the world by revenue and profit, earning more than
Google and Microsoft combined.
• Source: "Apple's $56 billion sales set new tech record". CNN. January 24, 2015.
• “We’re armed with the strongest product line in our history, the most talented employees and the best
customers in our industry & $25 billion of cash safely in the bank with zero debt.”
- Sir Steve Jobs
Committees
Internal Assessment
• Operational Focus - Willing to release incomplete products
• Wall Street - Engaging to increase dividends
• Shifting Values - MBA vs. Liberal Arts
• Relaxed Atmosphere - Leadership quiet yet demanding
• Highly Ethical ?- Some might question
• Procurement
• Vendors
• Foxconn
• Product Quality
• Privacy
• Sustainability
• Intellectual Property Theft
• Patents
• iPhone
• iPad
• iPod
• iCloud
• Upcoming:
– iTV
– iGame Counsel
Legal\Regulatory Hurdles
• Apple currently has 3.5 Billion Intangible Assets
– Typically are patents and copyrights
– Very active in filing patents on new products
– Literally everything they make
– They also peruse legal action
• Apple is very secretive and protects its products
• Industry Analysis
• Consumer Electronics Industry is very competitive
• Products can be looked at as a luxury and not a necessity.
• Demand is driven by the “desire” of the product not the “need”
• Demand for Apple products is expected to continue to grow rapidly
• Not one company in the Technology industry competes with Apple in all business segments.
• We took the market capitalization of all the industries of Apple’s competitors and compared
Apple’s Market Cap. It seems that Apple clearly dominates.
• Will have to get permission because it will exceed the limit of 2.5% of initial position.
Key Risk Factors
• Global Economic Conditions
• Highly competitive global market subject to rapid technological change
– “Wide Moat”
• Must successfully manage frequent product introductions and transitions
• Operating results depend on Apple’s ability to obtain components in sufficient quantity
• Depend on outsourcing, many outside the U.S.
• Relies on third-party intellectual property and digital content
• Apple outsources all of its production
– Because it can get it at a very low cost overseas.
– Behind HP in PC sales
– Does not offer other products other than PCs and accessories
Graham-Greenblatt
• Graham
– Greenblatt
– APPL=353.7%
– GOOG=46.37%
– RIMM=148.26%
– HPQ=81.81%
– DELL=42.19%
Greenblatt Methodology
• Establish a minimum market capitalization (usually greater than $50 million).
• Exclude utility and financial stocks.
• Exclude foreign companies (American Depositary Receipts).
• Determine company's earnings yield = EBIT / enterprise value.
• Determine company's return on capital = EBIT / (net fixed assets + working capital).
• Rank all companies above chosen market capitalization by highest earnings yield and highest return on
capital (ranked as percentages).
• Invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month
period.
• Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week
after the year mark.
• Continue over a long-term (5–10+ year) period.
The Graham formula
V: Intrinsic Value
8.5: the constant represents the appropriate P-E ratio for a no-growth company as proposed by Graham
4.4: the average yield of high-grade corporate bonds in 1962, when this model was introduced