Strengths
1. Customer loyalty combined with expanding closed ecosystem. While at first Apple’s closed ecosystem was a weakness for the business, this has now changed. First, Apple now has a full range of apps, software and products that are interlinked and support each other. Second, new products and supplements will be released soon (iTV), hence expanding the ecosystem. Third, Apple has a strong customer loyalty, which increases due to Apple’s closed ecosystem, which, in turn, is supported by customer loyalty. So the combination of Apple’s expanding closed ecosystem and customers’ loyalty increases firm’s competitive advantage.
2. Apple is a leading innovator in mobile device technology. Apple has been chosen as the most innovative business in the world for the 3rd time in 2012. Company’s core competency of producing innovative products is the strength the company builds upon and is able to bring the most innovative products to the market.
3. Strong financial performance ($10,000,000,000 cash, gross profit margin 43.9% and no debt). Apple’s financial performance is one of the best among many companies. Company currently (end of 2012) holds about $10,000,000,000 in cash, which can be used for acquisitions, buying back company shares and other matters. It also has higher gross profit margin than its main competitors, which is equal to 43.9%. Company has no debt and is not directly affected by interest rates or credit markets.
4. Brand reputation. Apple has a reputation of highly innovative, well designed, and well-functioning products and sound business performance. Apple brand is valued at $76.5 billion and was the second most valuable brand in the world in 2012.
5. Retail stores. Apple’s retail stores ensure high quality customer experience; provide direct contact with knowledgeable staff and increases brand awareness. Besides, Apple’s stores are one of the most profitable in terms of sales/ft2.
6. Strong marketing and advertising teams. Marketing is one of the strongest functional areas Apple has. It can sell pricier products, build superior stores (they are more or less built to achieve marketing goals) and advertise their products in a compelling manner.
Weaknesses
1. High price. Apple’s products cost much more than its competitors devices. Some critics argue that the price is not justified. When there’s such a fierce competition, Apple products price becomes a weakness because consumers can easily opt for similar quality but lower price products.
2. Incompatibility with different OS. The iOS and OS X are quite different from other OS and uses software that is unlike the software used in Microsoft OS. Due to such differences, both in software and hardware, users often choose to stay with their accustomed software and hardware (Microsoft OS and Intel hardware).
3. Decreasing market share. The less market share Apple has, the less it can influence its potential customers and persuade them to jump into using Apple’s closed ecosystem products.
4. Patent infringements. The firm is often accused of infringing other companies’ patents and has even lost some trials. This damages Apple brand and its financial situation.
5. Further changes in management. Apple has lost Steve Jobs in 2012 and Tim Cook became the new CEO. Scott Forstall and John Browett (chief of retail) left the company too and this will have an impact on company’s management, which, as many think, will be negative.
6. Defects of new products. This is not current Apple weakness but one that jumps out time to time. Some of Apple’s iPod and iPhone releases had clear faults and thus disturbed sales of the products and firm’s reputation of superior product performance.
7. Long-term gross margin decline. Current Apple’s gross margin is one of the highest in the tech industry but analysts fear that due to increasing component prices and competition current margins will not be sustained. Hence, glooming firm’s future financial performance.
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Opportunities
1. High demand of iPad mini and iPhone 5. iPad mini sales will increase Apple’s market share in the tablet market and, will strengthen firm’s competitive advantage.
2. iTV launch. iTV launch will support Apple TV sales and the products’ ecosystem.
3. Emergence of the new provider of application processors. Samsung, the main Apple’s competitor, is also the only provider of application processors for Apple’s products. Apple has to find a new source for the component but could not find a suitable one yet. Nonetheless, new manufacturers with superior engineering capabilities are arising and it’s just a matter of time, when Apple will seize upon the opportunity of being less dependent on its direct competitors.
4. Growth of tablet and smartphone markets. Growth of tablet and smartphone markets is a good opportunity to expand firm’s share in these markets.
5. Obtaining patents through acquisitions. Apple lacks of some patents to sustain its growth and the best way to acquire those patents is to acquire the firms holding them. In addition, Apple could develop new skills and competencies.
6. Damages from patent infringements. Apple patents are often infringed by its competitors. Thus, collecting the damages from the companies that do so is a viable opportunity to not only increase the cash reserves but to damage the competitor’s reputation and sales as well.
7. Strong growth of mobile advertising market. Apple has developed iAd advertising platform, which allows advertising on Apple iPhone, iPad and iPod touch. The growth of mobile advertising market is an opportunity which could be further seized upon.
8. Increasing demand for cloud based services. Apple could expand its range of iCloud services and software as the demand for cloud-based services is expanding.
Threats
1. Rapid technological change. One of the most severe threats Apple and the other tech companies are facing is rapid technological change. Companies are under the pressure to release new products faster and faster. The one that cannot keep up with the competition soon fails. This is especially hard when a business wants to introduce something new, innovative and successful. Apple was able to bring very innovative products to the market so far but for the moment, even Apple hasn’t unveiled any plans for the new products (except iTV) and may lack new introductions to keep up with competition.
2. 2013 tax increases. Tax increases in USA in 2013 will negatively affect Apple.
3. Rising pay levels for Foxconn workers. Pay levels for Foxconn’s workers already rose 3 times from 2010 to 2012. Foxconn is the main manufacturer of Apple products and the rising pay level for Foxconn’s workers will likely raise the prices for Apple products.
4. Breached IP rights. The companies that breach Apple patents might not be discovered soon and may benefit from it, while weakening Apple at the same time.
5. Price pressure from Samsung over key components. Samsung has already asked Apple to pay higher price for its application processors. Due to intense competition and no viable substitutes, Apple may be asked to pay even more.
6. Strong dollar. Apple earned more than half of its revenues from outside US. Dollar appreciation against other currencies reduces potential profits from those countries.
7. Android OS growth. Android OS is the main competitor for iOS in mobile device market. The domination of Android decreases iOS power over influencing consumers to join Apple.
8. Competitors’ moves in online music market. Apple faces threat from online music stores, such as Amazon, Wal-Mart and online music subscription companies, such as Spotify.
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