Apple Inc Strategic, Essay Example

Financial Viability

Apple Inc. is one of the most commonly known companies associated with the latest and greatest technology on the market to date. The company has continued to progress with extensive research and technological developments based on the corporation’s substantial financial viability and ability to reinvest the profits in future growth. The electronic giant reported a revenue of US$233.715 billion (2015) 27.85% increase over US$182.795 billion (2014). They earned a profit of US$53.394 billion (2015) 35.14% increase over US$39.510 billion (2014). Revenue and growth of the company are substantial. Also, the company has managed their operational expenses, keeping them in line with the projected revenue growth. Apple’s operating margin for the fiscal year 2015 is 30%. That is considered high for many companies, however with the industry that Apple is working in, this is very marginal. As soon as Apple rolls out their new product, they are back in the labs working on the next big product launch. The company depends heavily on research and development, a high sector of operation. However, despite their significant financial obligations of service, they have still managed to validate their financial position. The company’s sales growth for the past five years is an impressive 250%. The net income growth for Apple’s last five years is 263%. The financial viability of the company is evident with the continued growth and profit margins. Apple has also proven to be a sound investment opportunity with a stock price of 107.65, a dividend yield is 1.5%, and a payout ratio is 25%.

Based on the financial analysis of Apple Inc. the financial recommendations are to continue to find means of resourcing larger profits. The new products introduced to the market, based on past actions, will most likely yield a substantial return-on-investment. However, there is no deny that the current operating cost is high and taking away from an even greater profit. The company could seek alternatives for their research and development department. It is the heart of the business, and without their innovation, the company would inevitably lose their edges, but based on the financial findings it is important to remain financially viable. Apple Inc. is a global leader in technology, and they need to shift their focus to reflect that. They are currently operating with a few products, limiting their full potential of profit. Take, for example, Google, they have introduced the driverless car. It holds the promise of a trillion dollar return, far greater than the financial opportunity that Apple is currently pursuing. Apple is holding a large amount of cash that can be reinvested into a new technological avenue. If the company could use their ingenuity to broaden the product line, the company could double or triple their financial return. Capital surplus provides the resources to expand to innovation that the consumers have been waiting for – for decades. Cutting the operational cost and refocusing the direction of the company can provide a much greater return on investment, even more so than the technological giant is currently yielding.

Tangible and Intangible Resources

Apple has employed a think different mentality, allowing them to maximize their tangible and intangible resources to support their vision. First, the priority will be to assess the tangible resources and how efficiently they are being utilized. The company is considered a pioneer in the technological history of the computing industry. They are continuing to expand with innovation within their product offerings. The only critique to this tangible resources is that the product offerings is limited and could be broadened to include a more diverse product line. Apple currently has more than four hundred and eighty retail stores across the globe. They are strategically located in shopping structures and urban districts that best reach their target market. The company has utilized their store placement to maximize reach and profit. Apple has one of the strongest human resource structure; Steve Jobs and Tim Cook has set the ultimate standard for team leadership at all levels of the organization. Apple has outsourced much of their manufacturing, logistics, transportation planning, and assembly work to maximize efficiency while lowering costs. The company also has competitive market shares in the local and global market. The Apple trademark and logo is valid with wealth and quality. Apple is well versed in fighting within the consumer electronic market. They know how to use their resources to outdo their competition and remain competitive. Apple has built alliances with Microsoft within the software arena and works cooperatively with Dell in the distribution segment. Apple customers are willing to pay a premium because they know the product they are purchasing offers the latest and greatest technological field. The Macworld Expo and Conference establishes a platform for the company to demonstrate their newest innovation.

Apple’s intangible resources may not be physical in nature, but just as vital as the tangible resources. Apple has a historical pattern of tenacity and innovation in the industrial market allowing them to fact off to their stringent competition. The company’s brand reputation and the superiority of the Apple products are in high standing. The quality coincides directly with the brand logo, validating the price tag for the consumers. Apple’s internal philosophy of thinking different allows the innovative spirit to continue. The customer-focuses service strategy enables the company to maximize on the switcher campaign. Advertising real customers who switched from the many competitors to become an Apple customer. The company also employs a direct sales model that allows them to control the promotions and sales within the retail industry. The company also has implemented a hybrid strategy that enables them to integrate the differentiation strategy and the company’s cost leadership. Apple has devoted itself to build an integrated and well-managed distribution system and supply chain. The structure of the distribution and supply chain not only is cost efficient, but it also ensures that the products meet the deadlines so that customers can obtain their products when they are available. Apple also has a high management system that supports innovative thinking and employee diversity. The company depends on their employees to think outside of the box and what they collectively bring to the table is one of the greatest intangible resources that the company can employ.

Cost and Pricing Strategies

A company’s cost of pricing strategies is one of the most important factors in operation. Apple has to take into consideration many variables when pricing their products for consumer sales. The entire cost of production needs to reflect a price where a profit can still be yielded after the total investment. Apple has never been known for selling cheap consumer electronics. Their pricing strategy is significant with the sophisticated products they are providing to the customers. Apple’s pricing strategy has four main pillars when presenting the product to the customers. First, the company only offers a small number of products available on the highly anticipated release dates. It creates a high demand for clients who want to be first to have the newest Apple products, and the rest of the customers are left waiting for the next available shipment. The company is focused on the high end, pricing their product to reflect the value and prestige of the product. Customers are willing to pay the hefty price tag that coincides with the Apple product lines, in exchange they know they are getting the quality in which they are paying.

Apple’s third pillar is to give priority to the profits of the market share. The pricing cannot lessen the value of the product; it prioritizes the profit over the potential of market share. Lowering the price can maximize market share but decrease the profit, which is not Apple’s primary goal. Finally, the cost of pricing strategy can create a halo effect that makes people starve for new Apple products. The annual announcement of Apple’s new iPhone release is highly anticipated, and customers are waiting to find out the feature of the new product. It coincides with the other three pillars and directly influences the demand for the product.

Based on ideas of the strategic financial management the pricing should be established during the development stage. The systematic pricing strategies and policies allow for the particular companies to reap a greater profits while still maintaining or increasing their market shares. Apple has carefully selected their pricing strategies originally established by Steve Jobs and carried on by Tim Cook. Their focus was on prestige, notoriety, and ultimately profit. However, it is recommended to expand their product line to include a midrange product. It will not lessen their profit to grow their cost in price strategy to reach an entirely new market. Many individuals would love to own an Apple product; however, they cannot afford the hefty price tag associated with the product. Establishing a midrange product would not tarnish value, it would provide an entirely new target market. Strategic financial management requires the company to establish the price of their products based on demand, value, cost, and competition. Implementing a new, midrange product line would develop and entirely new service that would allow Apple to be competitive in a lower price structure. The cost of manufacturing would be lower, and the profits would be significant for this product line, just like it is with their existing product.

Internal and External Triggers

There are internal and external triggers of change that impact Apple Inc. The environment of operation is subjected to external physical circumstances that influence and impinge on the growth, survival, and development of creation. The business environment involves all factors of the internal and external operation that affects growth and profitability. One internal trigger is technology. It requires management to assess the planning, organization, leading, and control. For Apple, technology is an important internal trigger. The managers aim to control technological advances, however, are dependent on their various departments on implementing the necessary changes. Another internal trigger is the brand reputability. It requires the management to continue to deliver superior products to the consumers. The company’s philosophy of ease also in an internal trigger for Apple. It supports the other internal triggers that affect the company’s operations. An external trigger that Apple faces is globalization. It directly affects how the managers run the organization. It requires a cultural exchange, emergent economies, investments, and cross-border trade. Globalization requires management to handle the competencies in a different manner. The opportunities for Apple is also an external trigger. The newest products designed by the company provides opportunities for growth, and a means to maximize market presences.

A change management strategy involves different areas that reflect the interest of Apple’s stakeholders. Change management provides a systematic approach to addressing change, on the individual level and at an organizational level. “A somewhat ambiguous term, change management has, at least, three different aspects, including: adapting to change, controlling change, and effecting change” (Pearce, 2015). The company should implement a proactive approach to addressing the core aspects of the operation. The stakeholders are not only the top management and investors, but it also involves the customers. Apple’s change management means implementing and defining their procedures and technology to address the inevitable changes within the business environment while maximizing profit opportunities. It is important to understand that change is an inevitable part of any organizational process. The company has to determine how the proposed strategies will influence and affect the stakeholders. Apple has to take every change into consideration with the associated costs, the scope of the project, and what the expected change may provide. After analyzing the change strategies, they need to determine if it will establish favorable outcomes for the managers, stakeholders, and customers equally.

Stakeholder Analysis

Apple has many individuals with vested interest and concerns with the company. The key stakeholders directly influence the programs and policies as well as their corporate social responsibility. Stakeholders can be demanding, and they can impose many different requirements for the corporation. Apple has four primary stakeholders that include their customers, employees, investors, and employees of distributors and suppliers. The customers are individuals and businesses that purchase Apple products. The consumers are primarily concerned with getting a quality product at a reasonable price. They are willing to pay more for a product that provides better features. The second priority for stakeholders at Apple are those employed by Apple. They expect to be fairly compensated and be given a fair career path. The stakeholder group of employees is vital because they dictate Apple’s human resource abilities for development and innovation of profitable products. The investors are traditionally the primary determinants of the corporate social responsibility programs within the businesses. The investors want the maximum return on their investment and hold Apple accountable for their business practices to ensure that happens. And finally the employees of distributors and suppliers. These stakeholders indirectly influence the success of Apple. They want the same basic resources such as proper compensation and job securities.

The strategies to overcome resistance are based on knowing the type of resistance that can occur. There is the self-interest resistance that is based on how it will affect the individual. The small tolerance of change is geared to those people who like things that stay the same. The misunderstanding is a lack of communication and follows through for necessary changes. And finally, different perspectives of the situation can be based on a lack of understanding of the ultimate goal. The proposed strategies for Apple are to implement education and communication. All stakeholders benefit from the organizational growth, and the policy of training and communication can serve to get everyone on the same page. The second strategy is participation and involvement. Stakeholders who are involved in the process pose less resistance to change. Finally, the strategy of negotiation allows the stakeholders to voice their concerns and mutually reach a common ground. It is an important variable in addressing resistance to change.

Human Resource Contribution

The human resources management practices also contribute to the success of Apple and the organization’s future change management process. Apple’s human resource mission is to establish an interactive process that allows an exchange, assimilation, and absorption of knowledge that is used in a social and physical context. The management practices implement training and education in efforts to increase individual psychological capital and productivity outcomes. A significant part of the practice is managing the resistance that occurs in the change management process. Also, “Apple aims at fostering new combinations of knowledge by establishing novel associations through the reevaluation of current knowledge to come up with new knowledge” (Investor.apple.com, 2015). The human resource management plan clearly demonstrates Apple’s focus of veracity tackling various challenges and enhance employee skills. A significant variable in the change management process is educating and involving the employees. Change is not always easy, but it is necessary, and the management practices directly influence the success of the program.

Effective knowledge management is a key to adopting an innovation. The human resource management is the glue that holds all variables together. Innovation is a crucial motivator in the change management process. Apple’s human resource practices support innovation of improving efficiency, creative ideas, and the creation of new services and products. The company achieves this through a systematic investment of the innovation capabilities. It encourages the employees to cope with the ever changing environments that are a consequence of competition. Apple’s human resource management thus communicates their objectives to their employees in a manner that creates commitment for their personal involvement. Apple expects their employees to work honestly and efficiently, but also to share their experiences and competencies. The change management process requires all employees to comply with the ever-changing work environment of Apple Inc. The human resource management strategies provide a basis for implementing such changes.

Management and Leadership Styles

Apple is world renowned for their organizational management and leadership style. They extend the importance of diversity, individual contribution, and employee appreciation. Their approach to employee retention is strongly dependent on how they show their gratitude for their services. “The overall goal of performance management is to create a culture as high performance in which individuals and teams to take responsibility for the continuous improvement of business processes and their skills and contribute to achieving the targets set by managers” (Cania, 2014). Steve Jobs was a significant contributor to the leadership style of Apple; however, Tim Cook has his ideas. The culture supported employees to evolve and to think individually. Management performance directly shows an approximation of immediate objectives of the employees. The expectations at Apple are not dictated they are a universal driving force. There is a high accountability of all employees of Apple, in exchange for the freedom of individual processes. Cook was expected to ‘drop the ball’ on the organizational management however he has adopted changes that have been successful for the organization. Cook’s change management style is that of a coach, instead of the mastermind of dictating ideas and expectations.

Management and leadership style can adapt to deal with the planned changes within Apple. First, providing more thorough communications of expectations and feedbacks will yield a more accurate and desired outcome. “Performance management is a planned process in which key elements are different measurement, feedback, positive reinforcement and ongoing dialogue between managers and employees” (Cania, 2014). The proposed change management does not dictate taking away the support of workers bringing their contributions to the table. After all, that is a vital part of what has made Apple great. However, implementing ongoing and regular feedback will not only establish accountability but will yield a more desirable outcome. Management change needs to be able to measure results based on performance achievement and compares it with the company’s expectations and objectives. There is also the importance of input and values. It is the skills, behavior, and knowledge necessary to produce the desired outcome. Apple’s management needs to continue to arm their employees with the tools necessary to do their jobs and follow up to ensure the direction of the company is being followed.

References

Cania, L. (2014). The Impact of Strategic Human Resource Management. Retrieved 30 December 2015, from http://www.management.ase.ro/reveconomia/2014-2/14.pdf

Investor.apple.com. (2015). Apple – Investor Relations – Financial Information. Retrieved 30 December 2015, from http://investor.apple.com/financials.cfm

Pearce, S. (2015). Apple, Inc. The Strategy of Success. Retrieved 30 December 2015, from https://stevenwpearce.wordpress.com/2015/06/08/apple-inc-the-strategy-of-success/