This paper is an individual assignment from the MGT 521 course at the University of Phoenix. It follows the requirements to act as a mutual fund manager, to select a single fortune 500 company and to conduct a SWOT analysis and a stakeholder needs assessment to conclude if this fund manager would invest in the selected company. The company selected was Apple Inc. and after conducting an independent analysis and assessment it was concluded that this fund manager should make an investment in Apple. It should be noted though that this paper was written by Robert Eberhard, a passionate and long-time user of Apple products. Although the conclusions achieved were an attempt to be unbiased, it should be known that the author has strong preferences towards Apple products and the style of leadership conducted by the team at Apple Inc.
This paper is a review of Apple Inc., America’s leading ‘Fortune 500’ company, through the eyes of a mutual fund manager in an attempt to ascertain if Apple should be included as part of this fund managers portfolio. This is part one of a three part business analysis which will determine if Apple Inc. is a good investment. This first of three papers will look into Apple through a SWOT analysis and an examination of its stakeholders. This particular SWOT has been independently generated from a variety of informal sources and will be analyzed based on its relevance to the proposed investment. The second component of this paper takes a look at how Apple is dealing with the needs of its stakeholders. Although there is a lot more analysis which would be required before a final decision could be made regarding an investment in Apple, this paper will conclude with an interim investment decision based on the evaluations made in this assignment.
Background into Apple
In the 2011 fortune 500 rankings Apple finished 35th, jumping from the 56th position it established the year before. As of January 2012 Apple surpassed Exxon to become the largest Corporation in the world. Apple’s rapid climb from virtual bankruptcy in 1996 is an incredible story. “Despite its enormous market capitalization, Apple’s stock has been undervalued relative to its even more enormous profits” (Associated Press, Washington Post, April 10th, 2012). The markets seem to report that even though Apple has an incredibly high stock price it is still worth the purchase, which is the reason why Apple is being analyzed for this portfolio. Now that we have established Apple in context, let’s begin with an independent SWOT analysis.
The SWOT analysis is made up of Apple’s strengths, weaknesses, opportunities and threats. Each segment will be analyzed as an independent component followed by a conclusion.
Apples Strengths. Many believe it is the individuals that are the greatest asset of any company and not their products, but now that the legendary innovator Steve Jobs is gone is Apple still competitive? The answer is yes. There is a time and place for every type of leader and this is the ideal time for Tim Cook to take over as the leader of Apple. Tim Cook, is ranked as the number one CEO in the US by ‘Glassdoor’, with a 97% staff approval rating (James Johnson, March 30th, 2012). Tim Cook has cut Apple Inc.’s inventory from months to days, with ultra-efficient supply channels and is leading the fair wage movement in China (Adam Lashinsky, August 24th, 2011), but Tim is not the only superstar; the artistic genius behind Apple is still Jony Ive, as he is known to devoted Apple followers. The second key strength for Apple is their products ecosystem. Apple OS, iOS and iCloud, make up the foundation in which this ecosystem has evolved. The ecosystem enhances each new product making the ownership of two or more apple products worth more than the sum of their parts. This system is revolutionary because it goes against all post-internet thought. Its uniqueness is that it is a closed system, maintaining its own store, hardware and software applications (apps). This closed system has allowed Apple to enact control over the user experience minimalizing third party costs and maximizing profit. The “Walled garden” experience minimizes technical issues and is considered by most to be a virus free environment (Daniel Lyons, March 25th, 2010). Although most would consider Apple’s products to be their key strength, they are simply the by-products of their environment. The iPod, iPhone, iPad, iMac, iTunes Store, and the Mac Book Pro, are all the bestselling products and services in their category, with each classified as a benchmark product. As a final note it is the depth of their assets that provide diversity for the company. Some example assets include their cash position, which exceeds $100 Billion (Peter Svensson, Vancouver Sun, April 10th, 2012), their branded stores, and leading professional and consumer software apps to name just a few.
Weaknesses. Apples central weakness may simply be its ideology. Open systems are what have made the internet the powerful tool it is today and remains the mantra of companies such as Google and Microsoft. The diversity and specialization of competing open products highlight this issue. Individuals who are not already hooked on the Apples ecosystem or swayed by any social encouragement can usually find exactly what they are looking for with another brand. This segues into Apples second, weakness of significance, which is the price of their products. Even when their products are not higher priced they are perceived as having a higher price. Most consumers of electronics don’t have the knowledge to compare based on value or to recognize the potential for a poorly made product offered by a competing electronics company.
Opportunities. It has been a well-publicized rumour that Apple is going to enter the TV market with what has been called ‘iPanel’. In the Walter Isaacson biography called, “Steve Jobs” (Oct, 2011) he announced what is usually a well-kept apple secret and made it a highly publicized and anticipated product offering. As a result the TV industry in general has been undergoing significant innovations in an attempt to keep ahead of the coming Apple launch. Unlike the iPad and iPhone, the iPanel may not make it into the number one selling position but analysts believe that it, “could produce a halo effect that leads to consumers picking up an iPad or iPhone along with the new TV” (Steve Schaefer, Forbes, April 5th, 2012) The strength of the apple ecosystem is that products like the iPod Touch act as a gateway product for other Apple purchases (T. Sheridan, Apple’n’Apps, Sept 6, 2011). With each new product, the ecosystem expands and as a result a new added gateway increases the likely hood and opportunity for the expanded consumer use of apple products.
Threats. Under the leadership of Tim Cook tensions between Apple and Google have relaxed. Although apple has gained a dominant position in consumer computing products, that balancing point could shift back to open systems quite easily like we saw in the late 90’s when Microsoft essentially controlled the PC market. Such a return could be foreseen through inspired competitive leadership and a competing open OS that “just works” (R. Eberhard, personal remarks, 2012). Microsoft is coming out with their highly anticipated Windows 8. Google is also ever present and could easily expand its android operating system onto the desktop. Isn’t the android tablet a computer after all? Android currently represents Apples biggest threat to its ecosystem if they can tap into the youth market and bring an end to the cult following that has been apples forte for the past 15 years. One final threat could come in the form of a serious computer virus which would hurt apple from a public relations perspective.
It is the battle of the ideologies. Apple’s competition is cheap and abundant. It is essentially Apple vs. everyone else. That is a tough battle for any company because one false strategic move and a lot can be lost. That being said Apple appears to be under good management. Their growth trend does not appear to be slowing any time soon. Technology moves fast but not fast enough to realistically see a competitive threat anytime in the next two years based on this SWOT analysis. Quality leadership in association with an expanding ecosystem that encourages the purchase of additional Apple products is a very healthy argument for continued growth.