Introduction
Apple Inc. is an American multinational technology company that specializes in consumer electronics, software and online services headquartered in Cupertino, California, United States. The business model of Apple involves its business plan, revenue model, SWOT Analysis and many more.
It is the world’s biggest company by market capitalization, the fourth-largest personal computer vendor by unit sales and second-largest mobile phone manufacturer. It is one of the Big Five American information technology companies, alongside Alphabet, Amazon, Meta, and Microsoft.
There is no doubt that in the last year, the company has about 51 billion dollars of cash flow for sure. So, that is certainly more than the other companies that we see around. The business model of Apple predisposes the entire company for the cash generation via its different types of products.
Apple sells three types of products, and they are-
- Apple Hardware Products
- Apple Software Products
- Apple Online Services
Apple Hardware Products
- iPhone smartphone
- iPad tablet computer
- Mac personal computer
- iPod portable media player
- Apple Watch smartwatch
- Apple TV digital media player
- AirPods wireless earbuds
- HomePod smart speaker
Apple Software Products
- macOS
- iOS
- iPadOS
- watchOS
- tvOS operating systems
- iTunes media player
- Safari web browser
- Shazam acoustic fingerprint utility
- iLife and iWork creativity and productivity suites
- Professional applications like Final Cut Pro, Xcode, Logic Pro
Business Model
Apple’s business model targets mass-market consumers. That is hundreds of millions of consumers. They may be middle class and fairly affluent. It may be marketed as a premium product but it is a mass-market electronic good.
There are smaller customer segments that it focuses on for non-handheld products. Designers and entrepreneurs both use and love Mac products but in 2019 this is a relatively small proportion of Apple’s revenue.
In the tables below Apple’s customer segments are broken down across a number of different measures, geographic, demographic, behavioural and psychographic.
Apple is a software as well as hardware that also succeeded. The iPhone is certainly an emblem of our times. However, the iPhone, because of its software, is also a very good smartphone. When we look at the growth of Apple in 2019, areas like wearable, home, accessories (items like AirPods and Apple Watch), and services were driving this growth significantly.
Revenue Model
Furthermore, Apple makes money when the users of its products pay fees for the extension of their warranties. In addition to their products, they also sell compatible third-party accessories and apps.
As a passive revenue source, Apple also makes money through in-app purchases on iPhones, and app sales on their App Store — they take a 30% cut from every transaction.
Apple has been dividing its company into five sectors since 2018: iPhone, iPad, Mac, Wearable, Services, and Home Accessories. The iPhone provides most revenues of Apple, but both wearables and services, home and equipment have gained more prominence in recent years as Apple seeks to find new means of preventing stagnation in revenue.
From $42.7 billion in 2009 to $156.3 billion in 2012, Apple revenues climbed considerably. In the period, Apple improved its production capacity greatly via its Foxconn partner, which allowed worldwide sales of the iPhone. It also saw the arrival of the iPad, which in its first year of sales added $19.1 billion in income.
Competitors
Some of the Apple’s Competitors are:
SWOT Analysis
Strengths
- Innovative products – One of the key strengths of Apple over the years has been its innovative product line up. Apple has presented hit products after hit products and that’s been the major strength of Apple. In short, Apple has covered almost everything that an individual “desires”.
- Leadership position – As per Wikipedia, Apple is the leading technology company in the world with regards to revenue generated. It is also the second largest smart phone manufacturer. It become the first US company to cross 700 billion dollars and in 2014 was the largest publicly traded company in the world.
- Brand equity – Naturally, being in the leadership position requires that your brand equity be high. The brand Apple is the number 1 valued brand amongst all the companies in the world as of 2016. The brand value in 2015 was estimated to be 118.9 Billion dollars!!
- Design & Technology – The best part of Apple, and the reason for its fantastic brand equity is its design as well as the technology it uses. Apple has always been suave and elegant in its product design. And at the same time, beneath this exquisite design is a machine powered to give ultimate performance. All this runs on the MacOS which is another software known for its efficiency.
- Consumer focus – Apple always designs its products with a focus on consumers while keeping their mind in the future. They always try to imagine the things which even the consumer has not imagined yet.
Weaknesses
With a company which is a market leader and innovative, we can expect very few weaknesses. Still, here are 3 weaknesses which Apple might be facing.
- Matching Customer expectations – Being a leading company since 1980’s Apple has a major market share and the consumer expectation is going through the roof. People expect great things from apple year after year and maintaining these expectation levels is not easy for anyone.
- Incompatibility – A key issue in Apple as a company is that many of its products are incompatible with third-party software / accessories. So overall, when you buy a product of Apple, you enter the Apple universe and you have to continue with Apple only. That makes a huge impact on consumer decision making.
- Dependency on few products – Apple has only 7-8 products in its portfolio in comparison to the various products that its closest competitors Microsoft and Google have. Hence the dependency of Apple on each of its products is very high. If one product fails, then that is a 10% loss to Apple.
Opportunities
- Technological advancement – In the technology industry, technological advancement is always an opportunity. And the one brand we can expect to leverage technology to its best is Apple. We can expect even more advanced MacBook’s, Iphones, Ipads and Iwatches in the coming years.
- The growing market – Apple is a growing company in a growing market. Equally important to the company is the rising GDP of developing countries, thereby increasing consumption of such premium brands like Apple. Any company which is growing needs a larger market base and the market base is slowly being built via territory expansion for Apple.
- Iwatch and Apple TV – Two products which can increase the presence even further are the Iwatch and Apple TV, both of which are aimed at the future, for when the digital presence increases. Apple Iwatch already has a 50% market share of Smart watches in US.
Threats
Apple as a company does not have any threat.
- Market penetration in Smartphones – One of the key threats to Apple is the market penetration by other brands in the Smartphone market. Android is eating market share like anything and currently has 47.5% of the market share whereas Iphone is at 42% market share. Android is being used by Samsung, HTC, Lenovo and practically everyone who wants to enter the smart phone market. Naturally Android being of Google (2nd most valued brand), Apple has to be ready for Smartphone competition.
- Laptop competition – MacBook is obviously the best there is. But so is Dell, and so is Sony and so is Lenovo. The competition is ever-increasing in the laptop segments. Dell has introduced some beautiful models over the years including the Alienware model. So, although Apple as a brand is loved by everyone, MacBook is facing stiff competition from other brands as well.
Conclusion
Everybody in the world is familiar with the name duet, as Apple is not just a name to a fruit but also to one of the most important company in the world. Its revenue, dividend and brand name is acquired through a process of long marketing and user base. They have their products in almost every country.
