Entrepreneurial Investment Report

Executive Summary

This report gives an evaluation of the performance of Apple Inc. Company in terms of the current profitability and the prospective profitability in comparison to the initial rationale for its foundation. The analysis also provides information on the financial stability of the company in terms liability versus assets in the current period as compared to the past and the forecast financial performance. The findings show that comparative performance is fairly strong in terms of profit margins, credit control and management of inventory. The information is provided in a table to clearly show the information on financial matters.

It shows that the company’s prospects in the current form though not negative, there is need for management to investigate further and come up with remedial actions.   The report also provides information on why the value of the company Apple’s brand has improved by129% over the past year up from $3billion in year 2011 to $76 billion by 2015. The value of the company has been increasing year by year. It also provides recommendation on how to increase the sales volume. The reports also draws attention to the fact that in in 2011, the market share the company’s Smartphone expanded by close to 49 percent. Further investigation has revealed that the shrinkage in the share market coincide with entry of counterfeit phones in the market especially in the year 2013 and a reduction in the pricing of some of the competing smart phones. These factors seem to be the main cause of decrease in income in most of recent years and subsequent lower profits. The recommendation arrived at include an improvement on debt collection , better management on inventory and the adjustment of pricing in order to compete favourably with other firms. To increase the sales volume, aggressive advertising should be done and legal action taken in order to bring down the chances of the company’s products being counterfeited.

The company was initially started with a goal of targeting the middle class market and thus it had its products priced lower than similar brands. With an initial capital which included a secured bank loan, the company financial position has ensured that the financing loan has been fully serviced and the return on investment has seen the company stabilize financially. The report focuses more on Apples leverage brand iPhone.

Market and Customers.

The Apple Inc. was started on the basis of gaining competitive advantage over other existing competitors in order to penetrate the electronic market. The name Apple Computers Inc. was dropped and Apple Inc. was adapted in order to have an inclusive name since the company resulted to producing other electronic products apart from computers. Thus the company mainly deals with selling smartphones and computers but has also incorporated other electronics that include software Mac OS X operating system. It has been very successful in the introduction of the software that has enabled it to develop an excellent iPhone Smartphone.

 The company has attracted a significant number of users in the phone market since its inception. The number of the users however exceeded the expectation by the end of the year 2013 large where it was able to attract about 17.1 percent of worldwide users an increase that was largely attributed to the innovative features which was a strategy go compete in the market. By the year 2015 the company was able to reach it pick and its market share stood at 40 percent a factor contributed to high profitability in the same year (Lamido, 2016). The company, however, faces big competition from similar brand and the counterfeit brands that sell very cheaply especially in the low income countries. The company sales have been supported by partnering with more than 10000 stores which has been facilitated by 317 stores and this has seen gain a competitive advantage. It has also strategically partnered with other partners in foreign countries to produce and distribute the products. The computer products have largely been sold locally but the Mac OS software has been franchised with an aim of maximising profitability. The company target market is non corporates, and young income earners unlike the competitors. It has managed to leverage on the image of iPhone Smartphone and thus attain a good positioning in the market. Its target market has mainly been professionals and students who are between 18 – 35 years age basically (Lamido, 2016). The company faces stiff competition from other from other software developers such as Microsoft and Google and other innovative phone brands from Samsung, LG, Sony and blackberry

The company has applied the 4 Ps model of marketing mix in order to come up with a good strategy for marketing where the an exchange of benefits are done between the marketing pillars which was later modified to add three more Ps. The product can be found in more than 60 million pages on the internet, using a broad display screen in every mobile phone.  The software used is Pal OS system with expandable memory and replaceable battery. All the versions of the iPhones have been integrated with support for 3G network (Lamido, 2016). A SWOT analysis of the smartphone and the other products has been used to establish their strength and opportunities. The company should come up with main competencies on which it basis its strength and put more focus on the opportunities that may arise with time. An analysis of threats assist in safeguarding the development of the product and come up with contingency plans. The company has gradually adopted innovative methods in an effort to convert weaknesses into strength while using appropriate resources. The customers do not appreciate the locked iPhone that uses one Cingular network. The cost of this phone higher than other similar phones in the market which would partly explain the reduction in the sales. The company should also apply pricing strategy of the best-fit segment where it will target those customers who are less sensitive to price and want to utilise the benefit of the newest technology. This will enable it capture more market segment instead of targeting mostly the young income earner segment of the market. This is known as versioning, which is a price discrimination strategy where iPhone prices will be set according to the customers desire to pay. This should be structured in various countries because a significant difference in the per capita income in different countries.

Though the company has been active in promotion, it should aggressively engage in more advertising activities to boost the sales volume. This should also include press releases and posting blogs so as to increase the coverage of the phones and the computer products across the web. The company has seen a lot of counterfeit products affect its sales. To overcome this the company should go a set further from protecting its intellectual property. The company should work with authorities to police its products and pursue the counterfeit one. It should periodically monitor its sales, both retail and online to check for genuineness.

Income statements

In million USD for 2010-2015

	2015	2014	2013	2012	2011
	Period Ending 2015 -12-26	Period ending 31-12-2014	Period ending- 31-12-2013	Period ending 31-12-2012	Period ending 31-12-2011
Total Revenue	75,557.00	52,872.00	51,501.00	53,605	58,010
Cost of sales	30,636.00	45,449.00	30,953.00	29,924.00	34,354.00
Gross profit	19,921.00	30,423.00	20,548.00	19,681.00	23,656.00
General expenses	3,423.00	3,848.00	3,705.00	3,564.00	3,460.00
R. & development	2,511	2,404	2,220	2,034	1,918
Total operating expenses	36,570.00	51,701.00	36,878.00	35,522.00	39,732.00
Operating income	13,987.00	24,171.00	14,623.00	14,083.00	18,278.00
Loss on sale of assets	-510.00	-263.00	-149.00	-175.00	-226.00
Income Before tax	14,142.00	24,573.00	15,062.00	14,473.00	18,564.00
Income after taxation	10,516.00	18,361.00	11,124.00	10,677.00	13,569.00

 

 

Balance sheet as at 31-12- 2015

Current Assets	Amount(million dollars)
Cash	5,547.00
Short term investments	21,386.00
Cash plus short term investment	38,074.00
Accounts receivable	12,953.00
Net receivables	24,621.00
Total inventory	2,451.00
Other total current assets	11,073.00
Total current assets	76,219.00
Plant and equipment	54,051.00
Total Accum. Depreciation	-29,042.00
Net goodwill	5,202.00
Intangibles	3,924.00
Long term investments	177,665.00
Other L.Term investments	7,974.00
Total Assets	293,285
Accounts payable	33,312.00
Accrued expenses	22,968.00
Short-term loan	7,259.00
Capital leases	2,500.00
Other current liabilities	10,053.00
Total current liabilities	76,091.00
Long term debt	53,204.00
Other long term liabilities	98,594.00
Total liabilities	165,017.00
Total equity	128,267.00
Total liabilities	293,284.00

 

 

 

Cash flow statement as at 31-12-2015

Cash flow	Amount
Net Income	18,361.00
Depreciation	2,954.00
Deferred tax	1,592.00
Non-cash items	1,078.00
Non-cash items	1,078.00
Changes in working capital	3,478.00
Cash from operations	27,463.00
Capital expenditures	(4,006.00)
Other cash flows	(16,444.00)
Investing activities	(20,450.00)
Financing items	(373.00)
Dividends paid	(2,969.00)
Stock issuance	(6,862.00)
Debt issuance	(1,240.00)
Financing activities	(11,444.00)
Change in cash	(4,431.00)
Cash on interest paid	396.00
Cash on tax paid	3398.00

 

 

The income statement shows the peak of the company’s sales to be in the year 2015 NASDAQ (2016). It has been successful in allowing other parties in using their innovative Mac OS software in other gargets and making the iPhone smart phone act as a remote and this helps the firm to share the profits with such developers. The performance of the firm has been affected by the entry of other similar brands whose price are low and whose products have not seen much of counterfeiting. The stiff competition has seen the company experience no significant growth at all in terms of volume of sales although it continues to be profitable only because the costs of operation have been kept low. It continues to be a viable venture as proved by the latest income statement.

Conclusion

It has been confirmed that the company has been able to remain profitable even when it has been experiencing low volume of sales. This has been enabled by the effort to keep the expense at minimum level. The company should focus on adding new markets for its leverage phone brand and aggressively market the other products especially the Apple computers. It should also understand changes in social forces and apply it in targeting new customers. Instead of focussing only on the young professional segments of the market, it should plan to target other segments such as older segment of who usually have higher purchasing power. To further increase sales volume, the firm should consider expanding its market to more countries and develop products priced for such markets.

 

 

Reference

NASDAQ (2016) AAPL. Retrieved from: file:///C:/Users/user.HOME/Downloads/Financial%20Statements%20for%20Apple%20Inc.%20-%20Google%20Finance%202.html

 Lamido, K (2016).The Analysis of Apple Inc. Marketing Mix. Retrieved from: file:///C:/Users/user.HOME/Downloads/The%20Analysis%20of%20Apple%20Inc.%20Marketing%20Mix.%20_%20Kamal%20Lamido%20-%20Academia.edu.html

Website:  http://www.apple.com/