Do you want to know Apple’s strength, weaknesses, threats & competitive strategies? If YES, here is a detailed Apple SWOT analysis plus competitors analysis.
Apple Computer Company was founded on April 1, 1976, by Steve Jobs, Steve Wozniak, and Ronald Wayne as a business partnership. The company’s first product was the Apple I, a computer designed and hand-built entirely by Wozniak, and first shown to the public at the Homebrew Computer Club.
On December 12, 1980, Apple went public selling 4.6 million shares at $22 per share ($.39 per share when adjusting for stock splits as of March 30, 2019), generating over $100 million, which was more capital than any IPO since Ford Motor Company in 1956. By the end of the day, the stock rose to $29 per share and 300 millionaires were created. Apple’s market cap was $1.778 billion at the end of its first day of trading.
Apple has built its business by selling and manufacturing computer hardware and software, but experienced significant growth and success by entering consumer electronics market with iPod, iPad and iPhone products. The company designs, manufactures and markets smartphones, tablets, personal computers, wearables and accessories, and offers many related services including financial services.
The main company’s product is iPhone, which runs on Apple’s iOS operating system and accounts for 54.7 percent of the total company’s revenue. In 2019, the company introduced three new iPhones: iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max. Mac products are the second largest company’s product category by revenue, generating 9.9 percent of the total company’s revenue.
Mac products include MacBook Air, Mac mini and Mac Pro and run macOS operating system. iPad category, which includes iPad, iPad Pro, iPad Air and iPad mini products, accounts for 8.2 percent of the total Apple’s revenue. The rest of the company’s products include wearables, home and accessories, which account for another 9.4 percent of the revenue and is the fastest growing Apple’s product category, growing by 41 percent in 2019.
In addition to the consumer electronics and computer hardware products, Apple is offering many services to its customers, including:
- Digital Content Stores. The company operates digital content stores that allow customers to discover and download applications and digital content, including music, videos, books, games and podcasts.
- Subscription based services. Apple’s services like Apple Music and Apple TV+.
- AppleCare services. AppleCare is a fee-based service that provides additional coverage of phone hardware repairs, accidental damage and even theft.
- Other services. These services include iCloud, licensing, Apple Card, Apple Pay and Apple News+.
Services generated 17.8 percent of the company’s revenue and was the second fastest growing category for Apple, growing 16 percent in 2019. Apple operates and sells its products in over 100 countries, but the U.S., China, the U.K. Canada and Australia are the most important markets.
In 2019, the company’s net sales through its direct (sales in company’s 508 stores in 25 countries and sale through online stores) and indirect distribution (sales made by third-party sellers) channels accounted for 31 percent and 69 percent, respectively.
Apple competes in a highly competitive industry and has to continuously perform at its best to be able to stay ahead of its competition. Apple competes primarily on price, product and service features, quality and reliability, design innovation, a strong third-party software and accessories ecosystem.
There are many large and well-positioned rivals in the industry, so a fierce competition requires constant innovation and taking advantage of the arising opportunities.
Although Apple seems to be one of the leaders in tech industry, but they have major competitors who are equally doing pretty well in the industry and of course controlling a segment of the market.
These major competitors are Samsung Electronics Co., Ltd., Google Inc., Amazon.com, Inc., Huawei Technologies Co., Ltd. International Business Machines Corporation, Cisco Systems, Inc., Microsoft Corporation, Dell Inc., LG Electronics, Lenovo Group Limited, Sony Corporation and many other computer hardware, computer software, consumer electronics and internet companies.
SWOT Analysis for Apple Inc.
- Ability to Execute Massive Product Launches
Apple Inc. manufacturing, procurement, and logistics enable it to execute massive product launches without having to maintain large, profit-sapping inventories. In 2011, Apple’s profit margins were 40 percent, compared with between 10 and 20 percent for most other hardware companies. Cook’s catchphrase to describe his focus on the company’s operational arm is: “Nobody wants to buy sour milk.”
- Economies of Scale
Reliable statistics shows that Apple Inc. is the world’s largest information technology company by revenue, the world’s largest technology company by total assets, and the world’s second-largest mobile phone manufacturer after Samsung.
As of August 3, 2018, Apple was the largest publicly traded corporation in the world by market capitalization. On August 2, 2018, Apple became the first publicly traded U.S. company to reach a $1 trillion market value. Apple was ranked No. 4 on the 2018 Fortune 500 rankings of the largest united states corporations by total revenue.
- Privacy Stance
Another obvious strength that Apple Inc. can boast of is that the company has a notable pro-privacy stance, actively making privacy-conscious features and settings part of its conferences, promotional campaigns, and public image.
With its iOS 8 mobile operating system in 2014, the company started encryption all contents of iOS devices through users’ passcodes, making it impossible at the time for the company to provide customer data to law enforcement requests seeking such information.
With the popularity rise of cloud storage solutions, Apple began a technique in 2016 to do deep learning scans for facial data in photos on the user’s local device and encrypting the content before uploading it to Apple’s iCloud storage system
- Competent In – House Hardware, Software, Applications and Services Experts
It is a fact that Apple Inc.’s ability to design and develop its own hardware, software, applications and services allows the company to introduce unique, innovative and easy-to-use products and solutions for its customers.
Unique, innovative and easy-to-use products and services that integrate seamlessly into one Apple ecosystem are the reasons why customers buy Apple’s premium products and enjoy using them. In other words, it creates a competitive advantage no other company can match.
Many of Apple’s competitors have tried and still try to imitate the success of Apple’s product ecosystem, but fail due to not having strong capabilities in designing, manufacturing and developing both hardware and software, applications and services.
Samsung Electronics, Apple’s strongest competitor, lacks a comprehensive OS and has very few apps and services to offer for its customers. Google, Apple’s second largest competitor is very good at software, application software and services, but has only developed a few unsuccessful hardware products.
- The Authoritative Brand in the Industry
You can’t agree less that Apple’s brand is the world’s most valuable and recognizable brand and this is supported by strong advertising and marketing capabilities. According to Interbrand and Forbes, the Apple brand is worth US$234.241 billion and US$205.5 billion, respectively.
Brand value is closely related to its recognition, meaning that Apple is also one of the world’s most recognizable brands. Their brand recognition is supported by its vast product ecosystem. Furthermore, Apple has a reputation of developing highly innovative, well designed, and well-functioning products, as well as for delivering a great customer experience and sound financial performance.
Apple’s excellence in creating spectacular marketing campaigns, its superior advertising capabilities, premium quality products and ability to deliver an excellent customer experience has allowed the company to build the most authoritative brand in the world.
- Top – Notch Customer Loyalty
It is a known fact that there is this sense of belonging amongst Apple’s customers. Apple enjoys a very loyal customer base, considering that it doesn’t even have a loyalty program. Indeed the company can boast of having one of the most loyal customer base in every major product market where the company operates.
Customers praise the company’s products for their innovation, design, ease-of-use, reliability and the status they convey. This is why they continue to buy and use Apple’s products even when there are better or cheaper options available in the market.
Apple’s retention rates in the smartphone market are the highest among its major rivals. According to BankMyCell, Apple retains 74.6 percent of its customers, compared to Samsung’s retention rate of 63.9 percent and LG’s 40.7 percent.
The chart shows that five columns and companies names with respective retention rates. Apple smartphones retention rates were 74.6 percent, Samsung 63.9 percent, LG 40.7 percent, Motorola 37.9 percent, HTC 10.8 percent.
Apple also enjoys the most loyal customer base in the tablet market, where the company was able to grow its market share significantly even when the market declined slightly. Customer loyalty is a key to every technology company’s success. Apple’s ability to retain its customers and do it so well bring it a competitive advantage no rival can match.
- Lack of Innovation
An editorial article in The Verge in September 2016 by technology journalist Thomas Ricker explored some of the public’s perceived lack of innovation at Apple in recent years, specifically stating that Samsung has “matched and even surpassed Apple in terms of smartphone industrial design” and citing the belief that Apple is incapable of producing another breakthrough moment in technology with its products.
He goes on to write that the criticism focuses on individual pieces of hardware rather than the ecosystem as a whole, stating “Yes, iteration is boring. But it’s also how Apple does business. Whereas Google and Amazon make use of big data and analyze customer information to personalize results, Apple has a strong pro-privacy stance, intentionally not retaining user data.
“Siri is a textbook of leading on something in tech and then losing an edge despite having all the money and the talent and sitting in Silicon Valley”, Holger Mueller, a technology analyst, told the Journal. The report further claims that development on Siri has suffered due to team members and executives leaving the company for competitors, a lack of ambitious goals, and shifting strategies.
Though switching Siri’s functions to machine learning and algorithms, which dramatically cut its error rate, the company reportedly still failed to anticipate the popularity of Amazon’s Echo, which features the Alexa personal assistant.
- Tendencies to Exhibit Unethical Business Practices
Apple has been criticized for alleged unethical business practices such as anti-competitive behavior, rash litigation, dubious tax tactics, production methods involving the use of sweatshop labor, customer service issues involving allegedly misleading warranties and insufficient data security, and its products’ environmental footprint.
Critics have claimed that Apple products combine stolen and/or purchased designs that Apple claims are its original creations. It has been criticized for its alleged collaboration with the U.S. surveillance program PRISM.
- Repair Restrictions on Their Devices
In July 2019, following a campaign by the “right to repair” movement, challenging Apple’s tech repair restrictions on devices, the FTC held a workshop to establish the framework of a future nationwide Right to Repair rule. The movement argues Apple is preventing consumers from legitimately fixing their devices at local repair shops which is having a negative impact on consumers.
The United States Department of Justice also began a review of big tech firms to establish whether they could be unlawfully stifling competition in a broad antitrust probe in 2019.Poor customer services
- High Cost Structure
Another weakness that people can attribute to Apple Inc. is the fact that their products are usually very expensive when compared to similar products from other brands. For example, the fact that Apple computers are often more expensive than PCs does not mean that it is better.
As a matter of fact, pricier computers typically mean better components, but that isn’t always the case when comparing Apples to PCs. As a matter of fact, PC computers offer many more customization options than Macs. Macs has limited selection and gaming options. MacBook Air is expensive with the default model starting at $999 and the laptop comes with internal battery, which will be difficult to replace in future.
- Market Growth for The Main Firm’s Product
There are loads of opportunities that a company like Apple Inc. is open to and this is because the world is been driven in the technology direction; everything is becoming computerized. In essence, market growth for the main firm’s product is indeed a massive opportunity for the company.
The fact that Apple Inc. offers a greater level of security to the owners of their gadgets as it removes the need for weak and easily compromised passwords and online identities is a plus for them and will open up more market for them
As a matter of fact, new technology, that would drive production costs by 20 percent is in development and this will open up massive opportunity for Apple Inc. to continue to dominate the market.
- Changing Customer Habits
If you are a close watcher of happenings in the tech industry, you will notice that changing customer habits favors Apple Inc. People who ordinary didn’t bother owning any of Apple’s products are now working hard to ensure that they are part of the people who make use of Apple’s products.
Going forward, the demand for Apple’s products and of course the revenue generated is projected to increase rapidly as Apple Inc. explodes in popularity and accessibility, especially in consumer markets.
So also, growing number of people buying online now fancy buying Apple’s products due to the number of celebrities and public figures that make use of Apple’s products and are proud to showcase them on their social media handles and pages et al.
- Disposable Income Level Will Increase
Another great opportunity for Apple Inc. is the fact that disposable income level will increase and the economy is expected to grow by 4 percent next year which will put more money in the hands of people and they can consider buying Apple’s products. The national unemployment rate declined significantly over the past five years.
As a result, many consumers we don’t have enough to buy Apple’s products are now considering owning one or more of Apple’s gadgets, which ultimately will increase the number of products sold. These economy factors, coupled with rising disposable income, will sure result in a rise in demand for Apple’s products across people with different purchasing powers.
- Intense Competition
If there is any major threat that Apple Inc. is facing presently, it has to be from their major competitors; indeed, intense competition is a threat to the company. Although, apart from Google and Samsung Electronics, few other companies could seriously attempt to challenge Apple’s competitive advantage.
But you cannot rule out the fact that other tech companies such as Huawei Technologies Co., Ltd. International Business Machines Corporation, Cisco Systems, Inc., Microsoft Corporation, Dell Inc., LG Electronics, Lenovo Group Limited, Sony Corporation and many other computer hardware, computer software, consumer electronics and internet companies are working pretty hard to win some of the market shares that Apple Inc. is presently controlling not just outside the United States of America, but also within the United States of America.
- Global Economic Crisis
Economy crisis is a major threat that all industries and companies face and Apple Inc. is not immune from it. As at today, because of the effect of the corona virus pandemic (COVID -19), the economy of all the countries is on the downturn. Jobs are less and people are working at the least minimum wages.
The tech industry is declining, and people are not after buying new smart phones or tech devices as the would have done when the economy is booming. In such circumstances, the tech industry has to reduce the expenses to the minimum level. This is the only way to survive under the global crisis.
- unfavorable government policies
Government policies can intervene in the tech industry and have a very bad impact. For instance, government can come up with a policy that will compel all US based companies not to source their raw materials from some countries and that all tech products sold in the US must be manufactured from scratch from the United States.
With this type of legislation, Apple Inc. can be affected because the company has some production facilities outside of the United States of America. As a matter of fact, such interventions can result in the form of the loss to the company.
- Environment Threats and Pandemic
Every businesses and industry can sometimes be helpless to the environment threats and pandemics. For instance, tornados, heavy storms, and the strong wind could result in the destruction of the company’s production facility and this can cause a setback for the company.
When it happens, some customers have to cancel their orders and the company has to refund the money paid for the pre – order. In other words, environment threat can cause major loss to the company in terms of customers and income.
So also, global pandemic can hamper the growth of Apple Inc. The current pandemic of Coronavirus (COVID-19) has caused the lockdown of all most all businesses.
People and products meant for shipment are stuck in the country and spending their savings. Tech companies are affected by this lockdown and Apple Inc. is not left out. It’s still uncertain to estimate the loss that it would cost after the lockdown. One thing is certain that things won’t go back to normal after the lockdown immediately.
No company is perfect and Apple Inc. does not claim to be perfect, hence they worked hard to be able to position their business to maximize their strengths, leverage on the opportunities that are available to them, mitigate the risks they are exposed to and they are well – equipped to confront their threats.
Little wonder Apple Inc. is the largest technology company by revenue and one of the most valuable companies, both in terms of market capitalization and brand value, in the world. The company has revolutionized the smartphone market and has created one of the most iconic brands in history.