Apple SWOT analysis 2016

| May 11, 2016

A picture showing one of the main strengths in Apple's SWOT, which is advertising and marketing capabilities.
One of the main Apple's competitive advantages is its advertising and marketing capabilities.

This is an Apple Inc. SWOT analysis revealing the main company’s competitive advantages and disadvantages alongside external opportunities and threats. Apple remains one of the strongest players in its core product markets due to its marketing and advertising capabilities, excellent brand reputation, vertical integration and huge line of products in one ecosystem. Apple’s earnings growth in 2015 indicates that these strengths outweigh the company’s competitive disadvantages, such as low expenditure on research and development, overdependence on iPhone and weak distribution channels in China and India.

For the next few years, Apple will have some interesting opportunities to pursue, most notably in IoT market and health related wearable gadgets. Nonetheless, threats are ever more severe and the company will have to use all of its strengths to avoid these threats. Competition will intensify, especially with new Samsung products having a considerable success and the slowing growth of emerging markets.

Company Background

Name Apple, Inc.
Logo
Industries served Computer hardware (Mac, iMac, Mac Pro, MacBook, MacBook Air)
Computer software (iOS, OS X, Safari, iLife, iWork, iMovie, iPhoto)
Consumer electronics (iPod, iPhone, iPad, Apple TV and Mac products)
Digital distribution (iTunes store, iCloud, App Store, Mac App Store)
Geographic areas served Worldwide (retail stores in 18 countries and online stores in 120 countries)
Headquarters Cupertino, California, United States
Current CEO Tim Cook
Revenue US$233.715 billion (2015) 27.85% increase over US$182.795 billion (2014)
Profit US$53.394 billion (2015) 35.14% increase over US$39.510 billion (2014)
Employees 110,000 (2015)
Main Competitors Samsung Electronics Co., Ltd., Amazon.com, Inc., International Business Machines Corporation, Cisco Systems, Inc., Google Inc., Microsoft Corporation, Dell Inc., LG Electronics, Lenovo Group Limited, Hewlett-Packard Company, Sony Corporation and many other computer hardware, computer software, consumer electronics and Internet companies.

Business description

Apple business overview from the company’s financial report:

“The Company designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, Apple TV®, a portfolio of consumer and professional software applications, the iOS and OS X® operating systems, iCloud®, and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store®, App Store™, iBooks Store™, and Mac App Store.

The Company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. In addition, the Company sells a variety of third-party iPhone, iPad, Mac and iPod compatible products, including application software, and various accessories, through its online and retail stores. The company sells to consumers; small and mid-sized businesses (“SMB”); and education, enterprise and government customers.

The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services. The Company’s business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software and services to provide its customers products and solutions with innovative design, superior ease-of-use and seamless integration. The Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Company’s products and services greatly enhances its ability to attract and retain customers.

Therefore, the Company’s strategy also includes building and expanding its own retail and online stores and its third-party distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience. The Company believes ongoing investment in research and development (“R&D”), marketing and advertising is critical to the development and sale of innovative products and technologies.”[1]

SWOT Analysis of Apple

Strengths

1. Marketing and advertising capabilities, which increase brand awareness and create stronger demand for the company’s products. Apple’s annual advertising budget reached US$1.8 billion[1] in 2015, almost doubling from US$933 million in 2011. The company’s advertising budget is certainly not the largest when compared to its competitors’ budgets, but Apple uses it the most effectively.

Figure 1. Yearly advertising budget spending by Apple and its competitors (in US$ billions)

2012 2013 Change from 2012 2014 Change from 2013 2015 Change from 2014
Apple 1 1.1 10% 1.2 9.1% 1.8 50%
Samsung Electronics 4.3 3.8 (11.6)% 3.6 (5.7)% 3.4 (5.5)%
Microsoft 1.6 2.6 38.5% 2.3 (11.5)% 1.9 (17.4)%
Amazon.com 2 2.4 20% 3.3 37.5% 3.8 15%
Google 2 2.4 20% 3 25% 3.2 6%

Source: The respective companies' financial reports[1][4][5][6][7]

Apple’s advertising expenses started to climb in 2010 when its new iPhone and iPad products were launched. However, overall spending on advertising never climbed higher than 1% of total company sales. In 2015, Apple spent only 0.77% of its total sales revenue on advertising, compared to Samsung Electronics’ (Samsung) 1.86% of its total sales spent in 2015. This means that even though Apple spends less on advertising, it still achieves greater returns for the money spent than Samsung. This is also reflected in the company’s brand valuation growth. Forbes[8] and Interbrand[9] both listed Apple as the most valuable brand in the world in 2015, valuing it at US$145.3 billion and US$170.3 billion respectively. Both companies indicated Apple’s brand is one of the fastest growing in the world, even though Apple has spent comparatively little on advertising.

What does this say about Apple’s marketing and advertising capabilities? It means that Apple’s advertising money is spent more effectively than its rivals and provides it with greater returns in terms of revenue, brand value and recognition. It also shows the strength of its marketing and advertising capabilities. Such strength creates competitive advantages that no other company can match.