PEST and Industry Analyses Final
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Transcript of PEST and Industry Analyses Final
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8/13/2019 PEST and Industry Analyses Final
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APPLE INC 2010
CASE ANALYSIS
Submitted to Mr. Shafqatullah
Submitted by
FahadJaved 15540
ShahidJaved 17181
RawatAbbasi 25396
Akhwand Abdus Subhan(23876)
Muhammad Zeeshan Baig(20788)
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1. PEST and industry analyses
Political
85% of facilities where Apple products are assembled and packaged for distribution are
in China, In case of any political conflicts, apples production can severely get effected. 55% of apples sales were outside USA in 2009, and apple does not have control over the
political relationship with other countries, so its quite risk if any political conflict arise it
might affect apples international sales.
Economical
economic condition is also becoming one of the factors that influence growth of everybusiess. Economic recession that was started few years back has strongly effect the sales
of technological gadgets. The net sales of Apple products are growing with a declining
rate, which reflects that the purchasing power of consumers are seriously declining. A26.8% of growth in sales was observed between 2007 and 2008 but between 2008 and
2009 sales growth was only 11.1% which shows a declining trend.
Social
Globalization, Virtual World, and Lifestyle are a social factor that gives a huge impact tothe business development of technological industry. Possessing latest technological
gadgets are considered as status symbols in many societies which have increased the
sales of prestigious technological gadgets. Apple that is considered as innovator in theindustry brings in innovative trends which later on gives other companies to a gate ways
to enter into those new market. Another big social influence to Apple Inc products is the
rapid growth of the music industry, which have increased markets over the cyber space aswell. In 2010 more then 50Million customers visited the Itune store.
Technological
The technological environment for Apple's market has grown substantially over past
years. Most specifically, phones and computers have become a hot commodity. Apple is
on top of the market for innovating products and the main thing about these products is
that their life cycles are very short, making it inevitable for more products to be sold later.
The increase in technology is encouraging competitors to improve, which then keeps
Apple improving.
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PC MP3 player/online
music services
Mobile Products
Threat of Entry
Low
- Economies ofScale and R&D isespecially a big part
of the cost in
computermanufacturing
industry.
- A great sum ofmoney must be
invested to attain
the economies ofscale and it is
difficult to enter the
market with
existing firms
already operating
- Cost Advantage:
High demand
particularly in
proprietarytechnology.
Low
- Since iPod nanolaunched, somecompetitors such as
Rio and Olympus had
preferred to stop.- Economies of Scale:
iPod has maximum
percentage of market
share.
- Product
Differentiation: iPodhas its own music
store like iTunes
which allows
customers downloadmusic conveniently.
The complete set of
iPod, iTunes and theaccessories for iPod.
- Cost Advantage:
High demand inproprietary
technology. Apple
has several patents foriPod and favorable
access to raw
materials by thecontract withSamsung.
Low
The cell phoneindustry is highlyconcentrated.
- Since start-up costs
for a cell phonefactory are extremely
high, the threat of
new entrants is low.
- A great sum of
money must be
invested to attain theeconomies of scale
and it is difficult to
enter the market withexisting firms already
operating
Threat of Rivalry
High
- There arerelatively few
competing firms
compared to otherindustries, but
Microsoft has most
of the market share.
Moderate
- There are variouscompeting firms such
as Samsung, Sony, i-
River, etc., but iPodhas almost maximum
percentage of the
market share.
High
- There are relativelylarge number of
competing firms such
as Samsung, LG,Motorola, and other
Chinese brands etc.
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- Lower priced PC
makers like Dellhave been growing
in the market.
- But if it does not
keep the productsinnovative, the other
companys products
which are lower in
price than iPod can bea significant threat in
anytime.
Threat of
Substitutes
Low
- Many types of
products such as
PDA, DVD player,Tabs exist as a
substitute for PC,
but these cansubstitute only oneor two functions of
PC.
Moderate
- The substitutes for
MP3 player can be a
CD player, MDplayer, radio, etc.; but
cheaper and easier
access to MP3 fileshas been makingcustomers leave from
the other music
players.
Low
- Mobile phones can
be substituted by
home phones,internet messengers,
etc., but the main
convenience ofmobile phones whichis the portability
cannot be easily
substituted.
Threat of
Suppliers
Moderate
- The major
suppliers are of rawmaterials and the
labor which ishighly proprietary
in technology andhas the power to
impact price.
- Besides the threat
of the labor which
includes thetechnicians, there
are relatively
various suppliersfor the rawmaterials.
High
- The suppliers for
raw materials andlabor can be the
threat, but the supplierwho holds the main
profitability is thesong writers, singers
and players.
- Another big threat is
the illegal free music
download websites orP2P file- sharing
sources. Easy and
cheap access to MP3files can encouragethe MP3 player
market, but on the
other hand, this can be
the threat to iTunes.
Low
- Cell phone
manufacturer providesuch high volume
orders that suppliershave been cautious
not to temper with therelationship and
ended up being in a
low bargainingposition
- Apple which isalready in the
industry of PC and
MP3 mostly dealswith internalmediates and
suppliers.
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Threat of buyers
Moderate
- The number of
buyers is huge and
growing as new
technologies areintroduced at a fast
pace.
- Apple
differentiated by
creating its ownoperating system
and unique design,
but other
companies like Dell
or HP differentiateby lower price
marketing.
Low
- The number of
buyers is continually
increasing and they
keep demanding newand updated products.
- The internet speed
and the music file
providers are
developing and theseenvironments
encourage the MP3
buyers.
- IPod has relativelyloyal customers.
Low
- The number of
buyers is even huger
than the PCs. Also
the buyers keepincreasing with the
new market of otherdeveloping countries.
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2. Financial analyses
Efficiency 2004-09 2005-09 2006-09 2007-09 2008-09 2009-09 2010-09
Days Sales
Outstanding33.95 21.86 20.29 21.96 22.81 24.6 24.82
Days Inventory 4.76 4.91 5.79 7.09 7.31 6.85 6.95
Payables Period 78.97 59.62 68.77 96.25 89.74 79.02 81.31
Cash Conversion
Cycle-40.27 -32.84 -42.7 -67.19 -59.61 -47.58 -49.53
Receivables
Turnover10.75 16.69 17.99 16.62 16 14.84 14.71
Inventory Turnover 76.69 74.35 63.07 51.47 49.9 53.28 52.51
Fixed Assets
Turnover12.03 18.28 18.41 15.42 15.15 15.86 16.89
Asset Turnover 1.11 1.42 1.34 1.13 1 0.99 1.06
Liquidity/Financial
Health2004-09 2005-09 2006-09 2007-09 2008-09 2009-09 2010-09
Current Ratio 2.63 2.96 2.24 2.36 2.46 2.74 2.01
Quick Ratio 2.33 2.63 1.76 2.09 2.07 2.48 1.72
Financial Leverage 1.59 1.55 1.72 1.74 1.88 1.5 1.57
Margins % of Sales 2004-09 2005-09 2006-09 2007-09 2008-09 2009-09 2010-09
Revenue 7998 8334 11486 14128 18469 19870 20871
COGS 72.71 70.98 71.02 66.03 65.69 59.86 60.62
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Gross Margin 27.29 29.02 28.98 33.97 34.31 40.14 39.38
SG&A 17.16 13.34 12.6 12.34 11.58 9.67 8.46
R&D 5.91 3.83 3.69 3.26 3.41 3.11 2.73
Other 0.28
Operating Margin 3.94 11.84 12.7 18.37 19.32 27.36 28.19
Net IntInc& Other 0.69 1.18 1.89 2.5 1.91 0.76 0.24
EBT Margin 4.63 13.03 14.59 20.86 21.23 28.12 28.42
Profitability 2004-09 2005-09 2006-09 2007-09 2008-09 2009-09 2010-09
Tax Rate % 27.94 26.45 29.42 30.19 29.89 31.75 24.42
Net Margin % 3.33 9.58 10.3 14.56 14.88 19.19 21.48
Asset Turnover
(Average)1.11 1.42 1.34 1.13 1 0.99 1.06
Return on Assets % 3.71 13.62 13.83 16.43 14.89 18.92 22.84
Financial Leverage
(Average)1.59 1.55 1.72 1.74 1.88 1.5 1.57
Return on Equity % 5.94 21.29 22.8 28.52 27.19 31.27 35.28
Return on Invested
Capital %5.94 21.29 22.8 28.52 27.19 31.27 35.28
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3. IFAS, EFAS, TOWS matrix and SPACE matrix (each of these should have segments for PC
industry, Personal media industry, Mobile phone industry, and Tablet computers
industry)
Space Matrix
FINANCIAL STRENGHTS (FS) ECONOMIC STABILITY (ES)
Return on investment = +6 Technological Change = -5
Leverage = +4 Inflation rate = -2
Working Capital = +5 Price range of competitors = -6
Cash Flow = +6 Barriers to entry = -4
Ease of Exit = +5 Competitive Pressure = -4
INDUSTRY STRENGHT (IS) COMPETITIVE ADVANTAGE (CA)
Potential Growth = +6 Market Share = -4
Profit Potential = +5 Product quality = -5
Capital Requirement= +6 Customer Loyalty = -3
Technology Knowledge= +5 Technology Knowledge = -4
Ease of entry = +5 Product lifecycle = -3
Average IS score = 5.4
Average FS score = 5.2
Average ES score = -4.2
Average CA score = -3.8
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ES + FS = +1 (y-axis) CA + IS = 1.4 (x-axis)
+1
Aggressive Strategy
+1.14
4.
INTERNAL FACTORS ANALYSIS SUMMARY
INTERNAL FACTORS WEIGHT RATINGS WEIGHTED SCORE
STRENGHTS
Different Operating System(phone industry) 0.1 4 0.4
Financial Standing 0.2 5 1
Market Share(media industry) 0.2 5 1
iTunes(media industry) 0.2 5 1
WEAKNESSES
Weak holding in PC industry 0.3 5 1.5
1 4.9
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