Literature Review.
APPLE PRODUCT GROWTH AND VALUATATION.
Apple’s 1997 “Think Different” marketing campaign was one of its most memorable ever. Billboards and banners featured huge black-and-white portraits of performers, artists, scientists, and political leaders whose outsider ideas eventually became mainstream. The implicit message was that Apple’s “insanely great” products were for quirky rebels who would one day dominate the world. The photo of Steve Jobs on the cover of his posthumous biography would have fit right in.
The Apple of today is turning its back on that creative class. Apple no longer designs for creators of digital media, who tend to be very demanding about product quality. Instead, Apple builds for consumers—in both senses of the word: people who spend their own money, rather than their companies’, and people who consume digital media, as opposed to people who produce it. Focusing on digital consumption has made Apple wildly profitable, but the company’s products have trended downwards in quality, flexibility, and even reliability.
Apple appears to be suffering from growing pains. The company—which declined to comment for this article—seems increasingly overwhelmed by the wide range of products and services that it has created, and is responding (quite logically) by spending significantly less effort on items that appeal to a shrinking percentage of its customer base—a group that unfortunately includes digital creators. The danger is that by focusing on consumption, rather than production, Apple will jeopardize the very essence that first made its products insanely
The Good Apple
From one perspective, Apple's world could not be rosier and its future shinier. Rising from the rubble of a disintegrating company in 1997, Apple has reached the pinnacle of success in 15 short years. With a market capitalization of over $500 billion, Apple is amongst the most valuable and highly profitable companies in the world.
Its remarkable success lies in the company's ability to create truly innovative products with vast customer appeal. Apple flouts the conventional wisdom of the consumer electronics industry, which emphasizes low cost, "me-too" products, and a continuously shortened product life. Instead, Apple has opted for constant and discrete product innovation, resulting in fanatic consumer loyalty and a high level of profitability.
The Bad Apple
So why does Apple treat its customers and workers by two different standards? When it comes to customers, Apple is a bold innovator that leads the industry into new directions and forces others to follow. However, when it comes to the management of its supply chain and treatment of workers in the Chinese factories that make its products, it hides behind the constraints of prevailing industry practices. What is even more disconcerting is the fact that these practices are in violation of not only local and national laws, but also of Apple's own voluntary self-imposed code of conduct. It is important to note that this voluntary code of conduct breaks no new ground. It is at best a modest attempt to ensure that workers will be treated fairly and provided with a safe work environment.
Yet the violations continue, despite years of monitoring factories where Apple's own audits show persistent non-compliance and despite these factories' repeated broken promises to improve.
Apple's Strategic Profile - Value Culture vs. Cost Culture
In my view, Apple's good and bad sides both emanate from the same business philosophy: adroit exploitation of market power for the sole benefit of the company and its investors. This model does not consider "what is fair" but what is competitively achievable in higher prices for products sold and lower costs for products made.
Value Culture: When it comes to customers, Apple applies the notion of value, i.e., a pricing strategy that is driven by its focus on the value—real and perceived—to its customers. The customer is willing to pay a price that is equal to the product's perceived value to the customer. Hence, as long as the customers are satisfied, Apple is under no obligation to reduce its prices.
Why Apple's growth is set to continue ?
"Apple's increased profits have once again confounded sceptical analysts, who expected the company's latest results to disappoint. Shane Richmond says there is little sign of an end to Apple's rise.” When Apple launched the iPhone 4S, in October last year, there were some analysts who called it a disappointment. It wasn't fast enough or thin enough or magical enough, they argued. In fact, many complaints seemed to be based on the fact that it wasn't called iPhone 5. A few days later the phone went on sale and Apple sold four million in three days.
That didn't stop many of the same experts queueing up to express their disappointment in Apple's third-generation iPad last month. Once again, it was considered to be insufficient as an upgrade on the previous model and once again, the new gadget flew off the shelves; Apple sold three million in the first three days.
Despite two enormously successful launches in six months, investors were concerned as Apple's second-quarter results approached this week. The company's share price reached a record high on April 9 but fell by 10 per cent over the two weeks that followed. Though shares were still up 40 per cent this year, investors were said to be worried about whether Apple's phenomenal growth could continue.
In typical fashion, Tim Cook, Apple's chief executive, confounded sceptics and announced a 94 per cent increase in profits on the same quarter last year, powered by iPhone and iPad sales.
The company sold more than 35 million iPhones in the second quarter - an 88 per cent increase, year-on-year - and almost 12 million iPads - an increase of 151 per cent. Tim Cook said: "Just two years after we shipped the initial iPad, we sold 67 million. It took us 24 years to sell that many Macs, and five years for that many iPods, and over three years for that many iPhones."
In other words, Apple's current boom is being driven by its 'post-PC' devices, the iPad, iPhone and iPod touch. Those products contribute a huge proportion of Apple's products and all of them are less than five years old.
Colin Cieszynski, an analyst with CMC Markets Canada, said that there were indications that Apple is "probably in a bubble and vulnerable" but that many investors clearly believe the company can continue for a while.
He said: "The company’s ability to enter new markets and continue to successfully launch new products may determine whether or not the shares are able to maintain investor support over the longer term."
According to one insider, Apple's share price is the dominant topic among staff at the company's headquarters in Cupertino, California. Employee stock options will make plenty of staff very rich indeed, especially if shares hit $1,000 (£620) next year, as some Wall Street Analysts have predicted. The share price currently stands at a little over $600 (£372).
Apple plans to initiate a quarterly dividend of $2.65 per share later this year - its first since 1995. The move is one of several changes made to the way the company operates since Mr Cook became chief executive last year.
In his first months in charge, Mr Cook instituted a charitable giving programme for employees and visited the Foxconn factories in China, where Apple's products are made. Foxconn, which also makes products for Sony, Microsoft and Dell, among others, has been criticised for its labour conditions. In response, Mr Cook raised the profile of Apple's Supplier Responsibility programme and commissioned the Fair Labour Association to audit the company's suppliers.
Apple, like much of the technology industry, has been embroiled in patent lawsuits as manufacturers and developers sue and counter-sue one another. Steve Jobs, Apple's co-founder and former chief executive, who died last year, had declared "thermonuclear war" on Google's mobile operating system, Android. He told his biographer, Walter Isaacson, that Andoid was "a stolen product" and he would go to any lengths to destroy it.
This week, Mr Cook took a more conciliatory tone, saying that Apple would rather settle its patent lawsuits with rivals such as Motorola, Samsung and HTC. He told analysts: "I've always hated litigation. We just want people to invent their own stuff."
Those who believe Apple's success is temporary argue that its rivals will inevitably catch up. The company has taken a lead in smartphones and in tablet computers, the sceptics say, but rivals have seen the opportunity and will produce better - or simply cheaper - versions and erode Apple's lead.
If that is true, it's taking a long time to come about. Though the growth of Android has been rapid, the question of who is in the lead depends very much on what you measure. In terms of handset profitability, for example, Apple is very much ahead. When it comes to the 'tablet market', such a thing barely exists. There is an iPad market and, two years after Apple launched its device, no sign of a significant competitor.
This week Tim Cook echoed comments he made at the launch of the new iPad last month. He said: "Across the year you're going to see a lot more of the kind of innovation that only Apple can deliver."
Whether that is bravado or a hint of big things to come remains to be seen but on past form it should make Apple's rivals nervous.
Not only growth up like that, in this day Apple inc. is the big superstar of the 2011 Top 100 Global Brands list was Apple. Not only did Apple get designated as one of the top ten brands in the world, its brand value rose 58% in a single year to propel it into the Top 10. How can it be determined that a brand is 58% more valuable in 2011 than it was in 2010.
Apple’s 1997 “Think Different” marketing campaign was one of its most memorable ever. Billboards and banners featured huge black-and-white portraits of performers, artists, scientists, and political leaders whose outsider ideas eventually became mainstream. The implicit message was that Apple’s “insanely great” products were for quirky rebels who would one day dominate the world. The photo of Steve Jobs on the cover of his posthumous biography would have fit right in.
The Apple of today is turning its back on that creative class. Apple no longer designs for creators of digital media, who tend to be very demanding about product quality. Instead, Apple builds for consumers—in both senses of the word: people who spend their own money, rather than their companies’, and people who consume digital media, as opposed to people who produce it. Focusing on digital consumption has made Apple wildly profitable, but the company’s products have trended downwards in quality, flexibility, and even reliability.
Apple appears to be suffering from growing pains. The company—which declined to comment for this article—seems increasingly overwhelmed by the wide range of products and services that it has created, and is responding (quite logically) by spending significantly less effort on items that appeal to a shrinking percentage of its customer base—a group that unfortunately includes digital creators. The danger is that by focusing on consumption, rather than production, Apple will jeopardize the very essence that first made its products insanely
The Good Apple
From one perspective, Apple's world could not be rosier and its future shinier. Rising from the rubble of a disintegrating company in 1997, Apple has reached the pinnacle of success in 15 short years. With a market capitalization of over $500 billion, Apple is amongst the most valuable and highly profitable companies in the world.
Its remarkable success lies in the company's ability to create truly innovative products with vast customer appeal. Apple flouts the conventional wisdom of the consumer electronics industry, which emphasizes low cost, "me-too" products, and a continuously shortened product life. Instead, Apple has opted for constant and discrete product innovation, resulting in fanatic consumer loyalty and a high level of profitability.
The Bad Apple
So why does Apple treat its customers and workers by two different standards? When it comes to customers, Apple is a bold innovator that leads the industry into new directions and forces others to follow. However, when it comes to the management of its supply chain and treatment of workers in the Chinese factories that make its products, it hides behind the constraints of prevailing industry practices. What is even more disconcerting is the fact that these practices are in violation of not only local and national laws, but also of Apple's own voluntary self-imposed code of conduct. It is important to note that this voluntary code of conduct breaks no new ground. It is at best a modest attempt to ensure that workers will be treated fairly and provided with a safe work environment.
Yet the violations continue, despite years of monitoring factories where Apple's own audits show persistent non-compliance and despite these factories' repeated broken promises to improve.
Apple's Strategic Profile - Value Culture vs. Cost Culture
In my view, Apple's good and bad sides both emanate from the same business philosophy: adroit exploitation of market power for the sole benefit of the company and its investors. This model does not consider "what is fair" but what is competitively achievable in higher prices for products sold and lower costs for products made.
Value Culture: When it comes to customers, Apple applies the notion of value, i.e., a pricing strategy that is driven by its focus on the value—real and perceived—to its customers. The customer is willing to pay a price that is equal to the product's perceived value to the customer. Hence, as long as the customers are satisfied, Apple is under no obligation to reduce its prices.
Why Apple's growth is set to continue ?
"Apple's increased profits have once again confounded sceptical analysts, who expected the company's latest results to disappoint. Shane Richmond says there is little sign of an end to Apple's rise.” When Apple launched the iPhone 4S, in October last year, there were some analysts who called it a disappointment. It wasn't fast enough or thin enough or magical enough, they argued. In fact, many complaints seemed to be based on the fact that it wasn't called iPhone 5. A few days later the phone went on sale and Apple sold four million in three days.
That didn't stop many of the same experts queueing up to express their disappointment in Apple's third-generation iPad last month. Once again, it was considered to be insufficient as an upgrade on the previous model and once again, the new gadget flew off the shelves; Apple sold three million in the first three days.
Despite two enormously successful launches in six months, investors were concerned as Apple's second-quarter results approached this week. The company's share price reached a record high on April 9 but fell by 10 per cent over the two weeks that followed. Though shares were still up 40 per cent this year, investors were said to be worried about whether Apple's phenomenal growth could continue.
In typical fashion, Tim Cook, Apple's chief executive, confounded sceptics and announced a 94 per cent increase in profits on the same quarter last year, powered by iPhone and iPad sales.
The company sold more than 35 million iPhones in the second quarter - an 88 per cent increase, year-on-year - and almost 12 million iPads - an increase of 151 per cent. Tim Cook said: "Just two years after we shipped the initial iPad, we sold 67 million. It took us 24 years to sell that many Macs, and five years for that many iPods, and over three years for that many iPhones."
In other words, Apple's current boom is being driven by its 'post-PC' devices, the iPad, iPhone and iPod touch. Those products contribute a huge proportion of Apple's products and all of them are less than five years old.
Colin Cieszynski, an analyst with CMC Markets Canada, said that there were indications that Apple is "probably in a bubble and vulnerable" but that many investors clearly believe the company can continue for a while.
He said: "The company’s ability to enter new markets and continue to successfully launch new products may determine whether or not the shares are able to maintain investor support over the longer term."
According to one insider, Apple's share price is the dominant topic among staff at the company's headquarters in Cupertino, California. Employee stock options will make plenty of staff very rich indeed, especially if shares hit $1,000 (£620) next year, as some Wall Street Analysts have predicted. The share price currently stands at a little over $600 (£372).
Apple plans to initiate a quarterly dividend of $2.65 per share later this year - its first since 1995. The move is one of several changes made to the way the company operates since Mr Cook became chief executive last year.
In his first months in charge, Mr Cook instituted a charitable giving programme for employees and visited the Foxconn factories in China, where Apple's products are made. Foxconn, which also makes products for Sony, Microsoft and Dell, among others, has been criticised for its labour conditions. In response, Mr Cook raised the profile of Apple's Supplier Responsibility programme and commissioned the Fair Labour Association to audit the company's suppliers.
Apple, like much of the technology industry, has been embroiled in patent lawsuits as manufacturers and developers sue and counter-sue one another. Steve Jobs, Apple's co-founder and former chief executive, who died last year, had declared "thermonuclear war" on Google's mobile operating system, Android. He told his biographer, Walter Isaacson, that Andoid was "a stolen product" and he would go to any lengths to destroy it.
This week, Mr Cook took a more conciliatory tone, saying that Apple would rather settle its patent lawsuits with rivals such as Motorola, Samsung and HTC. He told analysts: "I've always hated litigation. We just want people to invent their own stuff."
Those who believe Apple's success is temporary argue that its rivals will inevitably catch up. The company has taken a lead in smartphones and in tablet computers, the sceptics say, but rivals have seen the opportunity and will produce better - or simply cheaper - versions and erode Apple's lead.
If that is true, it's taking a long time to come about. Though the growth of Android has been rapid, the question of who is in the lead depends very much on what you measure. In terms of handset profitability, for example, Apple is very much ahead. When it comes to the 'tablet market', such a thing barely exists. There is an iPad market and, two years after Apple launched its device, no sign of a significant competitor.
This week Tim Cook echoed comments he made at the launch of the new iPad last month. He said: "Across the year you're going to see a lot more of the kind of innovation that only Apple can deliver."
Whether that is bravado or a hint of big things to come remains to be seen but on past form it should make Apple's rivals nervous.
Not only growth up like that, in this day Apple inc. is the big superstar of the 2011 Top 100 Global Brands list was Apple. Not only did Apple get designated as one of the top ten brands in the world, its brand value rose 58% in a single year to propel it into the Top 10. How can it be determined that a brand is 58% more valuable in 2011 than it was in 2010.