SWOT on "Apple Stakeholder Performance Analysis Apple Inc. (AAPL)"

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Apple Stakeholder Performance Analysis

Apple Inc. (AAPL) is one of the most profitable and continually innovative manufacturers of MP3 players, cell phones, laptop computers and handheld tablets. At the close of their last fiscal year which ended September 25, 2010, Apple had attained a financial milestone no other technology company had to date, and that was attain a market capitalization of $258B, surpassing Microsoft's $220B. Apple has succeeded by taking innovation and monetizing it quickly to benefit external stakeholders while creating product- and value-driven ecosystems including iTunes that unify internal stakeholders as well. This combination of being able to monetize innovative products while at the same time building ecosystems has given Apple the ability to fulfill internal and external stakeholder requirements highly effectively compared to other technology-based companies. This is evidenced in the orchestration of new product development, software engineering, hardware engineering, ergonomic design and application development shown in the design cycles of Apple cell phones, MP3 players and other devices (Abel, 2008). Based on this unique approach to new product development and innovation, the company has successfully created an ecosystem that has captured 80% of the smart phone market as well with the iPhone series (Apple Investor Relations, 2011). Many credit Apple with transforming the economics of the music industry with their iTunes ecosystems as well (Weiss, 2005). Like the new product development and innovation processes within Apple that take into account the stakeholder requirements while redefining the customer experience, the potential for the iTunes ecosystem to surpass competing video-driven sources of content including Netflix is evident from the Apple track record of orchestrating partners effectively (Jonash, Koehler, Onassis, 2007). The focus on enhancing and creating a highly unique and differentiated customer experience to maintain their loyal customer base is in large part based on the ability to orchestrate the many internal and external stakeholders to a common, challenging objective over time (Cusumano, 2008). The intent of this analysis is to take these unique factors of Apple into account, complete a SWOT analysis, define the company's internal and external stakeholders, describe their wants and needs, and analyze how the company is fulfilling those needs over time.

An Assessment of Apple's Strengths, Weaknesses, Opportunities and Threats

The following is a SWOT analysis of Apple, with the summarized table shown in Table 1 of this section. Beginning with their strengths, Apple's ability to innovate is well-known, yet the strength of making products integrate well with each other has evolved over time as external stakeholders have continually pushed for a more unified and high quality user experience (Cole, Matsumiya, 2007). Apple continues to also be a dominant global leader in MP3, smartphone, tablet PC (iPad) and laptop development (Apple Investor Relations, 2011). Based on an analysis of the company's ability to retain and grow its customer base, the company claims in its Securities and Exchange Commission (SEC) reports to have a 90% upgrade rate on iPods and MP3 players one generation to the next (Apple Investor Relations, 2011). All of these factors contribute to the company's ability to keep one of its most critical stakeholders, customers, continually upgrading and staying loyal to the brand. Apple continues to invest heavily in new areas of growth including smart phones with the iPhone and tablet PCs with the iPad to win new customers while keeping the user experience consistent with previous generation products to retain existing customers. Apple has been able to successfully navigate these differences between their old-line customer base and the strategies necessary for attracting new customers (Cole, Matsumiya, 2007).

The company's weaknesses include a high level of dependency and reliance on its supply chains, and a lack of supply chain integration on major new product introductions which can put a very popular product into backorder status quickly (Apple Investor Relations, 2011). This was evident in how the initial iPhone 4 launch was managed and the first production runs of the iPad as well. Apple typically treats the external stakeholder groups of channel partners as the most critical alliances they have for generating profitable sales over time (Apple Investor Relations, 2011). Apple as a result manages distribution channels exceptionally well, yet has recently found that their distributors and dealers are resorting to price competition, which is a major weakness in the overall channel strategies of the company today. In addition, Apple continues to face investigations from the Securities and Exchange Commission with regard to patent and intellectual property cases that are pending (Apple Investor Relations, 2011).

Figure 1:

2011 Apple SWOT Analysis

Opportunities that Apple potentially can capitalize on are highly dependent on their ability to manage stakeholders effectively in their supply chains, distribution channels and across their value chain. The opportunity to continually grow their share of the smartphone market and creating convergence-based MP3, tablet PC and laptops is also very significant. Continually investing in operating system design and development can also significantly increase the technology leadership the company has today over Microsoft (Cole, Matsumiya, 2007). Finally, the orchestration of suppliers on new product development could yield, by company estimates, an 11% reduction in operating costs if attained on each new product introduction planned for FY 2011 (Apple Investor Relations, 2011). The weaknesses Apple faces could be overcome with more effective stakeholder coordination and strategy as well, beginning with reducing price competition on MP3 players. The price competition is based on indirect channel partners bundling MP3 players with PCs and other electronics devices in nations that do not have the same copyright and trade laws as the U.S. (Apple Investor Relations, 2011). The shortage of processors and the need for continually creating efficiencies with supplier is also crucial for Apple to continue growing, as is overcoming the claims of paten infringement and unfair competition from the SEC (Apple Investor Relations, 2011).

Internal and External Stakeholder Analysis

Internal stakeholders include by definition any group of individuals or organizations that engage in transactions with Apple, and these include creditors, customers, employees, suppliers and stockholders. These stakeholders create the value chain Apple relies on to attain its strategic and tactical objectives globally. External stakeholders include the communities that Apple operates in, business support groups, the press and media and the government Apple has operations in globally.

Internal stakeholder wants and needs vary significantly by their role in the value chain, and if they are external, by their need for compliance and information on how Apple is affecting the broader communities and nations it operates in. For internal stakeholders including creditors, customers, employees, suppliers and stockholders the common denominator all share is that Apple will continue to deliver high quality, highly differentiated products that will continue earning above-average gross margins and profitability over time. The expectations become more specific based on analysis of each stakeholder's requirements. Credits expect to have their invoices paid and for Apple to manage their forecasts for service and materials accurately and completely. They also expect to have advance notice, with suppliers, of significant changes in the business model and conditions of the company. Credits are also considered to be a primary stakeholder in the financial performance of the company, often providing significant influence on reported financials based on terms and conditions given (Apple Investor Relations, 2011). Customers as a stakeholder group expect innovation and cutting edge new products that redefine new markets while staying true to the Apple legacy and ergonomic principles the company is based on. This is a difficult task for Apple product management to handle, as they are continually looking to create new segments of the personal technology market, yet must remain true to the core values of the largest and most loyal customer based in high technology. Employees as a stakeholder group require a high degree of autonomy, mastery and purpose in their roles, and a chance to learn how their contributions are making a significant impact on the company over the long-term. Suppliers and stockholders require an intensive level of coordination and open communication in order to fulfill their responsibilities to the company as well. Suppliers require in-depth product forecasts, new product development timelines and plans, and a high level of synchronization to production schedules. Figure 2, Apple Supply Chain, shows a graphical representation of how the Apple flow of memory components works over time. Stockholders expect a realistic return on their investment in the equity offerings of Apple, including their grades of stock and their limited use of corporate debt for financing future growth.

Figure 2: Apple Supply Chain

Source: (Apple Investor Relations, 2011)

Assessment of Apple's Stakeholder-based Performance in Fulfilling Their Needs

Apple has excellent in certain areas of their internal stakeholder management yet is struggling in others. In the areas of creditors, employees and stockholders, the company continues to deliver exceptional financial performance and has one of the most highly valued stocks being traded today. This translates into many employees becoming millionaires based on stock options, stockholders earning an exceptionally strong return on investment (ROI) and the long-term appreciation of their initial investments. The company has struggled with stakeholder management of customers and… READ MORE

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