Apple Business Model and SWOT Analysis – How Does Apple Make Money?

Overview

Apple, Inc. is one of the world’s most successful enterprises. The firm has been known for its high-quality technological goods and superior software services. It is located in Cupertino, California, and was established in the year 2000 by Steve Jobs.

In 1976, the company released its first product and developed significantly in terms of goods and services. The ‘iPhone’ is one of the entity’s most successful devices today. Its sales of $137 billion account for half (50%) of the company’s total revenue of $274 billion in 2020. And right now, Tim Cook is the company’s current CEO.

Company Profile

Company NameApple Inc.
Websitewww.apple.com
FoundedApr 1, 1976
FoundersRon Wayne, Steve Jobs, Steve Wozniak
Key PeopleTim Cook – CEO, Katherine Adams – Senior Vice President and General Counsel, Eddy Cue – Senior Vice President, Services, Craig Federighi – Senior Vice President, Software Engineering, John Giannandrea – Senior Vice President Machine Learning and AI Strategy, Greg “Joz” Joswiak – Senior Vice President, Worldwide Marketing
HeadquarterCupertino, California, United States
Company RevenueUSD 274.515 B (2020)
Key CompetitorsSamsung, Microsoft, Xiaomi, Huawei, Oppo

What is Apple? A Brief History

Apple is a top-rated Global Tech Company that is well-known as one of the world’s largest corporations. Its business strategy is focused on the design, development, manufacture, sale of computer software, consumer products, and online services.

The company was established by college dropout students Steve Jobs and Steve Wozniak, who brought a goal of transforming people’s perceptions of computers. Jobs and Wozniak sought to develop computers small enough to fit in people’s homes or offices. They just simply desired an easy-to-use computer.

In 1977, Steve Jobs and Steve Wozniak co-founded the company, launching the Apple I and later the Apple II. The product came out publicly in 1980, but Jobs finally quit, only to return triumphantly years later. The business success is based on a strategic vision that extends beyond traditional desktop computers to encompass mobile devices. The company brand and its continued success are driven by both performance and design.

How Does Apple Work and What Does it Offer?

  • Putting Products Before Everything Else

When it relates to Apple, we all know that there is substantial cash flow. And, it puts a lot of effort and budget into the R&D laboratories.

The company’s management is fully motivated by the development of innovative products, not just to earn profits for the business.

  • Maintaining Constant Focus on Optimizing the Company’s Global Presence

The worth for the company is in its focus. It starts with the concentration they possess.

They grow the company’s network by leveraging company-owned retail outlets all over the world. The company is also committed to creating platforms that can create applications and distribute content for related devices.

  • Using a Vertically Integrated Business Model to Optimize User Experience

The firm develops and manufactures its operating system such as hardware, application software, and services.

Thus, the company combines all of this so that users can access easy-to-use products seamlessly. All technological and innovative advancements are processed through Apple exclusively and not through any other platform.

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As a result of this vertically integrated model, this leading brand produces top-quality products regarded as the best in the marketplace. As a result, this allows them to sell at higher prices without any hesitation.

Apple Business Model

Apple undoubtedly has a profitable, multinational, strong, and equally reliable business model. As a result, there is no question that organizations from around the globe would like to discover the company’s business model to draw inspiration from it.

Its business strategy is primarily around the selling of technological items.  It is both hardware and software, which has contributed to its success. Without question, the iPhone is a modern-day icon. Nonetheless, the iPhone is a gadget that performs admirably due to its software,

When we look at company growth in 2019, we can see that it was mostly driven by areas such as Home, Wearables, Accessories Products (such as Apple Watch and AirPods), and other services.

Products of Apple: The company offers three major products which are part of the Apple lines like iPad, iPhone and Mac. Additionally, it offers Home and Wearables, as well as Accessories Devices that include AirPods as well as Apple Watch. The devices made up almost 10 percent of the company’s total revenue in 2019.

The Operating Systems: These items are powered by the company operating systems such as iOS and macOS. And it’s backed up by a range of associated services, including digital content and services like iCloud and Apple Pay.

Services sales have also increased rapidly in recent years, accounting for over 18% of total revenues in 2019. The most intriguing aspect is the fact that they carry an extremely high margin of profit for the business, much higher than the core products since they operate on the platform model of business.

Apple Unique Selling Propositions

  • Concentrating on Product Functionality and Design

Apple’s business strategy has embraced sophisticated features and functionality of its goods and services as the pillars of its competitive advantage. Its innovations include the initiation of the iPad, the very first gadget that could store music files, the advancement of the Macintosh, the pioneer computer to include a user interface, and the iMac release.

Another aspect of a company’s competitive advantage is its first-mover advantage.

In particular, management may fail to ensure the integration of creative features and functionality in future versions of its goods, threatening its competitive edge.

  • Strengthening The Customer Experience

One of the foundations of this high-tech company’s growth strategy is emphasizing customer experience. It is fairly uncommon for these brand aficionados to film themselves unboxing their latest devices.

For example, getting started with any device of this brand is fairly simple. Customers unpack the package, plug-in power, and use the product.  Nothing has to be installed or downloaded. Over 500 Retail Stores in 25 countries and regions, where customers can test items and question the experienced staff, also promote positive customer satisfaction.

  • Reinforcing Apple Ecosystem

The company’s business approach is that the organization has advanced competence in hardware, software, and services simultaneously. One of the primary aspects that distinguish Apple from the competition is its vertical integration. The company has reaped enormous benefits from its integration. In particular, one of the major sources of the company’s competitive advantages is its ecosystem that is empowered through this integration.

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Its devices and software are convenient to sync and operate well together. Applications are compatible with numerous devices.

Its ecosystem raises the switching cost, causing current users to have higher costs to move to their competition. The ecosystem also gives opportunities to extend current customer relationships to deliver further products and services.

  • Reducing The Company’s Reliance on iPhone Sales

Its business strategy is shifting away from reliance on iPhone sales and concentrating better on its services business and other divisions. The movement of high-profile key people in the company, which occurred within three months, is a strong indicator of the company’s concentration on business units and other services to reduce the corporate’s reliance on iPhone sales.

It is worth noting that these and other initiatives are yielding favorable effects. In particular, its services business segment produced revenues of USD 53,77 billion in 2020, representing a 16 percent upsurge over the previous year.

How Does Apple Make Money?

Apple generates revenue from three primary sources:

1. Product Sales

The company generates revenue by selling some of the world’s best goods, including the iPhone, iPod, Mac, Apple TV, and Apple Watch, worldwide.

2. Subscription charge for  iCloud, iTunes Store, and other similar services

When consumers subscribe to various programs and software, they pay a subscription cost to Apple, which helps the business make substantial revenue. When content developers and owners sell their digital assets and apps through various Apple resources, they charge fees.

3. Charges for extended warranties on its products

The entity also profits when customers pay fees to extend the warranties on their goods.

This corporate distributes its goods and services in the world’s main markets through retail and online shops, as well as a direct sales force. Furthermore, it sells a range of third-party items that are functional with it, such as various apps and accessories.

In addition, the company provides third-party Value-Added Resellers, Cellular Network Carriers, and Retailers as indirect distribution channels.

Apple SWOT Analysis

Strengths

  • Apple is ranked #1 for the eighth consecutive time by Interbrand with $322 billion.
  • one of the most trusted companies in the field of personalization and high-tech computers as well as smart devices. It has millions of faithful clients with constant growth.
  • The first company to launch several ingenious devices that have revolutionized the world (iPhones and iPads). It continues to develop and create superior, more efficient technological devices.
  • The company has a dedicated business page that provides top technology solutions to meet all business needs.
  • An in-depth study is undertaken, and further research is carried out to better comprehend customers’ needs and expectations regarding product design.
  • Sustainable development was made possible by Liam, a recycling robot that allows separated reusable components to be stored safely to be utilized for future manufacturing.
  • Apple has been expanding its services offerings for some years. For instance, 19 percent of the company’s annual revenues, equivalent to $53B in 2020, was derived from its services. This is the second-largest source of income for the company after the sales of the iPhone. Those services are from Apple TV+, Apple Card, Apple news+ and Apple Arcade.
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Weaknesses

  • Products are thought of as luxury because of their high price. People with low incomes aren’t able to pay for their products. Due to their pricey pricing, only middle- and high-income consumers can afford their goods.
  • Despite limited advertising resources, it has secured its position by developing devoted consumers. The company’s marketing heavily relies on its famous and iconic retail stores. Due to their success, it does not feel the need to make huge advertising budgets.
  • The company enters a non-competency area, and they are not equipped with competence, which could trigger a failure, just like Apple Maps.
  • The products cannot be used with different software or technologies, rendering them unusable with other gadgets. It cannot be used with different software or technologies, rendering them unusable with other gadgets.
  • It was accused of installing tracking applications on its phones, which exposed the precise locations of users. While the latest version of the phones from Apple allows users to opt-out of tracking, trust can be difficult to restore once it’s lost.

Opportunities

  • The company has been dominating the tech industry for a long time in the past. They provide top-quality and innovative technology that provides the most innovative customer service. The customer retention of 92 percent is astounding. It can always count on the power of the internet to provide future opportunities to acquire new customers and create new alliances.
  • Highly trained professionals who have decades of experience in the branding of consumer goods. With the growth of their staff, it can continuously build new possibilities.
  • It may increase income and sales if it focuses on building a large distribution network. Furthermore, rigorous marketing and promotion might assist the organization.
  • It has yet to release items made using green technology. The firm has not yet adopted or engaged in the development of environmentally friendly sustainable technology.
  • Smart wearable technology is destined to take over the globe. According to Forbes, sales of intelligent wearable tech devices will be more than twice by 2022. With 233 million unit sales, it will grow to a $27 billion+ market. This tech firm has the potential to expand beyond the Apple Watch and AirPods into additional wearable categories.
  • The corporate should use artificial intelligence to boost its profitability and establish a high market position.
  • It has previously announced plans to expand its music streaming to 52 African and Middle Eastern emerging economies.
  • It has the option of focusing on supplying self-driving technology rather than constructing actual cars, just like Tesla does.

Threats

  • The company’s production and supply chain are heavily reliant on China. Furthermore, China accounted for around 14.5 percent of its $274 billion in revenue (a big market for this brand). The epidemic has had a considerable impact on company revenues and may continue to do so in the fiscal year 2021.
  • It has been exposed to third-world nations unlawfully using the brand image to sell counterfeit items. Illegal dealers offer brand counterfeit items at the same price as an authentic product, resulting in unfavorable reviews and poor brand image.
  • Android software is used to produce new devices by companies such as Samsung, Lenovo and HTC. Android currently holds 72.23 percent of the worldwide market share, while Apple holds only 24.55 percent.
  •  The United States government has raised tariffs on Chinese imports, raising the overall cost of the items. As a result, it harms the product’s gross margin and may raise the price for customers.