Apple's Financial Management Under New CEO

The assignment content discusses the financial management of Apple Inc. under its new CEO, focusing on the company's objectives, financial decisions, and impact on the capital market before and after Steve Jobs' departure. The summary highlights that the new CEO introduced a decentralized organization structure, rewarded shareholders with quarterly dividends and buybacks, and expanded the company's reach to emerging markets such as China and India.

FINANCIAL MANAGEMENT
NAME OF STUDENT
Apple’s story

Contents
Financial Corporate Objectives – Before and after the new CEO change......................................2
Impact towards financial decisions in finance and capital market.................................................2
Possible Impact of economic environment on Apple’s financial management.............................4
References..................................................................................................................................... 6
1

Financial Corporate Objectives – Before and after the new
CEO change
Apple Inc. became the most valuable company in the world before Steve Jobs stepped down as
CEO in 2011. (Luckerson, 2014). Before the CEO change the Apple’s objectives were focused on
providing best quality product even though they were not pioneered the product itself. The
focus was on product engineering and marketing with no role of operations and logistics in
decision making. After the CEO change, the objectives has shifted from centralization to a more
decentralized organization. Earlier, Jobs personally handled M&A and product designing and
marketing activities. (Lashinsky, 2012). After the CEO change, the company has empowered its
managers to take charge with minimal intervention and guidance of new CEO.
Impact towards financial decisions in finance and capital
market
The change in objectives of Apple Inc. under the new CEO has the following impact in the
financial and capital market:
a. The company used the cash reserves to buy back the equities from the shareholders.
This helped the company to boost its earning per shares and provide cash to the
investors who wanted to opt for buyback of equity. (Lashinsky, 2012)
b. The company’s focus to reward shareholders for their investment led to declaration of
quarterly dividends. This was in stark contrast of retaining and reinvesting every money
earned philosophy under Jobs. (Lashinsky, 2012)
c. The company meeting rooms for long term planning and product innovations involved
product management and supply management inputs as well which not the case was in
the earlier set up. (Lashinsky, 2012)
d. Traditionally, Apple has been able to boost its profitability through huge volumes on a
small range of products. The new CEO introduced new products which were cheaper
alternatives to the existing ones. This helped the company to extend its market further
2

to the lower earners class within the developing and emerging economies. This boosted
the sales of the company. (Luckerson, 2014)
e. The new CEO was open to mergers and acquisitions. There were big ticket acquisitions
under new CEO. The earlier CEO was not as open to mergers and acquisitions as the
focus was on innovation rather than copying quality through acquisitions. Acquisition of
Beta Electronics by Apple Inc. under the new CEO is viewed as loss of innovative spark
within the company. (Luckerson, 2014)
f. The stock price of the company has gained successive strengths post the new CEO as per
chart below:
(Source: Tetzeli, 2015).
The company has outperformed the benchmark index bu more than 4900 basis points.
The financial parameters of Apple Inc, from 2011 to 2014 shows increased in proitbaility
and volumes of the company. They are sumarised as below:
3

(Source: Tetzeli, 2015)
g. The level of preparation by the company of the Steve’s expected departure coupled
with this terminal illness being mage public two years before his stepping down and
identification of an inside man for the new role contirbuted to the lower shock on
Steve’s eventual departure. (FTI Journal, 2011)
h. The new CEO expanded its reach to the new emergiing market of China. The earlier CEO
made no attempt to capitalize on the potential demand in China (Luckerson, 2014). The
new CEO reflects upon globalisation as the new business driver for Apple. (Dou, 2017).It
has plans to duplicate its success story of China within India as well, the new market
with huge potential for apple’s products. (Mukherjee, 2016). The company aims to open
a production and assembly centres in India to boost lower cost product avaiability and
direct market reach capability of the company.
i. The new CEO has caused Apple Inc. to invest heavility in the production and assembly
facilities in low cost regions in China. The underlying intention of providing 100%
financing of the production facilities reflects the commitment of the company to long
term volume generation from the Chinese facilities (Lashinsky, 2012).
4

Possible Impact of economic environment on Apple’s
financial management
The management at Apple Inc. has been receptive of the changes in the business sentiments
within US and other global economies. Apple has been selling limited products which were
pioneers in technological and engineering innovation. This enabled the company to derive high
profitability through premium pricing and high volumes. However, the premium priced
products were often beyond the reach of medium level earners based in the Asian economies
of China and India. This expectation of potential demand caused the company to expand and
diversify its product portfolios. The company engaged in production and marketing of lower
priced cheaper alternatives of its highly successful i-pad. (Luckerson, 2014).
The cheaper alternatives enabled the company to tap the potential market base within the
middle class of Chinese and Indian market. The company was able to reap on the scale of
economies and drive its margin on its increased volume of new range of products (Luckerson,
2014)
The next phase of Apple Inc.’s growth would have been possible through new production
facilities based out in emerging economies to take advantages to market proximity, lower cost
through cheap labour and economies of scale. This global opportunity was addressed by Apple
to rapid expansion of production facilities in Chinese market. (Luckerson, 2014). It has plans to
boost the product reach and open new production base in the new Indian market (Mukherjee,
2016).
Apple Inc.’s growth is now a reflection of its strong logistics and product management. With
apple’s products reaching out to many countries across the globe, the economic environment
required a strong logistics team to ensure smooth supplies and reach of apple’s products to the
eventual consumers. Under new CEO, the product management and supply management
divisions of the company were given top priority in business meetings. They used to be
sidelined earlier under the leadership of Jobs. (Lashinsky, 2012).
5

Apple decided to reward investors with a stable dividend policy and buy back of equity. This
reflects the current economic environment where the shareholders expect cash flows in
addition to capital appreciation. The financial management under the New CEO started rolling
out quarterly dividends USD 2.65 per share and a buyback of USD 10 billion worth of equity
from the shareholders. (Tonner, 2016)
6

References
Dou E (2017), Apple CEO Tim Cook Defends Globalization in China Speech, Retrieved from
http://www.foxbusiness.com/politics/2017/03/18/apple-ceo-tim-cook-defends-
globalization-in-china-speech.html
FTI Journal (2011), CEO Transitions, Retrieved from: http://www.ftijournal.com/article/ceo-
transitions
Luckerson V (2014), 4 ways Tim Cook has changed Apple as CEO, Retrieved from
http://time.com/3162246/apple-tim-cook-ceo-3-years/
Lashinsky A (2012), How Tim Cook Is Changing Apple, Retrieved from
http://fortune.com/2012/05/24/how-tim-cook-is-changing-apple/
Mukherjee W (2016), India is one of the fastest growing markets for Apple: CEO Tim Cook,
Retrieved from
http://economictimes.indiatimes.com/news/industry/tech/hardware/india-is-one-of-
the-fastest-growing-markets-for-apple-ceo-tim-cook/articleshow/53408091.cms
Tetzeli R (2015), Tim Cook on Apple’s Future: Everything can change except Values: Sales and
Net Income in $ Billions, [Image], Retrieved from
https://www.fastcompany.com/3042435/steves-legacy-tim-looks-ahead
Tetzeli R (2015), Tim Cook on Apple’s Future: Everything can change except Values: Stock price
since Steve’s death, [Image], Retrieved from
https://www.fastcompany.com/3042435/steves-legacy-tim-looks-ahead
Tonner A (2016), Why Does Apple Repurchase So Much Stock?, Retrieved from
https://www.fool.com/investing/2016/08/27/why-does-apple-repurchase-so-much-
stock.aspx
7