Apple's International Business Strategy: Financial Analysis & More

This report provides a comprehensive analysis of Apple's international business strategy, starting with a brief background of the company, including its business units and areas of operation. It delves into Apple's financial performance, examining revenue, cost of sales, profit, working capital ratio, quick ratio, price-earnings ratio, debt-to-equity ratio, and return on equity. The report identifies Apple's corporate strategy as related diversification and analyzes the company's capabilities based on the value chain, covering firm infrastructure, human resource management, technological development, procurement, inbound logistics, operations, outbound logistics, marketing and sales, and service. Furthermore, it assesses Apple's generic competitive position using a matrix, presents a strategy map highlighting diversity in smartphone products, market share, and research & development, and evaluates Apple's diversification strategy using a diversification matrix. The report also identifies Apple's key stakeholders and concludes with recommendations for the company's future strategic direction. Desklib offers a wealth of similar solved assignments and past papers to aid students in their studies.

INDIVIDUAL ASSIGNMENT 2
INTERNATIONAL BUSINESS STRATEGY
Lecture: Bui Thuy Duong
IB1705_Group 6
Name ID Student Mission
Nguyễn Việt Yên HE161504 IV, VII, IX
Mai Thị Bảo Ngọc HS163324 II, III
Nguyễn Thị Xuân Mai HS163337 VI
Nguyễn Thị Mỹ Linh HS163466 I
Đào Minh Sơn HS176140 V, VIII
1

TABLE OF CONTENTS
I. BRIEF BACKGROUND OF THE APPLE COMPANY.............................................4
1. Business units & business areas of each unit..................................................................4
2. Place of operates.............................................................................................................4
3. Scope of the analysis.......................................................................................................4
II. APPLE FINACIAL ANALYSIS.....................................................................................5
1. Revenue, cost of sale, profit............................................................................................5
2. Working capital ratio.......................................................................................................6
3. Quick ratio......................................................................................................................7
4. Price-earnings ratio (P/E)...............................................................................................7
5. Debt-to-equity ratio.........................................................................................................8
6. Return on equity (ROE)..................................................................................................9
III. CORPORATE STRATEGY AND DIVERSIFICATION TYPE OF APPLE..........10
IV. ANALYSIS CAPABILITIES OF THE APPLE INC BASE ON THE VALUE
CHAIN....................................................................................................................................11
1. Firm infrastructure........................................................................................................12
2. Human resources management.....................................................................................12
3. Technological development..........................................................................................13
4. Procurement..................................................................................................................13
5. Inbound logistics...........................................................................................................13
6. Operations.....................................................................................................................13
7. Outbound logistics........................................................................................................13
8. Marketing and Sales......................................................................................................14
9. Service...........................................................................................................................14
V. APPLE’S GENERIC COMPETITIVE POSITION MATRIX.................................15
1. The capabilities of the company...................................................................................15
2

2. Justification...................................................................................................................16
VI. STRATEGY MAP..........................................................................................................17
1. Diversity in smartphone products.................................................................................17
2. Market share..................................................................................................................18
3. Research & Development.............................................................................................19
VII. APPLE’S DIVERSIFICATION STRATEGY-DIVERSIFICATION MATRIC....21
1. High Industry attractiveness, high Business unit competitive advantage.....................22
2. High Industry attractiveness, low-medium business unit competitive advantage........22
3. Low Industry attractiveness, high Business unit competitive advantage......................23
4. Low Industry attractiveness, low Business unit competitive advantage.......................24
VIII. APPLE’S STAKEHOLDERS.....................................................................................24
IX. RECOMMENDATION.................................................................................................25
X. REFERENCES...............................................................................................................27
3

I. BRIEF BACKGROUND OF THE APPLE COMPANY
1. Business units and business areas of each unit
Apple considers each of its products a business unit. So, Apple has 5 business units namely
Smartphones, Computers, Tablets, Wearables, and Services. Each of Apple's business units is
thriving and has its share of the market.
 Smartphones: Apple’s core product is the iPhone. The popular smartphone is among the
top five smartphone vendors in the world [1]
 Services: The company's services business is led by the App Store and Apple Music. The
segment's revenue also comes from selling a range of services, such as AppleCare, Apple
Pay, iCloud storage services, AppleCare warranties, and subscriptions to services like
Apple Music, Apple Arcade, Apple TV+, and the Apple Card, which competes with other
financial payment giants [2]
 Computers: Apple’s computer business is built around the Mac and includes its
MacBook laptops and the iconic iMac desktop computers. This unit generated sales of
$35.1 billion ($9.2 billion for the fourth quarter of 2021), which is an increase from the
$28.6 billion reported in 2020 [3]
 Tablets: When Apple launched its iPad in 2010, it quickly became the first commercially
successful tablet computer to hit the market. In the first three months after it was
released, the device sold more than three million units. Although worldwide demand for
tablets is waning, Apple continues to dominate this part of the market
 Wearables, Home, and Accessories: Apple’s Wearables, Home, and Accessories
segment is made up of devices such as AirPods, Apple Watch, and HomePods. The
segment posted $38.4 billion in revenue during 2021 and $8.8 billion for the year's fourth
quarter. That's compared to $30.6 billion and $7.9 for the same periods in 2020,
respectively. [4]
2. Place of operates
Currently, Apple has become the world's leading manufacturer of technology devices thanks to
the Apple brand positioning strategy. Apple is currently operating in about 25 countries around
the world including the US, China, Canada and Japan, Poland, Italy, France... Which, Apple
mainly focuses on and thrives in the United States.
3. Scope of the analysis
4

Analysis scope: International level
Valuation: Apple’s business is leading in the world. Up to now, with a market capitalization of
US$2.75 trillion as of May 2023, Apple was the largest company in the world that year.
Rounding out the top 5 are some of the most famous brands in the world, beating Amazon,
Google, and Microsoft. Apple is not only bigger than all 595 listed companies in the UK but also
bigger than all of the companies in France (235 companies) and India (1,242 companies). Apple
is twice the size of the entire German stock market, with 255 companies. This reflects the values
being given to companies that are: success and growth driven.
As of today, there are 2 billion devices in use by customers, up from 1.8 billion last year. [5]
II. APPLE’S FINANCIAL ANALYSIS
1. Revenue, Cost of sale, Profit
2020 2021 2022
0
50
100
150
200
250
300
350
400
450
274.515
365.817
394.328
170
212,981 224
104.956
152.836 170.782
Apple Inc, Revenue, Cost, Profit calcultation
Revenue Cost Profit
From the chart above, we can comment: Apple's revenue increased gradually over the years,
even from 2020 to 2021 it increased strongly by 33%, more than 4 times higher than the growth
rate from 2021 to 2022. Cost of goods Apple's annual sales in 2021 is an increase of 25.61%
compared to 2020, and in 2022 is an increase of 4.96% compared to 2021. Apple's annual gross
profit for 2021 is a 45.62% increase from 2020, and in 2022 is an increase of 11.74% year-on-
year 2021.
5

Thus, Apple's business activities in the last 3 years, including commercial transactions and sales
activities, are quite stable, and in general, bring profits to the corporation.
2. Working capital ratio
2020 2021 2022
0
20
40
60
80
100
120
140
160
180
0.5
0.9
1.3
1.7
2.1
2.5
143.713
134.836 135.405
105.392
125.481
153.982
1.36
1.07
0.88
Working Capital Ratio calcultation
Current assets Current liabilities Working capital ratio
From the financial statements, we can see that Current assets and current liabilities change from
year to year. Specifically, from 2020 to 2021, assets have decreased and increased slightly from
2021 to 2022. For liabilities increase gradually from 2020 to 2022. After the covid period, the
world economy is going down, Apple needs a lot of capital to focus on R&D, upgrade products,
and focus on launching new product lines to the market, therefore public debt companies
increased every year and peaked in 2022 in the past 3 years. [6]
Therefore, in 2020, the working capital ratio is quite high (1.36); in 2021 this ratio will remain
high (1.07), that's an indication of healthy short-term liquidity. A company with more cash in its
current assets will be able to pay off its debts faster. In 2022 current liabilities increased faster
than Apple Inc’s current assets, which led to an improvement in Apple Inc's Working Capital
Ratio has been 0,88 the rate dropped to a low of less than 1. The company may have liquidity
troubles and not be able to pay its short-term liabilities. But the trouble could be temporary and
later improve.
6

3. Quick Ratio
2020 2021 2022
0
1
2
3
4
5
6
7
1.3 1.02 0.85
4.061
6.58
4.946
Quick Ratio
Quick Ratio
Inventories
Through calculations, we can see that, from 2020 to 2021, the quick ratio is above 1, quite high
and stable. During those 2 years, the company is experiencing solid revenue growth, quickly
converting its receivables into cash, and can easily cover its financial obligations. But the ratio
has been a gradual decrease and until 2022, this ratio is 0. 85 was below level 1. The ability to
pay off all short-term liabilities in a short time may not be feasible. Or to be more precise,
businesses will have problems in paying short-term debts quickly.
7

4. Price-Earnings Ratio (P/E)
2022
2021
2020
0 5 10 15 20 25 30 35 40
22.5
25
35.1
Price-Earnings Ratio (P/E)
In 2020, Apple's stock price has risen sharply, and the company recorded significant growth in
profits. As a result, the stock price increased faster than the profit, the P/E Ratio also increased
strongly to a high level.
In 2021, Apple's stock price continues to rise and the company continues to record good profits.
However, the growth rate of the P/E Ratio may have decreased compared to the previous year
due to uneven increase in share price or profit not growing as fast as expected.
In 2022, Apple's stock price plummeted 27% leading the group of technology stocks to plunge
due to the impact of high lending interest rates, leading to a further decrease in P/E compared to
2021.
From this, we can see that the Price-Earnings Ratio (P/E) has been steadily decreasing from a
high value (35.1) to below 30 in the past 3 years. This shows that the stock is being valued
cheaper than the company's profits. However, this can also indicate that the market has bad
future expectations for the company.
5. Debt-to-Equity Ratio
Through the above financial statements, in the last 3 years, Total liabilities have tended to
increase, but Total shareholders' equity decreased, thus leading to an increase in Debt-to-Equity
Ratio. The company is using more debt than equity which can increase the financial risk of the
8

company because when it has more debt, the company has to pay interest and principal in the
course of doing business. However, in reality, the company has using debt for large projects, and
the expansion of operations focuses on R&D [6]. This can increase your chances of making big
profits, but it also comes with a higher risk
9
2020 2021 2022
0
50
100
150
200
250
300
350
0
1
2
3
4
5
6
7
258.549
287.912 302.083
65.339 63.09 50.672
3.96
4.56
5.96
Debt-to-Equity Ratio
Total liabilities Total shareholders' equity debt-to-equity ratio

On the other hand, the owner's capital is quite low compared to total liabilities, according to the
report, revenue, and profit still increase at a stable and positive level. Therefore, it can be said
that Apple is using quite good financial leverage because revenue and profit are still increasing at
a stable and positive rate.
6. Return on Equity (ROE)
2020 2021 2022
0
20
40
60
80
100
120
140
160
180
57.41
94.68 99.8
75,15%
144,12%
160,9%
Return on Equity
Net Income Return on Equity
According to the report, net income (expenses and taxes before paying common share dividends
and after paying preferred share dividends) increased over the past 3 years and increased
sharply from 2020 to 2021. For total shareholders' equity decreased slightly, therefore, Return
on Equity (ROE) has grown strongly (up nearly 50% from 2020 to 2021). Stable ROE and
sustainable growth are signs that the business is operating very efficiently and shareholders'
capital is used correctly.
III. CORPORATE STRATEGY AND DIVERSIFICATION TYPE OF APPLE
10

Related diversification means there are commonalities between existing products/services and
new ones in development. One of the most famous companies in the world, Apple Inc. is one of
the greatest examples of a “related diversification” model.
The world of consumer electronics technologies is converging on a point of highly portable, rich
media, Internet-connected devices. Apple has already entered this market with the highly popular
iPhone, which performs many of the most desired functions. The growing consensus is that a
tablet-format device may be the next step, bridging the divide between laptops and smartphones.
Apple’s patents deal with touchscreen technology and experience developing the iPhone and
iPod Touch will translate perfectly to a larger form, highly functional tablet device. A growing
category in digital technology is the ‘eReader’ device, which allows
consumers to transport and read books in a digital format. While the Amazon Kindle is currently
the leading product in this market, the category is still young and could be redefined. If Apple
could incorporate an e-book reader into a convergence device, or develop a successful standalone
device it would be wise of them to diversify the iTunes store to include e-book downloads in
addition to music, movies, TV shows, and podcasts among other types of content already
available. This is one of the next logical progressions of the iTunes store which has come very
far from its initial offering of music only. [7]
IV. ANALYSIS CAPABILITIES OF THE APPLE INC BASE ON THE VALUE CHAIN
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Value Chain Activity Corresponding Firm Practice, Policy, or Procedure
1. Firm Infrastructure A greener Apple: Reduction in energy use in production and
transportation to match the trend in green business.
Strong cash position: Allows the firm to internally finance
expansion and development without the cost of capital.
2. Human Resource
Management
Selective hiring process: find and attract talent
Generous employee benefits program: retain industry,
leading talent
3. Technological
Development
R&D: expenditure increased by about 40% from 2020 to 2022
Patent filing: protection of important inventions and
innovations in the US and worldwide
4. Procurement Positive relationships with suppliers: EICC member, working
to improve working conditions, created and enforces a
“Supplier Code of conduct”,
5. Inbound Logistics Automated receiving systems: reduce facility footprint and
space requirements.
Delegate raw materials acquisition: offer supervision to OEM
partners who carry out the acquisition.
6. Operations Utilizes OEM’s economies of scale: offshore production to
save money on build costs.
Internal design: design and conceptualize products internally
7. Outbound Logistics Economical/Stylish Packaging: eye-catching packaging takes
up less space and weight, reducing shipping costs and costs of
disposal.
Apple Stores/Authorized Retailers: working to maintain
standards over the presentation of products for sale
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Direct shipment: ship products from China to consumers to
minimize inventory buildups in costly locations.
8. Marketing&Sale “Get a Mac” Ads: Various direct/indirect favorable
comparisons against competing products, selling on quality and
image.
Retail Locations/Flagship Stores: living ads with solid
branding and image promotion
Secretive Selective Unveilings: the creation of hype and
suspension around product launches.
9. Service Apple Genius: Helpful 1-on-1 interaction and service on
products with 1st party provider.
Included and Extended Warranty: protect against defects
and issues, and build a positive image.
Free Consultation: In or Out of warranty consultation to
determine issues before billing.
1. Firm Infrastructure
A greener Apple: Apple redesigned packaging for many of its popular products to be more
lightweight and take up less space in shipment. This means reduced emissions during
transportation and results in savings for the firm. Apple has also made moves to reduce the
number of harmful chemicals used in the production of its products.
Strong cash position: Apple maintains a large cash reserve and carries a comparatively small
amount of long-term debt. [10] This enables Apple to finance expansion, capital purchases, and
development internally with little reliance on third-party creditors
2. Human Resources Management
Selective hiring process: Apple follows selective hiring practices to recruit and hire talented
individuals.
13

Generous employee benefits program: Apple offers a variety of attractive employee benefits to
complement direct wages. [10]The benefits system is used to entice and retain industry-leading
talent to benefit Apple
3. Technological Development
Research and development: Apple increased research and development funding by nearly 40%
from 2020 to 2022, in 2022 Apple spent $26.251 Billion on research and Development. [10] This
is a commitment to continue to push innovation forward to keep ahead of the competition.
Patent filing: Apple believes in the importance of protecting its intellectual capital by filing
patents in the United States and worldwide for its inventions and innovations. Apple currently
holds a portfolio of several thousand patents. [11]
4. Procurement
Positive relationships with suppliers: Apple works closely with its key suppliers to benefit all
parties involved. Apple is a member of the Electronic Industry Citizenship Coalition (EICC) and
works to ensure fair treatment of workers in OEM factories.[12] Apple has also developed its
own Supplier Code of Conduct to govern the actions of its suppliers.[13]These beneficial steps
foster positive relationships with suppliers.
5. Inbound Logistics
Automated receiving systems: Apple has implemented sophisticated automated receiving
systems to speed up the receiving process and reduce facility footprint and storage space
requirements. [11]
Delegate raw materials acquisition: Apple works with its OEM partners to delegate the
raw materials acquisition process but provides some supervision for quality control purposes.
6. Operations
Utilize OEM’s economies of scale: Apple outsources production to third-party OEM partners to
utilize their economies of scale while removing the burden of production management from the
firm.
Internal design: The design and conceptualization of current and future products are done
internally at Apple, utilizing industry-leading industrial design teams and engineering know-how
7. Outbound Logistics
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Economical/stylist packaging: To save money on shipment and entice customers Apple uses
eye-catching packaging that takes up less physical space and weighs less. This reduces shipping
costs and environmental effects while attracting customers to the firm’s products. [14]
Apple Stores/Authorized retailers: To control the firm’s brand image Apple sells through first-
party retail establishments and authorized retailers. Apple Stores act as advertisements for the
brand and provide a human point of contact between the firm and its customers. Authorized
retailers are held to certain standards to protect Apple’s brand image. [10]
Direct shipment: Apple.com online orders are shipped directly to consumers from storage
facilities in China. This minimizes inventory buildup in more costly warehouse locations in the
United States.
8. Marketing and Sales
“Get a Mac” Ads: Apple uses a series of television advertisements comparing the firm’s
products to competitors using a variety of direct and indirect methods to build a lifestyle brand
image. The ads are humorous and do not emphasize cost or feature-by-feature comparisons,
opting instead to develop the firm’s image. [15]
Retail locations/Flagship stores: Apple stores across the United States serve as living
advertisements for the company promoting the brand and lifestyle image. Flagship stores, like
the 5th Avenue New York store, are an attraction drawing visitors on novelty and hoping to
convert the visits into sales [10]
Secretive and selective unveilings: By keeping secrets about product releases and holding
invitation-only press events for product unveilings, Apple creates hype and suspension around
product launches
9. Service
Apple Genius: Apple stores house the ‘Apple Genius Bar’ where customers can talk with an
Apple specialist known as a ‘genius’ about problems with their device. This human interaction
with a first-party service provider builds a rapport with customers and offers a stark contrast to
endless phone service calls. [16]
Included and extended warranty: Apple offers an included 90-day warranty against defects
and issues with its products. Customers can also purchase extended warranties through ‘Apple
Care’ to protect their products.
15

Free consultation: Customers can bring in their device for a free consultation regarding issues
or problems with no commitment, whether it is in or out of warranty. The customer then has the
option to pursue different avenues of resolving the issue without an upfront charge.
V. APPLE’S GENERIC COMPETITIVE POSITION MATRIX
1. The capabilities of the company
Generic Competitive Strategy
 Cost Leadership
o Aims to achieve the lowest cost in the industry.
o Competitors: Walmart, Amazon, Costco
 Differentiation
o Aims to differentiate its products or services from the competition.
o Competitors: Apple, Tesla, Nike
 Focus
o Aims to focus on a specific market segment or niche.
o Competitors: Starbucks, Whole Foods, Trader Joe's [17]
Apple's generic competitive strategy is broad differentiation. This means that Apple aims to
differentiate its products from the competition by offering superior quality, design, and user
experience. Apple does not focus on any specific market segment but rather competes in all
market segments with its products.
Apple's broad differentiation strategy has been very successful. The company has been able
to consistently launch innovative products that are highly desirable to consumers. Apple's
products are also priced at a premium, which reflects the company's focus on quality and
design.
Here are some of the key features of Apple's broad differentiation strategy:
 Focus on innovation: Apple is constantly innovating and introducing new products
and features. This helps the company to stay ahead of the competition and to
differentiate its products from the competition.
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 High-quality products: Apple products are known for their high quality. The company
uses high-quality materials and components in its products, and it has a rigorous
quality control process.
 Sophisticated design: Apple products are known for their sophisticated design. The
company's products are often minimalist and elegant, and they are designed to be
both functional and aesthetically pleasing.
 User-friendly interface: Apple products have a user-friendly interface. The company's
products are easy to use, even for people who are not familiar with the technology.
 Apple ecosystem: The Apple ecosystem is a collection of Apple products and services
that are designed to work together seamlessly. This means that you can easily move
between devices, share data, and use the same apps and features across your devices.
Apple's broad differentiation strategy has been very successful. The company has been able
to consistently grow its market share and generate high profits. Apple is one of the most
valuable companies in the world, and its products are highly desirable to consumers.
2. Justification
Apple's broad differentiation strategy is justified because it allows the company to compete
successfully in a variety of market segments. The company's products are differentiated from
the competition by their superior quality, design, and user experience. This allows Apple to
charge a premium for its products, which contributes to the company's profitability.
In addition, Apple's broad differentiation strategy allows the company to stay ahead of the
competition. The company is constantly innovating and introducing new products and
features. This helps Apple to maintain its competitive advantage and to continue to grow its
market share.
Overall, Apple's broad differentiation strategy is a sound one that has allowed the company
to achieve great success.
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VI. STRATEGY MAP
1. Diversity in smartphone products
Diversity in smartphone products is a method companies use to expand a product's originally
intended market scope. Usually, product diversification entails adding a new component to an
existing product line, such as new technology, additional sibling products, or growing existing
product availability to reach new markets.
Apple: When it comes to Apple, we often think of Apple's product line as the iPhone. IPhone is
considered a flagship product of Apple. The time for Apple to launch a new iPhone product line
is once a year. Since 2007 until now, Apple has released 13 lines of iPhones, and each line will
have from 2 to 4 versions. For example, the iPhone X series includes iPhone X, iPhone Xr,
iPhone Xs, and iPhone Xs Max. Thus, Apple has launched nearly 40 iPhone models. [18]
Samsung: Samsung is also a developer in the smartphone field. In 2009, the first smartphone-
branded Samsung has been born. Since then, Samsung has researched and launched many
diverse phone product lines, divided into many segments. Samsung has about 11 product lines.
To date, Samsung is most popular with 5 phone lines: Galaxy S, Galaxy Z, Galaxy Note, Galaxy
A, and Galaxy M. The diversity of Samsung's phone products is also reflected in the number of
products in each line. For example, the Samsung Galaxy A product line alone includes 13
devices: Galaxy A02, A02s, A12, A22, A22 5G, A22s 5G, A32, A32 5G, A42 5G (launched
18

September 2020), A52, A52 5G, A52s 5G and A72. The remaining lines also have the same
number of samples. [19]
Xiaomi: Xiaomi started to launch the first smartphones in August 2011. Although launched late
after many competitors, the number of Xiaomi phone models is still very diverse. Xiaomi Phones
have a total of 3 product lines: Xiaomi Redmi, Xiaomi Mi, and Poco Phone. Each line splits into
multiple versions. For example, only in 2021, Xiaomi launched about 56 versions of phones, and
in 2022, Xiaomi also produced about 76 more phone versions, not to mention previous years.
The total number of Xiaomi's phone products is enough to prove its product diversity. [20]
Oppo: Since launching its first phone in 2008, Oppo has been constantly innovating and
developing launching more products. Regarding smartphones, Oppo has 4 phone lines: Oppo A
series, Oppo Reno series, Oppo Find X series, and Oppo Find N series. From these 4 lines, Oppo
produces many phone versions. Oppo's total number of phone models is about 250. [21]
Through research data, ranking the companies with the most number of phone models, the most
diverse are Samsung, Xiaomi, Oppo, and Apple.
2. Market share
The smartphone market has always been fiercely competitive. The market share numbers of
phone companies are always updated continuously and change every quarter every year.
Canalys’ latest research shows that global smartphone shipments fell by 13% to 269.8 million
units in Q1 2023. The demand decline has started to flatten, although the contrast between Q1
2022 and Q1 2023 is still stark. [22]
Samsung reclaimed its pole position and shipped 60.3 million units, driven by a refreshed
product portfolio. Apple came in second with 58.0 million shipments. Despite shipping fewer
units than Samsung, Apple was the only vendor among the top five companies to grow year-
19

over-year with a 21% market share, up by 3%. Xiaomi defended its number three position with
30.5 million shipments while OPPO and vivo completed the top five, shipping 26.6 million and
20.9 million units, respectively, securing 10% and 8% market share. [23]
Analysts believe that demand for mid-range smartphones will remain limited due to
macroeconomic challenges and a lack of distinguishing features within this pricing range.
Additionally, as inventory levels begin to clear, the prices of components may quickly rise,
making it difficult to sustain high specs at lower costs over the long run. [22]
Through research data, ranking companies with market share in order from high to low are
Samsung, Apple, Xiaomi, and Oppo.
3. Research & Development
Research and Development work basically on product innovation, modification, and research.
The role of the R and D department is critical. R&D is the means for companies to achieve future
growth and maintain their relevance in their chosen market. It involves spending resources on
investigation and testing to develop new products or new ways of doing things. It also supports
the enhancement of existing products or processes, enhancing the company's ability to compete
with its competitors.
Despite slowing sales growth and second-place market share, Apple remains a company rich in
cash to spend on research and development. The scale of Apple's R&D workforce is also much
larger than that of Samsung. Perhaps the reason Apple leads in terms of R&D expenditure is that
Apple is the only company that develops its hardware and software to create a large-scale
worldwide ecosystem [24]. Apple's R&D investment amount has gradually increased over the
20

previous year. Specifically, Apple's annual research and development expenditure for 2022 is
$26.251 billion, an increase of 19.79% compared to 2021. [25]
Samsung Electronics also significantly increased R&D investment in future growth drivers. In
2022, its R&D expenses totaled $19.748B, up to 10.3 percent from the previous year. [26]
In third place is Xiaomi company. In 2022, Chinese electronics company Xiaomi spent 16 billion
yuan (nearly $2,217B) on research and development. [27] [28]
21

At the bottom of this category is the company Oppo. In 2019, Oppo planned for the next 3 years,
Chen announced Oppo's R&D budget of RMB 50 billion (about $7 billion). Thus, on average,
Oppo has spent more than 2 billion USD on R&D. [29] [30]
Through research data, ranking companies with R&D costs ranked in order from high to low are
Apple, Samsung, Xiaomi, and Oppo.
VII. APPLE’S DIVERSIFICATION STRATEGY- DIVERSIFICATION MATRICES
A diversification matrix is a tool used to evaluate a company's portfolio of businesses based on
two dimensions: market attractiveness and business strength. Market attractiveness refers to the
attractiveness of the industry or market in which the business operates, while business strength
assesses the company's competitive advantage within that industry.
INDUSTRY
ATTRACTIVENESS
HIGH App Store, Apple Music, iCloud,
Apple Pay, and AppleCare
iPhone, Mac, Apple
Watch, iPad, Airpod
LOW iPod
LOW-MEDIUM HIGH
BUSINESS UNIT COMPETITIVE ADVANTAGE
1. High Industry Attractiveness, High Business Unit Competitive Advantage
22

Apple's core business of consumer electronics, specifically iPhones, iPads, Macs, and
wearables, would likely fall into this quadrant. These products have enjoyed strong demand and
generated substantial revenues for the company. Apple's ecosystem and brand loyalty
contribute to its competitive advantage in these markets.
 Growing Demand: The market for consumer electronics Size is a sizable business that is
expanding at a rapid rate. The global market for consumer electronics was estimated to be
worth USD 1.10 trillion in 2021 and is estimated to grow to about USD 1.70 trillion by
2028 and Zion Industry Research has published research indicating that this market is
anticipated to expand at a compound annual growth rate (CAGR) of 7.6% from 2022 to
2028. [31]
 Brand Value and Customer Loyalty: Apple has cultivated a strong brand image
globally, synonymous with innovation, quality, and design excellence. The company's
reputation and customer loyalty contribute to the market attractiveness of its products.
Apple customers often exhibit a high degree of brand loyalty and are willing to pay a
premium for Apple's devices.
 Ecosystem Integration: Apple has developed a highly integrated ecosystem across its
devices, software, and services. This integration allows users to seamlessly transition
between different Apple devices and enhances the overall user experience. This
ecosystem-driven strategy strengthens Apple's market position and attracts customers
who value the interoperability and convenience it offers.
2. High Industry Attractiveness, Low-Medium Business Unit Competitive Advantage
Apple's services divisions, including the App Store, Apple Music, iCloud, Apple Pay, and
AppleCare, could be placed in this quadrant. While the market for digital services is highly
attractive due to the growing reliance on technology, Apple faces competition from other
established players like Google, Amazon, and Microsoft.
 Growing Demand: Digital services have experienced significant growth in recent years,
driven by increasing smartphone penetration, internet connectivity, and changing
consumer behavior. The global digital transformation market size was evaluated at USD
731.13 billion in 2022 and is anticipated to witness a CAGR of 26.7% from 2023 to
2030. [32] The demand for services such as app downloads, streaming music, cloud
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storage, and mobile payments has been on the rise, presenting a lucrative market
opportunity.
 Competition: The digital services landscape is highly competitive, with established
players like Google, Amazon, and Microsoft vying for market share. Apple faces strong
competition from these companies, as well as other industry-specific competitors.
Differentiating itself and maintaining market share can be a challenge, especially in
rapidly evolving markets like music streaming and mobile payments.
 Revenue Dependency: Although Apple's services have shown growth and contribute to
the company's overall revenue, the majority of Apple's revenue historically has been
driven by hardware sales, particularly iPhones. As a result, the services division's
business strength may be considered medium as it is relatively less substantial compared
to Apple's core hardware business.[10]
3. Low Industry Attractiveness, High Business Unit Competitive Advantage
IPods- Apple's line of portable music players, could indeed be considered a business segment
that falls under the quadrant of low market attractiveness and high business strength.
 Market Attractiveness: The market for dedicated portable music players, such as iPods,
has significantly declined over the years due to the rise of smartphones and streaming
services. Consumers now prefer the convenience of carrying music on their smartphones
and accessing streaming platforms like Apple Music or Spotify. Consequently, the
market for standalone music players has become less attractive.
 Business Strength: In the first quarter of 2009, iPod revenue accounted for nearly 29
percent of the company's revenue. By the fourth quarter of 2014, this share was reduced
to less than one percent, generating just 410 million U.S. dollars in revenue. [33] Apple
has differentiated iPods by incorporating advanced features, improved storage capacity,
and enhanced audio quality. While the market for standalone music players is declining,
Apple's focus on product differentiation has helped sustain sales to some extent.
Moreover, iPods have benefited from Apple's strong brand recognition and reputation.
The Apple brand is associated with innovation, quality, and a seamless user experience.
This brand recognition has contributed to the continued sales of iPods, albeit at a more
modest level.
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4. Low Industry Attractiveness, Low Business Unit Competitive Advantage
In our case, the organization is Apple Inc, a very successful company renowned worldwide for
its product innovation and heavy investment in its R&D department due to which Apple is a
pioneer and market leader in its field. The list of top 30 successful Apple products is as under,
Macintosh 128k, iMac, iPod, Apple II, iTunes Music Store, MacOS X, LaserWriter, Titanium
PowerBook G4, QuickTime, iMac Core Duo, ILife, iBook, AirPort, Mac mini, Final Cut Pro,
Power Mac G5, AppleScript, The Apple decal, Fifth-generation iPod, MacWrite and MacPaint,
iTunes, System 7, PowerBook 100series, HyperCard, Mac II, Power Mac G4 Cube, X Serve
RAID, Newton, First-generation Power Macs,20th Anniversary Mac. [34]
Apple has a history of focusing on areas where it can excel and typically avoids ventures with
low market attractiveness and business strength. So it is challenging to identify a specific
business within Apple's portfolio that would fall into this quadrant.
VIII. APPLE’S STAKEHOLDERS
Stakeholder Type Issues
Customers Primary Price, quality, innovation, customer service
Employees Primary Compensation, benefits, working conditions, job security
Shareholders Primary Profitability, dividends, share price
Suppliers Secondary Cost, quality, delivery times
Competitors Secondary Innovation, pricing, market share
Governments Secondary Taxes, regulations, trade policy
Local communities Secondary Environmental impact, employment, economic development
Some of the specific issues that Apple may face with these stakeholders include:
 Customers: Apple may face criticism for its high prices, especially for its newer
products. The company may also face complaints about the quality of its products, as
well as its customer service.
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 Employees: Apple employees may be concerned about their compensation and
benefits, as well as their working conditions. The company may also face challenges
in retaining its employees, as the tech industry is very competitive.
 Shareholders: Apple shareholders are primarily concerned with the company's
profitability and share price. The company may face pressure to increase its dividends
or to make other decisions that will benefit shareholders.
 Suppliers: Apple suppliers may be concerned about the cost of their products, as well
as the quality standards that Apple imposes. The company may also face challenges
in ensuring that its suppliers are meeting its environmental and labor standards.
 Competitors: Apple's competitors are always looking for ways to innovate and gain
market share. Apple may face challenges in maintaining its competitive edge.
 Governments: Apple may face government regulations in different countries. The
company may also face trade disputes, as it competes with companies from other
countries.
 Local communities: Apple may face concerns about its environmental impact, as well
as its impact on local employment and economic development. The company may
need to make investments in these areas to address these concerns. [35]
IX. RECOMMENDATION
Based on the strategic map analyses, I recommend:
 Focus on differentiated lifestyle branding: Apple has successfully developed a
differentiated lifestyle brand and must continue to build on this foundation while resisting
pressure to move to the middle to directly compete with other competitors.
 Design innovation: Put additional emphasis on design development with internal resource
allocation to continue to lead the industry in design.
 Research user interface possibilities: As a mode of setting Mac computers apart from
other PCs Apple must continue to innovate in user interface focusing on easy-of-use and
intuitive menu functions.
Based on the capabilities of value chain analysis, I recommend:
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 Implement first-party quality checks in OEM factories: Despite working closely with
OEM partners, Apple must always protect its image of quality. Implementing random
quality check sampling and ‘quality audits’ in OEM facilities will ensure issues are
caught early and that Apple’s OEM partners stay honest with their quality control
processes.
 Make productive use of unused cash: While having a large cash buffer is important to a
firm, idle cash is not being used effectively. During the yearly capital budgeting process,
Apple should set aside a sizeable portion of unused cash for investment. Unused cash
does not create value for Apple, investing it in the near term will provide benefits in the
future to finance expansion and large capital purchases.
 Continue a wise expansion of Apple Stores: Apple’s retail stores have been massively
successful, and that success can be furthered in new locations within the United States
and abroad. During the expansion process Apple must practice extreme caution to avoid
over-saturation, the Starbucks effect, to retain the halo surrounding the stores and
maintain their status as a destination.
 Emphasize the integrated system in advertisements: Apple’s integrated system holds a
significant advantage over other industry systems relying on Microsoft Windows, yet
some customers have not experienced the seamless interoperability of all Apple products.
This marketing angle will result in cross-selling of more products to new and existing
customers.
Based on the industry analysis, I recommend:
 Create a differentiation strategy: The commodity PC market presents a perpetual
downward pressure on prices, which erodes firm profitability. Developing and brand
image that separates the firm from the competitive rat race will reduce the effect of
destructive competition and pad margins.
 Develop close relationships with suppliers: Because there are few suppliers of key
components required in PC manufacturing developing close relationships with suppliers
is of utmost importance. Rather than searching for the supplier of the lowest cost,
maintaining a collaborative and exclusive business relationship will help mitigate the
power of suppliers and help to lock in attractive component prices.
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 Consumer electronics diversification: While the PC market has grown increasingly
crowded with competitors and customers saturated other areas of consumer electronics
continue to grow. Developing complementary products in other categories provides
broader sources of revenue by accessing more customers in markets with less intense
competition.
X. REFERENCES
1. https://www.apple.com/newsroom/2021/10/apple-reports-fourth-quarter-results/
2. https://www.apple.com/ca/services/
3. https://www.cnbc.com/2021/10/28/apple-aapl-q4-2021-earnings.html
4. https://appleinsider.com/articles/21/11/01/apples-ipad-marketshare-growing-in-declining-
tablet-market
5. https://www.theverge.com/2023/2/2/23583501/apple-iphone-ipad-active-2-billion-
devices-q1-2023?fbclid=IwAR0Kse8Ji2uGcjqd9Gm-
kDkWqA7wsMxcjtK_POF50fyDUExXZnp0m6o64eo
6. https://www.cepro.com/business-support/distributors-reps/apple-spending-on-innovation-
at-all-time-highs/
7. https://www.digitalinformationworld.com/2022/07/apple-is-successfully-diversifying-
its.html
8. https://s2.q4cdn.com/470004039/files/doc_financials/2022/q4/_10-K-2022-(As-
Filed).pdf
9. https://s2.q4cdn.com/470004039/files/doc_financials/2020/ar/_10-K-2020-(As-Filed).pdf
10. https://www.annualreports.com/HostedData/AnnualReports/PDF/
NASDAQ_AAPL_2022.pdf
11. https://insights.greyb.com/apple-patents/
12. https://www.apple.com/supplier-responsibility/pdf/Apple_SR_2011_Progress_Report.pdf
13. https://www.apple.com/supplier-responsibility/pdf/FY23-Supplier-Code-of-Conduct-and-
Supplier-Responsibility-Standards.pdf
14. https://www.apple.com/environment/
15. https://igotoffer.com/apple/get-mac
16. https://www.apple.com/retail/geniusbar/
17. https://panmore.com/apple-inc-generic-strategy-intensive-growth-strategies
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18. https://apple.fandom.com/wiki/List_of_iPhone_models
19. https://www.samsung.com/levant/smartphones/all-smartphones/
20. https://phonesdata.com/en/smartphones/xiaomi/
21. https://www.gadgets360.com/mobiles/oppo-phones
22. https://canalys.com/newsroom/worldwide-smartphone-market-Q1-2023
23. https://www.counterpointresearch.com/global-smartphone-share/
24. https://www.kedglobal.com/tech,-media-telecom/newsView/
ked202205020021#:~:text=Apple%20could%20build%20up%20such,on
%20semiconductors%20and%20home%20appliances.
25. https://www.macrotrends.net/stocks/charts/AAPL/apple/research-development-
expenses#:~:text=Apple%20research%20and%20development%20expenses%20for
%20the%20twelve%20months%20ending,a%2019.79%25%20increase%20from
%202021
26. https://www.digitimes.com/news/a20230313VL204/ic-manufacturing.html
27. https://www.statista.com/statistics/1125785/china-xiaomi-randd-expenses/
28. https://seekingalpha.com/article/4611676-xiaomi-indian-markets-performance-r-and-d-
spend
29. https://www.oppo.com/uk/newsroom/press/oppo-plans-7bn-r-d-push-to-build-a-multiple-
access-smart-device-ecosystem-for-the-era-of-intelligent-connectivity/#:~:text=In%20the
%20next%203%20years,data%20and%20other%20frontier%20technologies.
30. https://economictimes.indiatimes.com/tech/hardware/oppo-to-spend-7-bn-on-rd-in-three-
years/articleshow/72460511.cms
31. https://www.statista.com/forecasts/1286653/worldwide-consumer-electronics-market-
revenue
32. https://www.grandviewresearch.com/industry-analysis/digital-transformation-market
33. https://www.statista.com/topics/1405/ipod/#topicOverview
34. https://www.titlemax.com/discovery-center/lifestyle/every-product-apple-has-made-so-
far/
35. https://panmore.com/apple-inc-stakeholders-csr-analysis
36. https://www.apple.com/vn/newsroom/2023/05/app-store-developers-generated-one-point-
one-trillion-in-total-billings-and-sales-in-the-app-store-ecosystem-in-2022
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37. https://www.apple.com/ru/environment/pdf/
Apple_Corporate_FY2019_Assurance_Statement.pdf
38. https://www.bbrief.co.za/2018/09/07/apple-and-value-creation/
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