Apple Case Study

A brief summary of Apple’s history and its development

Review Apple’s supply chain for its iPhone product, there are some differences set it apart from competitors

As Jessica Grant, what recommendations would you make to the company's VP? Explain

Buy, hold and sell are common investment strategies. We suggest that BXE Capital (BXE) should keep Apple as a key holding in the company’s fund. The function of Apple’s stock in the portfolio is to generate moderate income with low risk. Consistent growth in expected financial return and potential growth in dividend will benefit BXE if the company keep the current investment portfolio. Moreover, it is confident that Apple can consistently grow in the future.

Continuous growth of expected return (ref: http://performance.morningstar.com/stock/performance-return.action?t=AAPL)

When comparing the stock performance, Apple have better peformance than its competitor, SamSung.

  

           

(ref: http://www.gurufocus.com/dividend/SSNLF, http://www.gurufocus.com/dividend/AAPL)

Why Apple could grow in the future?

1. Strong Branding with a Valuable and Unique Market Position

There are 6 major product segment in Apple, such as iPhone, iPad, Mac, iPod, iTunes and Software, Accessories. The variety of product lines can share the R&D cost and also capture more market share.

When Apple announced the new iPhone Models, many people doubted if the new iPhone would still able to capture public’s attention. However, the iPhone 7 launched last year has turned into big hit and helped Apple capturing the largest percentage of market share in quarter 4 of 2016. The impressive sales figure has proven that Apple is very strong in keeping customers loyal to the brand.

2. A Leading Supply Chain which Helps Maintain Competitiveness

Apple is famous for innovation products and creative design, however, the powerful supply chain is also a factor that makes Apple so powerful. Research firm Gartner has ranked Apple’s supply chain is the best in the world for last 9 year (since 2007). The strong relationship with suppliers, tight control of the supply chain and strict protection on intellectual properties have made Apple’s supply chain efficiency and stand out from its competitors.  Apple’s prestige and market power helped a lot in negotiating prices with suppliers, therefore, Apple is able to capture high margin to support company growth.

3. Strong Inventory Management

Strong inventory management is key to control cost especially for innovative products. In 2012, Apple was said to turn inventory every 5 days; while Samsung turning their inventory approximately 21 days. Technology manufacturers can’t afford to keep too many products in stock because a sudden announcement from a competitor of new model product could change everything and suddenly bring down the value of products in inventory.  So, lowering the number of inventory can avoid the inventory cost and depreciation of products.