Apple Inc. designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, and education, enterprise, and government customers worldwide. The company also sells related software, services, accessories, networking solutions, and third-party digital content and applications. It offers iPhone, a line of smartphones; iPad, a line of multi-purpose tablets; and Mac, a line of desktop and portable personal computers. The company also provides iLife, a consumer-oriented digital lifestyle software application suite; iWork, an integrated productivity suite that helps users create, present, and publish documents, presentations, and spreadsheets; and other application software, such as Final Cut Pro, Logic Pro X, and FileMaker Pro. In addition, it offers Apple TV that connects to consumers' TV and enables them to access digital content directly for streaming high definition video, playing music and games, and viewing photos; Apple Watch, a personal electronic device; and iPod, a line of portable digital music and media players. Further, the company sells Apple-branded and third-party Mac-compatible, and iOS-compatible accessories, such as headphones, displays, storage devices, Beats products, and other connectivity and computing products and supplies. Additionally, it offers iCloud, a cloud service; AppleCare that offers support options for its customers; and Apple Pay, a mobile payment service. The company sells and delivers digital content and applications through the iTunes Store, App Store, Mac App Store, TV App Store, iBooks Store, and Apple Music. It also sells its products through its retail and online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. Apple Inc. was founded in 1977 and is headquartered in Cupertino, California.
Business Analysis of Apple
The Technology Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Apple compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Apple to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Apple with an interactive chart.
- Revenue Growth: Apple reported a revenue growth of -7.7% year-on-year during 2016. Computers Systems and Peripherals Industry grew at -7.5% in the same period
- COGS share of Revenues: As a percentage of revenue, Apple spent 60.9% of its total revenues on COGS. Computers Systems and Peripherals industry average (COGS share of revenue) in the same period was 65.0%
- R&D share of Revenues: As a percentage of revenue, Apple spent 4.7% of its total revenues on R&D. Computers Systems and Peripherals industry average R&D spending in the same period was 5.3%
- SG&A share of Revenues: As a percentage of revenue, Apple spent 6.6% of its total revenues on Sales, Marketing, and General Administration (SG&A). Computers Systems and Peripherals industry average SG&A spending in the same period was 8.1%
- Inventory share of Revenues: As a percentage of revenue, Apple spent 1.0% of its total revenues on Inventories. Computers Systems and Peripherals industry average Inventory spending in the same period was 3.9%
- Accounts Payable share of Revenues: As a percentage of revenue, Apple invested 17.3% of its total revenues on Accounts Payable (A/P) Computers Systems and Peripherals industry average Accounts Payable investment in the same period was 17.5%
- Accounts Receivable share of Revenues: As a percentage of revenue, Apple invested 13.6% of its total revenues on Accounts Receivable (A/R). Computers Systems and Peripherals industry average Accounts Receivable investment in the same period was 13.0%
- PP&E share of Revenues: As a percentage of revenue, Apple invested 12.5% of its total revenues on Property, Plants, and Equipments (PP&E). Computers Systems and Peripherals industry average PPE investment in the same period was 11.9%
- Intangibles share of Revenues: As a percentage of revenue, Apple invested 4.0% of its total revenues on Intangibles. Computers Systems and Peripherals industry average Intangibles investment in the same period was 12.0%
- Net Margins: Apple Net Margins in the year 2016 were 21.2%. Computers Systems and Peripherals industry average Net Margins in the same period were 15.9%
Sector and Industry Association of Apple
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
Apple is associated with Technology Sector and Computers Systems and Peripherals Industry.
Technology sector is comprised of the following industries: Computers Systems and Peripherals; Software; Semiconductor; IT Consulting and Outsourcing Services; Networking Equipment and Services; Internet; Other. The definitions for each of the industries is as follows:
- Computers Systems and Peripherals industry includes companies primarily engaged in manufacturing of personal computers, servers, mainframes, workstations, and other computer accessories and peripherals such as storage drives, mice, keyboards and printers. It also includes manufacturers of mobile phones and tablets.
- Software industry includes businesses providing software products such as operating systems, productivity suites, enterprise software, data and analysis software, advertising and marketing software, engineering and manufacturing software, networking software, and IT management software. It also includes companies providing industry-specific software focused on different sectors such as Financials, Automotive, Telecom, Utilities, Travel, Real Estate, Media, and Publishing.
- Semiconductor industry includes companies primarily engaged in manufacturing and distribution of semiconductor products such as microprocessors, chipsets, motherboards, flash memory, and wired and wireless connectivity products. It also includes companies that provide semiconductor equipment and services to the semiconductor industry.
- IT Consulting and Outsourcing Services industry includes companies primarily engaged in providing information technology consulting and outsourcing services to other businesses. The services include IT consulting, systems integration, application development and management, IT infrastructure management, and network operations management.
- Networking Equipment and Services industry includes companies primarily engaged in manufacturing and distribution of networking and communications equipment for transporting data, voice, and video traffic across intranets, extranets, and the Internet. The key products include routers and switches for local and wide-area networks, cable modems, teleconferencing equipment, and wireless access points.
- Internet industry includes Internet-based businesses providing products and services such as search engines, social networking, web hosting, email, domain name registration, and eCommerce. It also includes industry information/services portals focused on different sectors such as Financials, Automotive, Travel, Health, Real Estate, Media, and Publishing.
- Other industry includes companies providing products such as photocopiers, fax machines, point of sale machines, audio/video technologies, and video games. It also includes technology companies that are not part of other six technology industries.
Industry Ranking of Apple
With $215.6 billion revenues, Apple ranked number 1 of all the companies in the US Computers Systems and Peripherals industry. There were a total of 20 public companies in the US Computers Systems and Peripherals industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Computers Systems and Peripherals industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.