End of Degree Project

Degree in Business Administration and Management

Course 2014/2015
STRATEGIC ANALYSIS OF THE COMPANY
APPLE INC.

Author

Josué Vasquez Marquez

Faculty of Economics and Business

Year: 2015
 INDEX
t
on w
e. INTRODUCTION................................................. .................................................. o
t
tw w
o. METHODOLOGY ................................................. .................................................. o
3. HISTORY................................................. .................................................. ............ 4
Fo
ur. CURRENT SITUATION (2014) ............................................. .................................. 7
5. MISSION................................................. .................................................. ............... 13
6. VIEW .................................................. .................................................. ............... 13
7. CORPORATE VALUES................................................ ............................ 14
8. CORPORATE SOCIAL RESPONSIBILITY ........................................... 16
8.1. Employee training ............................................... .................................. 17
8.2. Jobs and Human Rights .............................................. ............................ 18
8.3. Health and security ............................................... .............................................. 18
8.4. Environment ................................................ ............................................... 19
tw
en
8.4.1. Improvements in environmental responsibility ........................................ ty
tw
en
ty-
on
9. ANALYSIS OF THE COMPANY'S ENVIRONMENT ............................................ .. e
The general
9.1. environment ............................................... ............................................. 22
9.1.1. PEST Analysis ................................................ ........................................... 22
9.2. THE SPECIFIC ENVIRONMENT ............................................... .......................... 36
9.2.1. Analysis of PORTER's 5 forces ........................................... ........... 36
10. ANALYSIS OF RESOURCES AND CAPACITIES .................................. 46
10.1. Tangibles ................................................. .................................................. ....... 47
10.1.1. Financial ................................................. ........................................... 47
10.1.2. Physical ................................................. .................................................. 48
10.2. Intangibles ................................................. .................................................. ..... 48
10.2.1. Technological ................................................. ........................................ 48
10.2.2. Reputation ................................................. ........................................... 49
fif
10.3. Humans ................................................. .................................................. ....... ty
ele
ve
n. STRATEGY................................................. .................................................. 51
12. CONCLUSION ................................................. ................................................. 54
13. BIBLIOGRAPHY ................................................. .............................................. 57

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 1. INTRODUCTION
The reason I chose Apple Inc as a Final Degree Project was because it is one of the
most valuable brands in the world. Its valuation is approximately $ 124.2 billion
according to Forbes in 2014. In addition, it has been recognized as the brand with the
highest growth in terms of value.

In this work, it is intended to make a strategic analysis of Apple Inc, in order to

discover the organization. That is, to be able to study and have knowledge of your data
regarding the evolution of both internal and external factors that may affect the
organization.

Knowing their environment is essential to know how they achieve their goals and
how they do it. It is also intended to know how they have reached their current situation
and the position they occupy in the market. For this, it is necessary to study their vision
and mission in order to see where the organization is going and how they make use of
their resources and the management measures that help them to be more competitive
and generate competitive advantage.

On the other hand, it is also intended to see a bit of the political, economic, social
and environmental environment in order to know its threats and opportunities in the
environment in which it competes.

2. METHODOLOGY
Regarding the methodology that has been used to prepare the final degree project, an
investigation about Apple Inc has been used in various types of external sources such as;
books specialized in strategic analysis, information from the organization itself, annual
report of its financial statements for 2014, 2013 and from some entities that are dedicated to
market research in the technology sector.

In general, to prepare the work, use has been made of PDF documents that have been
provided by the same organization (Apple Inc) through its own website, where much of the
information from that source has been used. It has been possible to find a lot of information
about the company as Apple is a large and publicly traded organization, therefore, it is
obliged to provide information on its websitewww.apple.com about the events that happen
to the company, its shareholders and the public

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in general. With this I have been able to obtain useful data for the preparation of my final
degree project, since without being a shareholder of the company I have been able to access
this information without any problem and for free. For example, from the report of its
annual accounts, it has been possible to obtain information on its income and expenses,
main competitors in the market, markets in which it operates, company risks, etc.

On the other hand, there is also information on the relationship it has with its
workers in the different production systems, as well as the relationship it has with its
suppliers and its workers.

It should also be noted that part of the information that has been obtained comes
from web pages specialized in market research, where the reader will clearly be able to
find out, since said data is referenced.

Ultimately, what is intended to show in this project are the results of a strategic
analysis on Apple Inc, where the data shown in this project is clearly contrasted by
entities dedicated to research.

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 3. HISTORY
Apple founders Steve Jobs and Steve Wozniak met while working for Hewlett-
Packard in 1971, when a mutual friend named Bill Fernández presented. The two hit it off
early and began working together on some projects. Later, Jobs joined the company"Atari"
as a game designer, and it was there that he met Ron Wayne, who would be the third
founder of Apple.

Figure 1: Steve Wozniak and Steve

In 1974, Jobs was part of Wozniak's club called Jobs

"Homebrew Computer Club", which was made up

of an informal group of electronics students, most of
whom had an electronic engineering or computer
programming background. Once inside, Jobs proposed
to Wozniak that they work together on creating a
computer
that is more affordable than the Altair 8800 (the first personal computer appreciated in
1975) and it was Steve Jobs himself who felt it was worth marketing.

Wozniak and Jobs were characters who had no passion for college and university
studies, so they both dropped out of college to enter the world of computers and electronics.
Later, in early 1976, Wozniak and Jobs considered starting a business. To do this, Jobs sold
his van and Wozniak sold an HP-65 scientific calculator for some money. Both established
their facilities in the Steve Jobs family garage, which was located at 2066 Crist Drive, Los
Altos-California, to start the manufacturing of computers.

In 1976, the company was founded under the name of “Apple Computer Inc”, by
Steve Wozniak (25 years old), Steve Jobs (21 years old) and Ron Wayne (41 years old),
who eleven days later resigned, selling their shares for $ 80, as he feared that the
customer would not pay for the 50 computers that had been delivered on account.
Figure 2: Apple I (1976)
The computer "Apple I", back then,it could be purchased
from computer product stores or by mail order. Apple I, was a
computer that was aimed at all lovers of digital electronics and
was composed of a circuit board

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with welded components and in addition, a monitor and keyboard had to be added, as
well as a wooden box in which the equipment could be installed.
Figure 3: Apple II (1977)
In 1977, Apple released an improved version of personal
computer, in order to correct some errors and add some additional
capabilities such as; produce color graphics and sound. The
computer case was also designed, the keyboard was included,
outputs were added to be able to use the television as
monitor, as well as an output for a tape recorder where programs could be saved.

In the early 1980s, Steve Jobs and his group of engineers

Figure 4: Apple Lisa
began to develop the “Apple Lisa ”. It was an improved
computer that allowed him to use images and other objects
graphics, providing a simple visual environment and allowing communication with the
computer's operating system.

In 1983, the board of directors was demoted and Steve Jobs, who owned only 11
percent of Apple's shares, was reassigned to another project because they believed him
incapable of properly managing the Apple II project. So, Jobs saw this reorganization as
an opportunity to change his focus on the design and features of his next original
idea,"The Macintosh."

Following the success of the Apple I and Apple II, the company began work on the
Apple III, which turned out to be its first failure as a project, as bad design decisions had
been made, and the computer overheated and it lacked a fan.

In 1984, Apple launched a new computer

"The Macintosh ”,with improvements to the Figure 5: Macintosh (1984)

graphical user interface. In these improvements

a desktop, mouse, file system graph, icons,
bitmap graphics, navigation bar menu,
applications that run within windows, and more. The Macintosh laid the foundation for
the entire computer industry, and the true look and feel of

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Today's personal computers can be attributed to the early design features of the
Macintosh.

Steve Jobs resigned from Apple in December 1985, due to constant power struggles
and disagreements with President Sculley and the Board of Directors. After Jobs resigned,
he formed a new company calledNEXT. Inc.

In 1996, the board of directors appointed Gil Amelio to lead the company as CEO,
succeeding Michael Spindler. Like his predecessors, Amelio's reign as “CEO” was
unsuccessful, and he was subsequently replaced by Steve Jobs, with approval from the
board of directors in late 1996. With his innovative vision and strong leadership style,
Jobs made his triumphant return to the company he had co-founded. Days later, on
December 20, 1996, Apple announced its plans to acquire NEXT Sofware, inc. He also
announced the renewal of the Board of Directors and surprised everyone with the
alliance that would be produced withMicrosoft. Consequently, the Apple company
would transfer shares to the Microsoft company in exchange for an amount of $ 150
million, in order for both of them to cross-license their patents and to enter into a final
agreement on the graphical user interface (GUI ) of the Mac OS.

In 2001, a line of digital audio players called iPods was first introduced. HeiPodit
was a good example of Steve Jobs' innovative mastery. The never-before-seen features
of the iPod could be attributed to its user-friendly, sophisticated design, and the ability
to be used on Mac and Windows-based computers. To accompany the iPod, Apple
releasediTunesin April 2003. iTunes sold individual songs through the app for 99 cents
each. These songs could be heard on Mac computers or iPods. Subsequently, Apple
announces theiTunes Music Store, which already had the backing of five major
record labels, and a catalog of more than 200,000 songs. At the beginning of that same
year, the company logo would also be changed, leaving it completely flat and gray.

Between 2003 and 2006, Apple's stock prices rose from $ 6 to more than $ 80 a share.
This huge rise in that period can be attributed to the sales of the iPod itself. In January 2007,
Jobs announced the development of the"IPhone", a

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mobile phone that also acted as an mp3 player, an internet access source, and featured
Apple's unique interface design.

Apple shares soared to an all-time high of $ 97.30 per share, thereby guaranteeing
the company's future in the technology market, which at the time was under the
leadership of Steve Jobs. As a result, Apple once again became the leader in emerging
technologies.

On January 9, 2007, Jobs announced that Apple Computer, Inc. would henceforth
be renamed "Apple Inc." because the company had shifted its emphasis from
computers to mobile electronic devices.

4. CURRENT SITUATION (2014)

What is presented in this section describes in detail the current situation in which
Apple is. Most of the information has been obtained from its annual reports and its
website. In addition, certain information has been graphically represented for better
understanding.

Corporate headquarters
Graph 6: "Cupertino" Central Office
Apple Inc. is an American multinational in
technology, located in Cupertino, California, where
tasks such as: strategic planning, corporate
communications, finance, marketing,
HR, information technology, etc. with the purpose of assuming responsibility for the
global success of the corporation, ensuring its Corporate Governance.

Current Executive Director or "CEO"

Figure 7: Tim Cook
Timothy Donald Cook is the current CEO of Apple, and is
a member of its Board of Directors. Tim Cook became CEO on
August 24, 2011, when Steve Jobs resigned due to health
problems. Prior to his appointment, Tim Cook was responsible
for all of the company's worldwide sales and operations. He
also directed the
division of Macintosh and played a key role in continuous development with strategic
vendors, creating flexibility in response to an increasingly demanding market.

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Industries in which Apple operates Figure 8: Apple technology sector
The company designs, manufactures and
markets mobile communication systems and
electronic devices such as: personal and portable
computers, and digital music players. It also sells
a variety of third-party related software, services,
accessories, network solutions, content, and
digital applications.
Source: self made; Apple inc. (Form 10-K)

On the other hand, its digital content products are sold through different online
stores, and it also markets its electronic products through its physical stores located in
different countries. It also has a direct sales force such as: wholesalers, retailers,
distributors and third parties.

Apple, when marketing its products in the technology sector, both software and
hardware, competes with different industries, which is why the production and design
of its products always have to be innovative and attractive to the public. In this case, as
Apple's sector is very large, we will focus on the “iOS” operating systems industry and
the iPhone or Smartphone, since they are its main source of income.

Geographic areas
Graph 9: Chain of stores or "Apple
covered Store"
Apple, being a well-known multinational
worldwide, has 458 “Apple Store” stores in 16
countries, where the country with the largest
number of stores is the USA, with 265

stores (its main market), followed by Source: Own elaboration of "www.apple.com"

United Kingdom, Canada and Australia. Then we have China and Hong Kong,
with 22 stores, but with a great buying capacity, since it is their second market in the
sale of their products. In addition, it has online stores in 39 countries, which allows you
to

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60
publicize your products and satisfy your customers in countries or places, where there
are no nearby Apple Store stores.

Income
Graph 10: Annual sales (in thousands)

Apple's total sales in 2014 have been

182.795 million dollars, that is, 7% more than
in 2013 (170.910 million dollars).
Apple's increased sales in the Source: Own elaboration of; Apple inc. (Form 10-K)

2014, has been driven to a greater extent by the total sales of the iPhone 6 and iPhone 6
Plus, iPad and Mac. But the increase can be highlighted more by the iPhone 6 and Plus,
although its launch to the market took place in the last four months of 2014.

Benefits
Apple's profits in 2014 were 39.510 million Graph 11: Annual profits (in thousands)

dollars, that is, 6.68% more than in 2013, but

compared to 2012 it has fallen by 5.33%. The
increase in sales is due to a greater extent to the
great acceptance
Source: Own elaboration of; Apple inc. (Form 10-K)
of smartphone models "IPhone 6 and iPhone
6 Plus" that it had after its market launch in September 2014.
On the other hand, it can be noted that Apple's benefits come from its main markets
such as: USA, EU and Greater China, where the turnover made in Greater China is
almost as large as that of the European market.

Employees
The number of employees in 2014 was Graph 12: Number of employees

97,000, of which 92,600 were on permanent

contracts and 4,400 were temporary. Compared
to 2013, the number of workers with permanent
contracts has increased by 15.75% and
the temporary ones in 7.32%. On the other hand,
Source: Own elaboration of; Apple inc. (Form 10-K)
the number of people working in Apple stores has increased by 7.94% compared to
2013.

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 In the USA, the total number of jobs, both directly and indirectly, is
approximately 514,000; where 304,000 are jobs directly related to the development or
support of their products, and 210,000 are jobs dedicated to the development of
programs for “iOS” mobile devices. The number of people directly hired by Apple is
approximately 50,000.
Regarding Europe, it can be noted that the number of jobs it has generated is
approximately 671,500 both direct and indirect, since it works with different
developers and technology providers. Where 530,000 jobs are attributable to its iOS
operating system, 123,200 are jobs created in other European companies indirectly,
and 18,300 work directly for Apple. In the 107 Apple Store that it has in Europe, it
has an average of 100 workers.
Main competitors
The markets for Apple's products and services in the
Graph 13: Competition
electronic equipment industry are very competitive, as it is
facing aggressive competition in all areas of its business.
The market is characterized by frequent product
introduction, and rapid technological advancement. These two
factors are substantially increasing the capacity and use of
communication media, mobile phones, personal computers
and other electronic devices.
Apple's competitors selling mobile devices and personal
Source: self made
computers based on another operating system have aggressive
low prices and low margins to gain or maintain market share.
Apple compared to its competitors in the smartphone sector in the fourth quarter
of 2014, has managed to obtain a market share of 19.7% worldwide, with Samsung
being its main competitor, with a market share of a 19.9%. But in Apple's main
market (USA), its market share is 41.6%, with Samsung with a market share of
26.7%.

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 On the other hand, in the operating systems sector, Apple has achieved a market
share in the fourth quarter of 2014 of 19.7% worldwide, and its main competitor
Android has a market share of 76.6%. Regarding its main market (USA), it has a
41.6% share and Android 51.7% (DAZEINFO, 2014).

Sales by product line

Graph 14: Sales by product line (2014)
The product line with the highest sales
in 2014 was the iPhone with 56% of total
sales. That is, a total of 169,219 units have
been sold, having an increase of 13% in
production and 12% in sales compared to
2013.
On the other hand, it can be noted that Source: Apple inc. (Form 10-K)

Product lines such as the iPad and the iPod have had a decrease of 5% and 48% in
sales, having produced 67,977 units of iPad and 14,377 units of iPod.
Sales in iTunes, software and services, have achieved a greater increase in sales
compared to 2013, with 13%, and accessories an increase of 7%.
Net sales by operating segment
In 2014, 64% of Apple's sales were
Graph 15: Proportion of sales by segment
made outside the American continent, with
Europe (22%) and Greater China (16%)
being the segments with the highest sales
worldwide.
The segment with the highest growth in
2014 was Greater China with 17%
compared to 2013, followed by Europe and
Japan Source: Apple inc. (Form 10-K)

with 8% and 11%. In America, annual growth has been 4% and in Asia-Pacific, -7%.
The Americas segment includes both North America and South America. The
Europe segment comprises the European countries, India, the Middle East and Africa.
The Greater China segment includes China, Hong Kong, and Taiwan. The Rest of
Asia-Pacific segment includes Australia and Asia with the exception of countries
included in

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 other segments. Each operating segment offers similar hardware and software
products as well as similar services.

The analysis of the current situation and of work in general, will focus especially
on the sector of smartphones and Apple operating systems (iPhone and iOS).
Information on its other products will also be given, but no market comparisons will be
made in its other sectors.

According to the information obtained regarding the current situation of Apple, it

can be noted that the current CEO Timothy Donald Cook is leading the organization in
a great way, since the results of Apple are seen since Steve Job will retire for reasons of
Health.

The industry in which Apple operates is getting bigger, as a lot is invested in

innovating products and making them attractive to the public. A clear example are
smartphones and the constant improvements in their operating systems, both on the iPhone
and on their other devices. For example, in 2014, Apple launched the new iPhone 6 and
iPhone 6 Plus, and the company also announced a new product "the apple watch”Which
would go on sale on April 24, 2015. As a result, it also launches a new service application
"Apple Pay". In other words, iPhones, Apple Watch and Apple Pay are related, because
Apple Pay and Apple Watch are a service and a device that work or need the iPhone. That is
why the iPhone has become Apple's engine. And apparently, all the initiatives of the
company are destined to increase its sales, through improvements in its value as a product,
and its way of making them more attractive to the user.

On the other hand, the turnover that has been had in 2014 compared to previous
years is increasing. This can be noticed, because the number of "Apple Store" stores are
increasing around the world. In addition, developing markets such as Greater China
have a large share of purchased products relative to Apple's sales (the purchase ratio of
Apple products is as equal to the European market). It should also be noted that growth
in that market in 2014 compared to 2013 was 17% (much more than in other markets).

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 According to data shared by the current CEO “Tim Cook” on growth in China, it is
expected that by 2016 the presence in that market will double. They currently have 19
“Apple Store” stores and a presence through their online stores in 350 cities.

5. MISSION
The mission of a company determines what its work or activity is in the market and
the target audience. The purpose is to guide the decisions and actions of all members of
the company so that objectives, strategies and execution of tasks can be established to
achieve greater coherence and organization.

Apple's mission focuses on two factors: "good products and experience."

That is, they are committed to making the best products in the world, with the
purpose of enriching people's lives and providing the best personal computing
experience to students, teachers, professionals and users around the world, in
the use of computers, electronic devices and mobile communications through
its innovative hardware, software and internet that it offers.(Farfan, 2014)

6. VISION
The vision is intended to define the goals to be achieved in a certain period of time
in the future, and in this way to promote the commitment and enthusiasm of all the parts
that make up the organization.

In a video conference involving CEO Tim Cook and Apple investors, an

unavoidable question was asked about how the company could function without Steve
Jobs, with Tim Cook saying the following (Lashinsky, 2009):

“We believe that we are on the face of the earth to make great products and that this is
not going to change. We are constantly focusing on innovation. We believe in the simple,
not the complex. We believe that we have to own and control the major technologies
behind the products we make, and only participate in markets where we can make a
significant contribution. We believe in saying no to thousands of projects, so we can really
focus on the few that are

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truly important and meaningful to us. We believe in deep collaboration and cross-
pollination of our groups, allowing us to innovate in ways that others cannot. And
frankly, we don't settle for anything less than excellence in every group in the
company, and we have the self-honesty to admit when we're wrong and the courage to
change. And I think that regardless of who I work for, the values are so ingrained in the
company that Apple is going to do extremely well. "

This mission lets us know that the current CEO of Apple "Tim Cook" is leading the
organization, just as Steve Job would have done, since he is an eloquent, constant and
passionate person for doing things well and obtaining good results.

7. CORPORATE VALUES
Apple's values are the qualities, customs, standards and principles that the company
believes in and that will help its employees succeed. Employees are the basis for what is
done in the company, therefore, all the values together, make Apple unique. The following
values are those that govern Apple's conduct.
Figure 16: Apple corporate values

Source: Own elaboration with data from www.apple.com

The information obtained in this section has been the collection of data from the internet
and Apple's website. And according to this information, the following corporate values
have been drawn up:

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Empathy with customers or users
Products and services are offered
superior quality, providing value
durable to the customer. In addition, they take
care of
meet the real needs of
users / clients, solving their your customers or users worldwide.
problems, and do not compromise your ethics or On the other hand, they accept the risks
inherent in following your vision and
integrity in the name of profit. working
Team spirit
Teamwork is important to
the success of Apple as they manage to work
with greater decision-making capacities and
management, exchange ideas, and carry out
suggestions to improve efficiency and
Apple quality of life.
Quality / excellence
Apple puts the best in its products
quality, that is, both in design and in
performance that their workers put to
time to design or manufacture a product. Is
quality or excellence is the result of constant
innovations, which generates for the public
a very high value and respect for
Apple products.
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Innovation and vision
The company has a strong
organizational structure in innovation, is
therefore, they always try to offer
innovative and necessary products for
in products that are leaders in the
market.
Individual reward
Apple recognizes the contribution
that each person performs. It is because of
that
the organization gives back to its
workers with economic benefits
derived from the performance of the
company.
On the other hand, it is also rewarded from
emotional form as retributive, with
the goal of creating a good environment
labor.
Social contribution
Apple creates products that extend and
enhance human capacity, helping
people to improve their performance.
But beyond that, they hope to make
this world, a better place for
people, with the use of their
technology.
As a corporation, Apple aims to
be an economic, intellectual and
social in the communities where it operates.
 Good management
Good management allows the organization to find problems that are affecting its
performance, performance, etc. But above all, it is in charge of making the most of its
resources to maximize its profits and reduce its costs, without interfering with the
quality of the products. On the other hand, the attitudes and behaviors of managers
towards their workers are of vital importance, since they must be able to generate
trust, with the aim of creating a productive environment where Apple's values
flourish.

8. CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility, are those legal or ethical commitments that the
company assumes in managing the impact that its activity generates on its stakeholders;
clients, employees, supplier shareholders, citizens in general, etc. That is, to generate an
identity and coordinate said image around that identity. Next, the important
characteristics of Apple's corporate society are revealed in graph 17.

Graph 17: Apple Corporate Social Responsibility

Source: Own elaboration with data from www.apple.com

The information obtained from this section has been prepared according to the
progress reports of 2015 compared to 2014, of responsibility of the suppliers in Apple.
("Apple" CSR Report, 2015)

In my opinion, both at Apple and its technology providers, there is a deep-rooted

concern for social welfare, where it is intended to make improvements in human rights and
equality, environmental protection and education.

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 Here are some very important aspects of Apple's supplier social responsibility.

8.1. Employee training

Apple wants its employees to be trained and qualified for good job performance.
That is why Apple needs its workers to show initiative, assuming and completing tasks
with greater knowledge. To do this, Apple offers education programs that help workers
gain the skills they need, to advance within the organization or to transition to a new
job. Apple also helps workers understand their rights, and makes sure there are different
avenues to speak up if their rights are being violated. Here are some advances regarding
training at Apple.

• 2.3 million workers have been trained on their rights within the
company in 2014, and more than 6.2 million since 2007. He The reason for this
training is to make employees in all its supply chains understand Apple's code of conduct,
local laws and health and safety regulations, and be treated with dignity and respect, to work
in a fair environment and ethical.
• A new app for a new mobile iPad education program has been
launched at ten facilities. That is, they go from the traditional classroom to another
learning system, where each uses iPad devices with the latest educational applications in
cafeteria-type establishments, which promote a more informal and collaborative learning
environment.
• Apple has expanded the education and development program
for its employees, having in 2014, more than 379,000 participants and more
than 861,000 in total since 2008. Investments of millions of dollars to equip its facilities
with computers, educational software and video conferencing capabilities to help workers
acquire the skills they need to improve their potential. They have also partnered with local
universities to give workers access to education programs.

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 8.2. Jobs and human rights
At Apple, it is trying to eliminate unethical hiring and excessive working hours in all
its supply chains, since in many of the companies that supply it with materials, (tin,
tantalum, tungsten and gold) the workers do great efforts and there is a need to improve
their working conditions. Some highlights of labor and human rights are described below:

• Ethical implementations in hiring practices. Apple has an

unacceptable behavior regarding the hiring by its intermediaries of: students, minors and non-
legal foreign workers, since, by participating with our commercial teams and suppliers, it is
intended to implement fair hiring practices.
• Limit excessive work hours. Apple is limiting 60-hour workweeks,
except in unusual circumstances with at least one mandatory day of rest every seven days,
and all hours must be strictly voluntary.
• End underage work. Apple, when working with Many providers, you
have to verify that you do not work with minors, otherwise, the minor's work is immediately
terminated. In 2014, only 16 cases of minors were discovered in six facilities and all were
successfully remedied. But what is sought is that these types of acts are eliminated in their
entirety from the supply chain.

8.3. Health and security

Apple believes that security should never be compromised. So you are
collaborating with suppliers and working correctly, to make sure that the facilities and
production processes are within the norms. And to help build a more efficient
management process, mid-level managers are enrolling in the Apple Supplier
Environment, Health and Safety (EHS) academy. Most important aspects to highlight in
the evolution of health and safety:

• Educate managers to maintain a better work environment. The

Providers have reacted positively to the (EHS) program as far more managers have been
dispatched than required to attend the Academy. In the

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 2014, 392 more participants were recruited into the program, which currently
amounts to 632 registered managers
• Strengthening prevention in emergencies. It's fundamental
Providers know how to respond to an emergency, be it accidents or natural disasters.
Therefore, Apple works to develop emergency management systems and develop actions for
vendor safety protocols.
• Identification and elimination of risks. Apple strives to identify
Possible problems in suppliers' factories before they cause problems. You work with
engineering and operations teams to anticipate any concerns that may affect workers and the
environment during or after production.
• Monitoring of environmental, health and safety issues. The Apple
employees from the operations and engineering departments work on-site daily to support the
operations of the production facilities of most of its major suppliers.

8.4. Environment
Apple cares that its suppliers around the world have environmentally responsible
manufacturing processes. In this way, it helps to make its facilities more efficient and
focused on conserving the planet's own resources. Here are some improvements
regarding the environment.

• The implementation of ecological and rational practices. The

Suppliers must respect strict environmental standards, above what is required by local law
regarding hazardous waste, sewage, rainwater, noise, and emissions to the atmosphere.
• Educate managers to solve labor problems. Apple in 2013
partnered with various universities to launch the EHS academy. The academy is one of the
most comprehensive environmental education and training programs in the industry, helping
mid-level managers in supply chains proactively resolve issues in their workplace.

Page 19 of 60
• Keep the water clean. Through Apple's Clean Water Program It is
intended to implement or identify measures to reduce the consumption of fresh water. That is,
working with your suppliers to improve and develop their capacity for wastewater
management.

8.4.1. Improvements in environmental responsibility

At Apple, steps have been taken to solve some problems that affect the planet. That
is why it is believed in the importance of the environment. (Apple Inc., 2015). Here are
some important improvements made at Apple.

• Means have been created to use energy and materials more efficiently in
their manufacturing facilities. In other words, obtain energy from clean sources, and
manufacture more efficient electronic products throughout the world.
• All Apple data centers are powered by 100% renewable energy sources, in
which the results in the emission of greenhouse gases are zero. These energy sources include
solar, wind and geothermal energy.
• New buildings are being designed and existing ones are being upgraded for
low power utilization. Since 2013, they have already converted 73% of the energy for all
their facilities, 86% for their corporate campuses and 100% for their data centers. And in
2014, more than 140 of its retail stores in the United States have been supplied with
renewable energy.
• Data centers run services like Siri, iTunes Store, the App Store, Maps, and
iMessage. So, every time a song is downloaded from iTunes, an application (app) is installed
from the Mac App Store, or when a book is downloaded from iBook, the energy that Apple
uses comes from nature. And the energy savings go beyond the data centers themselves,
because there are no physical materials to manufacture, package or transport.
• On the other hand, the alternative travel program for Apple employees,
provided more than one million trips and helped avoid greenhouse gas emissions equivalent
to taking more than 15,000 vehicles off the road.

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• Since 2008, Apple products have significantly reduced their average power
consumption by 57%. And each of Apple's products exceed the strict energy-saving standards
established byENERGY
STAR.
• Apple has led the industry in removing many toxins from its products, such
as PVC, brominated flame retardants, and phthalates. More than 191 million kilos of
electronic waste have also been recycled. In fact, all Apple stores take back their products
under their policies, and they also have a responsible way of recycling.

9. ANALYSIS OF THE COMPANY'S ENVIRONMENT

A deep knowledge of the competitive environment is a fundamental element of
your success strategy, since all factors external to the company have or may have an
impact on your results. This is due to two fundamental reasons:

1. The company has no control over environmental factors.

2. Only some factors are considered strategic for the company, that is, those that have
a relevant impact on its results.

The delimitation of its environment will allow us to know what is the scope of
action in which the company operates, how it influences the activities it carries out and
how it interacts with the factors derived from it.

The types of environment that will be analyzed in the company are: "General and
Specific". To evaluate the relevant factors of the general environment of the company, it
will be done through a “PEST analysis ", and to evaluate the relevant factors of the
specific environment, the “Porter's Five Forces Analysis”.

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 Figure 19: General and Specific Apple Environment

Source: self made

9.1. The general environment

The general environment of the company is formed by all the external factors that
influence its decisions and results. That is why it is vitally important to get some kind of
scheme or model that serves to organize the information. For example, the influence
that may be had on political, economic, social and technological factors; "PEST
analysis." These factors can be critical determinants of the threats and opportunities
your business faces in the future. In addition, the key issue is that these factors of the
general environment of the company are important because of their effects on the
specific environment, since they affect the demand of the company, its costs and the
competitive position of the company with respect to to their rivals. This is followed by
the Apple PEST analysis.

9.1.1. PEST analysis

The PEST analysis is a simple and widely used tool in the analysis of external
factors. That is why it will allow us to analyze political, economic, socio-cultural and
technological factors in the company environment. This will help you to understand the
picture of forces of change to which you are exposed, and from there, to take advantage
of the opportunities that arise. The PEST analysis will focus on obtaining information
specifically on the countries where Apple operates, that is, developed and developing
countries. Furthermore, all the information obtained in this section is from 2013 and
2014.

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 9.1.1.1. Political - Legal Factors
Apple is a multinational that has its corporate headquarters in the United States. In
addition, it sells its products and has suppliers in many countries worldwide, therefore,
it can be affected by the political stability of each of those countries. Next, some
problems of political stability that can be reflected in factors such as: political risk,
national and international legislation and regulation of financial markets will be
explained.

Political risk
According to the Political Risk Map Graph 20: Political risk map
of 2015 published by Marsh (world
leader in insurance brokerage and
risk management), the increase in
political violence, separatist
movements, together with the fall in
the prices of raw materials, make
political risks are worsening and
generate greater Source: elcomercio.es (2014)

challenges for foreign direct investment.

According to Marsh, there are 17 countries out of a total of 197, which have
experienced an increase in the level of political risks, of which 9 of them are located
in the Middle East and North Africa. However, there are other countries that have
presented improvements in their political risks and have generated great opportunities
for investments by multinationals in countries such as: China, India and Indonesia.
This has been possible thanks to the positive governmental and economic reforms
that have been carried out in these countries.
On the other hand, the fall in oil prices in countries that depend on crude oil may
benefit importing countries and the world economy in general, but a very long period
could affect oil exporting countries, so they would have a increased political risk if
oil prices continue to decline.
Finally, for the next few years, it is warned that it will be crucial for political risks,
since presidential elections will be held in France, Germany and Hong Kong, as well as
in the USA in 2017. On the other hand, there is the possibility that

Page 23 of 60
 hold a referendum on the UK's membership of the European Union. Therefore, it is
important that multinationals like Apple are prepared for the risks that affect these
countries and that they have strategic plans to ensure their interests.
National and international legislation
The company is taxed in the United States and numerous foreign jurisdictions such as
Ireland, which is where its subsidiaries are organized. Due to economic and political
conditions, tax rates in various jurisdictions may be subject to significant changes. The
future tax rates of the company could be affected by changes in income from different
countries with their particular tax rate, changes in the valuation of deferred tax assets, and
liabilities or changes in tax laws or their interruption.

Regulation of financial markets

The company is exposed to fluctuations in the market values of its investment
portfolio, and to credit risk. This is due to the global nature of its business and the
national and international investments it owns. Additionally, credit ratings and
investment prices may be adversely affected by liquidity, credit impairment, financial
performance, economic risk, political risk, sovereign risk, or other factors that harm you.

9.1.1.2. Economic factors

The analysis of economic factors will allow the company to obtain knowledge
about the economy in which it operates, and how it can influence it. For this reason, it is
essential to study both national and international economic factors (especially in
developed and developing economies). Some economic factors considered most
relevant to Apple are explained below.

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 Economic cycle
According to the graph made by the Graph 21: Economic Cycle of Developed Countries
manager Carmignac, it can be seen that many
of the large economies are in different
economic cycles. Economies like the USA are
in an acceleration phase of their economic
cycle, the Euro Zone, Japan, Mexico and even
closer, Korea and Taiwan are getting closer
and closer to the stabilization of their Source: CARMIGNAC (2014)

economies.
On the other hand, China is in a phase of slowdown in its economy due to multiple
imbalances that arose from the 2008 crisis; however, it has great liquidity both in its
central bank and in the balance of commercial banks. Therefore, this economy is less
vulnerable than others to the liquidity contraction.
Finally, countries like: India, Brazil and Russia are in a situation in which they are
going to generate growth again, however, economies like Indonesia, Turkey and
Thailand are in a situation of economic decline. (CARMIGNAC, 2014)

Level of development
According to the United Nations
Development Program, the countries
with the highest levels of development in Graph 22: Level of human development (2014)

2014 are located in the following places:

America (Canada, the United States,
Chile, Cuba, Argentina), Europe (the
EU), Asia ( Singapore, Hong Kong,
South Korea, Japan, Israel, etc.)
Oceania(Australia, New Zealand). All of these countries have reached a prosperous
Source: United Nations Development
economic state through the employment
and exploitation of their natural and human resources. Furthermore, they have high
concentrations of capital and technology and a very high standard of living.

Page 25 of 60
 In these developed countries, per capita income levels are very high, that is, each
of them has an income of more than $ 10,000 per year, and the number of people
living in poverty is very low. Furthermore, the purchasing power of these countries is
very high; Among them we can highlight China in the first place, followed by the
USA and in third place a country with little development but with a high level of
purchase such as India, followed by Japan and Germany.
Finally, the capacity to use ICT in developed countries is very high, since it allows
them to generate economic growth, promote innovation and improve the well-being
of their citizens. (WIKIPEDIA, 2014)
Wages
Of agreement to the Graph 23: Minimum Wages "July 2014"

statistical results performed

by Eurostat, the
minimum remuneration
established by the member
governments of the EU,
candidate countries and the Source: Eurostat

USA are the

that appear in graph 22 and are grouped into three categories that are related to their
minimum wage level. These salaries are represented monthly and without deduction of
income tax and social security contributions. As shown in graph 22, the member
countries of the EU have a minimum interprofessional wage that ranges from € 174 in
Bulgaria to € 1921 in Luxembourg. However, it should be noted that the candidate
countries to the EU are affected by the exchange rate, since in the graph the salary is
represented in euros.
One fact that must be taken into account is that the countries in group one have low
wages compared to the others, but their price levels are relatively lower. On the other
hand, countries in group 3 with high wages have relatively higher prices than group one.
These price differences between the groups soften the wage differences between
countries somewhat. (EUROSTAT, 2015)
Regarding other countries with medium and high levels of development that are
not represented graphically, their minimum interprofessional wages are: China
(approximately € 217), Japan (€ 1,148), Australia (€ 2,094), New Zealand (€ 1,479),
Korea del Sur (€ 781), Canada (€ 1,338). (EXPANSION, 2015)

Page 26 of 60
 Unemployment rates
According to the graph and the Graph 24: Unemployment rate by country "2013"
information obtained from the International
Labor Organization, countries with stronger
colors show a higher unemployment rate and
lighter colors, a lower unemployment rate. It
can be seen that the countries with the highest
percentage of unemployment in 2013 are
located in Europe, Africa and the Middle
Source: ILO
East.
The EU member countries with the highest levels of unemployment are: Greece
(27.3%), Spain (26.63%), Portugal (16.49%), Ireland (13.1%), Italy (12.24 %) etc.
And in the other developed countries, their unemployment rates are not as high, since
they have not had problems of economic imbalances as strong as in some of the
member countries of the EU.
Since the economic crisis in 2007, many countries worldwide have had a weak
recovery of their economies, therefore, the growth of employment in these countries
has been weak. It can also be noted that unemployment continues to increase
especially for the youngest and, in addition, another large number of workers are out
of the labor market.
On the other hand, the trend of employment is decreasing, because many sectors
invest and obtain more profits in the asset market and not in the real economy,
therefore, it damages the creation of employment in the long term.
Finally, in many developing economies, informal employment is increasing and
leading to decreases in job quality improvements. This means that the number of
workers emerging from poverty is decreasing (ILO, 2014).

Page 27 of 60
 9.1.1.3. Social factors
This factor is important to Apple, because it gives it information on the different
cultural characteristics and behavior of social groups in different parts of the world. Its
importance lies in the fact that Apple sells and manufactures components of its products
in different countries and it is necessary to have knowledge of the social situation in
which developed or developing economies find themselves. That is why an analysis of
some important factors for Apple will be carried out, such as: Income distribution,
Human capital, Migratory movements and Demographic evolution.
Distribution of income
According to the World Bank, to
analyze income distribution, the Gini Figure 25: World map of the Gini Index (2010)

Index has been taken into account,

where income inequality in different
countries is measured. The index is
measured in the interval [0,1], with zero
being a perfect income distribution and
the closest it is to one, an unequal
distribution.
Graph 24 can be seen as the countries with the lowest income inequality and the
highest balanced wealth (<0.30) are located in the northern countries
(Finland, Sweden, Norway, Source: World Bank

Denmark, Japan) and in the south Australia stands out. On the other hand, countries
such as the US, China, Canada, New Zealand, most of the EU countries, India and a
few countries in South America are below 0.5 of the Gini Index.
Regarding the last indicator relative to 2012, in Europe one of the countries with
the highest wealth inequality has been Latvia (0.357), followed by Spain (0.35) and
Greece (0.343), with the EU average being 0 ,3.
China, in relation to the other countries, presents a high level of social differences
since the population level in that country is very high. That is why the distribution of
income is not equitable and the differences in wages between cities are very high.
(Ofronterad, 2014)

Page 28 of 60
 With this information it can be said that the countries with the highest level of
development are generally the ones with the best social welfare index, and their
wealth is better distributed.

Human capital
According to the UNESCO Figure 26: Literacy level (2013)
Human Development report, it tells us
that countries with higher levels of
development have higher human
capital, as well as greater knowledge
of technologies. That is, the capital
increase Source: UNESCO

Human determines the level of development of a society and encourages the

entrepreneurial and innovative spirit of a given country. The best trained individuals
will make a difference in knowledge possessed and, therefore, the information
necessary for the research and development processes to lead to relevant and positive
results.
On the other hand, companies that use workers with high human capital will be
better able to carry out innovative projects in their R&D departments. They will also
obtain their own technology that will constitute a determining element for their
success and will condition the growth of companies and the economy in general.
Finally, in most OECD countries, people with a higher level of training have a
higher employment rate, while those with a lower level of qualification have a higher
risk of unemployment.
In this way, the increase in human capital will condition people in their public
life, reduce the level of corruption, fight against illegal activities and respect the laws.

Page 29 of 60
 Migration movements
Migratory movements generally Graph 27: Qualified migratory movement
occur in the more developed and
developing countries. The fact of this
event is that there is an important
difference in the remuneration of
workers in developed countries
compared to less developed ones.
Source: International Migration Policies
It also lies in the fact that the more
developed countries present, in some cases, a deficit of personnel with knowledge
related to new research technologies, thus generating the emigration of highly
qualified workers to developed countries. In addition, the movements of these
workers will allow them to obtain better knowledge and experience in the use of new
technologies that they will take with them to their country of origin. In other words,
this event carries with it a very important technological transfer.
As can be seen in graph 27, there is a higher qualified migratory movement ()
between EU countries and the US and between the US and Japan. It can also be
observed that the countries with the highest reception of workers with medium and
low qualifications () are: USA, some EU member countries, Russia, Saudi Arabia,
Canada and Australia. (International Migration Policies, 2014)
Demographic evolution
According to the World Bank, the
population growth rate in the world is
1.2% per year, however, compared to Graph 28: Population growth (2010-2014)

previous years, its growth has

decreased significantly. But much of
this population growth occurs largely
in countries
low-income and to a lesser extent high-income countries. It must also be taken into
account that mortality and birth rates have decreased in countries where
Source: World Bank

Page 30 of 60
 developing and developing, as they may have better medical care and better
medicines to cure diseases. On the other hand, women in developed countries have
greater access to education and jobs, which is why they are forming their families at
an older age, which is generating less childbearing but better care and better health.
In low-income countries, more than a third of the population is around the age of
15, while in high-income countries, less than a fifth is the same age. This means that
in low-income countries they depend on their parents or those who can work, so their
living standards decrease, because the greater the number of people, the greater the
need for food and medical care. (World Bank, 2014)

9.1.1.4. Technological factors

This factor will allow the company to obtain information about the countries that
invest the most in technologies, as well as their technological evolution and current
situation. It will also allow the company to know in which countries there is the greatest
amount of innovation through the creation of patents and, in addition, it will be useful to
know the knowledge of ICT in developed and developing countries. Next we will talk
about R&D spending by country, Patents and ICT.

Public Spending on R&D

According to data obtained from
the OECD, China will become the
country that invests the most in R&D Graph 29: Expenditure on R&D "OECD
Country"
in the world, due to the fact that
advanced economies such as the EU,
the US and Japan
they are carrying out budgetary
restrictions on R&D.
If you look at the graph, the
country that invests the most in R&D
Source: OECD
is still
US ($ 397,000 million) since 2002, but its slope is decreasing, as are the EU countries ($
282,000 million) and Japan ($ 134,000 million), with China ($ 257,000 million), the
country with the highest increase in annual spending in R&D.

Page 31 of 60
 On the other hand, one of the countries with the highest investment in R&D in
2012 was Korea, with 4.36% of its GDP, surpassing Israel with 3.93%. In this way,
China and Korea have become the countries with the highest number of destinations
for scientific brains from the US, in the period from 1996 to 2011.
Regarding the EU, the countries that lag behind in R&D are Portugal and Spain, as
they are still below pre-crisis levels with considerable budget cuts. And in most
OECD countries, 10-20% are financed with public resources. (OECD, 2014)
Patents
According to the World Graph 30: Patent applications in the 10 main offices "2013"

Intellectual Property
Organization in 2013, the
patent applications filed
worldwide, were 2.6 million,
and Source: World Intellectual Property Organization (WIPO)

it rose 9% compared to 2012. The countries with the highest growth in patent
applications were: China, USA, Japan, Korea and the EU. The 5 intellectual property
offices represented 81% of applications worldwide.
As can be seen in the graph, the Chinese Intellectual Property Office (SIPO) was
the one that had the most patent applications, followed by other offices such as the
US (USPTO), Japan (JPO), Korea (KIPO ), Europe (EPO).
On the other hand, around 40% of the applications submitted in 2013 were found
in the offices of low- and middle-income countries such as: Malaysia, South Africa,
Kenya and Nepal. The countries with the highest growth in patent applications were
China and Australia, but in both the source of their growth differs. The
patent applications in China Graph 31: Patent publication quota in 5 sectors

were made mostly by

residents and in Australia for not
residents.
Finally, in figure 31,
you can see that in 2012,
patents issued in the five Source: World Intellectual Property Organization (WIPO)

technological fields (Computational Technology; Electrical Machines, Devices and

Page 32 of 60
Energy; Computing; Digital Communication; Medical Technology) had the highest
publications in the US (37%), where the most published patents were those for
computer technology. In the other countries, what stood out the most were patents for
electrical machines, devices and energy, followed by computer technology. (World
Intellectual, 2014)
ICT development
According to the "manual for the measurement of access and use of ICT by
households and people" made by the International Telecommunications Union (ITU),
it informs us that in 2014 the number of mobile broadband subscriptions ( Mobile
ADSL), reached 2,300 million users, 55% of which were from developing countries.
That is, five times more than in 2008, and in addition, mobile ADSL growth rates are
growing faster in developing countries (26%) than in developed countries (11.5%).
If we look by regions, we can Graph 32: Mobile
ADSL Penetration (2014)

Note that mobile ADSL penetration in Europe is

64%, followed by America with 59%, with a
growth rate of 15%. In itself, all regions are
showing growth, but Africa (19%) stands out
because it has a growth rate of more than
Source: InternationalTelecommunication
Union
40%, that is, more than double the world average.
On the other hand, the number of mobile phone subscriptions worldwide
it resembles more and more, the number of people on the planet. As you can
Graph 33: Mobile phone penetration rate (2014)
see in graph 33, the countries in the process of
development have a penetration of 90%, in
compared to 121% in countries
developed. The growth of phones
mobile phones has reached lower levels at the
worldwide (2.6%), which indicates that the market
is approaching saturation levels.
Source: International Telecommunication Union

The regions of Africa (69%), Asia and the Pacific (89%) are the regions with the
strongest mobile phone subscription growth, but with the lowest penetration rates.

Page 33 of 60
In graph 34 it can be seen that the
internet penetration rate in developed
countries is 78%, being the highest in
 Europe (75%), but the region with the lowest
internet penetration is Africa with 19% . In
Graph 34 Rate of people using the internet by region (2014)

Asia and the Pacific (41%), a third of the

population is connected to the internet.
Globally, 4 billion
of

Source: InternationalTelecommunication
Union

people still do not use the internet and more than 90% of them are from developing
countries. (International Telecommunication Union, 2014)

The PEST analysis has provided external information to the company that will be
necessary to identify and analyze the opportunities it has in developed and developing
markets and, in addition, possible threats with its competitors that arise in the technology
sector. Below is a brief summary of this section.

Opportunity analysis.-.From this analysis it has been observed that markets that
Apple has focused the most on are developed and developing, such as: United States,
Canada, Europe, Singapore, Hong Kong, South Korea, Japan, Israel, Australia, New
Zealand, China, India, Chile, Argentina, Brazil, some Middle East countries, etc. These
countries are the ones with better political stability and lower risk, therefore, investment
opportunities from foreign multinationals such as Apple are adequate. In addition, they
have a high per capita income level, and where their economies are in phases of growth
or stability, thus generating more jobs and income for families. On the other hand,
human capital in these developed or developing economies is high, which provides
greater knowledge and interest in new technologies.

Page 34 of 60
 Threat analysis.- First of all, Apple is a multinational that belongs to the technology
sector and sells high-end products (such as iPhone and iOS) in highly competitive markets
where there are smartphone manufacturers such as: Nokia, Samsung, LG, RIM, Motorola,
Palm, HTC, Sony Ericsson, Philips, HP , ZTE, Huawei, Archos, etc ... and in the operating
systems that power these terminals: Windows, Android, Symbian, Blackberry, Linux and
Palm OS. But Apple's market is exclusive, since its products are aimed at people with high
purchasing power, that is, developed markets. With a lot of competition in the smartphone
sector, developed markets have already almost reached saturation, and it will grow only
moderately in the coming years. The challenge for Apple is trying to find growth in its main
products,

Competition in developing markets is based more on price, product features and

performance rather than product quality and reliability, as there are strong software
vendors and peripheral ecosystems. Apple competes with high-end products, and its
influence in that market is having a good reception, since its sales are increasing and, in
addition, there are forecasts of doubling its stores in China. On the other hand, these
devices are expensive, and their market share in China will probably be reduced, since
its main competitor in operating systems, Android, has an agreement to manufacture
smartphones with other brands that have cheaper devices. The constant growth of
Android market share puts pressure on Apple's iSO, because Android with the help of
Samsung, Huawei, Lenovo and LG, in the sales of their devices, generates a very fast
growth since it is the main operating system for smartphones in developing markets.
This seriously threatens Apple's ecosystem and its revenue.

Page 35 of 60
 9.2. THE SPECIFIC ENVIRONMENT
The specific environment will vary depending on each sector and will depend to a
greater extent on the activity carried out by the company. Therefore, the environment is
usually shared by all companies that work in the same industry and compete with each
other.

The prerequisite for effective analysis of the specific environment is to distinguish the
vital from the merely important. First, for the company to be profitable, it must create value
for customers; therefore, you have previously had to understand what they want. Second, to
create value the company acquires goods and services from its suppliers; therefore, you
must also understand your suppliers and how to establish a business relationship with them.
Third, the ability to generate profitability through value creation depends on the intensity of
competition between companies competing for the same value creation opportunities;
therefore, the company must also know the competition. Next, to assess the factors of the
specific environment, the “PORTER'S FIVE FORCES ANALYSIS” will be used.

9.2.1. Analysis of PORTER's 5 forces

Porter's five forces model considers that the profitability of the sector is determined
by five sources of competitive pressure. These five sources include three sources of
horizontal competition; that from suppliers of substitute products, the threat of new
entrants and established companies. They also include two sources of vertical
competition; the bargaining power of suppliers and buyers. The intensity of each of the
competitive forces is determined by a number of key structural variables as shown in
figure 35, and of which only some of them will be discussed.

Page 36 of 60
 Figure 35: Porter's Five Competitive Forces Model

Source: Own elaboration with internet data

9.2.1.1. Rivalry among industry competitors

Apple faces stiff competition in the market, from companies that have a significant
technical staff, marketing, distribution and other resources, as well as hardware,
software and relationships with digital content providers. In addition, the company faces
significant price competition, with competitors lowering their selling prices and
attempting to imitate the applications and characteristics of competing products or
alternatively, collaborating with each other to offer solutions that are more competitive
than the ones they currently have. currently offer. In this case, the analysis will only
focus on talking about the level of concentration, excess capacity and barriers to exit on
smart mobile phones and operating systems from Apple and competing companies.

Concentration.- Refers to the relative number and size of competitors in a

market. It is normally measured by the “concentration ratio”, that is, the combined
market share of the leading companies. Next we will analyze the concentration of 2
sectors; the smartphone industry and the operating systems industry of Apple's main
competitors.

Page 37 of 60
 Graph 37: Market share of operating systems of
Graph 36: Market share “smart phones” (Q4-2014) "smart phones" (Q4-2014)

Source: Own elaboration with data from “International Data Source: Own elaboration with data from “International Data
Corporation ”(IDC) Corporation ”(IDC)

(JONES, 2014)
= = 0,6264

= = 0.2752

one one one

on

= = 0.2752 = 3.6342 = = 0.2752 = 1.60

Degree of concentration of companies

It can be seen that the degree of In the operating systems sector of
concentration of the sector is not so great, smart mobile phones, you can
since only 2 companies (Samsung and Apple) observe that the degree of concentration is
represent 39.60% of the share of very big. Only “Apple iOS and
market of the entire telephone sector Android ”represent 96.3% of the total
smart phones, in the fourth quarter of the market share of this sector, in
of 2014, and the rest (60%) is distributed the fourth quarter of 2014.
among the other competitors.

Typology of industrial structure

When using the Herfindahl index, According to the Herfindahl index, we

may conclude what
concentration. That is, there is an oligopoly
since the range of H is between (0.2- 0.7),
and according to the defense policy of the
competence of the European Union; is
symmetric competition since companies
largest have a market share
less than 20%. On the other hand, it can be
said
that your price competition may be
exists low says that there is an oligopoly, since the
range of H is in the range (0.2-0.7), and
according to the defense policy of the
competence of the European Union; he
Android operating system used in
smart phones is the dominant one.
Its market share is 76.60% and
iOS of 19.70%, the rest having a
very small market share.
Page 38 of 60
 intense or weak, because it will depend on the
inter-company rivalry.
Rivalry between companies
It is observed that it is medium high, since the In this section it is observed that the
market is a little more distributed. The rivalry is low, given that the market says,
approximately 40% is divided practically by two concentrated in two companies
(Samsung and operating systems: "Android and Apple iOS) and the rest is distributed
in an Apple way." almost proportional.

Excess capacity and exit barriers.- Excess capacity can be cyclical or part of
a structural problem, a consequence of overinvestment and a decline in demand,
therefore, it is interesting to know if there is excess capacity in the market in the sector.
Also with excess capacity, prices can drop a lot, as companies will accept customers at
any price that covers their variable costs, therefore the consequences for profitability
can be disastrous. On the other hand, exit costs are costs associated with the possibility
of leaving the sector. These costs usually occur when the resources are durable and
specialized or when employees have their labor rights highly protected.

In the sector of smart phonesThe competition is very high, since there is a greater
balance between the competitors, but among them Apple and Samsung stand out.
Competition is usually stronger in developed markets than in developing markets. This is
because in developed markets there is a higher level of knowledge of ICT. Also in those
markets, social welfare, education and wages are higher. Therefore, the level of acquisition
of these products is high. But as competition is growing, an excess of smartphone capacity
is beginning to be noticed in those markets, which is leading companies to compete on
prices, and in this way see themselves hurt in their profit margins. That is why many
companies are looking for new developing markets such as China, where to introduce these
products. This is the case with Apple, where it is starting to gain market share and make
huge profits. In addition, Apple has a well-recognized brand value globally,

Page 39 of 60
and excellence in the quality of its products and services, which is what differentiates it
from its competitors.

On the other hand, the Chinese company “Xiaomi” has experienced a tremendous
growth of 205.55% compared to the previous year, going from 1.8% to 5.5% in the third
quarter of 2013 to 2014. Before, their smartphone sales were steady, but now, their
smartphones are in more than 5 countries. This means that sales in China have reached their
maximum growth. Therefore, from this point on, any growth will be determined by its
participation in markets outside of China. For many companies such as Samsung, Huawei
or Coolpad, which cannot compete with the level of differentiation that Apple has, it will be
hard to grow in China, because if Xiaomi grows more, they will lose market share. (JONES,
2014)

Regarding the sector of operating systems, Android and Apple occupy almost the
entire market, with Android being the company with the largest market share (76.6%)
and Apple with 19.7%. In this case, Apple by selling its products with its own operating
systems (iPhone + iOS) generates a differentiation in the market, since the way of
browsing and using its electronic devices is very different than that of its competitors.
On the other hand, Android and other companies such as Samsung, collaborate with
each other to offer products that are more competitive and can all benefit together.

In both sectors, exit barriers are very high, since investment in structures,
employees and relationships with suppliers is very strong. Even if you were getting
negative results, it would be difficult to get out. For example, Apple has approximately
97,000 direct employees and thousands of other indirect employees. It also has
production infrastructures in many countries in Asia, Europe and the USA, therefore,
leaving the technology sector or withdrawing from the market would entail very high
costs.

9.2.1.2. Bargaining power with clients

The company in its sector operates in two kinds of markets: those for productive
factors and those for products. In the productive factor markets, the company buys raw
materials, components, financial resources and labor; in product markets they sell goods
and services to customers (who may be distributors, consumers, or other manufacturers). In
both markets the transaction creates value for buyers and

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sellers. Therefore, the way in which value is distributed in terms of profitability depends
on the economic power of each of them. The bargaining power of a company vis-à-vis
its customers is determined by two sets of factors: buyers' sensitivity to price and
relative bargaining power.

Competition in the main markets of the smartphone sector (iPhone + iOS) is not so
concentrated, because it has its own distribution systems, which, the percentage of
purchase of its buyers is lower and does not represent a higher cost when losing one. In
addition, Apple, by having very different and unique products, has negotiating power
with its buyers, which is why it has the ability to increase the price of its products in the
market. The reasons are explained below:
First, Apple sells most of its products through its 458 “Apple Store” stores,
established in many countries, with the USA being the market with the largest number
of stores (265). On the other hand, it also has an extensive indirect distribution network
that includes third-party wholesale operators (AT&T, Verizon, Sprint, T-Mobile), and
retailers (BestBuy, Amazon, Market place, Wal-Mart, Target, Staples), and other
resellers. In the case of Apple, most of its sales are made through its physical stores and
its online sales system, since its way of selling its products is quality. That is, customer
service and the way to publicize their products, is highly valued by buyers. What Apple
intends is to reduce the indirect distribution system and increase its direct sales system
or improve support to its distributors. In other words,
Secondly, the weight of the cost of
iPhone components and their price is high
when compared to other smart phones on the
market, which generates greater sensitivity in Graph 38: Price of iPhone 6 “Free” (2014)

final buyers than intermediate ones. For

example, the value of
The components of an iPhone 6 cost 227 dollars and 176.7 euros approximately (ABC
TECHNOLOGY, 2014), but Apple sells it for a price of 649 dollars in the USA, that is,
almost 3 times more than it costs to produce itSource: own elaboration with data from Apple
(186% margin on your cost of

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manufacturing). But if we compare it with European markets, the difference is even
higher (296% margin). The price that a consumer will pay for a 16 GB iPhone 6 in
Spain, for example, will be 8% more expensive. It is important to note that the costs do
not include labor, shipping, packaging and transportation. On the other hand, if we
compare the difference between the price and the cost of the previous models, it can be
said that the profit margin has been reduced, since before the difference was 6 times
more than the cost of its components.
In third place, it can be seen that Apple products are really expensive compared
to the competition, but its buyers or users in the high-end smartphone markets have
always known. The price does not prevent them from buying an iPhone, what their
buyers are looking for is the quality of the product, image and brand recognition. That is
why the sensitivity of this type of buyer is lower before an increase in the price.
By last, Apple has a very important image and brand advantage to world level,
where its products (including the iPhone plus iOS) are unique and differentiated from
the competition. This is because Apple products have a good manufacturing design,
image quality, sound, and an operating system (iOS), which makes their products
unique in the market. In this way, users of the product (iPhone) will be less willing to
replace said product with respect to its price.

9.2.1.3. Bargaining power of suppliers

The analysis of the determinants of the relative power between the company in the
sector and its suppliers is analogous to the analysis of the relationships of these supplier
companies and their customers. The key now lies in the ease with which companies in
the sector can choose between the different suppliers of a productive sector and the
relative bargaining power of each party.

This factor cannot be considered as a serious threat for Apple, since there are many
companies that are within the technology sector, therefore, companies tend to be more
elastic with respect to their suppliers. For example, if an alternative supplier wanted to
increase its prices, then the company would probably look to another alternative
supplier, as there are many supplier companies within the industry. In addition, supplier
companies depend

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Mainly from large companies such as Apple, since it has a very large market share, and
generates large sales of electronic devices. That is why the benefits obtained from the
supply of materials necessary for the manufacture of the different Apple products, even
reach the suppliers of Apple's suppliers. This is because the business guarantee for your
clients is a guaranteed business for them.

On the other hand, Apple has an enormous influence on the income of its suppliers,
since Apple's technology purchases from its suppliers represent between 30% to 50% of
the income of the various suppliers it has (VALUE WALK STAFF , 2012). That is,
with a simple order from Apple, you could move the income of the different providers.

It must also be recognized that many supplier companies have some power over
what they are supplying. It is only the fact that these suppliers are supplying unique and
highly differentiated materials that gives you such bargaining power.

9.2.1.4. Threats of substitute products

The price that customers are willing to pay for a product depends, in part, on the
availability of substitute products. The absence of these means that buyers are
comparatively sensitive to price, that is, demand is inelastic with respect to price. The
existence of substitute products means that customers can choose these in response to an
increase in the price of the product, that is, demand is elastic with respect to price.

First, the needs that the iPhone meets will be analyzed. Between them we have:

Communication Favorite calls

Web browsing (emails, Set tones
social networks, etc) Manage contacts
Wi-Fi network availability Use iPhone in another country
Synchronize with iTunes, App Convert Videos
Store, iWatch Favorite calls
Music

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 In the smartphone sector there are many substitute products that can cover the
described needs of an iPhone at a lower price. For example, a simple Samsung phone
could replace an iPhone. In other Apple products, a simple mp3 to an iPod and a
Samsung tablet to an iPad. But it is clear that competing products cannot compete with
Apple, as these substitute products are available in the market and at a lower price.
Some reasons are explained below.

• One reason is that their products are well differentiated, that is, they have brand
value, design, and high social recognition. Therefore, it is clear that it has an advantage over
the substitute products of its competitors.
• Another reason is that competitors cannot compete with Apple, because the
company has achieved economies of scale, allowing it to produce at a lower cost and market
its products better than the competition.
• Finally, the ability of the company to compete successfully depends largely on its
strategy to ensure a continuous introduction of new products and innovative technologies to
the market. The company considers that it is the only one in which its designs and
developments are the solution for its products, which include the hardware, operating system,
numerous applications and related services.

There are many substitute products readily available on the market, but Apple has
done a phenomenal job marketing, advertising, and commercializing its products,
generating a perception of value superior to its competitors in its current customers and
in the marketplace. In other words, Apple has generated greater economic value for its
products than its competitors.

9.2.1.5. Threat of entry of new competitors

If the return on invested capital in the sector is greater than the cost of capital, the
sector will act as a magnet for companies that are outside. Unless there are barriers to entry
for new businesses, the profit rate will drop to the competitive level. In this case, new
competitors cannot enter into the same conditions as established companies. The dimension
of the advantage of those established over the entrants measures the height of the entry
barriers, which determine the extent to which the sector can, in the long term, obtain profits
above the level

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competitive. The main sources of entry barriers that will be analyzed are: investment,
economies of scale, and legal and administrative barriers. Each of them will be
explained below.

Necessary investment.- to enter the sector of smartphones or other Related to

technology, investment is very high, since there is a lot of competition and already
established companies with a high capacity to take an incoming company out of the
market. Only the cost of R&D, advertising, personnel, raw materials, production and
services are very high, so the incorporation of new companies is almost unlikely. On the
other hand, if we focus on operating systems, incoming companies would have a
difficulty, which would be to find a community of developers willing to create
applications for their operating systems. For example, the operating systems of Apple
and Android have a fundamental advantage, which is the possibility of expanding the
functionalities of their smartphones in everything imaginable, thanks to the possibilities
provided by developers who explore all possible fields. Only the advertising spending
made by companies in the technology sector such as: Apple, Samsung and Microsoft,
were 1,200, 3,800 and 2,500 million dollars. And in R&D; 6,000, 13,400 and 10,400
million dollars in 2014. (STRATEGY + BUSINESS, 2014)

Scale economics.-In capital intensive sectors such as telephones intelligent,

large-scale operations are required to obtain lower costs. The problem for those who
want to get in is that they have to choose between going in on a small scale and
suffering high unit costs, or going in on a large scale and running the risk of
underutilized capacity as long as sales volume does not increase.

In this sector, most of the companies try to reduce their costs to obtain better profit
margins. For example, we have Samsung and Apple, which have large, highly
optimized production lines, in which they manufacture large numbers of smartphones
per year. For example, Apple has manufactured in 2014, a total of 169,219 units, which
would be impossible to match this production for an incoming company. Therefore, it is
very difficult for a new company to want to enter the sector. On the other hand, the
main source of economies of scale are the costs of developing a new product, which
implies an investment in R&D, personnel, production systems, etc. very expensive.

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 Administrative and legal barriers.- through these barriers, companies
Established like Apple, they can operate in a highly competitive technology sector,
where innovation is the key to competitive advantage. The innovation is usually
accompanied by patents granted to the innovating company, so that company is the only
one that can use the innovation for a specific period of time. The patents that are filed
not only help protect innovation, but also help recover damages if another company
infringes on them. Therefore, the more patents a company has, the better positioned it
will be in the market, to compete and demand that others make use of its innovation.

This is what happens frequently in the market, and especially in the technology
sector, where devices are made in multiple parts, and the software that uses thousands of
lines of code is already patented by another company. Apple is not immune to this as
well. Although not voluntarily, Apple has also infringed patents of other companies a
few times, and it is very likely that it will do so again, due to the complexity of its
products and because many patents are involved in the design of its hardware and
software. .

To conclude, it can be said that the smartphone sector is highly competitive and
protected with many barriers to entry by companies such as: Samsung, Microsoft,
Google, Apple, Nokia and many other companies in the sector, which have thousands of
related patents. This is why regulatory requirements and security standards often put
new entrants at a disadvantage relative to established companies, as compliance costs
are often higher for new entrants.

10.ANALYSIS OF RESOURCES AND CAPACITIES

The decision between the resources and the capabilities of the company is
important. By resources we understand, the productive assets of the company;
capabilities refer to what the company can do. Resources alone do not generate
competitive advantage: they must work together to create aorganizational capacity;
she is the essence of superior results. Next, figure 39 shows the relationship between
resources, capabilities and competitive advantage.

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 Graph39; relationship between resources, capabilities and competitive advantage

Source: Own elaboration with internet data

To have a more complete vision we will identify the three main types of resources:
tangible, intangible and human. Regarding both internal and external organizational
capabilities that lead to a competitive advantage, they are disclosed in the "Strategy"
section (below).

10.1. Tangible
Tangible resources can be identified and evaluated in the organization's financial
statements. That is, we can value financial resources and physical assets. However, our goal
in resource analysis is not simply to value company assets, but rather to understand their
potential to create competitive advantage. Here are some tangible resources from Apple.

10.1.1. Financial
Apple's revenues grew by 29.4% on average between 2010 and 2014. In the same
period, the company's profits grew by 29.6% each year (Apple Inc., 2014). Therefore, it
is a successful growth when you look at the size of the company and the total revenue
they achieved. These being 182 billion dollars of sales in 2014. Therefore, the revenue
growth and the high profit margin indicate the ability of the company to efficiently
manage its operations.

Good cash flow and large cash reserves are a great additional financial strength for
Apple. The company has obtained an amount of 59.7 billion dollars

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cash from its operations in 2014 (Apple Inc., 2014, p. 49). Apple also has $ 87.152
billion in retained earnings, and $ 29 billion in long-term debt (Apple Inc., 2014, p. 47).

The company's growth, net income, retained earnings, and low debt provide enough
resources to invest in acquisitions, R&D, marketing, and other activities without having
to significantly threaten the company's financial condition.

10.1.2. Physical
The market value of its total fixed assets in 2014 is $ 163.308 billion. Of these
assets, what comes out the most are long-term investments. These represent
approximately 56.14% of total fixed assets (130.162 billion dollars), and compared to
2013 an increase of 22.55% has been generated. On the other hand, owned machinery
and equipment represent 8.9% of total fixed assets, that is, it has a value of 20.624
billion dollars and its increase has been 24.26%

10.2. Intangibles
Intangible resources are usually for the most part invisible in the financial
statements of the company, and for most of them, their contribution is much more than
the tangible ones to the value of their total assets. Therefore, among the most important
intangible resources are technological, reputation and human resources. Each of them
are explained below.

10.2.1. Technological
The company has been increasing its spending on R&D activities in recent years.
Has invested$3.4 billion, $ 4.5 billion, and $ 6 billion in 2012, 2013 and 2014,
respectively in its R&D activities (Apple Inc., 2014, p. 35). This represents 3.3% of total
revenues in 2014.

On the other hand, if we compare Apple's R&D spending with its main
competitors, it is observed to be lower. Apple's top competitors like Samsung, Ltd,
Microsoft, and Google have spent $ 13.4 billion, $ 10.4 billion, and $ 8 billion on R&D in
the same period.

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 The strong expenditure on R&D leads to increases in the company's income and
expansion of its products into new markets. Therefore, Apple should invest much more
in its R&D activities than its competitors in order to gain a competitive advantage.

R&D spending is also

reflected in the number of
patents obtained in recent
years. The company
registered only 1,775
patents in the United
States in 2014.

On the other hand, it can also be seen that Apple's patent portfolio is much smaller
than Samsung, Microsoft or Google.

10.2.2. Reputation
"Forbes and Interbrand" have named Apple's brand, as the most valuable brandglobally
in 2014, with a valuation of $ 124.2 billion and $ 118.8 billion respectively. And
wentrecognized as the fastest growing brand in terms of value. This means that the
company's brand is one of the most valuable and recognized worldwide. The leading
position of the company in the market, excellent advertising and marketing capabilities, and
the broad ecosystem of its products has led to the brand, to be well known in the market, so
much so that it cannot be equaled by any company that has other technology worldwide.

On the other hand, Apple has a reputation for highly innovative products, well
designed and functioning well, and good sound performance. Knowledge of the brand
and its reputation create the strongest customer loyalty in the Smartphone. According to
Statista (Richter, 2014), the brand of Apple enjoys a 90% customer retention rate in the
Smartphone market, with Samsung only retaining 77% of its customers.

The combination of brand awareness, your reputation and customer loyalty creates a
competitive advantage to more sales and almost impossible to match by Apple's rivals.

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 10.2.3. Culture
At Apple, culture begins with hiring, since they try to choose people who fit their
culture, that is, what they seek is to form groups of workers where there is diversity.
People with different experiences and who deeply believe in the philosophy of the
company.

The thousands of Apple employees share a passion for products that change
people's lives, therefore, from the beginning, they have realized that diversity is
fundamental to the success of the company. Diversity for Apple goes beyond the
traditional category of race, gender, and ethnicity, as it includes built-in personal
qualities such as sexual orientation, veteran status, and disability. For them, the diversity
of their team generates values and ideas, which drives innovation and makes Apple
unique, since its workers deliver the level of excellence that their customers expect.

10.3. Humans
The relevant aspects regarding Apple employees are explained in section 4 (in the
part of employees) and in section 8. These sections talk about the number of workers
they have worldwide and the training, entertainment and employee experience, which
determines the skills available to the company. It is also disclosed that the adaptability
of employees contributes to the strategic flexibility of the company, therefore, social
and collaboration skills are generated, where the ability of the company to transform
human resources into organizational capabilities is determined.

Finally, it has also been found that the commitment and loyalty of its employees
determine the company's ability to achieve and maintain a competitive advantage.

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11 STRATEGY
Apple seeks to differentiate itself from its competitors by offering something
unique that is valued by buyers beyond a simple low-priced offer. The differentiating
advantage appears when the company is able to obtain a higher price in the market that
exceeds the cost of providing the differentiation.

Differentiation is not simply about offering a product with different characteristics,

but about identifying and understanding every possible interaction between the
company and its customers, and asking how these interactions can be identified or
modified to offer additional value to the customer.

Finally, it can be highlighted that Apple, when facing international competition, has
generated competitive advantage through differentiation rather than cost leadership,
since it can create more value with a search for differentiation than by trying to reduce
production costs. Below is a chart showing Apple's strategy:

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 Figure 18: Apple's strategy

Apple is capable of
against t

Creation of "Sustainable Com

Value

Philosophy

Source: Own elaboration with information available on the internet and on the Apple page

Page 52 of 60
 At the corporate level, Apple is a multinational that competes in the technology
sector, both in the production and design of hardware as software. The technology
sector is very competitive and complex, so the barriers to entry and exit are very high.
Apple, in order to face this highly competitive sector, uses unique resources and
essential competencies that allow it to take advantage of internal and external sources to
differentiate itself in the market.

Apple's differentiating strategy comes from its internal sources, such as the
ability to innovateand generate creativity and originality in your products. That is why
innovation is its main distinguishing feature, which is why it is necessary to carry out
large investments in R & D & i. Another internal source that allows you to improve
your strategy is the ability of Apple to achieve higher quality in its products and a better
organization of its processes. In this way, a better quality is achieved in its materials
anddesigns, thus obtaining a higher quality and exclusivity in its products, with the
use of its own cutting-edge technology.

Another very important factor to highlight is the homogeneitywith which they act
and create their products, in such a way that their devices have similar functions,
designs and materials that complement each other. That is, when a buyer purchases an
Apple product and is satisfied, then a feeling of wanting to buy another product will be
generated in the consumer. Homogeneity is achieved, taking direct control of all
intermediate points until the product reaches the final consumer. For this, it is very
important to choose thedistribution chainsand the operators that can sell their products
and how to sell them. In this way, it is achieved that each product emanates the same
philosophy and this is reflected in each place of sale and after-sales services.

Finally, Apple's most important differentiation is its own philosophy:

revolutionary, pioneering, regardless of industry and market trends. Thus creating an
intangible value highly valued by consumers regarding their brand.

Regarding external sources from Apple, allow you to take advantage of

opportunities market to be pioneersin launching or renewing a product. In this way, the
products and the brand are associated with the consumer. There is also astructure

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productive, organized, flexible and collaborative that allows you to adapt to changes in
a fast and efficient way.

Apple, so that it can compete and be able to differentiate itself from other
competitors (exclusively at the hardware level), it is important to have a cost and
productive structure that allows it to reduce its costs as much as possible. To achieve
this, it is important to generatescale economics, in places with cheap labor and with
experience. Most of its electronic component suppliers are from Asian countries, the
majority being China. In this way, Apple achieves a low enough cost in its unique and
quality products to be able to establish an appropriate price for the consumer, but it is
not a true cost leadership strategy.

12.CONCLUSION
Apple is a multinational that has been run since its inception by great figures such
as Steve Jobs (who directed and was in charge of sales and customer relations) and
Steve Wozniak (who was the one who created the computers together with his
assistants), who gave everything of themselves to move the company forward. All these
attempts by its founders to bring new computers to the market with that differentiation
that distinguishes them from others, has been possible thanks to the constant dedication,
design and innovation of their products. In addition, it should also be noted that current
CEO Tim Cook has been doing well with the organization he is in charge of since Jobs
retired for health reasons.

Currently Apple is a well-known multinational worldwide, since it operates in

different industries, which allows it to further expand the range of its products and to
gain more customers or users, but especially the industry in which it has the most sales
is in that of smartphones (Smartphones), since its income represents 56% of the total in
2014, being in this case, America, Europe and China its main markets. All this is
possible, thanks to the brand equity that has been achieved, since the brand itself for
many users or customers has a significant influence on their lives.

In addition, it should be noted that Apple is achieving leadership in highly

competitive markets, as its growth is increasing. This can be noticed

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 because the increase in its infrastructures, stores, employees and more suppliers are
remarkable. An example of this is whatever it has achieved in China, where its products
are increasingly accepted by local people, and its sales have a significant representation
in Apple's results. In other words, its sales are almost equal to those of the European
markets.

As mentioned above, Apple products are having a great reception in new markets
like China (especially smartphones). This is so, because in these markets (developing
markets) the competition is not as great as in developed markets, where the smartphone
industry is almost saturated. That is why they try to take advantage of these
opportunities in order to make themselves known even more and increase their sales.
But a factor to be highlighted in these types of markets is that their human capital is
increasing, which arouses more interest in new technologies. It should also be noted that
spending on R&D in China, for example, is very high compared to other countries,

On the other hand, a very important part to highlight about Apple is that most of its
sales are made through its distributors, online stores and physical stores located in many
countries worldwide, the USA being the largest of all. with 265 stores.

Regarding Porter's analysis, it has been observed that the company is in a not very
concentrated sector, since the market is distributed almost proportionally between Apple
and Samsung in terms of smart phones but in terms of operating systems there is a great
concentration, since the Android company occupies a large part of the market.

On the other hand, Apple controls almost the entire chain of its devices "production
and sales". No other company manages or is capable of managing the four areas of the
chain. For example:

• Google has its own operating system and has released its own laptops, smartphones
and tablets, but none of the products experienced the

Page 55 of 60
 big success. Furthermore, the company itself did not design its own hardware or sell
its products in its retail stores.
• Samsung and Nokia tried to develop their own operating system for their
Smartphone, but due to the poor quality of their operating systems they had to cooperate with
Google and Microsoft. Any company that has tried to achieve the same level of management
and organizational skills as the Apple company, have failed to do so.

Apple provides its users with an excellent experience with its products, as the
company achieved its own design with its own hardware, controlling its quality,
software and hardware integration, providing essential services (for example; iTunes)
and a unique experience when shopping at their retail stores. By participating in every
aspect of the value chain, Apple creates seamless experiences that are highly valued by
its customers. In addition, the organizational capacity reduces the costs of the company
and increases the marginal benefits, creating a formidable competitive advantage over
its competitors.

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13.BIBLIOGRAPHY
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