Corporate Case Study: Apple Inc.
Article One: Apple’s Secret Plan for Its Cash Stash
In 2012, Forbes Magazine published an article that discusses what Apple Inc. plans to do with the large amounts of money it has acquired over the years. The sum reaches up to $100 billion, making the company one of the most profitable in history. However, the company has around $64 billion of their cash stuck oversees. If Apple were to choose to move the money back to the United States they would be hit with a gruesomely high tax rate of 35%. For this reason, the company chooses to use that money to improve offshore production. During a press meeting, Apple revealed that it had a plan to use $7.1 billion on capital spending in 2012, almost double what it spent the previous year which had people curious as to where all the cash was going to go. Apple has used some of the money to build new retail stores, a new employee campus, and more towers to support the iCloud service, but even with these new expansions the company still has a large amount of unexplained capital expenses. The author of the article suggests that Apple is looking into buying into its own supply chain and points out that while many manufacturers wish they controlled the cost and production of their parts, “Apple is one of very few firms with the financial wherewithal to make that come true, specifically by buying production equipment to outfit new and existing factories in Asia that other people will run”(Guglielmo, 2012). Quoted in the article, Katy Huberty, a Morgan Stanley analyst explains why this move would be beneficial to suppliers. She gives the example of suppliers for companies such as Nokia or Motorola having to produce large amounts of components for specific products and if that product ends up being unpopular then the supplier’s margins will decrease. However, if a company says, “I will take the equipment risk, and I will own it so you don’t have to depreciate it. I take the volatility out of your business” then it becomes unlikely that suppliers would say no to such a negotiation. Huberty estimates that by investing in its own supply chain, Apple will have a cost decline of 15% to 20% a year, which allows the company to have higher margins for existing products and be able to focus more on future projects (Guglielmo, 2012). The article goes on to explain that such high margins are one of the reasons so many analysts think that Apple’s shares will reach $1000 in the near future. Though there are still skeptics who think Apple will eventually reach a stand still, the company continues to have record-breaking consumer demands from all over the world. Article Two: Apple Inc. Annual Report 2013
The annual report of Apple Inc. gives a detailed synopsis of everything that makes up the structure of the company. This report is for the fiscal year that ended September 28, 2013. Apple’s headquarters are located in Cupertino, California, and has around 80,300 full time employees. The business strategy of the company is to give the best user experience to customers through the use of its innovative products and services. Apple believes that investments in marketing as well as research and development are critical for allowing the company to continue to be one of the most innovative leaders in the world market. Apple’s strategy also involves expanding its network to reach more consumers and provide them with top notch products. The business organization of the company is based primarily on the location of its customers. Apple houses operating buildings in the Americas, Europe, Japan, China, and Asia Pacific, all which manufacture comparable products. Apple also has retail stores in thirteen countries as of 2013. The company mainly makes its money by distributing to consumers, education, enterprise, and government markets. Retail and online stores are how most sales are made, but different third-party retailers are also a part of the equation. Apple is one of the...
References: Apple Inc. (2013). Annual report 2013. Retrieved from http://investor.apple.com/financials.cfm
Guglielmo, C. (2012). Apple 's secret plan for its cash stash. Forbes, (8). 116.
Karlgaard, R. (2013). Steve Jobs Warns Apple Don 't Be Greedy. Forbes, 191(1), 34.
LASHINSKY, A. (2012). HOW TIM COOK IS CHANGING APPLE. Fortune, 165(8), 110-118.
Lyons, D. (2010). Fortress Apple.(The Take)(Apple Inc.). Newsweek, (18).
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