Apple (AAPL, Financial) is undoubtedly the market leader when it comes to technology and innovation. However, it was exposed to lots of fluctuations in the market and the performances for late 2014 and early 2015 have not been as per expectations of the top management. The market is expected to act tough on Apple for this year as well. The company has announced various initiatives and strategies in the recent past in order to wade through the challenges of the stock market. Out of these, three strategies, if successful, could put Apple on a high pedestal that would be almost difficult to reach by any of its competitors.
Success of Apple watch
Apple’s CEO, Tim Cook, announced during September 2014, that the company would be introducing the all new Apple Watch by early 2015. Through this Apple entered the smartwatch industry and this is seen as a refreshing change because the company has been depending too much on the sales and profit margin of the iPhone brand for so long. While it cannot be denied that sales of iPhones contributed to more than 56% of Apple’s revenues for Q4 2014, it should also be noted that there was a dire need for Apple to diversify its source of revenues at the earliest. Apple Watch is seen as the cure that will bridge this gap of revenue diversification of the company. If this product is a hit, there will be no looking back for Apple.
The above chart shows that as soon as the launch of Apple watch was announced, share prices did take a dip; however that was due to the fact that investors had their own inhibitions about Apple’s performance in the smartwatch industry. Share prices were back on track right from the next day onwards as the stakeholders realised that the Apple watch did have lots of potential to succeed if it was introduced into the market at the right time. This was a very niche area that one of the biggest competitors of Apple, Samsung had tried and failed miserably. Apple could get a monopoly position in this sector if this strategy works in its favour.
Increase in net profit margins
The following chart shows the quarterly net profit margin over the last four years.
During 2012, Apple recorded a net profit average margin of 26.7%, which has been its highest value till date. It has been able to report only an average of 21.7% and 21.6% annual net profit margins for 2013 and 2014 respectively. This is one area that Apple should work on. It should develop some strategy so that this margin increases. The Android platform has been giving a tough competition to Apple’s iOS platform in the recent past, due to which Apple is finding difficult to raise its profit margin percentage. Nevertheless, some rejig is required in its business operations so that the earnings per share and the net profit margins will increase considerably. If this move is successful, Apple will easily overcome the threat that is posed by the Android operating system and emerge the undisputed leader in this segment.
Full-fledged foray into digital music
The digital music industry is quite interesting to explore and analyse. Though Apple introduced Pandora (P, Financial) and iTunes Radio during the latter half of 2014 and acquired the Beats Music Platform during the first half of 2014, it has to take advantage of these in 2015 and work towards being the market leader in the digital music industry. Its iTunes music store that had lost out a whole deal of market share to music streaming websites is now slowly picking up momentum. Apple should make use of this momentum in the right way and should try to tap the unharnessed potential of the digital music industry to its advantage.
Conclusion
Apple is known for its brilliant business strategies and for its innovative thinking. It has been the most respected technology company in the world for quite a few years now. If it wants to enjoy the same kind of reputation and goodwill among billions of its consumers and patrons across the world, it should use the above said cases to its advantage in the most honest way possible.
