Apple Case

Accounting for the iPhone at Apple Inc.

Overview of Business

Apple designs, manufactures and markets personal computers, mobile communication devices, portable digital players and a variety of related software and services. The Introduction of new products, particularly the iPhone, drives strong growth from 2007-2009. In fact the revenue from their iPhone business accounting for about 39% of Apple’s total business. Apple Integrate its own hardware, operating system and applications to provide best-of-class products and services. They always focused on innovative new products through aggressive investment in R&D. Expanded distribution network via Apple Stores was the main factor for their continued growth.

Porter Analysis

* Potential for new entrants was very high but they did dominate the industry

* Bargaining power with the buyers – low

* Buyer had other options however due to the unique nature/services of their product buyers were reluctant to switch

* Loyal customers

* They offered premium product

* Product Substitution – medium

* There are other choices in the market however customers were did not want to switch to other products as Apple’s products were very innovative

* Competition - High

* 3rd largest phone maker in North America

* Bargaining power with the suppliers – low threat

* Low switching cost between the suppliers

Business Model

Normally, the mobile carriers would provide subsidies to phone manufacturers which would lower the price of the phone for the consumers however in Apple’s case they made profit sharing arrangements with the carriers, thereby providing them a revenue of $10 per month for each customer who buys Apple’s product and at the same time Apple was making approximately $120 in gross profit for each iPhone sold. They offered free software upgrades for iPhones in order to increase user buy-ins as they learned from their past experiences that not every users will...