Apple Business Model focuses primarily on selling its products and offering services through subscriptions. Sales of Apple products like the iPhone, iPad, Apple Watch, and MacBook make up a large percentage of Apple’s revenue, while its services include Apple TV+, Apple Fitness+, Apple Music, iCloud+, and Apple Arcade, although a small percentage of its revenue, net them a whopping average of $13 billion per quarter.
Apple has surpassed the trillion-dollar market cap mark through its business model, making it the first company to ever manage such a feat.
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Steve Jobs and Steve Wozniak, two college dropouts, founded Apple on April 1, 1976, using Jobs’ garage as their main office. They aimed to revolutionize the way people saw computers. They wanted to make computers small enough to fit in people’s homes and offices. In effect, their first product, the Apple 1 — a hand-built computer —, included only functional hardware modules like CPU, RAM, and basic textual-video chips, and excluded features like monitors, keyboards, and other Human Interface Devices.
On their second product, the Apple II, expansion slots were included for attaching floppy disk drives and other components and Human Interface Devices. This second product increased their sales from $7.8 million in 1978 to $118 million in 1980 (when they went public).
A few years later, in 1983, Wozniak left the company, and Jobs followed suit in 1985, after hiring PepsiCo’s John Sculley as president. He was ousted after the growing friction between him and Sculley resulted in him organizing a ‘coup’ to remove Sculley. This coup backfired, however.
Steve Jobs founded his NeXT software company soon afterward, after buying Pixar from George Lucas. However, his departure was short-lived, and in 1997 Apple bought his company. This was done to bring him back to the company in order to save their declining market shares. The changes he implemented after coming back saved the company from impending doom, and in 2007, they launched one of their most successful product, the iPhone.
They have launched other successful products and services since then, which helped them become the first company ever to cross the trillion-dollar mark, this was in 2018. In 2020, they doubled their market cap by doubling down on their highly successful business model.
According to 2021 shareholder data, Apple’s major shareholders included corporations like The Vanguard Group (7.68%), BlackRock, Inc. (6.47%), Berkshire Hathaway Inc. (5.56%), and private investors like Tim Cook, Apple’s CEO, Artur Levinson, Jeff Williams, Al Gore, Dave Adams, and Andrea Jung.
Apple’s Mission Statement is: “To bring the best user experience to customers through innovative hardware, software, and services.” – Bstrategyhub
Apple leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers with products and solutions with innovative design, superior ease of use, and seamless integration — 10-K 2017.
Apple makes money by designing, manufacturing, and selling smartphones, tablets, personal computers, wearables, and accessories. Their main products include iPhones, MacBooks, iPads, Apple Watch, AirPods, and the Apple TV. They also generate revenue by offering subscription services like their iCloud cloud services, Apple TV+ subscriptions, Apple Arcade, and iTunes. The company recently announced its plans to start hardware subscription services for its products.
Furthermore, Apple makes money when the users of its products pay fees for the extension of their warranties. In addition to their products, they also sell compatible third-party accessories and apps.
As a passive revenue source, Apple also makes money through in-app purchases on iPhones, and app sales on their App Store — they take a 30% cut from every transaction.
Their largest and most profitable revenue source is the sales of their products, however, their subscription services generate the highest gross margins in comparison to product sales.
Let’s take a look at the Apple Business Model Canvas below:
Apple’s customer segments consist of:
Apple’s value propositions consist of:
Apple’s channels consist of:
Apple’s customer relationships consist of:
Apple’s revenue streams consist of:
Apple’s key resources consist of:
Apple’s key activities consist of:
Apple’s key partners consist of:
Apple’s cost structure consists of:
Below, there is a detailed SWOT Analysis of Apple:
-> Read More About Apple’s SWOT Analysis.
Through the success of its application, Apple’s business model is worth considering for new entrants into the tech space. However, do not expect overnight success since Apple experienced its fair share of challenges even with its implementation of its business model. Apple’s combination of the subscription business model and their product sales was a major factor that determined their huge revenue growth and as such, if you are to adopt the Apple business model, do not overlook the subscription business model.
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Excellent presentation for Apple Business Model
As I student of MBA it's opened my mind to how business build up.
Thank you very much.