Apple Inc.
Introduction
Apple Inc. is an American based technological company hat deals in the design and selling of personal computers, a range of hand-held gadgets such as mobile phones and portable music devices. In addition, Apple is also popular the design and sale of computer software. Since its initiation in 1976, Apple has developed to become one of the fortune 500 companies dealing in iconic design of computer electronics (Khan et al, 2015). In addition, the ability of the company to deal in variety of products has necessitated its expansion and this has facilitated its ability to treat each of its products such as iMac, iPhone, iPad, iTunes, iPod, and softwares as standalone business units (Apple Inc, 2015). The main objective of this report is to engage in critical analysis of Apple’s environmental situation. This will be through PEST, SWOT, and Porters five forces. Furthermore, the report will also engage the critical analysis of the company’s products and services, divisions, markets and the impact that they have in the development of the overall strategies while ensuring the existence of some form of balance between the enterprise social responsibilities and shareholder value.
Boston Consulting Group (BCG) Matrix
BCG Matrix is business model whose major role is to assist companies in making efficient and timely decisions to improve on the wellbeing of the company. From the company’s BCG Matrix analysis it is possible to notice that the iPhone positions itself as the main source of revenue for the company. Other than the high market share, the success of the product is in its high market growth potential that can ensure the success of the company (Khan et al, 2015). The innovative nature of the company facilitated the production of other innovative and creative Apple products such as iPhone 6.
The success of the iPad has been curtailed by the introduction of numerous substitutes available in varieties and at relatively lower prices. It is however possible the company to improve on the capacity and the potential success of the iPad through the introduction of differentiated features, increase support for more software and a direct selling strategy. The iPod and iTunes are at the maturity stage of technology (Khan et al, 2015).
Environmental analysis
The essential internal strengths and weaknesses of the company will be examined in relation to the technological industry. External factors are issue beyond the control of the company. Porters five forces, SWOT and PEST analysis will be essential in the identification of the strengths and weaknesses of the company and the existing threats or opportunities that affect the growth and development of the company in the highly competitive market. This will be in consideration of the political, technological, economic, and social factors.
Internal environment- SWOT Analysis
Strengths
Diversification of products is an essential aspect in the development and growth of Apple Company, since the introduction of other products such as the iPhone, Ipad, Ipod and the iTunes, Apple has been able to experience high profit due to improvement in the sales. This explains why the Forbes magazine ranked Apple as the leading brand with a capital of $416 billion (Khan et al, 2015).
The company has a strong brand enjoys recognition in different markets in the world due to its aggressive nature in embracing innovation and creativity. This has been facilitated by the ability of the company to engage in research and developmental initiatives aimed at developing essential sales and marketing strategies. The strategic positioning of its direct sales branches in high traffic areas has also improved on the company’s sales and profit margins. Apple Company operates on the philosophy that its products are user friendly. This explains why the company has been able to position itself as a trustworthy company (Apple Inc, 2015).
Weakness
Being the leading technological brand generates additional responsbility in terms of the expansion of its customer base. The company has found it relatively difficult to impact on all regions around the world because of the limited number of direct sales outlets, which are only found in 13 countries across the world (Khan et al, 2015).
The company also sells its products at relatively higher prices compared to those of its competitors such as Samsung and Microsoft. This has made it relatively difficult for the company to ensure that its products are made available to individuals belonging to different social classes (Apple Inc. SWOT Analysis, 2015).
The hardware product by apple can only support iOS. This had made it relatively difficult for all the customer to use in areas where android products are considers as the most desired products (Apple Inc. SWOT Analysis, 2015).
PEST Analysis- External Environment
Political environment
Apple Company is susceptive to different political problems considering that a large number of its suppliers are from Asian countries. The country also relies on selling its products across the international borders as a way of improving on its profits levels. This means that any form of political insurgence threatens the ability of apple to design and sell its products. An additional source of political problems is the potential disagreements between workers unions and the company (Khan et al, 2015).
Additional source of the company’s political problems emanate from within the US. This is because of the decision by the US government to toughen environmental and labor laws, which have banned the importation of different elements used in making parts of the iPhone. This has made it relatively difficult for the company to develop an effective competitive advantage.
Economic environment
The company experienced economic challenges when the major economies such as Japan, the US and Europe were recovering from the 2008 economic recession. Slow growth o the global economy in 2012 and 2013 reduced the sales of the company due to limited disposable income among the target customers. The increasing levels of unemployment in Apple’s target markets are considered as one of the economic downturns facing the company. In 2012, the unemployment rate in the US was at 7.1%, 4.6% in Japan, and 4.1% in China (Khan et al, 2015). Despite the envisioned economic growth in different target markets, the fiscal problems facing the US and other target markets may affect the levels of growth and development of Apple Company.
Social environment
One of the outstanding attributes of Apple Company over the years has been in its ability to make changes to its product as a way of fulfilling the needs of the customer. This had made it important for the company to make numerous acquisitions and alliances with other companies such as Philips, Motorola, and Sony. An essential advantage of this approach to business has been an increase in the sale of the company’s products in countries such as India. In addition, through its business relations on the international platform the company has been compelled into the opening of franchises and investing in countries such as India and this has become an indication of the techniques applied by Apple in rationalizing its growth and development strategy (Khan et al, 2015).
Technological environment
Information technology has become of the greatest earners especially for companies such as Apple, which have used it as an innovation platform. The ability of the company to offer unique and advanced technology has ensured that it retained about 49% of its customers. Furthermore, through its partnership with China Mobile the company has been able to attract more than 700 additional subscribers into its network. There is need for the company to invest in research and development as a way of ensuring that it is involved and active in the innovation of highly competitive and relevant products (Khan et al, 2015). Inasmuch as the designs presented by the company are relatively unique. Customers are not only focusing on their uniqueness but on additional features such as the screen size of technological devices such as the mobile phones. There is need for the company to invest in the development of ways of realizing the desires and interest of customers who consider the products by Apple as a preserve of the minority wealthy in the society (Khan et al, 2015).
Porters’ Five forces
The essence of these forces is to ensure that companies are involved in an effective decision making process which guarantees success to the company.
Rivalry among competing companies
There is high rivalry situation between Apple and its competitors. Despite the ability of the company to engage in the sale of well-diversified technological products, the highly competitive nature of the market threatens the ability of the company to ensure guaranteed sales and high-level profits. According to the 2012 company repot, Apple experienced a 14% decline in sales of its smartphones (Khan et al, 2015). This is associated with the existence of rival companies such as Samsung, Sony, and Huawei, which have captured the smartphone marketing by targeting of the existing Apple customers and diversifying ways of accessing the neglected markets through the introduction of customer friendly products in terms of their process, quality, and ease of use. Despite the relatively high competition in the market, the company has been able to retain about 49% of its customers due to its ability to develop a group of loyal customers by ensuring consistency in terms of product quality and product differentiation. In addition, the company has also been able to ensure that it maintains its position as a highly competitive company by providing products there relevant to the needs of its niche market in the US, Japan and China (Khan et al, 2015).
Potential entry for new entrants
There is a relatively low possibly of the threat of entrant of a new competitor into the technological company. Apple is the leading fortune 500 company in the information technology industry considering that it has a specific niche market, which is characterized by high-income customers (Lehuan et al, 2011). This makes it relatively difficult for a new company to grasp such a target market due to the high initial investment. The company has been able to secure its position in the market by using contract-manufacturing strategy, which facilitates its ability to save and redirect its finances to its social responsbility (Khan et al, 2015). Patents, copyrights and the high switching costs also make it difficult for new entrants to ensure an impact in the technological industry. Despite the low threat of new entrant, there is a potential threat of the refusal by the suppliers of Apple Company to renew supply contact with the company hence a threat to its dominance in the market.
Pressure from substitute products
The threat of substitute products for Apple Company is moderate. This is because for every Apple product available in the market there is a substitute. For instance, for the iPhone there exist substitute products such as HTC, Samsung Note, and Nokia. For the iPod, there are Samsung and Sony mp3 players. For the iPad, there is the Samsung pad among other products (Khan et al, 2015). Despite this threat, the iOS, which is the company’s operating system, is still considered as one of the best and strongest areas in terms of product diversification. This is because other than the Microsoft OS, there is no near substitute. An additional advantage over the substitute products is the existence of the company’s, App Sore, iCloud and iTunes (Apple Inc, 2015).
Bargaining power of suppliers
There is a moderate bargaining power among suppliers. This is because of the unique nature of the products by apple. The company has a diverse number of suppliers because they do not acquire all their suppliers from one source (Apple Inc, 2010). The ability of the company to engage in the purchase of its suppliers in large quantities gives it a higher bargaining power compared to that of its suppliers hence necessitating its ability to position itself as a highly competitive company in the technological industry (Apple Inc, 2015).
Bargaining power of customers
The bold an innovative behavior of the company provides power over its customers. The loyalty that the company’s customers have been able to develop with its customers makes it the sole determinant of the prices of its products. Furthermore, this position has also been facilitated by consistency in the quality of its products, research and development initiatives. Other than the retention of its customers, Apple has been successful in switching the customers of its competitors towards its products (Khan et al, 2015).
SWOT Analysis- External environmental analysis
Opportunities
Since the invention of Apple’s products such as the iPhone, iPad, and iPod, the activities of the company have been characterized by different inventions. According to existing statistics, Apple’s iPhone is still a dominant force in the market and this explains the high sales of iPhone 6 in different target markets globally. An additional opportunity was in the decision by the company to sign a partnership contract with China Mobile, which present a chance of expanding the company’s market share in the Chinese market (Khan et al, 2015). The company’s goodwill, which is approximately $150 million, serves as the main source of the company’s highly talented personnel. It also provides an opportunity for the company to attract more talent and improve on its pool of highly skilled employees hence facilitating its creative and innovative ways, which are essential in marinating a dominant position in the highly competitive market (Apple Inc, 2015).
Threats
One of the leading threats for the company is the competitive nature of the technological market, which is characterized by creativity and innovation. Apple imports most of its resources used in the design and the development of its products and this means that the success of the company relies on the ability trust and reliability of the suppliers. Most of the suppliers of the company emanate from different Asian countries(Apple Inc, 2015). This means that any form of political or economic disturbance in such countries may result in shortage of supplies or lead to an increase in the cost of production. The high process of Apple products is also an indication that the company will be experiencing gradual reduction of its sales and customer base due to the existence of substitute and quality products at relatively lower prices (Khan et al, 2015).
Apple’s Corporate Social Responsbility and Corporate Governance
The main objective of corporate governance in an established organization such as Apple is to eliminate any form of competition within the existing structures that facilitate the operationalization of the company (Khan et al, 2015). Through its corporate governance guidelines, the company has been able to develop a network of principles governing the relationship between different stakeholders whose responsibilities are integral to the functioning and success of the company. Despite the existence of these guidelines, the company has been criticized on its diversity in terms of ensuring a balance between the number of male and females in its board of governance. The company has also been accused of focusing on long-term goals while neglecting short-term goals, which are essential the realization of shorter returns from its shareholders (Lehuan et al, 2011).
In terms of corporate social responsbility, the company operates on an objective of ensuring that it exerts positive impact in the society. This has been deified by the ability of the company to insist that it suppliers must demonstrate their ability to provide safe working conditions without instances of exploitation or child labor (Apple Inc, 2010). Despite these initiatives, the company has been accused of different conflicts from its suppliers. These include long working hours and the engagement of underage workers in Foxconn factory (Khan et al, 2015).
Conclusion and recommendation
The success of Apple Company has been on its ability to provide quality products to its customers. This explains why the company has been able to be ranked as the nest performing company in terms of customer satisfaction ratio. The problem with the company is however in the high pricing of its products. The success of the company is also defendant on its ability to ensure the satisfaction of the shareholders. However, by concentrating on long term initiatives, Apple has not been able to satisfy the short-term needs of its shareholders hence creating some form of discomfort with in its corporate governance structures. The relationship between the company and its suppliers does not reflect respect to the supplier code. This is because of the decision by these suppliers to provide the company with high quality products while exploiting their workers and introducing underage employees working in harsh conditions.
In terms of recommendations, there is need for Apple Company to ensure that its cost minimization techniques are aligned with price minimization. This can be ensured by focusing on the Blue Ocean strategy, which will ensure high level of profit maximization despite a reduction in product prices.
It is also possible for the company to establish and maintain its top position in the technological market through research and development strategies.
In order to improve on its corporate governance, it is important for Apple to ensure high-level commitment to maters of corporate social responsbility. This can be ensured through effective communication between the investors and the management. Such communication help in developing opportunities of understanding the prevailing conditions and developing techniques of solving existing problems within the society of suppliers.
References
Apple Inc. (2015). Apple Inc. MarketLine Company Profile, 1-33.
Apple Inc. (2010). Supplier Responsibility 2010 Progress Report. Apple Inc.
Apple Inc. SWOT Analysis. (2015). Apple, Inc. SWOT Analysis, 1-10
Khan, A. U., Alam, N. M and Alam, S. (2015). A Critical Analysis Of Internal And External
Environment Of Apple Inc. International Journal of Economics, Commerce and Management. Vol III, Issue 6
Lehuan, W., Xuan, F., Danfei, L., Yongming, J., Hao, Z and Changhua, L. (2011). Apple Inc.
Copenhagen Business College
Appendix 1: Business Model Canvas
| Key partners The music industry Record companies Music artists | Key activities Development of tunes software Design and production of iPod, iPad, iPhone and iTunes Marketing and advertisement | Value propositions Can buy selective songs instead of paying for every song on the CD Access to high quality devices Take your favorite music anywhere | Customer relationships Online helpdesk Mass customizable Absence of live customer service | Customer segments Young adults iPod, iPad, iPhone owners Work enthusiasts | |
| Channels Apple store iPod, iPad, iPhone and iMac iTune store Gift cards | |||||
| Key resources iPod, iPad, iPhone iTunes software Partner deals | |||||
| Cost structure Maintaining online infrastructure Absence of overhead physical stores | Revenue streams Pay per song downloads Sales of iPod, iPad, iPod, iPhone, iMac and iOS Sale of gift cards |