Management SWOT and PEST Tools
Management SWOT and PEST Tools
Introduction
In the management field, PEST and SWOT analysis can be used to help in decision-making. SWOT is a useful tool that can be used for strategic planning, the evaluation of competitors, and product and business development. The PEST analysis refers to Political, Economic, Social, and Technological issues that may affect a business in one way or another. This is useful in conducting the industry analysis to evaluate the external factors that may impact a business. According to Scott-Quinn, a SWOT analysis is useful in summarizing key issues that arise from the assessment of the internal position and external position that influence a business and the PEST analysis helps to understand the environment in which a business operates and the implications it has on strategy (2012, p.410). This paper discusses the usefulness and limitations of the SWOT and PEST tools in relation to Apple Inc. and provides commentary on how managers can overcome the limitations and improve management decisions. It is imperative for managers to understand the internal and external environment that surrounds their business for effective decision-making.
The strengths aspect in the SWOT tool refers to the analysis of the unique capacity or resources that enable the business to achieve its set goals. Weaknesses refer to limitations, defects, or faults in the business that may potentially impede the business’ progress towards its set goals. Opportunities refer to the internal or external forces present in the business’ operating environment that allow it to achieve its set goals. Threats refer to the rather unfavorable factors in the operating environment that present barriers or limit the business from achieving the set goals. The PEST tool divides the business environment into political, economic, social, and technological domains. The political domain relates to the analysis of trade and environmental analysis and government regulations. The economic area relates to the analysis of the economic/business situation with aspects such as money supply, changing interest rates, and fluctuating currency value. The social area analysis relates to social aspects such as consumer preferences and purchasing trends. The technological area relates to the analysis of the rate of change, spending on research and development, new discoveries and the impact of new technologies.
Apple Inc. designs, manufactures, and markets mobile and media devices, personal computers and sells a variety of related software and digital content and applications. Apple is a brand with a wide recognition in the international market and has gained high customer loyalty owing to its diverse consumer products. The company operates in the tech sector where there is intense competition from other competitors like Samsung and where innovation is key. The tech sector is also highly regulated by the government. This means that the company’s management has had to consider both the internal aspects of its operations and the external tech sector environment.
SWOT Analysis
For Apple, the analysis of its internal strengths and weaknesses was done in relation to the tech industry. Over the past two decades, Apple has experienced increased sales growth due to the establishment of a strong brand in the market and the long-term recognition of the service-dominant logic of marketing. This attracts and retains more customers and the sales growth eventually increased the company’s cash flow. The company has also been committed to customer experience when it comes to their products and this has guided it to an innovation approach that has taken a people-centered approach (Ind, Fuller and Trevail, 2012, p. 39). Indeed, the aspects of creating a strong brand based on a service-dominant logic and innovations that focus on the users have been the core strength of Apple.
Apple brand products are supported with a customized operating system (iOS), which has been the basis upon which the product sells a variety of its related software and applications. The customized operating system in the practical world is incompatible with other applications that may be necessary for the users. Ind, Fuller and Trevail describe the move to run a customized operating system as an aspect that relates to Apple’s determinedly customer-oriented business that innovates within the framework of its brand (2012, p.39). On the other hand, other brands such as Samsung incorporate operating systems that are compatible with many applications that are not supported by the Apple devices. In that case, the company has witnessed a decreasing market share due to some of the customers moving towards the use of other brands that support a diverse range of applications. This has been a major weakness for the brand.
The tech market is characterized by a growth of the mobile market and demand for cloud services which can be interpreted as areas of opportunities for players in the industry. Apple is one of the players in the tech industry that has created a successful consumer cloud platform, iCloud. The brand has also been instrumental in manufacturing a series of mobile devices like the iPad and iPad mini. The strong growth of the mobile market and the demand for cloud services are opportunity areas for the brand. This is because the cloud services and the mobile devices can be used to tap into a wider market.
In regard to the threats analysis, Apple executives recognize that there are rapid changes in technology and price competition from other brands in the Android market whose market share is increasing. Owing to the factors of competition and the increasing market share for Android devices, Apple is slowly losing its market share. In addition, the rapid changes in technology mean that the company cannot rely on its existing brand technology because it may be rather outdated when it comes to its market relevance. These limiting factors form the basis upon which the brand recognizes the need to continuously innovate.
For the company, the SWOT analysis has been used by the executives to help uncover the optimal match between its internal strengths and weaknesses and the environmental trends based on the analysis of the opportunities and threats the business must face to succeed. In Apple’s case, the analysis has been put forward to analyze its broad idea of relying on its brand features and products to tap into the tech market. Initially, the company relied on premium pricing and product customization. However, based on the SWOT analysis, the company has continued to rely on innovation but with a shift towards ensuring that the devices and software are easy to use and enable the users to run diverse applications on them at affordable prices. The company has also introduced target costing in which the cost of different devices is based on target price that customers are willing to pay. The pricing model is a move aimed at using volume to generate sales to offset the cost of the price reduction (Dixon, 2012, p. 3). The company has also offered its customers free iCloud services and incorporated a range of attractive features on its devices to serve the needs of customers. In addition, the company has currently provided room for the operation of third-party applications. These strategic moves have been inspired by the innovation strength, customization weaknesses, opportunities presented by the growth of the mobile market and demand for cloud services, and the increasing competition from Android.
PEST Analysis
Apple brand has relied on China for low-cost manufacturing benefits to increase its profits despite being a leader in the American tech industry. However, this leads to a potential impact on the business from political factors. In recent years, the US has initiated calls to restrict imports from China in a bid to promote the local American manufacturing industry. By relying on China, the move could be interpreted as one that undermines the American potential and as a result, other American-made brands may be preferred over Apple brands. This could potentially reduce Apple’s market share. In addition, political unrest in China could result in adverse effects on the production of the Apple devices. A challenging factor that relates to the move to exploit cheap labor in China is that the employees are governed by the Chinese government regulations and policies and thus the company has been unable to effectively understand labor problems in the workplace and offer effective supervision (Chan, Pun and Selden, 2013, p.110). In this way, Apple cannot implement rapid changes when it comes to incorporating new features on devices and this can affect its rapid innovative elements.
In regard to the economic analysis, there has been a stagnating trend in middle-class incomes in the US and in most countries in the global market. This could potentially reduce the market for the high-end Apple products. There have also been issues around the US dollar’s strong value in the global exchange market. A strong US dollar means that the Chinese Yuan becomes weaker and this may potentially increase the cost of manufacturing in China and at the same time increase the price of Apple products in the global market. Therefore, the cost of doing business across borders is a factor that may place the profitability of the brand in jeopardy.
In the social area domain, the close association between Apple and China is a factor that could offend socially-conscious consumers. For customers who prefer local brands, the idea that the devices are manufactured in China could limit their preference on the brand. In addition, as tension rises between China and other countries or regions because of political and economic matters, the consumers in the countries or regions may choose not to purchase Apple products because of its association with China (Murray, 2016). Also, as income levels go down, there is a consequent backlash on expensive high-end devices. This will affect Apple’s move to continually invent high-end devices with more stylistic features.
In the technological domain, despite the new technological inventions today, the reliance on customized phone features limits the range of products and applications that Apple can produce and support. In that case, other brands are taking advantage of the advancements to produce a diverse range of products. This limits the market share that Apple can tap into. While other brands have been supporting open innovation in which different ideas are brought on board, Apple has had to follow a defined innovative path so as to maintain its brand features and functionalities but in an improved fashion.
With the PEST analysis, Apple executives can analyze the general environment of the business. In the process, they can identify the trends that may result in the erosion of the business’ competitive advantage and market share. Identifying the weak points is the starting point for initiating change in a manner that responds to the needs of the global market. According to Kesho, the PEST analysis is the framework for taking stock of the changes in the external ambiance (2015, p.193). In that regard, the business can keep up with the emerging trends and respond by implementing strategic choices that enable it to retain its market share and increase its competitive advantage.
Improvement of Management Decisions
Managers need to understand the constituents of the general business environment in terms of competitors and trends and understand the linkages between the general environment and competitiveness to make informed decisions. The present and the future are equally important for any business considering that the business environment is essentially dynamic as revealed in the SWOT and PEST analysis of Apple’s business environment. Managers need to carefully analyze the industry and their competitors at the corporate level, the internal and external inhibitors and enhancers of their business and the people who may be affected by the decisions when they are deciding the lines of business to consider. It is essential to take a proactive and informed stand when it comes to decision-making because the businesses ultimately serve people in a dynamic environment.
Summary
The global market is fast changing and businesses operate in a global environment that is connected with the external market. Businesses need to scan their internal and external environment to satisfy the changing demands of the market and to update or come up with new developments (Kesho, 2015, p.181). The SWOT and PEST analyses are useful for any business, especially in the tech industry as seen in the case of Apple. The internal structure, competitors, dynamic environment and the industry in question are all aspects that either make or break the success of a business. The analyses are useful in analyzing the business’ current position and serve to inform strategic decisions about coming moves considering that businesses have to respond to market demands for growth and profitability.
Bibliography
Chan, J., Pun, N. and Selden, M., 2013. The politics of global production: Apple, Foxconn and China's new working class. New Technology, Work and Employment, 28(2), pp.100-115.
Dixon, W., 2012. OS X 10.8 Mountain Lion Client and Server: A Review and History. London, UK: Wayne Dixon.
Ind, N., Fuller, C. and Trevail, C., 2012. Brand Together: How Co-Creation Generates Innovation and Re-energizes Brands. London, UK: Kogan Page Publishers.
Kesho, P., 2015. Strategic Management: Text and Cases. 2nd ed. Delhi, India: PHI Learning.
Murray, L., 2016. Foreign companies unnerved by China's political tensions. Australian Financial Review Weekend, [online] 24 May. Available at: <http://www.afr.com/news/world/foreign-companies-unnerved-by-chinas-political-tensions-20160524-gp2mzj> [Accessed 24 July 2016].
Scott-Quinn, B., 2012. Commercial and Investment Banking and the International Credit and Capital Markets: A Guide to the Global Finance Industry and Its Governance. Hampshire, UK: Palgrave Macmillan.
