Introduction
Apple Inc. is an American multinational firm that provides computers, mobile phones, tablets and software and miscellaneous electronic items to the consumers. The top selling and most famous items of Apple include iPhone, iPod, Macintosh, MacBook series of laptops and iPads. The company has a global presence in more than ten large economies through the state of the retail art stores. The origin of the Apple Company goes back to 1976 when it was formed by two co-founders namely Steve Jobs and Steve Wozniak. The company was founded in a garage in California. The company was incorporated as Apple Computers Inc. but later the word computer was omitted, and the name of the company became Apple Inc. The first product of the company was a big failure, and the product was introduced in 1976 with the name Apple I. However, the second product with the name Apple II was a huge success and was introduced in 1980. The purpose of this paper is to analyze the external and internal environment of the company to understand the strategy and operations of the company. The analytical tools like PEST analysis and SWOT have been applied for analyzing the environment (Hill, Jones and Schilling, 2014).
External Environment
The external environment analysis is divided into two parts namely micro-external and macro external environment. PEST framework will be applied to understand the macro external environment and the potential impact of various external factors on the strategy of the Apple Inc.
Micro-External Environment
Apple is a leading smartphone provider and global digital asset management company. The company had been declared as the largest technological company by market capitalization in 2013. The product offerings of the company include both hardware and software solutions. The company enables the consumers to share the software content like applications, movies and music through their Apple devices using an exclusive platform for the Apple devices named as iTunes (Hill, Jones and Schilling, 2014).
The sales of the Apple products have increased by many folds giving a tough competition to the competitors. The leading competitors of Apple are Samsung, HTC, Nokia, and LG. In 2012, Tim Cook revealed the excitement about the 35 million sold units of iPhone and 12 million units of iPads in the first quarter of the year. It is a huge success with a tough sales number. It was an immense beginning and take off for the new innovative iPad. Moreover, the sales of the other company products like Mac and iPhones also increased by 188%. There is a tough competition among the global brands, and Apple is in the second place. Samsung is leading the competition and is the top place. However, Apple has shown a notable growth of 9% in the mobile phones and is giving a tough competition to Samsung. Moreover, the product line of Samsung is extensive, but Apple is competing with the Samsung with a very distinctive product line (Hill, Jones and Schilling, 2014).
Macro-Environment Analysis (PEST)
Political Factors
Apple is a large company with large accumulated cash and assets. It is generating calls for the higher corporate tax. The focus of the US government is towards removing the income inequality through strong corporate taxation. Any fluctuations in the tax rate can have a serious impact on the profitability of the firm. Moreover, the company dependence on the low-cost offshore producers has increased in the recent past. The outsourcing to the countries like China can have serious repercussions. Any political and social unrest in these countries will impact the operations of the company. However, if the company tries to reduce the impact of the offshoring by relying on the local manufacturing, it will increase the cost of the Apple products making them less competitive (Pearce, Robinson and Subramanian, 2000).
Economic Factors
The changing legislation and increasing cost of the labor in China can decrease the profitability of the Apple products. It will take away the cost advantage from the company. Moreover, the products of the Apple are high-end and are marketed to the high-end customers. The stagnation in the economy and the recession can have a devastating impact on the profitability as the middle-class income group is more affected from the global stagnation. The recessionary trends will shrink the potential market for the products of the Apple. Moreover, the exchange rate fluctuations are another concern related to the international operations of the company. US dollar is a strong currency, and the depreciating foreign currencies will increase the exchange rates. It will increase the cost of doing international business for the Apple making the products more expensive in the regions like Europe and China.
Social Factors
The consumer spending trends and studies show that the spending is expected to increase the most in African areas where the people have the least familiarity with the Apple products. These areas have been deliberately ignored by the company as they do not fall in the target income of the company. Moreover, the young people in the potential markets and established markets of Apple lack emotional attachment with the products and perceive the products as expensive. The growing backlash against the expensive and stylish products has been witnessed in developed markets like Europe and US.
There are growing ethical concerns as well regarding the products of the Apple and its association with China. The low-cost manufacturing in China and malpractices of the Chinese producers can limit the brand appeal of the company products. Moreover, the Chinese association of the company is already offending the European and North American customers. The growing tensions with China can hurt the secondary brand association of the Apple and can tarnish its image (Pearce, Robinson and Subramanian, 2000).
Technological Factors
The technological interventions and the growth in this field have endangered the competitive advantage of the company. It took less than a year to counter the unique payment solution provided by the Apple namely Apple Pay. Google introduced the similar service with the similar features named Google Pay, and this service has support for more devices than Apple Pay. The growing technological advancements are limiting the competitive and signature services of the Apple. Moreover, the growing demand and usage of the smartphones and the tablets have reduced the demand for the computers. People rely more on the handheld devices. This trend has reduced the demand for the Apple computers as well. Similarly, the new products of the company have a limited market, and the target segments are tight. The example of this phenomenon is Apple TV with a limited market. Moreover, the unique selling proposition of the Apple products is end-to-end closed devices with a great degree of customization. The proprietary OS of the Apple is secure, yet it has disadvantages as well. The OS limits the support for the available applications and third party gadgets (Pearce, Robinson and Subramanian, 2000).
SWOT Analysis
Strengths
The major strength of the company is a strong brand recognition and market position of the brand
Apple has been declared as the largest company in the world by market capitalization. The size of the company is its strength
The company holds a huge amount of cash with no debts and the highest gross profit margins making it attractive to the investors
The company provides high-end customer services through its state of the art retail outlets that enhance the customer experience (Hill, Jones and Schilling, 2014).
Weaknesses
High prices of the products of Apple is a weakness as the alternative products can be purchased at more competitive prices
The closed ecosystem of the Apple devices is reducing the third party applications support and causing dissatisfaction among the customers
The company reputation has suffered due to the trials of disrespecting the intellectual property of some other brands. Such instances can cause serious damage to the brand equity.
The death of visionary Steve Jobs has left the repercussions for the lost innovation in the company product line
Opportunities
The product diversification will help in gaining the increased market share for the company products
The smartphone and the tablet market are growing at a much faster pace. It is an opportunity for the company to gain an increased market share
The growing advertising on the mobile devices is an opportunity for the iAd to increase the advertising revenue
The cloud-based technology is gaining more appreciation among the customers. It is an opportunity for the company to extend its iCloud services
Threats
The increasing customer pressure due to the rapid technological intervention is becoming a threat to the Apple products as well as its competitors. The customers want innovation at a much faster pace. Moreover, the innovation is specifically expected from the Apple products. It is turning to be a threat for the company (Hill, Jones and Schilling, 2014).
The changing taxation rates in the US is a threat to the company profitability
The increasing number of competitors in music stores like Wal-Mart, Amazon, and other online music companies is turning to be a threat for the iTunes
The supplier power and the association of the Apple with China is a threat to the company.
References
Hill, C., Jones, G., & Schilling, M. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Pearce, J. A., Robinson, R. B., & Subramanian, R. (2000). Strategic management: Formulation, implementation, and control. Columbus, OH: Irwin/McGraw-Hill.
