Executive Summary

This paper deeply analyzes Apple Inc. The paper first discusses the background of Apple

as an organization. It looks at the PESTEL and how they affect Apple. The paper also looks at the

internal and external analysis of Apple (S.W.O.T) analysis where the strengths, weaknesses,

opportunities and threats are critically discussed. The sources of competitive advantage are also

critically examined, the companys value chain, the porters five forces in reference to the

technological industry that Apple operates, financial analysis for the company including graphical

comparison with other firms in the industry (Nokia and Samsung), the organizations corporate

strategy level, the generic strategy that Apple uses and the industry life cycle. The paper also

provides some recommendations on what the company should do.

Keywords Definitions

Strategy: A strategy is basically a master plan that is designed to achieve the organizations

objectives (Porter, 1998).

Competitive advantage: it refers to the advantage that an institution has over its competitors, which

allow it to generate greater revenues and also to retain more competitors (Porter, 1998).

Organization Background

Apple is a multinational technology company, established in the year 1976. The company

designs, advances and also sells consumer electronics as well as computer software. It also

provides online services. Some of Apples products include apple watch, iPods, iPad tablets,

personal computers, portable media players and iPhone smartphones. The companys software
includes Safari Web browsers, iOS, iWork, iLife among others. Some of these services offered by

the company include iCloud, Mac App Store and iTunes Store.

The companys headquarters are situated in Cupertino in California. The companys

success is based on its mission and vision statements. The company has therefore changed its

mission and vision statements so that they can suit the current situations. Apples mission

statement currently is very specific as it indicates clearly what the company does and what it

intends to do-to design Macs which are the best personal computers globally as well as to define

the future of the mobile media and the computing devices with iPad (Apple Info)

External Environment Analysis (PESTEL)

The external environment to the organization represents those factors that are beyond its

control. The key external factors that affect the organizations success are economic factors,

political factors, technological factors, socio-cultural and legal factors.

Economic Factors

The economic environment largely affects the success of the company. The prevailing

economic conditions of the different countries that the company operates in affect the purchasing

power of the consumers of the companys products and services. For example, the increased labor

costs that are witnessed in China takes away what we can call the cost advantage of the company.

There is also an issue concerning the stagnant middle class incomes especially in the developed

nations, for example the US, this could shrink the potential market particularly for the higher-end

consumer goods and services that are being marketed by Apple. The other economic aspect is the

issue of increased dollar value, this means that the exchange rates are likely to go up and

consequently making it difficult for the company to do business especially in the major markets
such as Europe and China. This means when there is promising economic condition then there is

a promising successful future for the organization. When the economic condition is not too

promising this means the consumers of the Apple products will not be able to purchase the products

and services.

Social-cultural factors

The social-cultural factors do have some great impact on the company. Just to mention a

few of some potential impact, the biggest growth in the consumer expenditure in the near future

will be in different many areas of the globe like Africa, such places people are not too familiar

with Apples products and this makes the African continent a target market for the company. The

consumers in the markets such as the United States are mostly the young people. It is worth

noting that young people lack some emotional attachment the products of the company and this

drives away the sales. Some of the people in Europe and the United States have a backlash

particularly on what they call expensive and stylish products by Apple. There are also some

serious ethical issues particularly about Apples manufacturing in China.

There were allegations that factories in China had sweatshop conditions. Inventec and

Foxconn, happens to be by then the contract manufacturers, operated the factories that produced

iPod. It was alleged that the factory had employed over two hundred thousand employees. These

employees lived and worked in the factory, they performed for more than sixty hours of labor in

a week. It was also reported that the laborers earned around a hundred dollars per month. The

laborers were also required to live on the same premises where they were also supposed to pay

rent for the same as well as to pay for the food expenses. Now, this meant the workers had to

spend at least half of the hundred dollars they earned in a month so as to sustain their stay. This
controversial issue led to immediate reaction by the company, the following year Apple started

conducting annual labor audits of all its suppliers. This is an ethical issue that could limit the

appeal of the products especially among the consumers who are socially-conscious.

The Legal Factors

The legal factors also have some significant effect on the company. It is a matter of fact

that the company operates in a highly controlled financial services industry through Apple Pay.

This is an indication that the level of regulation as well as the government oversight definitely

has gone up. By the mere fact that the company is offering financial services, the company has

increased the chances of getting into the litigation process. The company also depends largely on

various products and services which are largely covered by the intellectual property laws, such as

music and software, which generally generate a lot of its income. The company is therefore

vulnerable to issues such as piracy which in other words means that the company is likely to get

involved in litigation. There are also reports that Apple is planning to enter into automobile

manufacturing, a much regulated sector. Now, entering into the auto-business, Apple, increases

regulatory, issues to do with insurance and the litigation costs.

Political Factors

Apple has accumulated quite a large amount of money. The company valued at $34.7

billion as on June 30, 2015. This means that the company is charged higher corporate taxation

which definitely affects the total net worth of the company as well as its ability to expand even

more. The company also relies largely on the lower cost production in China. This means that

any social or political unrest in China could obviously disrupt production or increase the total

manufacturing costs in China. In case the United States restricts the imports from China with the
intentions of trying to boost the American manufacturing sector, Apple is obviously at great risk.

The costs that are associated to finding an alternative to Chinese manufacturing are likely to be

high which could lead to the company increasing the prices of its products and services. The

companys reliance on the Chinese manufacturing makes it too vulnerable to any political unrest

in the country. It is also a matter of fact that the close association between China and Apple

could be politicized in the countries such as Japan and the United States. China would be

professed as a threat; obviously this could affect Apple in one way or another. To that effect,

Apple is highly affected by the legal/political factors and this necessitates that the company

calculates every action.

Technological Factors

The technological factors also influence Apple Company to a great extent. The

competitors are developing software and other products at comparatively lower prices. This

means that the companys market is being consumed and it continues shrinking each and every

day.

Porters Five Forces

The Porters five forces analysis is basically a framework that analyzes the competition

level within a specific industry. The five forces are used to derive the attractiveness as well as the

competition intensity of specific industry.

Bargaining Power of Buyers

There are two main points of interest that Apple needs to consider: the individual

bargaining power as well as the collective bargaining power. For Apple, the individual
bargaining power of the buyer is sincerely speaking a weak force; this is because the loss of an

individual customer represents an insignificant amount of income for the company. On the other

hand the collective bargaining power of the customers is a strong force. The company effectively

counters this force by massive investments in Research and development. It enables the company

to develop unique products which results to customer loyalty. We can say that Apple has

successfully tackled this area and that is the reason why many customers will not abandon the

Apple products for those of the competitors.

Bargaining Power of the Suppliers

For Apple, the bargaining power is a weak force. It is weakened by the mere fact that

there are very many potential suppliers for the company and also the amount of supply is ample.

The company can choose freely on whom it wants to supply them. The bargaining power is also

a weak force because the supplier switching costs are generally low and therefore do not have

significant effect.

Threat of Substitute Products and Services

There are many substitutes for the Apple products, but they are all a weak force. For

example in the case of an Apple iPhone a payphone is a substitute. It is a weak force because

looking at all the substitutes; they have very limited capabilities when we compare them to those

of Apple.

Threat of New Entrants

The threat of new entrants is also a weak force generally apart from cases where some

firms may have some funding from the government. Any entrant to the market is required to
have a strong capital base and also to invest massively on research and development. Any entrant

in the technological market is already assured that it will take them time to keep up with the

competition that is in place. Nonetheless, the company needs to continue strengthening on its

competitive position through targeting other markets with potential as well as developing new

products.

Intensity of Rivalry among the Competitors

There is high level of competition among the companies which are in direct competition

with Apple. Companies such as Google and Samsung are also investing heavily on research and

development as well as marketing strategies. The other thing that intensifies the level of

competition is the fact that the switching costs are generally low. Look at it this way; it does not

take much for an Apple customer to ditch an Ipad for another tablet. Therefore Apple needs to

seriously consider the intensity of industry competition and continue developing the unique

products that customers will find difficult to ditch.

SWOT ANALYSIS (INTERNAL AND EXTERNAL ANALYSIS)

Strengths

Apple enjoys brand equity. It is one of the companies in the world that enjoys brand

equity; many people acknowledge the fact that Apple is a company with a promising future.

Besides, the company applies the tag of innovation to a great extent. Apple has shown

innovativeness from iPod, iPhone and iPad. The company has been responsible for much of the

technological revolutions. The company also enjoys customer loyalty. A loyal customer of the

Apple products will make it known to the whole world that he/she is a proud customer of Apple

products. The company has the strength of developing amazing software. The operating system
of iPhone (IOS) is fast and flexible. Once anyone uses an iPhone he/she gets addicted to its ease

of use and cannot prefer any other phone. The company also maintains design consistency and

this possess as strength. The Apple iPhone looks very similar in terms of design; the difference

comes in terms of what is inside those machines.

Weaknesses

You agree with me that Apple products and services go at high prices. One thing that is

for sure, having such brand equity the company targets the A grade customers. All the same, the

Apple iPhone goes at higher price when compared to other phones offering similar features.

Most people are not able to purchase Apples products because of the high prices, particularly

the consumers from the lower class; this is a weakness because the lower class represents the

major segment of buyers globally.

Opportunities

The company has a lot of opportunities that it can exploit. These opportunities can

significantly influence its strategic direction. Firstly, Apple has the opportunity to expand on its

distribution network. With an expanded distribution network, the company will be able to reach

even more customers all across the world. The company also has opportunities that underlie in

the creation of other new product lines (Bohm, 2009). Actually, Apple has already realized this

opportunity and that is why we now have Apple watch. If the company can fully exploit this

opportunities, there will be no need to worry about the aggressive competition.

Threats
 Threats can limit the financial performance of any company (Bohm, 2009). There are

various threats that the company faces from the industry competitors. There is tough competition

in the technological industry because of the aggressiveness that the firms have. The major

competitor to Apple is Samsung which also has put a lot of innovation in the recent decades. Due

to the aggressiveness of such firms, it is critical for the firm to have some strongholds for

maintaining the competitive advantage that the firm already has. There is also the threat of

imitation that Apple faces. Other firms can easily imitate Apples services and products. Other

threats include the issue of rising of labor costs in China which could significantly reduce the

profit margins affecting the companys performance. The company must therefore take the

appropriate procedures to overcome the discussed threats.

Apples Value Chain

Inbound logistics-the company works with thousands of suppliers around the world.

Apple maintains a highly equipped supply-chain management. Apple basis it operations in

various segments of the world, including America, Great China, Japan, Europe, Asian Pacific as

well as retail. The majority of the companys products are manufactured by its outsourcing

stakeholders in Asia where it utilizes the low costs of labor. The sales activities of the company

generates billions of money and a significant portion of this is allocated to public relations and

advertising.

Competition Analysis

It is one of the companies in the world that enjoys brand equity; many people

acknowledge the fact that Apple is a company with a promising future. Besides, the company
applies the tag of innovation to a great extent. Apple has shown innovativeness from iPod,

iPhone and iPad.

The company also enjoys customer loyalty. A loyal customer of the Apple products will

make it known to the whole world that he/she is a proud customer of Apple products. The

company has the strength of developing amazing software.

The other source of competitive advantage is the high amounts of profit that the company

generates annually. It is a competitive advantage because it enables the company to allocate

more in research and development which in the long run result to competitive advantage. In one

way or another they are likely to lead to sustained competitive advantage.

Generic Strategy

Apple follows focused differentiation strategy. This is because, the companys products

offer some unique features that are afforded by the A grade customers and as such we can see

that the company strives to meet the demands of the narrow market (Porter, 1998). In the future,

I would recommend the company to use a combination of at least two strategies because then it

will be able to attract many customers basing the fact that the majority of consumers currently do

not afford Apples products and services because of affordability.

Industry Life Cycle

The technological industry is at the maturing stage at this point. Apple will survive the

industry through dominating in innovations. Diversifying the products that it is manufacturing,

investing in research and development and identifying the potential markets and investing there,

For example, Apple should make fast moves and take over the African market by coming up

with products and services that suit the customers in the continent. It is a very promising market

especially having in mind that Africa still rags behind technology-wise (Porter, 1998).

Assessment of Apples Corporate Strategy Level

Apple is at the global corporate strategy level with the opening of many stores in China,

the company has established a corporate governance structure that will enable effective decision-

making as well as monitoring all across its operating areas. The company has a board of

governors and CEOs who are in place to ensure that the interests of the shareholders are well

represented even in the long-term.

Recommendations

Apple is one company that possesses key strengths that if used appropriately will help

address the weaknesses and threats. Apple Inc. can also use its strengths to exploit the various

opportunities that we have identified. The company should work to expand on its distribution

network, taking advantage of the brand image that it already enjoys. The company should also

invest in other new products and services as a way of diversifying its portfolio. This will enable

Apple to remain in its competitive position even as new firms invest in the technological

industry.

References