The Economic Environment of Apple Inc - Coursework Example

?Introduction Developed world is going through tough economic situation with overall economic progress slowing down and unemployment levels are on the rise. In such an economic environment, it is often difficult for organizations to maintain their competitive advantage and continue to enjoy the benefits they have been able to do so in the past. All organizations pass through a natural life cycle in which they start, grow, mature and finally decline. Each stage on the life cycle of business provides its own advantages and disadvantages and prudently managed organizations design appropriate strategies in order to deal with such situation. The overall external environment and other strategic factors become important to manage in order to lengthen the stay of each organization in a particular stage of its life cycle. Apple Inc is one of the largest growing companies in the world which has been able to withstand much of economic downturn. Over the period of time, it has revolutionized many industries and changed the very fundamentals of doing business in consumer electronics market. Duly supported by the visionary leadership of its late CEO Steve Jobs, Apple has become a new force in consumer electronics industry while dominating handheld music devices, smartphones, tablet PCs and other consumer electronics items. This report will be based upon Apple Inc, what advantages and disadvantages it has enjoyed during its growth phase and how it can deal with its external environment for maintaining its sustainable development and growth achieved during last few years. Apple Inc- A general Introduction Apple Inc was incorporated as Apple Computers Inc is a global organization engaged in the manufacturing, development and marketing of consumer electronics items. It also produces consumer software and commercial servers which are used for storage as well as for other associated purposes. Apple’s range of core products however, is based upon a portfolio of consumer electronics items and is most importantly I.T. oriented. Its flagship products include IPod, IPhone, Ipad as well as Mac laptops. (Levy, 2008) The IPod comes in different models and shapes and is used as an MP3 music player. It can be used to store and play music as well as movies. IPod is also connected with Apple’s music store with the name of ITunes where users can directly download the music and listen the same immediately on their IPods. It was also one of the main products launched by Apple which it started its journey towards hyper growth it achieved during the recent past. IPhone is a smartphone whereas IPads are tablet computers and are considered as the leading products of Apple Inc now. Advantages & Disadvantages of Growth The recent growth observed by Apple has brought in different advantages and disadvantages to its business. Over the recent past, following advantages and disadvantages have been enjoyed by Apple Inc due to its growth: A Dedicated base of Consumers Apple’s growth has provided it a dedicated base of consumers which are more loyal to it than any other brand offering similar products. Recent growth of the firm has actually provided Apple a loyal group of users who value its brand and remain stuck with what is offered by Apple. It has been able to sell over 1 million IPhones; over 300 million of IPods have been sold whereas Ipad is also a hot selling product. These figures suggest that Apple’s growth has offered it a dedicated base of consumers who are willing to buy different product ranges offered by Apple. Technology and Customer lock-in Apple’s growth is often attributed to its ability to design aesthetically good products duly supported by excellent engineering and designs. As Apple grew in its size, it has been able to tap into far superior technology which is not used by other competitors. It has been able to design products which are considered technologically superior with longer useful lives and are considered as more durable. This aspect of its business therefore has helped Apple to lock in its customers as users get highest quality products from Apple at relatively at premium prices.( McCracken, 2012 ) It is also critical to note that Apple, through its music store ITunes has been able to lock-in consumers and is also directly selling music and movies to them. The absence of any major player in the market to offer such services therefore has allowed Apple to lock-in customers. Lower Costs & Premium Prices It has been observed that due to its growth, Apple has been able to maintain huge profit margins and charge premium prices. The overall growth observed in recent past has allowed Apple to charge premium prices to its products and it has also been able to maintain such high margins.( Reisinger, 2012 ) Disadvantages Increased Competition Growth of Apple has also resulted into stronger competition from firms which were not initially in this market. Apple is facing stiff competition from Samsung in both its smartphones and tablet range of products. Other players like Microsoft are also planning to launch their own touch screen tablets to directly compete with Apple. Apple is also competing on software front where its operating system is competing with the mobile operating systems of Google and Microsoft. With more smartphones using Google’s android operating system and Microsoft entering into the market, it is critical that overall competitive landscape is shrinking for Apple. Increased Lawsuits Due to its growth, Apple has also faced increasing number of lawsuits and is in legal battle with Samsung over patent issues. This may create negative publicity for Apple and can affect its overall image in public. It was also ordered to pay damages to Samsung by Dutch Court in a legal dispute over intellectual property issues. (Bbc.co.uk, 2012) Sustainable Development at Apple Inc Apple being the leading player in the market gives due consideration to its environmental footprints and comprehensively reports its environmental impact. The overall focus of Apple in terms of environmental impact of its products is built into a phased process wherein Apple considers environmental factors when it designs its products; manufacture them and when products are actually used by the consumers. It divides its total footprint according to different stages of its complete process of designing, manufacturing, transporting, selling and using its products. Manufacturing facilities of Apple caters to 61% of its total carbon footprints whereas transportation accounts for 5% with product use cater to 30%. 2% each is shared by its recycling and facilities.1 The overall methodology used by Apple to accurately measure its total carbon footprint is based upon a life cycle approach and it has been found out that majority of Apple’s carbon footprint is directly related with its products. In order to reduce such huge impact of its products on the carbon footprints, Apple however, employ state of the art manufacturing methods to control the overall carbon emission. Apple’s manufacturing, packaging, transportation and marketing processes duly cater to this need as Apple uses small packages, toxic free substances and energy efficient methods for its manufacturing. Over the period of time, the greenhouse emission per dollar of revenue for Apple has declined over the period of time despite the fact that revenue for Apple has grown steeply in the recent past. Apple’s products line also meets and exceeds the specifications made under energy STAR specifications. The overall manufacturing process of Apple is based upon designing smaller, thinner and lighter products. This could have relatively smaller impact on the environment as compared to the products which are larger in size and consume environmentally toxic material. As such, Apple has taken serious efforts to align its manufacturing policies with environment protection. It has been able to reduce its overall environmental footprints and have substantially conserved the environment. (Fiennes,2011 ) Stakeholder Analysis Stakeholder analysis is a dynamic process with organizations continues to face new stakeholders and also continue to manage existing stakeholders. Stakeholders are those groups of individuals who will be affected by the possible actions of any organization. A comprehensive stakeholder analysis therefore will offer the firm an opportunity to understand who their stakeholders are, what mechanisms can be adapted to influence the stakeholders, what are potential key risks involved with each group of stakeholders and who are the people who should be informed about the organization and its various proposed actions. It is also critical to understand that a stakeholder can be either an individual as well as an organization having both positive as well as negative effective on the organization. It is also because of this reason that stakeholders map is developed based upon the relative power and influence of each stakeholders group. Stakeholder Analysis of Apple Importance of Stakeholders       Unknown Little or No Influence Some Importance Significant Importance Stakeholder Influence Significant Shareholders Customers Somewhat Influential No Influence Government Competitors Unknown Owners and Shareholders Apple’s history suggests that the shareholders of the firm use to have significant influence over the way the affairs of the firm were managed in the past. The fact that Shareholders were successfully in ousting Steve Jobs from Apple during 1990s is an ample proof of the fact that Apple’s shareholders used to have significant influence over the decision making process within the organization. It is however, important to note that after assuming the charge for the second time, Steve Jobs created a culture where shareholders’ influence was minimized and firm’s management under the leadership of Steve Jobs started to call the shots. During Job’s second tenure, Apple even did not paid any dividends to its shareholders and focused on developing and maintaining a large hoard of cash. Apple, during recent times, though has started paying dividends however, the overall influence of shareholders still remain very low. Buyers, Consumers and Potential Buyers The fact that Apple has been able to charge premium prices on its products and have been able to sell millions of its products suggest that buyers may not have significant influence over the way Apple makes its decisions. Apple has not reduced its prices out of consumer pressure and thus so far consumers have not been able to assert significant influence. It is also however, important to note that concerns for quality and prices are important influencers for consumers. Consumers therefore can actually exert their influence on Apple through their buying decisions. Government Though government can be one of the significant stakeholders because of its power to change and amend the rules however, given the fact that Apple operates in US, this factor may be minimal. US government is based upon private enterprise philosophy therefore it tends to support market forces and as such hardly intervenes into the functioning of the market. It is also important to note that Government has the power to collect and impose taxes besides further strengthening the laws related to environment. Since Apple’s supply chain directly have an impact on the environment therefore it is critical that Government may impose certain legislative restrictions which can hamper the progress of Apple and can impose certain additional conditions. Competitors Apple is increasingly engaged in legal battles with its competitors as the competition heats up in the market in which it is operating. Since technology can be easily imitated therefore many competitors have actually entered into the market and are fighting for the share in the market. Since Apple competes both on the software as well as on the hardware side therefore its competition is relatively diverse and fragmented. What is also important to understand that it is competing against giants including Samsung, Microsoft and Google? All major competitors have the resources and capacity to influence the overall decision making process of Apple. Globalization and its Impact on Apple Inc. Globalization may not be described according to one specific parameter as its impacts are different and diversified. It not only had an impact on the way culture is perceived and managed but also on the economics and other social aspects of any given society as well as organization also. Globalization also offers opportunity to the organizations to tap into the cheap labor and material in order to reduce and manage their costs. It is also because of this reason that many organizations actually relocated themselves to the countries offering clear competitive advantage in terms of cheap labor and raw materials. Due to technology transfer and other factors many organizations have actually been able to relocated their manufacturing facilities to countries like mainland China and other countries. Apple’s manufacturing has been entirely done in China whereas it designs its products in US. This fact indicates that Apple has been able to take advantage of low cost labor and raw materials and is saving on this cost in order to improve its efficiency. Globalization of manufacturing and shipping facilities has therefore allowed Apple to actually shift its manufacturing to cheaper destinations. It is however, important to note that Apple has also been accused of having inadequate and unhealthy working conditions in the factories manufacturing its products.(Reuters.com,2012) Its supply chain therefore has been termed as unethical owing to the fact that it was accused of paying very low salary of $50 per month for a work shift of 15 hours per day. Though Apple refuted such allegations however, its global supply chain practices have been questioned during the recent past. (Duhigg, 2012 ) What is however more critical in terms of overall impact of globalization on Apple is the way it has been to reshape global culture. Apple’s products are considered as hot selling items for teens and young consumers looking for entertainment on the go. Several of Apple’s products have actually provided entertainment which can be enjoyed at any time and every time. Though Apple has not officially entered into developing countries markets however, its products including IPhone are readily sold in developing countries thus bridging the gap between developed and developing countries in terms of use of latest technology. Culturally and socially, Apple therefore has been able to dominate the global scene by introducing new and unique changes in local cultures. Technologically, it has also been able to change the way technology was used by consumers. Globally, Apple has been able to reduce the gap between users and technology and have provided cheap technology products to mass market which can offer entertainment and utility to common users. Apple therefore redefined the way technology; personal computers and entertainment go together.( Freeland,2011) It has been now argued that Apple has virtually killed the personal computer as the overall global market has shifted towards more compact hand held touch screen tablet PCs. Apple therefore has redefined the personal computing by introducing technologies which have effectively replaced the need for having personal computers. It is also important to note that the growth of Apple has actually resulted into dynamic competition at the global level. Global firms which were previously unknown have now been able to come up with products which are similar to that of Apple but are relatively cheaper. On the global level, smaller firms from China and other countries are offering cheaper alternatives to Apple products. Conclusion Above discussion suggests that Apple has been able to dominate the industry in which it is operating. Its recent growth has allowed it to actually take advantage of locking in its customers through superior quality products. It has also been able to take advantage of the costs and is earning relatively higher margins as compared to other players in the industry. It has been suggested that Apple’s margins consistently rank over 50% indicating the ability of the company to take advantage of its growth. The rapid rise of Apple however, has also created significant legal challenges for the firm also. Increasingly, it is becoming part of a legal battle against Samsung and other players in terms of patents and intellectual property. Apple has been following sustainable development practices and is in compliance with all the major international laws related with carbon and greenhouse emissions. It is also important to note that Apple comprehensively reports its carbon emission footprints and have been able to reduce it per revenue dollar despite the fact that its revenue has increased. Such great record therefore suggests that Apple takes greater care in designing its processes in order to comply with the international standards. Overall, the influence of stakeholders is relatively low as consumers are relatively locked-in by Apple through its high quality products. The fact that Apple has not being paying the dividends do also indicate that shareholders may not be able to exercise the relative power they could other assert on any other firm. Competitors and government both can have relative influence over the decision making process of Apple. Apple Inc. has proved itself as one of the leading change agents in globalized world by redefining the way entertainment and personal computing is now used in the world. References Bbc.co.uk 2012 BBC News - Apple ordered to pay damages to Samsung by Dutch court. [Online] Available at: http://www.bbc.co.uk/news/business-18529756 [Accessed: 1 Aug 2012]. Duhigg, C. 2012 Apple’s iPad and the Human Costs for Workers in China - NYTimes.com. [Online] Available at: http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?pagewanted=all [Accessed: 1 Aug 2012]. Fiennes, C 2011 What the sustainability movement can learn from Apple | Guardian Sustainable Business | guardian.co.uk. [Online] Available at: http://www.guardian.co.uk/sustainable-business/blog/sustainability-marketing-behaviour-change-lessons-apple [Accessed: 2 Aug 2012]. Freeland, C. 2011 How the iPod Explains Globalization - NYTimes.com. [Online] Available at: http://www.nytimes.com/2011/07/01/world/asia/01iht-letter01.html [Accessed: 3 Aug 2012]. Levy, S, 2008 25 Years of Mac: From Boxy Beige to Silver Sleek. [Online] Available at: http://www.wired.com/techbiz/it/magazine/17-01/ff_mac [Accessed: 2 Aug 2012]. McCracken, H 2012 It’s Time to Stop Talking About the Apple Cult | Techland | TIME.com. [Online] Available at: http://techland.time.com/2012/01/26/can-we-stop-talking-about-the-apple-cult-now/ [Accessed: 1 Aug 2012]. Reisinger, D 2012 Apple's iPhone margins hit 58 percent, nearly double iPad's | Apple - CNET News. [Online] Available at: http://news.cnet.com/8301-13579_3-57481203-37/apples-iphone-margins-hit-58-percent-nearly-double-ipads/ [Accessed: 1 Aug 2012]. Reuters.com 2012 Apple not turning blind eye to supply chain problems: CEO| Reuters. [Online] Available at: http://www.reuters.com/article/2012/01/27/us-apple-supply-idUSTRE80Q20T20120127 [Accessed: 2 Aug 2012]. Read More