Apple Inc External Analysis - Essay Example

?Apple Inc Case Study Introduction The company Apple Computer was established in the year 1976 by Steven Wozniak and Steve Jobs by selling personal computers named Apple I. The company grew, introducing new and innovative products ranging from personal computers in both desktop and portable form, personal media players, multimedia cellular phones, iPods, iTunes, Software, and hardware. Presently, the company has its operations in the Americas, Europe, Africa, Middle East and Japan. In addition, as Marino, Hattaway and Jackson (2000) report, there are retail Apple Stores in US, Italy, Japan, Canada and UK. In the year 2009, the company announced a net quarterly profit of $ 1.23 million. From figures, it becomes evident that the total net sales of the company rose from $ 8,279 million to $ 32,479 million between 2004 and 2008. However, despite being the introducer of most of the modern electronic equipments, the company finds it difficult to retain its superiority in the market. The External Analysis a) At this juncture, it seems useful to use Porter’s Five Force Analysis (Cited in Kurtz, Mackenzie and Snow, 2009, p. 56) to see the different aspects that would affect the company performance in the future. Now, each of the five factors is analyzed individually for Apple. 1) The degree of rivalry It is an accepted fact that Apple is facing serious threat from other players in all products. a) Computers Though Apple is the first one to enter personal computer selling market, presently, it only holds 8.7% of the US personal computer market. The main competition comes from other players like DELL, Hewlett Packard, Acer, and Toshiba. U.S personal computer market share– 2009 (in %) DELL 26 Hewlett Packard 25.7 Acer 14.2 Apple 8.7 Toshiba 6.8 (Source: Marino et al 2000) b) Media player It is in this sector that Apple enjoys a considerable degree of superiority over other competitors. Music player market share – 2008 (in %) Apple 71 ScanDisk 11 Creative 2 Microsoft 4 (Source: ibid) In addition, there are other players like IRIVER in Korea. c) iPhone Apple introduced its iPhone in the year 2007. It provided a multi-touch screen, virtual keypad, email, net browsing, and local wi-fi connectivity. However, the company lags behind Nokia and Research in Motion in this sector. Market share in smart phones- 2009 (in %) Nokia 41 Research in Motion 20 Apple 11 (Source: ibid) It is evident that as the market matures, there is a growth in the smart phone sale of Apple. As Marino et al (2000) reports, it grew from 3% to 11% between 2006 and 2009. 2) Threat of new entrants The threat of new entrants is highly visible in the music industry. The first one is Microsoft. The Zune hard disk player introduced by Microsoft introduces a lot of variety including wireless connectivity of 30 feet. In addition, Microsoft has started Zune marketplace, offering unlimited music downloads for $ 14.99 a month (Marino, p. 365). Another relatively new entrant is ScanDisk. 3) Threat of substitutes One has to admit that the threat of substitutes is much higher in the case of Apple, especially because of the premium price the company has set for its products. In fact, according to Marino et al (2000), Apple enjoys ultimate superiority in personal media player industry where it offers four products; the iPod Shuffle, iPod Nano, iPod Classic, and iPod Touch. However, as a response to iTune, Microsoft has started Zune brand which offers all the features of a flash player and in addition, it allows wireless connectivity and beaming of audio and video up to 30 feet distance. 4) The buyer power Considering the market, one can say that the buyer power of Apple is mediocre. Its operations are limited to geographic areas of Americas, Europe, Africa, Middle East and Japan (ibid). However, the impact of forgetting markets like India where IT flourishes has considerable impact on the performance of Apple. In fact, the company addresses only a single category; those who are willing to pay a premium price for high quality technology. 5) The supplier power In fact, Apple shows a poor supplier power. This is clearly evident from the fact that the company still considerably fails to address all sections of the society. Though the company succeeds in introducing new and inventive technology, it fails to reach masses, and other followers gain a better position. This is largely due to the high price of Apple products. As studies prove (ibid), all the products of Apple are in the constant threat of getting replaced by other brands that can offer almost a similar quality and that too at a considerably lower price. Even the iTune is in the constant threat of competition as Microsoft started its Zune Marketplace. PESTEL Analysis It seems that the PESTEL will best identify the major threats and opportunities faced by Apple in its work environment. The acronym PESTEL as stated by Campbell and Craig (pp. 501-503), stands for political, economical, social, technological, environmental, and legal. 1) Political factors There is a general consensus that the fight between China government and Google is going to benefit Apple. However, the fluctuations in the top management position of the company, and volatility it expresses in issues ranging from contracts, pricing of products, and environmental issues, one has to wait and see as to how much the company is going to benefit from this. 2) Economical factors Studies prove that the economical factors have a direct influence on the performance of Apple. For example, though Apple introduced personal computers, its share of computer market is still insignificant despite the fact that its applications are highly effective. As Marino (2000) states, the reason can be found in the premium price the company has set for its products. In addition, it has been observed that when a market matures, that is, when a variety of products of the same quality are available, price becomes the main point of consideration. Thus, according to Marino et al (2000), rivals like Microsoft, HCL, DELL, and Hewlett Packard have become serious opponents in the fact that they aim all categories of the society. 3) Social factors From studies it becomes evident that there are certain social factors that have a direct effect on the performance of Apple. The first one is the exclusiveness of the programs of Apple products, including computers, iPhone, iPod, and iTune. This is evident from the finding that people hesitate to use Mac because of its proprietary operating system. In other words, the exclusives or secrecy of Apple products are not so highly enjoyed by customers as expected by the company. Another serious issue is the company’s lack of operation in certain important markets in the world. For example, in Asia, the company only has operations in Japan, forgetting flourishing markets like India. 4) Technological factors One can see a lot of issues in the technological factors. It is an indisputable fact that Apple is the pioneers in all technological innovations. However, it is ironic to note that the company fails to capitalize on its technological capabilities. The company failed miserably in the personal computer section despite its technological abilities. 5) Environmental factors In fact, the company faced the wrath of environment protection groups for its lack of concern about environmental issues. As always, the company misjudged the situation, and came back to the track much later. History saw Greenpeace protestors gathering at Apple doors protesting its lack of care about environmental issues. As Gardiner (n.d.) states, While its competitors like Dell, HP and Lenovo entered the good books of protestors much earlier, the Apple lagged behind facing all sorts of allegations from environmental groups like Center for Environmental Health. Though the company started many measures to protect the environment, like the fully recyclable Macbook Air computer, environmentalists are still suspicious of the company’s benevolence. So, the future of the company is, to a large extent, dependent on how it satisfies the environmentalists. 6) Legal factors In fact, the main issue the company is facing will be to satisfy the environmental organizations and meeting the standards set by various non-profit organizations. Though certain steps have been taken, they have not satisfied the activists. Internal Analysis Now, an attempt is to be made to analyze the internal capabilities of Apple. For this purpose, Barney & Griffin’s VRIO model is used. A company enjoys competitive advantage if it has VRIO resources. VRIO (Cited in Peng, 2008, p. 71) stands for Valuable, Rare, Inimitable, and Organization. 1) Valuable An assessment will prove that the products of Apple will not provide chances for new opportunities in the market. Either the company will have to introduce new products or will have to improve on the existing ones. In either way, there will be competitors closely following Apple. In all the cases, price is going to the main concern for the public. 2) Rare Studies prove that the personal computers of Apple are excellent in business and personal purposes. However, none of the products from Apple is unique, thus losing competition in the market. For example, personal computers and smart phones are produced by a number of companies and none is considerably different or inferior to the others. The only exception is iTunes and iPads from Apple. The fall in iTune will be accompanied by the fall in iPads. None of the products from Apple is scarce so far. 3) Inimitable Here too, the performance of Apple is mediocre. In the case of personal computers, the Apple products seem to possess no special features that are difficult for others to achieve. In fact, the software of Microsoft seems more user-friendly to many. In fact, as Marino et al (2000) state, iTunes have become somewhat inimitable by achieving considerable profit; however, Microsoft has already started its Zune Supermarket to compete with iTunes. 4) Organization In this case, the company seems to achieve as its product secrets are entirely kept by the company. For example, Mac products have exclusive proprietary rights. In addition, iTunes have Apple’s proprietary Advanced Audio Coding (ibid). However, it is questionable as to how much this exclusiveness benefits the company. It seems that making its products compatible with other products will be of advantage to the company which is evident from the fact that developing a Windows based iTunes gave the company millions of new customers (ibid). Financial Analysis At this juncture, a look into the financial history of the company over the past few years will give more insight into the performance of the company. From charts (Marino et al, 2000), it is evident that the net sales of the company rose from $ 13,931 million in 2005 to $ 32,479 million in 2008. In the same period, net income grew from $ 1,328 million to $ 4,834 million. In addition, the quarterly profit of the company reached 1.23 billion in 2009 from the 1.07 billion of 2008. Thus, it is evident that the company is in the path of growth. Current Problem Diagnosis From the above, it becomes evident that the main problems faced by the company are as follows: 1) No product of the company is unique in nature 2) The company offers its products in a limited geographical area and the company is in need to spread to new areas. 3) The company faces acute competition in all products and markets. Other competitors offer same quality products at lower prices. 4) The company fails to capitalize on the new things it introduces. 5) The proprietary products are, to some extent, hindering the growth of the company. Generation of strategies It seems that the company faces a lot of challenges that need to be met at the earliest. Firstly Ansoff Gwowth Matrix is used to develop a market strategy. Market Penetration Product Development Market Development Diversification (Source: Kumar, 2010, p. 175). 1) Market penetration It seems that Apple can easily gain dominance in all fields through certain effective strategies. The first step that can be taken by Apple is to price the products strategically. As it is stated by Marino et al (2000), the Apple products are priced heftily. Another point of consideration is the fact that none of the Apple products is technologically inferior to other competitors, rather much better than them. Thus, pricing the products at a lower rate will help eliminate many competitors from the scene. In addition, more should be spent on advertisements and on making its products compatible with other competitive products. For example, one who purchases a Microsoft Zune MP3 player should be able to have iTunes in it. 2) Market Development Another vital strategy is to develop new markets. As it is evident from Marino et al (2000, p. 356), the company products are available in very limited geographical areas. The company can increase its sales by spreading to other geographical areas like Asian countries like India. While entering new market, and also in its existing market, it should satisfy all sorts of customers, not only the elite ones. 3) Product development It is evident that the company so far survived only because it managed to introduce new and innovative things in time. It should continue bringing new products into the market so that the products remain unique. 4) Diversification Yet another vital measure for Apple is diversification. When the company explores new markets, it should think about introducing new products meeting the needs of the customers. The same issues can be addressed and strategies can be developed through TOWS too. 1) Maxi-Maxi Here, the strength of the company is used to maximize the opportunities. In the case of Apple, the strength is its ability to introduce new and innovative technology. For example, introducing a new step in iTunes and personal media player will make sure that the company will continue enjoying its superiority in the field. Otherwise, the company is in the constant threat of losing its position. 2) Max-mini Here, strength is used to minimise threats. In the case of personal computers where the company is faring poorly, simple reducing the price of its products will give the company more customers. In addition, offers like free subscription to iTunes can be offered while purchasing personal computers. 3) Mini-maxi Here, weakness is reduced by making use of opportunities. It is known that Apple is facing serious competition in the existing market. So, a good way for the company will be to spread to new markets. Conclusion In total, it becomes evident that Apple is facing serious threats in the market, and its survival is really at stake despite its reasonable performance in the recent past. The success of the company in future will be purely dependent on the strategies the company adopts at this juncture and also depends on the company’s success in bringing new and innovative products to the market. The success mantra for the company in the future should be pricing the products considering all sections of society, spreading to new markets, and introducing new things first. References Campbell, D J & Craig, T 2005, Organizations and the business environment, Edition 2, Butterworth-Heinemann, Oxford. Gardiner, B n.d., “Apple’s Green Notebook does not impress environmentalists”, Wired, viewed 29 March 2011< http://www.wired.com/gadgets/mac/news/2008/01/green_apple> Kurtz, DL., Mackenzie, HF & Snow, K 2009, Contemporary Marketing, Second Edition, Cengage Learning, Canada. Kumar, D 2010, Enterprise growth strategy: Vision, planning, and execution, Gower Publishing Ltd, UK. Marino, L., Hattaway, J and Jackson, KB 2000, “Apple Inc, in 2009”. Peng, MW 2008, Global Strategy, Edition 2, Cengage Learning, US. Read More

 

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