Environment assessment of Apple Inc - Research Paper Example

Environment assessment of Apple Inc. of Table of Contents Introduction 3 Business environment: internaland external factors 3 Internal environment of Apple 3 External environment of Apple 4 Porter’s five force model 4 Threat of substitute products 5 Bargaining power of buyers 5 Strategy to manage opportunity, threat, strength and weakness of Apple 6 Opportunity 6 Threat 7 Strength 7 Weakness 7 Core competencies of Apple and its role in Value Chain of the company 8 References 9 Introduction Apple Inc. is an American multinational corporation that is well-known for consumer electronics and its unique software. The company mainly produces phones and tabs and other relevant accessories. Apple is a publicly owned company, which is registered with NASDAQ in the United States of America (USA) (Apple Inc., 2014a). The aim of the paper is to analyze internal and external environments of the company and its impact on organizational operations. Business environment: internal and external factors Business environment is defined by the direct and indirect components that may have a positive or negative impact on business. These components are observed within closed surroundings of a business, which can be internal as well as external in nature. The external forces include political, economic, socio-cultural, technological, legal and environmental factors. These forces have a significant bearing on an organization, but are beyond control of the same. On the contrary, the internal forces include controllable factors that are limited within the boundaries of an organization such as, organizational and management structure, organizational mission and objectives as well as organizational culture (Baron, 2003). Internal environment of Apple Apple’s internal environment is defined by its vision, mission and objectives and organizational culture. The mission of Apple is to present products in an innovative manner. Innovation is the key strategy for the company that majorly drives its success. The company delivers quality product with attractive outlook and features. One of the major internal strengths of Apple is robust research and development team. Moreover, Apple has a participative organizational culture, where every individual contributes significantly towards developing better product and services (Apple Inc., 2014a). External environment of Apple The external environment of Apple is mainly driven by technological development and political and economic scenario of its home country and host countries. Apple is one of the few companies that are highly dependent on technologies. The company sells its products through online store and has very limited number of physical stores in different countries. Apple has adopted differentiation strategy in order to stay ahead of its competitors. Then again, given the economic scenario, Apple products are not accessible to all consumers in terms of cost. One of the major economic aspects of Apple’s external environment is that products offered are comparatively expensive, which presents a great opportunity for its competitors such as, Samsung, Nokia and Google (Apple Inc., 2014a). Porter’s five force model Competition in any industry can be most appropriately described using Porter’s five force model. In the current paper, the competitive strengths of Apple have been explained using the same. The main components of the model are: Intensity of rivalry within industry Threat of substitute products Threat of new entrants Bargaining power of buyers Bargaining power of suppliers (Grundy, 2006; Miller, 1988). In context of Apple, the paper will mainly focus on ‘threat of substitute products’ and ‘bargaining power of buyers’, along with strategies that can be applied in order to improve its strategic position with respect to these components of the competitive model. Threat of substitute products According to Porter, the threat of substitutes shapes competition within an industry and unless there is demand for a particular product, substitutes may not have any specific impact (Grundy, 2006). It was observed that although Apple is the most favored company as a retail vendor of tablets, its market shares have gone down significantly due to launch of low cost tablets by the competitors such as, Samsung, Asus and Blackberry. In addition, consumers are shifting towards budget phones with similar software and outlook owing to their declining disposable income (The Wall Street Journal, 2014). Previously, Apple faced low competition level as that of innovation was low; but presently, almost all companies are competing at the same level in terms of software and hardware superiority. There is little product differentiation that Apple can incorporate regarding software, but it can utilize the same strategy that the competitors are applying for hardware. Apple needs to upgrade the hardware features offered within a specific price range; in other words, the consumers must be provided with better product related services without increasing the cost. Bargaining power of buyers According to the Porter’s model, the bargaining power of buyers is determined by the concentration of consumers in an industry, product differentiation, brand identity and price sensitivity (Miller, 1988). Apple products are mainly purchased by individuals within the age group 15 to 40years on average and its product market can be segmented based on age, income and education level. Initially, Apple products were highly differentiated, especially the iPods, which had brought in a huge market share (Apple Inc., 2014a). With introduction of low cost portable music players, market share of Apple has been affected. Nevertheless, the company is still recognized for its brand quality and value. The brand has high reputation in developed markets and is slowly gaining importance in the developing economies as well. Apple must focus on developing brand loyalty as it has been observed that consumers, who have once purchased an Apple product, prefer repeating the same as well as recommend those to their peers. Strategy to manage opportunity, threat, strength and weakness of Apple Opportunity The major opportunity lying ahead of Apple is that of capturing the market of emerging economies. The company is a well-positioned brand in the developed economies such as, the USA and the United Kingdom. Apple has a strong brand reputation all over the world, which must be utilized to facilitate growth in market share. Apple requires promoting its products to a greater extent so that consumer awareness and need for the product can be developed. The various benefits of purchasing Apple products include access to cloud based services and unique and superior software platform. Apple needs to capitalize these benefits and prove its superiority to the consumers. In order to reach more consumers in the emerging economies, the company can setup more number of retail stores and undertake promotional measures such as, occasional discounts (The Wall Street Journal, 2014). Threat The major threat to Apple’s products is rapid technological changes. Presently, the main competitor of Apple’s operating system (OS), iOS, is android OS. Android OS is developing at a quicker pace compared to that of Apple, which may result in iOS being dominated by the same. In addition, almost every company such as, Wal-Mart and Amazon, have online music stores, which can act as major competition for Apple music store. Similar to Apple, other companies are also selling eBooks, which is another reason of concern. On Apple store, although iTunes are available free of cost, certain applications are quite expensive and cannot be downloaded from other stores, unlike android applications. Apple must resolve this issue to prevent the above mentioned threats (The Telegraph, 2013). Strength The major strengths of Apple include strong market position, brand loyalty and a variety of products, software and applications that can be interlinked. The other strengths include high quality of service, a strong research and development team and robust financial position (Apple Inc., 2014a). Apple can use these strengths so as to improve its market share. According to Wall Street Journal (2014), Apple is entering in partnership with IBM Corp. to enhance market for iPads by developing more that 100 workplace apps. Apple, being a highly reputed organization with soaring brand value, can easily target the corporate sector for selling its products. Weakness High cost is a major weakness for Apple products, which is being utilized as an opportunity by most of the competitors. Currently, the market is flooded with low cost android based phones that offer the consumers with numerous free applications compared to that offered by Apple. Furthermore, low budget products that are recently launched by Google and Samsung may also prove as a threat to the company. Apple must work on the cost factor in order to improve and recapture market share as well as maintain the market position. Another strategy that Apple can implement is that of launching few products within reasonable budget, besides the high-priced products (The Telegraph, 2013). Core competencies of Apple and its role in Value Chain of the company The resources, capabilities and core competencies of Apple include participative work culture, highly motivated and skilled workforce, innovation driven work environment and strong research and development team. The other strengths are strong relation with investors, excellent post purchase support system and other services. According to Porter’s value chain model, there are two kinds of activities; primary and supportive activities. The primary activities include inbound logistics, operations, outbound logistics, marketing and sales and services. Apple is a large company with an integrated logistic system, which cannot be imitated by small scale rivals. It has a well-built procurement system and skilled research team in order to facilitate technology development. The company uses its technological advancement for selling products and has highly skilled manpower for managing after sale services. The company does not compromise on the product quality, thereby delivering outstanding products compared to that of its competitors. Overall, Apple has perfectly integrated core competencies and capabilities in its value chain so as to deliver best quality to the consumers (Apple Inc., 2014a; Apple Inc., 2014b; Hines, 1993). References Apple Inc. (2014a). Apple info. Retrieved from http://www.apple.com/about/. Apple Inc. (2014b). Working with Apple. Retrieved from https://www.apple.com/about/workingwithapple.html. Baron, D. P. (2003). Business and its Environment. Englewood Cliffs, NJ: Prentice Hall. Grundy, T. (2006). Rethinking and reinventing Michael Porters five forces model. Strategic Change, 15(5), 213-229. Hines, P. (1993). Integrated materials management: the value chain redefined. The International Journal of Logistics Management, 4(1), 13-22. Miller, D. (1988). Relating Porters business strategies to environment and structure: Analysis and performance implications. Academy of management Journal, 31(2), 280-308. The Telegraph. (2013). Apple iPad market share falls as tablet market booms. Retrieved from http://www.telegraph.co.uk/technology/apple/9839631/Apple-iPad-market-share-falls-as-tablet-market-booms.html. The Wall Street Journal. (2014). For Apple, iPhone Roars and iPad Whimpers. Retrieved from http://online.wsj.com/articles/apple-reports-strong-iphone-sales-1406061049. 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