Analysis of Apple Incs Business Environment - Case Study Example

Analysis of Apple Inc.’s Business Environment Affiliation Introduction Apple Inc. is a major multinational operating within the technology and communication industry through the development of phones, personal computers and other electronic gadgets. The company was established towards the end of the last century and has made significant progress to grow into a major force in the telecommunication industry. Based in Cupertino, California, Apple Inc. saw significant transformation under the leadership of the former CEO Steve Jobs who was also a founder of the company. Today, Apple Inc. markets popular products under various brand names including iPod, iPhone, Macintosh computers and other communication gadgets operated by the Mac OS X operating system (Kumar, Teichman, & Timpernagel, 2012). The external environment of the company influences its success and competitive advantage relative to the operations of other companies as will be discussed in this paper. PESTEL analysis and Porter Five Forces will be used to analysis the operational environment of Apple Inc. and how it affects its success and competitiveness in the face of new players in the industry. Steve Jobs assumed the leadership of Apple Inc., a company that he had helped establish at a time when the products performance in the market was dismal (Finkle & Mallin, 2010). Apple Inc. PESTEL framework PESTEL is a valuable too that is used in the strategic analysis of the external environment and how it affects the operations of a business based on its size, growth, the operational constraints and level of development. Apple Inc. is a leading digital asset management organization that has defined its role in the development and introduction of smart phones into the market. Compared to other players in the industry, Apple Inc. is the only company that produces both the hardware and software for its devices (Cusumano, 2013). In order to understand the operation of Apple Inc., the potential and opportunities and the challenges, which are attributed to the environment, a PESTEL analysis is helpful. PESTEL analysis describes the political, economic, social, technological, legal and environmental factors that influence either positively or negatively, the operations of a company (Kwateng, Manso, & Osei-Mensah, 2014). Apple Inc. political environment As a company that operates in the international business environment, Apple Inc. is exposed to a dynamic political environment that is influenced by the policies of the government. From China to the United Kingdom, South Africa to Mexico and Japan to Germany, Apple Inc. has emerged as a master of all trades, increasing its presence in all these environments. However, the difference in the geopolitical uncertainties in these countries affects the global policies adopted by the company. Apple Inc. has outsourced the services of agents from various countries including Ireland, China, Korea, the Czech Republic and the Republic of Cork (Kumar, Tuchman, & Timpernagel, 2012). The manufacturing operations and distribution of its products in such countries will also be affected in the event of political turmoil. Entry into other internal markets also remains a major challenge for Apple Inc. due to the variability of the tax regimes adopted by different countries across the world. Despite the liberalization of the world market, countries have failed to harmonize their tax approaches in order to improve the free operation of multinationals. In the United Kingdom, for example, the value added tax has increased to 20% from 17.5%, a political decision that is likely to affect the success of the company (Blessing, 2014). Upon taking over from gilbert Amelia, Jobs changed the entire board of the company and brought in people he believed could deliver results to the company (Sobel, 2007). This decision contributed to the growth that Apple Inc. witnessed in the years that followed. The introduction of Microsoft operating systems for mobile phones continues to threaten the dominance of Android and the infiltration of the market by Apple Inc. Microsoft launched its mobile Windows 8 operating system by collaborating with major companies like Nokia Inc and HTC. This approach has continued to impact on the aggressive campaign by the Apple Inc. to increase the dominance of its mobile operating system in the market of smartphones. Economic factors A global business entity is faced with a myriad of economic challenges as countries have different situations and level of economic development. World economic conditions influence the profitability of the company as the demand for its products declined with a decline in the economic development (Saxby, 2004). The high level of unemployment in the countries has affected the purchasing power of the target market, thus reducing sales of Apple Inc. products. The instability of oil prices is also likely to have an impact on the world inflation index, which will be translated on the costs of the products and availability of disposable income. Despite the gloomy picture that has been painted economically, positive growth has been witnessed in other sectors which will translate to an increase in sales at Apple Inc. (Blessing, 2014). Social factors The design and quality of Apple Inc. products has contributed to its publicity and public perceptions towards the company in different markets across the world. Within the global market, demand for luxury products has increased among technology consumers, thereby contributing to the exemplary performance of the company. The growth in the music industry has also provided a significant market to Apple Inc. since its iPad product has been targeted by many market players; thus, increasing its demand and level of sales (Hamlin, 2004). Social factors such as modern lifestyle have benefited Apple Inc. and it is likely to provide more opportunities to the company as the global market embraces technology. Technological, legal and environmental factors Being a key player within the technology industry, technological changes in production, marketing and sales will influence the performance of Apple Inc. However, the company has maintained a good reputation by being at the forefront of introducing highly competitive products into the market (Sahoo, 2012). While other competitors like Microsoft and other computer manufacturers rely on operating systems from other vendors, Apple Inc. has stood out as the developer of both software and hardware. The company has invested significant amount of its resource on research and development, which has enabled it to be a leader in smartphone and computer innovation within the larger telecommunication market (Sauer, 2001). Changes in health, business and safety laws in the United States and other global markets are also likely to affect the success of the company, as new approaches will be introduced to meet the emerging regulatory measures. As an electronic company, Apple Inc. is faced with various legal constraints especially within new markets like China and Europe where labour laws are different (Ganotakis & Love, 2012). Recycling of electronic products is a major challenge to many telecommunication industry players due to the threat that used electronic gadgets have on the environment (Robert, Cameron, Kristine, & Andre, 2011). Apple Inc. has also faced a challenge of similar magnitude as it introduces new and advanced technological devices to meet the needs of the market. The desire to replace the old machines based on regulations provided by different countries has high impacts on the success of the company. Porter Five Forces analysis of Apple Inc. Porter Five Forces tools are important in the determination of the level of external competition and the power that important players in the industry play in determining the success of the company. With Porter Five Forces analysis, the strengths and weaknesses of competitors to an industry are analysed in order to demonstrate the opportunities that are available to current players and potential new entrants. Porter Five Forces analysis is made up of five elements that include the analysis of the bargaining power of suppliers and customers and the threat of new entrants and substitutes all of which contribute to the level of competitive rivalry in the industry (Popescu & Dascălu, 2011). Threat of new entrants into industry Today, the financial and innovative muscle of Apple Inc. has enabled it to dominate the market and control the consumer electronic markets. The high cost of establishing a company within the electronic consumer industry attributed to the financial and resource powers of major players such as Apple Inc., Samsung and Microsoft has increased the cost of entry. Making significant impacts in the market demands high investment on research and development, which most new entrants may not have the muscles to pull. The uniqueness of the different products produced by industry players has also lead to market segmentation and loyalty. The wide spread of products marketed by the companies will also increase the operational cost among new entrants into the company, thus increasing cost of success (Mavengere, 2013). Competitive rivalry in the industry The differentiation of Apple Inc. products has also watered down the threat presented by the rivals in the industry like HP, Microsoft, Dell and Samsung. Apple Inc. targets different sectors of the technology market including consumer electronics, computers, mobile phones, software and online products, which are accessible from its stores (Porter, 2008). While competitors attempt to assert their influence through mainstream products like computers and mobile phones, Apple Inc. has diversified its market and improved its global image and market control. Apple Inc. rivals have put relentless efforts in research and development as a way of introducing competitive products into the market (Popescu & Dascălu, 2011). However, the issue of differentiation that Apple Inc. has perfected has given it significant advantage as compared to its competitors within the industry. Apple Inc. attempts to be the first company to introduce new innovations into the market including iPhone, the iPad and other products which other competitors in the industry have emulated and at times causing copyright legal battles as was witnessed between the company and Samsung. Threat of substitute products Electronic and technology industry has high presence of substitute competitive products, which are developed to serve the same purpose within the industry. For example, the iPod product of Apple Inc. has multiple substitutes within the market including the Samsung and Sony MP3 players, which aim to serve the same purpose and target the same market segment. The iPad introduced by Apple Inc. has been the source of major copyright infringement wars pitying Samsung and Apple Inc. as the latter developed the Samsung tab with similar features as the one developed by Apple Inc (Mallin & Finkle, 2011). Samsung has also developed the Samsung galaxy note, which Sony Erickson has introduced its Xperia tablet version to compete with the iPhone introduced by Apple Inc. However, Apple Inc. has adopted an economy of scale approach, which has significantly lowered the cost of its durable and high quality products unlike its competitors. The marketing approach and the brand image adopted by the company have also enabled it to beat competition from other companies with substitute products. Bargaining power of suppliers Suppliers within the technology sector have significant bargaining power due to their products high demand by different companies within the technology industry. However, Apple Inc. uses unique products, which are supplied by few companies in different parts across the globe, thus giving suppliers the influence on the prices and quantity supplied. Other players within the industry such as Samsung, Philips among others supply the microprocessors chips used by Apple Inc., which explains the bargaining power that they possess. Other microchip suppliers within this industry also work with other companies that desire their products, which contribute to an increase in demand. Bargaining power of buyers Despite the presence of substitute products within the technology industry, consumers have little bargaining power on Apple Inc. due to the uniqueness of its products. The company has established a strong market presence, which has given its advantage of influencing the prices of its products against the consumers. The unique and differentiated nature of products marketed by the company has given it an edge over consumers, thus allowing Apple Inc. to price their products based on internal parameters as opposed to forces from the consumers (Grossman, 2005). Consumer of luxury products do not bargain or care about the prices but rather the reputation and impact that such products will have on their lives. Apple Inc. Porter Value Chain Analysis Value chain analysis enables a company to identify its primary and support activities, which contribute to its final product. Value chain analysis is important in the reduction of production cost and gives room for more product differentiation in the face of stiff competition. In value chain analysis, the inbound logistics, operations, outbound logistics, marketing and sales and the services of a company that contribute to its profitability are defined. Inbound logistics components at Apple Inc. are obtained from multiple sources within the industry, which contributes to its competitive strength and product diversification. The company has outsourced its hardware products to other primary partners in different parts of the world including Asia such as Foxconn in China (Crosman, 2012). The operations of Apple Inc. have made significant efforts to ensure the reduction of the toxic substances from its products and even from the environment. The company has developed a policy that ensures that its products are free from BFR and other harmful toxins. Before being released into the market, the company has adopted an approach of ensuring that none of their products has bromine and chlorine toxins. The aluminium enclosure of the products developed and marketed by the company has allowed for the easy recycling of the products and the elimination on the environmental impacts that they product (Crosman, 2012). The company also uses original equipment manufacturers as a way of improving the economies of scale and enhancing the safety of the products. On outbound logistics, Apple Inc. uses a variety of direct and indirect distribution channels, which increase the presence of its products within the market. Major channels that the company has adopted over the years include the retail stores, 3rd part cellular networks, wholesales and even value added retailers located in different parts of the world. The company has adopted various efforts in order to improve its distribution capacities by an expansion of its retail stores in different parts of the world. As a result, the company has improved the buying experience of its target market and increased its global reputation as far as customer service is concerned. Economical packing of Apple Inc. products has also enhanced its reputation within the market and placed other competitors at an edge (Crosman, 2012). For example, the company’s product packaging is slim and light yet has the capacity to protect the products from hostile external environment, improve transportation efficiency and reduce material waste from Apple Inc. packaging approaches (Crosman, 2012). Conclusion Apple Inc. has dominated the technology industry for the better part of this decade which has been attributed to its great leadership approaches. Despite the tough market competition, Apple Inc. continues to increase its financial strength, market dominance and customer base within the market. In this paper, the external environment of the technology and telecommunication industry has been provided based on the confines of Porter Five Forces analysis, porter value chain analysis and PESTEL external environment evaluation. References Blessing, N. (2014). 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