The Operations of Apple - Essay Example

Apple Inc. PESTEL Analysis of Apple Inc. Introduction A PESTEL analysis is utilized by companies in order to identify aspects in their external environment which influence their performance and operations. External factors affect both the demand and supply of the company’s products and their costs in the market. This section seeks to address a PESTEL analysis of Apple Inc. in the marketing of their products. This is will include the factors which enhance their improvement or decline in the market share. Apple’s products are affected by political, economic, social, technological, environmental and legal factors which are characteristic of the countries they operate in. most of these factors are caused by the fact that there are many countries which are involved in the manufacture of Apple’s products. While most of the manufacturing activities take place in Japan, assembling activities take place in Europe and the United States. This process can be affected in terms of transport across borders considering that situation in one country have a bearing on the activities of Apple products in other counties (Porter, 1985). The PESTEL analysis of Apple Inc. can be understood as following. Political Factors Most of the operations of Apple are done outside America. This implies that the overall performance of the company is prone to problems raised by bad international relations such as war of terrorism, political issues, and geopolitical instabilities, natural and man-made disasters (Apple Inc. 2008). Other problems are caused by distribution and transport issues between the two counties which can disrupt the whole operations. Such international challenges which are beyond the control of the company are common in Apple (Bright Hub, 2010). Economic Factors The economic factors affecting Apple Inc. are attributed to the depression which caused immense negative effects on most sectors of the economy (Business Case Studies, 2012). The rise in the inflation rate has led to overall reduction in the purchasing power of consumers. Most countries where Apple operates experience economic problems such as inflation, unemployment and slow growth. USA and Europe are experiencing high rates of unemployment recently which reduced the sales of their technological products (Marketing Magazine, 2005). Social Factors Globalization has positive effects on Apple Inc. this is because technology is very influential in promotion of globalization. As such, Apple is able to market and promote most of its products globally. Furthermore, the MP3 sector of Apple enables it to cater for a wide market since the social influence is positively spread in the music industry. Apple has developed a very active virtual market which is used to market their products. Their products are also high quality and with class and design which makes it appealing to most of the people (The Economist, 2012). Technology Factors There is a lot of competition in the industry for technological products as companies enter into the technological market frequently. Furthermore, technology changes from time to time requiring Apple to update its technology into new and improved models (Simon, & Hitt 2003). The fast technological changes coupled with the intense competition especially in the smart phone industry causes Apple to spend a lot of money on improving the quality of their products (Mina, Connell, & Hughes, 2009). This involves investment in research and developed especially given the short nature of their products life. More research and development affects the financial performance of the company negatively (Washington Post Economy, 2012). Environmental factors Most of the manufacturing companies worldwide are required to observe corporate social responsibility in the protection of the environment by reducing pollution and in production of products which are recyclable if not biodegradable. Environmental protection and Health & Safety initiatives and organizations impose regulations and laws of environmental protection (Harrison, & John, 2010). This has been the fate of many countries where Apple operates and thus it affects its production by raining its production costs. This is unfavourable to the financial conditions of the company. Europe and Canada are some of the most hit areas which have been affected as the regulations require production of recyclable products (Trade Vibes, 2008). Legal factors The legal factors affecting Apple Company are caused by the regulations and rules of different companies. These regulations and laws include labour laws, ownership of digital content, promotions and advertisements of products, consumer protections, tax, import and export requirements, anti-competition, anti-corruption, health and safety among others. These regulations cause negative effects in the operations of Apple in different countries (Ideavist, 2011). Conclusion It is imperative to say that the operations of Apple Inc. in many countries are a source of the many challenges which affect the operation of the products in the market. Apple’s products have been able to compete effectively in a market with stiff competition as they produce products which are fashionable and update their technologies regularly by looking for avenues of connecting with the global world. The iPhone gives many people an opportunity to go digital through a phone. The high quality of their products raises the operation costs and considering the transport issues which has to be undergone in order to connect the products globally and in different countries in which manufacturing take place is a major cause for the rise in prices of Apple’s products. This leads to high levels of competition but fortunately, Apple has been successful in solving problems resulting from inter-country activities (Apple Inc. 2008). Ansoff’s Matrix for Apple Inc. Introduction Ansoff Matrix is a marketing tool which was published by Ansoff in 1957 in the Harvard Business Review (Ansoff, 1957). These marketing tools are used by businesses to make decisions on the strategies to use in developing products with a competitive advantage, penetrating into the market and also growth of market share (Haberfellner, 2009). The Ansoff’s Matrix has two dimensions; one applied for new products and the other one applied for existing products. The matrix in widely used today by major international corporations. Apple Inc. has applied several strategies from the matrix in their products. While most of the rival companies use strategies like lowering prices to curb competition, Apple Inc. has continued to produce high prices products due to the increase in their operating costs. Apple has used market penetration and products penetration in marketing some of their products while there are many other proposed strategies in this paper which provide a way in which Apple Inc. can increase their competitiveness in the market. Ansoff’s Matrix for Apple Inc. products Ansoff Matrix is used by Apple Inc. to show the strategies which are used in the marketing of their products. This is because the marketing tools apply to companies which want to penetrate the market and those who wish to develop their existing product (Mercer, 2001). This matrix aims at providing Apple Inc. with the knowledge and the field experiences of the market situation which will enable them to develop strategies which are more suitable to their businesses. There are four categories in the matrix which are; market penetration, product development, market development, and diversification (Tutor2u, 2010). • Market Penetration is used by companies which want to introduce existing products into an existing market. • Product Development is applied by companies who wish to introduce new products into a market that is already in existence. • Market Development is applied by companies wishing to attract new customers with already existing customers. • Diversification entails a company trying to attract new customers with new products. Apple applies “Market Penetration” for most of it products which has enabled it to survive the stiff competition. The stiff competition faced by Apple in the market allows it to survive in the market. There is need to adapt to other strategies which will be effective in pursuing growth and development of their competitive position (CNN Money, 2012). In “product penetration”, Apple uses it to introduce new product into the market. Apple introduced iPad in a market where there was already an iTouch. The iPad had better qualities such as bigger size and better resolution. This makes the iPad a better option in the market because it has a better capacity to watch movies, capture pictures and connect to the internet (Stone, 2001). Apple can also use other strategies which will help it in gaining competitive advantage in the market. Due to the intense competition from the iplayer by Google’s which has reduced significantly the market share of Apple’s products, Apple needs to change its strategy to product development (Apple official website, 2012). One of the strategies Apple can utilize to add their competitive advantage in the market is product differentiation. Since Apple has several products in the market, this strategy will be effective in reclaiming the lost market share (Simon & Hitt 2003). Another strategy would be to reduce the prices of the Apple products. This will entail reducing the cost of production in order to be able to reduce prices without making loses. Another strategy could be the formation of strategic alliances. This will help Apple to enjoy the benefits of economies of scale of the existing firms in the market which are more conversant and can withstand stiff competition without losing their market share (Meyer, 2012). This will also enable Apple to improve the quality of the products while the market share will be improved. These strategies will enable Apple to compete in the market favorably (Simon & Hitt 2003). Conclusion This study has shown that Ansoff Matrix can be used by Apple Inc. as a marketing tool for its products. The reason for formulation of these marketing strategies emerges from the stiff competition which faces Apple products in the market. Thus, there is need to formulate strategies which will allow the company to cope with the competition and gain a competitive position in the market. Apple Inc. has faced intense price competition between rivals such as android. There is also a lot of investment that has been put in research and development to speed up product and process innovation. Some of the company’s products have been involved with occasional price wars as the main suppliers compete for market share. A lot of innovation is encouraged as it was with case of release of the iPhone. Apple Inc. has used several marketing strategies such as Market Penetration and Product Development to market their products. Some other strategies may involve Market Development where Apple Inc. in order to increase their competitive position (Haberfellner, 2009). Value chain Analysis of Apple Inc. Introduction Apple Inc. is very much involved with marketing of its products since they are products which need regular attention in terms of upgrading and updating features. Their marketing experience is shaped mostly by the ability of the company to experience and learn most of the techniques through their own experiences as they relate them to their core principles and expansion of their activities in various countries through partnerships. Value chain analysis of Apple Inc. will take into consideration the primary and secondary activities which have led to the transformation of the company and its products leading to outwit profitability of the company in spite of the high competition level in the market. This analysis will undertake to provide for the operations of Apple Inc. from manufacture to marketing in various countries which lead to an overall performance of the company (Gardiner, 2008). Value chain Analysis of Apple Inc. Value chain in Apple analyses the activities which are involved in Apple and how the activities aid in its competitive advantage (Esch, 2004). The analysis of the value chain of any company helps to understand the competition level of a company with regard to competition in the market. Apple’s value chain can be pursued by looking at the different types of operations it is involves in and how they are utilized to provide competitive advantage (Porter, 2006). Apple prides in focusing on designing their own products by themselves. This helps them in production of unique designs which are competitive in the market. The major selling point of Apple is its style and quality which they are able to capitalize on by designing high quality products. All the design operations are centralised in America (Wong, Lai, & Kee-hung, 2011). Customer Service at Apple has been fundamental in the development and growth. Apple values the role of customer service and there has been reservation of cash reverse which were generated at the time the company made unpredictable profits due to massive growth (Capon, 2008). This has been done by connecting with their customers globally through creation of virtual liking of the customer base. This has also been contributed to by the introduction of superior and upgraded products such as iPods, Macs & iphones which are very marketable in many parts of the world. Apple has also invested much resources and capabilities in their constant quest to update their technical software and hardware (Times, 2012). Apple has also been overtly involved in the direct distribution and sale of its products. Their advertisement and promotional activities are contained in their product mix which allows them to keep in close touch with their customers (Apple official website, 2012). Virtual marketing is used by Apple in the marketing of their products as it keeps customers closer which helps in gauging the preferences and taste of the customers especially in the technology market where products keep advancing and changing from time to time. Apple does not do the direct sourcing of their raw materials but instead, they source them from other companies such as Samsung (The Financial Times, 2012). This is a move to reduce the cost of production since the investment of such activities are very high and thus will increase their costs of production (Thee Telegraph, 2012). Apple specializes in technology in most of its products like the personal pcs and mobile phones. The products are remarkably made in stylish designs which are very attractive to the market globally (Bruner, 2000). The technological operating system of Apple is very reliable compared to other providers because Apple has invested a lot in development and improvement of its technology as the core of is operations (Gardener, 2008). The sole involvement of Apple in its operations has given it the natural expansion edge for development of its technology (Marketing Magazine, 2005). Apple fore-go the opportunity requested by other companies to own the license of Apple’ operating system and thus, they developed their own hardware and the software which has propelled them in their production processes. For example, the 64 bit architecture utilized in the production of the iPod improved their performance tremendously (The Economist, 2012). Conclusion This paper has provided the information needed in the understanding of the operations undertaken by Apple Inc. in the bid to provide viable products in the market which are capable of competing favourably in the market. Due to the fact that manufacturing, assembling and marketing of the products takes place in different countries, the value chain of Apple Inc. is very complex and can be understood by looking at activities in the countries involved. The activities undertaken by Apple Inc. are meant to increase the competitive advantage of the products over the rival products. Apple Inc. is more involved in designing of their own products which helps them in production of unique designs which are highly competitive in the market allowing them to produce high quality products. All the design operations are centralised in America while manufacturing in centralised in Japan which as the best technology to produce high quality software products. Apple Inc. has also invested a lot in R&D to keep updating its technology (Bruner, 2000). Read More