Strategic Management External Environment Analysis: Apple, Inc - Essay Example

Strategic Management External Environment Analysis: Apple, Inc. SWOT Analysis According to Ahuja , the SWOT analysis is one of the most important frameworks for environment analysis. The advantage wit this is that it looks at both environmental as well as the organizational environment. This is important because the business is affected by both the environmental as well as the organizational environment (Pailwar, 2011). Even if the environmental factors are conducive for success, the internal environment that is found within an organization still plays an important role in determining how successful or not a business is going to be. In this regard, the SWOT analysis combines two important factors that are external (Strengths and Weaknesses) and two that are external (Opportunities and Threats). Strengths One of the strengths for apple is its technological innovation. Apple has been able to create its position in the industry as the leader in innovation. As a result, most of the customers who are interested in technological products look at the firm as their first choice when it comes to these products. As Ahuja (2010), while using the SWOT analysis, the important thing to consider is to look at the strengths of a business. This is used to look at the organizational environment from within the organization and identify what works out for the business. These are the things that a business can use in its survival in the market. A business will determine its strengths with regard to how it stacks against its competitors in the market. For apple, they know that their strong brand is one of the strengths they can rely on. The other important strength for apple is its ability to streamline production and reduce cost, thus transferring the cost advantage tot eh customers. Weaknesses Apple’s main weakness can only be identifies by comparing it with its main competitor. When compared to Samsung for instance, Samsung has advantage in that it is located in a low cost economy where production can happen at less costs. Although Apple can still access these low cost environment by outsourcing, they still have a disadvantage. As has been identified, all businesses will have some disadvantage as well as advantages. Identifying the weaknesses (disadvantages) of the business is actually important in that it helps the managers to know what they weakest points are and so deal with them. The theory behind identifying the weaknesses of the business is that when a problem is well defined, it is already half solved. Identifying the strengths without identifying the weaknesses of the business can be futile. In this regard, carrying out a proper SWOT analysis requires that both the identification of the strengths and weaknesses be taken as seriously as each other. Opportunities While the strengths and the weakness are usually used to scan the internal organizational environment, the opportunities and the threats are sued to scan the external environment (Kew & Stredwick, 2005). With regard to opportunities, one is looking at what the market has to offer in terms of how the business can offer the business. In identifying the opportunities, one is looking at the external environment to identify what is out there is the market that can work for the success of the business. In this regard, one must know what the business is trying to do and then try and link that with the opportunities in the market (Griffin, 2010). Apple has a number of opportunities that it can explore. These include the fact that the technology market is a market that so very dynamic. Consumers continue to buyer newer versions of their favorite products and this gives the firm an opportunity to grow. Threats Another part of the SWOT analysis is the threats analysis. Although every market offers at least a number of opportunities, it also offers a number of threats that if not well managed can end up hurting the business in a critical way. As Rodiek (2008), threats, unlike weaknesses, come from the external environment. It could be that the political factors are not conducive for the business or that the economic changes are going to affect the business in a negative way. Managers must keenly look at these threats and then know how to deal with them and avoid a situation where the business is going to be hurt by the external environment. In the minimum, they should be able to minimize the level of impact that these threats have on the business (Elearn Limited, 2005). In this regard, the role of the managers is t come up with a business strategy that avoids a situation where the business will be at an disadvantage. The main threat for apple is the new entrants. The technology industry does not offer resistance to new entrants and so many new firms are entering the smart phone market which is Apple’s cash cow. This will have a fundamental impact on the firm. PEST analysis The other important framework for external and organizational environment is the PEST model. The PEST model looks at the factors that affect the success of a business. It recognizes that there are many factors, some of which the business may not have control over, that affect the way a business is going to be successful. All businesses within an industry are affected by these factors and it is the SWOTs of a business that determine how well the business is going to weather these factors (Oldroyd, 2007). The elements of the PESTEL model are as follows; Political factors Political factors affect the way businesses are operated within any market (Morris, Willey, & Sachdev, 2002). The political factors that may affect a business include such issues as the tax policy of the government, labor laws that are in place within a certain jurisdiction, trade restrictions and political stability of a nation. Environmental laws that have been placed by the government can also affect the business depending on the sector and the operations of the business (Sahu, 2012). Other political factors that may affect a business includes the levels to which the government is developing important infrastructure and other public services delivery such as security and healthcare to the public. In considering political factors, one has to also consider whether the services that the particular business is providing are provided by the government. Some governments favor some goods over other and will restrict some goods and support the delivery of others (Stredwick, 2013). These issues need to be solved when looking at the political factors that can affect the business. The important thing to remember is that the way each of these political factors affect one business is the way it affects the others. The main challenge here for Apple is includes labor laws in the US where the firm operates. Due to various labor laws, Apple is not able to import the kinds of workers it may need from outside the USA and so it has been forced to outsource its labor to Asia. Economical factors In carrying out a PESTEL analysis, the second factor to consider is the economical factors. Economical factors are many and varied and how they affect the business is determined by the type of the business or the products or services the business intends to provide to the market (Shaikh, 2013). These factors include the rate at which the economy is growing, interest rates for financial services such as loans and the exchange rates. The currency inflation rate is also another important factor to consider and there is a need to make sure that it is considered in a critical way. These factors are important because they determine how the business is going to achieve growth. All businesses, small and big always seek to grow over time. As Bensoussan and Fleisher (2012), without growth, death is imminent. Some economics factors do not offer many opportunities for growth while others offer more opportunities for growth. Having a critical view of these factors can be an important way to determine how the business is going to perform in the market. The economic challenges that the US economy has been going through has affected Apple. If the economic turn down repeats itself, this will have a negative impact on the firm because its products are semi luxury goods which people refrain from buying when their fiancés are not good. Social factors The S is the PESTEL model stands for social factors. Social factors are many and affect businesses (Szymanski, 2011). These include the cultural aspects that are within the market in which a business operates. In looking at the social factors that affect the business, one has to consider health and wellness consciousness and emphasis on safety. Population growth rate is also another social factor that determines how well businesses are going to be. The population growth rate will mean increased demand for the products or the services that a firm is offering and so work for the benefit of the firm. The other factor to determine the way a firm is going to grow is the age distribution and demographics. If the population has more young people, it will mean more availability for labor for the business thus reducing the cost of labor. It will also determine what kinds of products are more in demand because the products that younger people are likely to demand are different from the ones older people are likely to demand. However, an old population will have its own impact on the way the business is going to grow (Farnham, 2005). This is because a population which has older people will mean les labor for the business. In applying social factors, one has to consider which ones are relevant for the particular businesses. In this area, it can be said that things are working well for Apple, especially in its major markets such as USA and Europe. The consumers in these markets not only can afford these highly priced goods but are also willing to pay the high prices to get high quality products that Apple sells. Technological factors In PESTEl model, the other factor that is considered is the technological factors. All businesses whether they are in the technology industry or not are affected by the technological development. It is necessary to understand what technological requirements the business is going to need in order to be able to perform. It is also important to critically review how technological advancements will affect the way a particular business is going to affect the way a business operates. This is one factor that must be considered in detail in order to know where the future of the business is. As has been identified, Apple is a leader in technological innovation and s this is not a big problem for Apple. However, with regard to the technological requirements needed for its production and innovation, this may be something for Apple to worry about. Legal factors The last factor is the Legal issues. All businesses operate within a jurisdiction with laws and regulations that the government has put in place. Even economies that are free markets also have regulatory bodies that work for the government to regulate how business is carried out in that particular country. The legal factors may include discrimination law and antitrust laws which have been put in place and are being enforced by the government. They may also include employment law and health and safety law. The significance of these laws is that they determine the cost of operating a business and also determine the demand for the products that a business is offering to the market (Tombekai, 2014). Apple has faced a number o labor law suits in the USA and it has been accused of using unfair and illegal labor strategies such as using Chinese seat shops, this can have a negative impact on the way the firm will be able to succeed in the future. Porters Five Forces Analysis In analyzing the environment of a business, it is almost inevitable that the Porter’s five forces model is going to be used. Although the other frameworks that have been discussed above offer a proper way to scan the environment and look at how the business is likely to perform, the Porter’s model brings in new factors that must be looked at. These include the following; Rivalry between businesses Porter identified that one of the factors that affects how a business’s going to succeed is the general completion between businesses that offer similar products. It is necessary for managers to therefore scan the environment and know how much competition there is and then find out how to deal with this competition. Strategies for dealing with competition can include mergers, diversification, specialization etc. The main competitor for Apple right now are Samsung and Huawei, both of which are technology firm from Asia. These firms form a formidable threat for Apple. Bargaining powers of the suppliers Almost every business has suppliers who supply it with either finished goods or raw materials, or even services. Their bargaining power is determined by a number of factors. The less the bargaining power that these businesses have, the more advantageous it is for the business. Due to apples ability to buy in bulk, the bargaining power of suppliers is mild. At the same time, Apple has many options with regard to where it sources its raw materials and labor resources. This makes it more powerful than its suppliers. Bargaining power of the customers The level of the bargaining power of the customer can also be a very important factor to determine how successful the business is going to be. If the customers have a high bargaining power, the business will not be able to set the prices and this can affect its profit margins. The bargaining power of the customers can be determined by the competition in the market. If there are too many suppliers of the products that a firm is offering and the customer has choices, the bargaining power for the customers will be high. The customers do have a bargaining power against Apple. This is more so with regard to the fact that now people have more options to access high quality smart phones from other sellers at a cheaper price. Barriers to new entry This is an environmental factor. Some industries and sectors do not offer much resistance to new entrants and this is a threat to the businesses that are already in that industry. The more difficult it is for new entrants to enter into a market, the more strategic advantage that a business in that industry has. As seem in the previous analysis models, the technology industry does not offer a lot of resistance with regard to new entrants. This is why newer firms such as Huawei and HTC have been able to come and grab a major market share from major industry players such as Apple. This is not good for apple in the long run. Threats of substitute products Substitute products refer to the products that the customer can use instead of the product that the firm is offering. For instance, if a firm is selling soda to the market and the customer can opt to use bottled water instead of the soda, this bottles water will offer a threat to the firms products. If the customer on the other hand does not have an alternative, the business will have an advantage. These factors have to be considered in detail to see how suited the business is to survive in the market. Since the main products that Apple sells are smart phones and tablet computers. The threat of substitute product is not a major one. However, this threat is higher for Apple’s tablet computers than it is for its smart phones. There are no substitutes fro smart phones but there are substitutes for tablet computers, such as laptops, kindle readers and even desktop computers Bibliography Ahuja, H. (2010). Economic Environment Of Business (Macro Eco.Analysis). New York, NY: S. Chand Limited. Bensoussan, E., & Fleisher, E. (2012). Analysis Without Paralysis: 12 Tools to Make Better Strategic Decisions. 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