Apple Inc - SWOT and PESTLE Analysis, Porters Five Forces and Internal Analysis - Report Example

Contents Contents Introduction 2 SWOT Analysis 2 PESTLE Analysis 3 Political Factors 3 Economic Factors 4 Social Factors 4 Technological Factors 4 Legal Factors 5 Environmental Factors 5 Porter’s Five Forces Analysis 6 Intensity of Rivalry among Competitors 6 The Threat of New Entrants 6 Threats of Substitutes 7 Suppliers Power 7 Customers 8 Internal Analysis 8 Resource Types 8 Firms Capabilities 8 General Conclusion 9 Recommendations 9 Bibliography 10 Introduction Apple Inc is the largest technology company in the world offering few of the most successful brands in the world. Under the leadership of Steve Jobs, firm has been able to transform itself into the largest technology company with high market shares in smartphone, MP3 players, Laptops as well as tablet PCs market. Crunchbase.com states history of Apple in following quote: (Crunchbase.com, 2013) Started by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple has expanded from computers to consumer electronics over the last 30 years, officially changing their name from Apple Computer, Inc. to Apple, Inc. in January 2007. It is however, important to note that markets which Apple has historically dominated are being saturated with new entrants. The overall degree of competition is on the rise and Apple is feeling the pressure to continue to grow its earnings at the rate which is expected by the market. SWOT Analysis Strengths Largest Technology Company in the world. One of the largest online music stores creating revenue for the firm from alternative streams. Leader in innovation and creativity. Strong global brand image. Weaknesses Weaker integration with other technologies makes Apple products less attractive for business users. Apple products are high priced therefore consumers generally consider pricing as serious constraint in choosing Apple’s products. Though Apple is an innovator however once it reaches the high point, it often tends to lose the market to other competitors. Opportunities iPhone and iPod Applications can result into more revenue being generated by Apple as compared to iTunes. Cross selling opportunities can further increase the revenue share for Apple i.e. advertising, in-app purchases. Apple is planning to introduce a new and more innovative T.V set. Threats Competition is heating up with Samsung became the largest mobile phone seller in the world overpowering Apple in this race. New Tablet computers are being introduced by many international firms including Google, Amazon etc therefore this may result into further reduction in iPad sales. New technology is being introduced every day and Apple may face constant threat from new and better technology being introduced by competitors. PESTLE Analysis Political Factors Apple operates in United States with its head office located in California. United States has a stable political system which favors private enterprises. The overall political structure of the country favors the free market economy with less interference from the political and government organizations. Overall legislative framework is also favorable for the private firms with organizations like Apple facing little threats from the political environment of the country. Economic Factors US is going through economic recession along with other advanced and developed countries. Major economies of the world are facing difficult economic challenges due to higher level of unemployment, slow economic growth as well as lack of consumer confidence. It is however, important to note that despite adverse economic situation, Apple has been able to achieve historically high level of profitability. Despite the adverse economic situation, Apple has performed exceptionally well and has been one of the most profitable organizations of modern times. (Rushe, 2012). It is also however, important to note that performance of Apple is showing slow growth due to difficult competition. Social Factors Apple has been a trend setter of many social factors including populating the concept of mobile MP3 players, online music portals, and touch screen phones as well as small and compact computers. Due to innovation of Apple, world has been able to witness drastic changes in the way we socialize and interact with each other. The changes have been so enormous that Apple is considered as one of the key exponents of social change in modern time. (Reuters, 2008) Technological Factors Apple is basically a technology oriented organization with focus on deliver simple and state of the art products and services. It is however, important to note that technology is changing rapidly and keeping pace with the technology requires constant innovation and creativity. Further, technology also needs to be low priced in order to allow mass market to utilize the technology to its fullest. Apple has been able to use innovation to create technology which has affected the mass market despite the fact that Apple Products are considered as premium in nature. In order to effectively deal with the technology changes, Apple need to focus more on innovating itself. Legal Factors Though there has been favorable legal structure within the country however Apple has been facing difficult legal battle with Samsung. The issues of patent violation have been recurring and point of contention between Apple and Samsung- its largest competitor in the market. Both the firms have been engaged into serious legal tussle which not only result into negative press coverage for Apple but also cost it money in terms of expensive law suits. (Wagstaff & Kim, 2012) The lates war between Samsung and Apple has been defined as under :(Lawler, 2011) The latest development in the patent skirmish between Samsung and Apple is a decision in Australias Federal Court to overturn a ban on Galaxy Tab 10.1 sales that was placed in October. The Sydney Morning Herald reports local retailers are still unsure when they may be able to sell Samsungs slate, as Justice Lindsay Foster ruled the ban will remain until 4PM Friday, giving Apple time to appeal the case to the High Court first. Like its battle over the redesigned slate just introduced in Germany, this war between the electronics giants will continue on -- well let you know when theres another decision of consequence. Environmental Factors Apple’s factories in China have been over-crowded because of the high volume of the sales. It has been suggested that Apple’s supply chain is not ethical as workers in those factories are not facing ideal working conditions. Apple therefore may face threats in terms of its overall orientation towards the environment and how its activities can have an impact on the environment. (Spence, 2012) Porter’s Five Forces Analysis Force Intensity of Rivalry among Competitors The industry is dominated by few but very large competitors with significant power to control the market. Given the lucrative nature of the market, there is a greater intensity of rivalry among the competitors. Apple’s nearest competitor is Samsung which has recent over-powered it as the largest mobile phone maker in the world. (Lashinsky, 2012, 32) Apart from this, the competition is also heating up in tablet pc market also as new players such as Microsoft, Dell, Samsung as well as Amazon and Google are entering into this market. The entry of the new and potentially powerful competitors therefor will further increase the competition within the industry. The Threat of New Entrants As discussed above that the market is relatively more profitable as compared to other sectors of the economy. Due to overall attractiveness of the market, more and more new players are entering into the market to offer similar and imitating products. The overall threat of new entrants is relatively higher as compared to other sectors of the economy. New entrants are entering into the market despite the fact that there are larger barriers to entry in terms of capital expenditure required and technological innovation. Threats of Substitutes There has been great influx of substandard as well as quality substitutes available in the market. Traditional mobile phones still exist in the market whereas smartphones are increasingly being used in the developed markets. Low quality me-too type of products is also available in the market and as such the overall threat of substitutes is relatively higher. It is important to understand that substitutes are easily available in the market and new replica products are specially emerging from China. Low cost Chinese products are easily available both on the online as well as offline markets therefore there is a greater availability of the substitute products in the market. Suppliers Power Due to sheer size of Apple and its competitors, Suppliers have relatively low bargaining power. The overall volume of the purchases made by Apple is large and one supplier can hardly provide the required raw materials therefore suppliers have relatively low bargaining power. Further, the overall number of parts used in the manufacturing therefore no one supplier has actually any monopoly in controlling the supply chain. It is however important to note that Apple’s major manufacturing is being done by a Chinese firm, Foxcon and excessive reliance on the firm may make Apple more vulnerable to the market changes. Customers Apple has been one of the most important innovators of recent times making it one of the all-time favorites. Apple’s products are considered as premium products and are relatively high priced among all the competitors. Though customers have relatively low bargaining power against the Apple however, recent trends indicate that customers tend to prefer competitors’ products over Apple products. Apple has monopoly in the portable music players however its monopoly in the smartphone and tablet pc market is shrinking fast. Internal Analysis Resource Types Probably the most important resource type available to Apple is the access to large market which it can easily tap into. Apple is in business since 1970s and over the period of time has perfected the market to the extent where it can easily exploit existing markets. Most importantly, Apple has a technology as a resource which is helping to create competitive advantage over others. Apple’s technology is not open source technology as against the technology offered by Google. Through this way, Apple has been able to roll out technologically innovative products in the market over the period of time. Firms Capabilities One of the most important core competencies of Apple is its ability to use technology to its fullest use. Apple has been manufacturing all its hardware based upon its own software which is effectively more agile and robust. Apple has been able to dominate the technology market through its innovative use of technology by producing sleek and beautiful designs of the consumer electronic products. Apple has been able to mash the artistic aesthetics with that of the innovative technology which has allowed it to be more effective in producing goods and services which are readily accepted by the market. General Conclusion Apple is one of the most innovative companies of modern times involved in reshaping many markets and industries. Over the period of time, it has been able to roll out products and services which have dominated the market and created new trends in the society. However, the current situation is relatively different as more and more players are entering into the market offering cheaper alternatives to Apple’s products. Due to increase in competitive rivalry, Apple may face difficult situation in future and have to re-evaluate its strategy to maintain its current position in the market. Recommendations In order to overcome the above situation, it is important for Apple to seriously engage into product development process. It needs to roll out low end and cheaper versions of its products to further penetrate into the emerging markets. So far, Apple has focused its energies on the developed market ignoring the potential opportunities available in regions like China and India. Though Apple has recently introduced itself into Chinese markets however it should have done it much earlier than this. Market development is also another strategy which firm has to follow in order to become more sustainable in future. (Sadler, 2003). Apple must look for increasing its portfolio of products and further innovate to offer different products aimed at different markets. It needs to focus more on entering new markets and establishing itself as market leader by introducing affordable and low end products which may be more suitable to such markets. It can introduced low priced editions of iPhone as well as iPad to suit more to the markets like India where overall level of affordability is on rise. By reducing the prices, Apple can effectively tap into these markets to increase its overall reach in the global market. Bibliography Lashinsky, A. (2012). Inside Apple: How Americas Most Admired--and Secretive--Company Really Works. New York: Grand Central Publishing. Lawler, R. (2011, November 29). Samsung wins a patent battle to sell Galaxy Tab 10.1 in Australia, war with Apple not over. Retrieved from Endgadget: http://www.engadget.com/2011/11/29/samsung-wins-a-patent-battle-to-sell-galaxy-tab-10-1-in-australi/ Reuters. (2008, March 31). Apple has biggest impact on world consumers: survey. Retrieved from Reuters: http://www.reuters.com/article/2008/03/31/us-brand-poll-idUSL2850164020080331 Rushe, D. (2012, September 12). iPhone 5 sales could see Apple boosting US economy, says JP Morgan economist. Retrieved from The Guardian: http://www.guardian.co.uk/business/2012/sep/11/apple-iphone-5-boost-us-economy Sadler, P. (2003). Strategic Management. New York: Kogan Page Publishers. Spence, E. (2012, November 18). Apples Supply Chain Issues Reflected In Stock Pricing. Retrieved from Forbes: http://www.forbes.com/sites/ewanspence/2012/11/18/apples-supply-chain-issues-reflected-in-stock-pricing/ Wagstaff, J., & Kim, M. (2012, December 07). Apple and Samsung: A defining rivalry in a changed mobile market. Retrieved from Reuters: http://www.reuters.com/article/2012/12/07/us-apple-samsung-idUSBRE8B61B220121207 Read More