Strategic Challenges for Apple - Case Study Example

Strategic challenges for Apple Name Tutor Course Date Introduction The Current business environment is increasingly becoming challenging. The challenges in the business environment can be attributed to several factors. This therefore presents businesses with strategic challenges that affect their performance. Strategic challenge can be positive or negative to the business. A positive strategic challenge presents a business with an opportunity to make more profits and ensure that it achieves growth and development (Edward, 2010). Negative impacts of the strategic challenges can affect the growth and development of the business. All the businesses are prone to the strategic challenges due to the nature of their operations as well as the external factors. Strategic challenges have the potential of affecting the future growth of an organization. The effects may be negative and this may lead to the collapse of a business. The resultant impacts can contribute to current and future effects on the business (Edward, 2010). It is important for the companies to understand the aspects related to the strategic challenges. Apple is one of the leading multinational technological companies. It has been faced with various strategic challenges that have affected its growth and development. This has seen the company develope new strategies to counter the problem. In the paper, SWOT Analysis and PESTLE analysis have been discussed in relation the strategic challenges facing Apple Company. The information has also been used to provide possible recommendations for the company. There are various tools that can be used by an organization to determine strategic challenges facing it. The use of different tools provides the organization with detailed perspectives regarding the challenges that it is faced with regarding the strategies (Freeman, Jeffrey, Andrew, Bidhan & Simone, 2010). The development of strategies is usually carried out internally by the organizations. This is usually in response to the business environment and the needs of the customers. The business strategies can therefore be formulated by the organization to counter the challenges. The increased competitions in the market as well as technological advancement are some of the factors that have contributed to the strategic challenges (Edwards, 2014). This affects the technological companies such as Apple as they have to be on the frontline in terms of using the modern technology. The strategic challenges have the potential of changing the strategies of a company. The paper thus discusses the strategic challenges facing Apple and the possible solutions. Overview of the organization Apple is a multinational technological company whose headquarters is located in Cupertino California. It is one of the most successful brands globally and a market leader in the industry. The company is involved in designing, developing and selling consumer electronics, computer software and a host of online services. The company has a total of about 115,000 employees across the world (Nolan, et al, 2014). The huge workforce is for the purposes of ensuring that it is able to carry out its activities effectively. In 2015, the net income of the company was US$ 45.687 Billion. The revenue collected in the same year was US$ 215.639 billion while the operating income was US $ 60.024 Billion (Wee, 2015). To ensure that the company is able to effectively sell its products and services, it has a number of retail stores across the world. Apple has 478 retail stores located in 17 countries across the world. The company was formed in 1976 by Steve Jobs, Ronald Wayne and Steve Wozniak. Steve Jobs is highly credited for the success of the company due to his innovativeness. Apple is currently the largest company in the information technology industry in terms of revenue as well as asset (Shaw, et al, 2012). In terms of market capitalization, the company is the largest publicly traded corporation in the world. Apple operates an online store which has improved on the access of its products and services. Apple is currently considered as the most valuable brand in the world. The company is currently putting in place measures to enhance its growth and development. Strategic goals and challenges SWOT Analysis Strengths The strengths of the company have played a vital role in ensuring that it is able to withstand the threats in the business environment. A strong brand image is one of the major strengths of the company that has enable it enhance growth and development. The strong brand image has impacted positively on the company when entering a new market (Helms & Nixon, 2010). The profit margins of the company is quite high and this has enable it expand its operations in different parts of the world. An intensive growth strategy is in place at the company and this is driven by rapid innovation. The strategies in place have been vital in keeping the company abreast with the latest technology. Weaknesses The weaknesses of the company are mainly related to the strategic challenge that serves as an obstacle for growth. The company policy of exclusivity has led to limited distribution networks. The authorised sellers of the products are usually selected based on a careful and long process. The premium pricing strategy is used by the company and this has led to strategic challenges for the company. This has led to high prices for its products making it affordable only to the high end market (Heracleous, 2013). The customers from the lower class which represents the majority are not able to afford the products of the company. The competitors of the company have taken advantage of this strategic challenge by introducing low cost products. The distribution as well as pricing strategy of the company has contributed to the challenges that it is faced with. The company has been unable to enhance its growth beyond the iphone which is its major product. As a result of the high levels of secrecy, the company finds it difficult to manage the expectations of most stakeholders. Opportunities The opportunities available to the company can be effective in terms of influencing the strategic growth of the company. The company is financially stable and it can provide resources for expanding the distribution network. Creation of a new product line is also an opportunity that is available to the company. This can be attributed to the innovative nature of the company. New markets can be explored by the company in order to enhance its profitability (Wee, 2015). Threats The external strategic factors are posing a threat to the company which may reduce its financial performance. The company faces aggressive competition in the market which can lower its revenue in USA and Europe (Nicolás Marín Ximénez & Sanz, 2014). The success of the company has seen an increase in imitation of its products. This therefore impacts negatively on the profitability of the organization. The imitators are taking advantage of the high prices associated with the original products. The cost of labour is in the countries where the company has its manufacturing plants are on the increase (Nicolás Marín Ximénez & Sanz, 2014). This has impacted negatively on the profitability of the company. In the recent past, the company has also been accused of exploiting the employees in the developing countries where its plants are located. PESTLE Analysis Political Apple is one of the companies that have accumulated a large amount of cash at the bank in USA. This includes more than $ 34.7 billion. There have been calls by the political actors in USA to increase the corporate taxes for the company. The company relies on countries like China for its manufacturing process. In order to boost American manufacturing, there has been a call by the political class to restrict the Chinese imports which may disrupt or increase the manufacturing costs for the company. Anti-American sentiments are on the rise in China and this has negative impacts as it poses a strategic challenge to the company in terms of the manufacturing process (Meyer, Mudambi & Narula, 2011). Economic The labour costs in China are on the increase and hence creating a challenge to the company in terms of its low cost manufacturing in developing countries. The income among the middle class people is on the decline and hence shrinking the market share of the company (Nolan, et al, 2014). The strengthening of the US dollar is increasing the exchange rates in China and Europe and hence affecting the profitability of the company. Social A strong emotional attachment to the products of Apple by the young people in its established markets is low. This has effects on its growth and development since the young people are becoming the majority customers. Socially-conscious consumers are increasingly boycotting the products of the company due to its unethical practices in the manufacturing process (Wee, 2015). This involves the exploitation of workers in the developing countries as well as the poor working conditions. The marketing strategy of Apple’s music has attracted criticism from the major recording stars and hence tarnishing its image. Technology Apple heavily relies on technology in the development of its products and services. Other competitors including Samsung and Google have been able to duplicate the products of Apple in less than a year (Heracleous, 2013). This has seen the company loose uniqueness in terms of its products. The technological products of the company such as Apple TV are too costly and hence impacting negatively on the ability to attract the customers (Shaw, et al, 2012). The use of Apple’s personal computers is reducing due to the popularity of smartphones and tablets. The products of Apple are increasingly becoming less secure due to the growing capabilities of cyber criminals. Legal The levels of regulation and government oversight may increase due to the entry of the company in the highly regulated financial sector (Helms & Nixon, 2010). Increased levels of litigation may take place as a result of offering the financial services. The company is also planning to enter the automobile manufacturing business which is also highly regulated. The company is highly vulnerable to piracy and litigation as it is highly dependent on a variety of products covered by intellectual property law. Environmental The disposal of electronic device is a major challenge for the company (Heracleous, 2013). The waste products are associated with high costs and high levels of environmental pollution. This may result to increased regulation and hence affecting the company. How the organization can address the challenge Apple faces a lot of strategic challenges that may affect its profitability, brand image and market share. The SWOT analysis also indicates that the company has major strengths that can be used to deal with the strategic challenges that it is faced with. The policy of exclusivity should be changed by the company should be changed in order to improve on the distribution network of the product. The loyal customers of the company in most cases have to purchase the products at a specific location (Helms & Nixon, 2010). This has seen customers waiting in queues for a long period of time. Increasing the resources to the distribution network is a major aspect that can impact positively on the company. This will increase the sales and expand the market share of the company. The pricing strategy of a company plays an important role in terms of attracting the customers. The pricing strategy of Apple should be changed as it only favours the high end customers. Low cost strategy should be embraced by the company so as to attract the low end customers. This can be achieved when dealing with the products that are competitive in the market. The low cost strategy will expand the competitiveness as well as the market share of the company (Heracleous, 2013). This is considering the low end customers form the majority in the market. The company has a good brand image and it is also financially stable which is vital for a low cost strategy. The strategies of the company when dealing with different operations including manufacturing should have an ethical dimension. The company has to incorporate the principles of ethics in order to improve on its public image. The competition in the market requires the development of strategies that can deal with the influence of the competitors (Edward, 2010). In order to secure the products from imitations which reduce its uniqueness, stronger patent portfolio should be developed. Rapid innovation process should be embraced by the company in order to reduce the cost of labour. A reduction in the overall cost of labour has positive impacts on the profitability of the organization. The company can change its marketing strategy in order to attract the young and youthful customers. This is important to the company in improving on its customer base and revenue. The entry to the financial services by the company has to be carried out after a careful analysis of the market. Entering into partnership with other major corporations in the market can be useful in reducing the risks associated with litigation. Partnership is one of the strategies used by companies when entering a new market. Sustainability efforts also need to be part of the business. The sustainability measures are useful in the use of energy as well as environmental protection (Shaw, et al, 2012). The company can utilize renewable energy in its plants and facilities so as to conserve energy. The company can also contract experts to deal with the electronic wastes generated from its products. The company should prioritize the development of new products and services. The company has a financial might and technology required to develop new products. This will be vital in reducing the reliance of the company on the iPhone. There is a rising demand for the tablets and smartphones in the market as compared to the traditional technological products (Shaw, et al, 2012). Apple should consider developing more tablets and smartphones in order to compete effectively in the market. The products of the company are available in 17 countries which are mainly in North America and Europe. The company is financially stable and it has the ability of entering new markets. Due to the high quality products and services of the company as well as its brand image, it is likely to perform well in a new market. The company has an opportunity to explore the market in Africa where it has not established its presence. The income of the people in Africa is on the increase while other continents are facing a decline (Freeman, Jeffrey, Andrew, Bidhan & Simone, 2010). The entry in the African market can impact positively on the company. The amount of cash in the bank is too high as a result of the huge profits. The company should consider investing in more projects so as to reduce the amount in the bank. This will be vital for the company in terms of promoting its growth as well as reducing the calls for increased corporate taxes from the political class. The low cost manufacturing strategy of the company should be changed. This can be achieved by setting up more manufacturing plants in different countries. The reliance on China for manufacturing is too high and this can be changed by diversification. Apple can also improve on its brand image by improving the working conditions of the employees and avoiding any exploitative practices (Heracleous, 2013). This can be achieved by working closely with the local trade unions as well as the government in the areas of operation. This will be relevant to the company is ensuring that its brand image is not tarnished. Relocating some of the manufacturing plants to USA will be vital in creating more employment opportunities in the country. This will improve on the relationship between the company and the political class. The political class play a vital role in terms of policy making and hence the need for the companies to develop a good relationship (Heracleous, 2013). Recommendations and Conclusion It is recommended that the company should consider changing its strategy in terms of the target market and customers. The company should invest in new products and services that are affordable to the low end customers. The financial might of the company as well as the positive brand image should be used as a means to enter the markets. It is recommended that the company should consider entering the African market as it has huge potential. The company should also increase the number of retail stores in order to improve on the access for its products and services. This is considering that most of the customers have challenge in accessing the products of the company due to the few number of retail stores. The company should use its innovation potential and technology that is available to reduce the costs associated with the manufacturing costs. It is recommended that the company should improve on the aspects of ethics during the manufacturing process. The working conditions should be improved and the workers paid better salaries and remunerations. Apple should move some of its manufacturing plants from China to other developed countries in Africa. This is due to the increased Anti-American sentiments in China. It is also recommended that the company should continue with the diversification of its products and services. In conclusion, it is evident that Apple is faced with various strategic challenges that impacts negatively on its profitability. The SWOT analysis indicates that the company has a limited distribution network due to the exclusivity strategy and policy. The high pricing strategy limits the product of the company to the high and customers. It is evident that the company is finically stable and it has a good brand image. However, it has only explores few markets globally. Imitation of the products of the company is also a major challenge that affects its profitability. Imitations have seen the competitors taking advantage of the high prices of the products of the company and are producing cheaper goods and services. The labour costs are on the increase and the political environment is also presenting a challenge to the organization. The company however has major advantages which may be used to effectively address the challenges. Apple has various opportunities including diversifying its products so as to improve on its sales. It is evident from SWOT and PESTLE analysis that the strategic challenges facing the company have the potential of reducing its profits and market share. Bibliography Edwards, J., 2014. The iphone 6 had better be amazing and cheap, because Apple is losing the war to Android, Business Insider. Nolan, M., et al, 2014. Validity of the Apple iphone/iPod Touch as an accelerometer-based physical activity monitor: a proof-of-concept study, Journal of physical activity &health, 11(4). Shaw, M., et al., 2012. 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Stakeholder Theory: State of the Art, Cambridge University Press, New York City. Read More