Company Analysis: Apple - Case Study Example

Company Analysis: Apple Name Institution Introduction Apple was incorporated in USA in 1977 as a company in the electronic industry. It was involved in the design and manufacture of products such as personal computers and digital music players. Today the company has greatly expanded its operations to involve the production of software, peripherals, networking solutions and most recently mobile phones and related appliances. The company has made its name in the last few years due to its highly distinctive products like iPod, Apple TV, iCloud and other support offerings (Apple Inc., 2012). Apple operates as a multinational company with dealings in most countries of the world. It distributes its products majorly through strategically positioned retail stores. Besides this the company operates online selling services where many clients log into its websites and selling blogs to order various products. It has also engaged third parties in its distribution function as well as direct sales representatives (Apple, 2012). The company operates advanced internet services thanks to its strong network connectivity. For example the company has designed a range of products targeted for the education sector. One such product is the facilitation of mobile learning distribution of learning materials using its iTunes services. This service allows interaction between the student and the instructor by enabling them to share materials. Geographically the company operates five major segments. The first one is in the country of origin which is America starting in the USA. Others include Europe, Japan, Asia-Pacific and Retail. America’s segment is sub-divide into Southern and Northern America to cater for the expansive market in the region. The company also has many subsidiaries some of which were established during its inception in 1977. Others have been created of bought as part of its expansion strategies (Apple Inc., 2012). Today the company is regarded as one of the leading firms in the electronic and related market. It serves in almost all countries of the world. It is capable of competing with equally well established entities such as Sony and Samsung. General Environmental Analysis The business context is influenced by various factors playing out it its environment. These factors range from political, demographic, technological, socio-cultural among others. These factors are evaluated on the effect they bring to the business – both positive and negative. This report evaluates how some of these factors have impacted on the welfare of the company and its performance in the market. Political factors USA as a country has enjoyed long spells of political stability for the last century and beyond. Since its non-participation status in the First World War and its late involvement in the second one the country has always been on the right hand of history politically. Having come out of the series of political assassinations, particularly that of Martin Luther King Junior, the America as a country has had a healthy time in the political arena. This state of affairs is one of the contributing factors to today’s dominance of the US companies in the global front. Supportive political environment encourages people to venture into business and engage in innovative practices. Many of the world’s most powerful companies either hail from the US or have strong connection to its market (Blomstrom, & Kokko, 1998). Apple is one of those companies that took advantage of the situation since its inception in the late 1970s. The government has been particularly supportive of the education systems and the yields are enormous (Apple, 2012). The high literacy levels in the country have assisted its growth in terms of expertise. Outside USA Apple company has had to deal with turbulent trends in some politically volatile companies. One such example is countries in the Asian region that have had numerous transitions hence destabilizing business. In Thailand for example which has been a major market for Apple products, the fortunes have gone up and down almost all through. It is interesting to note that the country was ruled by eighteen constitutions in less than half a century since 1960. Such uncertainty in the state of the country’s most supreme law makes investment very tricky and risky (Apple, 2012). Social factors Apple operates in the technology field where fashion is the tone of business language. People are generally trendy and want constant transformations in the products they use. Other players in the industry are fast to design new forms of products and the pressure mounts to each and every firm to develop the product that best appeals to the well informed customer base. Newness is the trend is the technology business. This is, however, not to suggest that consumers are not responsive to quality (Apple, 2012). The youth and corporate customers lead the wave of social transformation in the electronic industry. For the youth their desire is to have high quality and fashionable accessories that are multitasking. Corporate customers on the other hand are looking for the software products that are highly advanced, efficient and most importantly guarantee the security of their information. They want an assurance that they can store, manipulate and transfer data without the risk of being hacked or being distorted along the way. In this sense Apple has been moving with the pace of its customers. This is evident in its fast transformation of products an aspect that has almost made it the leader in the market. Year 2011 was a year of transformation for the company going by the number and the quality o the products it offered to the market. The most striking was the iPhone which comes as a combination of a cell phone and an internet communication device. The iPad is another mobile device with multipurpose applications including handling mails, watching web videos, reading e-books and many more. Other introductions in the industry include the large variety of mac hardware products, itunes, mac app store, icloud, many software products and computer technologies. These are just few examples demonstrating the company’s desire and ability to respond to social trends and fashion (Apple Inc., 2012). Macro-Economic Factors These cover aspects of the economy of a country or the world such as aggregate demand, interest rates, unemployment, inflation, strength of currency and related attributes. Since Apple is a multinational company, the forces have been varying from country to country and from region to region. In other times the effect has been on account of the global economic status. Aggregate demand means the ability of the households and corporate organizations to want to purchase products offered in the market backed by purchasing power which is money. The level of monetary supply in the country determines the ability to buy. When people have a lot of money in their pockets they have the tendency to want to spend and this boosts the aggregate demand. In such a case, it is not the industry or the firm that motivates the people to buy but the good state of the economy. In such cases, however, the prices of product go up persistently as high purchasing power creates a case of excess demand in the market. The forces of demand and supply try to correct the situation by hiking prices to block some potential buyers from being able to purchase products (Bernanke, & Gurkaynak, 2001). The situation is however good for manufacturers as they readily get market for what they purchase. They can also apply the excess revenues so generated to increase their production capacity to feed the excess demand. Interest rates refer to the rate at which commercial banks access finances from the central banks of their countries. These rates are then passed over to the borrowers in form cost of credit. It follows therefore that high interest rates implies high cost of credit and vice-versa. Interest rates dictate the firm’s ability to use borrowed capital and hence can promote or stagnate its growth pattern. It also dictates the household’s ability to access credit and hence to certain extent determine the aggregate demand in the country (Bernanke, & Gurkaynak, 2001). Inflation refers to the persistent increase in the prices of all products. It is created by two factors which are demand pull and supply shock. Demand pull is where consumers buy more products than usual over a period of time. Supply shock is a case where sellers avail less than appropriate quantity of commodities in the market making the prices to shoot. Inflationary tendencies are not good to anybody though producers may benefit in the short run due to increased profit margins created (Komendi, & Meguire, 1985). In the long run, however, the high prices rob the consumers of their purchasing power making them revise their buying patterns downwards and hence firms lose business. High unemployment level is a two edged knife from the producers perspective. High unemployment levels reduce the buying capability of the population and hence the firms lose business. On the other hand, the high supply of labour reduces the general wage rate subsisting in the economy making firms reduce their operational costs as they are able to earn higher profits. In the grand scheme of things, inflationary tendencies are a bad state to have in any economy and all stakeholders in economy management work towards eliminating cases of inflation (Komendi, & Meguire, 1985). Apple has found it difficult to operate in countries where inflation levels are extremely high. For instance business in Brazil do not fair well thanks to high inflation. This scenario has greatly devalued its currency which makes it inappropriate as the means of trading. The case has been similar in countries such as Zimbabwe in Africa and some other countries in Asia (Sultan, 2004). The strength of the countries’ currency affects the cross border transactions. A country with a very strong currency finds it difficult to export and vice-versa. USA as a country is well known for the stability of its currency – the US dollar. Apple has been able to export thanks to the acceptance of the US currency as a significant unit of account in many cross border transactions. In situations where the currency of a destination currency has grown very weak against the US dollar exports to that country has been a big problem. Lately this has been the case with Spain and to some extent Italy since 2009. Over this time Apple has found it difficult to operate in these countries and has not been able to match sales volumes as it has done previously (Apple, 2012). Industry Environmental Analysis Current Trends The past few decades have seen great advancements in the telecommunication and technology industries. Due to that many companies have totally revolutionalized their ways of functioning and approach to management. In general terms the electronics industry can be termed as highly competitive and most significantly fast-moving. The changes that have been witnessed in the recent past have boosted productivity by making more efficient, cheaper, faster and capable of producing high quality products (NAM, 2006). Threats The reorganization that has seen the companies go global has presented real challenges to the industry. There has been the creation of new related industries that also compete globally. These industries are majorly service and knowledge-based industries. These industries compete for the human resources for the high innovation needed by firms to survive the high knowledge oriented industry. There has also been debate over the conduct world-wide trade. Pundits say that there exists no free or pure market at the global front. The global market is never optimal and fails to follow any of the models as put forward by the classical economists. Countries such as China and India face the threat of weak education systems, lows levels of research and development and poor visa policies. The later foe example hampers the transfer of bright minds into these countries. These attributes among others hamper the pace of advancement in the electronic industry (NAM, 2006). Critical Success Factors The major complement is the intellectual asset. US has particularly noted this factor as probably the most significant competitive weapon thanks to its pool of human intellect. This makes room for innovation that has dictated the progress of the industry for nearly thirty years now (Catherine, 2003). There exist programs in the US and many other developed countries on continual skill training and worker education. These programs encourage continuous acquisition of new knowledge among workers providing them with a better chance to drive the wave of innovation much desired in the industry. This gives hope and facilitates faster development in the industry (Catherine, 2003). Ease of Entry The major hurdle to the entry of the electronics industry is the massive amount of resources required as start-up capital. This is no wonder the major players in the global from have their origins in the developed nations who have easier supply to finances and borrowed capital. This explains why many well established companies continue to enlarge in size and structure while new start-ups are very few (Sophie, 2003). In the same sense the industry is not as fragmented as many industries such as the food industry. Small scale producers shy away from the electronic industry and the reasons are much obvious. One is the level of intimidation that comes from the multinational organizations. Next is as noted the high amount of funding that is needed to back up the entry. There is also the aspect of economies of scale that the large scale producers enjoy that reduces their costs of production thus are capable of offering very competitive prices. New entrants cannot be able to match such prices (Sophie, 2003). Finally new entry into this industry is limited by the level of knowledge and expertise required to run its operations. Already the personnel with the capability in the field of electronics are in short supply compared with the industry requirements. The few available experts require high levels of remuneration and hence new entrants fail to meet their demands. 7.0 Recommendation In the light of the discussion herein and the facts so highlighted a number of recommendations can be formulated. These recommendations are based on the state of the art of the company and its proven capability in it past years of operation. A consideration has also been made regarding the attributes of the industry. Due account has been given to the versatility of the electronic industry and the immense competition encountered by all players in it. Given the level of effort, time and specialization that goes into the designing function of Apple Company it is safe to argue that the company needs to outsource a number of its functions. Specifically the company needs to outsource the marketing and distribution services. This move would allow the company management and its team of professional to the more technical duties of developing new designs as the market and industry dictates. The company cannot afford to brink or divert its effort to anything else far from advancement in technology. In the light of these the management should concentrate to the technical efforts of maintaining the company as the leader in the field of technology. In this regard, specialization will be enhanced and the rate of technological transformation increased. Seeking the services of marketing specialists will ensure that vital information regarding the products of the company diffuse to the market very fast. The awareness is also vital to ensure that consumers are well advised about the specifications o the original product so that they do not land at buying counterfeit products from scrupulous traders. The speed ensures that the company makes sales before the immediate competitors learn of the new features contained in the new product and create their own brand to counter it. It is unquestionably true that buying any product starts with the desire to have it but advertisement is integral in influencing that desire (Alesina, & Perotti, 1994). Distribution function is also another significant function of any manufacturer. While Apple Company can sell virtually all its software products online, the same cannot be said of hardware products. To ensure that such reach the customer in the most efficient way possible without diverting the attention of the top management, they should consider hiring the services of distribution firms. This could seem a great deviation from normality in the industry but it can as well be a prudent move. The arrangement could as well be designed as a franchise relationship where Apple retains all the production duties while the Franchisee partakes of all distribution formalities. Furthermore the company needs to equip itself with skilled manpower to keep up with the pace in the technology industry. The company can do this by taping young professionals who have demonstrated outstanding academic performance and have interest in the field of technology. The company can then train the highly talented students with an aim of making them experts who will lead the company’s innovative initiatives in the future. 8.0 Conclusion Looking at the status of Apple Company, it is easy to rank it as a company that is still enjoying its glory days. It is safely a market leader with no mean feat and the trend seems eminent to continue. Its technological activity in the year 2011 is unmatched by any organization of its class and this means that it is the leader of the champions. It has also subconsciously adopted a market niche and this is the high class citizens who have now become the major customer group. This trend looks set to continue and as people try to identify themselves with a certain class the company can be counting on revenues. Indeed this is the company of the future and going by what it has achieved in the last few decades there is preponderance of evidence that it will continue leading the technological transformation at least in the foreseeable future. With the attention accorded to the industry great progress can be forecasted. For instance, the continual skills and worker education program is one significant aspect to point to good expectations of continued creativity and advancement within the electronic industry. 9.0 References Alesina, A. & Perotti, R. (1994). The political economy of growth: a critical survey of the recent literature. World Bank Economic Review 8, 351-371. Apple Inc. (2012, April 14). International Business Times. Apple. (2012). Investor News. Retrieved from http://investor.apple.com/ on 30th September 2012. Bernanke, B. S. & Gurkaynak, R. S. (2001). Is growth exogenous? Taking Markiw, and Weil seriously, NBER. Macroeconomics Annual 16, 11 – 57 Blomstrom, B. P. & Kokko, A. (1998). Multinational corporations and spillovers. Journal of Economic Surveys 12, 247-277. Catherine L.M. (2003). Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth. International Economics Policy Briefs, No. PB03-11 (Washington: Institute for International Economics). Institute of International Education, (2003). Report on International Educational Exchange (New York: IIE, 2003). Retrieved from http://opendoors.iienetwork.org/. on 30th September 2012. Komendi, R. & Meguire, P. (1985). Macroeconomic determinants of growth: cross-country evidence. Journal of Monetary Economics, 16, 141-165. National Association of Manufacturers. (NAM). (2006). How Structural Costs Imposed on U.S. Manufacturers Harm Workers and Threaten Competitiveness Report. Sophie R. (2003) Bad News for 2004 Investment in R&D. Chemical and Engineering News 81, (51). Sultan, S. (2004). India readies to state its case. Asia Times, March 2, 2004. Read More