Impact of External Environment on Apple Operations - Essay Example

TOPIC: MARKET AUDIT Executive summary Apple Incorporation is a technology company that produces various products such as Mac, iPhone, Apple TV, iPod, Ipad, computer hardware and software among others. The company aims at becoming the market leader by providing brands that revolutionize communication in the world. With revenue of 156,508 billion US dollars, the company adequately meets the needs of its shareholders. Some of the major external factors that affect the operations of Apple include wars and terrorism, inflation, globalization, competition in the technology industry as well as legal processes in foreign countries. On the other hand, the company internal factors that arise from external effects include strong brand name, diversified product portfolio, strong management team and mergers. To remain competitive and address the weaknesses of poor relationship with the major competitor, it is imperative for the company to form more mergers with large company such as Dell. In the same way, the company should utilize the available market opportunities by advertising its products through social sites such as face book and twitter. This is in addition to establishing more sales outlets in the developing countries. Introduction One of the vital strategies that firms adopts to face off stiff competition in the contemporary business arena is the use of well designed marketing plan that takes into consideration the effects of external environment on the operations of a firm. One of the companies that have attained a competitive advantage due to its effective marketing strategies is Apple Incorporation. Apple inc. is an international company that deals with marketing and designing of computers hardware and software as well as household electronics products. Earlier on, the company was referred to as Apple computer incorporation (Adam, 2012). Apple inc. which is headquartered in US is well known for the quality and high-tech brands that have revolutionized communication. This marketing audit analyzes the impact of external environment on Apple operations by reflecting the current market situation of the company. Vision of the Apple Company The company is focused at becoming the market leader in the electronic and technology industry globally. According to the former chief executive officer, Mr. Steve Jobs, computers provided by Apple should be on every desk in the next 8 years. Mission of the company Apple Company will persist on offering innovative and revolutionized brands to its customer to meet their short term and long term demands. In addition, the company will continue to enhance its corporate social responsibilities to create a positive image on the eyes of the public (Janson, 2008). Current market situation Currently, Apple has a wide target market that covers young customers aged between 12-35 years who are music fans. Additionally, its market includes city dwellers, upper and middle economy class, university students and media professionals (Chien, 1986). As a result, the company has generated high revenue that stands at 156,508 billion US dollars. With more than 390 stores in 14 states, Apple market capitalization stood at approximately US$630 billion as of October 2012. Under the current leadership of Tim Cook, Apple has embarked on production of more brands to reinforce the ones established by the former CEO Steve Jobs (McKee, 2009). Some of the major company brands in the market include Mac, iPhone, Apple TV, iPod, Ipad and software among others. The table indicating the Apple revenue by category for the 1st quarter of 2012 financial year Product Revenue in percentage iPhone 53 iPod 5 CPU sales 14 iTunes store 4 Ipad 20 Other 3 Source- (Dan, 2012) The current performance of Apple has been influenced not only internally but also externally. PESTEL analysis PESTEL (Political, Economic, Social, Technology and Legal) is one of the market audit frameworks that companies emulates to identify the effects of external environment on their current market position. Being a vital tool for understanding decline or growth in the markets, Barney and Hesterly (2008) argues that PESTEL assists marketers in environment scanning that is fundamental is strategic management. This section identifies key external factors that have played part in the operations of Apple Company. Political impacts One of the major political aspects that influence current market position for Apple is international relationship between US and other countries. According to company 2007 financial report, 52% of the company sales were outside US. This indicates that wars and terrorism activities especially in developing countries have substantial influence on Apple. It is worth to note that Apple has no ability to control such political factors even if they affect its operations in US and other countries. One of the major points to note is that Apple produces most of its products in other countries including China, Ireland and Korea among other countries. This indicates that any political conflict between United States and any of the states that Apple has established its activities negatively affects revenue generation and Apple sales. Economic influences The 2009 economic downturn had a significant effect on Apple. This was due to the low purchasing power by households as a result of loss of income and low level of investment resulting to unemployment. In addition, the high rate of inflation experienced in the growing economies impacted on the costs of production and high prices thus discouraging consumers from purchasing Apple products (Evens, 2005). Even though US dollar and other currencies lost value due to economic depression, Apple Company did not experience huge economic dangers. This was based on the fact that the company had purchased foreign currency thus reducing the effects of global inflation on its sales. Despite the depreciation in US dollar, Apple revenue increased in the global market. Social influence One of the major roles of technology is enhancing globalization that encompasses interaction of people at the global level. This implies that for effective interaction of people in the contemporary world to be achieved, devices such as mobile phones, iPod and computers among others cannot be overlooked. Taking into consideration the current development in the music industry, Apple has established the largest virtual media store, iTunes making it to effectively face its competitors. Even though web piracy is a major threat for the company, most governments have taken measures to curb the vice thus benefiting Apple. Technological influences One of the key factors that have resulted to intensified competition in the technology industry is the expansion of technology market for mobile phones and computers. In this regard, innovations in the technology industry are occurring with a high speed thus reducing the products lifecycle. To curd the stiff competition, Apple has expanded its investment in Research and Development thus producing innovative products that meet ready market. Legal influences Despite its efforts to enter new markets, Apple is faced with complex legal processes especially during legislation. However, the need to comply with laws that govern foreign companies is a major goal of Apple thus such delays in the legislation does not deter the company from expanding to new markets. In the same way, most governments are aware of the quality products produced by Apple thus creating a positive relationship with the company based on the benefits such as jobs creation and improved technology that government will achieve. SWOT analysis As a result of the external factors, companies adjust their internal factors as a way of curbing the rising competition. One of the major model that companies adopts to identify its internal strategies and impacts of the PESTEL factors, is SWOT (Strengths, Weaknesses, Opportunities and Threats). This part of the marketing audit scrutinizes Apple internal factors. Strengths Strong brand name is one of the major strengths that have enabled Apple to remain competitive in an environment characterized by stiff competition. According to Holmberg (2010), strong brand names are essential in creating strong customer trust and loyalty resulting to increased company revenue. For example, the launching of IPad 2 in 2011 resulted to high sales for Apple due to the quality of the new brands as compared to the competing brands. Strong Research and According to Jeffrey (2007), development is another strength that has enhanced the performance of Apple in the technology industry. Through its adoption of innovation as a way of facing its competitors, Apple has diversified its product portfolio resulting to products such as iTunes, iPad 2, iPhones among others (Dan, 2012). Additionally, Apple has efficient economists and skilled financial managers that have put in place strong mechanisms to curb inflation in the world economy. As mentioned earlier, Apple purchases foreign currencies to curb effects of depreciation of US dollar. The merger between Apple and Intel Computers is another factor that has strengthened the financial position of the company. Strong management under the former leader Steve Jobs and current CEO Tim Cook, is a key base that has made the company to reach its current market position (Wozniak, 2006). Weaknesses Weaknesses entail the negative aspects that can be improved since they are under the control of a company. Despite its strong brands, Apple has a poor relationship with the major competitor, Microsoft. As a result, the company's chances to seek for assistance from Microsoft are limited. Based on the reduced lifecycle of the products produced by Apple, the company needs to be constant in the production of its products to meet the high global demand. This can create strain on the company budget as a result of high costs of production. As compared to the main rival Microsoft, Apple has little market share thus making the competitor to be advantaged. It is vital to note that due to the high level of trust that the company placed on Steve Jobs, his demise left many shareholders with little hope on the progress of the company. This is detrimental to the company since shareholders trust is imperative for the progress of any company. Additionally, the increased number of legal cases has resulted to the increased operational costs resulting to reduction on revenue that is needed to enter new market and meet the current demand for technology. Opportunities Opportunities entail the external factors that enhance the performance of a company currently and in future. One of the opportunities that exist for Apple is the production of more computer anti-viruses. This is due to the increased number of computer viruses that affects effective application of software produced by the company. As a result of the increasing global population, the demand for computers and other technology devices will hike thus providing Apple with an opportunity to produce more products (Bach, 2007). Additionally, Apple has continued to create partnership and bonds with other companies thus providing an opportunity for financial stability and more customers (Davidow, 2010). Threats These include external factors that Apple and other similar companies have no control over. In cases of threats, Flamm (2010) stipulates that companies either take precautions not to allow any harm or turn the threats into benefits. One of the major threats that Apple faces in the market is the strong competition from Toshiba, HP, Sony as well as Dell especially in the laptop market. In the same way, low-costs imports particularly from China are likely to reduce the demand of Apple products despite their quality. The continued increase of Window’s 7 has made it to gain a bigger market share that Apple may not have control over (Moore, 2000). Table below summarizing Apple SWOT analysis Strengths Strong brand name Intensive Research and Development Efficient and skilled economists Strong management team Weaknesses Poor relationship with the major competitor little market share compared to Microsoft High number of legal cases Opportunities Production of more computer anti-viruses Increased demand for computers globally Partnership and bonds with other companies Threats Stiff competition from competitors low-costs imports Inadequate resources to meet high demand Source- (Simon and Young, 2005) Recommendations Apple should adopt extensive marketing strategies. For example, due to the increased use of social sites including face book and twitter by young people, it is imperative for the company to advertise its products through such sites. Secondly, Apple should form merges with other bigger companies such as Dell to attain a competitive edge thus effectively facing the titanic Microsoft in the technology industry (Leonard, 2009). Thirdly, Apple should establish more outlets in the developing countries where the demand of computers and mobile phones is on the rise. In this way, the company will generate higher revenue that is needed for its expansion. Conclusion Based on the above analyzes, it is clear that for a company to employ effective marketing strategies and plan, is fundamental to emulate a market audit that will make it possible to identify weaknesses and opportunities. Based on the scarce resources and stiff competition, companies that undertakes market audit are at an upper hand as far as optimum allocation of resources is concerned. This market audit for Apple inc. will significant in establishing an appropriate marketing plan that is vital in making the company attain a competitive edge in US as well as in foreign markets. References Adam L.2012. Inside Apple: How America's Most Admired--and Secretive--Company Really Works. New York: Grand Central Publishing. Bach, B. 2007.Implications of Enabling Technologies for Apple Inc.: Cyber marketing & Enabling Technologies. California: GRIN Veglag. Barney, J and Hesterly, W. 2008. Strategic Management and Competitive Advantage. New Jersey: Pearson Prentice Hall. Chien, P. 1986. The First Ten Years: A Look Back. The Apple II Review, Fall/Winter 1986. Dan, G. 2012. Apple: iPhone 5 sells out pre-orders at 2 million. Marketwatch. Retrieved from http://articles.marketwatch.com/2012-09-17/industries/33889545_1_new-iphone-larger-touchscreen-4s Davidow, W. 2010. Total Customer Service. New York: Harper Perennial Books. Evens, P. 2005. 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