Strengths, Weaknesses, Opportunities and Threats of Apple Inc - Assignment Example

Apple SWOT analysis Apple is one of the most recognizable brands in the world today. It has a lot of products ranging from personal computers, mobile phones as well as music devices. All of these products have caused the company to be highly profitable. This has been on the fact that it leads in a lot of the products. This SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis will seek to look at the performance of this company in terms of what its shareholders are expecting from their returns in the long run, as well as, suggesting some solutions to the problems that the company is facing. Introduction Every business has its strengths and weakness. Apple is one such a company. Its origins are humble from the garage where the company’s founders, the two Steves worked on their inventions (O’Grady, 2009). The company has grown from those times to the large company that it is today. This article will, therefore, attempt to look into the company and come up with an analysis, to give the potential investor an idea about the company. This will then guide the potential investor towards making the decision on whether to invest in the company or not. SWOT Analysis The essence of the SWOT analysis is to look at the strengths, weaknesses, opportunities and threats. Strengths One prominent, strength of a company is its ability to be innovative (Ferrell & Hartline, 2011). This allows the company to maintain a competitive edge over its rivals. The launch of the IPod, I pad and the App store has allowed APPLE to become successful. This was done through the product design, branding, strategic alliances and its business model. The APPLE Company’s leadership, for example, has ensured that its corporate governance has remained stable (Hitt, Ireland & Hoskisson, 2008); even with the demise of its iconic Chief Executive Officer Steve Jobs. This was done by the appointment of Tim Cook who has a long history spanning around 13 years (Hitt, Ireland & Hoskisson, 2008). This, in effect, has served to stabilize the company and saved it the turmoil that comes with the search for a successor. Leadership has historically been one of the strong points of the company. In 1997, when the company was facing bankruptcy, it resulted in the hiring back Steve Jobs as its Chief Executive Officer (CEO) who helped restore the company’s profitability (Schneiders, 2011). This was mainly through the CEO’s creation of NEXT, as well as, the film company Pixar. This created a platform on, which the company rode on to return to profitability, momentum that has remained to date. Strength of the company has also to do with its brand. The company’s resolve to change the product line, as well as, its marketing strategy has contributed to its strengthening of its brand (Schneiders, 2011). In 1997, the company launched the Macintosh (Mac) a personal computer that it designed, produced and marketed. This was a profitable venture that played a vital role in restoring the company’s profitability. This was followed up in 1998 with the launch of iMac (Schneiders, 2011). The result was a return to profitability and thereby restoring its stability. On the same note, in the third quarter of 2009, the company made a profit of 1.67 billion dollars. In 2010, the company was able to beat the recession by selling 250 million IPods, a synonym in the mp3-player market. This is a fete that has allowed the company to cement its dominance in this market. The company has placed a major emphasis on its marketing strategy. The strong point of this is its numerous stores located worldwide (Ireland, Hoskisson & Hitt, 2009). Despite having been written off, these stores were responsible for contributing to 15-16% of the overall company’s profits of about 200 million dollars between 2007 and 2008. The fact that this is a profitable venture ensures that the company has retained leadership of its products. Sticking with the brand, Apple has a policy of “brand exposure” (Ireland, Hoskisson & Hitt, 2009). This means that the company has used its stores to allow potential customers to see what their products are capable of doing. This is calculated to paint an attractive picture of what these products could do to advance the lives of populace. The fact that it will portray a picture of being a product that promises to upgrade the lives of the customer then, this prompts them to purchase the products. At the same time, another of the company’s strength comes from customer loyalty. A lot of the customers will always come back for new products whenever the company launches them. This is something that can be described as cult-marketing (Schneiders, 2011). The result has been profitability of the company. Whenever the company announces a new product, its retail outlets are always filled with people who would line up to have a taste of the product either to purchase it or to look through the features it has. The company has also the dominance in the mobile applications (Ireland, Hoskisson & Hitt, 2009). This means that it is one of the most preferable brands as far as mobile applications are concerned. This further translates to a high turnover for the company, which, therefore, indicates that shareholders have little to worry as they will get a favorable return on their investments. The result should be to encourage them to further invest in the company or even purchase the products as a way of showing goodwill to the company. Weaknesses Though having a good turn-over the company has a number of negative aspects that need to be looked into. One of these aspects is its employment record. The company has been alleged to hire over 500,000 people in the United States alone from the engineers who design the products to the person who delivers the product at the client’s door step in its official website. The bulk of its production is based in Taiwan where a company called Foxconn runs a massive factory, which hires more than 350,000 employees (Hill & Jones, 2008). The company has a poor employment record in terms of the manner it treats its employees. They are, for example, discouraged from leaving the factory. This is done through the provision of low cost amenities that mean that the workers have all they need to survive within the factory premises including dormitories for sleeping. The amount of time that the employees work far exceeds Apple’s 60 hour rule. This rule stipulates that the employees cannot work for more than 60 hours in a day. This, therefore, means that the company has a breach of the rights of the workers (Hill & Jones 2008). The potential problem arising from this is that the company is seen to condone abuse of workers’ rights. At the same time, the prices of the company’s products are prohibitive. The cost of an iPhone, for example, had to be reduced from $599 to $399. This was aimed at increasing sales of the product. This, however, had the net effect if declining investor confidence as seen in the drop by $1.75 to $135.01 of the share price (Lamb, Hair & McDaniel, 2010). This shows that a lot of people cannot afford to purchase these products, something that the company needs to strongly look into as far as the returns to investors are concerned. Opportunities The company has a lot of potential, profitable ventures waiting out there for it to take advantage of. For starters, the company has shown that it is innovative enough to think outside the box (Ferrell & Hartline, 2011). This means that the company still has a lot of potential in terms coming up with new and more innovative gadgets that make life a lot easier. The company, therefore, should continue on the same path as this is a sure way to bring in more income and, as a result, increase the returns to its own investors. In terms of emerging markets, China has a lot of potential market possibilities for the company. The Chinese economy is only superseded by the U.S in size with indications that this is something the country will surmount soon (Song & Golley, 2011). The country of over one billion people is a potential goldmine for APPLE especially among its growing middle class that is relatively wealthy. The company has placed this matter to heart with the shifting of most of its production to this country where it has partnered with companies like Foxconn to ensure that the cost of production goes down, as well as, bringing the products closer to the people who need them. Threats While having a level of dominance in its mobile application segment the company is facing steep competition. This is coming from Android-based smart phones from Korea. The company that has the dominance in South Korea, SK Telecom has a lot of applications, 85% of which can be applied to Android-powered handsets. The company is even planning on opening its Apps stores to rivals LG and KT. This will bring Apps to more than 163,000. In comparison, Apple has 250,000 applications in its stores (Hui Pan, 2010). This represents a growing challenge that the company must look into since a decline in sales will mean a decline in investor’s returns. Other factors of consideration Looking at the company’s record of performance in the U.S and in the potential Asian market, the company has a number of matters that it has to look at. PEST analysis will allow the company to undertake a look at the performance of different countries where it operates and attempts to come up with a picture of events on the ground. As a potential source of a lot of the company’s revenue, the PEST analysis (Political, Economic, Social-Cultural and Technological) will look to china with an aim of establishing the country’s potential. Political Environment Looking into china, the political environment is not as liberal as is the case in the U.S (Gries, 2010). This means that the country has a strict control on events that are going on within its borders. The management of Apple must, therefore, have this in mind when doing business within the country as there is always the potential danger of having the government seize the property or introduce repressive laws cost the company more money. Economic Environment China has a very vibrant economy. It is second only to the U.S (Song & Golley, 2011). The country has a population of more than one billion people. Apple can undertake to make applications that suit these people or even adapt their current applications to suit the Chinese market. As a consequence, the shareholders stand to make a lot of profits, therefore, higher returns on their investments. This is something the Apple must thus put into consideration. Social and Cultural Environment The Chinese social and cultural environment is very different in contrast to the condition in the U.S. Having been a communist state (Gries, 2010), the country, therefore, operates quite differently in comparison to the U.S. APPLE has, therefore, to ensure that its applications are able to respect this. APPLE would be able to make returns to its investors if it is able to respect the cultural diversity of the people of China. Technological Environment The country has a high level of technological uptake. This can be seen in the amount of cheap technologies that are coming from this economy. The fact that PPLE uses some of the companies situated in this country is evidence enough of this (Hill & Jones 2008). Companies like Foxconn are based in this country and are locally owned. There are also foreign companies that are relocating into the country due to the low cost of doing business there. All this causes the country to be exposed to a high level of technology. Conclusion Apple has shown to have a high potential of returns to its investors. This means that the company is quite a safe bet when a person is looking to invest. Conversely, the company needs to be more aware of its human rights record especially when it seeks to partner with companies based out of the country. In China, for example, where the country has a high potential profit margin, the human rights record is not as stellar as in the U.S. This means APPLE must make sure that the local companies to whom it has outsourced its services follow strict human rights records. Failure to observe this will cause uproar where these products are sold, as well as, the possibility that people will refuse to purchase the products of the company. As a consequence, there is a threat of lower sales thus reduced returns on investments. References: Ferrell, O. C. & Hartline, M. D. (2011). Marketing Strategy. Ohio: South-Western Cengage Learning. Hill, C. W. L. & Jones, G. R. (2008).Strategic management: An Integrated Approach. Ohio: South-Western Cengage Learning. Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. (2008). Strategic Management: Concepts and Cases: Competitiveness and Globalization. Ohio: South-Western Cengage Learning. Hui, P. (2010). 2.5-4G: Monthly Newsletter: Apple’s Mobile Apps Dominance being Challenged by Android in Korea. Ireland, R. D., Hoskisson, R. E. & Hitt, M. A. (2008).Understanding Business strategy: concepts and Cases. Ohio: South-Western Cengage Learning. Lamb, C. W., Hair, J. F. & McDaniel, C. (2010). Marketing. Ohio: South-Western Cengage Learning. O’Grady, J. D. (2008). APPLE INC. Westport: Greenwood Publishing Group. Schneiders, S. (2011). Apple’s Secret of Success: Traditional vs. Cult Marketing. Hamburg: Diplomica Verlag GmbH. Song, L. & Golley, J. (2011).Rising China: Global Challenges and opportunities. Canberra: ANU E Press in collaboration with Social Sciences Academic Press (China). Read More