The Macro-Environment of Apple Inc - Research Paper Example

Apple Macro-analysis APPLE MACRO-ANALYSIS Introduction Apple Inc. is an American MNC founded in 1976 and headquartered in Cupertino, California. The company’s objectives are rooted on the design and development of PCs, PC related software, and electronic products like iPods, and MP3 players. Apple Inc.’s main product lines include the iPhone, iPod, iMac, and the iPad that have all been revolutionary products in the electronics industry (Lashinsky, 2012). Since it was founded in 1976, the company has relied, on the innovative competencies, to maintain a competitive advantage. However, although the organization has always been at the forefront of innovations in the electronics industry, their biggest drawback has been inability to hold onto market share after the initial novelty wears off. This has seen Apple Inc. start to transform itself to a fully-fledged consumer electronics organization and away from being an inventive computer manufacturer. The cause for this transformation has mainly been due to external factors as the company expands globally and comes up against increased competition (Lashinsky, 2012). This paper will seek to carry out an analysis of Apple Inc.’s macro-environment using the PESTLE tool with the aim of detailing critical issues facing Apple’s marketers. Moreover, this information will be applied when making recommendations regarding marketing strategies for Apple Inc. Apple Inc Macro-analysis The macro-environment of Apple Inc. will help in the determination of the organization’s current situation. To carry out this analysis, a PESTLE analysis will be applied with the objective of determining the political, economic, social, technological, legal, and environmental factors that will impact Apple Inc. This tool is effective in investigating the macro environment of an organization with the intention of using the information as a guide for strategic decision-making. The assumption for using a PESTLE analysis is that, if an organization carries out a current audit of its environment, while also assessing probable trends and changes, it gains a competitive advantage over its competitors in responding to these changes (Keller, 2013). This tool is useful in comprehending the larger picture with regards to, the wider environment that Apple is operating in, while also allowing the company to understand risks present in the market, as well as potential, position, and direction that the organization should take strategically. While using a PESTLE analysis, a company can find out where their products are positioned with regards to the external environment, which will affect the internal operations of the organization (Keller, 2013). Another tool that could be used to conduct a macro-analysis for Apple is a SWOT analysis, especially with regards to its opportunities and threats functionality. A situational analysis can also suffice in this case, as well as porter’s five forces analysis to some extent. Apple PESTLE Analysis Political Factors With over 60% of sales at Apple Inc., coming from foreign markets in the 2012 financial year, Apple is significantly impacted by global political changes. How the United States government relates with the rest of the world when it comes to terrorism and trade deals will have an effect on the operations at Apple (Keller, 2013). The Iraq War in the former past of the last decade, for example, was heavily influential in the return of Steve Jobs after sales and marketing strategies for global markets, especially in the Middle East that remains a major market for Apple, failed. Political uncertainty in overseas markets could lead to uncertainty regarding insurance costs, shipping costs, and currency volatility, which will impact Apple’s sales and profit margins. In addition, tariffs, tax rates, and trade regulations will impact Apple as well because they have to adhere to them to do business in these countries, while off-shoring some of their operations to countries like China and India means that Apple has to adhere to their labour laws. Therefore, Apple should keep track of changing political patterns and behaviour that affect its ability to market and sell its products in foreign countries (Keller, 2013). Economic Factors The global financial crisis of 2008/2009 and the subsequent global recession portended a possible challenge for Apple Inc and its continued growth. Some effects of the crisis, which Apple Inc. has had to navigate, include high rates of inflation and decreased consumer earnings and subsequent depressed spending on luxury items (Keller, 2013). Additionally, they also have to navigate interest rate fluctuations stock exchange trends, unemployment levels, exchange rate fluctuations. However, Apple does not seem to have been greatly affected by the economic recession despite most of its products being luxury items. This can be explained by Apple’s decision to design and market products differently from their competitors, which increased demand for their products. Additionally, they were also able to leverage option contracts and foreign currency forwarding to hedge their exposure in currency exchange rates (Keller, 2013). Social Factors In developed nations, technology has had a massive influence on social life, and Apple Inc. has acquired the reputation of being a major player in the industry. Apple has impacted social trends through design, quality, and creation of the virtual music store iTunes, with sales driven by generation “Y” (Keller, 2013). The average age of world’s population is up surging as a result of fertility decline and the effects of the “baby-boomer” generation; this could mean that Apple’s target population is decreasing as the relative population of people above the age of 65 increases. Therefore, Apple Inc. may find it a challenge to market products designed for a demographic between fifteen and thirty five to people aged above 65. However, overall, modern social life has impacted positively on Apple Inc.; the surging popularity of social media and their products compatibility with the trend (Keller, 2013). Technological Factors The development of 3G smart-mobile phones and their increasing availability has been one of the most influential trends in mobile telephony in the last five years (Keller, 2013). Majority of wireless careers, including Sprint, T-Mobile, Verizon wireless, and AT&T use the 3G system, which has enabled Apple to grow its business. However, major wireless carriers are developing 4G technology and are already developing chips support 4G networks. This technology will have to be incorporated into mobile phones, notebook computers, tablets, and other consumer devices. In addition, there has been a steady trend towards the use of mobile cloud technology, which includes wireless carriers, mobile device makers, and other internet and software based giants. Apple launched its own version iCloud in early 2012, allowing its customers to store documents, contacts, calendars, applications, and music storage (Keller, 2013). By investing significantly in R&D, Apple has been able to integrate these capabilities with its iOS devices. Technological forces are more important than the other factors because technological innovation is a crucial competitive advantage in the industry. Therefore, Apple must remain innovative to remain a market leader in its industry. Legal Factors Apple Inc. has been involved in several legal proceedings, while its peers and competitors have also been involved in litigation. The organization’s success is dependent on their ability to protect intellectual property rights (Mallin & Finkle, 2011). As the company continues to grow, it is likely that they will face more intellectual property claims, while globalization means that Apple will also have to protect its rights more vigorously. Apple recently won a settlement claim against Samsung after a jury ordered the latter to pay over &1 billion for patent infringement. Additionally, Apple also has to contend with international and US policies, laws, and rules, which could affect its prowess in marketing and selling (Mallin & Finkle, 2011). Environmental Factors New laws and regulations, which have been formed in the US, have mandated manufacturers to take responsibility for recycling, which Apple also has to adhere. Apple changed their policy of shipping waste overseas for recycling by opening domestic recycling (Mallin & Finkle, 2011). In addition, the trend by conscious customers to consider environmental conservation and carbon footprint has forced Apple to market their products as green. Critical Issues at Apple Two of the most critical issues that Apple Inc. faces in the current macro-environment are the pace of changes in technology and competition. Its strategic decisions to move into download portable entertainment and mobile communication devices placed the company in direct stiff competition with other players in the industry (Elliot, 2012). These range from; low-priced rivals, new competitors, and potential substitutes. All these factors threaten to harm Apple Products’ perceived value, as well as the success of its strategy. Apple also faces a challenge with regards to sustenance of its core competencies, including brand management, building of relationships, innovation, and especially marketing. This is especially so as they manage a wider product range and have to navigate additional markets. As its customer base becomes increasingly diverse, they will have new competitors with wider varieties of strategies and strengths (Elliot, 2012). The technology driving the electronics industry is changing rapidly and constantly. This, in turn, makes it uncertain whether the company can sustain its reputation for innovation in quality and design, while at the same time releasing new technological breakthroughs and products that satisfy their customer base. Moreover, from the analysis above, the range of products offered by Apple will no longer be based on software and hardware developed internally, but rather, on ability to secure content as they roll out 4G enabled products and embrace social media, and cloud mobile computing (Elliot, 2012). This latter resource comes with its own proprietary issues, entertainment value dimensions, and competitive forces. In addition, as Apple continues to grow and become more successful, they will face challenges with regards to balancing the demands of stakeholders. These include; government or legal entities, partners, suppliers, investors, and customers, all of whom will continually pressure Apple’s management to satisfy them. Increasing pressure from foreign governments, such as China and India, about labour rights will no doubt act as a challenge to Apple’s strategy to leverage cheaper labour overseas. The 2008 Chinese Labour Law has had a significant effect on Apple’s operations in China, which has caused a backlash from the Chinese public, harming their marketing plans (Elliot, 2012). Role of Macro-analysis at Apple Conducting a macro-analysis of Apple Inc. using the PESTLE analysis tool is important because it enables the company to examine the factors that will affect the emergence of new trends, as well as to direct their strategic direction. It is important for Apple’s marketers to analyze the host country’s institutional scenario in order to gauge their competitive value and required strategic revisions (Harnish, 2012). In addition, since most technology companies are from the United States, more specifically in the software and hardware sector, learning about future institutional changes that could affect its competitors as well is important for Apple’s marketers. The computing industry in the United States has managed to leverage the technological strengths present, in the country, to come up with desirable and high quality products, particularly because most of the major companies in this sector come from the US. It would have been impossible to develop this niche market without development of an internal market, which makes an audit of the external factors affecting the market important to marketers (Harnish, 2012). As a company that converges various technologies in the electronics industry, such as music and trade, maintaining an audit of macro factors that affect the entire sector is crucial to being competitive and innovative. The macro environment is the most important factor for Apple’s marketing strategy development because of its ability to impact other factors. The macro environment propitiates the correct conditions for Apple to grow and maintain its successful streak, while the marketing team works to position the company’s products according the macro environmental factors (Harnish, 2012). However, the macro environment is not an active participant in its influencing ability because most factors within this environment are independent of one another. However, by studying the macro factors, Apple’s marketing team can realign their products with emerging trends in order to make them more competitive. While the macro environment may be diminishing in importance since the emergence of “born-global firms” that start out at the global level, Apple’s home market has created specific conditions that have enabled it to achieve its current status. By targeting their new marketing strategy away from personal computing and integrating new business segments, marketing Apple’s products will require knowledge of factors that affect multiple sectors (Harnish, 2012). Therefore, a PESTLE analysis will give the organization a clearer picture about their position within the larger electronics sector, which will enhance their ability to market their products to the right people and be more innovative. Conclusion From this analysis, one can conclude that Apple Inc. needs to keep launching and marketing innovative products in order to maintain its brand image, which Apple’s most important marketing asset and competitive advantage. This brand image is mainly centred on their innovative design and product quality, which are both heavily influenced by trends in other business segments that must be factored in the marketing plan. A PESTLE analysis will enable the marketing team to analyze this external environment and the marketing strategies they can adopt to take advantage of innovations. By analyzing political, economic, social, and especially technological factors that will influence trends in the industry, the marketing team can subsequently determine opportunities and threats that are out of their control, but require action. Recommendations Apple should sign new pacts and explore new joint ventures to help them in marketing their existing products, as well as to advertise new products in the global market, especially with changing and more stringent laws and regulations in foreign countries. The company should become more eco-friendly and integrate this into their marketing plan in order to take advantage of a growing trend towards environmental conservation. In addition, Apple should design more products for a larger demographic base, especially those above thirty-five years of age, as the relative average population age moves away from their target group of fifteen to thirty five years. References Elliot, J. (2012). Leading Apple with Steve Jobs: Management lessons from a controversial genius. Hoboken, N.J: Wiley. Harnish, V. (2012). The greatest business decisions of all time: How Apple, Ford, IBM, Zappos, and others made radical choices that changed the course of business. New York, N.Y: Fortune Books. Keller, W. (2013). Apple, Inc: Strategic analysis of a global powerhouse. United States: s.n. Lashinsky, A. (2012). Inside Apple: How Americas most admired-and secretive-company really works. New York: Business Plus. Mallin, M. L., & Finkle, T. A. (December 01, 2011). Apple Inc.: Product portfolio analysis. Journal of the International Academy for Case Studies, 17, 7, 63-74. Read More