Apple Computers Market Analysis - Case Study Example

Running Headers: Apple Computers Market analysis Customer Inserts His/Her Name Customer Inserts Number Customer Inserts Course Customer Inserts Tutor’s Name 11, 03, 2011 Apple background Apple was founded in 1976 by Steve Jobs and Steve Wojniak and incorporated in 1977; it is headquartered in Cupertino California. The company deals with computer software and hardware and other electronics like iPhones, iPads, and iPods. Its current revenue is about USD$ 19.3 Billion. It has both local and international market in major cities like Sydney Australia where the focus of the paper is narrowed down. This paper provides a detailed environmental analysis of the company is provided through a detailed PESTDC and Porters forces analysis where different environmental factors are considered. Analysis of Apple computers in terms of internal strengths and weaknesses and external opportunities and threats through a SWOT analysis is also considered. Many professional and schools in Australia are increasingly dependent on technology a factor contributing to increased opportunities to Apple in Australia. Environmental analysis PESTDC Political Political and legal environment in Australia offers less restrictions and thus making it generally easy for Apple to do business in Australia. As compared to other major European countries, Australia legal and political environment offers fewer obstacles because of high transparency and low taxation as compared to countries like China where political influence is larger. Economic The last recession period that affected the entire world market had some effect on Apple sales not only in Australia but also in its entire market niche. This was mainly because of the change in buyer’s behaviour as a result of the global recession; buyers tend to concentrate on essential commodities when affected by economic downturn. International exchange rates also affected the company’s cost of manufacturing the product and hence leading to a declined profit margin. In Sydney and other major towns of Australia like Canberra, Apple is increasing its market niche as the effects of recession decline. Social- Cultural forces The internet presence is slowly changing out cultural norms especially through the development of social network. In Australia, this is the case and the introduction of internet supporting devices like iPad and iphones is greatly influencing the social trend in the country. The presence of Apple is Australian market is strategic in terms of social and cultural changes that affect the entire continent. Technological In Australian market just like European market, the development of technology is rapid, the normal desktop computers could be replaced by advanced systems like iPhones and iPads developed by Apple. Considering that Apple products like iPhone 4 is an internet based phone, its usage has increased in the Australian market as a majority of the young generation is using iPhone in Sydney to download music. Demographic change In Australia, most teenagers use iPhones to browse and download their favourite music from iTune and other sources of streaming media. Apple has thus taken advantage of is 3G and 4G enhanced handsets like iPhone 4 in Australian market. Young people of ages 14 to 35 largely use the internet and thus Apple products offer the service to the majority of the population. SWOT analysis Strengths i. Apple takes advantage of its brand and the failures of other brands hardware’s in Australian market. ii. The products of Apple computers set a very high standard of quality in the market and thus making its product dominant in its market niche as a result of optimization of its brand image. iii. Apple maximises on design and utility for instance, its computers are in designed to be a single unit as opposed to separate parts and cables. The iPhones produced by the company are well designed to suite the consumer (Kurtz & Snow 2009). iv. The company also has an advantage of its CEO Steve Jobs who is charismatic and visionary; he is also one of the world leading inventors with more than 200 patents and intellectual property rights. Weaknesses i. Faulty products like the Apple iPod Nano, its screen is faulty and can break under impact. Earlier iPods also had issues with the life of their batteries which the company had to replace. The recently launched iPhones also had antenna issues when working with 3G or 4G network and the company’s CEO had to explain the criticism of its products. ii. The company established and announced mutual relationship with IBM which is claimed by industrial specialist that the move may confuse Apple’s loyal customers (Kirkpatrick & Dahlquist 2010). iii. Apple’s product range is limited and also requires large amount of resources to fund research and development programs. iv. The products of Apple are of high prices and thus reducing the sales turnover in major cities like Sydney where a large market niche is located. v. Apple operating system are basically limited in software and thus forced to use Microsoft’s Operating system to run different applications platforms. Opportunities i. Apple products like iPhones and desktops have enhanced capabilities of supporting many applications. ii. Apple computers also allow easy upgrade of software and hardware especially in laptops. iii. Apple is well placed to develop its iTunes and its music player considering the increasing demand of music download. New strategies such as mergers with Disney can improve the innovativeness of Apple in the near future. iv. Based on the loyal customer base since the early 1990’s an introduction of Apple TV which takes advantage of the new highly enhanced webs can foster its market scope and demand as well (Walker 2003). Threats i. Level of competition in technological development is a major threat to Apple, its successes has attracted competition. It major competitors include; Dell, Toshiba, HP and IBM among others. Apple has thus invested in research and development to maintain its market niche (Katsioloudes 2002). If economies falter, the company’s products like Apple Mac and iPod will fall in demand. ii. Product substitution is also another major threat to Apple products, for instance as much as iPod and MP3 are famous at the moment, it is clear that CD and Vinly were forced out. The same might happen to iPod and MP3 as they might be forced out by let say wireless technologies which could replace the need for music players. iii. The leaks that were witnessed in 2005 regarding bloggers that were forced to reveal their sources of information demonstrate the vulnerability of Apple by its own employees who can cost the company its profits. iv. The attractive interface provided by Windows 7 recently launched by Microsoft may force users to abandon Apple’s Mac. Porters Forces Supplier bargaining power Major suppliers of processors and memory cards like RAM offer a challenging bargaining power since they are less in number; such companies include Motorola, IBM and Intel. Strategic alliance and supplier of Mac (Microsoft) also provides an enhanced supplier bargaining power which may influence Apples pricing decision. The other suppliers that have a substantial influence on Apple’s products are the suppliers of TV and movies like Disney, ABC, Fox and Sony. Sources of music for iTunes also offer a challenge to Apple such sources are BMG, Warner, Universal and Sony (DuBrin 2001). Threats from new competitors There are a number of potential entrances of new competitors in all spheres of the Apple computers market niche. For instance, V-cast (Verizon) has the capability of streaming both video and audio which competes with Apple’s iTunes. The other service like iTunes is on demand online service. There are other disruptive technologies like next Google which may compete with features of iTunes. There are also widespread technologies that can enable other firms to develop sophisticated phones like iPhones and threaten Apple in its market niche. Some companies like Huawei which is a telecommunication support company offer stiff competition to iPhones through their recently launched touch screen Android phones with many features and applications similar and even superior to iPhones. Other companies like Nokia, Siemens and Ericsson have also developed and are working on developing similar phones in the future and hence threaten to knock out Apple’s iPhones. Buyer bargaining power Because of the many varieties of products that can substitute others, consumers have a bargaining power and can alter the pricing of Apples product in order to increase their market scope. The distributors or retailers of Apple product may pressure for lower prices in order to improve on their profit margin. Consumer attitude and behaviour may lead to reduced spending on computers and other electronics like phones as a result of economic downturn. In economic crisis period, consumers are more attentive of their buying habits and are thus likely to purchase products that are unnecessary or one can stay without in the hard times, this then leads to reduced demand of Apple products marking a buyers bargaining power. There are a number of music sharing options that customer can easily access without incurring cost, such options include; peer-to-peer networks that allow easy music transfer and also Ares and Limewire increases buyer bargaining power. Intensity of competitive rivalry The major competitors of apple are IBM, Dell, HP, Acer and Lenovo in the computer world. In the year 2009, Apple only owned about 4 % of the market share in the UK market for PCs, HP had about 23 %, Dell about 21 %, Acer about 15 % and Toshiba about 10 %. Apple was a distant fifth position; this demonstrates the extent of rivalry that exists in the market which requires extreme marketing strategies to overturn market loyalty. Apple has about 8.6 % market share in Australia and hence the second largest market to Apple after North America. Stylish MP3 players like creative, Samsung and other Nokia phones like music express compete with iPods, iPads and iPhones offered by Apple in the market. Other phone companies like Nokia, Alcatel and Samsung offer phones with features like iPhones, other offer attractive operating system like Android which allows installation of many applications such as music and office applications (David 2009). Some Android Operating systems like the IDEOS manufactured by Huawei offer office applications, data applications like GPS and even YouTube applications hence competing with iPhones especially in developing countries considering the high pricing of iPhones. Online music stores like Napster also offer similar services to Apple’s iTunes and hence offering them high competition in its market. Microsoft also offer Windows operating system with installed operating system with media player or playing music and video competes with iPods and iPads which are only dedicated to music and video. Other operating systems like Mac OS X (Linux) also offer competes well with the products of Apple. Threats of substitute products In the computer world, there are several substitutes of Apple computers, some of the leading substitutes of both the software and the hardware are Microsoft, IBM, Dell, Lenovo and HP. According to Ignatiuk (2009) these products performs the same functions as Apple’s PCS and thus easily substitute Apple’s PCs because of their compatibility with Microsoft Software’s which are used worldwide. For iPads, iPods and iPhones, there are a number of other phones makers with similar features like music transfer or download, capacitive touch screens and others (Daft 2009). Satellite radio music like XM and Sirius are also substitutes of iPods; Entertainment Medias like XBOX, PS2 are also substitutes of iPods (Rodiek 2008). The substitutes of Apple’s iTunes are music from CDs and DVDs and currently MP4 with higher memory capacity. There are also other sources of obtaining music besides iTunes downloads these sources includes theatres, cables and broadcasts. In the software world, there are many software developers which can easily perform the task of Apples software. Microsoft offer competition especially because of its user friendly applications and operating system that easily create a substitute to Apples software like Mac Os. References Daft, RL & Lane, P 2009, Management, Cengage Learning, Abilene. David, JN & Hooper, MJ 2009, The global business handbook: the eight dimensions of international management, Gower Publishing, Sydney. DuBrin, AJ 2001, Leadership: research findings, practice, and skills, Houghton Mifflin, Upper Saddle River, NJ. Ignatiuk, A 2009, Analysis of Dell's Business Strategy, GRIN Verlag, New York. Katsioloudes, M 2002, Global strategic planning: cultural perspectives for profit and nonprofit organizations, Elsevier, Thausand Oaks. Kirkpatrick, CD & Dahlquist, JR 2010, Technical Analysis: The Complete Resource for Financial Market Technicians, FT Press, Brightwaters, NY. Kurtz,DL. & Snow, KM 2009, Contemporary Marketing, Cengage Learning, Whistler. Rodiek, C 2008, External Environmental Analysis - The U.S. Television Manufacturing Industry, GRIN Verlag, New York. Walker, G 2003, Modern Competitive Strategy, McGraw-Hill International, New York. Read More