Apple is a multinational firm whose origin is in the US. The firm has seen numerous growths resulting from the rise in its sales. It is the first US firm to hit $1 trillion in value (Gurman, 2018). This essay starts by giving a brief overview of Apple Inc. before stating specific data and analysis tools that will aid in conducting this research. In phase 2, it identifies the industry in which Apple operates, and uses PESTEL and SWOT Analysis to analyze Apple’s external environment. It goes ahead to use Michael Porter’s forces to explain Apple’s competitive nature and its attractiveness. In phase 3, the paper identifies some of the strategies employed by Apple such as acquisition and pricing at premium among others. It goes ahead to mention some of the strategic issues facing the firm and offers solutions on how to deal with the mentioned problems. It analysis Apple’s performance over that last years before concluding on different topics such as leadership and management, marketing, and legal environment among others that might affect its strategies.
Apple Inc. is an American global technology firm founded by Steve Jobs, Steve Wonziak, and Ronald Wayne. Its headquarters are in Cupertino, California but have set up over 500 retail stores in different regions. The company designs develop and sell computer software, computer hardware, fabless silicon design, semiconductors, consumer electronics, and online services. As of 2017, the company had employed approximately 123,000 employees. The same year, the revenue generated totaled to $229.234 billion. However, the firm faces stiff competition from firms such as Amazon, Samsung, Dell, Sony Mobile, Google, and PayPal among others.
As a vivid Apple products user, I found this company interesting because it has repeatedly been ranked as the world’s most valuable brand and boasts of high brand loyalty. In August 2018, it was the first US Company to get a valuation of over $1 trillion. It is ranked as the world’s 2nd largest mobile phone manufacturer, and the world’s largest information technology business in terms of revenue. On the contrary, despite its performance, it received numerous criticisms bringing us to the question what are some of the strategies used by the firm’s management to ensure its continuity and what strategies they should introduce to deal with the various challenges and critics facing the firm?
The company was founded on April 1, 1976 where it started by producing Apple 1 computer. The firm got incorporated on January 3, 1977 and Wayne sold his shares to the other two co-founders. In five years, the company experienced a 533% growth rate resulting from increased sales. They later introduced Apple II on April 16, 1977 and later launched the Macintosh computer in 1984. The company saw a decline in its sales and profit in the 1990s due to increased competition and unsuccessful consumer targeted products. It was later revived and returned into profitability in the period 1997 to 2007. It saw success in the sale of mobile devices in the period 2007 to 2011. Since then, the company has seen a growth in its market and sales. It has since introduced new products and services with the aim of serving numerous market needs. The firm has changed both its vision and mission statements over time with the goal of meeting current market needs and trends. It aims at being the best firm in the market by providing quality products and services to the market. The company is well known for products such as iPhone, iPod, and iPad among other products. It has created a good reputation for itself, making it easy to sell its products.
Different essential data for completing phase 2 and 3 are available over the internet. Such data include its financial statements, its environmental factors, general information on the industry it operates, its current strategies, and other strategies that may be beneficial to its success. Different analysis tools will be used when developing a detailed analysis of Apple Inc., such tools include the use of PESTLE, SWOT, and Michael Porter’s five tools. These tools will help analyze Apple’s performance, its marketing position, and competitiveness.
Apple is listed under the information technology industry where it has ventured in different sectors such as computer software and hardware, digital distributors, corporate venture capital, semiconductors, and consumer electronics. Being the only firm that generates and runs both hard-wares and soft-wares, Apple has managed to secure a broader market. It has continued to experience a significant market growth despite the high levels of competition. This analysis will use PESTEL and SWOT analysis to analyze its external environment.
Political and legal factors
Apple has to prepare for uncontrollable factors such as terrorism and political instability among others. Due to the high production cost, Apple has ventured into countries such as China, Cork, and Ireland which offers a low production cost due to cheap labor and raw materials (Jeynes, 2013). However, these nations face political instability which might affect its manufacturing process. The firm also operates different stores in different areas which can be influenced by terrorism, resulting in reducing market share, and eventually cut the profit. Different countries have entered into contracts such as duty-free and free trade zones among other policies aimed at improving their economy. Through such strategies, Apple can reduce its operating cost and can easily venture into different regions. International trade laws are also making it easy for Apple to operate in different countries since clear laws are guiding how it should run. However, it faces the problem of taxation since different governments have changed their taxation policies over time resulting in a reduction in its revenue.
Issues such as purchasing power affect its profitability. Due to the high cost of living and increased unemployment, people may fail to purchase Apple’s products since they fall under the category of luxury products. Additionally, an increase in oil price results in inflation affecting Apple’s operating costs and revenue. Being a multinational firm, it faces the problem of currency exchange inflation and deflation. However, the introduction of cryptocurrency has made it easier for the firm to operate smoothly.
Different social factors such as culture and income affect its operation. Due to the economic growth experienced in various countries, people are now able to purchase luxury products such as Apple products since they have higher purchasing power. Apple has always focused on the quality and design of its products, making it easy to attract customers. One current culture is the growth of the music industry. Since the introduction of iTunes, which is an essential music store, Apple has increased its revenue and reputation.
Due to increased competition, Apple has to encourage innovation and creativity. For this to happen, they must adopt modern technology in their operation. One such technology is e-commerce which has been brought about by globalization. Due to the dynamic nature of technology, Apple is forced to adopt modern technology regular translating to substantial operating cost and reduced revenues. The company has also invested in its research and development since it has to meet the different market needs.
There is a growing concern of firms to protect the environment due to the increased rate of global warming. Firms have been advised to engage in green and sustainable procurement, which at times may be costly. Apple has to adhere to these regulations and ensure that it protects the environment. Management engages in different activities such as community cleaning which not only helps improve the environment but also promotes its brand name and reputation.
In this research paper, the focus is on Apple’s opportunities and threats since they are the ones that help analyze its external environmental factors. Some of its opportunities include technological advancement which encourages innovation and creativity. Internet growth has made it easy for people to use Apple products. Similarly, social media offers a cheaper and effective marketing platform for Apple. The company is also expected to increase its products by launching its Apple cars in 2020, which will not only increase its market share, but also help diversify its risks. Apple also enjoys from the increased growth in the market as a result of increased GDP, increased per capita, and increased brand loyalty (Pratap, 2018). However, it faces numerous threats such as increased competition, technological advancement, insecurity and political instability, and globalization.
Porter’s Five Forces
This analysis tool assesses the future attractiveness of the firm and for competitor analysis. As mentioned in the introduction, Apple faces high competition from huge companies. This high competition/ rivalry forces Apple to invest more in research and development, processing, and marketing. The firm experiences a moderate bargaining power of buyers. Although it produces quality products, its customers have the benefit of low switching cost since there are a variety of substitutes in the market. The firm faces a low bargaining power of suppliers since it has diversified its market in different countries. The firm can easily outsource cheap raw materials from countries such as China, which limits supplier bargaining power. The firm encounters low forward integration from their suppliers due to their unique products hence help protect its brand position.
The firm also experiences a low threat of new entrants due to the high cost required to venture into the industry. Additionally, new entrants demand high costs to create a brand name for themselves, a fact that discourages new firms from venturing into the market (Pratap, 2017). However, different Chinese firms who have the benefit of cheap labor and raw material are finding their way into the market resulting in increased competition. Apple, therefore, has to encourage creativity and innovation with the hope of continuously introducing new products to the market. Lastly, the company is experiencing a high threat of substitute products since different firms offer similar products. Although the firm has a high brand loyalty in America, its brand is not as strong in other countries which it easy for customers to go for these substitutes. It is, therefore, evident that Apple is likely to face more competition in the future since numerous firms are venturing into the market. Technological advancement will make it easy for new firms to not only venture into the market but also establish a brand name for themselves.
Strategic issues facing Apple Inc.
Apple employs various strategies to enhance its business growth. The primary strategy is pricing at premium. Since Apple has already established high customer loyalty by producing quality products, it sets its process higher than those of its competitors. Apple mostly focus on high-income class and setting high pricing helps create the idea that their products are better than those of rivals. Additionally, Apple is known to be the first to introduce products into the market. To fight competition, Apple encourages creativity and innovation and always aims to be the first company to launch a new product in the market. By doing this, it not only creates customer loyalty but also enjoys increased revenues before competitors produce a substitute. Apple has also utilized the merger and acquisition strategy with the aim of diversifying its risk, improving its products and services, and reducing competition. It has acquired firms such as Shazam, Boddybuild, Texture, NeXt Inc., Prime Sence, and Novauris among others.
However, the firm faces numerous strategy issues with the first being its poor global strategy which is the process of expanding and competing in international markets. Unlike Nokia which is estimated to generate most of its income outside its home country, Apple generates most of its revenue from the US. Another challenge is intense competition from numerous companies. Its high prices make it hard to compete with other firms that use low prices to penetrate into the market. It also faces the challenge of sustaining the development of new products since the market needs are changing over time. Apple’s reliance on third-party suppliers such as NAND flash company and DRAM pose another challenge. I believe that the firm can address these challenges by adopting strategies such as price skimming where it offers different products for different people. It can also improve its brand name in other countries by focusing on meeting the needs of the people and increasing its advertisement. It can also establish a good buyer-supplier relationship based on mutual trust. It should also encourage innovation to meet the changing market needs and also adopt modern technology.
Apple’s performance has changed over time. For instance, in 2006 it sold 39.4 units which were made up of iPods, computers, and portable music players which represented 40% of total revenues generating approximately $19 billion in sales. With the continuous introduction of products such as the iPhone in 2007, it experienced a boost in its sales. In 2016, it saw a total sale of $216 billion. However, it suffered a decline in sales of iPhones by 8% translating to a 12% drop in revenues in 2016 (Duprey, 2017). The company continued to experience a 14% percent annual decline in its net profits. The firm has however seen a rise in its revenues with time to $78.4 billion in the 2017-quarter period and $229.234 billion by end of the year. Despite the challenges, the firm has seen a 1000% appreciation of its shares over the past ten years, and it is now the first American Company to hit $1 trillion in value. The firm is expected to have high revenue this year resulting from massive sales of its products.
I believe that the management should thoroughly analyze the market needs before implementing any strategy. They should consider issues such as the legal environment which will shield them from increased lawsuits that can ruin their reputation and raise their operating costs. Such issues include wages and salaries. To venture into foreign markets, it should conduct a thorough analysis of the needs of its potential customers. It should uphold accounting principles to help determine the effectiveness of their business. These practices will help identify the performing sectors and the non-performing ones. As stated earlier, Apple should focus on increasing its brand loyalty in other countries which is possible through globalization. The overall economy is stable since nations are focusing on improving their GDPs, meaning that Apple can increase its market base. Effective leadership and management are crucial for its performance since these leaders will help develop and implement strategies.