Table of Contents
- Political Factors
- Economic Factors
- Social Factors
- Technological Factors
- Legal Factors
- Environmental Factors
- Porter’s Five Forces
- Strategic Plan
With the advance of technology which has become both a blessing and a curse. A curse due to the fact it has become easy for the manufacture of counterfeit goods or imitation. The constant improvement of 3D printers. As a brand Apple heavily affected as many people what to own its products, and as the company charges a premium price for them a reduction in price from imitation bring forth the unknown potential of the global market. Many of such imitation come from China. Also the rise in cost of manufacturing push prices higher away from potential consumers. The increase in such costs also affects profits of the company. Aggressive marketing by companies like Samsung, Huawei and Htc are a threat to market share of Apple Inc. The dip in sales in china has reduced the company’s revenue projections though this was foreseen and sales in the last quarter of 2018. Also the fact that company changed its practice of selling older model of its phone at lower prices so that they can introduce a new range or model. Also the strategy of counteracting the slow grow in smartphone market by raising prices has worked until now they need a new strategy. More and consumer of the companies smartphones fell that for a long time they paying more and getting less it terms of device performance. A good example is that iPhone X which provided a technical leap which matched the price charged but it’s so called improvement the iPhone XS and XR model didn’t offer any performance enhancement as hoped.
The current administration in America headed by Donald J Trump is on verge of trade wars with China this will impact Apple negatively. As China has threated retaliation the company is stuck in the middle. Major sales contribution for the company are from outside the US, $113.8 is foreign sale while local sales accounts for $ 68.8 billion. Europe is also a huge a market for Apple but Chinas population has the highest number of millioners in the world and a growing middle class. This is a good market for the company’s range of products and politics could lead to its loss. As Trump will be choosing another $200 billion worth of Chinese goods to face tariff China could choose Apple as a scape goat for retaliation and cost it hundreds of million dollars’ worth of sales.
The company heavily dependent on Chinas low labor cost coming not from China but other neighboring countries and any political unrest could disrupt it and lead to an increase. This will further reduce the company profits. An alternative to China manufacturing companies will also increase the cost of Apple products. Also growing nationalism in China could result in a reduced market for Apple Inc.
Most of the world’s economies are facing slow growth others are on recession. The US credit crisis had far reaching effects beyond its borders. In 2013 the company was affected by the recession. Rising labor costs in China is a positive sigh as more people rise out of poverty is an achievement as it means a larger potential market for Apple Inc.. But for China its bad news as the economy key comparative advantage has been the low labor costs.
The increase in value for the US dollar means the exchange rate also increases. The increased exchange rate affects the cost of Companies products. This makes it expensive to do business in countries in Europe and China. A good example is in 2015 were revenues would have been $52.8 billion without increase in dollar value but the reported revenues of $49.6 billion.
The fact that the company to capitalize on Chinas low-cost labors this could limit the product’s appeal to some socially conscious consumers. Third world countries like those in Africa could offer new market for Apple products, if the company can penetrate these markets new revenues can be obtained.
As the internet becomes a new to trade and keep in touch with loved ones on social media. The company is taking steps to exploit these new social trends by the introduction of iPhones, Apple Watch and ipad. This easy to use devices make it easy to keep communicate on the internet.
This is one of the key drivers for many economies in the world. In 2015 Apple spent $8.07 billion for R&D that is 3% of company’s net sales. This research enables the company to access the mind of the consumer for taste and preference which key in this market were product life cycle is short. The company is known for innovation which what technology is, solving consumer problems through application like Apple Pay and consumers designs that excite the mind. Cybercrime is another negative side of technology development, hackers are becoming more and creative and Apple needs to keep its competitive advantage for safety and security.
As the market for its products cuts across borders so also the company is vulnerable to many factors and litigation. The introduction of Apple Pay attracts the company to increased level of regulation as it has entered the financial sector which is highly regulated in the US. The intellectual property laws will affect the company’s operations as third ware software and music. Also the software produced by Apple makes it vulnerable to piracy.
With many consumers becoming aware of greenhouse gases and the ever increasing toxic waste from technology and the harm it causes to the environment Apple need to show so commitment to recycling. Factors of waste disposal can and will influence company’s revenues and brand image to the consumers. The has no waste management plans and the company has a problem of discarding electronic junk anyhow. The lithium batteries are a huge problem to the company at present.
The company use ships to move it products as it cheap and eat into the company’s profits. Transoceanic shipping will be a problem to the company as it is the core part of apple chain supply and it is said to contribute to increase in global warming. The data centers the company depends upon for internet infrastructure also contribute.
Porter’s Five Forces
This analytical tool allow for better strategic decision making as it avails more factors on the external environment the company is operating in.
The company operates in very competitive industry which means that competitors have a huge influence on each other. The company operates in the hardware and software with rivals like Google, Samsung and Microsoft. To keep market share they all spend heavily on R&D also marketing is key. Market switching is common as they cost of products on the market isn’t that significant. For a consumer to move the Google Chrome book to another tablet in the market cost differentiation isn’t something to write home about.
Apple Inc. has maintained its brand status by not having sales for its product. This is a sigh of great quality in the mind of the consumer. The company also great consumer service and ensuring that only products of great quality are offered to the loyal consumer. The memory of Apple II Plus disaster keeps the company on its feet. All companies are more vulnerable in the pick of success as a faulty product can take the consumer running to the next alternative. It is known that it easy to lose a consumer but to recover one who has switched is next to impossible.
Buyer Bargaining Power.
There are two types of buyer power collective buyer bargaining and individual bargaining power. The latter isn’t so significant but when numbers go beyond the tens to the hundreds that lost revenues will affect company profit projection. Consumer retention is key so they company keeps it products glamorous and sexy.
To avoid consumer migration to the competitors the company ensures the product features are compatible and easily transferable across Apple products only. Like iCloud, iPhoto, iMovie such simple consumer consideration keeps them loyal.
Supplier Bargaining Power
The number of suppliers is large so this makes the power they hold low in the industry. The switching cost of the company is low and not a significant obstacle to overcome. The lack of supplier power gives Apple leverage over them. As the company at any one time requires large products to deliver to the various suppliers around the world, this is another power over the supplier due to the economies of scale available. To further keep power away from suppliers the company designs its own chips and the company also bought the manufacturing equipment necessary for the production of Apple components. By driving down the cost the company keeps competitors on their feet by forcing them to find different manufacturers and suppliers.
Threats of Substitutes
For Apple the threat is moderate. A substitute would not be the same product but a product that might satisfy the same need for the product. To avoid substitutes Apple creates products that replace their own. This keeps the consumer loyal and the high-end niche market well served. And to keep true this to this strategy the company created a cheaper version of the MacBook to mitigate the threat of substitute. With such a strategy Apple ensure it continues to profit from it product instead of a competitor. By considering all factors the comes close to potentially retiring its products with new ones.
Threats of New Entrants
The chance of a reputable company being established to affect the current market share of Apple Inc. is relatively low. This is chiefly due to the high cost associated with such a venture, a brand name requires to be established with time. Loyalty to the brand already in the industry is cemented to beginning and break such would require a lot of money in marketing as well as research and development for success to be achieved. The supply chain that the company has exists in its favor and also there is a defense against low send disruption from new entrants.
Apple has been using the blue ocean strategy successfully as it has been able to innovate and deliver new products to meet and exceed the consumer expectation. Some failure has been witnessed on the launch of iPhone XS and XR these two improvements of iPhone X. The leap of the iPhone X could not be matched by the later model.
The importance of reviewing the strategic plan is vital as this isn’t new territory for the company remembers Apple III and how it affected the ability to compete with IBM. With such a history the company is aware of the importance of keeping and improving a competitive advantage to lose it is easy to regain is not a guarantee. Quality products are the core competence of Apple Inc., the reduction of cost by designing chips for its product is also a good direction.
For a plan to set in motion to ensure that the company’s objective are achieved and the right course of action must be charted. “‘If you don’t know where you are going, you’re probably not going to get there ”. So a vision, mission and core values are needed to be a guide to the end result desired.
“Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumer around the world through its innovative hardware, software and internet offerings”
Apple designs Macs, the best personal computer in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPod and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices iPad.