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Essay: Apple’s responses to changes in the market & business environment (inc. SWOT, PESTEL, 5 Cs)

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  • Subject area(s): Business essays
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  • Apple's responses to changes in the market & business environment (inc. SWOT, PESTEL, 5 Cs)
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In the year 1976 Steve Jobs & Co started a company dealing in computers, which later was named Apple Inc. famous for its glamorous product design, updated technology and aggressive visionary pioneer Steve Jobs. Initiated as a pure I.T company but later it focused on consumer products because of intense competition in the tech sector . Apple has gained a lot of brand recognition and high customer loyalty via its related diversification strategy i.e. it offers computer, mobile phones, music players, television, tablets, and laptops. Apple is considered one of the largest businesses in the world what focuses in technology. Apple trades in the European Union and across the world which therefore suggests they are major business who trades internationally. However, they also have very big competitors such as Samsung and Google.

This report will evaluate the extent to which the business has responded to past changes in the market and business environment, and suggests how Apple may react to future changes.

The business environment

The business environment consists of three stages:

1. Internal environment

2. External environment

3. Competitive environment

Internal

The conditions, entities, events, and factors within an organization that influence its activities and choices, particularly the behaviour of the employees. Factors that are frequently considered part of the internal environment include the organization’s mission statement, leadership styles, and its organizational culture.

External

An external environment is composed of all the outside factors or influences that impact the operation of business. The business must act or react to keep up its flow of operations.

Competitive

Competitive environment is the dynamic external system in which a business competes and functions. The more sellers of a similar product or service, the more competitive the environment in which you compete. Look at fast food restaurants – there are so many to choose from; the competition is high.

Swot analysis – internal environment

A swot analysis summarizes the key issues form the business environment and the strategic capability of an organisation that are most likely to impact on strategy development. Thus, strengths and weaknesses are part of a business internal environment while opportunities and threats are from external business environment.

Strengths

This aspect of Apple’s SWOT analysis identifies the biggest strengths that enable the company to withstand threats in its business environment. These threats can reduce business performance. In Apple’s case, the following are the most notable organisational strengths:

1. Strong brand image

2. High profit margins

3. Effective innovation process

Since diversifying beyond personal computers, Apple has enjoyed terrific obdurate sales growth and has wisely managed its cash flow which resulted as No. 1 brand at Forbes with a total capital of $416.62 billion . Due to the size of Apple and their successive history they have built a well renown brand image what is memorable all around the world. Having a brand image known around the world will be a strength to Apple and this is because they will get an increase in brand recognition on a global basis. Due to Apple size they will also have high profit margins what will be a strength to the business. The strength analysis showed that apple is endorsed by an enormous brand; company has a strong recognition because of its aggressive nature of founder towards creativity and innovation.

Weaknesses

In this aspect of Apple’s SWOT analysis, the emphasis is on the weaknesses or inadequacies of the company. Weaknesses can serve as obstacles to business growth. In Apple’s case, the following organizational weaknesses are the most notable:

1. Limited distribution network

2. High selling prices

3. Sales limited mainly to high-end market

To be the world’s largest information technology company brings higher responsibilities as well. Apple like other entities is also facing problems in some of its areas. Based on internal analysis of Apple, it was found that it had a strong strategy for promotion of direct sale channels but unfortunately, they are still lacking behind. As they only had direct sales locations in just 13 countries. In addition, one of the weak area is the Apple’s dependency on iPhone and iPod, as their contribution towards overall sales is dominant. As well, it’s hardware products are only supported with iOS, which makes it difficult to use, whereas competitors’ products are android which doesn’t have such issues. Apple also have issues with high selling prices on their products and this is because apple charge extremely high prices for their products and having this could potentially decrease profit levels as customers might believe the price of the product is too high and not buy the product. Apple has a limited distribution network because of the company’s policy of exclusivity. For instance, the company carefully selects authorized sellers of its products. This part of Apple’s SWOT analysis shows that such an exclusive strategy supports control over the distribution of products, but limits the company’s market reach. In addition, because of the premium pricing strategy, Apple has the weakness of having most of its sales revenues from the high-end market. This market is composed of customers from the middle and upper classes. Customers from the lower class, which represents the majority of buyers in the global market, are unable to purchase Apple products because of the relatively high prices. Thus, based on this dimension of Apple’s SWOT analysis, the company’s pricing and distribution strategies impose limitations or weaknesses in the business

The table below highlights the prices of products from Apple, Samsung and Google:

Apple

Product Price

I phone X (latest product) £999

I pad £319

MacBook £1249

Samsung

Product Price

Galaxy S9+ (latest product) £869

Samsung Galaxy Tab S3 £299

Samsung Galaxy Book £649

Google

Product Price

Google Pixel 2 £629

Chromebook £200

Google Pixel Book £799

SWOT Analysis – external environment

Opportunities

This aspect of Apple’s SWOT analysis pinpoints the most significant opportunities that the company can exploit. Opportunities influence the strategic direction of business organizations. In Apple’s case, the following are the most significant opportunities in its business environment:

1. Distribution network expansion

2. Rising demand for tablets and smartphones

3. Creation of new products lines

Apple has the opportunity to expand its distribution network. Such opportunity directly relates to the weakness of the limited distribution network of the company. This part of Apple’s SWOT analysis emphasizes the need for the company to change its distribution strategy. An expanded distribution network can help the firm reach more customers in the global market. The rise in technology has meant that there is a big demand for smartphones and tablets and this would an opportunity for Apple as they focus in the sale of smartphones and tablets (I Phone and I Pad). There has been a 24 percent increase in elderly people buying smartphones and tablets from 2015 what suggests that Apple have a major opportunity with elderly people entering the market. In addition, Apple has the opportunity to explore new product lines. Its current product lines are highly successful. Through further innovation, Apple can introduce new product lines, like what the firm has already done with the Apple Watch. Developing new product lines can support the company’s growth. Thus, this dimension of Apple’s SWOT analysis indicates that the company has major opportunities for further growth despite aggressive competition.
In this aspect of Apple’s SWOT analysis, the focus is on the threats from various sources, such as competitors. Threats can limit or reduce the financial performance of companies. In Apple’s case, the following threats are the most significant:

1. Aggressive competition

2. Imitation

3. Rising labour cost in countries where Apple plants are located

The main threat that Apple have is aggressive competition. This is because tough competition in the industry is partly because of the aggressiveness of firms. Apple competes with giant firms such as Google and Samsung, which also uses rapid innovation. This part of Apple’s SWOT analysis highlights the limiting effect of aggressive competition. Because of the aggressive behaviours of competing firms, it is necessary to have strong fundamentals for maintaining competitive advantage. In addition, Apple faces the threat of imitation. This threat is significant because of the large number of firms that can easily imitate Apple’s products. Rising labour costs in countries will also be also be a significant threat to Apple and this is because this will affect profit margins or push selling prices even higher. Based on this dimension of Apple’s SWOT analysis, the company’s performance could suffer because of aggressive competition and imitation of product design. Thus, Apple must take appropriate action to prevent or overcome these threats

PESTLE Analysis – External environment

All organisations need to identify external factors within their environment that could have an impact on their operations. Many of these will be things that the organisation has no control over, but the implications of which need to be understood.

Political

The most significant political external factors in Apple’s remote/macro-environment present opportunities. This aspect of the PESTLE analysis model indicates the influence of organizations, such as the government, on business. In Apple’s case, the following are the most important political external factors:

1. Improving free trade polies (opportunity)

2. Stable politics in developed countries (opportunity)

The political factors that affect Apple are trading polices with different countries and this is because Apple want the best trade deals to maintain profit margins within the business. Therefore, having good relations with the European Union will allow Apple to have sufficient trading in countries that are part of the European Union and to have a trading deal which will allow them to maintain high profits without raising the price of products. Stable politics in developed countries is another political factor Apple will have to be aware of and this is because countries that are not in the European Union might offer different trade deals or have specific laws preventing the business making a trade deal with the country to sell Apples products. Apple will also have to deal with another political factor that will involve trading and that is the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland) Apple would have to negotiate with this union to sell their products in the union and set up a fair-trade deal with helps both parties. Apple would have political problems with Britain and this is because they under negotiations of leaving the European Union and this would mean Apple will need to negotiate with Britain to set up a trade deal as Britain are one of Apple’s top countries with most products sold so this would be vital for Apple to get a trade deal done to maintain profit levels. More free trade policies are created over time, especially with developing countries. Additional free trade policies increase the opportunities for Apple to distribute more of its products to various markets around the world. On the other hand, the stability of the political landscape in many developed countries presents opportunities because Apple can expect minimal political issues affecting its business. Based on this part of the PESTLE analysis model, Apple can improve its performance by taking advantage of these political opportunities in its remote/macro-environment

Economic

Most of the economic external factors in Apple’s remote or macro-environment create opportunities. This aspect of the PESTEL/PESTLE analysis model indicates market and industry conditions that impact firms. In Apple’s case, the following economic external factors are the most significant:

1. Rapid growth of developing countries

2. Stable economies of developed countries

The economic stability of most developed countries creates opportunities for companies like Apple to expand their businesses. Economic stability will allow Apple to make more profits and maintain financial stability across the business. Expanding into a country what has economic stability will allow Apple to have financial stability and further improve their profit levels as they won’t have to tackle a recession or high inflation rates what will have negative impacts financially on the business. However, the rapid growth of developing countries is more significant. For instance, the high economic growth rates of Asian countries are major opportunities for Apple to increase revenues through sales in these foreign markets. Based on this part of the PESTLE analysis model, Apple must ensure that it effectively exploits these economic opportunities. Speed and effectiveness are important because competitors are also targeting these high-growth economies. The cost on trading could affect the business economically and this is because trading around the world comes to a cost to the business and trading with certain types of unions will vary in cost depending on how popular the products are to certain countries and regions around the world

Social

Apple’s business is subject to the effects of social factors. This aspect of the PESTLE analysis model points to the social influences on consumer behaviour and expectations. In Apple’s case, the following social external factors are the most significant in the firm’s remote/macro-environment:

1. Rising use of mobile access (opportunity)

2. Rising use of social media (opportunity)

The social factors would be opportunities for the business and this is because there is a rise of mobile access and use of social media and that Apple focuses in the sale of smartphones, I pad and laptops this would help the business make more profit. The rise in mobile access would also benefit the business as they predominantly focus on their smartphone (the iPhone) and this is because there is rise in the use of mobile phones and to also compete with aggressive competition such as Google and Samsung. The rising use of social media is also an opportunity because it increases demand for digital devices like Apple products. Based on this part of the PESTLE analysis model, Apple has major opportunities in the social dimension of its business environment.

Technological

The technological external factors in Apple’s remote/macro-environment generally provide opportunities for the company. In this aspect of the PESTLE analysis model, current technologies and technological changes affect business conditions. In Apple’s case, the following technological external factors are the most significant:

1. Cloud computing trend (opportunity)

2. Technological integration (opportunity)

3. Growing apps market (opportunity)

The technological factors would also be opportunities for Apple and this is because technology is growing rapidly and people of all ages are adapting the technological changes over time . Apple introduced cloud computing which allows users to access files and photos when they like by signing in to ICloud. This will allow users to access files on different devices such as I Phone and I Pad etc. Technological integration of devices is a major trend. Apple can take advantage of this opportunity by continuing its strategy of providing products that can be seamlessly connected to each other. In addition, the apps market is growing. Apple has the opportunity to grow its App Store. Based on this part of the PESTLE analysis model, Apple is in a positive position to exploit such major opportunities in the technological dimension of its business environment. They can use the app store to their advantage by creating applications such as Health, Apple Watch, pages, numbers etc. These applications are apples way to try to match competitor’s ideas and to imitate them on ios will give users another reason to buy Apples products.

Legal

The legal external factors in Apple’s remote/macro-environment create threats to the business. This aspect of the PESTEL/PESTLE analysis model indicates the impact of laws or regulations on business. In Apple’s case, the following are the most significant legal external factors:

1. Increasing privacy regulations (opportunity & threat)

2. Increasing telecommunications regulations (threat)

Governments are realizing the privacy issues connected to digital technology use. As a result, more privacy regulations are imposed on businesses like Apple. This factor is a threat because it creates new challenges for Apple in developing products that involve transmission of private information. However, this factor is also an opportunity for the company to improve product features that protect privacy. On the other hand, governments are also imposing stricter telecommunications regulations, which are a threat because they could potentially limit the usability of Apple products. Based on this part of the PESTEL/PESTLE analysis model, Apple must emphasize privacy protection and regulatory compliance in all of its products to maintain the company’s leadership in various markets worldwide.

Environmental

Most of the environmental factors in Apple’s remote/macro-environment provide opportunities. This aspect of the PESTLE analysis model highlights environmental concerns and their impacts on business. In Apple’s case, the following environmental external factors are the most important:

1. Business sustainability trend (opportunity)

2. Product energy efficiency trend (opportunity)

3. Labour rights trend (opportunity)

Apple is already addressing the opportunity to maintain business sustainability through recycling and related programs. In addition, the company continually seeks for new technological solutions to improve the energy efficiency of Apple products, such as through improved batteries, processors, and components that emit less heat. On the other hand, the labour rights trend is affecting the global business arena. Apple has already taken steps to address the opportunity to improve customer perception about its products by improving employment practices throughout its supply chain. Based on this part of the PESTLE analysis model, Apple is already on the right track in addressing the opportunities based on environmental factors in its remote/macro-environment.

The 5Cs marketing analysis – internal and external environment

The 5C analysis is an environmental scan on five key areas especially applicable to marketing decisions. It covers the internal, the micro environmental, and the macro- environmental decisions. The 5C analysis is an extension of the 3C (company, customers and competitors) to which some marketers added the 4th C of collaborators. The further addition of a macro-environmental (climate) results in a 5C analysis.

1. Company— The company analysis studies an organization’s vision, strategies, capabilities, product line, technology, culture, and objectives. It is useful in understanding the existing and potential problems with the company’s business.

2. Customers— Understanding customers is a key part of situation analysis. It involves knowing the target audience, their behaviour, market size, market growth, buying patterns, average purchase size, frequency of purchase, and preferred retail channels.

3. Competitors— Competitor analysis is critical in understanding the external environment in which the firm operates. This analysis involves knowing the competitors’ strengths, weaknesses, positioning, market share, and upcoming initiatives.

4. Collaborators— Collaborators are the external stakeholders who team up with the organization in a mutually beneficial partnership. Agencies, suppliers, distributors, and business partners are typical collaborators. It is important to understand their capabilities, performances, and issues to better identify business problems.

5. Climate— Climate analysis is the evaluation of the macro-environmental factors affecting the business. PESTEL analysis can be used to analyse climate—political, economic, social/cultural, technological, environmental, and legal scenarios are included in PESTEL.
Company

Apple’s current vision statement was introduced by CEO Tim Cook, who stated, “We believe that we are on the face of the earth to make great products and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self- honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well.” . There are three major segments which Apple targets. It generally uses lifestyle segmentation as Apple is the most premium brand out there. The segment is usually the urban population with enough buying power for purchasing Apple products. These are people who are early adopters in life but the brand equity of Apple is such that even laggards have started adopting the products . Apple has the highest brand equity in the world as of 2016 and it is the topmost ranked brand in the world. The brand worth of Apple is 118.9 billion dollars. The brand has done a lot to reach this brand equity, but a major contributing factor was its ability to give hit products back to back, and to reach across the globe with these excellent products. The combination of both with the excellent marketing communications of the brand help Apple reach the highest brand equity possible. Apples have a lot of capabilities and this is because they are a business that is based on technology.

17.6.2018

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