Introduction
Apple Inc is an American Technology Company that sells consumer electronics, computer software, and other online services. It is one of the prominent fortune top 500 companies. Due to effective strategic management process and external business strategies, this company has gained the success. International operations are triggered by distributors and supplier. Apple Inc gathers these suppliers and distributor on the same agenda and sustains the business process. This paper revolves around the internal and external analysis of Apple Inc along with different insights. Ethical business, international influence, and the business diversification are significant factors of the study (Apple Inc., 2018).
The background of Apple Inc.
The success of Apple Inc started in 1976. Steve jobs depicted his leadership and came with some remarkable outputs. For instance, he introduced Apple I Phone and sold it in 1977. Steve Job made a deal with the Byte Shop Company to sell 50 I computers. Interestingly, the success started in 1976 by Steve Jobs and Steve Wozniak. Friends and family members of Steve tested the Apple I computer. It was a successful development and innovation that enhances the visibility of motivation to develop more things. After realizing the success and potential, they decided to develop Apple II.
In 1977, Apple II was introduced. The selling point of the Apple II was the spreadsheet. It was an app., created by Dan Bricklin. The concept of developing the spreadsheet was not in the limelight. They can only develop the spreadsheet on paper. Thus, this simple app helps to make further developments and enhance the sales process.
In 1980, the company decided to offer its shares. The share was offered at $22. Total shares were 4.6 million. In 1983, Apple Company introduced the first personal computer, called Lisa. It was a remarkable achievement. However, later in the year, Macintosh computer was introduced in the super bowl commercial. In 1985, Steve decided to leave the company. He started his own company. After ten years, Apple Inc wanted to buy the company, created by Steve Jobs. However, in 1997, Steve job appointed as the chief executive officer of Apple Inc. I Pods and Mp3 players was some exceptional developments that this company depicted under the leadership of Steve Jobs. These products hit the technology market and transformed the portable music industry. It was the big change that was created through these developments (Arping & Lóránth, 2006).
Another development was the iTunes Music Store to use an iPod and Mp3 players. Further developments were iMac and Mac Book Pro. It accelerates the sales of in Internet-based computers. The major attainment of the company was the development of I Phone, which was introduced in 2007. In a short time, iPad was launched that also hit shelves later in the year. After the development of iPhone, the company intended to accelerate some further developments. For Instance, iCloud was a prominent development that allowed users to find the data online. Tim Cook was appointed as a new chief executive officer of the company in 2011. The millstone was attained by the company, as the management managed to put 25 billion songs on iTunes. The new CEO made some changes in the company, which created the positive impact on the business process. The stock price depicted the shift as $92.44 from $647.50. Apple Watch, Apple Music Stores, Camera, and innovative series of I Phone have made the company one of the top technology companies in the world. This organization believes in the continuous innovation and improvements. For Instance, development of I Phone X contains the face detection, wireless charging, and many other things (Apple Inc., 2018).
Internal analysis of Apple Inc.
The Apple Company intends to come up with some effective internal strategies. These internal strategies create the best impact on the internal business process. It helps to identify several strengths and weakness and make some improvements. Interestingly, the internal strategy of the company assists in neutralizing the environmental threats. The management of the company is quite capable of exploiting the opportunities and streamlines the operational process in an effective manner. It has been revealed that the company wants to reduce the manufacturing cost through effective cost measures and boost the profitability.
SWOT Analysis of Apple Inc.
Strengths of Apple Inc.
Apple Inc has sustained its brand image, and it seems the biggest strength. The company is containing several advertising capabilities, which create the brand awareness. A Strong distribution channel in the United States of America is also a prominent strength. The strong financial position has also helped the company expand the business in different regions (Arping & Lóránth, 2006).
Weakness of Apple Inc.
Revenue streams are depended on iPhone sales. In different companies, it has been revealed that the company contains the weak distribution channels. Several products are not compatible with the operating systems. Comparatively, the company takes much time in the research and development process (Khan, Alam, & Alam, 2015).
Opportunities of Apple Inc.
It is a great opportunity for the company to expand the distribution channels when operating in different countries. Due to demand for tablets and Smartphone, the company can maximize the production process. Creation of the new product line is a great opportunity for this technology firm, which can beat other competitors in the competitive market.
Threats of Apple Inc.
The aggressive competition in the market is the prominent threat. Firms are coming up with differentiated products. Along with the threat of new entrants, companies are quite capable of imitating products. Another threat to the company is increasing labor cost in different regions (Montgomerie & Roscoe, 2013).
For internal analysis, it is needed to look at the inbound logistics of Apple Inc. The company Apple Inc uses its OEM partners for logistics. The company had the reputation of using the labor and manufacturing plants using these labors in poor working conditions. The poor conditions of labor while working for the suppliers of the company tarnished its reputation. It has led to more control over the supervision of the OEM partners. It has been made by Apple Inc for ensuring that the raw material acquired is of good quality and has not been part of an ill process. The company Apple Inc has also been using automatic systems for reducing its footprints of facilities. It also enables the company Apple Inc Company to have less space requirement.
In operational perspective, the company has been using its internal designer teams for the development of new teams (Ive, 2017). Furthermore, the company Apple Inc also uses the economies of scale alongside its OEM partners to improve its operations.
The company has been using design as a way of cost reduction as well. The use of stylish yet simple packaging and design enables a reduction in the weight, space, and economical packaging of the products. It also enables the lower cost of disposition and shipment.
The company Apple Inc has a well-articulated infrastructure for the delivery and shipping of its products. The capability of this infrastructure makes it easy for the company Apple Inc to deliver its products directly from China to customers reducing its shipment costs. The suppliers of the company follow its code of conduct which is established by Apple Inc. Apple Inc has also become part of the EICC for maintenance of quality assurance throughout its suppliers.
The company owns a wonderful in-store experience equipped with the help of the Apple Geniuses (Aaker, 2012). The company has been using all forms of advertising mediums. The retail store of the company Apple Inc is used as a promotional medium as well translating the strong brand image (Greenspan, 2017). The new products of Apple Inc are unveiled after creating hype in the media. It helps build interest and is an effective marketing strategy (Verganti, 2010). The company builds a strong image of goodwill by using extended warranties for the damaged and defective products. The one-on-one service provided by the Apple Geniuses for repairs and free consultation also helps gain good will. The company is committed to green business trends and using lower energy for the production and transportation of its goods. The company internally develops and expands with the help of its strong financial position (Rosoff, 2015). The company picks high caliber talent from the faculties. The attractive and competitive compensation packages are used to retain high-skilled employees (Lev-Ram, 2014). A major portion of its retained earnings is spent on the Research and development expenditures. It used more than 5% of its net sales in 2017.
Financial Data Adapted from Apple Inc. (2018, March 1). Form 10-K: Apple Inc. Retrieved from http://files.shareholder.com/downloads/AAPL/6251631693x0x962680/D18FAEFF-460A-4168-993D-A60CBA8ED209/_10-K_2017_As-Filed_.pdf
External analysis of Apple Inc:
The External analysis of Apple Inc is important to analyze how it is utilizing the opportunities offered in the environment and how well it is coping with the threats put forward by the environment. The PESTAL analysis is one of the tools which can help to analyze the external environment of the company Apple Inc. The analysis is shown below:
Political Environment for Apple Inc.
The major factors about the political environment affect Apple Inc as well. Like it is important to notice that more than half of the revenues of the company Apple Inc comes from the countries beyond America. It shows that the political environment of these countries can have a major impact on the financial performance of the company. The company uses the labor of China for its manufacturing. The manufacturing is done in China for lower cost of production. It makes it dependent on the labor laws and political environment of China. Any changes in the current political environment of China would affect the manufacturing and operations of Apple Inc. This dependency can be lowered by Apple Inc through finding new alternatives for cheaper manufacturing; however, there is a cost associated with this. The relationship between China and US also faces many challenges now and then. The instability in the relationship of US-China has an impact on the company Apple Inc (Khan, Alam, & Alam, 2015).
Economic Environment for Apple Inc.
The economic downturn faced by Europe and USA affects the revenues and profits of Apple Inc. The Apple Inc has a concern about the fact that the markets spend less on its products as compared to the products of its competitors. It is because of the expensive products of Apple. The economic climate of China has a profound effect on the manufacturing ability of Apple Inc. The decline in the disposable income of the middle class of the countries has an impact on the revenue of Apple Inc. (Khan, Alam, & Alam, 2015).
Social Environment for Apple Inc.
There have been many critical social dilemmas faced by the company Apple Inc. The low-cost labor used by Apple Inc in China has been the focus of criticism. The suppliers of China were identified for providing poor working conditions for the labor for the manufacturing of the Apple products. It has led to declining in the revenues, goodwill and share price of the company substantially. The company faced criticism because of its marketing strategy for Apple Music as well. There was strong resentment for the company from the recording stars. The high prices of the Apple products also faced a backlash. The opportunities in the developing countries with their higher consumer spending are, on the other hand, a positive sign (Apple Inc., 2018).
Technological Environment for Apple Inc.
The company faces a threat for the duplication of its technological abilities. Google and Samsung have shown the ability to provide similar competitive products. The new products which are launched by Apple Inc tend to have a limited market. The growing android fever has declined the market for Mac Computers. One thing which makes Apple Inc superior to all its competitors is the security that it provides to its customers regarding their data. The increasing threat of cyber criminals, if able to probe the Apple security framework can affect the reputation of Apple Inc (Lombardo, 2017).
Three Main Strategies:
Premium Pricing and Integrative Strategy:
Apple Inc had been following premium pricing strategy to follow since its inception. The company uses low-cost segregated strategy and integrated product lines for its low shareholder return policy, and lower focus on the market share (Khan, Alam, & Alam, 2015). The company has been among the most successful brands globally and implemented strategies that have seen criticism along with appreciations. The company has been widely criticized for its high pricing strategy (Ellickson, Misra, & Nai, 2012). The company targets, higher, and upper middle economy class and thus make it difficult for an average income person to afford its products. Samsung and Google have been seen following low pricing strategies, how Apple here adopts the differentiation strategy to maintain its market share (Arping & Lóránth, 2006). Similarly, the integrative strategy has seen much appreciation. The company provides a full package of software, hardware and with access to millions of applications (Baroto, Abdullah, & Wan, 2012).
Exceptional Innovation by Apple Inc.
Apple Inc has won the award for the most innovative company for seven consecutive years. The company is known for its seemingly flawless deigns integrated hardware and software attracting the best people towards it. The company has been focusing on developing its innovation capability through using the best minds in a culture where innovation is second nature. The deep collaboration at its California research space, bundled with the strong market presence, maverick branding, and the trendsetter is in business again (Zott & Amit, 2010). The controlling of the customer experience and the high barriers to entry in the market and also for customers to leave its products created by Apple makes it successful.
Achievement of Rock-Bottom Cost by Apple Inc.
Steve Job wanted Apple to become more efficient when he posted Tim Cook as the COO. The streamlining of the company manufacturing units, and its distribution operations and supply chain impacted its efficiency. The cutting down of warehouses for finished products and the number of suppliers from 100 to 24 enhanced the bargaining power of Apple. The adoption of the Just-in-time system and positioning facilities near Apple reduced costs. Apple has been efficient, not only because of its strategic focus as well as simplicity. It aims to be a consumer product as compared to B2B (Heracleous, 2013).
International Influence in Foreign Market of Apple Inc.
The international influence in foreign markets is in the limelight. For Instance, when it comes to the global technology market, the product standardization and differentiation are the main considerations of companies. Thus, when emerging in the foreign market, Apple Inc is looking to make the difference through the standardized process. Product features, design, and characteristics have generally been accepted in foreign markets. Based on demand for iPhone and many other products of Apple Inc, the company chooses the country to expand the business. The international influence seems prominent, as far as the business expansion of Apple Inc is concerned.
Compare and Contrast Diversification Strategies of Apple Inc.
Apple’s Ex-Chief Operating Officer, Tim Cook, had famously said about the focus of their company on its core product line by saying that all of the products of the company can fit on a table. The then CEO argued that the focus helped the company have better results. At that time, in 2010, the company was offering 14 of the Apple Products. Under the leadership of Tim Cook, this product line has ballooned up to 27 products. These 27 Apple Products are available in about 200 of different versions and variations. This strategy of diversification, even though opposing to the founder Steve Jobs minimalistic strategy is providing revenues for the company when its core product the Smartphone was at a stall. The products like Air Pod, the wireless earphones, Apple Watch and the more versions of the iPhone, and the sales rocketing from the different software services has helped drive the revenues up and expanded its market. While Apple Inc has struggled to come up with new product categories, the building out of the current product line is taken as positive by the investors. Even though the new ways may not look like innovative, they can sustain the business model. Apple Inc is now in a quite different position, then the time when Tim Cook started his leadership. Apple diversification in peripheral products is paying off by picking up some of the market segments (Heracleous, 2013).
Ethical Concerns Affecting Stakeholders of Apple Inc.
Even though the company Apple Inc is considered as the most admirable company in the world, it has seen its fair share of criticism as well. The company has been facing problems in maintaining the quality of its products. The iPhone 4 has faced problems, and many consumers raised concerns. The analysts have criticized how Apple has always adopted a reactive strategy. Apple along with Google has been facing concerns for the violation of user privacy. The phones from Apple have been blamed for collecting information about the user and selling it. Then there are also concerns over the sustainability activities of the company. The company has adopted green trend to reduce its impact, however it is not substantial. Apple released tones of Gas. The business model of Apple has been criticized in this respect as well. As the model depends on the introduction of new products, the company urges its users to make technology and products obsolete constantly. Another problem relates to the intellectual property rights. The company has been involved in many lawsuits to protect its intellectual property rights (Arping & Lóránth, 2006).
Financial Analysis and Recommendations for Apple Inc.
Looking at the financial performance of the company is necessary for assessing how well its strategies and tactics are paying off. The company stock has stabilized as compared to last year. The company has gained a lot of value during the year 2017 as shown in the figure below.
Price Range of Common Stock Adapted from Apple Inc. (2018, March 1). Form 10-K: Apple Inc. Retrieved from http://files.shareholder.com/downloads/AAPL/6251631693x0x962680/D18FAEFF-460A-4168-993D-A60CBA8ED209/_10-K_2017_As-Filed_.pdf
The five-year summary of the financial performance of the company can be seen in the figure below. The figures are taken from the 10K annual report of 2017. The figures show that 2017 was the best financial year for Apple Inc in its last five years. The company has not only regained its position regarding its profits, but also has made more profit as compared to last five years. The company can be considered performing far better than expectations in its last quarter of 2017.
Financial Data Adapted from Apple Inc. (2018, March 1). Form 10-K: Apple Inc. Retrieved from http://files.shareholder.com/downloads/AAPL/6251631693x0x962680/D18FAEFF-460A-4168-993D-A60CBA8ED209/_10-K_2017_As-Filed_.pdf
The revenue of Apple Inc had seen a decline in 2016 which recovered in 2017. The company witnessed this decline because of the revenue decline reported in the Mac, iPhone and iPad products. The decline in these products was reported to be witnessed in the segments of China and US. These are the geographical segments which yield the highest revenue for Apple Inc is regarding the total revenue contribution. These both combined yields about 10% of the total revenue for the apple company. The major operational expenses that were incurred by Apple Inc in 2017 are reported to be in the areas of selling, admin, general expense, and research and development expense. The operating expense has been increasing in the last three years. The increment in the general, admin, and selling expense is also because of the high advertising costs which Apple reports at this expense. The company operating expenses are more than 10% of its net sales value.
The financial analysis of the company shows that it is investing highly in the research and development to offer more efficient ways of producing innovative products in the future. Apple is known for its innovation. They invest in the product that has to be launched now two years ahead. It shows how much ahead, they are actually as compared to their competitors and their market. It certainly offers better opportunities for success for Apple Inc.
Conclusion
The analysis of the company Apple Inc regarding its competition, internal environment, and external environment showed how it was able to couple its innovative strategy with a great customer experience to make a successful product. The company creates high barriers not only for the entrants and the competitors to enter and compete in its market, but also for the customers as well by higher the cost of switching their product for that one of a competitors. The company has been using a focused integrative high pricing strategy until it diversified its portfolio and used low cost and innovation in its peripheral products as well. The company has been under the fire for many ethical concerns, in term of the cheap labor use of China, the intellectual property rights cases, the lower focus on sustainability activities and quality issues in its products. Collectively, the financial strength, innovative base, and high investment in research and development make it a successful company.
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