Apple Inc.’s Business Environment in 2015

Introduction

Apple Inc. has established its position in the business world by depicting itself as an outstanding technology company on the global arena. This position has been earned over a long period through groundbreaking technology that has placed the company’s products ahead of others in terms of innovation (Eisend, Evanschitzky, and Calantone 47). The company has enjoyed considerable financial success and stability, which have enabled it to invest in research and development for its products.

This success has been achieved through tremendous efforts and leadership by different chief executives that the company has had in place. The late Steve Jobs is credited with Apple’s success. He stands out as the most successful executive officer who took Apple to new heights. Other heads of the company have followed suit by being determined to keep the business up in the success charts.

Statement of the Problem

Although the company has enjoyed tremendous success, it faces challenges in different areas that define its existence. These challenges are a considerable threat to its existence and continuous profit making. For instance, the company has a strategic plan that needs to be implemented in accordance with the market conditions to ensure that it keeps its profits high. Different socioeconomic factors have been identified as concern areas that the management needs to address keenly. The company faces competition from other players such as Samsung, Nokia, and Sony that have similar products in the global market.

These players have eaten into the market that Apple once commanded. Hence, these players remain a threat to Apple’s future market. Other factors that define the business world, including dynamism of products and evolution of the business environment, are contributory factors that the company has to tackle. Consumer behavior has also been identified as a social factor that defines the market trends. These factors have been considered a problem that the company needs to address.

Purpose of the Report

The purpose of this report is to provide an incisive analysis of the business environment that Apple is presently operating in. The business environment is made up of different facets that need a delicate balance for any firm to survive. By doing this analysis, the report will compare and contrast different areas that make up a business environment. The report has been divided into different areas that provide an analysis of the situation that Apple is facing.

Identification of the problem areas and success areas is meant to show where the company needs to invest different resources for a sustainable future. The report provides alternative solutions that can be used to improve the company’s performance in accordance with the emerging business practices. As discussed in the report, the new practices are meant to provide an insight that can be transformed into a foresight that will steer the company ahead in terms of profitability and competitive advantage. The past performance of a business needs to be continued with new ideas to create a promising future. Therefore, this report will dwell on the past, present, and the future situation of the Apple Company.

Analysis

Political and Legal Factors

Apple, which is a company in the United States of America, is bound by both political and legal factors that affect its operations. Political factors are usually policy matters that are advocated by the political parties, which have a great influence on how a company can achieve its objectives. Currently, the biggest political policy decisions affecting Apple revolve around the outsourcing of manufacturing and sourcing of raw materials.

According to Eisend, Evanschitzky, and Calantone, the current political situation in America provides an uncertain future to companies such as Apple and Samsung, which have outsourced their manufacturing to other countries (42). The current political debate in America touches on the retention of manufacturing as a way of creating labor to the local population. Apple has outsourced some of its manufacturing to China and Ireland.

The Chinese platform is favorable because it provides cheap labor, which further translates into more profits. A free trade environment will be good for Apple because it provides an opportunity to new markets that can be exploited. Apple faces a myriad of legal challenges that are under litigation or are acting as inhibition to its business. The company faces uncertainty over legal challenges related to patents to some of its technologies. The company has also faced other antitrust litigation suits that are ongoing while others have been settled. These legal proceedings have a negative implication on the company’s operations.

Economic Factors

Just like any other business entity, Apple is affected by economic factors that make up the business world. Apple is an iconic global name. The company trades its shares publicly at the NASDAQ under the symbol AAPL. Hence, the company’s value is subjected to market shocks that happen on the securities exchange. The economic stability of the United States of America is imperative to Apple’s economic growth because it secures the value of the company’s shares.

A tumble in the shares at the securities exchange can easily wipe off billions of dollars in the company’s profile. Therefore, the stability of the country’s economy and the stability of the dollar on the international market are important for the company. Apple’s international market as a global player plays a huge contributory factor to the firm’s value. Therefore, the stability of other consumer countries is an important economic factor in the Apple’s survival.

The rapid growth of developing nations provides a fertile ground for new markets that can be exploited. Developing countries in Africa, Asia, and America’s are a new market that can boost the sales of Apple products as shown in the appendix section (United States Securities and Exchange Commission par.26). New markets provide an equal opportunity to all players because their products are new to the consumers. Therefore, it is a great opportunity for Apple to enter such markets with a lot of speed to reduce the level of competition that it would experience if it delays securing the markets.

Social Factors

Social factors relate to consumer behavior, which shapes the market trends. Hence, these factors have a great influence on the buying choices of a target market. New software applications used in mobile phones have become an integral part of people’s lives, thus making mobile phones a must-have gadget. Every day, a new application is unveiled on the mobile platform. Such applications are meant to make life easy for users.

Therefore, Apple has the opportunity to further stamp its position in the market by coming up with groundbreaking applications that can enhance people’s social life. Apple’s products are expensive on the market compared to products from other companies. They are also unique in terms of security features compared to other phones (Sanchez 33). This situation creates a ‘class feeling’ to Apple consumers due to the uniqueness of the company’s products. Apple has identified social media and entertainment as one of the most lucrative market areas. The company has started the Apple TV as a way of creating an entertainment platform to its consumers.

Apple’s ability to set social trends in the market and in society has given it an advantage over its rivals. The company was the first to come up with a digital portable player. It has continued to develop other features that connect phone owners to their surroundings. The target age group for Apple clientele has always been tech savvy between the ages of seventeen to thirty-five years old. This age group makes up the biggest chunk of consumers.

Technological Factors

Apple is a firm whose products primarily rely on technology to sell. As one of the leading tech companies in the world, Apple faces a big challenge of trying to keep up with the ever-evolving technology. Since the onset of the 1990s, when technology became widespread, many innovations have been brought on board to the market to the level of defining the market trends. Many companies and individuals continue to develop new technologies that set trends in the market (Finkle and Mallin 32). However, such technology is both good and bad for Apple. For instance, expertise is good when it is in the hands of Apple because it provides it with a new opportunity to offer its clients. Such technologies have led to an increase in the company’s profitability as shown below.

Increase in the company’s profitability
Increase in the company’s profitability.

On the other hand, expertise is bad for Apple when the new technology falls into the hands of its competitors. Companies such as Samsung have proved a worthy competitor to Apple because of their good technology. They have cut a big niche in the high-end phone market by developing or embracing popular technologies. Apple stands out in terms of technological innovation because its applications are unique to its products. Apple software can be described as the most secure against hacking and other interferences. Apple’s products are not attractive to theft because they become useless once the owner loses them because of the high security technology that the products use.

Competition Structure

Apple’s products are subject to competition from other companies that have developed similar products. Due to an influx in technological innovations, other players in the field have developed products that are not only attractive to the market but also affordable to many people. Most of these products are continuously rolled as new features. They have forced Apple to keep pace with them. Apple faces competition in many areas that its rivals hedge on as a way of maintaining or getting new customers.

Many rivals such as Nokia and Sony have cut prices of their products as a way of lowering product margins and/or sustaining their existence in the market. On the other hand, Apple has hinged on several factors to remain active in the market as shown in the appendix (United States Securities and Exchange Commission par.26).

Some of these factors include prices of its products in the market, the features that the products carry in the market, the designs of the products, and the reliability of the products among other features. To stay afloat in the competition world, Apple has developed third-party relationships with software producers by offering them a platform to sell their products. This strategy allows Apple to host and gain from products it does not own, but ones, which are popular with its customers. Apple has developed similar products and services for its market without discriminating what to offer in any given market. The company’s future competitive streak will depend on innovations that can beat off other players in the field.

SWOT Analysis

The SWOT analysis delves into the strength, limitations, opportunities, and pressure that any organization can face. The analysis is meant to indicate a company’s strong areas in terms of performance that it needs to keep up, the areas it needs to exploit, and the areas it needs to strengthen.

Strengths

Apple has its strength in the brand name that it has built over many years of operation. The Apple brand has been identified with breakthrough innovations that continue to mark it as a reliable product. All Apple products are unique to Apple. They have features that may not be found in other products (Lacroix 27). The uniqueness of these features makes the Apple brand iconic.

Weaknesses

Apple’s products face a few weaknesses that work against them. The products are expensive when compared to similar commodities from other companies. This situation dissuades possible customers from going for the products because many people in the market want good pocket friendly products (Lacroix 27). Apple’s products have been viewed over a long period as elitist devices that are attractive to a certain class of people. This notion has been advanced by the rigid way that Apple uses to price its products. This pricing criterion has been seen as meant to lock out other groups.

Opportunity

Apple has a great opportunity to expand its base by venturing into new markets in the developing world. Many countries in the developing world have developed an expanded middle class that can afford Apple products. The company can also exploit new markets such as Iran and Cuba that have been released from international trade sanctions.

Threats

The main threat that Apple faces comes from other technology firms that have developed technologies that are similar to the ones that Apple provides. The margin of product differentiation between companies has narrowed down significantly to the extent that most companies can provide the same services. Hence, the threat that Apple faces is now found in its pricing structure.

Customer Analysis

Apple’s customer analysis provides an insight into the type of clientele the company has attracted and/or wishes to draw in the future. Apple attracts its customers from two segments, namely the corporate world and domestic consumers. The corporate world provides a customer base that is primarily interested in Apple computers, iPads, and software solutions. Many companies that wish to obtain secure software for their operations have been attracted to Apple products.

The second segment is the mobile market, which is popular with different age groups. For instance, iPhones provide consumers with a consolidated experience of different applications that are popular with groups of people who want to explore life. The phone provides a camera, music player, and internet services to its user. Many customers that Apple has acquired are loyal. They have held their belief in the products since they first used them. Therefore, they upgrade with new products that come into the market.

Market Segmentation & Positioning

Apple’s market segmentation and positioning can be viewed from two platforms, namely, the product platform and the geographical podium. The product platform divides the market according to the products the company is offering to the market. Different types of consumers are offered specific products and services that are important to their work and needs. The company has segmented its markets as regional blocks where its operations are centered to serve the global market. The company has segmented its market into geographical areas such as the United States of America, Canada, Asia, Europe, and Africa.

Market segmentation is simply meant to serve specific markets according to the need. Different markets have different needs that come as products and services. Market segmentation and positioning has enabled the company to announce its presence in the local markets by providing after-sale services to its buyers. It has also enabled the company to market its products aggressively in the different regions of the world.

Market Mix Strategies

Apple’s marketing mix is a combination of different approaches that are supposed to convince the customer to buy its products. Apple has developed its strategy through pricing of its goods at premium rates as a way of convincing consumer that the goods are top-class. Most Apple products go for almost twice the amount of similar products from other companies. The company has packaged its products as an experience that any individual should yearn (Mallin and Finkle 65). The company markets its products through an elaborate communication scheme that is strong enough to convince the buyers about the products.

Before the launch of a product, the company exaggerates the product since it is geared towards being unveiled. The company has created a strong identity base with its clientele. This strategy gives Apple product owners a sense of identity. Apple has a massive fan base that is always ready to buy the new products. Whenever the company is planning to unveil a new product, mass media is usually engaged through commercials that exaggerate the new features to be unveiled. Apple involves operators in the advertising of its products by letting them do so by following very strict procedures.

Alternative Solutions

Investing in Consumer Market Research

Consumer market research has been identified as a key area that any profit-making organization should invest in. The consumer market is a volatile area that can shift unpredictably to the detriment of a firm’s business. Therefore, it is prudent for organizations to understand the consumer behavior before they can place their products in the market. The consumer’s buying drive is both need and psychologically driven.

Some consumers buy a product because it has specific features that they are looking for, while others acquire a product because of psychological bias. Therefore, understanding a consumer’s mind requires a company to invest in consumer market research. Market research will enable Apple to understand market trends and given people’s taste for particular goods and services (Finkle and Mallin 33). This option will push Apple to develop goods and services that suit certain markets.

It will also make it Apple package and market its goods in a manner that can convince consumer groups to buy its services. Consumer market research is crucial to Apple’s success because it will be the driving factor for its innovation. Coupled with product research and development, the company should develop specific goods and services that will be easily embraced by the market. Market research identifies gaps within a specific market. These gaps can be exploited to create a new market, to expand an existing one, and/or maintain the present market. As a company, Apple has extensively invested in consumer market research besides other research components that it needs for its survival.

Investing in E-Commerce

Electronic commerce, popularly known as E-Commerce, is a modern-day phenomenon that any company operating on a global scale should adapt. Electronic commerce has been made possible by technology, which has integrated the world into a global village. Modern businesses are exploiting electronic commerce to their advantage as a way of faster communication in transacting business deals.

Electronic commerce is a cost-saving venture that allows an organization to access the global market using very few personnel. Previously, global players were required to have desk personnel in almost every region of operation to handle business deals and queries. This manual work has been eliminated using internet services. As a big player in the technology field, Apple has already applied the system. However, it needs to improve the system (Finkle and Mallin 33).

Apple has an online store for all its products where a buyer can visit and find out the products available for sale. Buyers can buy their goods electronically and/or have them delivered to their addresses through a press of a button. Through partnerships, Apple can greatly enhance its potential to do business by coming together with players in different countries to form a working relationship. Apple can exploit the use of E-commerce by investing in developing countries such as Kenya among other African countries whose systems are still behind. The potential offered by developing countries through E-commerce is great and worth pursuing.

Returning the Strategic Positioning Strategy

Returning the strategic positioning strategy requires a company to revisit its original purpose and long-term plans. Every company has long term and short term plans. Short-term plans and strategies are used to achieve long-term goals. Whenever one task is achieved, there is a need to go back to the main plan and pick the next course of action. Apple’s strategic plan involves a continuous evolution of its products through innovation.

The company needs to fight back and win the market share that it has so far lost to companies such as Samsung and Sony. These two companies are providing heightened competition to Apple products through good products and services as shown in the appendix. The strategic position of the company requires it to remain a unique player in the industry. So far, this goal has been achieved because the company’s products have the most enhanced security systems in the technology industry. This uniqueness is strategic because it allows the company to deliver its promises to its clients. Apple boasts of an array of products that it is yet to release to the market. This position is strategic because it allows the company to continue in its leadership role of leading in innovation.

Investing in Eco-Friendly Products and Promotion of Consumer Safety

It has become a compulsory trend in the technology industry for companies to observe strict anti-pollution standards as a way of saving the earth. Global warming has led to an increase in temperatures on the earth surface to the level of leading to unstable climatic conditions. Technology firms have been accused of exacerbating this problem because they are the biggest consumers of goods whose production contributes a lot to pollution.

Apple has joined other technology firms in developing eco-friendly goods whose production is within the minimum acceptable pollution levels. Although the company has invested a lot in the green campaign, it has been accused of doing little to stop some of its suppliers from polluting the environment. Most of the processors used in Apple products come from Asian countries, with China leading the queue. Chinese companies that supply vital products have been accused of heavily polluting the environment for short-term economic benefits. This continuous association is a blot on Apple’s goodwill campaign on environmental conservation.

The amount of money the company has invested in this campaign is insignificant compared to the massive profits that Apple reaps from its product sales. Consumer safety requires clients to be widely advised on what to do, including what not to do while handling Apple products. Accidents have been reported in instances when technology devices are mishandled by users. Most accidents happen when devices are being charged. Apple needs to identify problem areas and advise the user adequately.

On the other hand, Apple can improve consumer safety by enhancing the product handling mechanisms. Apple has developed other hands-free kits such as earphones and watches that help to minimize accidents. It has also developed software that can be used on the device and other gadgets in a vehicle to the level that an individual can comfortably use the devices while driving. Consumer safety is a challenging zone because some areas can only be realized once an accident happens.

Recommendations

Apple is a big company whose development has a great history. The company has pioneered in developing unique products that are competitive on the market. Technology is an ever-evolving phenomenon that needs to be further exploited to achieve new heights. Hence, the company can adopt the aforementioned option of investing in E-commerce. Apple has been restrictive in its venture of technological devices.

The company has narrowed its scope to mostly media devices and office software. This situation has limited its market in other areas that it can expand to. Currently, medical equipment and software are a big business that electronic companies such as Philips are controlling. The amount of expertise that the company controls is good enough to enable it to roll out a medical equipment branch that can be an alternative source of revenues. The company can also give its pricing policy a second look as a way of accommodating the emerging markets. Many emerging markets have low-income groups that cannot sustain the price offered by Apple.

Therefore, Apple should look for an option of unveiling middle-end products that it can easily use as an entry point to the new markets. Companies such as Samsung have managed to provide low-end and middle-end devices, which have enabled them to remain competitive. The company should work hard to resolve any disputes that relate to patent rights and ownership. These cases have become an albatross on the company’s neck because they cloud the company’s progress with uncertainty. The company needs to break into new markets for it to add to the loyal market base that it has developed over time.

Works Cited

Eisend, Martin, Heiner Evanschitzky, and Roger Calantone. “The Relative Advantage of Marketing over Technological Capabilities in Influencing New Product Performance: The Moderating Role of Country Institutions.” Journal of International Marketing 24.1 (2016): 41-56. Print.

Finkle, Todd, and Michael Mallin. “Steve Jobs and Apple, Inc.” Journal of the International Academy for Case Studies 16.7 (2010): 31-40. Print.

Lacroix, Jean-Pierre. “Designing Immersive.” Brand Packaging 19.6 (2015): 26-28. Print.

Mallin, Michael, and Todd Finkle. “Apple Inc.: Product Portfolio Analysis.” Journal of the International Academy for Case Studies 17.7 (2011): 63-74. Print.

Sanchez, Julian. “The Real Meaning of Apple’s Battle with the FBI over Encryption.” Time 187.8 (2016): 32-33. Print.

United States Securities and Exchange Commission. Form 10-k. Apple Inc., 2015. Web.

Appendix

Net Sales by Product

Source: (United States Securities and Exchange Commission Par.26)

Information regarding net sales by product for 2014, 2013 and 2012, is as follows (in millions):

2014 2013 2012
Net Sales by Product:
iPhone (1) $ 101,991 $ 91,279 $ 78,692
iPad (1) 30,283 31,980 30,945
Mac (1) 24,079 21,483 23,221
iPod (1) 2,286 4,411 5,615
iTunes, Software and Services (2) 18,063 16,051 12,890
Accessories (3) 6,093 5,706 5,145
Total net sales $ 182,795 $ 170,910 $ 156,508
(1) Includes deferrals and amortization of related non-software services and software upgrade rights
(2) Includes revenue from the iTunes Store, the App Store, the Mac App Store, the iBooks Store, AppleCare, licensing and other services
(3) Includes sales of Apple-branded and third-party accessories for iPhone, iPad, Mac and iPod