Company Description
Apple Inc. is among the largest technology companies in the world, with headquarters in California, USA. The company is widely known for its technological innovations in electronics, computer software, and online services. Since its debut in 1976, Apple Inc. has been pioneering technology developments (Thao & Tsanthaiwo, 2017). The company designs and manufactures personal computers, wearable accessories, smartphones, and tablets. The products developed include home and accessories and wearables. Mac, iPhone, and iPad. Apple Inc.’s lines depend on the operating system and product type (Thao & Tsanthaiwo, 2017). The company offers payment services, Apple Care, advertising, and cloud services.
The company’s mission is to provide high-quality personal products and support engineers, consumers, business people, educators, scientists, students, and designers in more than 140 countries globally. The mission of Apple Inc. considers the changing business environment in which the company operates, making it create products that suit consumer needs despite technological advancements (Rowland, 2022). It pushes the company to solve the latest issues in the global market, hence satisfying customers’ needs and requirements. Its vision states that they are on earth to develop quality products, and nothing will change. This statement shows that the company is always determined to manufacture top-notch products for its clients (Rowland, 2022). Furthermore, it portrays that quality product development is long-term, which explains why the company is among the dominant companies in this sector. The company has a brand value of $947 billion and annual revenue of $365.82 billion (Laricchia, 2022). The revenue generated is because of its operation from a global perspective.
Environmental Analysis
Competitive Forces
Samsung
Samsung is a Conglomerate Multinational Company located in South Korea. Samsung has a wide product line compared to Apple Inc., including telecommunication equipment, automotive, consumer electronics, home appliances, and semiconductors. The company was founded in 1938 and is among the top industries in technology. The company leads in the Smartphone market share, with Galaxy being the pioneer in the sector (Farooq, 2022). iPhone and Samsung Galaxy significantly compete in expanding their market share, negatively impacting the iPhone market share. The company produces phones that are affordable in the market (Farooq, 2022). Samsung is the main competitor of Apple Inc. in the hardware sector. Its market share greatly surpasses Apple Inc.’s, with a strong relationship with retailers in Europe and the United States (Farooq, 2022). The company has been able to develop quality products that replicate that of Apple, gaining popularity. Apple surpasses Samsung’s smartphone market share in the US more than in other regions. Despite the company being dependent on Google’s Android operating system, it is effectively competing with the iPhone, which uses its iOS operating system.
Google is a Technology Company that owns the Android operating system, which many smartphone companies use. The operating system is launch-free, making it easy for manufacturers to utilize their software. More than 80% of mobile devices worldwide use the Android operating system (Farooq, 2022). The devices that use Android operating systems utilize the Google Play Store, where applications are downloaded, allowing the company to retain 30% of the sales from the Play Store. Google has Google Maps, which is more popular than Apple Maps (Farooq, 2022). This application collects user information used for advertisements because of its significant capabilities. Apple has been cutting Google competition through replacements such as Bing, Google Maps on Apple Car Play, and enabling ad-blockers in its Safari iOS platforms.
Microsoft
In software development, Microsoft poses great competition to Apple. It is the first operating system that most people have used, leading to its brand reputation. Other brands provide insignificant competition to Microsoft, making it have more than 90% of the market share in the operating system of personal computers (Farooq, 2022). The company’s products, such as Microsoft Office and Windows, are easy to use, making it gain popularity. Apple has an Office version called iWork, which is not as popular as Office. This has led to the development of the Microsoft Office version compatible with the iOS system. The company has various distribution channels to enhance its competition with Apple (Farooq, 2022). These channels include Samsung, Dell, Lenovo, and Toshiba, selling computers with pre-installed Windows software. Microsoft has been in the software development industry for a long period, making it gain crucial innovations. However, the company depends on hardware manufacturers since their products rely on hardware. Despite Apple being both a hardware and software manufacturer, Microsoft is a pioneer in Windows and Office applications, posing great competition.
Dell
Dell is a technology company that deals with computer manufacturing, parts, repair, and other products and services. The company competes with Apple Inc. effectively in the laptop segment. The development of Dell DJ steered the competition, which posed a significant competition to Apple’s iPod (Farooq, 2022). Since then, the company has been innovative, developing Dell XPS laptops, which compete with MacBook Pro (Farooq, 2022). Apple is using customer loyalty to compete effectively with Dell computers and utilize brand awareness in all their operating segments.
Latest Development and Market Share
The competition between Apple Inc. and other technology companies has led to investments in research and development by various key competitors such as Microsoft and Samsung. Samsung recently developed a second-generation SmartSSD (“Samsung Electronics Develops Second-Generation,” 2022). The new product creates significant competition for Apple as the product has high data processing functionality at a high performance. Compared to the existing SSDs, SmartSSD can process data directly, which minimizes the transfer of data between the RAM, GPU, and CPU (“Samsung Electronics Develops Second-Generation,” 2022). The technology is useful in avoiding bottlenecks leading to increased system performance. Furthermore, it is energy efficient, playing a critical role in the expanded growth in Artificial Intelligence, Fifth and sixth generation, and machine learning, which necessitate a large volume of data processing.
Apple had a market share of 15% in the global smartphone market in 2021. COVID-19 effects positively impacted its performance (Wise, 2022). The new model developed by the company did not perform well, but the old iPhone models kept the company’s performance high in the global market share. Apple’s top competitor in 2021 had a market share of 22% (Wise, 2022).
Competitive Advantage
Apple Inc.’s competitive advantage depends on the company’s brand and services. The Apple brand enables the company to have a large volume of sales to new and existing clients. The hardware business significantly impacts Apple Inc. with a brand stamped in all their products, giving the company a higher markup than other hardware companies (Huber, 2017). Their clients are loyal to the brand, thereby having few individuals switch their products with those of other companies. This has resulted in predictable revenue generation over time (Huber, 2017). The company provides reliable services, enabling the client to rely on this segment, hence promoting the company’s revenue. Apple Inc. has more than 1 billion devices that are active all over the world (Huber, 2017). These devices operate like a miniaturized retail store, enabling the company to generate high revenue from subscriptions and apps such as iTunes, which has more than 17 million subscribers.
Economic Forces
Economic effects have a significant impact on the performance of Apple. It is dependent on various outsourcing companies that provide cheap labor. An increase in the cost of labor in China hugely impacts the production of iPhone devices (Greg, 2020). The economic growth in China raises the poverty line for the Chinese. However, this is bad news for Apple Inc. because it implies an increase in wage inflation, which causes a rise in product prices to fill the gap. Increased competition has significantly affected Apple Inc., losing its market share to companies such as Lenovo, which sells personal computers and laptops (Greg, 2020). The dollar value is also affecting Apple’s products because of the exchange rate and its rising value. This is brought by the currency region of various regions, leading to the high cost of operations in certain regions such as China.
Political Forces
Apple Inc. is heavily dependent on the low labor cost that China offers. With the increased cost of living leading to high production costs, the company has to look for other alternatives for manufacturing. This issue makes the company vulnerable to political unrest in China (Greg, 2020). The association between China and Apple Company can become a political problem for other countries when they perceive China as a threat. The political unrest in China negatively affects the manufacturing of Apple products, which has increased the cost of manufacturing. Furthermore, the restriction of importation from China to the United States to promote the US manufacturing sector has affected companies dependent on China, such as Apple (Greg, 2020). This has led to an increment in the cost of the product. Countries such as Russia have tough laws regarding gays, which affects Apple Since their CEO Tim Cook made a public announcement about being homosexual.
Legal, Regulatory, and Ethical Issues
Apple Inc. has various legal, regulatory, and ethical issues that have affected the company’s reputation. Some of the issues the company has faced include violation of child labor laws, cases of low wages, violation of the natural rights of workers, and using an unethical hiring method. Apple Inc. faces notable unethical issues (Bukhari, 2022). In 2016, Apple was mentioned in a report published by Amnesty International, which portrayed the company as operating against human rights in various mines in the Democratic Republic of Congo (DRC). The mines provide cobalt used to manufacture lithium-ion batteries in all electronic devices manufactured by the Apple Company. The company uses more than 20% of the cobalt exported from DRC (Bukhari, 2022). The working environment in the mines is brutal in that it involves children, women, and men who work day and night. Apple Inc. was linked to these activities by its supply chain, which involves manufacturing the final product distributed to consumers (Bukhari, 2022). The collected cobalt is sold to various distributors, manufacturers, and suppliers, who then sell it to multiple companies such as Apple. Amnesty International communicated to Apple regarding the issue, and the company stated that they are investigating whether the cobalt originated from the DRC.
Technological Forces
Technological factors provide a significant opportunity for Apple Company. This is because there is a worldwide demand for cloud computing, which is an opportunity for the company. Apple Inc. provides a maximum of 2 TB of iCloud storage for its users (Chen et al., 2021). With the advancement in cloud computing, the company is maximizing this chance by offering profitable cloud services. Statistics show that Apple Inc.’s revenue expanded from $32,700 million in 2017 to $53,768 million in 2020 (Chen et al., 2021, p. 6). However, the growing competition from companies such as Google is a significant threat to Apple Company.
Cybercrime has increased significantly, raising the internet’s safety and security level. This affects Apple’s competitive advantage as their system becomes less secure. There is increased competition from other companies, such as Huawei and Samsung, as they can copy the company’s services (Greg, 2020). This makes the company invest more in research and development to remain at the top. Competitors offer services that are used to identify Apple uniquely (Greg, 2020). For instance, Google took less than a year to develop a payment application that is no longer distinctive from Apple’s.
Social Forces
The social factors determine the profitability of Apple Inc. Despite these factors being a determinant in sales of electronic products, Apple managed to increase its earnings and growth during the COVID-19 pandemic, with an increase of about 11% in 2020 (Chen et al., 2021, p. 3056). The increment is because the company has spent a significant amount of time studying, analyzing, and understanding the needs of various people. For example, the iPad and MacBook benefit from the current social change (Chen et al., 2021). The increased demand for Apple devices is an opportunity for the company. However, multiple anti-Apple sentiments are taking place all over the world. For instance, most Chinese customers are swapping Apple with domestic brands to support local development (Chen et al., 2021). Furthermore, domestic brands are cheap, making social factors hugely impact Apple Company.
Current Target Markets
The company targets consumers who can pay more for designs and products with extended features and functions. The clients have the same characteristics of appreciating the products’ performance, quality, design, and services offered over the prices (Dudovskiy, 2021). The individuals in urban areas in the United States and other parts of the world. The users are within an age range of 18 to 45 years and both genders, male and female. The targeted users are high earners in occupations such as professionals, students, managers, and executives (Dudovskiy, 2021). The life cycle stage includes newly married couples, the bachelor stage, full nest I, and full nest II. The psychographic features targeted include middle and upper social classes, people with a lifestyle of aspirer, explorer, resigned, and succeeder (Dudovskiy, 2021). Furthermore, risk-neutral, loving, and avoiding individuals are also targeted. The target market uses the devices and services for entertainment, education, research, storage services, and payment. Table 1.0 below summarizes Apple Inc.’s target market.
Table 1.0: Apple Inc.’s target market
Review Current Marketing
Apple focuses on people who live in urban areas because of their high purchasing power. These people quickly adopt the Apple brand because of its reputation (“Apple Marketing Strategy,” 2022). Apple brand is famous for its quality design and technological features, making its advertising easy. The company concentrates on strategic advertising by understanding its clients’ language, likes, habits, and dislikes (“Apple Marketing Strategy,” 2022). It has simplified its marketing process in a language it can understand, forming bonds between the client and the customer. Apple websites are customized with their aesthetic products, whose images are placed beautifully with fonts that provide descriptions and benefits of the given product. The company has focused on creating a community of fans, customers, and loyal users worldwide (“Apple Marketing Strategy,” 2022). The company’s marketing strategy is to make the client want to be part of a community that is perceived as cool. This strategy has created a universal self-perception that makes the clients believe that the Apple brand is like theirs (“Apple Marketing Strategy,” 2022). This has made Apple Inc. devoted users believe in the strength of the Apple brand.
The buying process of Apple products involves visiting their websites or an Apple store. Individuals may use personal pickup when purchasing Apple products or other available delivery methods (“iPhone – Shopping Help,” 2022). With personal pickup, one purchases the product online and then picks it up from an Apple store (“iPhone – Shopping Help,” 2022). In 2020, Apple Inc. was ranked 12th among companies that spend a significant amount on advertising. During this period, Apple Inc. spent $64.8 million on sponsored search advertising (“How Much Does Apple Spend On Advertising?”, 2021). The company had a fall of 68% in advertising costs in 2019, representing $76.3 million compared to 2018, where it used $243 million in digital advertising (“How Much Does Apple Spend On Advertising?”, 2021). In 2017, the cost of advertising was $257 million, which was also a decline (“How Much Does Apple Spend On Advertising?”, 2021). This shows that the company has been reducing its expenditure on advertising.
SWOT Analysis
Strengths
Strong Research and Development
The company is hugely dependent on its product design. Its innovation forms the main source of Apple’s competitive advantage. It majors in user experiences, upgrading its products to fit the requirements and needs of clients (Greg, 2020). The research and development area enables Apple Company to have various product ranges while upgrading the existing ones (Greg, 2020). The company has invested hugely in research and development since it is the source of its quality products.
Strong Brand Image
Research by Forbes shows that the Apple brand is the most valuable worldwide. The company enjoys customers’ trust because of its focus on customer satisfaction. The brand gives Apple Company significant bargaining power when negotiating with vendors and distributors (Greg, 2020). The company continues its reign by focusing on clients’ experiences, promoting and strengthening brand equity (Greg, 2020). High power in brand equity has enabled the company to have superior financial performance, leading to great influence in the smartphone industry.
Distribution and Leadership Position
The company operates globally, with 511 stores in 25 countries. Most of its stores are in the USA, China, the UK, Canada, Australia, France, Italy, Germany, and Spain (McCarthy, 2021). The company generates the highest revenue in the technology industry globally. It is the second-largest company manufacturing smartphones (Greg, 2020). Apple was the first company in 2014 to generate more than $700 billion in the USA after being the largest publicly traded company in 2014.
High-profit Margins
The profit margin of Apple Inc. is enormous with every product upgrade, such as the new Mac laptop, iPod, and iPhone. Apple Inc. had a gross margin of 39.1% in 2016, 38.5% in 2017, and 38.3% in 2018 (Greg, 2020). Despite the decline in the gross margin, Apple is still among those with the highest in the computing and smartphone industry (Greg, 2020). A high profit margin is important for the company because it enables it to maintain business operations in the period of economic crisis as it has cash reserves. This was visible in the 2008 to 2009 economic crisis (Greg, 2020). The company’s Net sales increased by $ 119,017 million despite the crisis affecting a large portion of the economy from 2008 to 2012.
Products Portfolio
The company is innovative in the line-up of its products, with expansion in hardware and software, leading to various new services. The product mix has made the company develop and uphold its competitive advantage in the technology industry (Greg, 2020). This greatly strengthens Apple Inc. with products such as HomePod, Apple Watch, iPhone, Apple TV, Mac, and iPad (Greg, 2020). Also, services such as iCloud, Apple Ray, and software products like macOS, tvOs, iOS, and WatchOS have boosted their strength in the market.
Weaknesses
Price Too High for Some Consumers
The price of Apple products is too high for local consumers as they are perceived as luxury products for high earners. Although the company has grown significantly in the smartphone market, its prices are still high, making it not have the largest market share (Greg, 2020). Its premium prices make it used by middle and high-class people as they are the only ones who can afford it. This prevents the product from experiencing sales growth.
Incompatibility with Other Software
Apple products are incompatible with other computer operating systems, making individuals who can afford them join the Apple universe (Greg, 2020). This issue has made many clients purchase accessories and apps for Apple devices to enable them to continue using their products.
Lack of Marketing & Promotions
The company spends less on marketing and promotions because it has solidified maintaining loyal clients (Greg, 2020). Apple does not feel the significance of investing in marketing because its success is based on the loyalty of its clients.
Lack of Competition
The company does not compete with its competitors because it does not involve product promotion and marketing (Greg, 2020). Apple products are heard only during updates or new product launches.
Opportunities
Invest in Research and Development
The company needs to invest more in research and development so that it can come up with new products and also be able to identify the gap its competitors are filling in research (Greg, 2020). This will promote Apple sales as well as the profit margin.
Qualified Professionals
Apple has qualified professionals with several years of experience and can develop various attractive products for their loyal consumers (Greg, 2020). This gives the company the chance to continuously come up with new opportunities.
Expansive Distribution Network
Apple Inc. has a limited distribution network with an opportunity to grow. This will enable the company to increase its revenue generation and sales. The company has a chance to invest in green technology to build its reputation (Greg, 2020). Sustainability has grown enormously in the 21st century and has gained popularity in many areas. Apple Inc. has a chance to invest in these areas to foster its growth and popularity.
Threats
Economic Fluctuation
The fluctuation of currency in areas in which Apple operates poses a critical challenge to its expansion (Greg, 2020). It affects the company’s business, leading to decreased demand for Apple products.
New Competitors
New players providing quality smartphones at affordable prices have entered the market. This includes companies such as Huawei, Samsung, and HTC (Greg, 2020). They pressure Apple Inc. to develop new products with more features than competitors.
Apple Software and Hardware Are Expensive
Apple hardware and software are more costly than products from their competitors, such as Dell. This pushes consumers to purchase products from their competitors since they are affordable (Greg, 2020). Apple customers are getting tired of software upgrades because of phone fatigue.
Heavy Competition in Laptops
The laptop industry has significantly expanded, leading to great competition. Despite Apple maintaining its popularity, the market is expanding, leading to the entrance of key players such as Dell and Lenovo (Greg, 2020). These companies are bringing good products to the market, effectively competing with MacBook.
Strengths to Opportunities & Converting Weaknesses and Threats
Weaknesses and Threats to Strengths
Having expensive products enables Microsoft to attain enormous revenue because it serves high earners with more to spend. Many Apple users prefer their products because of their unique software. The company saves a lot by not engaging in marketing and promotion programs. The lack of competition enables Apple products to dominate the market. Economic fluctuation enables Apple Company to have fewer stores in specific countries, avoiding its effects. New competitors have enabled Apple to extend their research and development, creating upgrades to their products. The cost of Apple software and hardware has enabled it to have expensive products that serve the middle and wealthy class. The increased competition in laptops has enabled Apple to expand its technology, enhancing its products’ quality.
Strength to Opportunities
The company has to increase its research and development to enable it to develop new products that are attractive to its clients. The brand Image is an opportunity for Apple to invest less in marketing and promotion. The company can expand its distribution network to operate in many parts of the world. A high-profit margin will enable the company to invest more in research and development, hence promoting the quality of its products. Its product portfolio is enough to attract new clients to join the Apple community.
Marketing Objectives
The company will expand its distribution networks to many urban areas in Middle Eastern countries, Africa, and South America to expand its revenue and sales. This strategy will enable the company to expand its market share by more than 5% by 2022. This will promote the sale of the iPhone, iPod, and iPad.
References
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