Contemporary Developments in Business and Management of Apple INC

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Introduction

Environmental scanning has become an important aspect of strategic management planning in most organizations. Today, it is not just important to know the business operation environment but it has become necessary and advantageous to adequately understand the social, political, economical, legal, and technological factors that offer opportunities and threats to the business. Apple Inc. Corporation, being an internationally acclaimed organization has not been left behind in incorporating the necessary environmental scanning tools in an attempt to understand its operation environment well.

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Background information

Apple Inc. previously known as Apple Computer Inc. is one of the biggest American multinational companies, having been established in 1976 by three friends; Steve Jobs, Steve Wozniak, and Ronald Wayne (O’Grady, 2008, p.1). The initial aim for the formation of the company was to sell the Apple I personal computer kit which had been designed by Wozniak as part of his hobby activities (O’Grady 2008, p.ix). That hobby activity has today become an essential life component that people seem to cherish and appreciate. In 1977, Apple was incorporated, with Wayne missing out after selling his shares to Jobs and Wozniak. Notable in the new company was a multi-millionaire Mike Markkula who came in and was instrumental in providing the important business expertise and also contributed a sum of money totaling $250, 000 towards the new company. This new company, known as Apple II, was inaugurated on April 16, 1977, at West Coast Computer Faire; it was unique from the former and its competitors since it was the pioneer of color graphics and open architecture. Moreover, the new company immediately introduced a 5.24-inch floppy disk drive and interface and also Disk II which differed greatly from the earlier ordinary cassette tapes (O’Grady, 2008, p.5).

In 1984, Apple launched the Macintosh which became a fast-moving market product due to its advanced graphic capabilities and unique features that included, LaserWriter and PageMaker. The growth witnessed in Apple Inc. has been associated with the establishment of the Apple II platform that enhances the application in various service industries, thus enabling Apple II to establish and maintain a loyal base of customers around the world.

In January 2007, the company came to be known as Apple Inc., removing the word computer and this was done to reflect the company’s strategies of growth into the market of manufacturing electronics, apart from its main focus of manufacturing personal computers (Boone and Kurtz 2008, p.489). Today, Apple Inc. is concentrating on designing and marketing consumer electronics, computer software, and personal computer hardware, and digital distribution. Its most celebrated products in the market “include Macintosh computers, iPod, iPhone and iPad” (Apple Inc. N.d).

The iPhone is the company’s product that has hit the market with a bang (Apple Inc. N.d). The introduction of the iPhone in the market has been in four generations: 1) the initial iPhone was designed with features like the screen size and the button place and which have persisted in all other models; 2) it was the introduction of iPhone 3G which resulted into 3G cellular network abilities and A-GPS location; 3) the iPhone 3GS model had a compass, a faster processor and a higher resolution camera that included video; 4) iPhone 4 model has two cameras for face time video calling and a higher resolution display (Apple Inc. N.d).

PESTLE analysis of Apple Inc. Corporation

The organization’s interaction with the environment in which it operates has become inevitable. Most organizations’ managements have been forced to study the environment in which they are operating for effective strategic purposes to remain relevant. To have a better understanding of their operational environments, most organizations have identified the related factors which they categorize into two groups; external and internal factors (Analoui and Karami, 2003, p.74). Further, the external factors are classified into two groups; those that include the general environment and those associated with the industry (Analoui and Karami, 2003, p.74) all of which influence organizations in different ways. Most organizations, in many instances, are confronted with two major questions: what are the strengths and weaknesses of the firm in terms of marketing, resources, and competitive advantage? And what are the opportunities and threats for the firm in the new market? These two major questions lead many organizations to carry out what is known as environment analysis (scanning) as a method of finding answers to the questions. Several techniques have been established as tools for investigating the enormous number of issues that may affect a business organization. PESTLE is one of the tools that have been employed in the analysis of Apple Inc. Corporation.

The macro-environment of the business is affected by six major factors which are; “political, economical, social/cultural, technological, legal and environmental” (Haberberg and Rieple, 2008, p.105), all of which are the environmental factors that constitute PESTLE.

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Political factors

The political factors include all actions by local and national administrations, political parties, and also international bodies such as the European Commission, the United Nations and the World Trade Organization. Most political factors impact the business in different ways such as the government nature and its stability, the attitude to taxation, attitude to social welfare, attitude to foreign trade, the political ideology, deregulation philosophy and also the education philosophy (Haberberg and Rieple, 2008, p.106). As a result, many businesses may develop uncertainty, making it difficult to make decisions.

Apple Inc., iPhone has become affected by the ongoing censorship laws in China, for example, China government has blamed the access to internet facilities such as instant messaging, chat rooms and text messages that are believed to have escalated public demonstration on key pressing issues. This has greatly reduced the market share for Apple Inc., especially among the youth. At the same time, China has banned the sale of any device that lacks the country’s wireless standard known as WAPI, forcing Apple to disable its iPhone to be allowed in China’s market (Musil, 2010). Moreover, the USA government through international trade agreements such as the United States International Trade Commission has allowed the shipment of HTC phones and which are infringing on Apple’s iPhone market resulting in its shrinkage. Further, Apple Inc. is involved in a legal tussle with HTC Company on what it terms as a violation of patents that covers the iPhone user interface, hardware, and also the internal architecture.

Economic factors

Consumer spending constitutes a major factor in the propensity of any company, whereby during the boom, a company realizes growth especially for those producing differentiated or luxury goods, and during the downturns, most companies are affected, and thus growth is slowed. Therefore, the competitive nature of the industry may be significantly influenced by certain issues that range from a rate of employment, prevailing rate of interest, and the general economic growth patterns; indeed, these factors have an effect on the purchasing behavior of the consumers, which is an important aspect of the company’s pursuit of competitive advantage. Moreover, the presence or absence of skilled labor, international economic trends, business cycles, inflation, wage rates, exchange rates, and GNP, has the potential to affect the performance of a company. Indeed, international company like Apple Inc. depends much on worldwide economic conditions.

The economic downturn (recession) has caused uncertainty on Apple’s iPhone products, for instance, customer demand for iPhone has gone down while others have postponed their spending on iPhone and other products. The global fuel and other energies costs have continued to increase thus impacting the company negatively. Moreover, the problems that most bank systems and other financial markets are experiencing have tightened the credit markets and in turn, reduced the borrowing enthusiasm. This has translated into consumer spending behavior for iPhone products to go down. Indeed, the economic recession translated into low employment opportunities especially for young people and considered to be the greatest purchasers of iPhone products, thus translating into fewer sales as young people cut on their spending.

Social and cultural factors

Social trends are important to a company as various groups in society portray varying tastes and preferences for particular products. In some cases, the trends are linked to phases of economic boom or bust and therefore, any environmental analysis needs to consider all relevant trends including those that may affect the business in the future. For instance, most consumers have preferred a single device that can merge business and pleasure without having to use additional gadgets. In the illustration, iPhone 3G has three vital components; a more changed phone that has a widescreen iPod and an internet device that fully-fledged HTML email and a classic web browser. Moreover, most consumers continue to show preferences for low-cost but efficient iPhones. What is important is that many sections of the population are accepting iPhone as gadgets of education, leisure, information gathering, and sharing which indicate the potential growth for the products.

Technological factors

The presence of Apple Inc. in the international market has been escalated by its superior technology. To its advantage, the technological advancement and sophistication have rendered the company’s competitors speechless as it has been seen as the most innovative and master of design. Moreover, the company has embraced innovation, using every detail to come up with fabulous designs. However, current concerns by most consumers are alarming, for instance, iPhone has been detected to have antenna problems especially for the new model, iPhone 4. Also, some concerns have been raised over the presence of spots on high-resolution screens, scratches on the super-hard glass back, and the poor reception when one holds an iPhone case (Sherman, 2010).

Environmental factors

The acceptance of iPhone products has not been that smooth given that claims of iPhone exhibiting environmental and health problems are fertile. For instance, Greenpeace international has accused Apple Inc. of failing to cover harmful chemicals in the iPhone. Such harmful chemicals include BFRs and harmful PVC. Therefore, Apple needs to address such issues exhaustively.

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Legal factors

Apple Inc. has continuously been confronted with legal issues, for example, the licensing of its iPhone products has not been easy in some countries like China. At the same time, China’s suicide episode saw calls for the company’s prosecution of negligence, abuse of workers, and code of secrecy. These, to some extent, affect the operation of the company and its reputation as an international company.

Apple Inc. competitive environment using Porter’s Five Forces model

Upon identifying the boundaries of an industry, it becomes necessary for the company to investigate and analyze competitive forces in the environment to identify opportunities and threats (Hill and Jones, 2009, p.43).

Rivalry among established companies

Apple Inc. faces competition from established big corporations like Google, Samsung, Motorola, and HTC which at the same time have a large capital base to influence the market. Further, the big corporations sometimes lower their product prices to the level that affects Apple Inc.’s prices. Therefore, the strategic analysis should be on price, branding, and product differentiation.

Threats resulting from buyers

Currently, the threats of buyers for Apple Inc. Corporations are not fierce. Primarily, the company has designed many low-cost products to choose from; and due to its unique features, the demand for iPhone products is high. However, of significance is the strategy to view the markets in developing countries keenly as they seem to be sensitive to the price of the iPhone.

Threats resulting from supplier

Threats from the suppliers are minimal to Apple Inc. The company only depends on suppliers of hardware and third-party suppliers for the apps but on a larger scale, it builds its OS, Application software, and other music player features.

Threats as a result of competitor entry

Currently, the company does not face major threats from the new entry of companies. This may be attributed to the fact that entry capital is relatively high and this causes disadvantages to the newcomers. At the same time, sophisticated and high research and development that characterize Apple Inc. products have scared most potential new entrants. What is needed is that Apple Inc. must move strategically into acquiring some of the markets held by its competitors through product differentiation, branding, and price adjustments.

Threats of substitutes

Threats of a substitute to Apple Inc. iPhone products are low as most of its iPhone products have advanced features like satellite-based systems, internet, multi-touch screen user interface, netbooks, and also its size is compact. These features are notably absent in competitors’ products.

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USA Government and Apple Inc. competition

For most businesses operating especially in international markets, regulation and compliance are some of the risks that they have had to face in international markets. The policies largely circumvent the existing bilateral and multilateral trade disciplines. The government has been at the forefront in enacting the competition policy and regulatory policy (USA Chamber of Commerce, 2009), which have been important in regulating the iPhone market. At the same time, the government aid control measures and policies have been vital to the promotion of R & D for Apple Inc. Corporation. Other measures that the government has fostered include anti-trust laws, anti-competitive laws, and price-fixing mechanisms. Moreover, regulatory measures have largely centered on correcting the market malfunction. All these have affected Apple Inc. markets in the USA, especially for the iPhone products.

Reference List

  1. Analoui, F. and Karami, A., 2003. Strategic management in small and medium enterprises. NJ, Cengage Learning EMEA. (Online). Web.
  2. Apple Inc. n.d. iPhone. (Online). Web.
  3. Boone, L. E. and Kurtz, D. L., 2008. Contemporary Business 2009 Update. Cengage Learning. (Online). Web.
  4. Haberberg, A. and Rieple, A., 2008. Strategic Management: Theory and Application. NY, Oxford University Press. (Online). Web.
  5. Hill, C. H. and Jones, G., 2009. Strategic Theory: An Integrated Approach. OH, Cengage Learning. (Online). Web.
  6. Musil, S., 2010. Lenovo: Apple losing out in China. Cnet news. (Online).
  7. O’Grady, J. D., 2008. Apple Inc. CT, Greenwood Publishing Group, Inc. (Online). Web.
  8. Sherman, E., 2010. Apple iPhone 4 Problems Show that Innovation without Execution Fails. BNET News. (Online).
  9. USA Chamber of Commerce. 2009. Aligning International Regulatory, Trade and Competition Policy. (Online).

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