External Environment of Apple Inc Introduction Competition is a significant marketing factor that determines the appropriateness of a firm’s activities that can contribute to its performance. As competition is at the core of the success or failure of a business, it should normally search for a favourable competitive position in the industry in order to establish a profitable and sustainable position against the competitive forces (Porter, 1998, p. 1). This paper presents a case study of Apple Inc. and discusses how external environment and microenvironment can influence the performance of a company. The paper presents an analysis of Apple’s external environment, microenvironment and competitive advantages.
Analysis of External Environment of Apple Inc: With PEST analysis The external environment, including competitors, suppliers and customers often mean that the organization also require to implement changes. A commonly used and highly valuable tool for analyzing the external environment of a firm is PEST analysis that divides the overall environment in to four areas namely political, economic, social and technological (Gregory, 2000, p. 49). As far as Apple’s case is concerned, the activities and market forces of its major competitors like HP.
Dell, Acer and Nokia are of greater significance in its competitive landscape. Political Environment Apple Inc is a multinational company and it is marketing its products like iPhone, iPad, iMac throughout a number of countries and hence any changes in the export and international trade relations can significantly impact its business. Economic Environment Even though the recent economic downturn that hit almost all industries worldwide has impacted Apple’s sale of its Smartphone and computer hardware and software products, the current market share and its growth especially in Smartphone market shows that it was not only able to recover the loss but also to maintain its strong brand loyalty among its customers.
Apple’s recent report says that it sold more than 3.36 million Macintosh computers during the first quarter of 2010, showing record increase of 33% from the same quarter of 2009. It sold 8.7 million iPhone in the first quarter of 2010 recording 100% unit growth from the year ago quarter (Apple. com, 2010). Social Environment Consumers worldwide have become more computer experienced, software literate and they like using digital players both at home and offices.
As computer and internet usage increases day by day, Apple has growing opportunities in its marketing of computer hardware, software and digital music payers. Technological Environment The technology and innovative product design are major factors that led Apple’s success. The Macintosh system and 3G iPhones have gained unique marketing position because of its technology advances. Apple has long been able to create a strong customer base that they place high value for Apple’s products like iMac, iLife, iTunes, iPad, iPhone etc and it helped it create strong brand image as well.
Microeconomic Analysis of Apple Inc Microeconomic analysis is considered to be a vital step in strategic planning because it can help explain efficient allocation of resources, measure internal efficiency of operation and find out employee productivity in the firm. SWOT analysis is invaluable tool for analyzing both micro and macro environment of a firm. It draws together key strengths and weaknesses that present internal (micro) analysis and opportunities and Threats that present external analysis (Beamish and Ashford, 2007, p. 42).
Strengths Weaknesses Strong brand loyalty Strong financial performance Innovation and R&D focus Patent infringement Product recalls Opportunities Threats Increased growth in smart-phone market share Ongoing growth in the demand for mobile PCs High Competition Dependence on specific suppliers Strengths Datamonitor (2010) reported that Apple’s brand ranking has been improved to the 20th position in 2009 from the figures of 24th of 2008 and 35th of 2007. Apple’s products have high level of brand awareness and recognition with differentiation and innovative product design strategies, that it has proved to be successful with iPad, iMac, iPod, iTunes, iLife, iTunes and iPhones and this shows its internal strengths for further development.
Apple’s huge investment in R&D, accounted as $1,333 million in 2009, has been led by the thought that better investment in R$D is highly critical for its success (Datamonitor, 2010). Its total revenue has been increased to the highest figure of $42,905 million in 2008 from the $24,578 million of 2007. The annual total revenue growth rate is accounted as 32.15%. (Apple. com, 2010) Weaknesses Apple is manufacturing and marketing highly complex hardware and software items that are likely to face design and manufacturing defects that in turn can adversely affect its overall business.
For example, Apple faced huge loss due to defects with Ultracompact Apple USB and had to exchange every adapter for new redesigned adapters during 2008 (Datamonitor, 2010). Intellectual property protection, patent infringement and related risks are very common for multinational companies. For instance, by the end of 2007, Apple had to defend around 47 patent infringement cases. Nokia Inc has sued against Apple for patent infringement (Datamonitor, 2010). Competitive Advantages of Apple Inc Apple’s major strategies for establishing sustainable position in a highly competitive market are its innovative product design (Hoskisson, Hitt and Ireland, 2008), brand loyalty (Keates and Clarkson, 2003), own store distribution and complete solution strategies (insidecrm. com).
Porter’s five force analysis is a widely used strategic analysis tool that presents five potential forces that a business faces within its industry, they are, competitive rivalry, threats of substitutes, new entrants, bargaining of buyers and suppliers (Kurtz, MacKenzie and Snow, 2009, p. 56) The above Porter’s five force analysis shows that Apple Inc is experiencing rigorous competition in its hardware, software and digital media player markets.
The major competitors of Apple are HP, Dell, Microsoft, Acer, Nokia etc. The hardware and software markets are hot and therefore chances of potential entrants are relatively more. Price gap and product differentiation is another big challenge that Apple faces, however, its innovative product design and huge R&D investment will be some of its opportunities. Availability of a number of substitute products seems to be a challenge in the software, hardware and digital music player markets.
In this critical marketing environment, it is important that Apple Inc should take extreme care of protecting its product ranges like iPod by delivering high quality services to its customers. Apple’s strategy of brand loyalty will be a success pathway because, creating brand loyalty and better customer relationship can help its overcome the market forces related to bargaining power of buyers. Similarly, its own store distribution strategy also will help it overcome the challenges of bargaining power of both suppliers and customers. Apple’s another strong marketing strategy is complete solution (insidecrm. com) that enables it to design and manufacture differentiated products and thus to overcome the marketing challenge of substitute products.
Conclusion This paper has presented a detailed analysis of both internal and external environments of Apple Inc and highlighted its major competitive strategies. PEST, SWOT and Porter’s five force models are used to present detailed strategic analysis of Apple inc in this paper. References Apple. com, 2010, Apple Reports First Quarter Results, All-Time Highest Revenue and Profit, New Accounting Standards Adopted, Retrieved 27/07/10 from http: //www. apple. com/pr/library/2010/01/25results. html Beamish K and Ashford R, 2007, Marketing planning, 2007-2008, Illustrated edition, Butterworth-Heinemann Datamonitor, 2010, Apple Inc, Company Profile, Datamonitor, Retrieved from http: //www. ebscohost. com/ Gregory A, 2000, Planning and managing public relations campaigns, Illustrated second edition, Kogan Page Publishers Hoskisson R E, Hitt M A and Ireland R D, 2008, Competing for Advantage, Illustrated and revised second edition, Cengage Learning Insidecrm. com, 2010, 11 Effective Strategies Apple Uses to Create Loyal Customers, insidecrm. com, Retrieved from http: //www. insidecrm. com/features/strategies-apple-loyal-customers/ Keates S and Clarkson P J, 2003, Countering design exclusion: an introduction to inclusive design, Illustrated edition, Springer Kurtz D L, MacKenzie H F and Snow K, 2009, Contemporary Marketing, Illustrated edition, Cengage Learning Linzmayer O W, 2004, Apple confidential 2.0: the definitive history of the world's most colorful company, Illustrated second edition, No Starch Press Porter M E, 1998, Competitive advantage: creating and sustaining superior performance: with a new introduction, illustrated edition, Simon and Schuster