Strategic Management: Internal and External Environment of Apple - Case Study Example

Apple Inc. Name Date Introduction Apple Inc. is one of the most valuable and successful companies in the world. It operates in the electronic industry which is one of the most competitive industries in the world mainly due to the number of competitors existing in this industry. The company headquarters are located in Cupertino, California and deal with online services, computer software as well as the consumer electronics. Furthermore, computers and iPhones makes up for the most of the company hardware's that it offers in the market. In the past, Apple has faced significant challenges in the way it approaches the market but the change in strategy aided in revolutionising the industry, especially in mobile phone industry. Even though the Apple is one of the leading companies ion computer sector, it has been able to succeed in the mobile phone industry despite competition from other companies such as Samsung. Before Steve Jobs took the helm of the company for the second time in 1997, Apple was facing serious challenges in terms profitability, and failure to consolidate adequate customer base threatened the success of the company. However, it is as a result of charismatic leadership, the innovative process as well as the ability to scan the external environment that propelled Apple to be the most valuable company under Steve Jobs. Even though the company has been able to maintain steady sales even after his death in 2011, of late the company has recorded decrease in sales as a result of increased competition in the electronic field. This paper evaluates the internal and external environment of Apple to establish the reason behind the company success in the past and what can help propel it into the future success despite operating in one of the most competitive industries in the world. Leadership Leadership is behind Apple success story. The management of the company is essential for its long-term success as well as in maintaining sustainability practices in the long run. Apple leadership has been one of the most critical capabilities has enabled the company to succeed in the market. Steve Job was one of the most influential figures in Apple history. Despite being the co-founder of the company, Steve Jobs left Apple in the 1980s only to return to the top leadership of the company in 1997 after the acquisition of his new company NeXT in 1997. His leadership laid the foundation and the creation of the successful brand in the market and as a result was able to gain the competitive advantage in the market. Most important was the dominance of Nokia in the market in the 1990s and the early 2000s, but the introduction of smartphones helped the company in gaining a competitive advantage. Steve Jobs contributes to change the way the operations are carried out with innovativeness and involving people across the department to help in improving the company position in the market. Even though it was challenging at first, he was able to succeed and ensure that Apple Inc. was able to create a reputable brand in the market an aspect that it was unable to achieve in the past (Sahoo, 2012). Steve Jobs influence on Apple Once Steve Jobs took over as the CEO of Apple, he instituted a change process where he adopted the culture of simplicity and team work. His main focus was training and development and empowering the research and development team to help in propelling the company to succeed in the long run. However, Steve Jobs took more initiative in the product development by eliminating bureaucratic which affected the production process and through this he was able to streamline the production process. However, the major contribution that Steve Jobs made was instituting the culture of innovation in the company that at time was performing poorly in the market and was unable to produce competitive products. The culture of innovation has played a key role in making sure that Apple retains a competitive edge over the others in the market. By coming up with the culture of innovation, Steve Jobs was able to promote flexibility within the company operations thereby enabling Apple to respond quicks to the changes in external environment including the change in technology. At the same time, Steve Jobs was still able to promote the culture of secrecy which has made it difficult for other companies to replicate Apple Inc products. This led to the introduction of competitive products such as the iPod, as well as iPhone which revolutionized the mobile phone market. Prahalad and Hamel Core Competency Prahalad and Hamel introduced the concept of core competency which is the process in which a company has the ability to utilize the skills and multiple resources which helps it in achieving the competitive advantage or even achieve a differentiation aspect in the long run. However, the core competencies must however be difficult to replicate especially by the competitors in the same field, should ensure that it is able to create additional benefits to the customers and at the same time should have the ability to penetrate various markets in the long run (Drejer, 2002). Therefore, the core competence must have the ability to create an additional customer benefits especially when the end products are considered. Apple Inc. has been able to rely on its core competencies that includes its superior research and development department and its ability to introduce new and superior products over a short period of time. This has enabled the company to come up with hardware’s as well as software’s that are hard to replicate such as iTunes which has become dominant in the music industry. Organization capabilities Apple internal capabilities have been the basis of the company success in the past, and this has enabled the company to succeed in the market. The capabilities are either classified as non-substitutable, costly to imitate, rare and valuable. Valuable capabilities are the company ability to take advantage of the opportunities and at the same time eliminate the threats that the company may face in the market. Over the years, Apple has been able to come up with unique and attractive designs in its innovations which have also played a key role in differentiating its operations from the others in the market. Furthermore, other aspects such as the Apple store has played a key role in promoting brand recognition in the market and one of the most valuable characteristics that the company possesses. Other valuables capabilities include the presence of "halo effect" and powerful software that the company owns which has also contributed to the emergence of capabilities such as, iTunes, and the presence of the video-editing programs which has enabled the company to succeed in the past (Mallin, and Finkle, 2011). On the other hand, rare capabilities incorporate other abilities that some of the competitors possess and even though this is the case it still enables the company to gain a competitive advantage over the other in the market. Furthermore, given that Apple has been able to create its own software's which includes iTunes, it has been able to reduce reliability from other companies. This also includes the leadership and the innovative design that the corporation has been able to generate. The costly to imitate capabilities are those that are difficult for the competitors in the market to implement due to their expensive nature. However, the expensive to emulate capabilities also includes the valuable capabilities which help in propelling the company to success in the long run. However, one of the non-substitutable includes the brand reputation which is hard to imitate given that it is created as a result of the high productivity, innovative and the production of high-quality products (Jacob, 2013). Resources Apple has both tangible and intangible resources which have played a key role in Apple becoming one of the most dominant companies in the world. This includes the Apple leadership either under Steve Jobs and also Tim Cook. However, before Tim Cook took over, he was also working under Steve Jobs which shows the company ability to nurture future leaders. Other resources at Apple disposal includes computer software and hardware's, smartphones, financial assets, patents, trademarks, copyrights and goodwill which are fundamental to the operations and success of Apple in the market. Competitive advantage The brand loyalty, innovativeness and advertising has enabled the company to gain a competitive edge over the others in the market. The brand reputation has been one source of the competitive advantage for Apple especially due to the positive reputation that the company has been able to build in the past. This has also enabled the company to use this as a marketing initiative especially since the company has a track record of producing high quality and innovative products in the market. In fact, it is as a result of the business ability to produce high-quality products, and the positive brand reputation the company has been able to create brand loyalty. Over the years, Apple has been able to come up with marketing slogans which include "think differently" which has also been the basis of the innovativeness that has propelled the company to success in the long run (Nair, and Leng, 2012). Over the years, the company has managed to build a reputable brand due to the ability to avail high-quality products over a short period and through this has managed to ensure that it is one of the most valuable companies in the world. Apple Inc. innovativeness enables the company to produce products from time to time, and through this, it has propelled the company to success. Culture Apple has been able to promote the culture of diversity and inclusion over the years. Through this, it has been able to offer employment opportunities to people from different backgrounds which has been key to creating a diverse workforce in the long run. However, Apple Inc. mainly promotes the culture of innovativeness. Ever since Steve Jobs took over the leadership of the company, he always challenged employees to think differently which has over the years motivated them to come up with innovative products in the market (Ismail, 2012). This has been significant company progress and the dominance in the world. Furthermore, the company ability to establish the culture of the usual combativeness, secrecy, innovation, creativity as well as the top notch excellence has also been the root for its success. Over the years, Apple has managed to safeguard its secrets thereby enabling it to succeed in the long run given that the competitors are unaware of the company operations and how the activities have been carried out. The employees that are incorporated in Apple operations are required to be competent given that they work under creative kind of environment. This helps in making sure that Apple products suitable products from time to time. The culture and secrecy and innovation has been the sources of the company success especially given that leaders such as Steve Jobs were able to create an environment where company secrets do not spill over to the business. This has been one of the reasons that the corporation has been able to retain a competitive edge over the others in the market given that they are unable to monitor the operations of Apple and predict their next move. External influences Industry Profitability Over the years, Apple has operated in profitable market segments especially given that the markets are dominated by few number of companies who have large market shares. For instance, Smartphone is mainly dominated by Apple and Samsung where else music industry is dominated by Apple which has improved the company profitability. Apple Porters Five Forces Competitive Rivalry There is a healthy competitive rivalry between Apple and other businesses in all the market segments that the company engages in. Competition in computer, electronics and the mobile phone industry is high especially given that most products are easier to replicate in the long run. However, the success of Apple is determined by the existing of low switching costs and the aggressiveness that different competitors use when approaching the market. In the global market, there is the case of the aggressive approach by the company such as LG and Samsung especially in mobile phone market where the companies adopt, imitations, aggressive marketing strategies as well as the rapid innovations in respect to their products. This has created a scenario where companies often produce new products on a yearly or half-yearly basis to try and match the innovative powerless that Apple possesses. Furthermore, in most of the market segments that Apple operate in, there are cases where there are low switch costs which make it possible for the company to shift to different brands in the market in case they are not entirely satisfied by the available products (Piao, and Kleiner, 2015). In this case, Apple faces stiff competition from various companies in different market segments which make the competitive rivalry a vital part in the company success in the market. Apple Customers Bargaining powers Due to intense competitive rivalry and the low switching costs in most market segments, the customers bargaining power is strong. However, this is determined by whether the bargaining power is collective or individuals given that customers, in general, have high bargaining power when compared to individual customers. However, the presence of low switching costs is a significant threat given that customers, in the long run, may collectively switch from using one brand to another which is a threat to the company progress in the long run. However, to make sure that Apple still retains a considerable market and to reduce customer's turnover, Apple has equipped its research and development department which has been instrumental in promoting customer satisfaction. Furthermore, it has also enabled Apple to ensure that it retains a competitive edge over the other in the market. Bargaining Power of the Suppliers The suppliers have a weak force in relation to the operation of Apple. This is due to the presence of the high overall supply and at the same time, there are the greater number of suppliers in the market. The availability of a vast number of suppliers means that they lose their ability to negotiate for better prices. A large number of vendors makes it difficult to the vendors who are often unable to bargain especially given that in case this happen, Apple can turn on to new suppliers. This is similar cases with the switching costs relating to customers which are always low which makes it easier for Apple to switch to other vendors in the market (Shield Jr, 2014). The more a company is dominant in the market, the more the bargaining power of suppliers is likely to be weakened. Threat of Substitutes The Threat of Substitutes in the market is weak. Even though there is the large supply of Substitutes in the market, they have limited performances which compromise their performances. For instance, the availability of cameras and landlines are the primary substitutes in the market, but they have limited features that limit their success. The Products offered by Apple are, however, comprehensive which enables the company to devise ways to succeed in the market given that the substitutes do not have the ability to outperform them in the market. Instead, it is the competing products that provide the major threats to the Apple products in the market. Threat of new entrants in the market There is a moderate force in terms of new arrivals' in the market due to the financial capability of Apple and existing competitors as well as the brand reputation that the company has been able to create. Establishing a successful cooperating to compete with Apple require massive investment and track recorded of proven sales which make it difficult for new companies to dominate the market even though in the long run may be harmful to the company operations. Furthermore, any company venturing into this industry must invest heavily in the research and development to ensure that can produce high quality and products that can compete in the market. However, there are other brands with proven market research such as Google, and this could be detrimental to the company success in the long run. Resource-based theory at the firm The success of any business is determined by the availability of the various resources in the market whether tangible and intangible asset and the ways in which they are utilised in the market to ensure that they are competing for products. The use of physical and non-physical assets helps in propelling any company to success in the market especially Apple given that it has some assets at its disposal and have driven the company to success in the long run. Tangible assets in respect to Apple include the machinery, which includes the hardware's, buildings and other commodities that the company has been able to produce. Apple has also been able to provide products such as computers, iPod, and the mobile phones which have propelled the company to success in the long run. The use of the business assets has been fundamental to Apple success given that it has contributed to the production of high-quality products which has been the main driving force to the company success. Intangible assets are those assets that help that are helps the company in gaining a competitive advantage, but they are immaterial. This includes the brand reputation which has been one of the most important factors to the success of Apple in the market. However, to Apple brand reputation of Apple is important given that the company has been able to create an atmosphere where it is known for coming up with unique and innovative products in the long run. Other intangible assets that have been essential to the success of Apple has been the leadership of Steve Jobs and the ability to create the culture of innovation in the company (Nair, and Leng, 2012). Others include the availability of intellectual property as well as trademarks which help in securing Apple position in the market. On the other hand, there are products available in the market that include the heterogeneous and the immobile based assets. The heterogeneous based expertise include the creativity and the innovation that Apple has at its disposal which also includes the organisation culture which is different from one institution to another. Even though in MOBILE industry the competition is mainly between the Samsung and Apple, Apple Inc. mobile phones are more expensive when compared top Samsung. The quality and the brand reputation that Apple has created has enabled it to creative the products and avail them at higher prices and at the same time they are still accessed by the customers in large numbers even in cases they are considered as premium products. McKinsey 7-S model Strategy The strategy of the company defines it is future direction and the way it relates to others in the market. The strategy represents the company operations and the way it refers to the mission as well as the goals of the company in the long run. The strategy of Apple is to provide high quality and innovative products in the long-term which has defined the company products. Furthermore, the premium pricing has also been fundamental for Apple success in the market especially with the increase in competition in the market. High quality and premium pricing define the company product (Chikhale, and Mansouri, 2015). Structure The structure of the business determines how various responsibilities are carried out. The Chief Executive Officer is the head of the company and is responsible for providing the necessary leadership of the way Apple is governed and how operations are executed. Tim Cook is the company CEO. However, the structure also incorporates the Chief Operating Officer and different VP in charge of HR, Creative Director, Mobile Advertising, and the Communications. However, they are aided by the other VP in other sectors as well as the Senior VP WHICH HELPS IN running the company. However, similar connections are established to help in managing the subsidiaries. In fact, it is the structure of Apple that has been critical to the company success (Michalski, 2011). Systems The structures of Apple determines the way the information is distributed in the company. However, the VP in charge of communications is responsible for executing all the information, and this is important to Apple progress in the market. Staff The staff are some of the valuable assets of the company. Apple Inc. has the staff who have the ability to be innovative and helps ion promoting innovative practices in the long run. They include the employees in the research and development department, engineers as well as the marketers who play a fundamental role in the organisation success. Style The style is key to how the organisation activities are run. Apple company priorities are set by the management though the main driving force of the business is to be different and producing high-quality products. Employees duties are distributed in the orderly fashion, and every employee is required to contribute to the organisation goals in the long run. Skills Skills are one of the most critical components on how Apple is run and the way operations carried out. Duties are distributed depending on the employee's skills, and their skills are fundamental to the long-term success of the company. It is the skills of the employees that enable Apple to be different in the market and develop distinct capabilities, and this has given the company the competitive edge over the others in the market. Shared Values Apple shared values are guided by maintaining standards in the organisation, integrity, ethics, interaction, diversity and the production of high-quality production to help in solving the problems or inefficacies that have been identified in the market. The success of Apple has also been as a result of engaging in social activities which have also been important in maintaining the brand reputation necessary for the long-term success of the company (Kaplan, 2005). PESTLE Analysis Political Factors Apple has been able to achieve success due to the stable political environment that it faces in various countries. Apple Inc. mainly relies on the suppliers from the low-cost areas which include China. However, there have been labour issues in the past and this could result in the long effect how the operations of Apple are run. Furthermore, there also cases where major stakeholders are working to ensure that American production is promoted, and at the same time Chinese imports are discouraged, and this could have a long-term effect on the pricing of Apple products. However, seeking for alternatives could be a difficult task for and as a result may contribute to the increase in the prices of the products offered by Apple. Economic Factors Apple sales are determined by how the company financial resources are affected as a result of changes in the external factors. For instance, Apple transactions and operations are rated in terms of American Dollars and therefore fluctuations, and the variations in the exchange rate could, in the long run, have a large effect on the operations of the company as well as the prices of Apple products. Furthermore, Apple products are mainly purchased by the Middle and high class but due to the stagnation of the economies across the world such as the United States and other developed nations, then the operations of the company are likely to be affected given that the sales are likely to stagnate or decrease. Furthermore, labour issues in China could have an economic impact on the company given that it could increase the business operation costs (Yang, and Lauricella, 2017). Social factors African countries have become an important destination for most businesses especially due to the higher rate of economic development in African nations. However, the dominance of Apple is mainly in the developed countries and other economies in Asia, Europe and in the South America. However, the spread to African nations has been limited, and the emotional connection to various products is required for its long term success (Bivolaru, Andrei, and Purcaroiu, 2009). Therefore, Apple should have the ability to create the emotional connection in African countries given that this is the new market that the company must establish its operations to gain a competitive advantage in the long run. The consumer spending and the expensive nature of Apple product is a major challenge to most people, and therefore it is important to come up with ways to ensure it succeeds in the market. Furthermore, labour issues in China could, in the long run, have ethical repercussions thereby affecting the company reputation in the long term. Furthermore, the focus on the Chinese market could prove to be a challenge, and in addition to this, the music issues and how it has consolidated the music industry market could also be a major problem in the long run. Technological factors Apple is guided by the technological innovations, and therefore it must ensure that it maintains high innovative products. However, the ability to imitate and innovate from the companies such as Samsung and Google could affect the dominance of Apple in the long run. The technological capabilities that other companies have could, over the long term, eliminate the superiority and the uniqueness that Apple has over the long term. Furthermore, personal computers can be affected especially if the consumers highly adopt the use of mobile phones given that with the technological advancement most features are well integrated into the mobile phones (Yüksel, 2012). Legal Factors The operations of Apple Pay could, in the long run, affect the company operations negatively especially given that financial sectors are well regulated and government conducts timely scrutiny from time to time. Therefore, litigation could have an impact on Apple operations in the long run if the operations are not handled in the right manner. The focus on music industry also exposes the company to cases of litigation and piracy could, in the long run, have an impact on how the company operations are run. Environmental Factors The world is slowly shifting to environmental friendly environmental (Bivolaru, Andrei, and Purcaroiu, 2009). Therefore, disposal of wastes and the malfunctioning electronic devices could be a major problem in the future. Furthermore, there are cases where some of the electronic devices have lithium batteries and therefore must be disposed of in the right manner, and failure to dispose of them in the right manner may lead to legal issues. Furthermore, the pollutions issues in China could also affect the company long-term plans, and if more regulations are adopted, then Apple operations are likely to be affected. Furthermore, there has been cases where there has been a significant shift from the fossil fuel would have an impact on the electricity production and electricity pricing. With this in mind, the company supply chain and the shipping through transoceanic methods could be affected by the global warming. References Bivolaru, E., Andrei, R. and Purcaroiu, G.V., 2009. Branding Romania: a PESTEL framework based on a comparative analysis of two country brand indexes. Management & Marketing, 4(4), pp.101-112. Chikhale, M.M. and Mansouri, M., 2015. An Agile and Collaborative Framework for Effective Governance to Enhance Management in Large-Scale Enterprise Business Systems: The Case of Apple Inc. Global Journal of Flexible Systems Management, 16(3), pp.283-293. Drejer, A., 2002. Strategic management and core competencies: Theory and application. Greenwood Publishing Group. Ismail, A.R., 2012. Understanding the factors that affect the adoption of innovative high-technology brands: The case of apple iPhone in Malaysia. Journal of Global Marketing, 25(4), pp.226-239. Jacob, W., 2013. Inside Apple: The Secrets Behind the Past and Future Success of Steve Job's Iconic Brand. Kaplan, R.S., 2005. How the balanced scorecard complements the McKinsey 7-S model. Strategy & leadership, 33(3), pp.41-46. Mallin, M. and Finkle, T.A., 2011. Apple Inc.: product portfolio analysis. Journal of the International Academy for Case Studies, 17(7). Michalski, A., 2011. The McKinsey 7-S Framework: Invented in the 1980s and still a possibility for success today. GRIN Verlag. Nair, P.B. and Leng, Q.A., 2012. The Sweet and Sour Apple: The Case of CEO Strategies at Apple Inc. Vidwat, 5(1), p.21. Piao, M. and Kleiner, B., 2015. Excellence in the Electronics Industry: The Comparison of the Organizational Culture among Apple Inc., Samsung Electronics and Google Inc. Conflict Resolution & Negotiation Journal, 2015(1). Sahoo, D., 2012. Strategic Change of Campaign at Apple Inc. Vidwat, 5(2), p.38. Shield Jr, J.J., 2014. Apple, Inc. v. Superior Court: Caveat Emptor: The Future of Online Credit Card Transactions. DePaul Bus. & Comm. LJ, 13, p.529. Yang, J.G. and Lauricella, L.J., 2017. Apple's Tax Debacle in Ireland. Journal of Taxation of Investments, 34(3). Yüksel, I., 2012. Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), pp.52-66. Read More