Welcome to our sample essay on Apple’s internal environment and external environment case study. Here, you can learn more about Apple’s strengths and weaknesses and get some inspiration for your Apple internal and external environment analysis.
Strategic Environment Analytical Tools
SWOT Analysis
SWOT analytical tool is considered an important approach for comprehending strengths and weaknesses and identifying threats, as well as opportunities available to an organization in the business environment. Companies such as Apple apply SWOT analysis to carve a specific, sustainable niche in a given market. The tool derives its power from simplicity. That is, the SWOT analysis does not require complex algorithms to uncover massive opportunities that businesses can exploit and create a competitive edge. Moreover, firms that comprehend their weaknesses can, in turn, manage and lessen potential threats that would otherwise not be identified fast.
Beyond this, by assessing the business against its main rivals utilizing the SWOT analysis, a firm can begin to formulate strategies that can separate itself from rivals with the goal that it can compete effectively in the market.
A PESTEL (Political, Economic, Social, Technological, Environmental, and Legal) Analysis
A PESTEL analytical approach focuses on macro or external forces that influence the business environment of a firm (Cullen & Parboteeah 2014). Based on their organizations and analytical needs, some analysts refer to it as PEST.
In marketing, conducting a situational analysis before implementing any strategic plan is imperative. Additionally, PESTEL analysis is a part of situational analysis and ought to be conducted regularly, at least twice a year, to recognize changes in the macro-environment. Firms that effectively assess and react to changes in the macro-environment can distinguish themselves from competitors and create a competitive edge.
Porter’s Five Forces
Porter’s Five Forces analytical tool is vital for assisting firms to understand critical forces that influence their operations in a given business environment (Lasserre 2012). This tool is simple but assists companies in comprehending their current strengths and position in a competitive environment and exploring other areas for potential expansion.
With an unmistakable comprehension of what forces influence business environments, organizations can make reasonable preferred decisions of strength, enhance shortcoming points, and avoid incorrect decisions. Thus, Porter’s Five Forces analytical tool is essential in business planning.
Traditionally, Porter’s Five Forces analytical tool has been applied to determine whether new businesses, products, or services can perform well in a market. Nevertheless, it is an effective tool for evaluating forces influencing business environments (Lynch 2015).
Apple Internal Environment
Apple’s major internal environment is evaluated to determine its strengths and weaknesses in the industry in which it operates. Where applicable, PESTEL, SWOT, and Porter’s Five Forces analytical tools are used to explore the company’s internal environment.
SWOT Analysis
The SWOT analysis for the internal environment accounts for significant elements from the company’s business environment and its strategic approaches that are most likely to result in change and realization of corporate goals (Khan et al. 2015). Therefore, the company’s strengths and weaknesses are the constituents of this analysis. However, this analysis does not consider threats and opportunities that may emanate from the external environment.
Apple’s financial strength remains the most vital component of its internal environment. In the fiscal year 2015, Apple declared the largest yearly profit in corporate history. The company made $53.4bn or £35bn driven by sales of the iPhone. This earning was comparable to the $45.2bn that ExxonMobil realized in the fiscal year 2008 (Titcomb 2015). Following the release of the latest smartphone, the iPhone, sales profits rose in the fourth quarter by 31%. Nonetheless, the world’s largest firm warned that the growth would decline in the coming quarters.
Given the tremendous financial success, critics have started to question the company’s capability to sustain this monumental growth, as the economic slowdown affects China, where demands for its flagship products are constantly rising (Titcomb 2015). Nonetheless, the company projects further financial growth in revenues and profits as new models are released into the markets in a given quarter. Since the company embarked on diversification and the introduction of new models of its products, Apple has realized tremendous, sustained growth over the last few years. It is now considered the most valuable brand globally with its $233.7 billion in revenues and annual profit of $53.4 billion, implying that the company was making more than $1 billion weekly for the fiscal year 2015. The company now has a global reputation for being the best brand.
Moreover, Apple is touted in the industry as the most innovative, creative, and aggressive firm, driving on the success set by its founder. The company invests heavily in research and development (R&D) to ensure its innovative products meet consumer expectations. Experienced and skilled personnel who understand Apple products run the company’s boutique retail outlets in high-end locations worldwide. Such choices have strengthened the company’s revenues and reputation. The company manages its aspects of the supply chain, as it strives to adhere to best practices by publishing supplier codes to protect its brand and reputation. Apple has developed a cult-like customer base because of its brand trustworthiness. Fanatics are always thrilled with new models and struggle to be the first ones to acquire the new model. Moreover, the gadgets are simple to use across generations. That is, Apple designs user-friendly products and consequently attracts customers from all age groups.
The company also faces some weaknesses in its internal environment. Apple is under immense pressure to be the leading technology firm in a competitive world to sustain innovation, profitability, and growth. The company’s approach to direct sales and limiting potential retailers restricts its geographical coverage often. Few channels imply that Apple cannot serve many consumers globally. For instance, Apple has at most 15 direct sales locations outside the US. It means that some emerging countries do not have Apple retail outlets and perhaps get such products, if all, from third-party retailers. The financial results in 2015 showed that Apple realized massive profits after the release of the iPhone. This could be a problem for the company because of the dependency on one or two products. The case of Samsung, for example, demonstrates how its Galaxy battery failure affected its revenues.
Nevertheless, Apple is gradually addressing its dependency on iPhone by introducing new products and services, such as the Apple Watch and Apple TV. Apple also suffers a significant setback of compatibility issues (Jinjin 2013). The company products can only run on iOS, which brings compatibility issues. Unlike other manufacturers that depend on Android OS, Apple faces this challenge in the market. While the premium pricing strategy has resulted in relatively higher revenues and profitability for Apple, the company has locked out many would-be customers. Ordinary people are more likely not to purchase Apple products because there are comparably cheaper alternatives. In the recent financial quarter, Apple declared that sales are more likely to decline in the future because of slowing economic activities in its major markets, such as China. The inability to maintain sales, revenues, and profitability momentum could adversely affect future operations and the company’s strategic goals.
SWOT analysis for Apple’s internal environment shows that the company is stable and the leader in the industry. Its financial positions, innovation, creativity, and excellent customer and support services simply outdo the noted weaknesses. Hence, the company must exploit its internal strength to promote its brand globally, particularly in emerging markets.
The UK’s Contemporary Strategic Environment for Apple
The UK’s external environment is explored using PESTEL and Porter’s Five Forces analytical tools. It is imperative to recognize that Apple has no control over external environmental factors.
PESTLE Analysis of Apple in the UK
The political environment reflects a country’s political stability and tax regimes. Following the reforms of the 1980s, the UK government has encouraged investment. However, the recent decision to leave the European Union through a popular referendum led to a new government under Theresa May (Heritage Foundation 2017). Her policy to take the UK to the next political level outside the EU is currently unclear and remains to be seen. Nevertheless, political consequences based on the Brexit negotiation will determine the political future of the UK. These are generally peace negotiations and democratic processes. Overall, the country offers a stable political environment for business and foreign investment. However, the UK government’s investigatory powers bill is an instance of an action that can affect Apple’s sales in the UK because of data security (Hern 2015). The UK’s top corporate tax rate is 20%, alongside other taxes, such as environmental and value-added taxes (Heritage Foundation 2017). High taxes are most likely to result in higher prices for Apple products.
The economic environment reflects current conditions, inflation, fiscal policies, and consumer spending power. These factors influence revenues and profits through consumer spending power. More recent data indicate that British consumers spending power declined in 2017. This observation contradicts significant growth driven by consumer spending following Brexit. Economists argue that rising inflation will affect sterling and consumer spending. The growth of 0.4% noted in January 2017 relative to the 2.5% observed in December of the previous year is the weakest annual growth over three years (Milliken 2017). Apple must, therefore, observe the inflation rate, the sterling performance, and consumer spending post-Brexit.
Social factors demonstrate high consumerism in the UK. Moreover, changes in demographic trends, lifestyles, and perceptions are most likely to favor Apple in the UK.
The technological element shows that the UK is equally innovative, and the current and future trends and investment in R&D are technologically driven. Thus, Apple must advance its practices.
The legal aspect demonstrates that the UK has highly secure intellectual property rights, private property rights and contracts, and an effective, independent court system (Heritage Foundation 2017). The rule of law is observed, and the legal framework is among the best globally in dispute resolution. Rare cases of corruption and bribery are severely handled.
In the UK, environmental factors are critical. Thus, recycling, lesser pollution, and environmental-friendly packaging are factors that Apple must consider.
Porter’s Five Forces Analysis for Apple in the UK
The five forces are critical for understanding current external forces and the UK’s competitive landscape.
Supplier power shows all the materials and services that Apple requires to develop and sell its products and services. Supplier power is not an issue for Apple in the UK because the company deals with Intel and Foxx. Moreover, Apple is known to sign contracts with its suppliers to ensure that product components are delivered when required such that new product launch dates are always observed.
Buyer power is a threat to Apple. The company does not cut its premium prices. Buyers always tend to opt for relatively affordable options, both in the mainstream and grey markets in the UK. Competition is now fierce, and buyer power is rising.
The threat of new entrants is now expected. Many companies, especially Chinese firms, have proliferated the market with cheap options, offering serious competition to Apple and its close rivals. Some unknown companies now manufacture tablets and sell them globally through e-commerce platforms, for instance. This observation demonstrates how the threat of new entrants is extremely high due to low barriers to entry.
The threat of substitutes is noted in multiple other products and services from different manufacturers, which offer relatively lower prices and enhanced capabilities. Apple remains the leading company that offers superior products at premium prices. Its closest rivals, such as Samsung, HTC, and others, have developed alternative substitutes, including smartphones and laptops, to cater to the lower segment of the market (Pressman 2016).
Competitive rivalry shows competition among existing players in the industry. High competition usually affects market shares, margins, and pricing strategies. On this note, the threat from the competition is relatively high. However, Apple’s superior products, solid customer base, and fanatic following worldwide have protected the company from the competition.
Reference List
Cullen, JB & Parboteeah, P 2014, Multinational management: A strategic approach, 6th edn, Cengage Learning, Mason, OH.
Heritage Foundation 2017, 2017 index of economic freedom: The United Kingdom.
Hern, A 2015, ‘Apple calls on UK government to scale back snooper’s charter’, The Guardian.
Jinjin, T 2013, ‘A strategic analysis of Apple Computer Inc. & recommendations for the future’, Management Science and Engineering, vol. 7, no. 2, pp. 94-103. Web.
Khan, UA, Alam, MN & Alam, S 2015, ‘A critical analysis of internal and external environment of Apple, Inc.’, International Journal of Economics, Commerce and Management, vol. 3, no. 6, pp. 955-967.
Lasserre, P 2012, Global strategic management, 3rd edn, Palgrave Macmillan, Basingstoke, United Kingdom.
Lynch, R 2015, Strategic management, 7th edn, Pearson, Edinburgh, United Kingdom.
Milliken, D 2017, ‘UK consumer spending growth slumps to five-month low after Christmas boom’, The Independent.
Pressman, A 2016, Threats to Samsung and Apple phone dominance rising worldwide’, Fortune.
Titcomb, J 2015, ‘Apple reports biggest annual profit in history with net income of $53.4bn’, The Telegraph.