Strategic Analysis of Apple
Strategic Analysis of Apple This report provides a comprehensive analysis of Apple Inc.
(Apple Incorporation California USA), which is an American multinational corporation established in 1976 (1). A PEST Analysis will be conducted on Apple, pointing to the various factors affecting Apple’s growth. To move forward, organizations need to assess their current position in the total marketing environment relative to their competitors.Therefore, the report will undertake a SWOT Analysis in close relation to the above mentioned contemporary constraints, in which the strengths, weaknesses, opportunities and threats will be pointed out. Towards the end, one major contemporary constraint will be highlighted and shown to have the greatest effect on this business.
The Company focuses on producing personal computers, portable media players, mobile phones, computer hardware and software (2).Apple employs worldwide 21,600 full time employees and 2,100 temporary employees, in addition the Companies net sales for the fiscal year ending September 29, 2007 amount to $24,006 million (2). Apple is situated in the private sector and offers a range of personal computing products with its three main pillars: Apple Macintosh computers, iPod portable music players, and the newly manufactured iPhone. The Company sells its products in 197 of its own retail stores, through its direct sales force, and its personal online stores (2).Und naturlich uber andere retail stores und online shops In short: The Company is committed to bringing the best personal computing, portable digital music and mobile communication experience to students, educators, creative professionals, businesses, government agencies, and consumers through its innovative hardware, software, peripherals, services, and Internet offerings (2).
Apple is currently facing various legal proceedings and claims that have arisen in the ordinary course of business (2).The European Commission launched an investigation into Apple, last April (2007) because Apple had subsequently charged British iTunes customers 79 pence for a song, whereas European customers only paid 99 cents (74 pence). The case carried on into the year 2008 and Apple finally indicated its intention to make price changes within six months, which will match the already standardized pricing on iTunes across Europe. As a result the European Commission dropped its investigation against Apple which if found guilty, would have been fined up to 10% of its annual worldwide turnover by the European Commission (4).
Another interesting political and legal case happened in Norway in 2006, in which the Norwegian Consumer Council launched a complaint against Apple to drop its DRM scheme on iTunes. Up to now, songs which are bought on iTunes can only be transferred to an Apple iPod product and no other mp3 player. Also, the songs can only be copied to an Audio CD and not to an mp3 CD. On April 2nd, 2007, Apple set up a firm jointly with EMI.However, Apple still needs to meet the demands on the September 2007 deadline, which calls upon supplementary measures to certify that iTunes is legally operating and complying with Norwegian law, otherwise a lawsuit or a termination of production in Norway will follow (6). An accurate definition of Digital rights management can be found on the BBC News webpage which states that, “Digital rights management (DRM) is a class of technologies that allow rights owners (copyright-holding companies) to set and enforce terms by which people use their intellectual property” (5).
The key trend in the economic sector is the development of newly emerging markets such as China, Japan, and Asia which play a part in a period of increasing global growth (7). The inevitable issue of market saturation in the European cellular phone market will lead to stagnation within the next 3 years, according to Arthur D. Little, a consultancy, and the French brokerage house Exane BNP Paribas (8). Since Europe is currently experiencing market saturation especially in telecommunication devices, electronic manufacturers such as Apple are looking towards new markets and trying to settle down though not without complications.China greatly welcomes new levels of investment by multinational companies and was therefore willing to strike a deal with Apple and its newly launched iPhone (9).
During January 2008, discussions between Apple and China Mobile were put on hold after China Mobile refused to hand over 30 percent of revenues generated by locally sold iPhones. “Apple had given the impression it wanted to control the value chain”, said Gao Nianshu, general manager of China Mobile’s data department (10). Competition for skilled and experienced personnel in the technology industry is subjugated towards high demand.The Company can count itself lucky at maintaining such high staff requirements in addition to its CEO, Steve Jobs.
Apple has not only attracted but has also retained its skilled personnel in order to continue the Companies success story (2). Electronic Gadgets dominated the market in 2007 and are continue to rise in sales numbers. Following statistics from Gadget Speak and Games Dog, it can be seen that the new iPod nano and the iPhone were under the Top 10 of electronic gadgets for 2007 (11, 12).This makes it plain to understand, that as time goes by society demands more and more electronic devices. The iPhone, especially has started to become more than just a smart phone device but an all round friend for leisure time in everybody’s life. Unfortunately society still has to endure sometimes long waiting periods in between their activities and Apple has successfully managed to fill that gap with highly designed and application based products, e.
g. iPhone or iPod.When focusing on the final technological influence of the PEST analysis, it is important to keep in mind that companies’ fortunes are highly affected by this force and they are therefore likely to meet their downfall if they do not operate within certain criteria in their associated market. Within these criteria, Apple is politically pushed to develop or even licence new technological devices which provide certain DRM solutions. However, it cannot be forecast, whether, Apple will develop or license adequate solutions at “a reasonable cost and in a timely manner” (2).One of the major concerns with portable notebooks or any electronic device, is the limited energy density making it inevitable for users to regularly connect their devices to power outlets which wastes time and causes inconvenience.
This however might be an unnecessary provision in near future due to breaking research in December 2007 at Stanford University. Science Daily reports that, “Stanford researchers have found a way to use silicon nanowires to reinvent the rechargeable lithium-ion batteries that power laptops, iPods’, video cameras, cell phones, and countless other devices” (13).The silicon (capable of holding large amounts of lithium), nanowires are deposited on stainless steel and act as the anode, which in turn helps to facilitate the permanent issue of cracking by the small size of the wires (13). Unfortunately the public will have to wait another 5 years before this technological breakthrough will be on the market, says team leader, Yi Cui (14).
Another Key trend in the current technological market is “Green-It”. According to Seagate, the world’s number one hard drive producer and Apple hard drive supplier, they have launched a new era of digital storage in October 2007 (15).Seagate will start to deliver hybrid-notebook hard drives in close combination with flash storage which will elongate energy density up to 50 percent, allow faster boot-ups, and enhance software reliability in the expanding laptop market. However, Seagate has not given an exact launch for its innovation (15). This report will now continue with the SWOT Analysis on Apple, starting off by focusing on the strengths of the company.
Here are some figures, which were released by Steve Jobs on January 15th, 2007.Apple has produced the thinnest laptop ever released, weighing only three pounds and which is only 0. 76 inches thick. iTunes stores have sold to date around four billion songs worldwide from which 20 million were sold on Christmas Day 2007, a one-day record for Apple (16). Apple is a well-known Company whose products are sold on a geographical basis, specifically focused on the United States, Europe, and Japan (2).
It is also the manufacturer of the world’s Number one mp3 player and entertainment device, and the carrier of the most prosperous music file download shop: iTunes store (17).Apple has secured itself financially for future research and development with continuous inventions and upgrades to its current products, addressing diverse markets and different customers. According to Apple its products are generally known for being easy to use and promise lasting entertainment and technological possibilities (2). Apple faces Apple is the only company manufacturing hardware using Mac OS which is a series of graphical user interface-based operating systems (2).
In addition, the personal computer market is well established with computers using Microsoft Windows OS .Because the Mac OS holds such a unique position within operating systems it can be classified as an advantage of Apple but on the downside it only acquires small market share. The company, therefore, needs to ensure continuous research and development to its Mac platform, as otherwise it will lose its market shares (2). Apple has experienced some difficulties regarding the focus on the high quality market. Apple is widely known for its distribution of highly complex and quality rich hardware and software.
However, within such a huge company, it is not uncommon that products sometimes experience quality issues or defects in the hardware and software its sells. Nevertheless, these kinds of issues must be dealt with immediately or the company risks losing revenue or experiencing major damage to its reputation, which will encourage competitors to outstrip Apple in performance and service (2). When facing current and prospective competitors, Apple must make sure to continue offering its products and services in a unique style, as the company faces substantial competition within each market.Aggressive competitors try to imitate Apple’s approach in developing hardware and software by offering their products and services at little or no profit, trying hard to push Apple out of the market (2).
Another issue, which could weaken Apple or more likely the iPhone, presents itself with Apple’s reliance on a singular cellular network carrier within the States (AT), Great Britain (O2), Germany (T-Mobile), and France (Orange). If these network carriers do not successfully compete with other local carriers, it will lead to negative revenues of the iPhone and might even harm in the future the company’s financial condition (2).Apple currently focuses on market opportunities within the computer sector of the market. Apple managed to produce the thinnest laptop ever released, the Macbook Air. This product entered a new market with an already existing trend: the popularity of the ultra light laptop, and it is expected to become “a fashionable niche product”, between the basic Macbook and the Macbook Pro (18).
At the moment the thinner and lighter versions of the laptop account for about 50 percent of laptop sales, according to Creative Strategies Tim Bajarin, predicting a 20 percent increase in the laptop market’s near future (18). After decades as the computer of choice for homes and businesses, the desktop PC is being pushed to the scrap heap by its smaller, nimbler sibling: the laptop” (19). According to a Los Angeles Times Article, U. S.
laptop sales rose 21 percent in 2007 to 31. 6 million while desktop sales slumped nearly 4 percent to 35 million (19). The modern notebook is easy to handle and can be “spirited away in a briefcase”, which requires no major sacrifices in inconvenience, storage or performance (20). As society becomes more mobile it therefore cannot associate itself with an immobile desktop, which can only be accessed from one place.
It’s not really a computer anymore,” said Dag Spicer, senior curator of the Computer History Museum in Mountain View, California. “It’s a companion, it’s your memory, it’s your teacher and your entertainer” (20). Apple faces aggressive competition within all its acquired sectors of the market, especially, the markets for mobile communications, personal computers, and digital sound devices. These markets are presently characterized by increasing technological advances in both hardware and software (2). The mobile communications industry is a tough market in which new investors are faced with experienced competitors.
Apple faces threats from competition within this market, as companies may try to copy some of Apple’s iPhone function into their own smart phones (2). Worldwide sales of mobile phones increased 15 percent from 2006 to 2007 reaching 289 million units in the third quarter of 2007, according to Gartner, Inc. The top five market leaders are Nokia (market share of 38. 1 percent), Samsung (market share of 21 percent), Motorola (market share of 7. 6 percent), Sony Ericsson, and LG (market share of 7.
1 percent). Together the market leaders’ accounts for 81. 6 percent of the global market share (21).Although Apple has sold around four million iPhones since its release in June 2007, the iPhone still only accounts for 1.
3 percent in the smart phone market share and 0. 13 percent of the global market share (22). A major issue with Apple’s almost non-significant market share, within the phone market, relates to the fact that goods with future perspectives must account for a reasonable share in the market. If, however, they do not do so, they will lose relevancy within the market. The iPhone is clearly a niche product in the smart phone market and has therefore no chance of competing with the market leaders.Another serious threat to Apple is now fuelled by Apple’s main music competitors: Universal Music Group, EMI, and Sony BMG.
Universal Music Group now joined EMI in a 6 month trial and put thousands of albums and tracks up for sale without the copyright technology, DRM. However, Universal Music Group will not allow iTunes to access the DRM files, feeling that Apple is already dominating the digital music market and therefore hopes to increase competition (23). This report has now conducted a PEST Analysis of Apple, outlining the four major influences this company could be affected by.Apple needs to watch carefully its political issues and make sure that these will not interfere with the marketing strategies of the company. Regarding economical influences, the company must assure a safe position in emerging markets and form close relationships with local companies.
As for the social influences, Apple is sure to succeed with its electronic gadgets. Finally turning to the technological influence, key trends such as the new “hybrid notebook hardrive” or reinvented lithium-ion batteries must be kept under close surveillance and adaptations to these trends must be done for future growth.Summarizing the main factors of the previous done SWOT Analysis, Apple stands out with its continuous upgrades to its already existing products and even new inventions, such as the iPhone, whereby it has achieved economic growth on a wide scale. However, Apple needs to be aware of constant competition in all its businesses: the digital music market (Universal Music Group and EMI), the personal computer market (Dell and HP), and the mobile communications market (Nokia and Motorola).At present time, Apple is capable of holding its already existing market shares and the future will show whether the Company is able to acquire greater market shares. After the PEST and SWOT Analysis, the most important single contemporary constraint is probably the aggressive competition, which the company is confronted by in all its businesses.
Apple has existed for over three decades, evolving from a business idea produced in a garage to an American multinational corporation with net sales of over $24 million (2).The company is represented in the markets for consumer electronics, personal computers, digital music devices, and mobile communication devices. These markets, as discussed above, are characterized by rapid technological advances in both hardware and software. Over the past couple of years, concentrated price competition within these markets has caused insecurity among competitors. Apple, which has always maintained a high price policy for its products, now sees itself under serious threat of aggressive competitors who aim to removeApple from the market by offering their goods and services at substantially lower prices combined with good quality.
As with all goods and services, there will always be competition, and Apple will need to keep establishing new strategies continually to surpass their competitors. Apple’s products became the known technology sensation “de nos jours”, (contemporary), and the Company does not seem to take a break both in producing and innovating new goods. Bibliography Apple Picture Apple Inc. 2007.
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