Apple Inc., is known to be one of the world’s most valuable companies. It is a multi-national company with a worldwide presence; approximately 72,800 employees and total net sales of $156 billion in the year 2012 (Apple annual report, 2012). Steve Jobs and Steve Wozniak, both college dropouts, founded this corporation in 1976 - “Steve Jobs, helped to transform the way in which the computer is used today through his creation of the first computer processing unit and his creative product innovations.” (Gupta and Prinzinger 2013).
This paper will analyse the external environment, using the PESTEL model. The external environment incorporates all the factors that a company has no influence over and is only able to adapt to these changes; studying and adapting to these factors are essential for a business to survive.
2. The PESTEL analysis includes 6 sections: a. Political: Being a multi-national, Apple is strongly affected by political factors. Political factors which include but are not limited to government laws and regulations as well as political stability and security can adversely affect the company performance and results. Whilst contemplating expanding into a new country, Apple Inc would have to take into consideration compliance of safety, employment and financial laws in order to legally and successfully open a new branch. Apple Inc must ensure that government laws are business friendly and favourable towards large corporations.
In addition to government laws and regulations, political stability in the country Apple Inc is contemplating is a key consideration that has to be taken prior to expansion into that market. Apple is an international corporation with a great reliance on the international market; 61.4% of sales were from outside the US and only 38.6% were from inside the US in 2012 (Datamonitor 2012). Therefore this shows the company’s vulnerability to negative “global relations, wars and terrorism” (Hasan 2012).
As Apple’s electronics are made in China (Lamy 2011), any political problems between the US and China would negatively impact Apple.
b. Economic: Sharp economic fluctuations affect all businesses. Economic factors are those that have to do with the general economy of the country or world and its effect on a specific business. For instance the markets’ crisis and eventual crash of 2008 greatly affected Apple results and performance. The market crash directly caused large corporations who saw their income and turnover diving; to turn to lay offs and consequently high unemployment rates had a spiralling direct effect on consumer spending.
“Apple slumped almost 18% after RBC and Morgan Stanley analysts downgraded the stock to "neutral" from "buy" saying the consumer spending slowdown will hurt profits” (Twin 2008). Since Apple sells luxury “cool” products, its sales was adversely affected significantly. Apple had no say or influence in this matter and this factor shows truly how external elements are uncontrollable.
c. Social/Cultural: Social factors are important when it comes to the sales of a product - basically how the public views a product. Apple is at a large advantage in this area due to its perceived uniqueness as having “cool” state of the art, smart, simple to use products. This, coupled with an intense marketing campaign to deliver that particular message and along with its impressive reach into global markets, has led Apple to ultimately succeed in establishing its brand linked to the genius and meticulous Steve Jobs approach.
Today Apple is seen as a luxurious, high quality brand; it is well known, seen as a strong social symbol and renowned for its unique design no matter what product is being purchased. Due to its strong brand name, Apple receives a lot of sales and becomes the go to Technology Company for luxury seeking consumers.
d. Technological: This is the definition of Apple’s success. Due to the world being in a technological era, innovation is key. Apple spent its largest sum of capital on research and development in 2013 when the money spent on that field reached $4.5 billion (Hughes 2013). The company develops and creates new products on a yearly basis for all its categories to keep itself in the spotlight, ahead of the game, and constantly moving forward. However with the death of Apple’s founder and innovator Steve Jobs, this has proven to be a great handicap to the sustainability of the company and consumers has become sceptical and concerned about maintaining the uniqueness of Apple devices.
Recently there has been the perception of a sacrifice in hardware capabilities for better design and better seen quality thus ruining Apple’s reputation in the eye of tech savvy consumers, who claim other competitors have better technology for a cheaper price (Yun Qing 2012) such as Samsung (Datamonitor 2011). This figure shows the international sales of Samsung compared to apple, in the last few quarters Samsung is ahead. (FOSS Patents 2012)
e. Environmental/Ethical: The environment and ethical factors have been in the spotlight at a much larger degree lately. These include factors that keep a company green and also treat its employees ethically. Apple has recently improved its environmental credentials by rolling out new recycling campaigns, the company is now minimizing the environmental impact of its growth by using “less material”, shipping “with smaller packaging”, being “free of many toxic substances”, and being “as energy efficient and recyclable as possible”(Apple website, 2013).
“Though our revenue has grown, our greenhouse gas emissions per dollar of revenue have decreased by 21.5 percent since 2008.” (Apple website, 2013). However, Apple’s assembly method has shamed them as well. Apple is known, like other major companies, to assemble their products in China with a company called Foxconn. “In the last several years Foxconn's operations have been under scrutiny for violation of Chinese domestic employment law” (Josephs, 2013) This has received major criticism due to the poor working conditions the company offers its employees, and the outsourcing of local jobs for cheap labour. It is seen as unethical but unchanged since it increases profit.
f. Legal: Legal factors are concerned with governmental laws on issues such as price fixing, as well as patents on innovative ideas. An example of this came in 2012 when Apple and Samsung had a court battle over Samsung infringing certain patents of Apple. However Apple won most of its legal battles with Samsung even though not all of them and had already received financial compensation. “The company won a $1 billion patent infringement judgment against Samsung.” (Duhigg and Lohr 2012) Apple did well with protecting its products, and innovative ideas in order to stay on top of competition.
3. Conclusions & Recommendations: In conclusion, Apple Inc has a very good stand on its Political factor, as it has not broken any law or regulation in the political field. On its Economic factors, it is recovering from the stock market crash. Apple’s dependence on the society plays a prominent role in its success. This multi-national company never ceases to come up with innovative technologies that intrigue the society and makes them want their products even more. With regard to its technological factor Apple is well protected by its brand equity and worldwide recognition.
Although Apple is starting to be seen as technologically lagging, its high quality and luxurious style make up for that even though the competition is on its heels and catching up fast; technology is a fast game and the winner is the constant innovator of faster, sleek, cooler, easy to use products and Apple with its ample resources of capital, technology savvy and innovating avant-garde personnel that consistently create relevant applications appealing to the different sectors of Apple consumers is still in a leading position. However, the rapid growth of Apple’s products and new technologies will eventually reach a plateau. A time will come when Apple will reach market saturation.
For instance, if everyone has an iPhone, the odds of them buying a new one will begin to decrease. Add to this, the rise of Samsung in China causes a great threat to Apple. Threats of substitute keep on elevating as technology improves, that is why apple must seek more marketing through word-of-mouth and possibly seek corporations in China which know the nature of its market.
A suggestion would be Apple doing more research on upgrading its hardware while upholding its high class.
Legally Apple maintains a conservative policy. It consistently updates its patents and protects its intellectual property. Finally, on the factor of Environment and Ethics, Apple would strongly benefit from a more ethical stand towards its employees such as finding a more ethical manufacturing company maintaining, strict guidelines of labour employment, or negotiating stricter contracts with Foxconn for better work ethics.
References Apple annual report 2012 Sec.gov. 2012. Form 10-K. [online] Available at: http://www.sec.gov/Archives/edgar/data/320193/000119312512444068/d411355d10k.htm Apple.com. 2013. Apple - Apple and the Environment. [online] Available at: http://www.apple.com/environment/ Datamonitor. 2012. Apple Inc.. [online] Available at: http://mtnuam.files.wordpress.com/2011/08/reporte-anual-de-apple.pdf Duhigg, C. and Lohr, S. 2013. Log In - The New York Times. [online] Available at: http://www.nytimes.com/2012/10/08/technology/patent-wars-among-tech-giants-can-stifle-competition.html?_r=0 Fosspatents.com. 2012. FOSS Patents: July 2012. [online]
Available at: http://www.fosspatents.com/2012_07_01_archive.html Gupta, A. and Prinzinger, J. 2013. Apple, Inc.: Where Is It Going From Here?. Journal of Business Case Studies (JBCS), 9 (3), pp. 215--220 Hasan, M. 2013. Apple Inc. - An Analysis. [online] Available at:
http://books.google.com.lb/books?hl=en&lr=&id=vh6D6n4Ha_QC&oi=fnd&pg=PT2&dq=apple+pestel&ots=YZ2d2OZYg4&sig=uq4mN_LkXNPTM0zESqUeYjUVatE&redir_esc=y#v=onepage&q=apple%20pestel&f=false Hughes, N. 2013. Apple's research & development costs ballooned 32% in 2013 to $4.5B. [online] Available at: http://appleinsider.com/articles/13/10/30/apples-research-development-costs-ballooned-32-in-2013-to-45b. Josephs, H. 2013.
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