ECONOMICS AND BUSINESS ENVIRONMENT

Introduction

Apple Inc. is an American multinational company that is located in California and that which designs, develops and also sells computer software, online services, consumer electronics and personal computers. It’s best known hardware is mainly, iPhone smartphone, iPad tablet, iPod media player and also the Apple Watch. Apple also provides hardware, software, peripherals and network solutions. Apple sells its products throughout the world on online stores, through third party wholesalers, in its retail stores and with its direct sales force. Its online services include the iTune Store, the  iCloud and the App store. Apple enjoys a high level of brand loyalty and is the world’s second largest information technology company.

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Project interest

The report paper presents an analysis of internal and external environment of Apple Inc, and examines its strategies for international marketing and this is in terms of usefulness and effectiveness for its international operation.

SWOT AND PESTEL ANALYSIS FOR THE INTERNATIONAL BUSINESS ENVIRONMENT OF APPLE INC.

  1. SWOT ANALYSIS

SWOT is a useful technique for the analysis of both macro and micro environments as it draws together the key strengths and weaknesses as presented as the internal (Micro) analysis and opportunities and threats as presented as the external (Macro) analysis.

  1. Internal Environment: Strengths

The total revenue of Apple Inc has greatly increased to the highest record figure of $ 42,906 million in 2014 from the total revenue of $20.578 million in 2008. The growth typically shows that the annual growth rate is 37.16% and this is an outranking performance as compared to most firms that are playing in the same market.

In addition to this, it is evident that apple’s focus on Research and Development (R&D) and thrive on innovation have been critical factors behind its success.

 Moreover, Apple is also highly awarded for its unique brand loyalty and brand success. With a number of unique names such as the iMac, the  iLife, the  iTunes, the iPhone and the  iPads which are not attributable to any other brand other than Apple itself. The loyalty and brand image of Apple remains major strengths in the international market (Barney 2010, P.49).

  • Internal Analysis: Weakness

Manufacturing and design defects are the major risks that many high tech electronic companies usually face from its end users and also its corporate customers. As Apple deals with advanced technology and innovative products, any defects in its products can affect its international business adversely (Crews 2012, P.30). For example, Apple usually faced risks of defects with Ultra compact USB in 2008 and this caused it to exchange every component of its new redesigned adapters. Another great risk is patent infringement which is common for multinationals and high tech organizations. In 2007, Apple had to spend a lot of money in a bid to defend its more than 47 patent infringement cases.

More recently, Apple has had to sue Samsung Electronics over the same issue. This is a big problem for Apple since Samsung is the company’s largest competitor.

  • External Environment: Opportunities

One major opportunity that is faced by the international business of Apple is the growing market share of Apple’s Smartphone. This is expected to grow even further in the coming years. This is because Apple’s Smartphone has been valued as 15%of the total mobile market in 2010 alone. Thus the Smartphone market is expected to account for 35% of the total world wide market in the coming years.

Apart from this, the touch screen device has also been a trend among customers all over the world and this is a great opportunity for Apple in the global market. In addition to this, the mobile PC has also attracted a great number of customers all over the world (Crews 2012, P.30). The market for the PC is also expected to increase in the coming years. Both the PC and the Smart phone provide great opportunities to Apple and thus it can grab the slices of the hot markets by enhancing technology, diversity, innovation, designs and quality of its future products.

  • External Environment: Threats

The competition in the worldwide market for PCs, digital music players, cell phones and software is rigorous. Apple is playing in an environment where there multinationals like Samsung, Acer, Dell, Sony Ericsson, Fujitsu and HP exist. These are great competitors who are going head to head with Apple and this in the long run is a great challenge. The greatest Apple competitor has been Samsung on the design, the product, the innovation and its sales which reflect victory. In addition to this, lawsuits between Apple and Samsung are soiling the names of the company. Notably, however, the two companies continue to work together on the development of certain components such as Apple’s A8 and A9 processors.

Factors in the sector’s current operating environment

  • PESTEL ANALYSIS

The major factors in the current operating environment are such as the P.E.S.T.E.L factors. Political, Economic, Social, Technological, Environmental and Legal factors are the major environmental factors that play a big role in the decision making process in Apple Inc.

  1. Political factor analysis

One important aspect that should be considered by Apple is a product and market launching regulations. Also of importance are important aspects such as taxes, government regulations, political stability of the countries whose markets it has entered, there competitive regulations and their employment policies (Johnson, & Maltz 2010, p.20).

The political factors play a major role in influencing the decision of Apple Inc., this is basically because of the many companies that have been established all over the world From 2007 to 2009, more than half of the sales of the products from Apple Inc. came from countries other than America. In a bid to reduce the operating cost, Apple spread their manufacturing products to other companies outside America.

Some of the states where Apple placed their company included countries like China, Czech Republic, Korea, and Ireland. Wars, terrorism, Bad international relations and public health issues between the U.S and these countries have given a negative impact and this in the long run has damaged the reputation of Apple Inc as well as their business process (Johnson, & Maltz 2010, p.20).

In cases where there is political instability between U.S and other countries where Apple operates is wavering, a business delay could occur and this results in a negative image to retailers and customers. It is thus evident that the political relationship between the U.S and these other countries where the company is placed is important as it greatly affects the decision making process of Apple Inc.

  • Economic factors

Economic factors include interest rates, exchange rates, economic growth and inflation rate. Interest rates affect the cost of capital of the organization. In addition exchange rates affect the costs of exporting goods, the price and supply of imported goods in an economy. Economic depression had a serious impact on the sales and improvements of Apple in the organization (Burns, & Stalker 2013, P.40). During such a time, there was a high inflation rate and a low income and employment rates. This brought a severe loss in the sales of its products. However, despite the loss of value by the U.S.D, Apple Corporation does not risk economic breakdown because they have purchased foreign currency. Thus, the decrease in the U.S.D has increased the revenue of Apple in the market.

  • Social-Cultural factors

Apple has had a significant leverage in the business sphere and also in the popular culture. For instance, the arresting design of the iPod portable music player has been greatly achieved through target advertising and this has made the hobby of listening to music trendy. Moreover, the tablet computer market and the mobile phone market have greatly contributed to the advances of Apple. The devices are essential as they enable people to read magazines or store crucial documents without using a bulky laptop.

Apple’s image typically displays the lifestyle of a modern person. This is a sociological effect which has greatly benefited the company.

  • Technological factor analysis

As the technological market becomes wider, it is evident that the competitors of Apple Inc. will also rise. In addition to this, competition gets harder as the technology changes and thus innovation develops faster (Grilliches, 2009, P.92). This implies that technology has a short lifetime and this is the reason Apple needs to upgrade their product more often so as to outdo their competitors.

Thus, Apple will in the long run invest a lot of their capital to Product Development and Research. One great example is the way in which Apple installs its own brand operating system and this increases its production cost while on the other hand, their competitor such as Dell uses the operating system of Microsoft in all of its products (Burns, & Stalker 2013, P.40). This is the reason as to why external technological factor will help Apple to compete with their competitors by planning new goals.

  • Environmental factors

Every country has its law on issues that concern the environment, thus Apple has to follow the restrictions and regulations. There are some governments which have legislations on product recycling so the company ought to follow the regulations by the production of recyclable products that don’t harm the environment.

  • Legal factors

This looks into the fact that Apple must operate its business within special regulations such as health, safety, consumer laws, competition regulations and employment laws. In addition to this, patents on the products of the company as well as intellectual property are also important legal factors that must be taken into consideration.

STRATEGIES USED BY APPLE Inc.

Strategies are plans or patterns that integrate policies and goals of an organization. A well formulated strategy helps allocate the resources of the organization into a viable and unique posture on the basis of its relative shortcomings and internal competencies.

  1. Diversification

The company has always pursued its strategy of the creation of devices which are linked to each other. One of the strategic options used by Apple to address key factors from the environment is basically the marketing strategy which is greatly focused on covering the expectations of customers and entails the need of the company to have a wide diversification (Long, & Field, 2012, P. 16). Apple creates market computing products and manufacturers so as to enable people to use them in order to make their lives better. Thus, Apple strives to understand the needs of her customers, providing them with skills and tools so as to enhance the use of the products.

The highest principles that Apple uses to create marketing policies are innovation, creativity and the responsiveness of its customers. This goes hand in hand with Apple’s mission statement: “Apple is committed to bringing the best personal computing experience to educators, creative professionals, consumers and students around the world through its internet offerings, and innovative hardware and software (Long, & Field, 2012, P. 16).

The main objective of Steve Jobs in the market was to transform the company’s personal computer niche into one which is less dependent of PC sales and this was on the basis of the 80% of revenues. The change in the corporate levels also brings about a change in the marketing strategy and leads to the adaption of a new strategy.

The gross margin of Apple is also considered to be one of the highest in the industry because of their unique, innovative and revolutionary products which are launched yearly.

This is essential for the company to penetrate into more markets around the world. The global market for communication devices, personal computers, related peripherals, music devices, digital video and services are competitive standards when subjected to the changes in technology (Grilliches, 2009, P.92

Apple Inc. competes in a highly competitive global market which is characterized by high price cuts and this basically leads to a decline in the gross margins. The continuous improvement of the prices and products together with the continual introduction of new products as the rapid adoption of product advancements and the rapid adoption of technology creates high rivalry. However, Apple still stands out in terms of its unique design and style while other rival companies focus greatly on competing through pricing strategies.

  • Research and Development

The innovations from Apple Inc mainly came from a strong Research and Development branch and thus most of gross margin of Apple is reinvested R&D and sales strategies (Burns, & Stalker 2013, P.40). This is essential for the company to penetrate into more markets around the world. This involves thorough research on effective strategies that will help the management to move further.

Positioning strategy defines the tools, strategies and tactics that are used by a business in order to gain market share and thereafter differentiate itself from competitors. Positioning is a catch all term that includes the brand strategies and the pricing strategies.

It catapults three forms of strategies:

  1. Brand positioning strategy
  2. Product positioning strategy
  3. Pricing strategy

Brand positioning strategy

The brand positioning strategy is typically about finding the right place for a brand in the consumer’s mind as well as in the market place.

The success of Apple sprouted as a result of the formulation of the brand positioning strategy. This involved a couple of steps. First, there was the identification of the primary values of the brand. Second was the identification of the primary competitors and the values that they espoused. Lastly was the identification of the factors that makes Apple different from other competitors and thereafter being able to have a larger portfolio of products, better equipment and better customer service (Kirmani, & Rao 2009, P. 66). These key strategic steps have enabled Apple to be one of the most respectable brands in the world.

The branding strategy by Apple clearly seeks out its uniqueness and greatly focuses on the emotions. Apple has a way of selling out its usability, innovation and simplicity against the style of its greatest competitor in the software category, Microsoft. This is a crucial key as it helps in understanding the forms of communication and their marketing. For example, Apple has an interesting format because all of its application icons and their ease of functionality are memorable and identifiable to all of its customers (Long, & Field, 2012, P. 16)..

Product positioning strategy

This mainly refers to the processes that are used to differentiate and to market products.  Thus the products that are from Apple and the brand positioning strategy of Apple go hand in hand. How the products from Apple are perceived as well as the brand perception incorporate the result of the brand. Products from Apple are well received and this is essentially what makes the brand attractive. An example of the interplay between products and brands can be seen in Apple products. Before the launch of the iPod, Apple was a respected but a minor player in the market. The total sales in 2001 before the launch of the iPod was 3.08M units. However, in 2004as the iPod was beginning to gain momentum, this increased to 3.30 M units. By 2007, the phenomenon of the iPod had reached its peak at over 7.05M units.

 This is a prime example of the interplay that greatly exists between products and brands. The remarkable success of the iPod introduced many people Apple’s desktop products (Johnson, & Maltz 2010, P.20). In addition to this, positive feedback that was obtained from the customers about the products further improved the perception of the brand and this later on helped improve iPod and later the sales of the iPhone and the iPad. The positioning of the product has played a key role in building a successful Apple brand and this is what makes the sale of Apple’s products successful till to date.

Pricing strategy

This is the final piece of the positioning puzzle and it mainly entails the heritage of the brand, the quality of the product, the first mover advantage and the target market.

With the brand heritage, it is evident that Apple can command its premium prices. A strong brand like Apple thus requires an increase in its prices and this is due to the   way people perceive more expensive brands to be better and of higher quality.

Product quality explains the fact that people are able to command premium prices with little brand pedigree (Mussa, & Rosen 2008, P.301). Apple has a fast mover advantage and this is what enables the company to be able to dictate it’s pricing in the market. Apple was able to charge upwards of $500 for an ideal iPhone and this was because it was the only touch screen Smartphone during its launch in 2007.

Key Principles of Change Management needed by an Organization

To be competitive and effective in the world today, there is need for the organizations to learn to live and manage the constant change. For the change management to be successful, there should be a change in the ‘projects’ such as new goals, ideas and objectives and also a change in the ‘people’ such as the management, the leaders and  the employees. This is demonstrated in the model below:

http://www.tiba.de/sendf.php?i=002130-0.png

Figure 1: Model of Integrated Change Management

  1. Effective Leadership

There are key principles that organizations needs to adopt in order to implement changes that result from R&D. One of the principles is having an effective leadership. Effective leadership is an essential component of the successful modern organization. Central to the performance of an organization, leaders seek, through their behaviors, to influence the direction of the organization and also actions of employees. Successful leaders, it is acknowledged, help people not only understand where their organization is going but more importantly why it is heading in that particular direction. Thus, leadership is a process that begins with the leader giving context of information to the followers and they thereafter provide outcomes to the change that was given to them.

This is basically because change is inherently unsettling for people at different levels of an organization. Thus, when it is on the horizon, all eyes will turn to the leadership team and the CEO for direction, support and strength. It is essential for the leaders to be in position to embrace the new approaches so as to motivate and challenge the rest of the institution (Sondur, & Luo, 2012, P.270) Executive teams who are in position to work together are best positioned for success. This is because they are more committed and aligned to the direction of change and thus they are in position to understand the behaviors and changes. Successful downstream results can be easily delivered once the leadership team goes through the entire process of committing and aligning to the change initiative. An effective leader is also able to influence change by enhancing research and development in the organization.

Image result for models of effective leadership in change management

Figure 2: The Leadership process

  • Effective Management

Another key principle that can be implemented in order to implement changes and bring about research and development is having an effective management. Effective management is an essential component for the success of any organization. Central to the effective performance of an organization, managers seek to organize, plan, control and supervise people so as to meet the intended outcomes of the organization. Successful modern mangers, it is acknowledged, not only carry out these functions but also assist the organization to be in position to change and develop the entire organization (Mussa, & Rosen 2008, P.301).  

Effective managers emphasize market and financial considerations such as high cost of research and also competitive pressures for the existing environment for research. This is basically because in an era of global competitiveness, industrial R&D holds great promise for improving the entire organization. In the process of industrial R&D, scientific properties and principles of the natural world are transformed into processes and commercial products and this uses large amounts of resources (Doyle 2012, P.90).

Effective managers are able to implement change, to innovate and also to develop future goals for their organizations. One key issue with which the corporate management is able to grapple is by effectively managing the scientists who are performing the research. These scientists occupy a unique position in the organization. They are thus viewed differently from other employees because they are perceived to be independent, self stimulating and capable of giving direction to the efforts they make (Sondur, & Luo, 2012, P.270).

  • Stakeholders, Ethics and Corporate governance

Stakeholders are the groups of people who will be influential in the success of the change management in an organization. Thus, communicating change to the stakeholders is one way to bring about the change. R&D project management involves the use of multiple stakeholders who have conflicting stakes (Sondur, & Luo, 2012, P.270. Ethics also plays a critical role in the entire process of innovation and change in terms of the need for honest and open communication among the employers and employees and also between the public and the company. Communication needs to be transparent during the entire process. Ethical behavior towards the employees and the community helps the organization to grow stronger.

References

Barney, J.B. 2010, ‘Look inside for competitive advantage’, London. P. 49

Burns, T.E. and Stalker M.G 2013, ‘The management of innovation through Research and            Development’. University of Illinois at Urbana Champaign’s Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship. P. 40

Crews, J.A. 2012, ‘Influence of Management in Apple Inc.’Newyork. P.30

Doyle. 2012,’Organisation management strategies’. Handbook of Research on management          change, Peter Lang. P. 90

Grilliches, Z. 2009,’Issues in assessing the contribution of research and development to     productivity growth’. The Bell Journal of Economics. P.92

Johnson. & Maltz, D. 2010, ‘Mobile computing’. Newyork: Thompson learning. P.20

Kirmani, A., &Rao, A.R. 2009, ‘No pain, no gain’: A critical review of the literature on signaling unobservable product quality. Journal of marketing, 64(2), 66-69.

Long, N.M &Fields P.A 2012, ‘the interlocking of theory and practice in social research and            development’. London; Routledge P. 16

Mussa, M., &Rosen, S. (2008). ‘Monopoly and Product Quality’. Journal of Economic      theory, 18(2) P. 301.

Sondur, R.,& Luo, P. 2012, ‘Platform independent distributed management system for     manipulating managed objects in a network’ U.S Patent and Trademark Office.P.270

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