Apple external environment analysis

Business background

Apple.Inc. was founded in 1976 by Steve Wozniak and Steve Jobs. It became successful in the personal company industry because of its incredible innovative products and business strategy. Small computer was the costumer- friendly product that has a clear future vision. Steve Jobs found this market and believe the demand for this market was big. Apple was the most successful initial public offering after Ford Motor Company in 1980. Apple also was the fast company that hit the Fortune 500 in the history.

However, Apple nearly goes into bankruptcy by the middle of 1990s due to the fierce external competition from the IBM and the Microsoft and the internal rapidly growth. In order to stay afloat, apple focused on innovated their personal industry line. This helps Apple became successful ever after.

Nowadays, the Apple Company involved in designs, manufactures, and markets personal computers, mobile communication and media devices and portable digital music players. It also sells the relative service, software, third- party digital content and applications and etc.

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The main product included IPhone, IPad, Mac, Ipod, AppleTV. The professional software applications and operating system IOS and OS X are also the part of product for the Apple. Apple sells the delivers digital content and application online through ITunes Store, App Store, iBooks Store, and Mac App Store to provide service for the item they sale such as Mac. Customer can buy the entire product through online store, the retail stores, direct sales force that located worldwide. Not only these, customer can buy the Apple product as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers.

(Apple Inc. Form 10-K, September 28, 2013)

Mission statement

According to the information show on the Apple website, there is no clear “official” Apple’s mission statement. The following paragraph can be seeing as the mission for the Apple Inc on the Apple Corporation website.

“Apple designs Macs, the best personal computers on the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devises with iPad.” (Apple Inc. Form 10-K, September 28, 2013)

This is Apple’s mission statement because it matches with the characteristics of a mission statement in some parts. During this paragraph, the product, services and the market for Apple has been clearly described. Customer can understand who are they and what they do through this short paragraph. However, in another way, this “mission statement” is more like a product list. Without list all the product, this mission statement nether mentioned customer nor the value or the purpose for the company. It is clear to see that Apple Corporation is the product-oriented company.

Vision statement

The vision for the Apple Corporation is also can be seen as its mission statement.

“Apple is committed to bringing the best personal computing experience to student, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.” (Apple Inc. Form 10-K, September 28, 2013)

Unlike the mission statement, the vision statement is clearly customer- oriented. The market, product, customer and the self-concept for the future Apple Corporation has been mentioned in this one sentences. The future path of the Apple is clearly described as to bringing the best personal computing experience to all the customers.

Strategy

Based on the vision of Apple Corporation. Company will continue bringing the best product for the customers by innovation. Using unique ability Apple will continue design and improve its own operating system and all the other service, hardware and application to customer. Let the customer enjoy the new product that more easy-to-use and innovated design. Apple Corporation will continue investment in research, design, marketing and advertising. All these investments will play important role at developing and sale the new products. As the part of online store, all the customers who have “IOS” devices can discover, buy and download application and book from Apple store and iBook. Third- party application and digital content also are the important parts of iTunes store, which provide large number of revenue for Apple Corporation. To expand the discovery and delivery platform for the third- party who provide high quality hardware or software are also parts of strategy. The company believes that knowledgeable salespersons who can transform the value of product has the ability to attract and keep customers. The strategy for the marketing part is included that enhancing and expanding both online and retail stores to reach more customers and provide them a high-quality buying and post sales experience. (Apple Inc. Form 10-K, September 28, 2013)

Strategy objective

The financial objective- Continuing working in product innovation to extent the current product lifecycle. Through update the current system or launch the new product to maintain and growth market share and make profit.

The customer related objective- the best way to keep loyal customer is by launch new innovative product. Keeping current customer base and extent the new market with the special focus on the developing countries like China and India will help Apple Corporation win the competition with the competitors.

External Macro environment analysis

Political Factors:

Apple Corporation manages its business based on the geography base, which are general based on the location of its customers. Nowadays, Apple has retail store in 13 countries and sell their product through reseller and other ways all over the world. According to the annual report of 2013, the domestic and international sales accounted for 39% and 61%. The international market plays an important role for Apple Corporation. Wars, disasters, bad global relations and terrorism can affect business. In order to inter the foreign market, the company activity is affected by the local laws and regulation. For example, tax import and export requirement, intellectual property, labour, ownership and infringement, foreign exchange controls, environment and etc. those policy are different in different countries. In some of the countries, to enter the market may need to do the additional testing, product modifications, delays in product shipping dates, or decline product from the product list. All these will increase the operation cost and affect the sales of Apple product. As the policy may consistent change, in the future, the cost of doing business will continue increase. Any delay the introduction of new product caused by the changes of law or regulation has the possible result that product or service are less attractive to the customer even worst may damage the Apple image in its customers and retailers. (Apple Inc. Form 10-K, September 28, 2013)

Economic Factors

In the past few years, the world’s economy starts getting better from the recession. But the inflation rate still high, while the earning for the customers did not change. The unemployed rate is increase in many countries. Due to all these reason, customer’s purchasing power may reduce. People trend to spend less and do not buy the product that is experience. According to the finance data provide by the Apple annual report, the net income of 2013 (37,037 million) was less than the 2012(41,733 million). (Apple Inc. Form 10-K, September 28, 2013) The sales in some product are decreased. During the economic recession period, currency exchange rate become volatile. Apple using the margins on sales of the products in foreign countries to paid the foreign suppliers. Using this way to minimum the affect of foreign currency exchange rate fluctuations.

Social Factors

As the global warming become more and more serious. Environmental protection problem become major issues in many countries. Some of them are where Apple operates. Most of the Apple product is produced outside the American. For example, iPhone is mainly produced in China. However, in the past few years, as the people and government in China are start consider the environment issues that caused by the manufactories. And the labor cost has increased in China. The total cost for producing iPhone has consistent increase.

Technology Factors:

Apple Corporation is in the market that has fast technology changes, no matter for personal computer, mobile phone and all the other electronic products. All of products are facing the heavy competition to the other companies such as Samsung. The characters of the technical industry are short product life period, need to introduce new product frequently and need to improve product performances frequently. In order to facing the rapidly changes in this industry, companies need to spend lots of money on research, design and development. However, this is good for Apple Corporation as they are using the unique operation system that designed by themself.

Macro- environment affect industry

Environment

Apple Corporation are belong to the electronic industry, which is the industry that worth billions of dollars. More and more people’ work and daily life communication are relay on the consumer electronic such a computer and mobile phone. The size of the electronic manufactories continues increase. The electronic wastes are coming with the development of industry. The electronic devices are usually made by the toxic materials that are very hard to recycle. In one year, over 3 million tone electronic waste are produced in the United States. (EPA.)

It’s clearly to see that in today’s society people are trend to be more environmental friendly. Not only the material that use to make the electronic devices need to be save, but also the other materials. Currently, the people in the industry are trying to design the sustainable electronics to help reduce the wastes. Tim Cook reveals his vision of industry. The future of the electronic industry is to use greener materials, less packaging, keep electronic product out of the landfills. (Jay Yaro, 2014)

Demographics

Currently, the customer for the electronic devices like computer and mobile phone are the young people at age between 18 and 35. It’s turn out that lots of company are forgot a important market-the middle age adult. The adult in the age between 40 and 60 should be the major market as most of them are earning money. Nowadays, with the technology development people are forced to use electronic devices. Especially for the middle age people who has a job. Those people are willing to buy the product for the work and start learning technology. Middle age is the group of people that has the highest purchasing power no matter in what time. After ten years, the young people at age of 18 to 35 are growing to the middle age and start work. This group of people is both familiar with all the electronic device and have money will provide much more revenue for the electronic industry.

The developing countries like China also have a potential to growth in the future. Based on the population of those developing countries, the major market for the electronic industry in the future will transform from developed countries to the developing countries.

Economic

Electronic industry is one of the fastest developing industries in the world. In some way, it is driving the economy growth. Electronic is important for almost every major industry in the world. The trend for the global industry is to become more and more automated. The productivity for the electronic industry or the information technology industry will increase much more than the other industry, especially in the developing country where skilled labor are experience.

Porter’s Five Forces model

Rivalry Among Existing Competitors- Strong

The electronic and information technology industry are both well know as the fast growth industry. The competition between companies is strong. This is the reason why the larger companies for the industry are less. The threat of existing competitors is very high for the Apple. The company is now operating three major markets: personal computer, mobile phone and the music players. For the personal computer area, Apple needs to compete with the big company like Dell, Toshiba, HP and etc. Apple using its unique operation system successful occupied parts of the market. However, as the difference of the market strategy, all the company is focus on different market. For the mobile phone area, Apple has to compete the big companies like Samsung and Blackbarry. For the music player area, Apple occupied 72% of the market. (Cole, 2013)However, the competitors like Sony are continue improve themselves. The only way to keep all the market share is to consistently improve and provide new product.

In the future, as the market for the industry are moving from the developed countries to the developing countries, how to win the competition without lower price will be the top issue that Apple should work with.

Bargaining Power of Buyers – Strong

For the Apple Corporation, the “buyers” will be almost every one in the world. According to the large customer base, it’s clearly to say that the bargaining power of buyers is strong. There are so many choices for buyers. (different brand that provide the similar product.) Customers can easily switch between the brands. The individual buyer often knows the basic information for the product. These group of customer looking for the computer that has high quality but lower price. The bargaining powers for them are moderate. Apple is mainly targeting the customers that have academic institute, colleges and schools students, and retail buyers. School and some other organization is the big buyer for the apple computer area. Their bargaining power as a buyer is high.

As the technology industry continues development, the new buyer come into the market. This large number of customers may change the current market. But one thing will not change is that the power is control by the customers.

Bargaining Power of Suppliers - Weak

Expect the suppliers like Intel. The bargaining power for the suppliers is low. For the big company like Apple, there are thousands of suppliers want to establish the relationship with it. For the suppliers, the competition between their own industries is strong. The low enter requirement caused lots of new enter. However, it’s hard to get large order since the existing relationships between current suppliers and company. Apple has lots of choices, the number of satisfaction substitute suppliers are many. The cost for Apple switch the supplier from one to another is low. The bargaining power for Apple as the buyer is strong, which sometime can influence the price for the product. Not only Apple as a buyer can influence the price, the price competition between the suppliers will also lower the price, which lower the cost for Apple.

Currently, people are start pay more attention on the environment protection. According to Tim Cook’s vision of environment, the current supplier may have to become even greener to maintain the relationship with Apple.

Threat of New Entrants – moderate

The electronica industry keep attracting to the new enter with its rapid growth and increasing customer base. In another way, the industry are not attracting new enter as they are enter to the mature market that have to face the fierce competition. The giant player like Apple, Dell, Samsung are
in the market and control the most of market. It’s hard to compete with these companies.

To enter the high-tech industry the capital requirement are relatively high. The giant company like Apple are already controlled the supply and marketing channel. It is hard for a new enters get assessing to those channel. Another important parts is that in the current market, customer are usually loyalty to the larger and old brand. This is the challenge for the new enter to get market share from the well-know competitors.

Threat from Substitutes – moderate

The threat from the substitutes is moderate for Apple. There is not much product can substitute the electronic devices like computer, smartphone and music player. However for some of people, they do not need these entire products especially for the elder people. They may more like to read news on newspaper rather than on the websites and writing on the paper rather than taping on Computer. The traditional way is the substitute for this industry. However, as the industry continually developing, the threat from this part will consistently decrease.

Reference

Apple. Inc (Sept.29, 2013) Apple Annual Report Form 10-K. Apple.Inc.

Jay Yaro (APR. 21, 2014) Tim Cook Reveals His Vision For Apple In An Environmental Video. Retrieved from http://www.businessinsider.com/tim-cook-apple- video-2014-4

EPA (n.d) Cleaning Up Electronic Waste. EPA.gov
Retrieved from http://www2.epa.gov/international-cooperation/cleaning-electronic-waste-e-waste

Shane Cole (December 19, 2013) Apple's iPod continues to lead an
ever-shrinking
market of portable media players. Retrieved from
http://appleinsider.com/articles/13/12/19/apples-ipod-continues-to-lead-an-ever-shrinking-market-of-portable-media-players