Apple Incorporation - Essay Example

Apple Incorporation Introduction Apple Incorporation is a renowned computerhardware and Software Company, cofounded by Steve jobs and Steve Wozniak in 1stApril 1976, Califonia. The company produces soft wares’, consumer electronic devices, computer hardwares’ and cell phones. The renowned products include Macintosh computers, iPad, iPod and iPhone. Its list of high brand soft wares’ include the Final Cut Studio, iTunes media-browser, Airplay, Mac OS X operating system, Airprint, Aperture, iOS, iLife and iWork productivity software. Currently, the company has 447 retail stores out of which 265 are in the United States and 182 outside America.The importance of this research is to evaluate the internal and external environment in which Apple Incorporation operates. The External Environment Apple incorporation external environment will be analysed using the PEST analysis model. PEST stands for its political, economic, social and technological aspects of the company in order to determine Apple’s feasibility in relation to its growth, market, size, its performance position and possible operation ventures (Newlands & Hooper, 2009). PESTAnalysis: This measurement tool is used to determine Apple’s future markets, its current performance potential and the direction of its operations (Newlands & Hooper, 2009). Political Environment Apple’s political environmentincludes the external problems that can hinder its routine operations,which can be caused by the instability of the national government. The problems can include terrorism, civil wars, corruption, health concerns and political instability. All these uncertainties can affect the sales of Apple products worldwide. In order for Apple to reduce its overall operational costs and external calamities, it has outsourced its activities in various countries. The countries include the Republic of China, Cork, Ireland, Korea and the Republic of Czech.Apple’s business activities can be hindered if these countries encounter political instability, which can otherwise affect its manufacturing processes. The hindrances of products manufacturing can cause a delay; resulting inshortages and dissatisfaction from the customers and its loyal dealers (Gendron, 2013). Economic Environment The economic environment can be analyzed by the global economic condition. The purchase of the company’s products can be hindered by the unemployment level of the country. If the unemployment rate is high, the consumers will have a low purchasing power and subsequently,a decrease in disposable income. Inflation is another robust problem which can adversely affect Apple’s revenue values.Inflation can be brought about by the increase in oil prices leading to inflation in the global economy. Due to the rise in operational costs, the costs arelater transferred to the products, leading to higher prices and subsequently, limited purchasing power by the consumers. Contrary, Apple Incorporation has purchased foreign currencies, due to the gradual stability of the global market to increase and diverse its revenues (Gendron, 2013). Social Environment The secret behind Apple’s brand products is the quality and the design of its products. The trend of people buying the luxury products has been largely contributed by the increase in their purchasing power due to improvements in the global markets, hence leading to the demand of Apple’s iPads, iPhones and iPads. Apple’s social influence has also been significantly influenced by the music industry because of the use of iTunes for their online music Storage facility.Its social factors have an infectious influence globally due to their defining modern impact lifestyle(Gendron, 2013). Technological Environment Apple contemporary and classy products have been attributed by their huge investments in Research and Development. The blue chip company enjoys the use of modern technologies and innovative materials in order to boost its high performance of its products.In terms of technological advancement, Apple tops the chat thanks to its visionary and co-founding leader, Steve Jobs (Gendron, 2013). Competitor Analysis Even though Apple is among the leading smart phone providers and digital-asset management organization globally, it has various competitors in its niche. A number of competitors in the cell phone, hard wares’ and computer soft wares’ exist in Apple’s markets. The most notably include Samsung, Nokia, Blackberry, HTC and others (Viticci,2015). Source: http://www.theverge.com/2015/1/27/7923461/apple-q1-2015-earnings In order to understand the market critically, Porter’s five model theory will be used to evaluate Apple’s competition and market presence in the market. Michael Porter’s Five Competitive Forces: Intensity of Rivals inthe Industry Apples products are normally promoted by its strong brand name, technical support, unique products and its customers’ loyalty. However there exist external competitions from similar companies offering the same products. They include Samsung, Blackberry, HTC and Nokia (Viticci,2015). The Bargaining Power of Suppliers High supplier prices can lead to reduction of profits on Apple’s income. Apple Company receives its application processors from Samsung, which offers a big gap in Apple’s operations. If Samsung charges a huge amount for its services, Apple can then suffer in terms of its operational costs which translate to higher prices on the consumers end (Lowensohn,2015). Bargaining Power of the Buyer The organization should also focus on reducing their products prices because there exist a numberof organizationsoffering the sametype of products at a cheaper value. Failure to do so can lead to switching of price sensitive consumers to the other competitors or even lose the new potential consumers who were looking to purchase new phones (Macworld, 2014). Threat of New Entrance Through entrance of other companies for example Nokia and the like, it decreases Apple’s market share. However, Apple can still maintain its status by differential of its products, its brand and extensive marketing in order to stabilize its profits. Apple still enjoys competitive advantage from innovation and its quality products (Macworld, 2014). Threat of Substitute Product The threat can come in the form of performance and its price which can make the consumers to switch to the competitors’ products. If Apple consumers increase their loyalty to the company, the threat can easily be dissolved. The problem can also be managed by the reduction of its price (Gendron, 2013). The Internal Analysis: Financial Analysis According to Apple’s 2015 first quarter results, it recorded $74.6 billion revenue and a quarterly net profit of $ 18 billion. These results are the highest earned revenues as compared to subsequent years.This is also an improvement from the previous yearwhere it recorded $57.6 billion and a net profit of $ 13.1 billion.The gross margin was 39.9% as compared to 37.9% in the previous year. In the current total quarter revenue sales, the international sales bucked 65%. The impressive results were achieved from Mac sales, the high rocketing App store sales and the iPhone sales (Lowensohn,2015). SWOTAnalysis Apple incorporation deals with computer soft wares’, cell phones, net-working solutions, computer hard wares’, music players plus other related products. Apple’s products performance has improved its investors’ confidence due to its aggressive global success. However, the margins of the company can be affected by adverse competition (Lowensohn,2015). Analysis of Apple Company Strengths weaknesses 1. Strong brand name 2.Consumer loyalty across the globe 3.Global chain stores 4.It is a trend setter in mobile innovation technologies 5.Has a large financial capital; $18 billion and a profit margin of 39.9% 1.Loss of its visionary co-founder Steve Jobs and other senior managers, pose a management crisis in future 2.High prices of its products 3.Interference of its patents 4.Decrease in market share Opportunities Threats 1.New products like Apple TV, Apple watch will increase its market share 2.Patent damages from its competitors 3.Increase in online cloud-based services 4.Increased demand of iPads 5.Increase of Smartphone and tablets demand 1.Legal issues 2.Online music industry competition 3.Technological changes 4.Increase in taxes 5.Future development of Android OS Strengths Apple’s serious strength is attributed by its competitive advantage over its competitors;due to its loyal consumers and a strong market presence. The other advantage is that Apple has various computer and mobile products, soft wares’ and applications which are inter-related and complement each other. The other unique feature of Apple Inc is that they develop unique products frequently for example beats products, Apple watch, and Apple TV which are no-existent form their competitors (Hoover,2015). Apple also boosts of prestigious award recognitionswhich it has continuously been nominated,for example in 2012;it was awarded for the third time as the most global pioneering company in the world.During the financial quarter of year 2015, the company clocked $18 billion worth net profit where its profit marginswere way higher than its competitors.In Apple retail stores, top end customer service is vital, which creams up the company’s brand awareness. Currently, the company’sbrand name is the leadingin the world with a brand value of $124.2 billion (Hoover,2015). Weaknesses The leading problem in Apple Incis the market value of its products. This can pose a major problem in its operations because of stiff competition from its competitors. That is, Apple consumers can get the same functioning products from competitors at a lower price. Apple Inchas often been accused by other companies regarding patent rights, where it has lost some and this can severely damage its reputation.After the death of Steve jobs in 2012, the company’s management was at stake, additionally, two other senior board members left the company; which was a big blow to the company (Parker,2015). Opportunities After the introduction of the unique products: Apple TV, beats products and Apple watch; the company has been able to locate a new market segment apart from its current market share. Through the advancement of the iPad versions, the company has a competitive advantage over its competitors. Through the current high performing tablets and smart phones’ series, the company’s market share is sure to increase (Parker,2015). Through the patent damages received from its competitors, the company benefits in two reasons. First, the competitors name will be tarnished swaying its customers to the Apple company and secondly, the company’s revenues will be increased due to the cash damages it has been awarded. The increase in cloud based online services by customers can be seized by Apple Company to maximize its market share and profit margins in the long run (Nolo, 2014). Threats Technological advancements are a major problem to both Apple and its competitors to day. Advancements of products by competitors can create a huge pressure to the company. Increment in tax can hinder Apple’s operations, growth and its consumers’ purchasing power.Its application processors are provided for by Samsung which charge higher prices due to lack of substitutes. In the mobile market industry, Android OS poses a significant challenge to Apple’s iOS program. Android OS has a longer lasting power than Apple’s iOS. The online music stores like Amazon, Wal Mart creates a bigger threatto Apple’s online music store application (Nolo, 2014). Recommendation In the next five years, the company should continue to employ uniqueness in its design and features development strategies. The company should venture into new products, continue upgrading its personalized services, add product features, lower their products prices to increase market share,increase their customer experience to remain exquisite,venture into its own application processors in order to minimize additional costs and improvements of power consumption rate for its products.The company can further decrease its operating expenses by outsourcing more of its manufacturing activities to less developed nations in order to increase its economies of scale(Lowensohn,2015). Conclusion Apple has a commanding presence in the cell phone and technological world. This is due to a chain of computer hard wares’, soft wares’ and consumer electronic goods. The company has a variety of technological improvements to its products portfolio which sets it out from other competitors. The competitors fear risky ventures which provide a window of opportunity for Apple Company. The company’s competitive advantage is greatly influenced by the consumers’loyalty, user -friendly products, strong brand name and global market. Despite the company’s fortunes, it also has a couple of challenges which can damage its operational activities. The company should avoid legal issues so as not to tarnish its quality brand name. The company can also outsource more of its manufacturing activities to less developing nations in order to maximize its economies of scale. Further, the company can develop its own application processors in order to avoid high overheads from the manufacturers. The company should also lower its products prices in order to maximize its market share.Lastly, the company should improve its products power consumption rate in order to avoid consumers’ dissatisfaction which can pose a big threat. Reference List Viticci, F., (2015).Apple Q1 2015 Results.RetreivedOn 3rdMar 2015 From: http://www.macstories.net/news/apple-q1-2015-results-74-6-billion-revenue-74-5-million-iphones-21-4-million-ipads-sold/ Hoover, J., (2015). Apple Reports Record First Quarter Results.RetreivedOn 3rdMar 2015 From: http://www.apple.com/pr/library/2015/01/27apple-reports-record-first-quarter-results.html Lowensohn, J., (2015). Apple Posts $18 Billion Profit, The Largest In Its History. RetreivedOn 3rdMar 2015 From: http://www.theverge.com/2015/1/27/7923461/apple-q1-2015-earnings Macworld, S., (2014) . Why 2015 Will Be The Year Of The Apple. Retreived on 3rdMar 2015 From: http://www.macworld.com/article/2862580/what-to-expect-from-apple-in-2015.html Parker,I.,(2015).The Shape Of Things To Come. Retreived on 3rdMar 2015 From: http://www.newyorker.com/magazine/2015/02/23/Shape-Things-Come Nolo, (2014).Quicken Willmaker Book & Software Kit Plus 2015.Berkeley, California Newlands, D. J., & Hooper, M. J. (2009). The Global Business Handbook: The Eight Dimensions Of International Management. Farnham, Surrey, England, Gower. Gendron, M. S. (2013). Business Intelligence Applied: Implementing An Effective Information And Communications Technology Infrastructure. New Jersey: Wiley. Read More