External Environment Analysis Assignment Sample

Contents
Executive Summary........................................................................................................2
Introduction to the organization........................................................................................3
External environment analysis..........................................................................................4
Internal environment analysis...........................................................................................7
Five forces analysis.........................................................................................................9
Four building blocks of competitive advantage................................................................11
Distinctive competencies...............................................................................................12
Differentiation strategy..................................................................................................13
Strategic alliances..........................................................................................................14
Potential problems.........................................................................................................15
Recommendations.........................................................................................................16
References....................................................................................................................18
1

Executive Summary
This report comprises of strategic case analysis of Apple Inc. Apple Inc is an American
organisation which was founded in the year 1976 jointly by Steve Jobs and Steve Wozniak.
After the immense success of the organisation in the personal computers market the
organisation for the diversified their portfolio by offering various electronic products
including music player, tablets, mobile phones, computers and laptops. It is not just an
immensely successful consumer electronic products organisation but is also a commonly
recognized brand with high visibility across the world. The external environment of an
organisation comprises of the various factors which influence the operations and the
profitability of the organisation. Understanding these factors and their influence on the
organisation helps in developing the strategic plan to identify the position and the proposition
of the company and develop strategies for ensuring their success. The internal strengths and
weaknesses of an organisation make up their internal environment. The study of internal
environment comprises of the analysis of the financial performance of Apple Inc and the
strength and weakness of the company which impact their efficiency and productivity in the
market. The simultaneous targeting of the software and the hardware market by Apple Inc is
coming up as a challenge as there is intense competition in every field which is making it
even more difficult for them to continue with their innovative developments. Apple needs to
ensure that they develop a robust plan for the production, marketing and launch of their
products if they want to continue to maintain their position in the market.
2

Introduction to the organization
Apple Inc is an American organisation which was founded in the year 1976 jointly by Steve
Jobs and Steve Wozniak. After the immense success of the organisation in the personal
computers market the organisation for the diversified their portfolio by offering various
electronic products including music player, tablets, mobile phones, computers and laptops. It
is not just an immensely successful consumer electronic products organisation but is also a
commonly recognized brand with high visibility across the world. The business model of the
organisation is extremely unique having proprietary software and all the electronic products
developed by them feature their own operating system. Headquartered in California, it is a
public organisation employing more than 123,000 people and the registered revenue for the
organisation for the financial year 2017 was US$ 229.23 Billion. In addition to offering the
consumer electronics, apple has also ventured into the domain of information and
entertainment services and has become the largest retailer of music online. The software
solutions and video streaming apps offered by apple are also very successful. The
organisation has been constantly performing well in the market and is the largest information
technology organisation in the world at present. It is also the second largest cell phone
manufacturing company falling only behind Samsung. Running and maintaining 499 retail
stores in 22 countries, there are more than a billion Apple products actively being used by the
people across the world. The marketing initiatives and aggressive and unique proposition
offered by the company through their innovative products and services has accumulated
worldwide critical acclaim for Apple Inc.
3

External environment analysis
The external environment of an organisation comprises of the various factors which influence
the operations and the profitability of the organisation. Understanding these factors and their
influence on the organisation helps in developing the strategic plan to identify the position
and the proposition of the company and develop strategies for ensuring their success.
PESTEL analysis is a tool implemented to identify the various political, economic, social,
technological, environmental and legal factors that constitute the external opportunities and
threats for the company. The PESTEL analysis for Apple Inc is included here.
 Political factors
Being a multinational organisation, there are various political factors that influence the
working of this organisation. They have the retail stores operational across 22 nations and the
products of the company are also sold through the resellers. Global relations of the countries,
communal disturbance, terrorism, wars and disasters impact the business of the company.
The operations of Apple Inc are also affected by the local regulations and rules, tax structure,
intellectual property laws, foreign exchange control and the import and export duties
determined by their governments.
 Economic factors
The cost of labour, GDP of the countries, the disposable income and the variation in the
currency exchange rates plays an important role in the operations of Apple Inc. The
production of most of the Electronics by the company takes place in China and therefore the
labour costs in China let Apple enjoy the cost advantage. The purchasing power of the people
and the economic conditions across the world also directly impact the sales and the
productivity of the organisation (Mrak-Blumberg, Renery, & Bundgaard, 2006).
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 Social Factors
Design and quality are the two factors that have played an important role in the entire course
of development of Apple Inc. The standard of living of the people and the consumer spending
trends along with the emotional attachment and loyalty that people have for the brand plays a
key role in helping the organisation grow and sustain in the market. By analysing what people
want and finding out the solutions to fulfill their needs, apple can take the strategic decisions
to further improve their market share and popularity.
 Technological Factors
The technological Trends and advancements are crucial to the development of an
organisation operating in the Information Technology sector. The ability of the competitors to
imitate the products or offers similar product in the market can reduce their market share.
Products with same capabilities will also take away the uniqueness that Apple products offer
and therefore this is one area where the organisation needs to constantly carry out the
research and development and continue to innovate to provide a head on competition to rivals
like Samsung and Google (Corpas, 2009).
 Environmental factors
The disposal of old devices is the biggest challenge that Apple Inc is facing with regard to the
environmental issues. Most of the devices contain Lithium batteries which can be extremely
detrimental to the environment. Pollution and waste management by the manufacturing
facilities of Apple in China also raise a lot of concerns that they need to address and take
measures to fulfill. More than 3 million tons of electronic waste is produced every year in the
United States alone. The concerns and awareness regarding the environmental protection are
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at a rise and apple Inc needs to take them seriously if it wants to stay in the market for a long
time (Corpas, 2009).
 Legal factors
The legal compliance that the organisation has to take care of includes the rules and
regulations in each market with regard to intellectual property rights and the patents of their
products. They have to pay royalty for using the product of any other manufacturer and have
to ensure that due credit is given to the developers and the people possessing the rights to the
intellectual property that the organisation makes use of in their devices and mobile
applications (Jadoon, 2009).
6

Internal environment analysis
The internal strengths and weaknesses of an organisation make up their internal environment.
These factors help the organisations in gaining a competitive advantage in the market and
impact the strategy development for them. It comprises of the analysis of the financial
performance of Apple Inc and the strength and weakness of the company which impact their
efficiency and productivity in the market (Alexander, 2018).
 Strengths
The strong market position of the organisation and the customer loyalty which is built by
providing quality products consistently is the biggest strength of Apple Inc. Apple is a
leading innovator in the information technology industry and the strong brand recognition
because of the aggressive marketing campaigns and the environment that embraces creativity
helps the organisation in various ways. The organisation invest heavily in the research and
development and skilled sales personnels are hired by them which ensure that the market
share of the organisation is maintained. The products developed by the company are
extremely user-friendly and very easy to operate. Ease of use is of prime importance to Apple
Inc when designing and developing the products. The organisation has consistently delivered
excellent financial performance over the years and is a market leader in terms of production
and sales (Jinjin, 2013).
 Weakness
The products manufactured by Apple Inc. Are generally expensive and only target the
premium customers. Because of this the organisation is struggling with a declining market
and the response to a few recent products was lower than what the expected. Steve Jobs was
the founder and face of Apple and after his death Tim Cook became the new CEO. Every
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new person brings a new vision and way of working to the organisation which is different
from the previous one. Similarly, Tim Cook has also brought about various changes in the
way Apple Inc operates which may or may not be accepted by the employees and the market
that well. The organisation is also facing tough competition because of the popularity of other
operating systems that Apple products do not support. Apple Inc is having the direct sales in
the form of company owned retail stores in only 22 countries. By limiting this the
organisation is not able to exploit the full potential and explore some of the market that may
prove to be potentially productive for them (Miller, 2013).
8

Five forces analysis
The five forces analysis is a framework given by Michael Porter that helps in assessing the
attractiveness of a market. It helps in defining the competition in the given market and
evaluate the ability of an organisation to complete there.
 Rivalry among competing sellers: High
All the Apple Inc has a well diversified portfolio of various products, there are numerous
players against which the organisation is competing globally. The information technology
market is highly competitive and it is an extremely dynamic industry where the organisations
need to constantly innovate and develop new products to keep up with their performance.
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 Potential entry of new competitors: Low
The threat of new entrants in the information technology products market is low. Although
the industry continuous to attract new players, the few giant organisations including Apple,
Lenovo and Samsung are not affected by them. There is a huge capital required by the
company to enter this industry and supply and marketing channels are already controlled by
these giants which leaves little scope for the new players (Johnson, 2012).
 Competitive pressure from substitute products: High-Moderate
There are numerous substitutes for every Apple product available in the market. Although the
operating system of Apple distinguishes the products from the rest of the alternatives, the
electronic devices are here to stay and they cannot be substituted by any other products.
 Bargaining power of suppliers: Low
There are numerous organisations in the market that provide similar raw materials that are
required for the production of the electronic devices. Apple is a reputed organisation and
there are companies willing to establish a relationship with them. Therefore, the bargaining
power of the suppliers providing the raw materials for Apple Inc is low and the organisation
enjoys a strong position in the industry because of this (Sharma, 2013).
 Bargaining power of customers: Low
The buyers are the customers of the organisation are Central to their business. The customer
has a lot of choices in the market and they can easily switch between the products and the
brands. The people enjoy a high bargaining power since they can influence the type of
products developed by the company as per their tastes and preferences. They need to
constantly meet with the Expectations of the customers for maintaining their position in the
market (Atif, 2017).
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Four building blocks of competitive advantage
The four building blocks of competitive advantage include efficiency, quality, innovation and
customer responsiveness. Apple Inc has an excellent performance in all these parameters.
Apple is known to produce high quality product and although the offering by the organisation
are considered expensive, there is no question raised about their quality. The organisation has
a culture driven by creativity and innovation. They are known to present products in the
market by being the first mover and identifying the needs of the customers by being
extremely responsive to their suggestions and feedback. With the excellent combination of
hardware and software offering by the company and a well-designed retail strategy, apple
continues to gain a competitive advantage in the market even among the tough competition
from the leading global players and the smaller organisations offering similar products. The
astounding success of the organisation can be attributed to the strategy of constantly
innovating and providing quality products that fulfill the needs of the customers in an
effective manner ensuring the profitability and efficiency of the organisation (Gosnar, 2012).
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Distinctive competencies
The distinctive capabilities and competencies that allow Apple Inc to stand apart in the
market and emerge as a global leader are included in this section. Apple develops and
environment of complete secrecy with regard to the product design and launch. They create
the right buzz in the market just in time of the launch of a new product and ensure that the
customers remain inquisitive and curious about their next move. The blocks and the social
media accounts of the company make use of viral marketing technique and superior brand
and product placement by the company by catering to the niche market also provides the
organisation a distinctive advantage. Superior pricing for the product and a huge investment
in the research and development is also an essential element of Apple Inc. Apple has
managed to create brand loyalty among the people in the right way. They provide their
potential customers real life experiences of using their products and also allow them to
personally check out the features in their stores. By developing user friendly products with
superior design, apple has continuously developed the distinctive competencies and are
enjoying an enviable position in the electronics market by becoming a much admired brand
and company among the people (Khan & Alam, 2015).
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Differentiation strategy
Apple make use of the premium pricing and product differentiation strategy to gain an
advantage in the market. All the product by the company are designed to provide a high value
and premium quality to the customers. The four pillars of the differentiation strategy adopted
by the organisation include developing products in lesser quantity and higher quality,
focusing on the niche market of high end customers, prioritizing the profit margin for the
company over their market share and creating a halo effect that maintains the loyalty and
premium stature of the brand (Johnson, The Innovative Success that is Apple, Inc., 2012).
The uniqueness and attractiveness of the Apple products is maintained with every new launch
and the company stays ahead of all the competitors by innovating and designing the products
by adopting the differentiation strategy (Gosnar, 2012).
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Strategic alliances
Apple Inc is not only a remarkable example of the organisation offering innovative products
in the market, but the business strategy of the organisation also makes for an interesting case
study. Strategic alliances allow organisations collaboratively partner with other companies
and build a secondary market by making allies (Datamonitor, 2009). Finding the strategic
partners that share common vision and goal can allow the organisations to further expand and
explore the market potential. Apple has previously created strategic alliance with the number
of organisations including MasterCard, IBM and Foxconn. They have allowed the
participating organisations to benefit from each other. With the advancement in technology
and the changes in the mode of payment preferred by the customers, it is suggested that
Apple create another strategic alliance with the E-wallet services (Kerr, 2015). The
cryptocurrencies like Bitcoin and Ripple are also gaining popularity with time. Apple can
collaborate to accept payments in the form of the crypto coins which can further expand the
possibilities for both the organisations involved.
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Potential problems
Apple Inc has grown enormously over the past few years and has developed into a brand
which is held in high regard by the customers. However, there are a few challenges that the
organisation is struggling from which need to be immediately addressed by them. The
convergence of the Smartphone and the computers market has limited the possibilities for the
organisation. Apple products are also termed to be a slightly different version of their
previous model and there are no major innovations and upgrade in the smartphone offered by
the company. With the declining sales of the macbooks, iPad and the iPods, the iPhone has
become the central product of the organisation and entire research and process of the
company is now centered around the iPhone only (Meyer, 2017). The Apple watch has also
not performed as per the Expectations of the company and is still in its early days. The
response to the latest iPhone was also mild because of the high price point. Some other
innovations that the organisation is working on include the self driving car and a more
advanced version of the Apple television. However, if the sales of the iPhone continue to
decline for the company, it will become difficult for them to sustain in the market. The
revenues from iPhone x and the iPhone 8 were weaker than expected under unit of production
challenges faced by the company are also going around in the market. The shipment of the
iPhone X has been slow and the suppliers are asked to cut the shipments which has also
resulted in development of a negative sentiment towards the organisational performance
(Mickalowski, Mickelson, & Keltgen, 2008).
The security problems reported by the users of iPhone declining battery life of the new
products is also an area of concern that the organisation needs to immediately address. The
simultaneous targeting of the software and the hardware market by Apple Inc is also coming
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up as a challenge as there is intense competition in every field which is making it even more
difficult for them to continue with their innovative developments. Apple needs to ensure that
they develop a robust plan for the production, marketing and launch of their products if they
want to continue to maintain their position in the market (Mittan, 2010).
Recommendations
Aggressive competition and imitation of the products are the major challenges that Apple Inc
faces at present. The organisation should develop a patent portfolio that is stronger and
continue to innovate in order to maintain the competitive advantage in the market. The
strategic success of the organisation can be slightly attributed to the ability of the company to
innovate and come up with products that creatively fulfill the needs of the customers. The
organisation should ensure that they receive the required funding for the research and
development so that they can continue to grow themselves and develop more innovative
products (Duzansky & Duffner, 2017). Augmented reality is the latest development in the
technological sector and by incorporating it in the Apple products, the company can be the
first mover in the market. Apple is at a better position in the smartphone market as compared
to its competitors but by including more offerings through their applications and streaming
movies and TV shows directly into the iPhones and iPads, the company can further develop
and provide better services to their customers. The organisation should also think through
their supply chain strategy. The lags in the product launch and their availability in the market
create a negative impression and may result in a further decrease in the market share of the
company. Apple is operating fairly efficiently (Wang & Ma, 2015). Much of this is due to the
excellent management. The main challenge will come as Apple continues to grow, expand
and the company becomes less nimble and efficient. In certain areas, scale economies will be
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created (production plants and in-house accounts or lawyers), but other costs will rise
(Asgarali, Wang, & Paik, 2014).
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