Strategic Management Report: Internal and External Analysis of Apple

This report provides a comprehensive strategic management analysis of Apple Inc. It begins with an introduction to strategic management and its application to Apple, followed by a company profile. The core of the report involves an in-depth internal analysis, evaluating Apple's current strategies, including its focus on product differentiation and integration. A value chain analysis examines primary and support activities, highlighting strengths in R&D and technology. The external analysis employs PEST and Porter's Five Forces frameworks to assess political, economic, social, and technological factors, as well as competitive forces impacting Apple. The report identifies key strategic issues, such as declining iPhone sales and increasing competition, and proposes recommendations, including focusing on promotion strategies, cost reduction, and mitigating political risks. The report concludes by emphasizing the importance of continuous internal and external analysis for effective strategy formulation and implementation, recommending that Apple expand its market share to navigate challenges and capitalize on opportunities. The analysis is supported by references to relevant academic sources and industry reports.

RUNNING HEAD: STRATEGIC MANAGEMENT
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Strategic Management

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Introduction
Strategic management is considered as the process that promotes a systematic approach to
strategy and ensures strategy formulation by integrating it with mission, vision and purpose of
the company and then implementing strategies to meet the mission and goals (Witcher,2019). In
order to understand the concept of strategic management an organization has been selected that is
Apple. Apple is a multinational American company that headquarters in California. The
company operates in consumer electronics and offer hardware and software products to its target
customers. This report further includes internal and external analysis of Apple in order to know
strength and weaknesses of the company. At last, strategic issues are identified and
recommendations or different alternatives are identified.
Company Profile
Apple Inc. is an American company that operates in consumer electronic industry, online
services and computer software and hardware. Apple Inc. ranked as the second largest
organization in the world in term of smart phones and ranked as the third largest in the world for
technological services. Apple was founded in 1977, manufacturer and designs and markets media
devices and mobile communications, personal computers and other applications (Apple,2020).
In 2019, Apple iPhone contributed 54.7% in the sales of the company at the global level and
service sector of Apple contributed 17% of revenue and other segments are wearables, home
accessories and iPad. The valuation of the company in 2019 was $ 502 billion because of
increasing shift of people towards the innovative products. The sales of the company improved
and the valuation of the company experienced its highest (Apple,2020).

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Internal and External Analysis
Internal Analysis
Current Strategies
At present the company’s strategies are formulated with the aim of achieving its vision and
mission. Vision of Apple is “Man is the true creator of change in the world, so he should be
above structures and systems”. Mission statement is “Empowerment of man; by making personal
computer accessible to every individual so that the way people work, communicate and learn can
be changed”. The company focused on product differentiation strategy and integration strategy.
At present the company established itself in the market as the luxurious brand that provides
quality services and products to its target customers. The customer base of Apple is loyal
customer base that stuck with the company products. Further, some of other strategies of the
company include effective promotion strategies, branding and leadership skills of Tim Cook.
Value Chain Analysis
Primary activities
Inbound logistics: Apple supply chain is the largest as the company has 200 suppliers that helps
the company to manufacturing, material procurement and assembly. In this Apple enjoy high
bargaining power of suppliers. The company set high standards for its suppliers and adopted
smarter methods of production (Cusumano et.al,2019).
Operations: The operations of the company take place in many nations mainly in China and cost
of production for the company is low in Asia. That indicate that Apple also focus on reducing its
cost of production by investing huge amount in setting up assembly stations in different nations.

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Outbound logistics: The distribution network of Apple includes both indirect and direct channels.
From online stores to retail stores the products and services of the company are accessible by the
target customers on the right time.
Marketing and Sales: Apple is famous for its marketing as the company has strong marketing
mix. Apple products are well known for its design, quality and innovation. Due to that customers
are ready to pay the premium prices for Apple products.
Product and services: Apple targets higher income group segment due to that products and
services offered by Apple are luxurious. Further, warranty and services provided by the company
to its customers are appreciable. Online assistance and offline assistance is available and Apple
authorized stores are also accessible by people.
Source: (Cusumano et.al 2019)

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Support activities:
R&D and Technology: This is the strength of Apple as the company mainly depends on
innovation and technology advancement. In 2017, Apple invested 11.6 billion USD on research
and development and its investment in R&D doubled as compare to 2015.
HRM: Apple focuses on hiring and training of employees in order to make them the asset for the
company and to gain competitive advantage. Apple always focuses on hiring the best and
effective candidate for the company.
Procurement: The company managed excellent relationship with its suppliers and provide better
working conditions to its employees in order to produce best and standard quality work. Apple
is amongst the major buyers of their suppliers due to that both parties get advantage of it.
Firm Infrastructure: Apple went to major cultural changes and adopted different organization
structure in order to manage the external forces. Hence, infrastructure developed by the company
contributes higher in the success.
External Analysis
PEST Analysis
Political: The political factors that can impact on customer electronic industry are political
stability, rules and regulation by the government and decisions taken by the government. Some
of issues that impact on Apple negatively are trade dispute between China and the US. Due to
that production of Apple get affected as most of assembly of parts of Apple products done in
China. Further, stable political situation in most of developed countries prove to be beneficial
for the company to expand globally (Wierzbicki and Nowodziski,2019).

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Economic: At the global level the economy is growing but at the decreasing rate this will create a
threat for Apple in near future as the sales of the company might decline. However, on the other
side the growth is declining because of developed countries but developing countries are
growing speedily that provide an opportunity to expand speedily and target developing countries.
Furthermore, developing countries experiencing high disposable income and improve standard of
living that give opportunity to Apple to broader its target market.
Social: Apple business is subject to effect on social trend and social cultural trends. This aspect
influence behavior of consumers and expectations of consumers, the main issue for the company
is international anti Apple sentiments. This brand at the global level is used to indicate status and
prestige and shift of people to Apple brand might impact on the loyal customer or existing
customer base of the company. On the other side, rising use of mobile access and shift of people
towards technology prove to be an opportunity for Apple to increase its market share.
Technological: Technological factors that impact Apple are growing demand for cloud
computing, use of technology in businesses, growing market of smart phones, and increasing
capabilities of firms to compete on technological parameter. Apple corporate infrastructure is the
strength for the company and helps the company to enhance business growth. But on the other
side technological advancement by other firms is a threat for Apple (Nayak et.al,2019).

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Source: (Cusumano et.al 2019)
Porter Five Forces
Bargaining power of supplier: This is weaker force as Apple has connection with 200 suppliers
across the globe. Any changes by one supplier will impact the capability of supplier not Apple.
Hence this force has not that impact on Apple operations.
Bargaining power of Buyers: This force is strong because of increasing competition in the
consumer electronics segment as in this industry it is important to understand needs of

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customers and offer products that satisfy their needs. Hence, the dependency of Apple on its
customer base is higher due to that this force has major influence on operations of Apple.
Threat of substitute: The threat related to substitution is low in the industry as the brand image
of Apple in the market is high due to its innovation and design that leads to moderate force of
substitution for Apple. On the other side, low performance of substitute is also a reason for
moderate force.
Threat of Entrants: This force is also moderate as in this industry technological infrastructure
require huge amount of capital and high one time investment. Further, brand development cost
for new players in the market is high. All that contributed positively for Apple and due to that
threat of entry and exit in this industry weaken or moderate this force.
Competitive Rivalry: This force is amongst the strongest as the company face aggressive
competition from firms such as Samsung, Nokia and Vivo and Oppo. The increasing competition
is a threat because customers can shift to other brand easily because of low switching cost and
low differentiation in the industry because of technological advancement (Anantachart and
Tangsritrakul,2019).

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Source: (Witcher, 2019)
Strategic Issues and Recommendations
The two strategic issues that are identified from the above analysis of environment are issue
related to pushing people or make people influence to buy luxurious phone. As Apple is well
known for its iPhone family but because of decreasing sales of iPhone X and XS it is an
question mark for the company whether customer will ready to buy advance technology
products at higher price in near future (Chunk and Kim,2019)
. Decreasing sales and increasing competition and imitation from other companies is the strategic
issue that the company is facing. There are two alternatives available for Apple, first to focus on
promotion strategies and attract more customers to buy products especially millennial and second
alternative is to reduce cost of production and profit margin and make iPhone accessible to upper
middle class and high class people at the low prices not that premium prices.

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Another strategic issue that Apple is facing is increasing disputes between China and the US, due
to that tariff policies changes and the company is facing huge issues because of political
disturbance. Trump introduced 10% tariff on Chinese made MacBooks and iPhones that impact
on the sales of Apple in the domestic market and hamper its overall production across the globe.
First alternative to solve this issue is to spend more amounts in creating jobs in the US and
strengthening infrastructure in the US so that dependency of Apple on China can be reduced
(White,2019). Furthermore, the company can focus on boosting its sales in other developing
market in order to balance the overall financial position of Apple. Focusing on developing
countries can prove to be beneficial for Apple as it help in to increases its market share and to
strengthen the customer base with existing products.
In a nutshell, other issues that the company might face includes increasing competition, problem
in distribution network and influencing people to spend amount on buying luxury phones and
gadgets. However, the company can solve these issues as the company has high resources and
capabilities as compare to its competitor to gain competitive advantage and to compete in the
market.
Conclusion
It is concluded from the analysis that big players like Apple also need to do external and internal
analysis in order to ensure effective strategy formulation and implementation in the company.
From the analysis it is identified that Apple has strong resources, technology and innovation but
the company lacks in customer base and distribution network. Further, using external analysis
tool it is identified that political factors impact highly on Apple and social factors are the one that
prove to be beneficial for the company in near future. Hence, it is recommended that Apple

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should focus on increasing its market share across the world in order to control the impact of
these factors and to reduce the impact of these factors on revenue and sales of the company.

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References
Anantachart, S. and Tangsritrakul, N., 2019. Relating Brand Personality with Customers’ Brand
Experience: A Case of Apple Brand in Thailand. Communication and Media in Asia Pacific
(CMAP), 2(2), pp.27-54.
Chung, S.J. and Kim, S.I., 2019. A study on the user experience according to place branding-
Focused on the experience store of Samsung and Apple. Journal of Digital Convergence, 17(7),
pp.293-298.
Cusumano, M.A., Gawer, A. and Yoffie, D.B., 2019. The business of platforms: Strategy in the
age of digital competition, innovation, and power. New York, NY: HarperCollins.
Nayak, B., Bhattacharyya, S.S. and Krishnamoorthy, B., 2019. Integrating wearable technology
products and big data analytics in business strategy. Journal of Systems and Information
Technology.
White, J., 2019. Apple settles tax bill with France ahead of DST. International Tax Review.
Wierzbicki, M. and Nowodziński, P., 2019. Imitation and innovation in business
environment. Production Engineering Archives, 22(22), pp.36-40.
Witcher, B.J., 2019. Absolute Essentials of Strategic Management. Routledge.