SWOT Analysis: Apple Inc.

Apple Inc
Introduction
Apple Inc is an American multinational organization located in 1 infinite loop, Cupertino, California 95014, in the middle of the Silicon Valley. It is focused on designing and developing the personal computers, other related software products, and the electronic products such as MP3 players and iPods. Apple Inc’s main products are iMac, iPod, iPhone, and its latest advanced product is iPad, which is on the verge of creating another revolution after iPhone. Apple Inc was founded in 1976 and since then Apple Inc has been leading the way in innovating new products, however it has encountered numerous ups and downs since then. Apple Inc produced the first ever extremely successful personal computer. It has been always on the forefront of innovating new products; however it has often struggled to maintain the hold on the market share in the product line. Lately, Apple Inc has transformed its image from an inventive computer manufacturer to a fully fledged consumer’s electronic company. Some facts of its success can be calculated from its sales of $13.95 billion in the year 2005. In year 2005, Apple Inc had controlled 4.2% of the US market in PCs. Also, Apple iPods models had controlled 70% of the hard drive MP3 player market. Apple Inc enjoys the leading share in the handset market, generating over 71% of the industry’s profit with 6.5% of the international handset market. Apple unveiled its first iPhone on 9th January, 2007. The most recent iPhone, is iPhone 4S, and it was announced on 4rth October, 2011 and was released 10 days later (OPPapers.com 2012).
External Analysis External environment determines the present situation of Apple Inc, and also helps find out the possible influences of the political, economical, and social and the technological factors on the organization.
Political Factors
Apple Inc has reportedly obtained 52% of its business from outside US in 2007. Due to the bad international relations, wars and terrorism might influence Apple Inc in a huge way, and also the organization has no control over these factors. Apple Inc manufactures a number of its parts and products from outside the US, like Czech Republic, Ireland, China, Korea and Cork. The bad political relations between US and the other world have bad outcomes for the Apple Inc (CNetnews 2012).
Economic Factors
The global economic crisis had huge impact on Apple Inc. The inflation rate went high and so did the unemployment rate in the country, and since Apple Inc products were viewed as luxury products, the customers started pending less on them. US dollar value keeps fluctuating, and thus again which have a bad impact on Apple Inc products, however the company has purchased itself foreign currencies and thus, the economic effects on the company are minimized. Thus, Apple Inc revenue has increased in the global market (Apple Inc 2012).
Social Factors
Throughout the history of Apple Inc, two factors have been on the forefront of Apple Inc products, the quality and the design of the product. Thus, globalization plays a very important role in Apple’s products. As the world cannot be imagined without the gadgets, thus Apple products have marked their presence on the international market. Also, as the purchasing power of the common has risen in various markets across the world the purchasing of luxury products have gone up, for e.g. the iPhone, iPods and the latest technology iPad. Possessing these items are considered as status symbols in many societies which have also increased the sales of Apple Inc products. Another big social influence to Apple Inc products is the rapid growth of the music industry, which have increased markets over the cyber space as well. The main virtual music store is the iTunes. Thus, in all Apple products have benefitted from the social factors as it has began defining a modern individual lifestyle.
Technological Factors
Apple Inc has invested largely in its product research and development field and thus, Apple products are at the top of the new innovative products ranking. The technology has been fast changing in the world and the market for it has become gigantic, which has added to more and more competition and thus, as soon as technological change are concerned the product life cycle has been shortened drastically, which the Apple Inc takes the advantage of by introducing newer products in the market, which ultimately lead the market.
Legal Factors
Nokia has filed various lawsuits against Apple Inc, claiming the violation of 13 additional patents by iPhone, iPad and iPod touch, this apart from US complains covering 24 Nokia patents. Also, in China Apple Inc has been fighting the battle for its right to the iPad trademark.
Internal Environment
VRIO framework
The VRIO framework can be stated as the value, rarity, imitablity, and organization as a whole. VRIO framework is extremely important for the internal analysis of Apple Inc organization. Resources and Competencies | Value | Rarity | Imitablity | Organization | Competitive Advantage | Brand Name | Yes | Yes | Yes | Yes | Sustained | Simplicity | Yes | No | No | Yes | Parity | Hardware | Yes | No | Yes | Yes | Temporary | Software | Yes | No | No | No | Parity | The above figure shows the VRIO framework for Apple Inc. For gaining competitive lead over its competitors Apple Inc should explore its internal as well as the external advantages, its internal advantages that Apple Inc paid attention to on developing iPhone, are its brand name, advanced technology, and effortlessness of using the user interface (AppleCaseStudy 2009)..
Value
The value of iPhone is that there are a number of advantages, like the highest technology, the fast and the easy usage, that the user can carry, all in one device when he/she purchases the iPhone.
Rarity
The technology that has been used in making of the iPhone is rare and unique, which is why it has a unique design, quality, easy to use and is also a status symbol among the youngsters however, it has been experiencing slow internet connection and call dropping problems, which can make Apple Inc lose some customers, which was found to be a problem in the chip that handled the call operations, meanwhile the publicity and status of owning an iPhone will keep the customers intact.
Imitablity
The iPhone is nearly not imitable, however there are some phones available in the market which provides some of the features same as that of the iPhone, also, the companies which have seen the flaws in the iPhone development can refrain from committing it and thus can come up with better designs, which can be a threat to Apple Inc. For e.g. Google has released its phone T-Mobile G1, which can be a competition to iPhone in the future (AppleCaseStudy 2009)..
Organization
Apple has tried its best to maintain its brand name and has been successful in doing so and thus is its biggest competitive advantage, however its flawless designs and quality are still replicable in the future and thus Apple should take advantage of applications market, however as with iTunes which were the best and easiest music application, same approach would not work with iPhone.
Thus, Apple holds a huge and stable market however it constantly needs to update on its methods and technologies to grow further. SWOT Analysis
SWOT analysis stands for Strength, Weakness, Opportunity and Threat for a particular organization, which can help in formulating a strategy for its business and can also help in analyzing its internal environment (Strengths & Weakness) and external environment (Opportunities & Threats).
Strengths
The first and foremost strength of Apple Inc is its technological edge over its competitors. IPhone have turned out to be a great success and has been associated with status in many of the countries. ITunes has turned out to be a wonderful revenue generating source and since it also sells with its own tool i.e. the iPod, thus, revenue has multiplied for Apple Inc. Another strength for the organization is that for every software that Apple Inc produces, it introduces its hardware with it too, which leads to its expertise in both the industries. Apple Inc products are classified as luxury items, thus its products provide enough room for it, so that the competitor products are no longer a competition. The another strikingly advantage over competitor’s products, is the design of the Apple products, and which are also simple to use. The brand loyalty of its product and its super dedicated research and development department are also its major strengths (Wharton 2012).
Weaknesses
Weaknesses are the disadvantages that are hindrance in obtaining the business goals for the organization. The poor relationship with the market than Microsoft is surely a disadvantage to Apple Inc. Another point could be that the products introduced by Apple Inc have very short life cycle, which concludes that the research and development department has to be constantly maintained, which requires huge capital. Apple Inc has very low presence in the advertisements, and also it has very small market occupation as compared to its main rival Microsoft. Thus, all this leads to the fact that Apple Inc gets very less business from its home country US, and major of its business is from outside the US.
Opportunities
Opportunities can affect both the present as well as the future condition of an organization. Apple Inc opportunities are the introduction of more and more PC viruses, on which Apple Inc can capitalize on. The second opportunity is the population of the world is growing at a rapid pace and thus, this opens the front for many new markets, also the purchasing power of a common man has increased drastically, who can be pursued or impressed to buy the luxury Apple products. The online sales of the organization are increasing and also, the bonds and the partnership with the other organizations have been on the rise in the past few years. Products such as iPhone have create a new set of potential customers altogether which can be targeted in the future i.e. the young population who have a craze for any new technology gadget (MarketingTeacher.com 2012).
Threats
In the past few years, many competitors have come up for Apple Inc, especially in the field of laptops, like Dell, Sony, HP, and Toshiba. Another threat could be that many of the customers have started downloading the music for free instead of purchasing at iTunes. The product expensiveness is itself a threat to the product, as substitutes at a lower price are always available. Long lasting recession could also be a threat to its products. Windows 7 software is gaining more market place after vista flopped and last but not the least, the technological advances that have been taking place every single day, is a big threat to Apple Inc.
Porter Five Force Model
Porters Five force Model is a very powerful tool to understand the core of the power in a business or in a company. The Porter Five Force Model for Apple Inc is as shown in the figure: (Source: Slide Share 2010)
The existing rivalry is the MP3 players of rivals like Sony, Samsung, other online free music stores like iTunes, Alternate sources of laptops like Dell, Lenovo, HP etc, competition to the Mac operating system, and windows Operating system for playing videos and music. The threats of new entrants are new entrants with the new technology, for e.g. Google with its new phone, on demand online services, and streaming audio and video with v-cast. Bargaining powers of suppliers are suppliers of the processors like IBM, Intel etc, supplier of TV and various movies, other sources of music like Sony, Universal etc, and strategic alliance of the Mac of the Microsoft. The bargaining power of the customers are customers may reduce purchasing laptops in fear of economic downturn, retailers may star pressing for lower prices, customers may download and share music with friends without paying for it, and the threat from the substitutes are satellite radio for the music, other entertainment media like XBOX, PS2 etc, alternate source found by customers for audio and video files (Management Pocketbooks 2012).
Analysis of Strategic Factors
Thus, Apple Inc is known for its price strategy according to its quality and design. The strategies Apple adopted was to lessen the size of the notebook, so as to increase the profits by 20% and also the growth was increased by 30%. Also, another strategy adopted by Apple Inc was that during the holiday time it reduced its Mac books by up to 15%, compared to their competitors and still they managed to make profits. Thus, it can be said that Apple adopts the strategy to compete with their competitors on differentiation rather than on cost. This way it may take little longer to conquer the market but it helps getting stable customers and helps establish a brand name (Strategic Analysis n.d.).
Strategic Alternatives, Recommended Business Strategy and Implementation
The strategic alternatives that Apple Inc can adopt are lowering the costs of the existing products in the market or else if a new product is launched, the price should be fixed a little less initially, while maintaining the same quality standards, also the design of the product should e unique in order to capitalize on new markets and customers.
New pacts should be signed with the other organizations, and new joint ventures should be entertained, this helps in better marketing of the existing products and if a new product is launched, it helps in better advertising of the product, in the global market, which at resent is the disadvantage for Apple Inc, as it is very low on the advertising.
Third Strategic alternative could be introducing the concept of knowledge management in the organization.
Also, as customers mostly tend to buy Apple Inc products from its store only, the number of retail stores should be increased around the world which helps the product and the customer better reach each other and thus sales could be increased.
Also, last but certainly not the least, even more investment should be made in the research and development area of the company, so as to create more and more innovative products. Conclusion
Thus it can be concluded that Apple Inc, continue to launch its innovative products in the market, and has been a luxury brand for its existing customers, and its best competitive advantage is its brand image, the quality of the product and the design, however with various analysis, like Porter five force model, VRIO framework, SWOT analysis and PESTLE analysis, helps us in analyzing the work environment of the company and what strategies can be adopted like lowering down the price of its products a bit, increasing the number of retail stores, advertising more can all be adopted to increase the sales even more in the future. IPhone has been a major revolution in the case of smart phones; however company has developed iPad, which is another revolutionizing technological breakthrough. Thus, a lot many strategies could be adopted to make even more and better products in the future (Bright Hand 2010).