Internal and external market environment of Apple

Apple is one of the biggest technological designers in the world. The company manufactures and markets personal computer and technological gadgets such the well know iPod, iPhone, iPad and other hardware and software products.

Apple also designs the applications that are going be used into this personal computers. Apple is one of the few companies in the industry of computers that designs and manufactures the entire product, from the hardware to the applications which are used in an Operational System also created by them.

Apple has created a selling strategy by the creation of online stores, direct sales forces, third party wholesales and resellers in most of the countries around the world. Plus their own retail stores which are very sophisticated and unique in comparison to the competence stores, created an advantage over theme.

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Apple’s creates their products having in mind that the personal computers have entered into a new era in which all the new digital devises and other electronic products work around the computers. As we can mention the iPod the iPhone and the iPad, and even the Apple TV, all of these products are linked to each other making the personal computer the HUB of al these components that permanently share media and information through an internet connection, adding value to the internet and other pheriferical devices.

The company will always be pursuing their strategy of creating devices that are linked to each other, creating a digital life by linking computers to electronic devise.

Marketing

Apple has developed a marketing strategy focusing on covering customers’ expectations.

“Apple creates, manufactures, and markets computing products so people can use them to make their lives better. Apple strives to understand our customers’ needs, to provide customers with the tools and skills to enhance their use of Apple products, and to be courteous and instructive.”

Apple Computer Inc.(2003)

Apple’s highest principles for creating marketing policies are creativity, innovation and the customers responsiveness as reflected on their mission statement:

“Apple is committed to bringing the best personal computing

experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.”

Computer Apple Inc(2003)

Marketing Strategy and Marketing Mix

Steve Jobs objective in the market was to transform the personal computer niche focused company into a less dependent of PC sales based on 80% of revenues.

These corporate level changes makes marketing strategies also change and adapt to a new strategy. Apple reorganized the departments and created the centralisation of responsibilities in company’s wide groups for a short term improvement in communication and effectiveness.

Apple gross margin is one of the highest in the industry because of their innovative, revolutionary and unique products that are being launched almost yearly. But these innovations come from a well based Research & Development. Most of apple gross margin goes back to the company invested on R&D and on sales strategies in order to penetrate their products into more into known markets around the world.

Accordingly to the Apple annual report 2009 the global market for personal computers, mobile communication devices, music devices, digital video, related peripherals and services are highly competitive standards subjected to changes in technology. If the company is unable to compete effectively in these markets, its financial position and results of operations could be affected. Apple Inc. competes in a highly competitive global market, which is characterized by aggressive price cuts, resulting in a significant decline in gross margins. The continual introduction of new products and the continuous improvement of products and prices as the rapid adoption of technology and product advancements creates a very high rivalry well explained in the external environment chapter of the assignment.

Many of the above factors are critical to the company at the time of trying to sustain among its competitors in technology. 

Apple stands out as unique in style and design while other rival companies focus on competing primarily through aggressive pricing strategies.

Brand Positioning

Apple has developed a branding strategy that clearly seeks uniqueness.

Apple sells design, simplicity, usability and innovation against the style of his great competitor Microsoft. All Apple products are unquie for their usability and cleanliness. This is a crucial key to understand all their marketing and the forms of communication as for instance the website design of Apple has a very interesting format, all the application icons, and the easy functionality that are even identifiable and memorable into costumers.

Competitive Advantage

Apple has being able to differentiate itself from competitors even though when the industry has a huge competitiveness

The differentiation of products that Apple develops allows them to create a premium product with a higher premium price.

As mentioned before Apple focused on a niche market, but this market gives them more profitability than competitors which means that the gap between the cost of the product and the customer perceived value is much greater than the competition.

Research & Development

General Information

As mentioned above Apple has created a competitive advantage created by the constant innovation of the company. Adapting to customer needs and global changes. Creating revolutionary products by investing a big percentage of their gross margin into new technology like the well-developed iPhone technology which started as a mixture of a phone and the current iPod launched in 2001, creating a revolutionary change in the mp3 players market to generate an amazing phone that almost yearly evolves to a new version adding value to the products for a sustainability in the competitive industry.

Innovation

What differentiates Apple from other companies is their ability to perceive trends in behaviour, gather points and launch high quality products to meet those aspirations.

Apple has being working like a puzzle, starting in 1984 with the first Macintosh, the company took advantage of innovations by other firms that were already available in the market, such as the mouse and the graphical interface, packaged in a truly revolutionary project which gave the foundations of what we know today as a personal computer

Operation & Logistics

As we know the process of the value- generation created by Michael Porter, the operation and logistic processes are linked to as follow:

Inbound logistics supply of raw materials, components, services, etc. as input to the value generation process.

Operations value generation by operational processes, (manufacturing).

Outbound logistics value generation by transportation, distribution, and supply logistics.

Service value generation by specification and offer of customer

service, by customer-orientation, and by customer care.

Apple distribution channels are trough wholesalers, resellers, national retailers and catalogue sales. Apple also sales their products to certain third party resellers focused on education customers, consumers, businesses and online stores around the world.

Operation Capabilities

Value Chain Analysis

Strategic Issues

Key Performance Indicators

5. External environment

a) The uniqueness of Apple

Apple Inc is famous for unique products, excellent marketing strategy and its leader Steve Jobs who plays a very important role in development and innovativeness of the products in the company.

First of all, one of the uniqueness of the organisation is its leader Steve Jobs because of him the company achieved an incredible business performance. Below, there are some other things about his personality and his role in the company.

Steve Jobs is a charismatic leader who impresses people by his presentations that he did for the company’s product. He is inspired by the excellence, brilliant design and beauty of his unusual vision to things. One of the best qualities of Apple’s co-founder is that he can translate his vision and dreams into products and profits (Jason D. O’Grady 2009). Thus, we can consider Steve Jobs as main leader who brought the uniqueness to the company by creating new innovative products.

As we know Apple products such as IPod, IPhone, IPad, Mac, etc that are very popular products in the market because of its own software, design, brand image and functions. Besides, Apple has a good business and marketing strategies. For example, all product line of Apple and marketing materials are different and you will not find the same things among competitors including its design, advertisement strategy, brand name, product packaging as the company spends a quite a big amount to beat its competitors and look better than them. Another strategy of Apple Inc is to make presentation about its new product before its release and also tell more in details about it and give a clear presentation to people, mass media, reporters by impressing them with a new launched product (SmallFuels Marketing Inc, 2007). Distribution, product diversification, brand image makes the company very successful.

Thus, we can see some important aspects of Apple’s uniqueness that is written above but it is only a small part of apple success because there a lot of other aspects of its success.

b) Market

In this part we shall write about Apple’s industry, its target market and market segmentation

i. Industry, market and market segments

The main industry of Apple is personal computing, portable, communication devices and also software applications. The company offers Mac computers for professionals and students and also its digital and communication devices. For its computers company has its own software like Mac operative system and many other applications iLife, iWork for different Apple devices (Datamonitor, 2007)

Therefore, these are the main products on what Apple concentrates on.

As we know the company has different kind of products and for every of them it has a special target market. Market segmentation is usually used to apply marketing and sales strategy to focus on the special market where people are ready to buy your products. If it is done well the company can recover all marketing and sales expenditures. Thus, a company can concentrate on individual customers or a whole business (Business Resource Software Inc, 1994-2001).

As we know Apple has a lot of different products and every of them have its target market. For example, IPhone that concentrates on mobile selling it was the fastest growing segment among smartphones in 2006 with every year growth of 72 percent. In 2007 IPhone reached 28 percent market share (Will , 2008). Generally we can say that every product of Apple has its own market segment as you see IPhone is among smartphone’s market, another example Apple Mac computers orientated to professional users and also students and IPods’ devices for entertainment and music market.

ii. Porter’s five forces model

Porter defined the nature of competition in a specific industry that is determined by five forces: bargaining power of buyers and suppliers, rivalry among competitors in the industry, threats of substitutes and barriers to entry. The main aim of Porter’s Five Forces Model is to gain better understanding of a specific industry by analysing the external environment. This Five Forces Model proved its effectiveness of analysing the market and the forces that affect on the industry and the influence of existing competition on it. (Wei- Ming Ou, Taiwan, 2007).

http://www.kstoolkit.org/file/view/porters_five_forces.png/194319300/porters_five_forces.png

Source: http://www.kstoolkit.org/Porter’s+Five+Forces+Analysis

Therefore, using this model we will discuss about competitive situation of Apple by analysing its external environment.

Existing of rivalry: Medium: as Apple also produces software it has its main competitor Microsoft that produces Windows operative system and media for playing music and video. In hardware area of computers it has competitors like Dell, HP, Lenovo companies. In MP3 industry Samsung produces very creative and stylish MP3 players. For example, Napster has the similar music stores to ITunes ones (Varun Aggarwal, 2009). Therefore, we can see that the company has different products in the industry that show us real competitors in the areas. For example, new iPad a tablet computer also found its competitors for a short time of period after launching so it means competition in this area also increasing very fast.

Threat of entrants: Low: as Apple a leader in the market so it has a lot of products such as IPhone, IPad and IPod that have many features and functions compare to other producers. Apple brand image and very large market share is a big advantage. Customers’ loyalty also is very high. Distribution channels in US gain more reached 60 percent of the market (Apple Inc, 2010). Thus, threat of new entrants is low because Apple and other large companies like Microsoft, Samsung, LG, HTC competing between each other and all of them have its power in technology and brand image.

Threat of substitutes: Medium: Substitutes for IPod can be CD, DVD, MD players or other competitors music devices . IPhone can be substituted by mobile or smartphones phones with multi functions. IPad can be substituted by laptops and netbooks or even smartphones.

Bargaining power of suppliers: Medium: Raw materials of suppliers and labour can be threat for the company. For example, IPhone has many functions such as MP3,video players, camera, memories, therefore Apple deals with internal and mediates suppliers and this the power of supplier is low here ( Gwen Johnson, 2008). At the same time Apple is a large purchaser of hardware so it means the company also has a power over suppliers as they depend on sales volume. If Apple can get more suppliers it is better for it because there is less dependence from them.

Bargaining power of buyers: Medium: Illegal sharing of music from one person to another without paying for it. Many Apple retailers can ask better terms for supply and also they can pressurise the company for lower prices. Sales may be low during economic downturn and customers can buy less on computers, mobile phones and music players (Hufeza,2007-2009). On the other hand, customers can change their preferences as time is changing very fast and they can choose another products of Apple’s competitors in the industry. For example ,they an option to find the cheapest and good quality product.

Macro-Environment PESTEL analysis

In this part, we are going to apply PESTEL analysis as a tool to evaluate macro external environment of Apple Inc. There are lots of factors in macro environment that influence on manager decisions of every organisation. For example, regulations, laws, population and demographic change, , government regulation, trade barriers these are some examples of macro environmental change. Thus, for a good analysis of the factors managers can use the PESTEL model( Oxford University Press, 2007).

In this way, by using PESTEL analysis we shall analyse external environmental of Apple Inc.

Political factors: One of the important aspect that Apple Inc must consider is a market and product launching regulations. Another important aspect is competitive regulations, taxes, government regulations, employment policies and political stability of the entering country. For example, when Apple entering new country it should know its regulations on imported products and tax legislations. Political instability also can affect Apple’s sales and distribution channels and trade barriers of the country. As we know Apple is US Company and it is a big advantage for it as the country has a lot of trade agreements with many countries including trade unions.

Economic factors: The main economic factors can be taxation policies, economic development of a country, exchange rate, inflation, living standards, average income. The purchasing power of buyers and the ability of people to buy Apple’s products as it targeted to medium and high class people.

Exchange rates and currency fluctuations plays a very important role as many product’s components the company get from foreign suppliers and in this way international trade regulations are very vital for the company performance ( Nice Essay, 2008).

Social-cultural factors: Technological developments of the country, people’s lifestyle, living standards, demographic trend, age, etc are important social factors that can influence Apple’s performance and sales. Technology and computer industry is developing very fast in the world and more people are interested in it, for example young people, educational groups, businessmen is a big opportunity for Apple. The countries with a good population income and large population also can be a potential market for the company.

Technological factors: As technology is growing fast it is a big advantage for Apple because if it continue innovates like today it will be able to keep a pace of the high technology growth in the world. Increasing demand in technology can lead the company to new success.

Environmental factors: Every country has its law on environmental issues , therefore Apple has to follow to the legislations and restrictions. If a company can operate in the standards then it can run its business without any problems. Some governments have legislations on product recycling so the company must follow the regulations by producing recyclable product that do not harm environment.

Legal factors: Legal environment it means that Apple must operate its business within special regulations like consumer, health, safety, employment and competition laws. Intellectual property law and patents on company’s products. ( Nice Essay 2008).