STRATEGIC MANAGEMENT

DBA 401

ASSIGNMENT 1

Tatu Eumot June

D33/47534/2017

[email protected]

[email protected]
Tatu June D33/47534/2017 DBA 401

Contents

Executive Summary.........................................................................................................................2

PESTEL Analysis........................................................................................................................2

SWOT Analysis...........................................................................................................................5

Key Problems Facing Apple............................................................................................................7

Recommendation.............................................................................................................................8

References........................................................................................................................................9

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Executive Summary

This study has been undertaken in order to discuss strategy analysis of Apple Inc. The study is

also going to identify key problems facing Apple and provide key recommendations. This

analysis is based on the document “Apple (in 2013): How to Sustain a Competitive Advantage?”

by Frank T. Rothaermel. It is very important to undertake strategic analysis because the analysis

will reflect the company’s internal conditions and capabilities. The analysis will also asses the

company’s external environment, including both the competitive and the general contextual

factors. Apple’s major mission is to enhance the satisfaction and loyalty of consumer. Therefore

frequent Strategy analysis should be conducted to ensure they are on the right track.

To undertake strategic analysis of the Apple Inc., we will use SWOT analysis to look at the

company’s weaknesses, strengths, opportunities and threats. PESTEL analysis will also be used

to analyze Apple’s macro environment. We will also look at internal analysis of the company so

that we can find out the organization’s resources in terms of financial capital, technical expertise,

skilled employees, experienced managers and other capabilities in performing different

functional activities such as marketing, manufacturing amongst others.

PESTEL Analysis

PESTEL Analysis

Political Since its founding, Apple has taken advantage of political

opportunities in the micro and macro-environment[ CITATION Jes19 \l

1033 ]. Stable political environment in developed countries and free

trade policies have created opportunities for Apple to open its doors to

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markets outside united states.

Stable political environment in Asia has enabled Apple to outsource

manufacturing from Taiwan[ CITATION ROT13 \l 1033 ].

EU, which has been accused of targeting tech giants including Google

and Amazon, declared that Apple owed Ireland $14.5 Billion in taxes.

Apple is the biggest tax payer in the world and this may affect US-EU

relationship. Ireland has accused EU of interfering with its sovereign

matters thus affecting Ireland relationship with EU[ CITATION Abh17 \l

1033 ]. Such tax matters may affect Apples revenue too.

There is barrier to entry in Indian market because Indian government

does not favor premium brands like Apple, unless the brand sets up

production units in the country.

Trump government threatened to increase tariffs on Asian countries

especially china. This could have increased cost of production, causing

production to move back to the US.

Economic Apple products are aimed for people who are willing to pay a tad more

for better quality devices [ CITATION ROT13 \l 1033 ]. Rapid economic

growth of developing countries and increased disposable incomes

among target customers have created an opportunity for Apple to

increase its revenues.

Social/Sociocultural Apple’s corporate culture has spilled out of the company leading to

Factors movements such as “iPod people” that brought in the “coolness factor”

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has created a huge following for the apple products[ CITATION ROT13 \l

1033 ].

Rise of use of mobile access and increased in dependence on digital

systems has created an opportunity to increase sales[ CITATION Jes19 \l

1033 ].

Technological Apple is one of the tech giants in the world. It has revolutionalised

tech world through its products, which were first of their kind such as

iPod iPhone, Mac books amongst others. However, other tech

companies are catching up, posing a threat to the apple market.

Rise in growth of mobile technology has heightened the sale of iPhone

but has hurt the sale of MacBook. Competitors such as Samsung are

offering products with similar features with cheaper prices, leading to

dominance in African and Asian markets, giving Apple a lower

competitive advantage[ CITATION Abh17 \l 1033 ].

Environmental In today’s world, focus on environmental issues affects image of the

brand and popularity. Apple is focused on using renewable energy

sources to make its products and to reduce toxins from its products. In

2015, 93% of energy used in manufacture was from renewable

sources[ CITATION Abh17 \l 1033 ]. Mercury arsenic and lead have been

taken out of the screens and soldiers used too.

Legal There has been an increased pressure on technological companies to

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increase privacy regulations. This has limited technological

companies.

Apple has faced legal battles against patents.

Also the company is facing legal battles on its policies of third party

repair services especially in the EU, US and Australia amongst other

countries.

SWOT Analysis

SWOT ANALYSIS

Strength  Strong brand image. Apple is the most valuable brand in 2021, for the

8th year in a row, with the value of $322billion[ CITATION KGu21 \l 1033 ]

 Effective innovation. Apple was the first to come up with many

innovative products including iPod, iPhone and iPad [ CITATION

Saw01 \l 1033 ].

 High profit margin. Apple is the most valuable company.

 Sustainability, through recycling and re-using parts of its products.

Apple uses sustainable energy for manufacturing.

 Diverse products, including iPhone, iPad, iPod, apple TV, apple news,

apple cards amongst others.

Weakness  High prices. Apple products cannot be afforded by low income earners.

 Apple attempting expansion into areas that they lack competencies

such as credit card, game streaming and content streaming. It has led to

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failure such as the infamous “Apple maps.”

 Incompatibility with other software. Apple software do not support

other software making them incompatible, therefore a customer has to

exclusively purchase apple accessories to continue to use their

products.

Opportunitie  Consistent Customer growth. They have phenomenal customer

s retention rate of 92%[ CITATION KGu21 \l 1033 ].

 Qualified specialists and professionals, such as Jonathan Ive, an award

winning British designer, who is the head of Apple’s in-house

Industrial Design group (IDg). Ive has been credited with being the

chief designer of the iMac, iPod, iPhone, and the iPad amongst others.

[ CITATION ROT13 \l 1033 ]

 Expansion of distribution network. Its current distribution network is

quite limited, with minimal growth.

 Creation of new product line, especially wearable technology, which

according to Forbes will become a $27 billion+ market by 2022

[ CITATION KGu21 \l 1033 ].

Threats  Corona virus outbreak

 Counterfeits in the 3rd world countries.

 Increased competition from brands such as Samsung

 Market penetration. Apple has only 24.55% market share globally,

compared to android which has 72.23%

 Lawsuits. So far, 60 class-action lawsuits have been filed against

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Apple.

 Higher tariffs on imports from China by the US government may

increase the cost for customers.

Key Problems Facing Apple

 Death of Steve Jobs. Steve Jobs led Apple through a period of innovation, where products

such as iPhone, iPod, iPad started production He also led Apple through disruptive

business models and led to skyrocketing sales and profits. He was an irreplaceable human

resource and he has left huge shoes fill. The biggest fear is that the repeat of what

happened between 1985-1997, that sent Apple to losses.

 Continuing Innovation. Innovation is the fuel that powers Apple’s growth cycle. With

changes in technology every day, Apple is expected to keep up, otherwise they risk losing

customers. Apple has to produce 5G compatible phones with the launch of 5G network,

the need to incorporate applications that support health workouts on Apple watches, with

the health rage sweeping around the world and integrate hardware and software to drive

more stickiness on its ecosystem, amongst other technological changes.[ CITATION Inv20 \l

1033 ]

 Competition. Up to 2020, Apple had only 24.55% of the global market. Android happen

to have 72.23% of the market. Other brands such as Samsung, Huawei have been able to

produce similar products with similar functions and selling them at lower prices, thus

attracting customers especially in Africa and Asia

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 Apple is venturing in areas where they have little competitive advantage, such as video

streaming and credit card space and they are spreading themselves thin and they end up

failing miserable.

 Breaking into Asian and African markets. Bureaucracy and politics are hindering its entry

into Indian markets while African markets and other 3rd world countries has been filled

with counterfeit Apple products.

 Emerging economies with large population. These economies could boost any company

because they offer large populations, growing disposable income and low cost of living.

These populations offer a strategic dilemma to apple execs because to penetrate these

markets, they’ll have to offer low price and low margins.

Recommendation

 Just before the death of Steve Jobs, Tim Cook was appointed CEO of Apple. Before, he

was a high ranking executive at Apple. He has led Apple to greater heights, such that the

sales of Apple have increased tremendously and in 2021, Apple has been the most

profitable company in the world for the eighth year in a row. Apple is also the company

that pays most taxes in the world.

 Apple’s corporate culture encourages the staff to try 1000 times and fail, therefore

encouraging the staff to innovate some more. Despite of technological changes, Apple

has no sign of being under huge threats, thus proving a great stock to long-term

investors.

 Apple should set up shop in the 3rd world countries and encourage their governments to

set up laws against counterfeit products.

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 Apple should strategize their entry to the emerging economies such as Brazil, while

maintaining their hold on developed countries.

References
Gupta, .. (2021, February 07). Apple SWOT 2021/ SWOT Analysis of Apple. Retrieved from

Business Strategy Hub: https://bstrategyhub-

com.cdn.ampproject.org/v/s/bstrategyhub.com/swot-analysis-of-apple-apple-swot/?

amp_js_v=a6&amp_gsa=1%amp&usqp=mq331AQHKAFQArABIA%3D

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%3D#aoh=16210098804572&referrer=https%3A%2F

%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https

Investig.com. (2020, Aug 21). Apple Faces 3 Challenges As It Hits $2-Trillion Market Value.

Retrieved from Investing.com: https://m.investing.com/anaysis/apple-faces-3-challenges-

as-it-hits-2trillion-market-value-200534742

J., S. M. (2001). The seven steps to nirvana: Strategic insights into ebusiness transformation.

McGraw-Hill, Inc.

Lombardo, J. (2019, June 09). Apple Inc. PESTEL/PESTLE Analysis & Recommendations.

Retrieved from Panmore.com: http://panmore.com/apple-inc-pestel-pestle-analysis-

recommendations

Pratap, A. (2017, February 7). Apple PESTEL Analysis. Retrieved from notesmatic.com:

https://notesmatic.com/apple-pestel-analysis/

ROTHAERMEL, F. T. (2013). Apple (in 2013): How to Sustain a Competitive Advantage?

MCGRAW HILL EDUCATION.

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