Our main purpose of this SWOT Analysis and Porter’s Five Forces Model analysis is to identify the most significant factors that affect a company and its market both internally and externally. These analyses provide Apple with quick, executive keys by looking at strength and weaknesses alongside opportunities and threats. Introduction:
Apple was launched April 1, 1976 by Steve Jobs, Ronald Wayne and Steve Wozniak and is considered to be one of the most innovative technologies companies in the world. The company is responsible for products and services such as the Macintosh desktop and laptop computers, iTunes, iPod, iPhone, iTouch, iPad, Apple TV, and iCloud. Apple also develops its own software to run on its computers. This accomplished company faces constant challenges from a competitive market to a technology lifecycle that is continuously being shortened and thus must make key decisions on which products to build or discontinue in order maintaining its competitive edge. This analysis will look at several analytical tools that can be used to evaluate Apple’s competitive intelligence. The tools are; SWOT analysis, The Five Forces Model. SWOT analysis:
SWOT analysis is an excellent tool to use to identify strengths, weaknesses, opportunities and threats (www.mindtools.com). There are several questions that you should be able to answer when using this tool. • What advantages does your company have (strength)?
• What areas can you improve upon or avoid (weakness)?
• What interesting trends are you aware of (opportunity)?
• What are your competitors doing (threats)?
Applying this tool to Apple and we would see the following;
Apple is a company, which manufactures a variety of products including computers, operational software, mobile phones, portable digital music and related accessories. The brand is well known for high quality products, which help differentiate them from competitors. The company owns one of the top brand names in technology worldwide with 54% of their profits coming from foreign markets (Apple Annual Report, 2006).
The company operates on the purpose of developing new products which offer an easier and more efficient way of using technology. The final products always appear at the most convenient and easy to use in the market.
Apple is a worldwide leader in harnessing a portfolio of product diversification. With its product lines, the company targets a wide ranging audience in almost every technological market. Moreover, with such a large customer base, the company has a large network of corporate and commercial buyers who are loyal to the brand, even though sometimes the price paid is higher than alternatives in the market.
The following table shows net sales by operating segment and net sales and unit sales by product during 2012, 2011, and 2010 (dollars in millions and units in thousands): 2012 Change 2011 Change 2010 Net Sales by Operating Segment:
Americas net sales ............................ $ 57,512 50% $ 38,315 56% $24,498 Europe net sales .............................. 36,323 31% 27,778 49% 18,692 Japan net sales ............................... 10,571 94% 5,437 37% 3,981 Asia-Pacific net sales .......................... 33,274 47% 22,592 174% 8,256 Retail net sales ............................... 18,828 33% 14,127 44% 9,798 Total net sales............................ $156,508 45% $108,249 66% $65,225
Figure 1: Apple Inc Revenues and Projections
In the personal computer industry, the company has one of the highest stock prices. Apple is financed mostly by its equity; the company does not have any debts, as a result investors would be at less risk by holding Apple’s stocks. The company cash flow went up rapidly from $90 million to $2,220 in four years from 2002-2006 which ensure a healthy financial performance as well as abilities for future expansion and growing plan.
There was a report that the Apple iPod Nano might have a faulty screen. Apple replaced all the faulty items. In addition, early iPods had faulty batteries. Thus the customers were offered free battery cases. The music industry has also added pressure on Apple to increase the price of its music download file. Many of those companies make more money from iTunes (the downloadable music files) than the original CD sales. It is also the 82% of legally downloaded music in USA. In 2005, Apple announced that they are going to end the long-term relationship with IBM as a chip supplier and it was going to change over to Intel. Specialists from the industry commented that this would cause confusion among the Apple consumers. In 2007, Apple confirmed the fault about its iPod touch’s screen. It was reported that the problem affected the units but the exact number of units being affected wasn’t disclosed. There were also reports that some iPhones have dim screens, especially the newer ones for the iPhone 3g. Many had given feedbacks about how Apple products work. You need a computer to synchronize your songs, photos and data that you want to put into the gadget. It has caused a stir about the inconvenience of the product. They photos in the gadget cannot be sent via Bluetooth which is a function commonly used on Sony Ericsson, Nokia and other phone manufacturing companies.
Apple has strong online presence and it has a steady growth in the industry for its operations. During 2012, the Company’s domestic and international net sales accounted for 39% and 61%, respectively, of total net sales.
Apple developed its iTunes and music player technology into the mobile phone format which is now installed in the iPhone. Downloads are also available via the USB cable and the software on the handset pauses the music if a call was to come in. New technologies and strategic alliances offer opportunities for Apple. The iCloud is also a one of a kind function available in the market for the smart phone market. By having a storage space and using it as a backup, it is convenient. Apart from the 5GB free storage space, more storage space is also available for sale via iTunes to suit the different needs of the consumers. The constant growth of PC and mobile industry enabled a boost.
* Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets. * Global economic conditions could materially adversely affect the Company. * The Company depends on the performance of distributors, carriers and other resellers. * The Company’s products and services may experience quality problems from time to time that can result in decreased sales and operating margin. * The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregate adversely affect the Company’s business. * The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of whom are located outside of the U.S.
Porter’s Five Forces:
The five forces model, developed by Michael Porter of Harvard Business School in 1979, provides methods in which corporations can evaluate their competition and determine strategy. The model looks at the strength of five competitive forces and, when combined, determines long-term profitability and competition. Baltzan (2011) lists the five competitive forces as buyer power, supplier power, threat of substitute products or services, threat of new entrants and, rivalry among existing competitors. Bargaining Power of Buyer:
In this sector buyer has lots of option in their hand. So bargaining power of buyer is very high. But sometimes customers cherish particular products they end up paying more for that one product. This positively affects Apple Inc.
Bargaining power of Supplier:
High levels of competition among suppliers act to reduce prices to producers. The easier it is to switch suppliers, the less bargaining power they have. So Apple faces no threat from suppliers. Design, innovation, and production occur from within.
Threats of Substitute Products or Services:
The threat level for Apple is high due to the numerous options that consumers have to choose from. Amazon and Android both offer buyers the ability to download digital content, i.e. books, music, movies, and etcetera through its online store. Samsung, Sony, Motorola and Microsoft sell various products (tablets, mp3 players, cellular phones) that directly compete for the same consumers as Apple. Barriers to Entry:
High capital requirements mean a company must spend a lot of money in order to compete in the market. High capital requirements positively affect Apple Inc... Advanced technologies make it difficult for new competitors to enter the market because they have to develop those technologies before effectively competing. This requirement positively affects Apple Inc... Sometime customers are loyal to existing brands (Apple Inc.). When barriers are high, it is more difficult for new competitors to enter the market. High entry barriers positively affect profits for Apple Inc... Degree of Rivalry:
Rivalry among existing competitors is considered to be high when there is strong competition in the same market. The life cycle in the technology sector is short and there are new products that come out every year. Apple stays ahead of the competition by developing products that exceed the needs of their consumers. The business strategy has kept them leaders in their sector for the past decade.