Sample Essay on Apple Analysis and Management Recommendations

Executive summary

This essay is an investigation into the internal operations of Apple Inc. It conducts strengths, weaknesses, opportunities, and threats analysis to come up with recommendations for the company’s success. Among the findings, Apple Inc. is a large multinational corporation in electronic products and has a high market capitalization. With more than 60,400 employees worldwide, working on a full-time basis, Apple has a problem engaging underage and child labor that has now put the company in the spotlight. It also retails very expensive products prompting social challenges with people selling their children or body parts to afford one. Another key threat identified is patent infringement leading to legal battles with competitors such as Samsung. The company however enjoys a good product brand reputation and financial stability that enables it to have many loyal customers. It also has the opportunity of penetrating international markets with new product lines such as the TV and watch to improve competition. This report, therefore, recommends that Apple amend the cost of its products to increase accessibility besides making use of unclaimed market destinations in sophisticated electronic products.

TABLE OF CONTENTS

Executive summary. 2

1.0 Introduction. 4

2.0 Background. 4

3.0 Apple Swot Analysis. 7

3.1 Strengths. 7

Loyal customers: 7

Strong product brand: 8

Product leadership: 9

Strong leadership: 9

3.2 Weaknesses. 10

High Cost of products: 10

Customization and Incompatibility issues. 10

Patent infringement Allegations: 10

3.3 Opportunities. 11

Room for international expansion: 11

Increased tablet and smartphone market: 11

3.4 Threats. 12

4.0 Recommendations to the management of Apple. 13

REFERENCES. 14

1.0 Introduction

Strategic management is the main pillar that helps firms to gain a competitive advantage. If profit-oriented organizations had a deficit in strategic management, the realization of profits would be difficult because of poor planning and stiff competition. Effective business management begins with the internal analysis of the strengths, opportunities, weaknesses, and threats of a company (Valentin, 2001). This paper conducts an analysis of the strengths, weaknesses, opportunities, and threats available in the internal environment of Apple and makes managerial recommendations.

2.0 Background

Apple is an American-based company specializing in the manufacture of electronic products mainly computers and related accessories since 1976 (year of establishment) in California. The company has a new technology for their products that unfortunately, under the able management of the CEO, Tim Cook, experience compatibility issues for software and hardware applications with other existing computers. This has erupted into global debates in the industry with key players blaming the company for locking in Apple customers. The company generally has a global reach with revenues amounting to more than $156,508 billion by the end of the 2012 financial year (Apple Inc., 2014). Apple had 60,400 full-time employees worldwide according to a form filed with the US Securities and Exchange Commission (Camm-Jones, 2011). In 2012, the number of employees had increased to about 72,800 with profits also hitting their highest in history at $41,733 billion. The company competes closely with Samsung electronics, IBM, Cisco Systems, Lenovo group, and Sony Corporation. The chart below shows quarterly incomes for 2010-11

Source: Apple (2014)

Apps are pretty darn cool allowing one to play games, shop, gamble, and book holidays using apps. It is a reflection of how far mobile technology has gone in recent years and symbolizes the transition from normal cellular phones to the smartphone generation (Kirk, 2013). Because of the differentiation strategy in the design of Apple products, many customers have had an urge to own one, especially the touchscreen iPhones. This has however been received by a number of challenges not only to the company but also to the customers. For example, Wong (2012) reported that many customers were selling parts of their bodies like kidneys to be able to buy an iPhone or IPad with majority of the cases being reported in China. The main reason is that the products are attractive but unaffordable. The figure below shows the trends in the consumption of IPads and iPhones (Apple products rated 1st and 2nd among top 50 Apps in the industry) in various markets.

This fact, the attractiveness of the products, however, communicated a bitter lesson to Apple because the cost of the products could just cause more mayhem given that the products were not utilized for productivity other than entertainment. In fact, Kirk (2013) reported that a person had to hang himself (commit suicide) because he was unable to buy an iPhone like his colleagues. Furthermore, just to increase accessibility, a young Chinese couple is suffering a long jail term after being victimized for selling a baby daughter to raise money for an iPhone for just $5000 (Shears, 2013). Despite the high cost, Gabbatt (2013) argues many customers are very devoted that they would queue for days and even weeks waiting to be served with an IPad and iPhone. Should Apple reconsider its marketing price strategy? What is the way forward? Such instances have seen the company being summoned by humanitarian organizations civil society groups and law courts but much is not yet to be realized.

There are also allegations that Apple Company is involved in child labour and has admitted to these allegations a couple of times (Moore, 2010). Seemingly, the company has many tasks but with an 85limited workforce, hence the use of child labour to people as young as 15 years old. With the rise of children’s rights and child support organizations globally, child labor does not only destroy the reputation of Apple but also consumes some profits because of cowed customers. Besides, child labour paints a bad picture in the political sense where the company risks developing bad relationships with the governments of the day through summons and discriminatory injunctions and legislations. Eventually, this would lead to reduced revenues, bad publicity, empowered competitors, and legal battles with the civil society. Such time that would be used for strategizing will therefore be wasted in addressing the raised issues.

3.0 Apple Swot Analysis

3.1 Strengths

Organizational strengths make a firm to be unique in their marketing and operational strategies often assuring the company of a competitive advantage (Bajarin, 2012). Generally, Apple is successful because its products are easy to use, have good customer service, and store experience. Precisely, Apple enjoys a number of strengths for example innovative designs of its products, good product leadership and highly influential leadership (Apple Inc. 2014). These are discussed below:

Loyal customers: One of the strengths of Apple Inc. is that it has loyal customers as quoted by Bajarin (2012) claiming that two million people pre-ordered the latest and greatest smartphones from Apple Inc. in the first 24 hours of its launch. Apple Inc. has built emotional bonds with its customers. Many customers now believe that Apple’s products are better compared to those of their competitors. Because of their consumer loyalty, Apple Inc. has reduced the cost of educating and promoting its products, this is because their customers play the role of net promoters. The reason for loyalty among customers is the quality products that the company offers to its clients. Indeed, Wong (2012) argues that Apple Inc. produces one of the best iPhones, iPads, Macintosh in the world that many customers wish to be associated with because of its high quality. Customer loyalty is about not only the customer’s emotional loyalty but also the intellectual loyalty. Some customers justify doing business with Apple instead of another companies because of the product benefits the company offers.

Strong product brand: Secondly, as earlier clued, Apple product design is of its own innovative design with computers using the Mac operating system hence positive brand reputation. IPods and IPads, and Apple phones, Apple’s products, also have a unique design that attracts and locks in customers for lack of compatibility with most existing ones (Sherman, Rowley and Armandi, 2007). During their inception in 2010-11, the products commanded a huge market share; see the figure below:

According to Kirk (2013), apps by Apple are amazing and inspire consumers to shop, gamble, play games, and even book holidays using the apps. This utterance shows how the mobile technology by Apple has transformed from just the normal cellular phones to a much more sophisticated smartphones generation. As part of the innovative technology, Apple also produces an operating system known as IOS that has enabled the company to receive a much profits. A survey carried out in 2012 showed that the company made a profit of about 41,735 billion dollars from the innovative technologies making it of the one of the largest companies in the world in market capitalization. Besides, the company was in 2012 chosen for the third time as the most innovative business in the world (Apple Inc. 2014).

Product leadership: On product leadership as a strength, generally, Apple products hit on the market as soon as they are launched because of sophisticated features and design. Currently, Apple products have penetrated all markets globally because of new features like ability to resist viruses common with windows applications. All this is because of strong marketing and advertising teams that have been another source of competitive advantage to Apple Inc. It is through marketing and advertising that potential customers get to know about the products that a company offers. Apple retail stores provide eye-catching advertisements for their products and services hence quick market penetration.

Strong leadership: On the last strength, Apple enjoys great leadership such as that of Tim Cook who is a strategist economist. Besides, the company had a strong and visionary executive officer, Steve Jacobs whose death met him in 2011. According to Online (2011), Steve Jacobs was a visionary leader who introduced several products in that market that made Apple the most respected company in the world today. Steve Jacobs also introduced several apps that are very common today. Jacobs changed how people use computers, handsets, and how people download music. When the success of Apple is mentioned, the name Jacobs is always remembered because, when he was the CEO of Apple, he worked hard in ensuring that the company provided the best and quality products.

3.2 Weaknesses

High Cost of products: Despite the great strengths analyzed above, Apple faces many weaknesses. For instance, Tar (2013) argues that many of the Apple products are very expensive with some costing more than 20 times the cost of competitor products. Secondly, the company’s iPod technology has almost reached saturation.

Customization and Incompatibility issues: Besides, it is not easy for Apple products such as Mac computers to have customer preferences for lack of compatibility and customization capabilities. Many Apple devices are incompatible with other operating systems. Mac products are only manufactured for a single operator. For example, Apple’s iMessage can only be used to chat with other users who own or access Apple devices while Google hangout, Apple’s competitor, can use any operating system. This is one of the reasons that in the past, there have been increased issues of the products leading to their recall for example iPhone 4.

Patent infringement Allegations: Patent infringements of other company’s rights have also raised issues for Apple. It has been accused of infringement of competitors’ rights in the past. A patent is a grant of a property right of the government or the inventor (Sherman, Rowley, and Armandi, 2007). It is issued through the US patent and trademark office by the commissioner of patent acting under the authority of the US department, one of the recent patent cases that Apple Inc. is answering is the Apple versus Samsung patent trial. The two companies have accused each other of stealing one another’s innovations and design.

Because of infringement allegations and court proceedings, Apple is at risk with critics arguing that this is possible damage to the good brand reputation of its products. Related to this, other companies are now copying Apple technology, especially in iPhone and touchscreen, meaning that competition will be high in its future. This could have been contributed by the change in leadership from Steve Jobs with critics arguing that the current CEO cannot fit in the big shoe left behind by his predecessor.

3.3 Opportunities

Room for international expansion: The greatest opportunity for Apple is in untamed markets globally meaning there is room for international expansion of its products. The company also has the opportunity of switching to other consumer products now that their manifesto does not lock them to computers only such as iTV and luxury watches among other electronics such as (Zhao, Dai, Wang, 2002). In fact, the CEO, Tim Cook, one time announced that Apple was set to introduce something that will be much better and bigger than Apple TV in relation to ITV. Towards the end of 2012 however, it was reported that the project had been postponed in favour of iWatch technology.

Increased tablet and smartphone market: Another opportunity available is the rapid change in the tablet and smartphone market across the globe. Apple manufactures tablets and smartphones and given that there is growth in the market for these two products, it only means the company has potential clients ready to purchase if marketing and advertisement are effective to catch their attention. Many people are now realizing the importance of using digital devices like smartphones and tablets to communicate having moved away from normal cellular phones to a much more sophisticated smartphone. Taming this noble opportunity will help Apple compete with companies like Samsung that have diversified enough. There also seems to be enough room for expanding the iTunes technology and the mobile gaming market. Lastly, Apple has an opportunity of reducing its product costs to increase access to its products to people without really suffering losses.

3.4 Threats

There are two major threats for Apple in its global markets. The first one is about the high competition it faces from existing and upcoming companies with Samsung and Lenovo being great threats to competition especially in Croatia (Anic, Nusinovic, 2005). The company also faces the threat of changing customer tastes and preferences and should this occur, Apple could really have no alternative but suffer the losses. Moreover, the 2013 tax increase is bound to increases the price of Apple the products further creating an extended threat since cost is already a big issue. This is because the company may increase the value-added tax on their products, making them much more expensive than it already is. The high price of Apple products has been of great disadvantage to the company because only a few rich individuals are able to afford and a further increase in the price may affect the consumer’s perceptions

4.0 Recommendations to the management of Apple

Apple Inc. is one of the best companies in the world but this does not mean that the company does not have its weaknesses. It is important for any company that wants to improve the quality of its service and products to know its weaknesses and find the best solutions to improve. The first recommendation is because Apple’s products and services are very expensive. As a result, Apple devices are still unpopular in some markets especially in countries where the majority of citizens are still poor. In order for Apple Inc. to reach all the untapped markets, the company should consider reducing the prices of its commodities. A recommendation is also hereby made from the incompatibility point of view. Every business must try to ensure their competitors have no advantage over them. Some of Apple Inc. competitors for example Samsung and blackberry produce devices that are not restricted to a single operating system. In order for Apple Inc. to have an equal playing ground with its competitors, it should ensure that its devices are also compatible with other operating system. Another recommendation that Apple Inc. should put into consideration in order to maintain their good reputation is to ensure that they solve all the cases involving patent infringement this is because when a company is involved in a legal battle, its reputation falls at risk.

References

Anic, I. D., & Nusinovic, M. (2005). The Apple industry in Croatia: a value chain analysis approach. International Journal of Entrepreneurship and Small Business, 2(3), 211-225.

Apple Inc. 2014. Apple Infromation. [Online] Available at <http://www.Apple.com/about/> [Retrived 1 April 2014]

Bajarin, T. (2012). Six Reasons Apple Is So Successful. [Online] Available at <Http://Techland.Time.Com/2012/05/07/Six-Reasons-Why-Apple-Is-Successful/> [Retrived 1 April 2014]

C (2011). How Apple Computers Changed The WorldForever. [Online] Available at <Https://Www.Catholic.Org/News/Technology/Story.Php?Id=42601>[Retrived 1 April 2014]

Camm-Jones, B. (2011). Apple Employees Number More Than 60,000. [Online] Available at <Http://Www.Macworld.Co.Uk/News/Apple/Apple-Employees-Number-More-60000-3313897/> [Retrived 1 April 2014]

Gabbatt, A. (2013). Apple devotees line up for hours – even weeks – to buy new iphone. [Online] Available at <http://www.theguardian.com/technology/2013/sep/20/apple-lines-iphone-5s-5c>[Retrived 1 April 2014]

Kirk, K. (2013). Why Are Mobile Apps So Important In The World Today. [Online] Available at <Http://Www.Thenewsofiphone.Com/2013/10/Why-Are-Mobile–Apps-So-Important-In-.Htm1>[Retrived 1 April 2014]Online.

Moore, M. (2010). Apple admits using child labour. [Online] Available at <http://www.telegraph.co.uk/technology/apple/7330986/Apple-admits-using-child-labour.html> [Retrived 1 April 2014]

Shears, R. (2013). Chinese couple face jail after selling their baby daughter for £5,000 to buy an iphone read more. [Online] Available at <http://www.dailymail.co.uk/news/article-2465820/couple-china-sell-baby-daughter-5-000-buy-iphone.html> [Retrived 1 April 2014]

Sherman, H., Rowley, D. J., & Armandi, B. R. (2007). Developing a strategic profile: the pre-planning phase of strategic management. Business Strategy Series8(3), 162-171.

Tar, A. (2013). Apple SWOT Analysis. GRIN Verlag.

Valentin, E. K. (2001). SWOT analysis from a resource-based view. Journal of Marketing theory and Practice9(2), 54-69.

Wong, G. (2012). Chinese teen sells kidney to buy iphone, ipad. [Online] Available at <http://news.yahoo.com/chinese-teen-sells-kidney-buy-iphone-ipad-072601309.html> [Retrived 1 April 2014]

Zhao, Z. Y., Dai, J., & Wang, L. C. (2002). Analysis of the Apple Industrial Present Situation and International Competition Ability in Shaanxi Province [J].Acta Agriculturae Boreali-occidentalis Sinica4, 030.