MGMT Project Paper
Section 2: External Environment and Industry Analysis
Political Factors:
Tax payments are among one of the major political factors affecting Apple, Inc. Considering the company has made an appearance around the globe, they pay for a complex legal system to work to pay as little taxes as they can, particularly in the United States and parts of Europe. According to the article, Commentary: Apple Avoided $40 Billion in Taxes. Now It Wants a Gold Star? “Apple currently holds about $252 billion in profits offshore, where it can avoid paying US taxes. That is over 90% of the company’s total cash on hand. This profit is subject to the corporate income tax as soon as it’s “repatriated” back to the US.” It is clear Apple has taken extra steps to avoid taxes in the US, which is affecting the company politically. [1]
Apple has also had its fair share of heated debates with the US Federal Bureau of Investigation. One debate was fixated on the government demanding the access of a San Bernardino terrorist’s cell phone who had just killed 14 people in a terrorist attack. According to the article, Apple vs. FBI one year later: Still stuck in limbo written by CNET, “US Magistrate Judge Sheri Pym ordered Apple to create that software for the FBI. Apple refused, with Cook arguing that the order went too far and would threaten the security of all iPhone users. Bypassing the iPhone’s password meant creating a “back door” in its iOS mobile software that could then be used to access every other iPhone, he said.” Overall, Apple claimed it was a privacy issue, the FBI claimed it was a security issue, and the entire matter created a political divide, some siding with Apple and others siding with the government. [2]
An additional issue concerning the US government is the debate to remove the Absher app from the App Store that has been commonly used in Saudi Arabia. Congress has been criticizing this app due to the nature of its use. It is said to be used to track the women in the country and is being used to derail them of their basic human rights. Senator Ron Wyden wrote to apple saying, “It is hardly news that the Saudi monarchy seeks to restrict and repress Saudi women, but American companies should not enable or facilitate the Saudi government’s patriarchy.” This just shows how much politics can interfere with the details in how a company composes itself. [3]
Another impactful political stake from the company is efforts made by political lobbying and is very influential in this analysis. Political lobbying, by definition, is “Lobbying” means communicating directly or soliciting others to communicate with any official or his staff in the legislative or executive branch of government or in a quasi-public agency, for the purpose of influencing any legislative or administrative action” as stated by the National Conference of State Legislatures’ website. [4] The amount of money Apple puts towards lobbying positively correlates with their ability to sway policymakers into passing bills that benefit the company. Although Apple did increase its lobbying budget to $7.4 million in 2019, it is still no match to the other tech giants such as Facebook or Amazon who had increased their budgets to $16.7 million and $16.1 million, respectively. Apple claimed they typically stay away from most political battles unless they have great social or financial importance to the company. [5]
The figure below shows Apple’s lobbying expenses in the United States from 2009 to 2020. [6]
Economic Factors:
Just like every other company today, Apple is also struggling with increased labor costs, particularly from China.
With the middle class quickly shrinking in most countries around the world, Apple’s potential market is diminishing along with the need for their high-class products.
With the inflation rate increasing in the United States, it is becoming more difficult for Apple to sell in key markets such as Europe and China. [7]
Social Factors:
Consumers concerned about ethics regarding Apple’s manufacturing operation in China could reduce the company’s overall appeal.
If tensions concerning China’s politics continue to rise, customers in North America and Europe could take offense to Apple’s relationship with China.
In the United States and Europe, younger consumers are favoring cheaper and less stylish products.
Technological Factors:
Google and Samsung have both proven they can copy Apple’s new products, making Apple unable to appear unique to the consumer.
Fewer consumers are purchasing Apple’s laptops now that smartphones and tablets can do everything the computer can, and more.
Apple’s operating system is not compatible with all software, such as QuickBooks, making personal computers useless when you need them most.
Legal Factors:
Now that Apple has decided to release Apple Pay, they will now face more regulation and government interference as it is a financial service.
Apple Pay also increases the opportunities to face litigation.
A good amount of Apple’s income is from software and music which is highly susceptible to piracy and litigation.
Environmental Factors:
One major environmental factor Apple faces is the disposal of devices that no longer work and contain lithium batteries. This is an expense the company may have to take on considering these devices should not make their way into landfills.
China recently passed another law to attempt to reduce greenhouse gas emissions in the country. This could increase overall manufacturing costs for Apple.
Any increase in electricity rates is a huge additional expenditure for Apple considering they run data centers and other internet infrastructures 24/7.
Opportunities:
Ability to enter green market
Option to expand distribution
Consistent Consumer Growth
Smart Watch Growth
Increase Use in Artificial Intelligence
Threats:
Coronavirus Outbreak
Supply Chain Problems
Counterfeit Products
Increasing Competition
China Tariffs
References:
[1] Hoxie, J. (2018) “Commentary: Apple Avoided $40 Billion in Taxes. Now It Wants a Gold Star?” Fortune, Available at: https://fortune.com/2018/01/18/apple-bonuses-money-us-350-billion-taxes-trump
[2] Tibken, S. (2017) “Apple vs. FBI one year later: Still stuck in limbo” CNET, Available at: https://www.cnet.com/news/apple-vs-fbi-one-year-later-still-stuck-in-limbo/
[3] Owen, M. (2019) “Members of congress demand Apple take down Saudi Absher app” Apple Insider, Available at: https://appleinsider.com/articles/19/02/25/members-of-congress-demand-apple-takes-down-absher-app
[4] (2021) “How States Define Lobbying and Lobbyist” National Conference of State Legislatures, Available at: https://www.ncsl.org/research/ethics/50-state-chart-lobby-definitions.aspx
[5] Campbell, M. (2020) “Apple spent $7.4M on lobbying efforts in 2019, well below outlays from Amazon and Facebook” Apple Insider, Available at: https://appleinsider.com/articles/20/01/22/apple-spent-74m-on-lobbying-efforts-in-2019-well-below-outlays-from-amazon-and-facebook
[6] Vailshery, Lionel Sujay (2021) “Lobbying Expenses of Apple in the United States from 2009 to 2020. Available at: https://www.statista.com/statistics/1043061/lobbying-expenses-of-apple/
[7] https://pestleanalysis.com/apple-pestle-analysis/
Section 3: Analysis of Internal Condition
Apple is arguably the worlds most recognized brand and is the world’s most valuable company with a staggering 2.57 TRILLON dollar market capitalization; it is clear that Apple is doing something correctly. The purpose of this section is to highlight areas where Apple is able to create competitive advantage with specific focus on their core competencies and resources, and to identify the areas where Apple sustains their competitive advantage, and in the next section, we will discuss strategies Apple can adopt to grow their competitive advantage; we will also compare how Apple’s internal firm resources and capabilities compare to their competitors in the market.
When comparing Apple to their competitors, it is important to highlight where Apple’s competitive advantage lies and how they developed that competitive advantage, and for this we will be analyzing how Apple has developed their core internal resources and capabilities; we will then examine Apple’s weaknesses and in the next section make recommendations on how to remedy these weaknesses. As aforementioned, Apple is arguably the world’s most recognized brand, which is no easy task; when comparing directly to Apple’s brand to their competitors, if they are able to best the likes of Microsoft, Hewlett-Packard, Sony, Samsung, and more, this speaks to the quality and recognition of their brand. Apple’s brand image and brand equity is arguably their biggest asset and intangible resource. Apple’s brand places emphasis on lifestyle and imagination, catering to adventurers and creatives alike. Apple has also been able to create and foster a community between its users. Apple’s mission statement is as follows:
“To bring the best personal computing products and support to students, educators, designers, scientists, engineers, businesspersons and consumers in over 140 countries around the world.”
Apple’s brand is often also tied to innovation, and as can be seen in their mission statement, they strive to bring the best products to their consumers; Apple is touted as one of the key innovators within the tech space they also note that they wish to support their consumers. Since their inception in 1976, Apple’s mission has also been to improve the relationship that their users have with their products and for this relationship to develop, Apple has been focused on creating products of incredibly high quality and usability. The relationship that Apple has been able to develop between their customers and their devices is a direct product of the brand they have been able to create. One of the largest benefits Apple has been able to take advantage of due to their brand loyalty is the high premiums they charge for their devices. Below are two images, one highlighting the increasing prices in iPhones (Apple’s flagship product) over the years, and the market share of different phone manufacturers within the United States.
Despite the high premium iPhone owners pay for their devices, Apple continues to dominate the U.S. market, and sustain their competitive advantage.
Another important aspect of Apple’s brand is usability. The usability advantage that Apple provides is how well each of their products integrate and interact with each other; this integration and interaction between Apple’s products is also known as the Apple Ecosystem. This ecosystem is fueled by proprietary hardware and software that Apple has specifically designed and catered to work best between its own products; for instance, a single Apple ID can be used to sign in to all of your Apple devices, and with this all of the data and information associated with your Apple ID can be shared seamlessly between all of your separate devices; you took pictures at a picnic you and your spouse attended on your iPhone, at the time of capture these pictures are uploaded to your personal iCloud that is associated with your Apple ID, and when you get home you will be able to view these pictures on your iPad, MacBook, Apple TV, etc.. Apple’s Ecosystem also serves to provide a consistent experience across all their devices, part of this mission is fueled by specific innovations and design choices Apple has made for their devices. If you are in the market for buying a new computer, if you know that the experience on a MacBook will be similar to that of your phone or tablet (in this case iPhone and iPad), you are more likely to stick with that consistency. UI and hardware design are two of the more obvious attempts to create a consistent experience across their devices. The UI between all of Apple’s devices are incredibly similar but are unique and significantly different from non-Apple products which provides the user a seamless experience between using their Apple devices, while at the same time disincentivizing customers that are already within their ecosystem from leaving. As aforementioned, Apple’s UI designs for their products are purposefully similar between their devices; take for instance the images seen below:
The first image is one of the iPhones, which operates on IOS (the same as every other iPhone). The second image is of the MacBook Pro, which operates on MacOS. Note the design consistency between the 2 devices. All the apps/programs that are shared between the 2 devices share the same logo and design, and the UI itself features the same design language (round corners, bright and vibrant colors, etc..). This is another one of the competitive advantages Apple has been able to foster; by developing all their software/designs in house, limiting these designs and software to only their products, and constantly improving and innovating these designs to suit the needs of their customers, Apple has created desirability and reliance on their products for those who are looking for a consistent experience, or those who are unwilling to give up on it. Due to the uniqueness of Apple’s software designs, leaving the Apple Ecosystem to rely on other products would come with a learning curve. Apple devices do have a learning curve of their own, but Apple has devoted RND to creating resources for their customers to utilize, such as Siri, the voice assistant which can assist with both simple and complex tasks (note, all of the tasks Siri is capable of can be performed without Siri), or the Genius Bar, which allows Apple’s customers to have face to face technical support on their products; innovations such as Siri and the Genius Bar further disincentive Apple’s customers from leaving their ecosystem if their customers have become reliant on these proprietary offerings. Apple’s competitors are developing and innovating alternatives to Siri such as Google Assistant, Bigsby, Alexa and more, and have begun to develop interoperability between different devices, but Apple seems to be lightyears ahead. The Apple Ecosystem is a core component of their product offering which is a key aspect of their competitive advantage.
While Apple’s has utilized their internal resources and capabilities to garner them incredible competitive advantages, they have obvious weaknesses that are important to remedy in order to grow and sustain their competitive advantages. As aforementioned, Apple’s biggest strength is their brand, so any detriment to their brand is a detriment to the entirety of their company. Apple has been accused of anti-competitive behavior, as well as exploiting their work force in China, where their products are made. While Apple has a feverishly loyal and devoted customer base, it is hard to support a company that allegedly exploits child workers. Apple prides themselves on differentiation and providing innovation to their customers, but if they engage in anti-competitive behavior, their customers are inhibited from experiencing the innovations that Apple’s competitors can provide. Competition is good for consumers, so governments have been cracking down on anti-competitive behavior (particularly with large tech companies). Apple’s most successful product is the iPhone, and while it is an incredible source of revenue, Apple is arguably over reliant on the iPhone to sustain their business. According to research performed by investopedia.com, 49% of Apples Q3 2021’s revenue came from the iPhone. With the increasing premium of Apple’s devices and the increased quality and longevity of Apple’s devices, Apple needs to be increasingly more innovative in order to drive demand for their new products, and some view their more recent innovations as gimmicky (e.g. arbitrary performance increase in their products year over year, increased battery life, etc.). Recommendations on how Apple can remedy these problems will be discussed in the next section.
Section 4: Strategy Development
Taking into account the analysis of Apple competitors and external/internal environment, we would make the following strategic recommendations for Apple future managerial decisions: 1) continue to expand on existing physical storefront infrastructure support with new store openings; 2) expand and improve upon the growing online; and 3) scale capabilities and reduce existing issues within its supply chain operation.one of Apple sources of competitive advantage over online competitors such as Samsung is its nationwide
Competitive Strategy
Competitive strategy is defined as a company’s long-term plan of action intended to lead to greater competitive advantage over competitors. Competitive strategy is developed from evaluating the company’s strengths and weaknesses compared to its competitors. Apple main competitors are Samsung in the area and Google
– Section 2
– Intro and Conclusion
Sections 3 (.)
strategy Development