PESTEL five forces and SWOT analysis of Apple

PESTEL five forces and plodding analysis of AppleIntroduction This study is an analysis of the business environment of Apple, Inc., which is typically undertaken as social occasion of the strategic analysis of Apples operations for the medium and long term. The aim of this analysis is to assess the prospects of Apple, Inc. as a potential investment for consideration. at that place ar three aspects of environmental assessment that ar undertaken the macro-environmental analysis makes use of the PESTEL model, industry analysis employs door guards Five Forces model, and the organisational analysis is performed using the SWOT model. PESTEL Analysis The business of Apple shall be evaluated within the context of its operations in the UK. Investor sentiment attached to the dry land plays a major role in determining the level of confidence reposed by investors in the country itself. Negative sentiment in the country overall may cause an investor breaking that would excise stock prices even for companies in industries normally unaffected by the particular events or developments, thus consideration should be extended to indirect repercussions or infection effects collect to perceived weaknesses in the country environment (Chittedi, 2014 Ha, et al., 2014 Ioan, et al., 2013 Liu et al., 2014, Syriopoulos, 2014 Trenca Dezsi, 2013 Yaqing Hongbing, 2013). 2.1 Political The coupled Kingdom is a democratic country with a shelter governance system, and maintains strong influence over the laws and customs of those countries that were formerly part of the British Empire, and now comprise the Commonwealth of Nations. The UK thus holds a strong and enviable position in global politics. However, there ar risks posed by terrorist elements much(prenominal) as members of the Islamic State of Iraq and Syria (ISIS) recruited from among the British nationals. Current political challenges accept the increasing tensions in the ruling coalition and the sagging government popul arity (UK Country visibility, 2013 USCIA, 2014). 2.2 Economic The UK is a world frugal power, with a highly developed thriftiness that gained its footing after the Second World War. According to the World Banks assessment, as of 2003 the UK is the seventh best country to invest in or do business with. It is however burdened by a growing government debt problem (currently at 1.38 trillion) and a huge budget deficit. In send to strengthen the financial system, the Bank of England (BoE) was given the authority to oversee the macro-prudential health and stability of the financial system. The BoE coordinates interest rate movements with the europiuman Central Bank during measure of crisis, however Britain still remains outside the European Economic and Monetary Union (CEEDR, 2012 UK Country Profile, 2013 USCIA, 2014). 2.3 Social The standard of living of UK citizens is comparable with other outset World countries. The education and health care systems are among the worlds best, and the social goals of the government include the alleviation of income inequality and eradication of child poverty. As a member of the European grocery, the UK benefits from the free flow of young people into the country to offset the problems posed by an aging population. Demographically, the population is aging (i.e., 35% of the population are 55 eld and older, only 30% are below 25 years), with average purport expectancy r distri only whenivelying 82 years for women and 78 year for men (CEEDR, 2012 UK Country Profile, 2013 USCIA, 2014). 2.4 Technology The United Kingdom is ren admited worldwide for its scientific expertise and cutting-edge research and development (RD). expert property rights are stringently protected by legislation. Among the challenges to the UK with respect to technology is the increasing shortage of RD workforce, a trend that has persisted since 2008. The number of engineers and technicians in the physical and life sciences, as well as IT and telecom speci alizers, continue to decline. The lack of technical personnel and RD specialists is a serious threat to the continued competitiveness of UK industry. Patent applications curb also been on the decline, meaning that innovations may slow d cause, further compromising competitiveness (UK Country Profile, 2013 USCIA, 2014). 2.5 Environmental The UK is a strong participant in the manifestation of global policies, particularly with respect to agreements dealing with the environment, emission reduction, and sustainable energy source. However, the UK is also known to fuddle a high level of air pollution. The European Commission issued a final warning to UK for the poor quality of its air, prompting the country to expedite a solution to the problem (BBC, 2014 Mathiesen, 2014). High air pollution, due to exhaust fumes and emissions from power stations and factories, prevails in London, while dangerous levels of NO2 have been recorded in Birmingham, Glasgow and Manchester (BBC, 2014 Dugan, 2013 Mathiesen, 2014 UK Country Profile, 2013). Government policies, however, go forth continue to tempo the middle ground between environmental protection and economic development (UK Country Profile, 2013 USCIA, 2014). 2.6 Legal The UK has a legal system that is organised, transparent and efficient, and efforts are cosmos exerted to make the processes in the courts simpler and more efficient and transparent (Great Britain Ministry of Justice, 2011). The legislative system favours a high level of freedom in business, primarily to enable investor believe and confidence. There is effective enforcement of the law in the World Banks Doing Business indicators 2013, UK ranks at the 21st position among 185 countries with regard to enforcement of contracts. Challenges remain, however, in terms of appraise evasion, and balancing in the flesh(predicate) liberties against the threat of terrorism. These challenges are being addressed by current proposals to amend legislation (UK Country Profile, 2013 USCIA, 2014). Porters Five Forces Porters Five Forces analysis is a model used for industry analysis. Apple plays a significant role in four businesses, namely the converse equipment industry, the euphony and video industry, the mobile phones industry, and the personal computer (PC) industry. Because its participation in the overall PC industry is comparatively small compared to its other products, only the initial three industries shall be analysed here. Apples overall business includes eight product lines iPhone, its related to products and services iPad and related products and services, Mac portables and other music related products and services, Mac desktops, iPod, software, services and other hardware (Apple, Inc., 2014 GCEIP, 2014). 3.1 Bargaining Power of Buyers conference Equipment effort Buyer power is moderate. Apple communications equipment caters to individual emptors, but each buyer has little bargaining power as he/she bargains for him/herself al one. If the comp both loses just one consumer, the effect on the company will be insignificant. Collectively, however, buyer power may be more significant, as switching cost are low. Fixed line telecommunication guiles have a low story of differentiation and there is little innovation taking place in this area, for which reason buyers are sensitive to price levels and could easily transfer from one provider to another. Apples major competitors in this market include Lenovo, Nokia, and Samsung (GCEIP, 2014 CEIPUK, 2014). melody and Video Industry The bargaining power of buyers is moderate. As with the communications equipment industry, there are many buyers in this market, thus reducing their bargaining power. Offsetting this, however, is the low switching costs that enables customers to transfer brands quite easily. Also, there is a trend towards greater taste for online retail channels and digital download gross sales due to their greater convenience. Buyers are because sen sitive to price, recommendations, availability, obedience schemes, and brand image. In the global music and video industry, Apples key competitors are Amazon, Tesco, and Wal-Mart Stores (GMVIP, 2014 MVIPUK, 2014). lively Phones Industry The bargaining power of buyers is moderate. There are two types of buyers in this market, the retail outlets (e.g. Europes Carphone Warehouse, Walmart) which purchase handsets for sale to consumers, and the mobile network operators that now make their own retail sales bundled with the service they pop the question. The huge retailers are at a disadvantage because they need to stock up on the latest innovations to meet end-user demand. When new innovations or models appear, unsold inventory of earlier models become obsolete. Apple is at an advantage because the firm is capable of forward integration i.e., they conduct their own retail operations. As a result, buyer power is diluted. Apples surrounding(prenominal) competitors in this industry a re LG Electronics, Nokia, and Samsung (GMPIP, 2014 MPIPUK, 2014). 3.2 Bargaining Power of Suppliers Communication Equipment Industry mobile Phones Industry Supplier power is moderate. There are only a relatively small number of large multinationals who supply parts and components to this market, reducing market players options when sourcing for products. While backward integration is difficult due to high costs of telecommunication manufacturing, it is however not impossible for instance, British supermarket brand Tesco will launch its own smart phone device, which if successful and followed by other retailers will reduce supplier power. Aside from their scarcity, suppliers are also benefitted by the level of customer loyalty that firms develop for their manufacturers. Apple, however, is one of those few companies which sell their products online and which operate their own retail shops (GCEIP, 2014 CEIPUK, 2014). Music and Video Industry Supplier power is relatively high in th e music and video industry. The suppliers in this industry pertain to the purveyors of discipline, such as the record companies, TV studios and film studios. End-user tastes drive demand, and when the particular content is specifically in demand then market players are compelled to stock on popular products so as not to miss out on revenues for songs, movies, or shows that have high appeal. Also, suppliers such as large film and TV studios tend to integrate forward, that is, they sell directly to the retail market through their own websites. In these situations, there is strong supplier bargaining power (GMVIP, 2014 MVIPUK, 2014). Mobile Phone Industry Supplier power is moderate in the mobile phone industry. Mobile phone manufacturers are much large than their suppliers, and are thence in a position to better influence supply contracts. Operating systems are vital components to smartphone manufacturers, but in the case of Apple and Blackberry the in operation(p) systems are de veloped by the manufacturers themselves, and therefore one element of supplier power is diminished (GMPIP, 2014 MPIPUK, 2014). 3.3 Threat of Substitutes Communication Equipment Industry The threat of substitutes is moderate to strong, as product substitution may potential exist within the market. Landline phones and mobile devices are substitutes for each other, although mobile devices have the advantage of flexibility, portability and mobility. In developing countries, counterfeits may proliferate, drawing demand away from legitimate retailers, but such risk is gradually being eroded by regulation, law enforcement, and security measures. Cheaper second-hand products are also substitutes for new models, which may challenge the higher-priced Apple products in certain market segments (GCEIP, 2014 CEIPUK, 2014). Music and Video Industry The threat of substitutes, particularly from counterfeit media, is rattling strong this becomes apparent when one considers that digital video and audio content are easily duplicated. Pirated titles appear online, on CDs, and more recently through blow and file sharing websites. While lawsuits have been filed and litigation pursued in some cases, the lawsuits are so slow that by the time they take effect, abuse has already been done that cannot be undone for the titles thus distributed. The same contents made legally accessible online also act as substitutes for the same content formatted on CDs and DVDs. Although demand for the latter may decline, there will still remain buyers who prefer their music or shows on a physical device (GMVIP, 2014 MVIPUK, 2014) Mobile Phones Industry The threat of substitutes is low. The threat posed by landline telephones as substitute for cellular phones is weak, due to the greater flexibility, portability and wide area insurance coverage offered by mobile phone usage. Neither are laptops a strong substitute due to disadvantages in size, weight, and the capacity for outward calls (GMPIP, 2 014 MPIPUK, 2014). 3.4 Threat of New Entrants Communication Equipment Industry The threat of new appetizers is moderate. There is a low degree of differentiation among the products and services that players in this industry can offer this signifies that customer loyalty is low, and customers tend more to follow the brand of the manufacturer rather than the retailer. Since buyers can easily switch retailers, low cost entry into the market is possible. Entry barriers are thus low, and threats of new entrants is strong, despite the fact that more established and larger-sale retailers would have developed better relationships with their suppliers as well as enjoy economies of scale (GCEIP, 2014 CEIPUK, 2014). Music and Video Industry The threat of new entrants is strong, and entry barriers to this market are low. If the prospective player already runs a retail business, then entry into the market becomes easy. Switching costs among vendors is low, and enables customers to transfer a mong players depending on the price, stock or brand image. Larger players carry strong brand images however, this alone will not be sufficient basis to draw market share away from new entrants (GMVIP, 2014 MVIPUK, 2014). Mobile Phones Industry The threat of new entrants is moderate. The popularity of smartphones continue to attract new players which offer the same features as the established brands, such as Apple and HTC. A good number of the more mature mobile phone manufacturers offer their own smartphones. A market for cheap feature phones thrives in developing economies. New entrants are nevertheless faced with challenges, such as the huge amount and the specialist skills and experience required for capital outlay for RD in which Apple is well entrenched (GMPIP, 2014 MPIPUK, 2014). 3.5 Internal rivalry Communication Equipment Industry Internal rivalry in this market is low to moderate. The market for global communications equipment is highly fragmented market participants are numerous and diverse, including large foreign companies as well as local independent shops. Competition is slightly more intense among specialty shops than it is for the larger firms that have a presence in several markets. Even so, contest tends to ease because the demand for digital communications products is still expanding, enabling all firms to acquire a reasonable share of the market (GCEIP, 2014 CEIPUK, 2014). Music and Video Industry Internal rivalry is strong, mainly due to the similar choice of products offered by competing players and the low switching costs among market players. Unless the content is originally produced or print by the player, it would not be able to sustain any long-term competitive advantage over its rivals as content and processes are common and very(a) (GMVIP, 2014 MVIPUK, 2014). Mobile Phones Industry Internal rivalry among mobile phone manufacturers is moderate, with the lions share of the market being shared among a few large and well-know n firms (i.e. Apple, Nokia, LG, Samsung). A second tier of smaller manufacturers are directed towards specific niches and do not really pose strong competition to the larger firms (GMPIP, 2014 MPIPUK, 2014). SWOT Analysis (Datamonitor, 2011 MarketLine, 2014)4.1 Strengths Apples several businesses are the result of a combined horizontal and upended integration. Horizontal integration is comprised of its wide trope of products, while the interconnectivity among such products is the result of the vertical integration. This has enabled the firm to create strong competitive advantages that competitors find difficult to challenge. Apple continues to enjoy strong growth evaluate and cash flows, as sales remain brisk particularly on its online stores. Apple commands high Application Service Providers (ASPs) which continue to perform well in the market while demand for ASPs of other company providers has declined. 4.2 Weaknesses Apple failed to anticipate certain product categories suc h as phablets, and therefore was a later entrant into them. Until recently, Apple had not launched a larger screen phone, despite having invented the tablet. Samsung outperformed Apple in this respect, having pioneered in the phablet with Galaxy Note in 2011, and now has a peremptory presence in the phablet market. Apple positions itself in the premium category and prices itself at a single price point. Consumers who could not afford the premium price therefore turn to Samsung and other brands that have a range of differentially priced products for different markets. Apple has an overdependence on the iPad and iPhone for its revenues and growth rates the revenues from these two products comprise 72.1% of its total revenues for 2013. ultimate decline in the sales of these products will threaten the companys sustainability and viability. 4.3 Opportunities The iPhone and iPad remain popular in the personal gadgets market, and further growth in their sales could still be explored in the corporate arena. A trend known as bring-your-own-device has become popular in the workplace, as people have appropriated these personal devices for their business purposes. Companies have only begun to exploit mobility strategies to offer better choices to the customers, and iPads may be tapped for this. Apple has yet to fully tap the growth prospects in the acclivitous markets. There is a rising middle class in India in which Apple may carve out a greater market share. It should be recalled that India is a member of the Commonwealth with which the UK is developing increasingly closer ties. The vast market in emerging countries is far from saturation, and Apple in UK is in a position of take advantage of it. 4.4 Threats One of the weaknesses of Apple cited is its premium pricing policy. This policy shall prove detrimental to any efforts to penetrate an emerging market, because few if any will be able to afford it. Therefore, in the event of any economic downturns that tend to erode the buying power of consumers, demand may shift from Apples more expensive products to lower-priced competitors like Samsung. The complex environment of electronic communication devices is constantly innovating and poses a serious challenge to Apples position in the market. Players are aggressively competitive, principally because of the fluidity of this disruptive innovation that allows for constant redesigning and modification. Conclusion The business of Apple, Inc. is a viable investment in the UK, although recommendation of entry stock price will have to await a valuation analysis of the stock based on financial and economic models. Being an investment that relies in technological innovation, Apple will have to be a growth buy, that is, it may not have long-term prospects but it will continue to have a strong market presence in the medium term. The principal concern of investors will be the sustainability of Apples cutting-edge innovations in the post-Steve Jobs era. App le should continue to maintain its core competence in technological innovation and its competitive advantage in its horizontal and vertical integration to remain a viable investment. References Apple Inc. 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