Apple Case Study - SWOT & PESTLE Analysis

A Brief Profile of Apple Inc
Apple is regarded as the world’s most recognized and remarkable brand in the electronics field. Apple products have innovative and distinct features for each of its range of products. This multinational corporation is known for its unbeatable niche in the industry. It is has created a benchmark and revolutionized the world of personal computing since its formation. Steve Jobs and Steve Wozniak are the two college dropouts, who co-founded Apple. Today, In the IT industry Apple has carved its name on top as the world’s largest IT Company. It is world’s largest information technology company may that be in terms of total assets, revenue. It is also the world’s second largest company in the mobile phone manufacturing industry having with 115,500 employees(as of July 2016).

For Apple case study, let us discuss some of the basic information about the company:

Industry

Consumer electronics, computer hardware, computer software, and online services

Headquarter

Apple Campus, Cupertino, California, U.S.

Geographic Coverage

Worldwide

Revenue

$215.6 Billion (2016)

Present CEO

Timothy Donald ‘Tim’ Cook

Competitors

Samsung Electronics Co. Ltd., Google Inc., Cisco Systems Inc., Hewlett-Packard Company, Lenovo Group Limited, Sony Corporations

Products

iPhone, iPod, iPad, Apple TV, software applications system iOS, OS X operating system, portable digital music players, iCloud and its accessories, applications like App store, iTunes stores, iBook store, Mac App store, and more

Website

www.apple.com

SWOT and PESTLE Analysis of Apple

In this Apple case study, the aim is to identify the internal as well as the external factors that have an impact on obtaining achieving high performances by Apple. From the study, the conclusion is if the company wants to continue to succeed the same way then it must consider macro and micro environmental factors. To determine these aspects from this Apple case study, data has been collected from a varied source like published paper, journals and many case studies, which were conducted by the company.To review Apple’s business operation framework there are two methods used for analysis –SWOT analysis for internal factors and PESTLE analysis for external factors that affect the performance of the company.

SWOT Analysis

SWOT analysis is the most popular and basic analytical tool for identifying internal strengths and challenges, and external available opportunities and threats for the assessment, enabling managers to scan the environment properly to organize everything more efficiently.SWOT stands for,

  • Strengths
  • Weaknesses
  • Threats
  • Opportunities

To improve an organization's strength, making sure its weaknesses have to be eliminated, grab the opportunities and foresee the threats.

SWOT Analysis of Apple

Strengths

Leading innovator amongst the electronics brands:
Since 2005, Apple has persistently been ranked at the top position on the in BDG's list of 50 companies because of its uniqueness in electronics devices. Apple is regarded as a leader for innovating products in the market like I Work (a presentation program) and iTunes Media Player (publishing photos, movies, organizing editing and music). Moreover, Apple has now become one of the biggest online retailers for streaming music, videos and software solutions. Apple has extended its coverage by reaching out to more customers.

Remarkable sales growth every year.

From the year 2016, Apple has observed high growth in its sales and that resulted into, Apple has prudently managed to be on top of the Forbes 100 Most Valuable Brands (2016) list having a total capital of $416.62 billion. In one year Apple is likely to wait for 38% revenue growth by the end of March 2017.

Annual Financial Report of Apple Inc.
Fiscal Year October – September, all values are in USD

 

2011

2012

2013

2014

2015

2016

Sales Revenue

108.6 B

155.97 B

170.87 B

183.24 B

231.28 B

214.23 B

Costs of Goods Sold (COGS) incl. D&A

64.08 B

87.92 B

107.24 B

112.55 B

142.26 B

131.51 B

Gross Income

44.52 B

68.06 B

63.63 B

70.69 B

89.03 B

82.72 B

Net Income

25.92 B

41.73 B

37.04 B

39.51 B

53.39 B

45.68 B

High brand recognition
In Apple case study that to review the market broadly, Apple has invested $4.5 billion in 2013 for Research and Development as compared to $2.4 billion in 2011. Apple with the aim of targeting direct sales, it has located its branches in densely populated locations that can contribute to earn more revenues and to ensure more results that are terrific. For improving goodwill and brand recognition, it took over whole control of supply chain and provided a report of the code of conducts to the suppliers. The same practice is still maintained for which Apple has earned great trust from the customers who wait eagerly to get the latest version of Apple products.

Strong and effective marketing team:
In Apple case study, CEB elucidated that to approach customers they furnished correct information to the customers about what they exactly looking for, instead of very complicated and multifaceted websites.This is exactly what Apple is doing since long while involving a simple process to market its products.

To have a better understanding of Apple case study, we can take the Mac vs. PC advertisement into consideration. There are two boys in this ad standing with a white backdrop, not discussing about its features in length, even not about price, no professional background voice over sort to give emotional pinch, not even telling about how to purchase MAC; just one focal point and that is MAC is better than PC in every sense.

Premium quality of customer experience In Apple case study, we will see how it pursues to make a magical solution to ensure the long-lasting relationship with the customers to increase its sale of products. In order to persuade undeniable or unbeatable trust of the consumers, Apple’s customer service follows the following steps:

  • Reach to customers by giving a more personalized touch.
  • Empathically identify and understand the customer’s need.
  • Bring solutions to the consumers that are acceptable to them.
  • Always first, hear the problems raised by the customers and then resolve it at your best capacity.
  • Close the status of current visit of the customer by offering the return.

Weaknesses

High price
If Apple has one limitation then that has to be its high price. Many people pinpoint the brand for its prices however there are its fans that validate the state by labeling it as a ‘Premium’ gadget- maker. These fans justify by saying that this brand is for those who can afford to keep a pony. In other words, Apple is labeled as BMW, not as Ford. However, this has left a negative impact on its sales, as consumers have many options available other than Apple. These brands like Samsung, Microsoft, are much cheaper and offer most of the apple phone features and various. As per strategy analytics, Apple has faced loss in its customer base, as compared to 2012 from 93% iPhone user purchase has come down to 88% in 2013.Hence, every year its competitors are offering the customer by reducing prices or adding features similar to Apple.

Apple

Cost

Samsung

Cost

32GB iPhone 7

£599/$649

Samsung Galaxy S7 with 32GB micro SD card

£597/$670

Wrong prediction
Steve Jobs founder of Apple anticipated that ‘No one' is going to use big phones. Clearly, his prediction was incorrect. Apple unsuccessfully predicted few brand’s futures like Phablets. Even after launching a tablet, Apple has not introduced big screen mobiles. Samsung has performed far better than Apple by launching its Samsung Galaxy Note in 2011 in place of Phablets. The craze and demand for big screen size smartphones are just increasing day-by-day.

Incompatibility of different OS
Customers, who have been using any other operating system, find it very difficult to apt or comfortable to use iOS or OSX. The reason behind this is simple, it is not easy to switch to completely different oS after being comfortable with the one, like one switching to Mac from PC finds it practically difficult to use it for the first time. For instance, as in PC, an individual is in practice of using ‘Start’ menu, while in Apple the individual needs to use ‘Finder’ to find out all the apps, documents, and other files.

Market shares of Apple iPhone are declining
According to a survey conducted to analyze the sales of smartphones in the year 2015, which was conducted by Kanter Worldpanel ComTech, the market share of Apple phones declined. As per the February findings of the survey, this decline in the sales continued for two months in the US, Japan, Germany, Great Britain, Italy, and Spain. Resulting in the loss of a significant number of the customer by the company. It was not even able to convincingly influence its customers to buy iPhones. Let us consider data comparing the declining market share of iPhones in different countries:

Country

In 2015

In 2016

US

38.8%

43.5

Japan

49.8%

45.4

Germany

17.04%

15.03%

Great Britain

38.60%

39.90%

France

21.60%

20.45%

Italy

17.50%

17.20%

Spain

8.70%

7.35%

Over dependency on iPad and iPhone
Income of Apple Inc. is prominently dependent upon iPad and iPhone sales. In the year 2013, 72.1% of its total income was from these two ranges of products. Eventually, the sales of both the products declined, which adversely affected the sustainability and feasibility of the brand.

A defect in new products

Apple confirmed about the manufacturing defect in iPhone 5sby giving the statement to New York Times. iPhone 5s users have faced multiple problems like poor battery life etc. Some problems were also observed in iPhone6 after its launch. However, the engineers of Apple resolved those problems immediately.

Opportunities

Rising demand for Apple products
As per the recent studies, Apple products are gaining high demand, majorly for latest launch PowerBook and Power Mac products along with the new upgrade to Mac OS X. CEO of Apple Tim Cook said that the demand of new Apple Watch has been exceeding its availability or supply. Due to which many of pre-order deliveries pressed back to the month of May or later.Apple's loyal customers are eagerly waiting for new iMac line and iDVD products.

Rapid growth in the market of communication devices
In one of the interviews, CEO Cook said that Apple products are not made for selling at low- cost or priced phones. It always aimed at selling high-end products. In the field of smartphones, Apple celebrates its growing demand in the market with each passing time even after having price difference from its competitors.

Worldwide share of Apple in SmartPhones

Period

Apple

2012 Q2

16.6%

2013 Q2

12.9%

2014 Q2

11.6%

2015 Q2

13.9%

2016 Q2

11.7%

 

A wide undiscovered potential marketplace in commonwealth countries:
Apple has not yet realized the prospect of growth in the electronics market. High level of possibility of earnings is possible in the middle-class strata of the commonwealth nations. Apple needs to take this fact into account that the UK is working on increasing proximity with the Commonwealth countries. Therefore, it is a great opportunity for Apple UK to gain the advantage by allocating itself in these member-countries’ markets.

Increasing cloud-based services
It is predicted that forthcoming iCloud innovation will redefine the earnings of the company in future. In apple case study, it is suggested that Apple has a prospect of expanding its services or chance of adopting new strategies to engage new customers in these services to meet the high rising demands of services of iCloud.

Threats

Ever developing surroundings of electronic communication
The world of electronic communication and its devices is consistently innovating in a complex structure. The company needs to maintain the pace; otherwise, its competitors will leave it behind in no time. As per apple case study, it is a potential and serious challenge in front of Apple and its market position in future. Communication market has robust competition and the company is compelled to introduce great designs and modifications in its products to meet the expectations of the customers.

Tax scandal and repute damage
Involvement of Apple in tax sandal caused huge damage to its reputation. The news of its involvement in tax scandal went viral in no time. Apple kept a substantial amount of $44 billion of its earnings from reaching into the approach of the taxmen. The company tax perspectives are nil and minimal taxes are paid by it. To analyze the source of income from Apple’s foreign operations, the tax professionals had to make a guess.

Contravention of the intellectual property (IP) rights
There was a flaw in company’s IP rights policy, due to which if there is any infringement of patent rights of Apple, then instead of being immediately notified about the theft, it gets to know about it after some time. As it always takes time to know about such activities, the result is it has to bear serious damages to its brands and services.

The growth of Android OS
Data on sales of the year 2015 of Smartphones to consumers as per Operating System (Thousands of Units).

Operating System

Units in 2015

Market share in 2015 in percentage

2016 Units

Android

271,010

68.5

243,484

iOS

48,086

20.2

35,345

Windows

8,198

9.9

8,9095

Others

1,229.0

1.4

1,416.8

As shown in data, it is evident that the company has a serious threat of losing its customers to the Android operating system.

PESTLE Analysis
In Apple case study, PESTLE analysis is done critically. PESTLE is the analysis of the external factors that play a crucial role in conducting an extensive research before starting up of a new project. The risk posed by the identified factors is assessed by the managers and application of the knowledge is ensured to make the constructive decisions for the company. PESTLE is composed of six significant factors, mentioned below:

  • Political
  • Economic
  • Social
  • Technological
  • Legal
  • Environmental

In contrast with SWOT analysis, it majorly focuses on the macro environmental external factors, which might affect the present or near future position and situation of the business.

PESTLE Analysis – Apple

Political Factors
It is pertinent to know that Apple receives a major portion of its sales from outside the US. Sales contribution of Apple sales from outside the US is of more than $113.8, whereas, the sales income from the US is $68.8 billion. In the Apple case study, it is important to understand the amount of negative impact of any political disturbance or revolution on the company in its operating countries.

Suicide cases against the biggest Taiwan Supplier of Apple
Several suicide cases were registered against its one the major supplier, Foxconn (a Taiwanese company). Due to this unexpected situation, Apple had to undergo immense political pressure. Several cases of suicide were registered against Foxconn in May 2010, claiming is responsible for the suicide of its employees. It was held responsible to compel its employees for long working hours, due to which two of its employees were forced to commit suicide. In another reported incident of one of the other Apple’s suppliers, 16 of the employees got injured.

Political disturbance in China
China being a low labor cost country, manufacturing of Apple is enormously dependent on China. However, the troubled political scenario of China affects and disrupts its manufacturing every now and then. Due to which its manufacturing costs keeps on increasing. In addition, to promote the manufacturing within the US, the Chinese imports have imposed restrictions. In the Apple case study, the fact of impact and effect on apple, which is a US-based company, of the political bonds of the US government with the Chinese government is also taken in the account. One of the major concerns of Apple is that if it tries to get an alternative to production in China, it will increase the cost of production, resulting in an increase in prices of Apple products. In addition to it, Apple may face a major loss of market share in China, due to growing nationalism amongst the Chinese. In such condition, Apple may become a target to show protest against anti-Americanism in China.

The threat of terrorist attack
Even though the UK government is a stable government, the risk of a terrorist attack is always there. It can leave a negative patch on the company. Apple is encountering the current political situation of growing tensions amongst the coalition of ruling and sagging government popularity.

Tim Cook Ban in Russia
The CEO of Apple Tim Cook made a public acceptance of his homosexuality in the month October. This led to a suggestion on the ban on his visit to Russia by a lawmaker in Russia, who is popular for having a strict and harsh approach to gay propaganda.

Economic Factors
Due to a situation like recession and other economic issues or crisis, the income of the company can adversely get affected. While in comparison with other businesses, Apple is likely to get affected badly, because of its premium class products and huge pricing.

Impact of global recession
Apple witnessed a very slow economic growth in the year 2013 and 2014, this was the time of global recession in 2013. Apple was amongst those companies, who were the most affected ones during the global recession.

The decrease in sales because of the global recession

Country

2011 - 2012

2012 - 2013

The United States of America

50%

9%

Europe

31%

4%

China

78%

13%

Economic challenges and difficulties of Europe
In Apple case study, it is discussed that the change in the economy of Europe has affected Apple directly. It has led to a downfall in its revenues to 16%, during the third quarter of 2012, as compared to its revenue in the same period of the last year.

The increased inflation rate in the US
The company reserved a huge amount of cash, which affected it during the increased inflation rates in the US. However, the company was sued by a cautious fund billionaire, David Einhorn, asking it to pay the dividends of $137 billion. It helped the company to use the abundant cash in paying the dividend.

Increase in labor cost in China
It was a world known fact that for manufacturing of Apple products, China is the hub. However, now the government of China decided the minimum wages within the country, this led to increases the labor cost in China. Although, it depends upon the area to area and there are various other deciding factors like a house, food, overtime pay etc. While considering the official figures by Trading Economies in this Apple case study, increase in the wages was seen in some areas like Northern Hebei Province areas witnessed 22% rise in wages in past year, whereas Southern Guangdong city had 5% to 17 %wage rises. It is evident that rise in wages is affecting and causing an increase in the prices of the products of Apple. Furthermore, even if the company looks out for any other option or alternative to sort this, it will cost a fortune to the company.

Growing worth and value of the US dollar
There is a rise in exchange rates, because of increasing value of the US dollar. The price of the products of Apple gets affected due to this increase in the exchange rates. Apple’s potential and key markets are countries like Europe and China, but the rising difference between the US dollar and other currencies of these countries like Euro and Yuan results in increasing the cost and making Apple products even more expensive. In normal circumstance, the revenue of Apple would have been higher by 800 points. This implies, if there was no such increase in the value of the dollar then Apple would have made revenue of $52.8 billion instead of recorded revenue of $49.6 in 2015.

Social Factors
Due to globalization, various factors have contributed and marked a massive impact on Apple like the rapid increase in the popularity and usage of the virtual world, present lifestyle etc.

Defines the high –status lifestyle of an individual
Everyone knows that Apple is the leading and premium brand in the world. It defines its own brand, this is that one name with which people across the world wish to move with. This is not about possession of an iPhone and iMac. It is desirable and wishes by the customers because of its unique selling proportion, innovative design, simple and straight marketing strategies of its products and high pricing of its products. Eventually, it has become a status symbol in the society across the world, due to its exceptionally high prices, making it affordable to the high class of the society.

Potential market share in the third world country
The Apple case study suggests, in coming decades Apple has a huge scope of finding its potential market share in the third world countries like Africa. The people of these countries are unaware of the products of Apple. The company must formulate strategies to explore and penetrate its products in these unexplored, unapproached markets to understand new possibilities of generating revenues.

Moral factors of determining manufacturing process in China
Some people may find the company that the company lacks social- consciousness and responsibility, as it carries out its manufacturing process in China, while it can be a job-creator for the home country. Still, it is attracted to China to get low-cost labor for its manufacturing. This factor may limit its appeal to some people.

Brand acquisition in lots of countries
The brand made acquisitions like Embark Prime Sense and Topsy and alliances with Sony, Motorola, Philips, and AT&T, to attain customer satisfaction and fulfill the needs of the customers in the best possible manner. The company takes into account the social background of various brands.

Technological factors
When it is about earning revenues, Information technology’s stakes are higher than any other industries. Apple is one of those rising industries who has grown with the time. It is proven that any company who wishes to earn well must innovate time to time.

The advantage of 760 China Mobile Subscriber
In the year 2013, Apple revealed that it has made a deal with China Mobile to attract customers towards its iPhone, which was previously under the influence of other low-budgeted android smartphones. Through this deal, Apple could get a massive entry to the Chinese market and China Mobile’s 760 subscribers at very large level. As per the contract, Apple products iPhone 5, iPhone 5S are accessible in China at Apple retail stores and China Mobile.

Assessing the consumer’s minds
As per the report of 2015, Apple spent $8.7 billion in its Research & Development that cost it for around 3% of the total company’s net sales. The purpose of these researchers is to understand the approach of customers by having the short product life cycle of the industry.

Preferences to screen size
Its spectacular design is Apple’s unique selling point. Apple is committed to better designs and concepts. The edgy and attractive designs of Apple products are unbeatable to match for its competitors. However, with the time people are preferring the bigger screen sizes.

Year

Screen choice

Description/Comments

2008

Sub – 4”

Considered as sufficiently big

2011

4.0” to 4.3”

Smartphones like Samsung Galaxy S II and

Thunderbolt pressed size to 4.3”

2014

4.5” to 5.0”

5”+ devices enormously got popular

2015

5.0” to 5.5”

Samsung Galaxy S6 and G4 were hugely preferred because of their bigger sizes

2015

5.5” to 5.7”

Microsoft launched its new Windows phone that grew high in demand within a few days

However, Apple’s last product iPhone 6 has merely 4.7” screen size, and iPhone 6 Plus has 5.5” display.

Competitors offering the same
Samsung and Google are the main and strongest competitor of Apple who is catering products and services that were once apple's prime features. Google did not take a year to make payment app just like, Apple has offered. Almost within no time, Apple Pay has its competition from Google Pay. Google has shown that it has got the capability to develop the exact product, app or any service that can be a threat to the leading company Apple.

Limited market for new products
Apple has a very limited customer base as it launches limited products for consumers. Along with these products like Apply TV has got really selected customers.

The growing menace of cyber crimes
In this virtual era, Apple is not being up to the mark when it comes to the cybercrime as it is quite vulnerable and less protected for customers. When it is about safety and security Apple wins in it and takes away the competitive advantage over others.

Legal factors
As legal aspects are concerned Apple becomes quite vulnerable as it deals worldwide that involves various legal factors and legal issues.

Domestic legal stress
America, the homeland of Apple is causing its legal problems. In the last year, the company had to restore imports of some of its parts that are used in iPhone. The US government banned these parts.

Offering financial services by Apple Pay
There are financial services, which are offered by Apple in the form of Apple Pay. Lately, it entered the highly regulated financial sector, which can take the company to increased regulation level. For rendering such financial services, it could lead the company to various litigations.

Breach of IP laws:
Apple has a variety of intellectual property like Software and music that are produced by its brands. The major part of the revenues of Apple comes from the software produced by it. This makes it more susceptible to piracy as well as litigation.

Entering automobile industry
Apple is all set to enter into the automobile industry. It is pushing hard its team to start with the production of electric vehicles by 2020. In the past year, the company has already invested $6.04 billion in research and development. The CEO Tim Cook is under huge pressure of shareholders to return the invested money. As per legal case filed against his company states that, the company is aiming to start a new campaign and is hiring the best of minds to develop the battery, though the company is starting from the scratch and hence in general phenomena to launch such a product at this stage a company requires time period of at least 10 years, Apple is rushing to launch it by 2020.

Environmental factors
The company’s revenue can be affected badly because of varied environmental factors such as disposal.

Disposal of used or non-working electronic devices
Apple is facing huge issues while disposing of all the electronic junk that is not required anymore or not in the condition of usage. Due to lithium contained batteries in its electronic items the company is going through massive hurdles while discarding them. It may cost a fortune to the company. As it involves environmental factors, Apple has to incur all the cost.

Pollution issue in China
The growing pollution and environmental issues along with its various side effects, that manufacturing process, and facilities are the reason of concern for Apple. To ensure a reduction in environmental issues in the process and facilities, the company needs to spend more money on future processes. This will lead to increases in expenses at a great level.

Attempt to cut greenhouse effect increases cost of production in China
In today's environment we are surrounded by harmful greenhouse gases and for reducing greenhouse gases and use of fossil fuel, China has come forward to take this commendable initiative. This initiative possibly could increase the rates of electricity in China. Resulting manufacturing costs might also increase for Apple.

Global warming
As global warming is increasing rapidly, Apple may face the issues regarding transoceanic shipping. It is pertinent to mention here that it is the crucial aspect of the supply chain of Apple.

Increase in costs of electricity
Dependability of Apple upon data centers and internet infrastructure makes it more susceptible to electricity rates. The company needs to carry out more expenses in the manufacturing processes.

Conclusion
After conducting a detailed assessment of all factors in SWOT analysis in this Apple case study, the conclusion drawn is apple has an edge over its opportunities and strengths over threats and weaknesses. Considering the position of the leader in the industry, Apple is and will continue to enjoy these available opportunities. However, it will beneficial for the company if it can revise some of its strategies in order to effectively address the threats and weaknesses, which it has encountered recently or likely to develop in future.

Based on PESTLE analysis, in the next five years despite the challenges, Apple can prosper in the electronic device industry. The reason behind its assured success is it has a unique ability of always adapting to the challenging environment. Its distinct features like exclusive and unique designwin it the competitive advantage, which can be seen in its sales growth and rising revenues. Hence, it is appropriate to state that Apple is and will be in the years to come, be leader in the electronics industry.

References
Apple Info.
www.forbes.com/sites/susanadams/2015/12/08/is-apple-the-worlds-most-innovative-company/#1cadfd617557
www.forbes.com/powerful-brands/list/3/#tab:rank
www.marketwatch.com/investing/stock/aapl/financials
www.forbes.com/sites/jaysondemers/2014/07/08/heres-the-simple-secret-to-apples-marketing-success/#19108e0d63ab
www.forbes.com/sites/carminegallo/2015/04/10/how-the-apple-store-creates-irresistible-customer-experiences/#135b249f2a0c
www.forbes.com/sites/chuckjones/2015/04/06/apples-worldwide-iphone-market-share-declining-except-in-china/#368e9d923165
tech.firstpost.com/news-analysis/apple-admits-some-iphone-5s-devices-have-manufacturing-defects-107447.html
www.bloomberg.com/bw/articles/2014-09-04/for-iphone-6-defects-apple-has-failure-analysis-team-ready
techcrunch.com/2015/08/20/peak-android/
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www.phonearena.com/news/Heres-how-screen-size-preferences-have-changed-through-the-years-infographic_id71924





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