Professional Documents
Culture Documents
The business operation of Apple Inc is a matter of disruption that can be caused
by any natural calamity, deficiency of power, terrorist attacks, nuclear conflict
accidents, labour clash, community health issue and many other proceedings
beyond its control. There is a potential adverse concern on the financial situation
and operational outcome as a result of these political factors. A negative impact
will be made on the Companys demand of products if such events or natural
disaster happens also Apple Inc will be struggling to produce and deliver its
goods and services to the consumers as well as channel partners. The suppliers
can confront with difficulties in receiving components which can generate
interruptions and inefficiency in the Company supply chain. A good example of a
situation which Apple has encountered with is the Iraq war. Apple Inc its also
operating in Middle East and for the duration of Iraq war the company was
strongly affected by insecurity in concern of currency instability, high delivery
cost and assurance expenditure. Nevertheless conflicts between Arabs
communities generates prospective threats for Apple`s industry in these
countries.
On the other hand the statement abovementioned is evocative for the political
forces that can make indirectly influence on the international trade and
worldwide economy which affects Apple`s Inc production. Other than that, the
manufacturing of Apple Inc merchandises takes place outside the U.S in
countries like China, Korea and Czech Republic for that reason China`s leadership
transition will have an impact on Apple Inc operation. (Carnegie Endowment
website, 2012)
2. Economic
Apple Inc has been in a secure position ever since 1990 recession and 1999
economical fall down but still it can be a matter of economic cycles like inflation,
GDP and interest rate. The functionality operation and performance of the Apple
Inc depends considerably on the global economic factors and conditions
indicated accordingly to its annual reports. Insecurity concerning worldwide
economic situation causes a high possibility for the consumers and businesses to
withdraw its payments and spending in reaction to unemployment, less credit
access, negative financial news, turndown income or asset values which can
generate a financial unconstructive materially outcome of the demands products
and services of Apple Inc. However the demands can fluctuate essentially from
the Company generally prospects that increases prices on goods retailed
externally from U.S in order to balance the effect of fortification of U.S Dollar.
According to Apple Annual report of 2010, Apple Inc has applied financial tools
like foreign currency presumptuous and selection contracts prevaricating
confident coverage in foreign currency exchange rates. Other than that it
extends financial assets in multiple currencies and according to Yahoo UK and
Ireland Finance 2012 Apple has improved its revenue thankfully to international
market.
Another economical factor which can persuade the Company is the global
recession where the inflation rate is extremely high whereas customers earnings
did not change considerably and besides that the unemployment rate is
influencing the consumer spending behaviour particularly `Luxury products`. On
the other hand Apple`s revenue is not affected by the recession even though the
Apple`s are premium products thankfully to designers of iPhone, iPads and Pc`s
which are distinguished from its competitors and it has resulted in an increased
demand of Apple big-ticket purchases.
3 Socio-cultural
The socio life these days is controlled by the innovative technology and Apple
Inc is on the first place, it is the king of this trend market because of its exclusive
premium products and the ability to design and develop its own operating
system and application software with an introspective concept that Apple
concedes factors that demonstrates what customers desires.
Nowadays, owning a high-tech computer, iPhone or an iPod has become am
aspect to demonstrate others that a person fit in the cool society.
An additional huge social impact which is acknowledged its advertise on
cyberspace and has become fundamental is the music industry whereas Apple
has created the biggest virtual media store of online music recognized as iTunes.
The music fanatics targeted by Apple are aged 13-35 years old for that reason it
may possibly became a big challenge for the Company because the 65 aged
populations has increased in the last period.
Other than that the usage of social networks like Facebook, Instagram, Twitter
and Linked In have a strong impact on Apple`s industry since the iPhone
application usage is increasing due to outstanding number of social network site
users. Also there is an additional requirement of computers with application that
helps out students to train and develop.
Therefore the global social-cultural trends are certainly influencing positively the
industry of Apple Inc.
4. Technological
As a high-tech company Apple has constantly been in the spotlight of developed
advancing and high quality products. This movement emerge from the head start
when Apple observed that the assiduity of giants carrier as HP and Intel were
generating headway into the technological evolution of computer hardware. To
balance the performance capability attained by the new chips and hardware
systems, Apple and Microsoft has combated for the optimal operative system.
Since that time technology has significantly ameliorated offering the company
extra prospects to contract the hardware size and create it to a greater extent
high-speed and powerfulness. Additional media devices can be linked to
computers to make possible wireless communication.
According to 4GTrends website one of the major impact in mobile technology
expansion was in 2008 when the 3G mobile phones were accessible such as
Apples iPhone 3G. Nowadays 4G technology is enclosed in computers,
Notebooks, pcs, digital cameras and any other consumers devices. Therefore
the products and services are in a high competitive position for a place on the
market. Apple Inc is continuously investing a lot in new technologies to improve
its existing products and to increase the variety of the services tender
throughout exploration and improvement. For example in 2011 Apple has
launched a new service for its customers which can serve to storing documents,
contacts, music, photos etc and through wi-fi connection it can be transferred to
multiple ios devices. Furthermore Apple Inc has definitely gain the battle upfront
its competitors it stays on top of the market thankfully to the devotement and
originality.
5. Legal
a. The Company currently hold rights to patent and copyrights relating to certain
aspects of its iPhone, iPad, Mac and iPod devices, peripherals, software and
services.
The Company has register or has applied for trademark and service marks in the
U.S. and a number of foreign countries.
b. Many of the Companys products are designed to include intellectual property
obtained from third parties.
While it may be necessary in the future to seek or renew
licenses relating to various aspects of its products and business methods, based
upon
past experience and industry practice, the Company believes such licenses
generally
could be obtained on commercially reasonable terms; however, there is no
guarantee
that such licenses could be obtained at all. Because of technological changes in
the
industries in which the Company competes, current extensive patent coverage,
and
the rapid rate of issuance of new patents, it is possible that certain components
of the
Companys products and business methods may unknowingly infringe existing
patents or intellectual property rights of others. From time to time, the Company
has
been notified that it may be infringing certain patents or other intellectual
property
rights of third parties. (Page 8)
Legal forces in the industry Apple competes in have a steady trend. Currently,
Apple and its
competitors face minimal regulatory intervention. There are key legal forces that
cannot be
completely disregarded though. As the former statement above discusses, the
ownership of
patents, copyrights, trademarks, and services are an important factor in the
Companys
operations. Successful financial and operational results are therefore partly
attributed to the
rightful ownership of these legal requirements. As discussed in the latter
statement, legal issues
regarding intellectual property require careful, continuous scrutiny. This is to
avoid accidental
infringement caused by the rapid technological changes, extensive patent
coverage, or the rapid
rate of issuance of new patents.
6. Environmental
devices. The Companys competitors who sell mobile devices and personal
computers
based on other operating systems have aggressively cut prices and lowered their
product margins to gain or maintain market share. The Companys financial
condition and operating results can be adversely affected by these and other
industrywide downward pressures on gross margins. Principal competitive factors
important to the Company include price, product features, relative
price/performance, product
quality and reliability, design innovation, a strong third-party software and
peripherals ecosystem, marketing and distribution capability, service and
support,
and corporate reputation. (Page 6)
The intensity of competitive rivalry in the computer manufacturing industry is
strong. Apples
competitors that carry comparable products attempt to gain or sustain market
share through
strategies involving dramatic price cuts and reduced product margins. These
strategies from
competitors create an industry-wide downward pressure on gross margins which
can
substantially affect Apples standing. Nonetheless, Apple has identified several
elements that it
can integrate into its strategic planning to create a competitive advantage. This
includes price,
product features, relative price/performance, product quality and reliability,
design innovation, a
strong third-party software and peripherals ecosystem, marketing and
distribution capability,
service and support, and corporate reputation.
8. Threat of New Entrants
a. The Companys competitors who sell mobile devices and personal computers
based
on other operating systems have aggressively cut prices and lowered their
product
margins to gain or maintain market share.
b. R&D expense increased $647 million or 36% to $2.4 billion in 2011 compared
to 2010.
c. The Company currently holds rights to patents and copyrights relating to
certain
aspects of its iPhone, iPad, Mac and iPod devices, peripherals, software and
services.
The statements above demonstrate determinants that Michael Porter uses to
assess whether an
industry has a strong threat of new entrants. These determinants indicate that
there are high
barriers to entry thus reducing the threat of new entrants. For instance, the fact
that aggressive competition has created a downward pressure on product
margins indicates that there is a high
level of expected retaliation. Capital requirements are high as well since heavy
R&D investments
are required to remain competitive. Furthermore, the current market players,
including Apple,
hold several patents and copyrights to withhold their proprietary product
differences from other
competitors. Overall, there is a weak likelihood of new entrants to the industry
the Company
competes in.
9. Bargaining Power of Suppliers
a. Although most components essential to the Companys business are generally
available from multiple sources, a number of components are currently obtained
from
single or limited sources, which subjects the Company to significant supply and
pricing risks. Many components are at times subject to industry-wide shortages
and
significant commodity pricing fluctuations. In addition, the Company has entered
into
various agreements for the supply of components; however there can be no
guarantee
that the Company will be able to extend or renew these agreements on similar
terms,
or at all. Therefore, the Company remains subject to significant risks of supply
shortages and price increases that can materially adversely affect its financial
condition and operating results. (Page 7)
The bargaining power of suppliers of the industry in which Apple competes in is
assessed as
strong. It can be derived from this excerpt that there are two key types of
suppliers to the
Company. There exists the suppliers that offer the basic components that are
commodity in
nature and then there are the suppliers that offer the more sophisticated
electrical components.
The majority of Apples suppliers are those that provide components that are
readily available
from multiple sources since supplier concentration is low. Some of the key
components,however, are procured from a single or limited source. This
increases the supply and pricing
volatility for these items. The statement above also depicts that even though
various supply and
price agreements have been contracted, there is no guarantee that these
statements of work can
be extended or renewed on similar terms. Therefore, supplier power is
recognized to be strong.
10. Bargaining Power of Buyers
a. The Company believes providing direct contact with its customers is an
effective way
to demonstrate the advantages of its products over those of its competitors.
(Page 2)
b. The Company believes that sales of its innovative and differentiated products
are
enhanced by knowledgeable salespersons who can convey the value of the
hardware
and software integration, and demonstrate the unique solutions that are
available on
its products. (Page 6)
c. Principal competitive factors important to the Company include price, product
features, relative price/performance, product quality and reliability, design
innovation, a strong third-party software and peripherals ecosystem, marketing
and
distribution capability, service and support, and corporate reputation. (Page 6)
The bargaining power of buyers the industry in which Apple competes in is
assessed as
moderate. The key buyers for the Company are consumers, small and mid-sized
businesses
(SMB), and education, enterprise and government customers which is
indicative of a robust
buyer volume. Larger entities may be able to negotiate on the terms of the
contracts with the
Company. The smaller organizations and regular consumers do not have this
same bargaining
leverage over the Company. The quote above from Apples 10-K denotes several
determinants
the Company uses to reduce overall buyers bargaining power. Apples attempts
to highlight
product differences by advocating direct contact with consumers to depict the
advantages of its products over those of its competitors. It also strengthens
buyer information by providing
knowledgeable salespersons to convey the products value-added. The Company
has identified
several elements that it can integrate into its strategic planning to address the
price sensitivity
and bargaining leverage of their customers. These elements include price,
product features,
relative price/performance, product quality and reliability, design innovation, a
strong third-party
software and peripherals ecosystem, marketing and distribution capability,
service and support,
and corporate reputation.
11. Threat of Substitute Products or Services
a. The Companys digital content services have faced significant competition
from other
companies promoting their own digital music and content products and services,
including those offering free peer-to-peer music and video services. The
Company
believes it offers superior innovation and integration of the entire solution
including
the hardware (iPhone, iPad, Mac, and iPod), software (iTunes), and distribution of
digital content and applications (iTunes Store, App Store, iBookstore and Mac App
[1] Thielman, S. (2016) Apples battle with the FBI: whos supporting them and whos
not? The Guardian, Available at:
http://www.theguardian.com/technology/2016/feb/29/apple-fbi-encryption-battlesupporters-technology-politics
[2] Russia Today (2014) Available at: http://rt.com/politics/210675-russian-parliamentiphone-ban/
[3] The Independent (2014) Available at:
http://www.independent.co.uk/news/people/news/russian-politician-says-apple-ceotim-cook-should-be-banned-from-country-after-coming-out-as-gay-9829670.html
[4] Annual Report (2014) Apple Inc
[5] Lunden, I. (2012) Tech Crunch, Available at:
http://techcrunch.com/2012/07/24/apples-feeling-europes-economic-crisis-essentiallyflat-revenues/
[6] Morris, D. (2015) Will tech manufacturing stay in China? Fortune, Available at:
http://fortune.com/2015/08/27/tech-manufacturing-relocation/
[7] Neate, R. (2013) David Einhorn Suing Apple Over Shareholder Cash The Guardian,
Available at: http://www.theguardian.com/technology/2013/feb/07/david-einhornapple-shareholder-cash
[8] Annual Report (2014) Apple Inc
http://www.tradingeconomics.com/united-states/unemployment-rate
http://www.tradingeconomics.com/united-states/inflation-cpi
http://cliffsnotes.com/subjects/economics/what-are-the-advantages-anddisadvantages-of-gdp
http://www.greenenergyinvestors.com/index.php?showtopic=14596