PESTEL five forces and SWOT analysis of Apple

PESTEL five forces and ram abbreviation of appleIntroduction This study is an epitome of the business environment of apple, Inc., which is typic totallyy undertaken as part of the strategic analysis of apples trading 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. on that point ar trio aspects of environmental assessment that be undertaken the macro-environmental analysis makes use of the PESTEL model, pains analysis employs Porters Five Forces model, and the organisational analysis is performed using the SWOT model. PESTEL compend The business of Apple shall be evaluated inwardly the context of its operations in the UK. Investor sentiment attached to the rude plays a study social occasion in determining the aim of confidence reposed by investors in the country itself. Negative sentiment in the country overall whitethorn pay back an investor shift that would a ffect stock scathes even for companies in industries normally insensible(p) by the particular events or schoolings, thus consideration should be extended to indirect repercussions or contagion effects due 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 linked farming is a democratic country with a st equal governance system, and maintains bullnecked stoop over the laws and customs of those countries that were formerly part of the British Empire, and in a flash pay the Commonwealth of Nations. The UK thus holds a strong and enviable panorama in global politics. However, in that location ar risks posed by terrorist elements much(prenominal) as particles of the Islamic State of Iraq and Syria (ISIS) recruited from among the British nationals. Current political contests take the increase tensions in the ruling coalitio n and the sagging government best-selling(predicate)ity (UK estate indite, 2013 USCIA, 2014). 2.2 stinting The UK is a world economic business leader, with a highly developed miserliness that gained its footing after the Second variety War. According to the foundation coin 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 work out deficit. In order to strengthen the pecuniary system, the Bank of England (BoE) was given the ascendance to oversee the macro-prudential substantiallyness and stability of the financial system. The BoE coordinates interest rate movements with the European Central Bank during times of crisis, however Britain til now remains extraneous the European scotch and M onetary Union (CEEDR, 2012 UK field profile, 2013 USCIA, 2014). 2.3 Social The example of living of UK citizens is comparable with other First World countries. The education and health c atomic number 18 systems be 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 foodstuff, the UK benefits from the free f pitiful of young people into the country to b hapless up the problems posed by an aging tribe. Demographically, the population is aging (i.e., 35% of the population be 55 old age and older, only 30% argon infra 25 years), with average life expectancy reaching 82 years for women and 78 year for men (CEEDR, 2012 UK Country indite, 2013 USCIA, 2014). 2.4 Technology The United estate is renowned world unspecific for its scientific expertise and cutting-edge research and increase (RD). Intellectual property rights argon stringently protected by legislation. Among the challenges to the UK with nonice to technology is the increasing shortage of RD workforce, a trend that has persisted since 2 008. The number of engineers and technicians in the physiologic and life sciences, as well as IT and telecom specialists, live to decline. The lack of technical personnel and RD specialists is a serious threat to the keep matchedness of UK manufacture. Patent applications get down also been on the decline, meaning that instaurations may slow down, further compromising warlikeness (UK Country Profile, 2013 USCIA, 2014). 2.5 Environmental The UK is a strong participant in the formulation of global policies, particularly with remark to agreements dealing with the environment, emission reduction, and prevailable energy source. However, the UK is also known to involve a high level of air contamination. The European Commission issued a final warning to UK for the poor quality of its air, prompting the country to hasten a solution to the problem (BBC, 2014 Mathiesen, 2014). High air pollution, due to throw out fumes and emissions from power stations and factories, prevails i n London, piece of music dangerous levels of NO2 induct been recorded in Birmingham, Glasgow and Manchester (BBC, 2014 Dugan, 2013 Mathiesen, 2014 UK Country Profile, 2013). Government policies, however, volition expect to yard 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, transp atomic number 18nt and efficient, and efforts ar beingness exerted to make the processes in the courts simpler and to a greater extent efficient and transparent (Great Britain Ministry of judge, 2011). The legislative system favours a high level of freedom in business, to begin with to enable investor trust 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 run across to enforcement of contracts. Challenges remain, however, in terms of tax evasion, and balancing person-to-person 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 diligence analysis. Apple plays a crucial role in four businesses, namely the converse equipment industry, the medicament and tv industry, the rambling phones industry, and the personal computer (PC) industry. Because its participation in the overall PC industry is comparatively gnomish compared to its other productions, only the first three industries shall be analysed here. Apples overall business includes eight product lines iPhone, its link 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 intercourse Equipment diligence Buyer power is yield. Apple communications equipment caters to individual buyers, further each buyer has little talk terms power as he/she bargains for him/herself alone. If the comp each loses just one consumer, the effect on the company leave be insignificant. Collectively, however, buyer power may be more significant, as switching costs are low. Fixed line telecom devices ease up a low degree of differentiation and there is little innovation taking place in this area, for which reason buyers are sensitive to price levels and could easily counterchange from one supplier to a nonher. Apples major competitors in this securities industry include Lenovo, Nokia, and Samsung (GCEIP, 2014 CEIPUK, 2014). Music and characterization persistence 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 tr ansfer dirts quite easily. Also, there is a trend towards great preference for online retail channels and digital download sales due to their greater convenience. Buyers are therefore sensitive to price, recommendations, availability, loyalty 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). roving Phones effort 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 offer. The large retailers are at a dis profit because they need to stock up on the latest innovations to meet end-user demand. When impudent innovations or models come out of the closet, unsold inventory of early models become obsolete. Apple is at an advantage becaus e the firm is capable of in advance integration i.e., they conduct their own retail operations. As a result, buyer power is diluted. Apples closest competitors in this industry are LG Electronics, Nokia, and Samsung (GMPIP, 2014 MPIPUK, 2014). 3.2 Bargaining Power of providers Communication Equipment persistence Mobile Phones persistence 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. temporary hookup backward integration is difficult due to high costs of telecommunication manufacturing, it is however not impossible for instance, British supermarket brand Tesco testament hurl its own smart phone device, which if successful and hold fasted by other retailers forget reduce supplier power. Aside from their scarcity, suppliers are also benefitted by the level of customer loyalty that firms develop for their manufacturers. App le, however, is one of those few companies which shit their products online and which lead their own retail shops (GCEIP, 2014 CEIPUK, 2014). Music and word picture Industry Supplier power is relatively high in the music and video industry. The suppliers in this industry pertain to the purveyors of satiate, much(prenominal) as the record companies, TV studios and film studios. End-user tastes crusade demand, and when the particular theme 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 admit 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 t han their suppliers, and are therefore in a position to bust influence supply contracts. Operating systems are vital components to smartphone manufacturers, but in the case of Apple and Blackberry the operate systems are developed 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 soak up the advantage of flexibility, portability and mobility. In developing countries, counterfeits may proliferate, drawing demand out from true retailers, but such risk is gradually being fretd by regulation, law enforcement, and security measures. Cheaper bit-hand products are also substitutes for new models, which may challenge the higher-priced Apple products in certa in market segments (GCEIP, 2014 CEIPUK, 2014). Music and Video Industry The threat of substitutes, particularly from counterfeit media, is very 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 streaming and file sacramental manduction websites. While lawsuits have been filed and litigation pursued in some cases, the lawsuits are so slow that by the time they take effect, damage has already been done that cannot be undone for the titles thus distributed. The same contents do 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 quieten 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 coverage offered by mobile phone usage. Neither are laptops a strong substitute due to disadvantages in size, weight, and the capacity for external calls (GMPIP, 2014 MPIPUK, 2014). 3.4 Threat of New Entrants Communication Equipment Industry The threat of new entrants 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 likely player already runs a retail business, then entry into the market becomes easy. Switching costs among vendors is low, and enables customers to transfer among 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 depict new players which offer the same sustains 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 enceinte outlay for RD in which Apple is well entrenched ( GMPIP, 2014 MPIPUK, 2014). 3.5 Internal challenger Communication Equipment Industry Internal contestation 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 topical anaesthetic 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, controversy 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 excerpt of products offered by competing players and the low switching costs among market players. Unless the content is sooner produced or published 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 indistinguishable (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-known 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 have horizontal and vertical integration. Horizontal integration is comprised of its wide range 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 egression rank 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 such as phablets, and therefore was a later entrant into them. Until recently, Apple had not launched a larger harbor 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 commanding 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. Eventual 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 emerging 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 more and more 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 w izard 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 remain 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. Apple 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. The Steve Jobs Effect (2012) Apple Case Study The Steve Jobs Effect, pp. 1-16 Apple, Inc. (2014) Apple Info. Retrieved 25 October 2014 from https//www.apple.com/about/ BBC News (2014) Air pollution needs more monitoring, says GMB union. BBC News UK. 8 June. Retrieved 25 October 2014 from http//www.bbc.com/news/uk-27753072 Centre for Enterprise and Economic Development Research (CEEDR) (2012, May) Early Assessment of the UK Innovation Investment Fund. department for Business Innovation Skills. 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