Assignment

Apple Inc's External Business Environment

Introduction

Companies do not operate in a vacuum and as such they have to pay attention to their external environmental in order to remain competitive. Managers have little influence on the external environment and businesses have to adapt as the external factors keep on changing. External business environment factors include the political landscape, technology, legal and regulatory frameworks, societal factors, the economy in general, and competition. These factors are not static and the more they shift, the more volatile the environment becomes. Apple Inc. operates on a global scale, which means that the external business environment is quite complex. This paper will explore some of these factors which affect the business strategy that the company uses.

Political Factors

Political factors are perhaps what the company cannot exert any influence on because of the complexities involved. Apple Inc is an American company which has customers all over the world including those countries whose relations with the US are strained (Grant, 2003). The company has to hope that tensions between the various countries it has interests do not become rocky to a point where business becomes impossible to run. The company has factories in China and other Asian countries where there is an ample supply of labor. Potential conflict between the US and China could force the company to shift the locations of the labor-intensive factories.

Economic conditions affect the demand for Apple's products because of people's purchasing power. Increase in inflation and recessions have a negative effect on demand because people tend to check their spending habits (Grant, 2003). The company's products can be classified as luxury products, which mean that people can decide to reduce spending on them to be able to purchase their basic needs. Further, economic conditions affect the cost of raw materials for production and labor as well. Therefore, the company has to keep track of developments in the economy because they have to adjust their prices and product offering to match the changes (Husso, 2011).

Social factors are quite important to Apple because their competitive advantage currently lies in the perception that their products are of high quality. Their customers feel classy because of the premium pricing which the company practices. The company has to keep track of the people’s attitude towards their products so that they can produce what people want in case their preferences change. Another dimension of the external business environment is technology. Apple has to invest in research and development to produce innovations that will keep customers interested in what the company is producing. Further, the company has to keep an eye on any developments in technology which could help it improve its products (Grant, 2003).

The regulatory and legal environment is quite important for Apple to keep an eye on because it has operations in many countries. The company has to ensure that their factories do not violate any rules meant to protect the environment because that would lead to time-consuming lawsuits (Husso, 2011). The company must also ensure that it abides by the labor laws in the countries of operation. The company often has to go beyond the labor laws in the countries of operation so that its image in the eyes of employees and the public in general. The company ensures that the factories are safe and healthy for workers, and they also remunerate employees competitively (Grant, 2003).

The geographical factors that Apple has to pay attention to relate to the distance between the factories and markets. The company has to invest in an elaborate supply chain management system to ensure that parts reach the respective factories for assembly. The same has to be done to ensure that the company's products are equally available in all markets.

Five Force Analysis

The five force analysis tool is useful in analyzing the competitive environment in which the company operates in. The competition between players in the industry is quite fierce especially because Apple has to compete in the operating systems market, smart phones market, and personal computers front as well. However, the company has gathered customer loyalty by manufacturing quality products for the premium market. The bargaining power of Apple's suppliers has been reducing as the company continues to grow in size. Apple places orders in large quantities and many suppliers want to do business with it and as such Apple is able to put conditions in the supply contracts (Mason, 2007).

The company has cut a niche in the luxury phones and personal computers market and customers are very loyal. The bargaining power of buyers is therefore little and is expected to continue buying even when prices increase. The threat of new entrants entering the market and reducing Apple's market share is little because of the loyal customer base and a strong brand image the company has built over the years. Lastly, the threat of substitute products is real for Apple because there are companies in the market that manufacture quality products. An example is Google's Android operating system and Samsung's Galaxy smart phone (Mason, 2007). However, the company is working to reduce this threat by cultivating customer loyalty. In conclusion, the company has managed to place itself strategically in a manner that reduces the threat of competition.

The strengths of the company include its strong financial position and brand loyalty of customers. Weakness includes the incompatibility of its products with rival operating systems and high prices. The opportunities existing in the market include an increasing demand for smart phones and tablets. The main threat to the company' success is the growth of Google Android operating system and increased scrutiny on working conditions in the company's factories in China (Mason, 2007).

References

Grant, R. M. (2003). Strategic Planning in a Turbulent Environment: Evidence from the Oil Majors. Strategic Management Journal, 24(6), 491-517.

Husso, M. (2011). Analysis of Competition in the Mobile Phone Markets of the United States and Europe.

Mason, R. B. (2007). The External Environment's Effect on Management and Strategy: A c

Complexity Theory Approach. Management Decision, 45(1), 10-28.