Preliminary Strategy Audit

An environmental scan is vital for every company as it helps to determine the threats and opportunities that are posed to the company. The following will be included in the environment scan of Apple incorporated: economic factors, political factors, legal factors, societal factors, technological factors, geographic factors and Porter’s five forces.

Key Factors and Trends

The economic environment of the company is determined by factors such as taxation policies, exchange rate, inflation, the economy, living standards, the average income and consumer buying power. Apple’s products main target market are people of medium to high income and standards. In an economic boom, the company’s products are more likely to be bought than during a recession. The rapid growth of developing countries provide an opportunity for Apple to venture into new markets.

Political stability can be a threat to Apple’s products. Poor political stability would mean a reduction in sales and distribution of the products would be hard as trade barriers would be imposed. Various trade policies that could be imposed on a country would have an adverse effect on the company’s sales. However, developing countries create an opportunity for Apple expand its customer base as more free trade policies are put into effect. As Lombardo (2015) states, “Additional free trade policies increase the opportunities for Apple to distribute more of its products to various markets around the world” (section 2).

Social-cultural factors, such as lifestyle, living standards, and demographics important to Apple. Social factors have an effect on consumer behavior and expectations. The increase in mobile phone use and social media is an opportunity for Apple to provide easy-to-use smart phones.

Current technology and technological changes can affect a customer’s priorities changing the demand for Apple products. For example, with the increasing popularity of Cloud computing, Apple can use that to bring in customers and retain their existing customers. Apple has taken advantage of this by making it so that information can be transferred between the different apple devices and between family members. “Everything’s better when shared, and sharing has never been easier” (Apple, 2016, section 3).

Legal factors can also create a threat to Apple. As governments become more aware of privacy issues in relation to digital technology, stricter regulations are imposed on companies like Apple. This poses a threat to Apple as they are now required to develop a product that not only meets consumer demand, but also the privacy regulations imposed by the government. Stricter regulations have been implemented on telecommunications therefore increasing threats to Apple. These regulations can limit the usability of the products.

Apple has an opportunity to expand their geographical boundaries making their products readily available to more individuals around the globe. New technology has reduced geographical boundaries to nothing allowing more people access to their products.

Porter’s Five Forces

Porter’s five forces is a model “identifies and analyzes 5 competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths” (Investopedia, 2016, para. 1). Apple’s five force analysis will aide in giving insight about the external factors that may affect the company. Porter’s five forces are supplier power, buyer power, competitive rivalry, threat of substitution, and threat of new entry.

Supplier Power

Apple’s suppliers have weak bargaining power toward the company due to the availability of suppliers around the world. The company also has a high level of supply for most of its components. “This condition makes individual suppliers weak in imposing their demands on firms like Apple” (Ferguson, 2015, section 5).

Buyer Power

The bargaining power of Apple’s customer is strong because the costs incurred when switching from one brand to another is low. However, an individual buyer generally only buys iPhone therefore they have a very small effect on the company’s sales.

Competitive Rivalry

Apple faces a strong force of rivalry from competitors such as Samsung, LG, and Blackberry. Their competitors aggressively compete for the market through rapid innovation, aggressive advertising and imitation. Another threat to Apple is the low cost of switching between brands. A customer can easily convert from an Apple Product to a Samsung product or other competing brand. According to Ferguson (2015), “this part of the Five Forces analysis shows that competitive rivalry is among the most significant considerations in Apple’s strategic formulation” (section 3).

Threat of Substitution

Substitute products have a weak force in attracting Apple’s customers. While there are several substitute products in the market, they tend to have low performance and few features. Due to the advanced features of Apple products, many customers would prefer Apple products. Therefore, substitutes have little to no effect on the Apple.

Threat of New Entry

New entrants into the industry have a weak force toward Apple. New competitors into the market would face challenges such as high capital and high cost of brand development to achieve the level brand establishment that Apple has. However, companies such as Samsung and Google have the financial capacity to enter the market and competing directly against Apple. The threat of new entrants should be considered to be of moderate threat to the company.

References

Apple. (2016). iCloud. Retrieved from http://www.apple.com/icloud/family-sharing/

Ferguson, E. (2015). Apple Inc. Five Forces Analysis (Porter’s Model). Retrieved from http://panmore.com/apple-inc-five-forces-analysis-porters-model-case-study

Investopedia. (2016). Porter’s 5 Forces. Retrieved from http://www.investopedia.com/terms/p/porter.asp

Lombardo, J. (2015). Apple Inc. PESTEL/PESTLE Analysis & Recommendations. Retrieved from http://panmore.com/apple-inc-pestel-pestle-analysis-recommendations