Presentation of Strategy Audit Findings

External Environmental Scan

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Introduction

Understanding the marketplace environment is essential for developing effective business strategies. Various factors in the external environment including economic, societal, technological, regulatory and political factors influence the operations of entities such as Apple’s iPad business unit. The Porter’s five forces analysis also provides a meaningful framework for understanding industry dynamics in the tablet market. In addition, the five forces analysis reveals opportunities that the business unit can exploit and the threats it must address in order to remain competitive. Conducting a comprehensive external environmental scan of iPad business unit and the industry where it competes will aid in identifying some of the opportunities and threats that the company should exploit or mitigate.

Discussion

Economic factors and trends are important in the analysis of the iPad business unit and other players in the tablet market. According to Khan & Alam (2015), problems in the globe’s financial systems brought about by incidences such as the global final meltdown have manifested detrimental effects on many businesses. The financial crises have led to reduced spending and purchasing powers, thereby prompting consumers to switch from products deemed non-essential (Ferrell & Hartline, 2014). Substitutes such as smartphones are much cheaper as compared to many tablets; therefore, consumers will tend to go for these alternatives during times of economic hardships.

Political factors and trends also have a significant impact on the iPad business unit. This is particularly true since the business operates on a global level. Hitt, Ireland, & Hoskisson (2014) acknowledge that political stability of a nation is a good indicator of the viability of conducting business in foreign nations. The level of political corruption in a country also matters because it can dictate factors such as issuance of business certification and licensure (Khan & Alam, 2015). In stable and transparent nations where there are no political tensions, business units such as Apple’s iPad can be able to operate sustainably.

It is worth mentioning that regulatory and legal factors also influence the operations of the iPad business unit and other tablet manufacturers. Government regulations, including those dealing with taxation, can have a drastic effect on the operations of the business. For instance, as Murph (2012) asserts, an increase in VAT in foreign countries can reduce the purchasing power of the consumer and subsequently discourage them from buying the iPad. In the US and other parts of the globe, environmental and labor laws also have an effect on the conduct of the iPad business unit and other tablet manufacturers. Tablet manufacturers such as Apple need to comply with all regulations in order to avoid legal litigations.

Societal factors also affect players in the tablet market. According to Ferrell & Hartline (2014), socio-cultural influences on a firm encompass various aspects such as cultural practices as well as people’s changing preferences and attitudes. With the rise of the internet, more and more people from different societies are finding gadgets such as tablets very essential to their personal and professional lives. This indicates that demand is likely to surge in the near future. Business units such as Apple’s iPad unit can benefit through capitalizing on this opportunity (Murph, 2012).

Hitt et al. (2014) contend that the rapidly changing technology has been a deciding factor for the success of many companies, particularly those in the consumer electronics industry. In the tablet industry, the iPad is the trendsetter when it comes to technological prowess. The company has invested massively in R&D and human capital, a factor evidenced through the superb product functionalities and features that other competitors in the market have been unable to match (Murph, 2012). The iPad business unit needs to maximize on this strength through continuing to emphasize on ongoing innovation.

Noteworthy, a five forces analysis is important in highlighting the environment of the industry in which the iPad business operates. The threat of new entrants in the industry is moderate. As Khan & Alam (2015) point out, the tablet market is technology intensive with few bureaucratic or restrictive barriers to entry. Nevertheless, the start-up costs are substantially higher for businesses aspiring to venture into the industry. The other major hurdle for prospective entrants is establishing market share since products such as the iPad have already dominated huge chunks of the industry (Murph, 2012). Apple should exploit this opportunity of size through extending to other markets such as the emerging BRICS nations.

The threat of substitute products for the iPad business unit is relatively high. Many of the existing tablet manufacturers including Samsung, Microsoft, Sony and Amazon manufacture tablets that are similar to the iPad and offer their products at lower prices, thereby posing a threat to the market share enjoyed by the business unit. Smartphones, which also come cheaply from many manufactures, are a viable substitute for the tablet. Furthermore, the switching costs in this industry are low, indicating that consumers can easily move from one brand to another if they feel dissatisfied with a particular brand (Murph, 2012). Despite this threat posed by substitutes, however, Apple’s iPad has managed to succeed with its premium pricing strategy because of strengthened customer loyalty.

Similarly, buyers’ bargaining power in the tablet industry is high. Ferrell & Hartline (2014) acknowledge that the presence of outstanding substitutes and cheaper tablet computers gives customers a higher bargaining power over the manufacturers. In addition, the ability of consumers to switch to substitute products is easy. This gives them a higher bargaining edge and enables them to exert pressure on manufacturers to lover prices, provide better customer service and offer higher quality products (Hitt et al., 2014). Apart from the availability of many substitutes, the buyer power is also high because most consumers are price-sensitive. Since Apple sells products such as iPad at premium prices, it faces a threat if other industry competitors improve quality and sell at lower prices.

The intensity of competitive rivalry in the industry is high. The iPad business unit faces stiff competition from other established market players such as Microsoft, Sony, Samsung and Amazon (Murph, 2012). Other smaller competitors including tablet manufacturers from China also intensify the competitive rivalry in the industry. In the meantime, however, Apple’s iPad continues to command a dominant market share, capturing approximately 26.4% of the share. It has managed to stay abreast of competitors because of various factors including emphasis on innovation and quality production. The bargaining power of suppliers in the tablet market is low - moderate. This is because of the existence of many suppliers and the practice of outsourcing some functions to overseas suppliers.

Conclusion

The environmental scan of iPad business unit and the industry where it operates reveals various trends that may affect the operations of the business. Factors such as economic meltdowns, the political climate, taxation regime, people’s attitudes towards the company or product and technological advances have huge implications for business units in the tablet market. This industry is very competitive, with many substitutes available from rival companies. Because of this, buyers tend to have higher bargaining power. Business units such as Apple’s iPad unit should continue investing in R&D and exploiting the available opportunities in order to thrive in the industry.

References

Ferrell, O. C., & Hartline, M. D. (2014). Marketing strategy : text and cases (6 ed.). Mason, OH: South-Western/Cengage Learning.

Hitt, M., Ireland, R., & Hoskisson, R. (2014). Strategic Management: Concepts and Cases: Competitiveness and Globalization (3 ed.). Mason, OH: Cengage Learning.

Khan, U. A., & Alam, M. N. (2015). A critical analysis of internal and external environment of Apple Inc. International Journal of Economics, Commerce and Management , 3 (6), 955-967.

Murph, D. (2012). IPad Secrets. Hoboken : John Wiley & Sons.