Apple Inc Company PEST Analysis

Apple Inc Company PEST Analysis

An organization’s external environment significantly impacts its operation. Operation into perpetuity is one principle that governs business operations. All organizations have the objective of operating into an invisible future and maintain optimal profitability. Strategic management is an important tool in realizing perpetual operation. It allows for both external and internal environmental scanning and devising the appropriate solutions that can allow for smooth interaction with these environments.

Apple Inc embraces strategic management in conducting its operations. The company is one of the most recognized manufacturers of consumer electronics brands in the world.  Apple inc. Is an international company that operates across different host nations, and for this reason, the company has to be highly strategic to accommodate the diverse external factors such as political, economic, socio-cultural, and technological factors exhibit across these nations (Onyusheva & Seenalasataporn, 2018). SWOT analysis of the company’s strengths, weaknesses, opportunities, and threats is essential in discerning how well the company is placed in dealing with diverse political factors. The company’s SWOT analysis reveals the following. In terms of strengths, the company has a well-built brand reputation that promotes customer loyalty, significant financial strength, and high innovation as a result of heavy investment in research and development.

The major weaknesses of the company include a lack of compatibility of its products with products from other companies and a limited portfolio in terms of the product range. Some of the opportunities that the company can exploit include the adoption of green technology and developing new products to increase the company’s range of products. In relation to the threats the organization is facing, include factors such as intense competition within its industry, legal and regulatory pressure from different countries it operates in. The company must know its strategic position regarding different external environmental factors to ensure it maintains relevancy in regards to competition within the industry. PEST analysis on the same reveals the following.

Political

Apple inc. Operates across different nations with different political systems and policies. Some of which favor the company’s operation within the country, presenting new opportunities and some present major threats to the company like closure of operations, and some of these include the following. The United States is the company’s home country that hosts its central headquarters. In the recent past, there has been an increased debate for equality within the United States in which the responsible government authorities have been constantly pushed to adjust the country’s tax system to reduce inequality within the country (Onyusheva, & Seenalasataporn, 2018).  This proposal will result in an increase in corporate tax, which will significantly reduce profit levels. Implementation of such a policy within the United States can significantly affect the company’s operations within the country. Tax disputes as a result of a change in tax regulations can destabilize a company’s operation and consequently cause a reduction in profit levels while settling these disputes. For instance, The Ireland government had tax disputes with the company, and as a result, the company had to pay more than $21 billion in settling the tax dispute, which significantly impacted the company’s profit levels within the country.

Apple inc. Heavily depends on the lower manufacturing cost it enjoys in China, which results from the availability of cheap labor within the country. The ongoing trade wars between the united states and china pose a significant threat in its operations within the country. If the united states tariffs rapidly increase on Chinese imports into the US, then Apple products will also face heavy taxes from the Chinese government as a form of retaliation on policies implemented by the company’s home country (Li, He & Lin, 2018). The result will be a reduction in Chinese consumers’ demand for products from Apple Inc, including the iPhone. The overreliance on a production facility in China can significantly impact the organization’s operations in other countries in case china witnesses political unrest. The effect won’t be felt within the country but also in other countries which rely on the company’s imported products from china. Additionally, China has been witnessing rapid rise economically, which has affected its relationship with other nations that see it as a threat. Apple Inc’s close association with china can impact its operation in countries that see China as a threat to them

Improved free trade policies among countries can present a significant opportunity for companies. One of such countries with improved free trade policies in India. India has been the third-largest market for Smartphone devices. The country’s free trade policy implemented by its political authorities has proved to be a significant revelation on this. This free trade provides a vibrant opportunity for apple inc. To further formulate viable solutions that can help it acquire a significant market share, thereby increasing its revenues and, subsequently, profit levels.

Economic

Economic factors such as economic stability, economic growth, and disposable income level among targeted consumers can present opportunities that organizations can exploit to increase their profitability. A stable economy ensures proper planning and forecasting of an organization’s activities within a country. A stable economy also shields an organization from factors such as inflationary conditions, thereby resulting in stability in product’s prices. A rapidly growing economy means an expansion in the size of an economy and an improvement in the living standards of residents. This presents additional investment opportunities for individual companies (Kim & Lee, 2018). An increase in the level of disposable income results in an increase in consumer purchasing power, which can result in an increase in sales, thereby increasing revenues.

There has been a recent uproar in the Chines labor market in which the workers demand a hike in wages and salaries. This will definitely increase the labor cost for companies like apple inc, which will be translated to an increase in prices of the company’s products. This will affect the cost advantage the company was enjoying, which gave it a competitive edge within its industry, thereby affecting its competitiveness within these markets.

Technological brands like those developed by apple inc. Largely depend on developed countries’ markets, which provide room for expansion, thereby creating opportunities for the companies that specialize in such products. Some developed countries like the United States have been witnessing stagnation in the middle-income class. This stagnation results in market shrinkage for higher-end goods like the products from apple inc. And as a result, the company faces a reduction in its level of competition within the industry. Additionally, apple inc relies on premium products, which are only meant for high-end markets, something which disadvantages the company’s operation in the Asian market. The economic level of the Asian market has resulted in a significant proportion of consumers in the market opting for low-end products. Huawei and Samsung have mastered this market, and the two companies developed products that suit both the low-end consumers’ demand and high-end consumer demands, thereby greatly disadvantaging apple inc. With its premium pricing (Kim & Lee, 2018).

Normally again of a company’s home country’s currency in the money market significantly affects its operations in other countries as it increases the product prices in these other countries. Apple Inc’s home country is the United States; any gains of the US dollar in terms of strength in the financial market will negatively impact the exchange rate resulting in difficulty In operating in other countries. Apple inc. Relies heavily on the European and Chinese markets, such an increase can negatively place the company‘s level of competition in these markets.

Socio-Culture

The world is diverse in terms of culture. Every country within the world has a unique characteristic in terms of culture that can be a threat to businesses or present more business opportunities to organizations. Apple inc. Has to devise strategies that can enable the company to adapt to each and every culture in which it operates in. These policies must be flexible enough to snap up any opportunities presented by these cultures and mitigate against potential threats presented by these cultures.  There has been a major shift in culture exhibited among different countries in the world that have resulted from millennial development. These include Socio-cultural factors such as the rising use of mobile devices and increased dependence on technological products. These present significant opportunities for businesses like apple inc operating within the industries that provide products aligned to these changes.

A rise in the use of mobile phones entails an increase in demand for smartphones and tablets.   These are some of the products that apple Inc deals in, thereby presenting an opportunity for expansion. Similarly, the increase in reliance on digital products such as television and smartphones for entertainment and other uses further creates more opportunities for the company’s products (Mogensen, 2018).

There is an expected rise in consumer spending in Africa, as the continent is expected to continue embracing digital products. However, Apple Inc’s products have not gained much popularity in these areas, probably as a result of the diverse cultures exhibited by the African population (Mogensen, 2018). However, the anticipated increase in terms of consumer spending in Africa as a result of the millennial development presents an opportunity that the company can snap up by increasing the popularity of its products among African households.

The rapid rise in social concern on topics such as ethics presents a challenge on apple Inc’s operation in china. The company relies on cheap labor in its production process in china to give it a cost advantage in the industry. However, there has been an increased campaign for companies to be socially responsible and promote the sustainability goals provided by the United Nations, which demand value creation for all stakeholders (Mogensen, 2018). The company’s low wage compensation in china significantly contradicts the requirements spelled out in the sustainability goals. This can significantly impact how the company’s products appeal to the socially conscious group in the whole world not just in china, and subsequently affects the company’s revenue

Technology

Technological space has been a highly volatile sector in the contemporary world. Technology has been developed to the extent that it controls almost all proceedings in the contemporary world. Companies operating in industries that deal more with the technological intensive product have to be on constant alert on each and every development within their industry or risk their products being considered as obsolete even before generating the cost involved in producing these products. There is no way out in this. These companies must heavily invest in research and development to stay competitive in these industries or form a strategic alliance with more advanced companies (Permozer & Orehovački, 2019).

Some of the technological factors that can affect a company’s operation include emerging demand in cloud computing, an increase in technological integration in business, and a growing mobile market, all of which present viable business opportunities to the company.  Additionally, the recently witnessed growth in the technological capabilities of other firms within the industry can present a threat to the company. The growth in other organizations’ technological capabilities exhibited by Google and Samsung has resulted in these organizations duplicating Apple Inc’s products and services. For instance, upon the launching of apple pay, it took Google less than a year to launch a product similar to apple pay (Permozer & Orehovački, 2019). The overall effect of this is that it reduces the uniqueness of the company’s signature products and services.

In recent years there has been a growing use of smartphones across the world. This presents an opportunity for the company’s smartphone brands but on the other hand, is likely to cause a decrease in demand for the company’s popular personal computers.  Additionally, the company’s proprietary operating system limits the variety of applications that consumers of the company’s products can access. This significantly impacts the level of value the company’s products create to its users.

Apple Inc has gained a massive reputation on a high level of security and safety, which has given the company a competitive advantage within its industry. However, the emergence of cyber crimes has significantly compromised this reputation. Cybercriminals always aim at exploiting the slightest of opportunities that can give them access to a company’s system and retrieve vital information relating to an organization’s systems and procedures.

Conclusion

The external environment has a significant impact on an organization’s operations. Political factors such as political stability and policies implemented by the political figures always present both opportunities and threats for organizations conducting their operations within these countries. Good political relations with other countries, better tax regulations, and friendly policies that encourage direct foreign investment within a country present viable opportunities to businesses. On the other hand, constant political disputes between countries significantly impact an organization’s business operations within the countries involves, as seen in the case of US-China trade wars that has a significant impact on apple inc’s operation in china.

Economic factors such as stable economy and increase in the level of disposable income present opportunities to companies as stability in the economy shields organization from factors such as inflation, and on the same note, an increase in the level of disposable income increases consumer spending power thereby increasing a company’s revenue. However, an increase in a company’s home currency strength in comparison with host nations’ currency negatively impacts the company’s operations in these host nations. The cultural diversity exhibited by different nations requires multinational companies to formulate robust and flexible policies that can enable them to adapt to the different cultures they operate in. The technological space is highly volatile and requires heavy investment in research and development to maintain relevancy in each industry an organization operates in. Apple inc. Is strategically placed in terms of technological business environment; however, the dynamism presented by political, socio-cultural, and economic factors makes it difficult for the company to operate in these environments. In regards to these, the company has embraced efficient and effective strategic management policies that allow it to operate in different environments regardless of the dynamism exhibited in each environment.

References

Kim, K., & Lee, S. M. (2018). Does Sustainability Affect Corporate Performance and Economic Development? Evidence from the Asia-Pacific region and North America. Sustainability, 10(4), 909.

Li, C., He, C., & Lin, C. (2018). Economic Impacts of Possible China-US Trade War. Emerging Markets Finance and Trade, 54(7), 1557-1577.

Mogensen, B. G. (2018). Managing Corporate Legitimacy Through CSR Reporting: A Qualitative Case Study of Apple Inc.’s Supplier Responsibility Reports (Master’s thesis).

Onyusheva, I., & Seenalasataporn, T. (2018). STRATEGIC ANALYSIS OF GLOBAL E-COMMERCE AND DIVERSIFICATION TECHNOLOGY: THE CASE OF AMAZON. COM INC. The EUrASEANs: a journal on global socio-economic dynamics, (1 (8)), 48-63.

Permozer, I., & Orehovački, T. (2019, January). Utilizing Apple’s ARKit 2.0 for Augmented Reality Application Development. In 42nd International Convention on Information and Communication Technology, Electronics, and Microelectronics.