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Milestone 2: External Analysis

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Milestone 2: External Analysis

Apple Inc.

Overview

Apple Inc. (referred ‘Apple’ herein) is one of the most successful public companies in

America. Since its establishment in 1976, Apple has become famous for its brand in technology

products such as smartphones, watches, tablets, and desktops. Besides, Apple offers its

customers various hardware and software products and services. The company has made

significant profits in the market. Apple’s approach to external forces has helped it remain a

competitive industry in America and globally.

PESTLE Analysis

The following is a PESTLE analysis of Apple’s macro-environment. Notably, each

PESTEL factor (political, economic, sociocultural, technological, ecological, and legal) is

supported by at least two factors.

Political Factors

There is significant political influence on international trade. For example, the trade war

between the United States and China is impacting the Apple brand. Most Apple products are

manufactured in China, and the U.S. government has imposed import restrictions from China

(Martins & Rodrigues, 2021). This situation has negatively impacted Apple company for the

overall cost of its sales has become higher in America. There is also an issue of political

instability in the world. For example, the Russian-Ukraine war and the European Union's cold

relation are obstacles to the marketing of Apple brands. Apple will be politically disadvantaged

if the governments change their free trade agreements, such as the European Union Free Trade

Agreement (EUFTA).
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Economic Factors

There is a global economic crisis of the Covid-19 pandemic. It negatively impacted

businesses, such as lockdown and employee layoffs (Rowland, 2022). Henceforth, Apple

corporation is a worldwide company that has faced the economic hardship caused by the health

crisis. Besides, Apple faces market threats and stiff competition from other companies that deal

with technology products and services, such as Asian Huawei, Samsung, and Sony. Additionally,

there is a significant decrease in purchasing power of electronic product consumers due to the

high cost of living and higher wage demands.

Sociocultural Factors

There is increased competition in consumerism, choice, and preference among tech users.

Most young people prefer innovative and luxury to outdated electronic devices (Perera, 2017).

Henceforth, Apple should strive to meet the zealous savvy consumers. The company has also

faced the threat of sociocultural alignment. For instance, most Africa Americans do not like

luxurious electronic devices and services, for they perceive them as expensive. Henceforth, the

middle-income class will choose cheaper electronic products such as Huawei and Xiaomi.

Technological Factors

Apple company enjoys high innovation and technological advancement. However, there

is increased competition on the level of technology from other firms such as Samsung and

Google. The giant companies can easily replicate Apple products, such as Apple Pay. This

situation can be linked to the demise of the innovative Steve Jobs compared to logistic Tim

Cook. There is also increased concern about the security strength of any technology signatures.

Consumers are selective and sensitive to products that they trust for their security (Perera, 2017).
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Nonetheless, the technology revolution is fast, and Apple should strive to match the top

competitors and be relevant in the market.

Ecological Factors

Apple, like any other company, faces strict environmental concerns. One of the biggest

issues is the disposal mechanism of Apple products, which is seen as a pollutant to the

environment and ecosystem. There are dangerous mining activities of smartphone raw materials

such as copper, gold, and rare earth materials. Research shows that less than 1% of these raw

materials are recycled, while the rest is disposed of after the smartphone’s expiry (Martins &

Rodrigues, 2021).

Legal Factors

Several legal regulations and rules bind Apple in the target countries. The company is

planning to explore automobile manufacturing, a heavily regulated line. The company should

comply with the set insurance laws. Besides, there is an increased concern about the privacy of

users’ data. Various lawsuits are other potential legal factors that affect Apple's operations. For

instance, the firm was fined $27 million in a lawsuit where a French watchdog complained that

Apple had deliberately reduced the efficiency of its older smartphone models to force consumers

to purchase new models (Martins & Rodrigues, 2021). Lawsuits may diminish Apple’s brand

image, reputation, and sales.

Porter’s 5-Forces Analysis

The following is Porter’s 5-Forces analysis of Apple Inc. The analysis identifies the

entities and structural attributes (factors) and states the level of the force.

Threat of New Entrants

There is a moderate threat of new entrants venturing into the technology industry. This

situation puts Apple on an advantageous side to enjoy the privilege of the establishment because

of the various factors. High investment is required for new companies wishing to venture into the

industry (Petersen, 2020). Besides, there is a high cost of brand development, and new

companies would require extremely expensive staffing and finance to facilitate it. New

companies will not only work to match Apple’s thrive but also already companies, such as

Google, Samsung, and HP. The new entrant will also face challenges to outdo Apple in the

market since the latter firm has a global reputation and loyalty. Besides, it will be hard for a new

company to snatch part of Apple’s market share because of its outstanding public image

propelled by an aesthetic design and visible logo.

Threat of Substitutes

There is a low threat of substitutes. Several factors facilitate the weak force. For example,

inadequate companies can trade products and services related to Apple’s sales. Apple does not

fear substitutes since it has improved its ecosystem mechanisms. Loyal consumers may feel less

attracted, appealed to, and attached to substitutes (Martins & Rodrigues, 2021). For example,

Apple gadgets have lightning ports for data and power transfer, encouraging consumers to use

the devices friendly and safely. Additionally, substitutes would not match the high cross-

compatibility level of Apple’s products. Nonetheless, there is a high switching cost of substitute

goods and services.

Threat of Bargaining Power of Suppliers

There is a low threat of bargaining power of suppliers. Apple does not face stiff pressure

from its several suppliers globally. Henceforth, the economies of scale help Apple have a wide

choice of suppliers. Besides, the company has also introduced its processor that does not require
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suppliers’ engagement. In 2020, Apple introduced the M1 chip processor to propel the next

generation of MacBook laptops to replace the Intel microprocessors (Rowland, 2022).

Henceforth, Apple would benefit from the low bargaining power of suppliers since it is a

competitive and expensive switching cost.

Threat of Bargaining Power of Buyers

The buyers' bargaining power threat depends on the type of Apple’s customers. The

collective bargaining power is high, and the individual bargaining power is low. This difference

is propelled by the level of impact of the customers on Apple revenue. For example, an

individual customer who declines to purchase an Apple product would have minimal impact on

the firm’s revenue. In contrast, a loss in collective clients would significantly impact the

company’s sales. A loyal customer would have a low bargaining power since trust and brand

loyalty become the key drivers to purchasing the product.

Threat of Competitive Rivalry

There is a moderate and high threat of rivalry among the existing competitors. The

technology industry is competitive depending due to the race of innovation and advancement

(Petersen, 2020). Henceforth, Apple should not assume and underrate the influence of other giant

companies in the technology market. For instance, Google, Samsung, and HP are the top worthy

competitors of Apple. There is a dire need to employ massive research and development to boost

innovation among Apple brands. However, there is a low threat force since the existing rivals are

yet to surpass Apple. Companies like Google depend on Apple to make (Google) a default search

engine. Besides, Apple also enjoys low switching costs among its consumers, who can purchase

a new Apple brand without the high cost.

Sixth Force – Complementarity

The sixth (6th) Porter’s force is complementarity (also known as commercial symbiosis).

It is the condition created when there exist companies that trade products that are compatible

with those of a given entity (Allinson, 2019). Apple has several complementors, such as Google.

Google pays Apple to make it a default search engine. Another notable commercial symbiosis is

Nike which traded Nike+ products through Apple. Apple developed and inserted chips in Nike

shoes to track their running exercises. The data is displayed in iPhones and iPods that may

contain iTunes music. This complementarity is important to Apple because it increases its

marketing power. It can also benefit Apple by maintaining and thriving competition through a

good reputation. However, complementors may increase competitiveness in the technology

industry since other entities would increase their bar to match the company’s level.

Conclusion

Apple Inc. is attractive. The company has robust competitiveness in the technology

industry. Although Apple faces numerous negative external forces, it has various strengths that

can help it thrive. For example, Apple enjoys an average low threat to new entrants, substituents,

bargaining power of buyers and suppliers, and competitive rivalry. Besides, it has an established

brand that has attracted various complementors. Apple is also attractive since its innovative

mechanism is effective in technology. Nonetheless, Apple Inc. has consistently worked on its

vision and mission to remain relevant in the global market.

References

Allinson, R. E. (2019). The complementarity principle, the sixth. Space, Time and the

Ethical Foundations, 83-92. https://doi.org/10.4324/9781315183305-6

Martins, C., & Rodrigues, P. (2021). Competitive drivers for improving future business

performance. IGI Global.

Perera, R. (2017). The PESTLE analysis. Nerdynaut.

Petersen, L. (2020). Suitability and further development of Porter's Five Forces model

against the background of digital transformation. GRIN Verlag.

Rowland, C. (2022, May 9). Apple Inc.’s mission statement and vision statement (An

analysis). Panmore Institute. https://panmore.com/apple-mission-statement-vision-

statement