Apple is responsible for 4.3% of the value of the S&P 500 and 1.1% of the global equity market, it is often described as one of the most innovative and inspiring companies and has around $145bn cash in accounts across the world. This article will explore the reasons for Apple’s rapid growth and these reasons will be based on analysing the external, competitive and internal environment (Gordon, 2013).
Partridge and Sinclair-Hunt (2008) describe a PESTLE analysis is a tool used by businesses to assess the macro environment and its possible impacts on their business or industry. When the possible effects are identified by a framework like Porter’s (2010) five forces is used to see how these possible impacts will affect the business or industry. A PESTEL analysis uses a checklist of 6 different possible categories of external forces, they are as follows; Political, Economic, Socio-cultural, Technological, Legislation and Ecological (Henry, 2008).
Covered within political factors are things like government stability, taxation and government regulations, in the western economies government stability tends not to be an issue however Apple is global business and in less stable countries needs to be assured that no sudden changes will affect how they operate and damage profits (Henry, 2008). Taxation is a hot issue at the moment with many big companies gaining damaged reputations due to many companies and people being caught avoiding tax. Google, Amazon and Apple itself have all been caught avoiding tax, this looks very bad on a business especially combined with other external factors happening in the macro environment like the western recessions. This is because a country earns its money through taxes and when the highest earning companies don’t pay tax it’s the people in the countries that suffer who are also the customers. Recently Apple saved around $9bn when it actually issued $17bn in debt instead of using some of its $145bn it has in cash, Gordon (2013)suggests that Apple avoids tax because of pressure from shareholders; this is an example of how internal and external factors can conflict and create potential problems (Rushe, 2013) (Apple, 2013).
The typical economic factors businesses have to take into account are interest rates, income rates, unemployment rates, inflation, gross domestic product and exchange rates. The problem with economic factors is that the data is normally quite complicated and experts are needed to simplify the data. Generally the stronger the economy the better for its companies, as apple is a multinational company economic factors are very important and influence profits and costs a lot, for example the exchange rates of countries and currencies are constantly changing if the exchange rate was to change unfavourably in one of Apple’s supplying countries then costs would increase and therefore profits decrease (Henry, 2008) (Apple, 2013).
Socio-cultural factors are anything to do with the cultures of countries and their changes, the recent growth in concern about tax evasion as mentioned before can be described as a culture change as before the recession there was a lot less attention on the tax accounts of big businesses. Apple has demonstrated it can look at external factors such as social factors and react to be successful, one of Apple’s big successes was the iPod and Apple made this successful by actually integrating it into the culture of some countries, the iPod was marketed as so it was an aspirational product which in turn strengthened the brand into an aspirational one this meant that it actually became fashionable within certain cultures to own an Apple product, this allowed Apple to charge high prices and receive high profits (Henry, 2008) (Apple, 2013).
Apple operates within the technology market and therefore Technological changes have to be closely monitored to assure that competitors don’t gain advantage. When assessing technological factors it is also important to check the rate of technological changes as to attempt remain one step ahead. Apple has some fierce competition when it comes to technology especially in the smart phone market where apple competes with its iPhone where companies even collaborate to try and take market share from apple an example of this is Samsung and Google where Samsung make the hardware and Google the software this has caused Apple problems with the calibration beating them in creating the “phablet”, half phone, half tablet. However Apple are still in a strong position the “phablet” market is only a fraction of the smart phone market predicted to make sales of 60m units mainly due to the Samsung galaxy note, but smart phone market is predicted sales of over 900m. It is rumoured that Apple may take the tactic of releasing a cheaper version of the iPhone which would devastate competitors but might cause too much damage to the market; this is because of Apples economy of scales and strong brand (Henry, 2008) (Apple, 2013).
Legislation factors are the laws that affect a business such as employment law, taxation law, company law, health and safety and patent law. Apple operates all the way around the world and therefore has to abide by a lot of different laws in different countries but this can be beneficial for example, Apple has a lot of its manufacturing done in eastern countries where there are less strict employment laws this allows them to make products for cheaper by paying employees the least amount for the most work. Apple also keeps a lot of its money in countries with low tax so fewer profits are lost to taxation. Even though what apple does is perfectly legal it does conflict with laws and opinions of other countries which can result in a bad brand image in these countries. Apple has to be especially careful with patenting laws as it is often in legal battles with its competitors over patents on certain technologies, it also needs to make sure it creates patents itself as so competitors cannot patent them instead and as to have a competitive advantage (Cusumano, 2013) (Telegraph, 2013) (Apple, 2013)
Ecological factors include pollution control, planning policies, transport policies and waste disposal. Apple often talk about being more environmentally friendly, this is probably due to in recent years there being more focus on the environment and how everyone not just businesses can be more environmentally friendly, know this Apple always talk about what they do to be a ‘greener’ company as to improve their brand image (Henry, 2008) (Apple, 2013).
- Apple. (2013). Apple . Retrieved April 25, 2013, from Apple:
- Henry, A. (2008). Understanding strategic management. Oxford: Oxford University Press .
- Gordon, S. (2013, May 3). Apple’s mammoth bond deal tramples not only the US taxman. Retrieved May 6, 2013, from Financial Times:
- Partridge, L., & Sinclair-Hunt, M. (2008). Strategic Management. Select Knowledge Limited.
- Porter, M. E. (2010). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Simon and Schuster.
- Rushe, D. (2013, May 1). Apple saves $9bn with bond manoeuvre. The Gaurdian.
- Telegraph. (2013, January 27). Apple shelters almost $1bn a week from US tax man. The Telegraph.