Apple Inc., SWOT Analysis Example

Steve Jobs and Steve Wozniak founded The Apple Computer Company in 1976. The company went public in 1980 but Steve Jobs was forced out of the company in 1984. He returned to the company as a part-time advisor when Apple acquired Job’s NEXT Software Company to refresh its operating system. When Apple’s CEO at the time, Gilbert Amelio was forced out due to poor performance of the company under his watch, it paved the way for Jobs to resume leadership of Apple. Jobs quickly went at work and over the years, the company firmly established itself as the “hip” alternative to other brands in several product categories including digital music players, personal computers, and smart phones (Mallin & Finkle, 2011). Apple now markets a wide range of products including mobile communication devices, personal computers, portable digital music players, software, and hardware products. As of September 24, 2011, the company was operating 245 U.S. retail stores and 112 international retail stores (Apple Inc.). In addition, the company also sells products through its website and the iTunes store.

As far as the general environment is concerned, the two segments with the most influence on Apple and the industries in which it operates are sociocultural and technological (Dess & Lumpkin). Apple operates in product markets such as smart phone and personal computing where product life-cycles are getting increasingly shorter. Some of the reasons Apple leads its competitors are superior technologies as well as staying ahead of the competition in identifying consumer needs and providing them effective solutions. The rapid pace of technological progress forces companies including Apple to quickly introduce new models and allocate substantial resources to research to maintain technological edge. The first iPhone was introduced in 2007 and Apple has recently introduced iPhone 5 (Hachman, 2012). The similar trend is also found in the company’s other product line including iPod and iPad. Sociocultural segment is important because the success of technological companies not only depend upon the quality of the products but also getting the timing right. Consumers’ lifestyles and cultural trends also determine the probability of success in technology sector. We know that iPad was not the first tablet device and iPod was not the first portable digital music player ever. But Apple succeeded where early-movers failed because the company waited until it felt that the sociocultural environment is ripe for better solutions to existing problems and the technology has reached a level that would enable the company to offer revolutionary solutions.

The two forces of competition that are most significant for Apple are competitive rivalry and buyer power. Apple competes in a number of product markets including digital entertainment, personal computing, and communication. Similarly, the power of buyers has been growing due to rising income levels and wide product choices. As far as competitive rivalry is concerned, Apple has sought to differentiate itself from the competition through innovation in technology and product design. Apple’s competitive strategy was best defined by Steve Jobs when he said that Apple’s goals were not to achieve maximum sales or become the biggest but to make the best products in the market (Bloomberg Businessweek, 2004). Apple’s leadership has proven itself to be more capable than the competition in recognizing emerging trends and Apple has a track record of being ahead of the competition in terms of technological innovation. It is no wonder that the company enjoys considerable power over its consumers despite intense competition because buyers expect the company to come with the best products. This is why buyers don’t mind paying premium prices for Apple’s products, enabling the company to earn record profits as a result.

Apple’s strategies have worked well so far, thus, it is reasonable to assume that the company will continue its current competitive strategies in the future. The company will continue to technologically lead the respective industries in which it competes, through major investments in research and innovation and maintaining focus on quality as opposed to product volume. Similarly, the company will also continue introducing newer models with latest innovative features ahead of the competitors. In order to protect its market share and possibly grow it, the company will maintain focus upon seamless integration among hardware and software to provide unrivaled user experience to consumers. This strategy will help Apple mitigate the effects of increasing competition which could give greater power to the buyers at the expense of the company. Apple may also establish partnerships with more content companies including print media to distinguish itself from the competition. The company is in a stronger position than the competition to win favorable terms from content providers due to its huge and loyal customer base as well as a track record of shaping emerging trends.

The threats facing Apple include Google’s Android operating system and management focus. Android operating system is a threat because it is open source as opposed to Apple’s iPhone operating system which the company doesn’t license to anyone. Thus, it is much easier for Android to increase its market share in the same way Microsoft Windows operating system increased its market share again Mac operating system. The popularity of Android-based devices will into Apple’s market shares in product categories such as tablet devices and smart phones. There is also a threat of management losing focus because Apple is a leading player in several industries and competition continues to grow more intense. The competitive pressures may result in costly strategic mistakes such as entering other product markets or shifting focus from quality to volume. The opportunities include focusing on business clients as well as exploiting cloud computing market. Business clients often purchase in huge volume and they also replace products more often. Similarly, cloud computing is being seen as the future of computing when all storage and data will move to the cloud and not only devices will be lighter but accessibility and security will also improve.

The greatest threat is loss of management focus and in order to ensure relenting focus on quality, the management should continue to follow Steven Jobs philosophy. Jobs philosophy was reflected in his advice to Google’s Larry Page to focus on few products which Google can do well in the long run and get rid of the rest because they will drag down the company (Giles & Chan, 2011). Thus, Apple’s management should never lose focus of the company’s core competencies otherwise they may hurt the brand’s reputation. The greatest opportunity for the company lies in cloud computing because it will support Apple’s objective of best user experience and seamless integration among devices manufactured by the company. Cloud computing is the future of computing at both personal and business level and it will also help Apple gain business customers. Fortunately, the company has also taken steps to exploit this opportunity. The company already offers cloud computing services under the title of iCloud and has hired numerous engineers with background in web-based software from other organizations including Yahoo Inc. and Quantcast Corp. There were also reports that the company had been looking for senior level executives with backgrounds in web-based software (Vascellaro, 2011).

Apple’s greatest strengths include brand name, leadership, and its organizational culture. Apple’s brand has a reputation for quality and unrivaled user experience. This is why consumers eagerly wait for new products from Apple and are willing to pay premium prices despite numerous alternatives provided by Apple’s competitors. Apple has also been successful because Apple’s leadership has proven itself to be more capable than the competition in identifying consumers’ needs, recognizing emerging trends, and predicting product features that will win customers’ hearts. Similarly, Apple’s organizational culture promotes innovation and relentless pursuit for quality in everything the company does. This is why Apple has such a successful track record. Apple’s greatest weaknesses are its pricing structure and huge cash reserves. While Apple’s pricing structure demonstrates its pricing power and allows the company to earn attractive profit margins, it also limits growth potential, especially in countries with lower average income levels such as India and China. Similarly, Apple’s huge cash reserves point to lack of acquisition opportunities. Cash is unproductive tie-up of capital because it may generate higher returns if invested. According to Apple’s latest 10-K statement, Apple has approximately $81.57 billion worth of cash and cash equivalents (Apple Inc., 2011).

Apple’s greatest strengths are perfectly suited to an ambitious strategy in cloud computing. The company has a valuable brand name and it can gain edge over the competition by offering better value proposition to individual and business clients through innovative service features and quality assurance. Apple’s leadership may yet again demonstrate how it understands emerging trends and consumers’ needs better and similarly, Apple’s product developers and designers may deliver hardware and software products related to cloud computing that integrate with each other better than competitors’ offerings. Apple has an advantage since it retains control over both hardware and software, thus, it can design better solutions to consumers’ needs and desires than anyone else who either concentrate on hardware or software but rarely both.

Apple can tackle its weaknesses by offering cheaper variations of its products just as it has done recently with iPad mini. The greatest growth opportunities lie in emerging economies because market for Apple’s products is still in infancy in those countries and in addition, countries like India and China also have significantly larger populations than the U.S. and other developed countries. Similarly, Apple can use cash resources to build core competencies in cloud computing and gain edge over the competition. Cloud computing sector is still developing which also gives Apple ample time to shape the cloud computing industry just as it has redefined other industries.

Apple’s major resources are creative workforce and financial resources and its capabilities and core competencies include product/service design and seamless integration between hardware and software. One of the opportunities to further improve the value chain is through more efficient design and production of products and their packaging which should not only increase the company’s social image but also improve its profitability. Fortunately, Apple is already focused on discovering creative ways to further reduce materials waste by using lighter materials in products as well as using packaging that is protective and slim at the same time (Apple Inc.). Similarly, the company can also help its suppliers design more efficient production processes that should benefit Apple through lower prices of inputs as well.

References

Apple Inc. (2011). Form 10-K. Financial Statement.

Apple Inc. (n.d.). Form 10-K. Retrieved January 21, 2012, from http://files.shareholder.com/downloads/AAPL/1646831833x0x512287/5a5d7b14-9542-4640-841d-e047ec28bb96/AAPL_10K_FY11_10.26.11.pdf

Apple Inc. (n.d.). The story behind Apple’s environmental footprint. Retrieved October 25, 2012, from http://www.apple.com/environment/#manufacturing

Bloomberg Businessweek. (2004, October 12). The Seed of Apple’s Innovation. Retrieved October 25, 2012, from http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_db083.htm

Dess, G. G., & Lumpkin, G. (n.d.). Analyzing the External Environment of the Firm. Retrieved October 25, 2012, from Strategic Management: Strategic Managment: http://highered.mcgraw-hill.com/sites/00728890/student_view0/chapter2/chapter_overview.html

Giles, T., & Chan, M. (2011, October 22). Jobs Told Google’s Page to Cut Bloat to Avoid Becoming Microsoft. Retrieved October 25, 2012, from http://news.businessweek.com/article.asp?documentKey=1376-LTFP6U0YHQ0X01-3MTMRFEDTG0SB4L0HQ03662H25

Hachman, M. (2012, September 11). A Visual History of the iPhone. Retrieved October 25, 2012, from http://www.pcmag.com/slideshow/story/302519/a-visual-history-of-the-iphone

Mallin, M. L., & Finkle, T. A. (2011). Apple Inc.: Product Portfolio Analysis. Journal of the International Academy for Case Studies, 17(7).

Vascellaro, J. E. (2011, November 23). At Apple, Cloud Experts Wanted. Wall Street Journal, p. B.1.