SUBJECT- BUSINESS ENVIRONMENT

NAME- AAYUSH BHANDARI

SEM-3
SECTION-A
SUBMITTED TO- PROF. NITYANAND JHA

ASSIGNMENT ON
APPLE
(PESTLE, SWOT AND PORTER’S FIVE FORCES)

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2
 INDEX

COMPANY OVERVIEW .......................................................................................4

PESTLE ANALYSIS ...............................................................................................5
SWOT ANALYSIS ................................................................................................14
STRENGTHS ......................................................................................................14
WEAKNESSES ...................................................................................................15
OPPORTUNITIES .............................................................................................17
THREATS ...........................................................................................................19
PORTER’S FIVE FORCES..................................................................................20
Competitive Rivalry or Competition with Apple (Strong Force) ..................20
Bargaining Power of Apple’s Customers/Buyers (Strong Force) ..................21
Bargaining Power of Apple’s Suppliers (Weak Force) ...................................21
Threat of Substitutes or Substitution (Weak Force) .......................................22
Threat of New Entrants or New Entry (Moderate Force) ..............................23
BIBLIOGRAPHY ..................................................................................................24
CONCLUSION ................................................................................................................................. 25

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COMPANY OVERVIEW
Apple is a prominent hardware and software company best known for its series of personal
computers, the iPod and its innovative marketing strategies for its products.

Introduced in 1984, the Macintosh was the first widely sold personal computer with a graphical
user interface (GUI). That feature and others -- such as an improved floppy drive design and a low-
cost hard drive that made data retrieval faster and more reliable -- helped Apple cultivate a
reputation for innovation, which the company still enjoys today. The Apple headquarters are
located in Cupertino, CA, at 1-5 Infinite Loop. Apple borrowed the name for the circular road
around their office buildings from programming, where an infinite loop is the term for a code
sequence lacking a functional exit.

Apple was founded by Steven Jobs and Stephen Wozniak. Jobs and Wozniak had been friends in
high school and in 1975 were members of The Homebrew Computer Club, a now-legendary group
where electronics enthusiasts met to discuss the Altair 8800 (the only personal computer available
at the time) and other technical topics. Wozniak designed his own microcomputer and offered his
plans to Hewlett-Packard, where he was working as an engineering intern. After HP turned him
down, Wozniak joined forces with Jobs to manufacture personal computers in Job's garage. That
endeavor started out as a shoestring operation, but quickly became successful. The pair introduced
a relatively modern-looking computer in a plastic case in 1977 and incorporated as Apple
Computer that same year. By 1980 the company had grown to include over 1000 employees.

Steve Jobs returned to Apple in 1997 after a succession of CEOs and Macintosh models failed to
gain much success in the marketplace in his absence. His introduction of the colorful iMac (which
sold over 6 million units) brought the company back to profitability. In 2001, Apple released the
first generation of iPods and included media jukebox software called iTunes. Apple introduced an
online media store as part of iTunes, initially selling only music for .99 cents per song. Eventually,
the iTunes Store grew to include videos, television shows and music videos.

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PESTLE ANALYSIS

POLITICAL FACTORS

Major sales contribution to Apple Company comes from outside US amounting to more than
$113.8 whereas the revenue from the home country is $68.8 billion. So any political insurgence in
these countries can affect the company’s position negatively.

Suicide Cases Against Apple’s Biggest Taiwanese Supplier

Apple underwent a political pressure as suicides cases were registered against one of the biggest
Apple’s supplier, Foxconn (a Taiwanese company). In May 2010, suicide cases were filed against
Foxconn holding it responsible for forcing the employees to work for long hours; two of the
workers committed suicide. In another incident, 16 others were injured in an explosion in one of
Apple’s supplier facilities.

China Labor Watch (CLW) said that Li Ming, 31, jumped to his death from a building in the city
of Zhengzhou, in the east-central Chinese Henan province, where he had been working for
Foxconn.

The death has triggered comparisons with a wave of suicides in 2010 and 2011 at Foxconn factories
in China amid concerns over working conditions.

CLW’s claim has the potential to reignite controversy surrounding the working conditions of
workers at Taiwanese firm Foxconn, which is China’s biggest private sector employer with a
workforce believed to be in excess of 1.2 million (/www.telegraph.co.uk/).

Political Unrest In China

Apple is immensely dependent on the low labor cost in China. But the unsettled political
environment in China disrupts its manufacturing now and then. As a result, the manufacturing
costs increases. Additionally, there is also an imposed restriction on Chinese imports in US in
order to enhance the manufacturing in America. The political bonds with the Chinese government
have immensely affected this US-based company. If the company tries to find an alternative for

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China, it will cost the company more and it will lead to increased prices for Apple products. Due
to growing nationalism in China, Apple could become a potential target for anti-Americanism in
China resulting in reduced market share.

Chances Of Terrorist Attack

Despite the fact that United Kingdom boasts a stable government, there is always a risk of terrorist
attacks. It can leave a negative impact on the company. The current political challenges in UK that
Apple can counter are the increasing tensions in the ruling coalition and sagging government
popularity.

Ban On Tim Cook In Russia

A lawmaker in Russia, who is noted for his harsh approach towards gay propaganda, has made a
suggestion to ban Apple CEO Tim Cook from visiting Russia due to his public acknowledgment
of his homosexuality in October.

Higher Tariffs On China

Under Mr. Cook’s leadership, Apple’s business in China grew from a fledgling success to an
empire with annual revenues of around $50 billion. Now, with the Trump administration saying
on Monday that it will identify another $200 billion worth of Chinese goods that could face
tariffs on top of the $50 billion already planned, and China having threatened retaliation, Apple is
stuck in the middle.

The Trump administration has told Mr. Cook that it would not place tariffs on iPhones, which are
assembled in China, according to a person familiar with the talks who declined to speak on the
record for fear of upsetting negotiations. But Apple is worried China will retaliate in ways that
hamstring its business.

 he cost of finding alternatives to Chinese manufacturing could be high for Apple. This
could lead to increased prices for Apple products.

 Apple’s dependence on Chinese manufacturing and markets makes it vulnerable to political

unrest in that country.

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  Apple could become the target of growing nationalism and anti-Americanism in China,
which could reduce its market share.

ECONOMIC FACTORS

Increased labor costs in China could take away the cost advantage of some Apple products.

Stagnating middle-class incomes in some developed countries, including the United States, could
shrink the potential market for higher-end consumer goods such as those marketed by Apple.

A strong U.S. dollar could increase exchange rates, making it more expensive for Apple to do
business in key markets like Europe and China.

Recessions and economic crises can affect the company’s revenues negatively to a greater extent
compared to other businesses due to the choice of premium pricing policies.

Impact Of Global Recession

At the time of global recession (2013), Apple had witnessed slow economic growth in 2013 and
2014. Apple has been affected by global recession immensely.

Europe’s Economic Difficulties

A change European economy has directly affected Apple which has resulted in decreased revenue
by 16% in the third quarter of 2012 compared to the same period in the previous year.

Increased Rate Of Inflation In US

At the time of increased rate of inflation in US, the company got affected as it reserved a large
amount of cash. But hedge fund billionaire David Einhorn sued the company to force payments of
dividends of $137 billion. The cash was used to dole out the dividend.

Increasing Labor Cost In China

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Recent figures suggest China's labor costs are rising fast, which could be good news, and could be
bad. Certainly the amount of Chinese people able to rise out of poverty is one of the signature
achievements of the early 21st century, but the prospect of wage inflation could signal bad news
for an economy whose key comparative advantage has until now been low labor costs (Source:
/www.forbes.com/).

Rising Value Of US Dollar

Due to the rising value of US dollar, the exchange rates are increasing. The increased exchange
rates directly affect the cost of Apple products. The difference between the US dollar and other
currencies like Euro and Yuan makes it more expensive for Apple to do business in key markets
such as Europe and China. Apple’s revenue could have been 800 points higher. In other words,
Apple would report revenue of $52.8 billion if there is no increase in value of dollars, but it
reported acquiring revenue of $49.6 in 2015.

SOCIAL FACTORS

Globalization, the increased usage of the virtual world and the current lifestyle are few factors that
leave an enormous impact on Apple.

An Accessory Of High-Status Lifestyle

Apple is one of the leading companies in the world. It is all about brand, it is the name that people
around the world want to carry. This has got nothing to do with iPhone and iMac. The uniqueness,
innovation in design, simple marketing of the products and high price of the products — these all
make the Apple more desirable to its consumers. It is gradually becoming a symbol of social status
mainly because of its extremely high prices that only who are higher in class can afford.

Potential Market Place In Third World Country

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Apple can see growth in consumer spending in the coming decades in third world countries like
Africa where people are not aware of Apple products. The company can penetrate the market
unexplored market and can harbor new possibilities of acquiring revenues.

Moral Factors Of Manufacturing In China

Many would not consider this brand based on the social-conscious ground because it is farming
out its manufacturing operations in China, whereas the company can create some job opportunities
in the home country. It is choosing China for its low-cost labor factor. This could limit the
product’s appeal to some extent.

Brand Acquisition In Many Countries

In order to satisfy and fulfill customer’s needs, this brand has been making some acquisitions such
as Embark Prime Sense and Topsy and alliances with Sony, Motorola, Philips, and AT&T. The
social background of different brands plays a vital role in this company’s operations.

Increased Use Of Mobile Devices And Social Media

The entire world is turning mobile. The trend of the increasing popularity of mobile access is an
opportunity for Apple to continue providing easy-to-use mobile devices. The firm has already
taken steps to exploit this opportunity, such as through the iPhone, iPad, and Apple Watch. The
rising use of social media is also an opportunity because it increases demand for digital devices
like Apple products.

TECHNOLOGICAL FACTORS

The stakes of information technology stays higher compared to other industries when it comes to
earning revenues. The companies who innovated with time, earned well and Apple is no doubt one
of them.

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The Advantage Of 760 China Mobile Subscriber

In 2013, Apple unveiled a deal with China Mobile to bring iPhone to customers in a market
dominated by low-cost android smartphones. The deal gave this company a bigger entry to the
Chinese market and China Mobile’s 760 subscribers. Under the agreement Apple products iPhone
5, iPhone 5S are available at China Mobile and Apple retail stores in China.

Assessing The Consumer’s Minds

In 2015, Apple reportedly spent $8.07 billion for R&D that accounted for about 3% of the
company’s net sales. These researches are conducted in order to assess the customer mind-set
considering the short product life cycle of the industry.

Preferences To Screen Size

Apple is known for its stunning concept design. It has created some of the finest and most attractive
designs for their products that its contemporaries cannot match. But gradually consumers are
giving preferences to larger screens.

Competitors Offering The Same

Apple’s direct competitors Samsung and Google are now offering the products and services that
were once the signature of Apple. It took Google less than a year to build payment app Google
Pay just like Apple Pay so it is no more a unique product of Apple. Apple’s competitors showed
the ability to replicate its products and services that can threaten Apple brand as a whole.

Limited Market For New Products

The number of consumer products Apple can launch is limited. Moreover, these consumer
products like Apple TV has a very restricted customer base.

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The Growing Menace Of Cyber Crimes

The increasing number of cyber crimes makes Apple systems vulnerable and less secure for
consumers. It actually takes away the most competitive advantage which is a high reputation for
security and safety.

LEGAL FACTORS

The company operates globally which makes it vulnerable to many legal factors and litigation.

Domestic Legal Stress

Apple is going under a legal stress in its homeland, America. As in previous year, the company
restored the imports of some of its parts used in iPhone that was earlier banned by US government.

Offering Financial Services By Apple Pay

Apple has introduced financial services through Apple Pay. It recently entered the highly regulated
financial sector that could lead the company to increased level of regulation. The company could
face increased level of litigation for offering financial services.

Breach Of IP Laws

Apple produces a variety of brands that are covered by intellectual property laws such as software
and music. Software produced by apple consumes a big part of its income that makes the company
vulnerable to both piracy and litigation.

Entering Automobile Industry

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Apple is making all preparation to enter automobile industry and pushing its team to begin
production of electric vehicles as soon as 2020. This multinational company has invested $6.04
billion for R&D in the past year, and CEO Tim Cook is facing immense pressure to return the
money to its shareholders. A lawsuit filed against this company says, ‘Apple has started the
campaign of hiring best minds for battery making, despite a company who is starting from scratch
needs more than 10 years to launch its products. Apple is planning it to launch it as soon as 2020.”

ENVIRONMENTAL FACTORS

Various environmental factors like disposal can influence the company’s revenues and brands.

Disposal Of Used Or Non-Working Electronic Devices

Apple is countering a massive problem of discarding the electronic junk that is used or is in non-
working position. This company is facing a huge problem of discarding the electronics that has
lithium batteries in it. It would cost the company some huge expenses. Apple is forced to incur the
expenses because of the environmental factor related to it.

Pollution Concern In China

The manufacturing facilities in China are a growing concern for the company because of the
pollution and environmental side effects. To minimize the environmental issues in the facilities,
the company has to shell out more money in the future that could lead the company to huge
expenses.

Attempt To Cut Greenhouse Effect Increases Cost In China

China has taken the initiative to reduce greenhouse gasses and limit the fossil fuel use. This attempt
of China could increase the electricity rates in the country. As a result, it could potentially raise
the manufacturing costs for Apple.

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Global Warming

Due to increasing rate of global warming, Apple could face the problem of transoceanic shipping
that is the core part of Apple chain supply.

Increased Electricity Costs

Apple is vulnerable to increased rates of electricity because of its dependence on data centers and
other internet infrastructure. The company has to shell out more expenses in its manufacturing
facilities.

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SWOT ANALYSIS
STRENGTHS
Leading Innovators Among Electronics Brands:

Apple has been ranking consistently at the top of the BDG’s list of 50 companies since 2005 due
to its innovation in electronic devices. It is also regarded as the pioneer of introducing the most
innovative products in the market such as iTunes Media Player, iLife (for organizing editing,
publishing photos, music and movies) and iWork (a presentation program). Additionally, in recent
years, Apple has expanded its reach to entertainment and information services and is now one of
the largest online retailers for streaming music and video and software solutions.

Terrific Sales Growth With Each Passing Year

Apple has witnessed strong sales growth in the year of 2016, and has wisely managed its cash
flow, resulting in the company ending up on top of the Forbes 100 Most Valuable Brands (2016)
list with a total capital of $416.62 billion. The company expecting 38% revenue growth in 12
months (ending march 2017).

High Brand Recognition

From $2.4 billion in 2011, Apple invested $4.5 billion in 2013 for R&D in order to assess the
market more closely. To achieve the results, it positioned its direct sales branches at high traffic
locations to contribute to the company’s revenues. It took complete control of supply chain and
circulated code of conducts report to the suppliers to enhance the brand recognition. The practice
still continues. Consumers have immense trust in this brand name and they stand in the freezing
night just to be among the fortunate ones to get a new version of their phones.

Strong And Effective Marketing Team:

In its study, CEB explained that the most effective way of reaching out to the consumer was not
through elaborated and complex websites, but to cater the right information to the customer as to

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what exactly they needed. This is what Apple has been doing. It involves simplicity in marketing
its products.

For example - Take their Mac Vs PC advertisement. Two guys are standing against a white
background, they are not talking about any lengthy list of features or even the price, no professional
voiceover with emotional background score, not even the information on how to buy MAC; only
one point is made: MAC is better than PC in every way.

Apple’s amazing marketing team goes above and beyond to keep the standards high. The team left
no stone unturned to celebrate the company’s 40 years in 2016. They put up a breathtaking video
chronicling 40 years of the company in 40 seconds, and an Apple Music playlist with songs from
its commercials over those years (/www.forbes.com/).

High-Quality Customer Experience

Apple always follows a magic formula; that is building up customer relations in order to sell more
products. They do it through customer centricity. The customer service of Apple follows few steps
to win over the trust of the consumers

 Approach the consumer in a more personalized manner

 Politely understand the need of the consumers
 Present a solution that consumers will accept
 Listen and resolve to their issues or concerns
 End the customer’s current visit with an invitation to return.

WEAKNESSES
High Price

A majority of the population criticizes the brand for its sky high product prices, but Apple fans
justify the situation by tagging the brand as a ‘premium’ gadget-maker. They also say it is for those

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people who can afford a pony. Apple, in other words is like BMW, not Ford. In 2013, Strategy
Analytics found that 88% of iPhone users would purchase another iPhone compared to 93% in
2012.

Later, a survey published by Morgan Stanley showed that 92 percent of iPhone users would “likely
or “most probably” buy the next edition of Apple iPhone. Moving further, towards the latest
researches, Loup Ventures surveyed a total of 511 people in the United States. Out of these, 226
people currently own an iPhone. According to the reseach, 22 percent of these iPhone owners are
eager to upgrade their device when Apple announces new models for its iPhone lineup, this fall.
The study further states that 20 percent of the surveyed people intend to purchase iPhone X or
iPhone 8 over the coming year (Source: /www.cnet.com/)

Despite this staggering customer loyalty, Apple loses a considerable amount of customers. This
happens when consumers have access to cheaper products with more or less same features.
Samsung, Microsoft, Asus and many other companies provide low-priced products compared to
Apple.

Unsuccessful Anticipation

Apple founder Steve Jobs predicted that ‘No one’s going to buy big phones’. He got it wrong.
Apple failed to predict the future of few brand categories like Phablets. Apple did not launch any
larger screen phone despite having invested in tablets. But Samsung outperformed Apple when it
came to Phablets by launching Samsung Galaxy Note in 2011, and now has a commanding
presence in the Phablet market. The demand of large screen phone is only accelerating.

Incompatibility Of Different OS

Consumers whoever is accustomed with other OS systems do not get a handy experience when
they choose to use iOS or OS X. The reason is if you are switching from a PC to MAC, it can be

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pretty intimidating using Apple’s operating system at first. When you are accustomed to using
‘Start’ menu, Apple will force you to use ‘Finder’ where you will find your apps, documents and
other files.

Apple IPhone Market Shares Are Declining

According to Kanter Worldpanel ComTech’s surveys of smartphones sales in 2015, February

findings showed that the market shares of Apple iPhone had declined for two months in a row in
US, Japan, Germany, Great Britain, Italy and Spain. As a result, the company had less power to
influence its customer to buy its iPhones. Here is a graphical representation of Apple’s iPhones’
shares falling in January and February in 2015

Overdependence On IPad And IPhone

The revenues of Apple Inc. are intensely dependent on the sales of iPad and iPhone. The revenues
from these two products consumed 72.1% of its total revenues in 2013. Eventual decline in the
sales of these products is leaving an adverse effect on the company’s sustainability and viability.

Defect In New Products

Apple had given a statement to the New York Times, confirming manufacturing defects in iPhone
5s. There was a long list of issues in the device including battery life that iPhone 5s users were
facing. Few problems were also detected in iPhone 6 after its release. The issue(s) was, however,
quickly resolved by the engineers working with Apple.

OPPORTUNITIES
High Demand Of Products

Studies show that there is a high demand for new Apple products, especially a flourishing demand
for recently introduced PowerBook and Power Mac products, as well as new upgrade to MAC OS
X. Apple CEO Tim Cook asserted that the demand for new Apple Watch was exceeding the
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available supply. This is why so many pre-order deliveries were pushed back to May or later.
Apple consumers are also waiting for new iMac line and iDVD.

Growth In Communication Devices Market

CEO Cook further said in one of his interviews that Apple did not intend to sell low-cost phones.
The aim was always to provide high-end products. Despite the huge price difference from its
competitors, Apple still enjoys increasing market demands in the smartphone industry. Apple took
a record 51% of global smartphone market share in the final quarter of the year, according to this
data (Source:/www.forbes.com/).

Worldwide SmartPhone Market Share Of Apple

Period Apple

2012 Q2 16.6%

2013 Q2 12.9%

2014 Q2 11.6%

2015 Q2 13.9%

2016 Q2 11.7%

A Vast Unexplored Market In Commonwealth Countries:

Apple is yet to touch the growth prospective in the electronics market. There is a high possibility
of earning revenues from the middle class segment of the commonwealth nations. Apple should
take note that UK is developing closer ties with the Commonwealth nations and hence Apple UK
should position itself in the markets in these member-countries to take advantage of the situation.

Increased Cloud-Based Services

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Some believe that the upcoming iCoud innovation will bring future revenues to the company. To
meet the high-rising demands of the iCould services, Apple can expand its services or can adapt
new strategies to involve more consumers in these services.

THREATS
The Evolving Environment Of Electronic Communication

The complex structure of electronic environment communication devices is constantly innovating.

The company must keep up with the pace or it will lag behind with its competitors. It poses a
serious challenge to Apple company and the future market positions. Due to the fierce competition
in communication market, this company is forced to constantly design and modify its product to
match the needs of consumers.

Reputation Damage Due To Tax Scandal

Apple was involved in a tax scandal that went viral. Apple managed to keep $44 billion of its
revenues from going into the hands of the taxmen. The company has no tax perspectives and pays
minimal taxes. The tax professional did a bit of guesswork to analyze the source of revenues from
its foreign operations.

Infringement Of Intellectual Property (IP) Rights

The company has a fault in its IP rights policies. If any company breaches the Apple patent rights,
Apple takes time to acquire the information, and not as soon as the theft takes place. It takes some
time to discover it. As a result, the company faces severe damages to their brands and services.

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PORTER’S FIVE FORCES
Apple’s strategies are partly based on the need to address forces in the external business
environment. These forces can limit or reduce the firm’s market share, revenues, profitability, and
business development potential. This Five Forces analysis, based on Porter’s framework, points to
the following strengths or intensities of external factors in Apple Inc.’s industry environment:

1. Competitive rivalry or competition: Strong force

2. Bargaining power of buyers or customers: Strong force

3. Bargaining power of suppliers: Weak force

4. Threat of substitutes or substitution: Weak force

5. Threat of new entrants or new entry: Moderate force

Considering the five forces, Apple must focus its attention on competitive rivalry and the
bargaining power of buyers. This external analysis supports the company’s current position of
continuous innovation. Through rapid and continuous innovation, Apple effectively addresses the
five forces in its external environment, although much of the company’s effort is to strengthen its
position against competitors and to keep attracting customers to Apple products. An applicable
recommendation is to intensify research and development for innovation to develop novel products
that will complement the iPhone, the iPad, and other existing products.

Competitive Rivalry or Competition with Apple (Strong Force)

Apple faces the strong force of competitive rivalry or competition. This component of Porter’s
Five Forces analysis model determines the intensity of the influence that competitors have on each
other. In Apple’s case, this influence is based on the following external factors:

1. High aggressiveness of firms (strong force)

2. Low differentiation of products (strong force)

3. Low switching cost (strong force)

Companies like Samsung and LG aggressively compete with Apple. Such aggressiveness,
observable in rapid innovation, aggressive advertising, and imitation, impose a strong force in the
industry environment. Moreover, in terms of product differentiation, available products in the

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market are generally similar in fulfilling specific purposes. For example, many popular apps are
available for Android and iOS devices, and cloud storage services from different companies are
available to iOS users. In Porter’s Five Forces analysis model, this condition creates a strong force
by making it easy for customers to switch to other sellers or providers. On the other hand, the low
switching cost means that it is easy for customers to switch from Apple to other brands, based on
price, function, accessibility, network externalities, and related concerns. The combination of these
external factors in this part of the Five Forces analysis leads to tough competitive rivalry that is
among the most significant considerations in Apple’s strategic management.

Bargaining Power of Apple’s Customers/Buyers (Strong Force)

The bargaining power of buyers is strong in affecting Apple’s business. This component of Porter’s
Five Forces analysis model determines how buyers’ purchase decisions and related preferences
and perceptions impact businesses. In Apple Inc.’s case, buyers’ strong power is based on the
following external factors:

1. Low switching cost (strong force)

2. Small size of individual buyers (weak force)

3. High buyer information (strong force)

It is easy for customers to change brands, thereby making them powerful in compelling companies
like Apple to ensure customer satisfaction. On the other hand, each buyer’s purchase is small
compared to the company’s total revenues. Porter’s Five Forces framework indicates that this
condition makes customers weak at the individual level. However, the availability of detailed
comparative information about competing products’ features empowers buyers to shift from one
provider to another. This external factor enables buyers to exert a strong force on Apple and other
brands. Thus, this part of the Five Forces analysis shows that Apple must include the bargaining
power of buyers or customers as one of the most significant strategic variables in the business.

Bargaining Power of Apple’s Suppliers (Weak Force)

Apple Inc. experiences the weak force of the bargaining power of suppliers. This component of
Porter’s Five Forces analysis model indicates the influence of suppliers in imposing their demands
on the company and its competitors. In Apple’s case, suppliers have a weak bargaining power
based on the following external factors:

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 1. Moderate to high number of suppliers (weak force)

2. Moderate to high overall supply (weak force)

3. High ratio of firm concentration to supplier concentration (weak force)

The global size of its supply chain allows Apple Inc. to access many suppliers around the world.
In Porter’s Five Forces analysis context, the resulting high number of suppliers is an external factor
that presents only a weak to moderate force against the company. In relation, the moderate to high
overall supply of inputs, such as semiconductors, makes individual suppliers weak in imposing
their demands on firms like Apple. Also, the ratio of firm concentration to supplier concentration
further limits suppliers’ power and influence in the industry. This external factor reflects the
presence of a small number of big companies like Apple and Samsung, in contrast to a larger
number of medium-sized and big suppliers. Thus, this part of the Five Forces analysis shows that
the bargaining power of suppliers is a minor issue in developing Apple Inc.’s strategies for supply
chain management, value chain effectiveness, innovation, and industry leadership.

Threat of Substitutes or Substitution (Weak Force)

The competitive threat of substitution is weak in affecting Apple Inc.’s computing technology,
consumer electronics, and online services business. This component of Porter’s Five Forces
framework determines the strength of substitute products in attracting customers. In Apple’s case,
substitutes exert a weak force based on the following external factors:

 Moderate to high availability of substitutes (moderate force)

 Low performance of substitutes (weak force)

 Low buyer propensity to substitute (weak force)

Some substitutes to Apple products are readily available in the market. For example, instead of
using iPhones, people can use digital cameras to take pictures, and landline telephones to make
calls. In Porter’s Five Forces analysis model, this external factor exerts a moderate force in the
industry environment. However, these substitutes have low performance because they have limited
features. Many customers would rather use Apple products based on convenience and advanced
functions. This condition makes substitution a weak force in impacting the company’s business.
Also, buyers have a low propensity to substitute. For instance, customers would rather use

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smartphones than go through the hassle of buying and maintaining a digital camera, a cellular
phone, and other devices. This part of the Five Forces analysis shows that Apple does not need to
prioritize the threat of substitution, specifically in management decisions in business processes
like marketing, market positioning, and product design and development.

Threat of New Entrants or New Entry (Moderate Force)

Apple Inc. experiences the moderate force of the threat of new entrants. This component of Porter’s
Five Forces analysis model indicates the effect and possibility of new competitors entering the
market. In Apple’s case, new entrants exert a moderate force based on the following external
factors:

 High capital requirements (weak force)

 High cost of brand development (weak force)

 Capacity of potential new entrants (strong force)

Establishing a business to compete against firms like Apple Inc. requires high capitalization. Also,
it is extremely costly to develop a strong brand to compete against large companies like Apple.
These external factors make new entrants weak. However, there are large firms with the financial
capacity to enter the market. For example, Google has already done so through products like Nexus
smartphones. Samsung also used to be a new entrant. These examples show that there are large
companies that have the potential to directly compete against Apple Inc. Thus, the overall threat
of new entry is moderate. This part of the Five Forces analysis shows that Apple must maintain its
competitive advantage through innovation and marketing to remain strong against new entrants’
moderate competitive force.

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 BIBLIOGRAPHY
 Apple Inc. – Form 10-K.

 Apple Inc’s E-commerce Website.

 GOOGLE

 MARKETING TUTOR

 PESTLE ANALYSIS.COM

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 CONCLUSION

Apple should be able to thrive in spite of these challenges because it has demonstrated an
impressive ability to adapt to a changing environment. In particular, Apple’s research and design
capabilities give it an advantage that should propel its revenue growth for decades to come.

After assessing all the factors in SWOT analysis, it is seen that Apple has more opportunities and
strengths compared to threats and weaknesses. Given the company’s current leadership in the
industry, Apple is in a position to enjoy these opportunities. But the company should devise few
strategies to address effectively the threats and weaknesses that it recently developed or has
chances of developing.

On the basis of PESTLE analysis, Apple should be able to thrive in electronic device industry in
the next five years in spite of the challenges because it demonstrates an impressive ability to
adopt to a challenging environment. The uniqueness in its design gives the company a
competitive advantage which reflects in their sales and revenues. So it can be said that Apple
will continue to be the leader in the electronic industry in years to come.

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