Apple's strategic and financial analysis in the digital media industry

Strategic and Financial Analysis: Case of Apple

Apple Inc. is a U.S. multinational company specializing in designing and selling different types of electronic products that include computer software, personal computers, and range of hand-held electronic gadgets. Over the years, Apple has grown to be an iconic designer of consumer electronic products. Established by Steve Jobs in 1976, however, Apple's business nearly collapsed in1980s because of the stiff competitions from other companies. In 1990s, Apple was forced to design an innovative personal computer and entered the fragmented DM (digital music) industry using a diverse set of a distribution channel. (Apple, 2014).

In the last decades, Apple has recorded an unparallel success in digital music players, and iTunes software. Apple uses a sophisticated distribution strategy to achieve competitive market advantages in the electronic industry. Presently, Apple sells its products globally through the retail stores, and online stores, which assist the company to generate annual profit of more than $182 Billion at the end of the 2014 fiscal year. Recently, Apple releases the "Boot Camp" software that makes Apple's personal computer to be run in both Apple operating system and Windows. The new flexibility of Apple's architecture makes the company to become a leader in both personal computer and digital media. Despite the success that Apple has recorded in the last few years, the company is still facing stiff competitions with other companies operating in PC industry.

Objective of this project is to develop Apple strategic analysis. The paper analyzes Apple external environment to enhance a greater understanding how the company has been operating in the economic and political environments.

Analysis of External Environment

Apple operates in a competitive business environment. The political, economic, legal and social-cultural environments are used to analyze the environment that Apple is operating.

Economic: Apple Inc. has its headquarter in the United States, a country with one of the best economy in the world. Moreover, American standard of living is one of the highest in the world, which assists Apple to enjoy superior market advantages. Apple also takes the advantages of the U.S. economic development to raise capital from banks and shares from the public. Apple also operates in multiple countries in Europe and Asia with varied economic developments. For example, Apple uses the cheap labor in Asia to manufacture its products to reduce the costs of operations.

Political: Apple operates in a stable political environment because the United States is one of the most politically stable countries in the world. The U.S. political stability assists the management to plan without fear of political turbulence that can destabilize the Apple strategic planning. Lei and Slocum (2010) argue that politics have a great impact on a business practice, and influence business activities. For example, recently, the UK government imposed 20% increase on VAT, and the decision can reduce the overall consumers spending. (Thomson, & Baden-Fuller, 2010). Since Apple is operating in multiple countries, government decisions on issues such as imposition of taxation on business can have impact on Apple business activities.

Competitive Environment: Apple faces a stiff competition with companies operating in multiple industries that the company is operating. Apple is facing a stiff competition with companies such as Hewlett Packard, IBM, Dell, Microsoft and other companies manufacturing the personal computer.

Socio-cultural: Thornton, Domingo and Urbano (2011) identify socio-cultural factors influencing business practice as attitudes, cultural practice, and preference. Based on these socio-cultural factors, Apple is forced to design its products to match the tastes and preferences of consumers. For example, Apple customizes its services using the current art of technology to design iPad and iPod that matches the tastes of younger generations.

Technological Environment: Apple operates in a superior technological environment that assists the company to design superior and innovative products. (Porter, 2006). Moreover, Apple uses the superior technology to implement its entire value chain that includes warehousing design, procurement of raw materials, and management of business logistics. Moreover, Apple uses the internet technology to carry out B2B (Business-to-Business) and B2C (Business-to-Consumer) business interactions.

Apple Current Strategies

Apple uses the cost leadership strategy to design its product in the United States and manufactures them in the low cost country such as China to achieve competitive market advantages. (Porter, 2006). Moreover, Apple uses pool of talented and skilled labor to design innovative products that match the purchasing preferences of all categories of consumers in the United States and outside United States. Apple also designs and manufactures different categories of products that match various consumer preferences. For example, Apple manufactures personal computer, mobile phones, iPad, iPod and different software products. The strategic choice has made Apple to enjoy superior financial performances. (Lei, & Slocum, 2010).

3. Recommendations

Apple is required is to implement the hybrid strategy to integrate the cost leaderships to achieve differentiation advantages. Apple should redesign its mobile phones from small screen iPhone to a large screen iPhone to compete favorable with companies such as Samsung, LG, Nokia and other manufacturers of large screen mobile phones. Moreover, Apple should redesign its computer laptops to make the products affordable to both middle earners and low-income earners. At present, the Apple computer laptops are more expensive than the HP and Dell laptop products. The company should make its products affordable to various categories of customers.

4. Competitors Strategies

The competitors of Apple Inc. use various strategies to compete in the business environment. First, Samsung is a leader in designing the large screen mobile phones that command high market advantages. Samsung is overtaking Apple in the sales of mobile phones because of the introduction of large screen phones. Moreover, HP and Dell are the main competitors of Apple in the production of Laptops and Desktop computers. Unlike Apple that targets high-end customers, HP and Dell design their product to various categories of consumers. Moreover, all Apple competitors are also manufacturing their products in low labor countries such as China and India to lower the costs of operations. The best strategy is the HP and Dell strategies that design computer laptops for all categories of consumers. Apple should also focus on different level of consumers for computer laptop consumer to combat the strategies of its competitors.

Conclusion

The study carries out Apple strategic and financial analysis. The outcomes of the analysis reveal that Apple is facing a stiff competition in a business environment, which make the company's growth rates to decline in the last few years. Apple should redesign its business strategies and redesign the products for various segments of consumers.

Reference

Apple (2014). Apple Annual Report. Apple Inc.

Lei, D. & Slocum, J. (2010). Strategic and Organizational Requirements for Competitive Advantage. Academy of Management Executive. 6(18): 34-47.

Porter, M. (2006) The Five Competitive Forces That Shape Strategy, Harvard Business Review. January pp 23-41.

Thornton, P.H, Domingo, R.S, and Urbano, D. (2011) Socio-Cultural factors and entrepreneurial activity: An Overview. International Small Businesses Journal, 29(2): 105-118.

Thomson, N, & Baden-Fuller, C. (2010) Basic strategy in context European text and cases. Chichester, Wiley-Blackwell.