Apple Inc. Internal and External Environment Analysis

Introduction

Organizations operate within both an internal and an external environment. The forces and circumstances within the boundaries of an organization constitute its internal environment, which comprises primarily of owners, employees, the board of directors, stakeholders, and corporate culture. By contrast, factors that are extrinsic to the organization form its external environment. These are elements over which the organization has no control, as they affect the entire industry and cannot be shaped by any single firm (Nieuwenhuizen, Badenhorst-Weiss, and Rossouw, 2008). Factors within the internal environment, however, are those that the organization can control and influence.

The external environment is further categorized into the general environment and the task environment. The general environment encompasses factors that may not have an immediate direct impact on operations but nonetheless affect the organization's activities. The task environment, on the other hand, comprises factors that have a direct impact on — and are also impacted by — the operations of the firm (Nieuwenhuizen, Badenhorst-Weiss, and Rossouw, 2008). The main objective of this paper is to extensively analyze the effect of the internal and external environment on Apple Inc.

Brief Background of the Company

Apple Inc. is one of the most renowned and successful companies in the market. The company, which carries a market capitalization of $656 billion, is pervasive across the globe. Since its founding by Steve Jobs, Apple has grown into one of the largest companies in the market. Apple Inc.'s business operations encompass the manufacturing and retailing of iPhones, iPads, and a range of laptops and desktops such as the Mac, MacBook, and MacBook Air. In addition, the company manufactures the software used to run these devices and its business also includes various media offerings such as movies, music, e-books, and software applications. More recently, the company has integrated a cloud storage service and an electronic payment processing system known as Apple Pay (Yahoo Finance, 2018).

PESTLE Analysis

PESTLE analysis is defined as a tool employed in the analysis and monitoring of the external environment of an organization. It is a framework that facilitates an understanding of the external influences on an organization. These external factors comprise political, economic, social, technological, environmental, and legal aspects. PESTLE analysis is beneficial in appraising the dynamic and competitive business environment, encompassing an evaluation of each fundamental factor that directly and indirectly impacts business performance (Zanoni, 2011).

The political environment is linked with government policies and engagements. Apple Inc.'s ability to achieve its key objective of profit maximization depends on a variety of political factors, including government stability, levels of corruption, the extent of bureaucracy, and freedom. In the contemporary period, the most significant political issue to affect Apple's operations was the company's confrontation with the United States Federal Bureau of Investigation (FBI). The dispute centered on whether Apple should have been compelled to hack into an iPhone used by one of the perpetrators of the 2015 San Bernardino mass shooting. This controversy sparked a broader political debate, dividing the public into advocates and opponents of the company (Tibken, 2017). The dispute significantly impacted Apple, resulting in costs as high as $5.46 million in the affected financial year; additionally, the company's revenue declined from $58 billion to $50 billion, owing to a drop in iPhone sales from 61.2 million to 51.2 million units during the same period (BBC News, 2016).

The economic environment encompasses financial performance, levels of demand and supply in the marketplace, employment levels, and the size of the consumer base. It is imperative for organizations to be economically sound in order to prosper. A broad range of economic factors impact Apple Inc. both directly and indirectly. One of the most significant is the exchange rate. Apple generates more than 60 percent of its total sales from global markets, and its revenues are therefore adversely affected by the prevailing trend of a strengthening dollar. In the 2014 financial year, Apple's chief executive officer (CEO) Tim Cook adopted a currency-hedging approach with the primary objective of mitigating the negative effects of dollar appreciation. However, these practices can only compensate for exchange-rate losses to a limited extent, and Apple is expected to continue facing foreign exchange risk (Adinolfi, 2015).

Another key economic factor impacting Apple is its cost structure. For many years, Apple has maintained manufacturing facilities in China and outsourced operations there in order to achieve cost efficiencies through access to cheaper resources and labor. In recent years, however, this has become considerably more challenging, as wage rates in China have increased by 64 percent over five years, reaching $3.60 per hour. This rise in costs has contributed to a decline in the company's profits.

Not all economic factors, however, negatively affect Apple. The tax reforms proposed by President Donald Trump to enhance the competitiveness of U.S. companies in the international market present a notable benefit. Reducing the mandatory corporate tax rate from 35 percent to 20 percent is expected to positively impact the profits generated by Apple (Thrush and Rappeport, 2017).

The social factor of the PESTLE framework takes into account the social influences on consumer behavior and expectations with respect to products, services, and organizations as a whole. One of the key social factors affecting Apple Inc. is the significant and continuing rise in mobile accessibility. The growing popularity of mobile access across the globe presents an opportunity for Apple to continue providing easy-to-use mobile devices. The company has already taken substantial steps to capitalize on this trend through the release of products such as the iPhone, iPad, MacBook, and Apple Watch, and it has continued to expand its global reach to serve a broader consumer base.

Additionally, the widespread rise and adoption of the internet and social media has had — and continues to have — a considerable impact on Apple's business. This represents a major opportunity for the company, as it drives increased demand for digital products of the kind manufactured and retailed by Apple (Lombardo, 2017).

The technological factor of the PESTLE framework addresses the ways in which prevailing technologies and technological change affect business conditions. These technological developments represent both opportunities and threats for Apple's operations. One of the most significant technological factors affecting Apple in the contemporary period is the prevalence of cloud computing. Cloud computing has become widespread among both individuals and organizations, and Apple has capitalized on this trend by launching iCloud as an expanded storage solution for users. The company should continue to build on this by developing devices and applications that are cloud-oriented. Another key trend is the demand for technological integration. Consumers increasingly seek devices that work seamlessly together, and Apple has responded by releasing the Apple Watch, which syncs with the iPhone for ease of use and integrates with Nike Plus to help users — including sports professionals — track their activities (Lombardo, 2017).

Advances in technology have also fueled the growth of the app market. Today, apps exist for almost every activity, from social connectivity, cooking, and fitness, to music, religious practice, education, and productivity. Apple has the opportunity to further develop and expand its App Store to attract a greater number of consumers. However, technology has also created significant challenges. Among the most prominent is ongoing patent litigation with rival companies such as Samsung over the technological components of product offerings, resulting in a sustained legal battle that requires substantial financial resources (Jinjin, 2013).

In order to compete effectively and sustain its competitive advantage, Apple must manufacture and release products that keep pace with the intense level of innovation within the industry while simultaneously stimulating consumer demand. A significant segment of consumers continues to demand cutting-edge products, the latest technology, and novel features that ensure proper functionality. The main challenge Apple faces is keeping pace with these developments and creating software that enables existing technologies to do more. To this end, Apple maintains a strong emphasis on research and development while driving frequent upgrades through timely releases of new models and ensuring a smooth experience for its consumers (Investopedia, 2018).

The environmental factor within the PESTLE model refers to ecological concerns and their impact on business. From an ecological standpoint, one of the primary issues affecting Apple's business operations is business sustainability and corporate social responsibility. In the contemporary context, corporate social responsibility (CSR) refers to the deliberate integration of social and environmental considerations into corporate strategy and business activity, as well as into a company's relationships with stakeholders such as consumers, employees, local communities, and society at large (Katavic, 2014). Apple Inc. is actively pursuing sustainability through recycling and related programs. The company is also continuously seeking new technological solutions to improve the energy efficiency of its products — for example, through improved batteries and components that generate less heat. Furthermore, Apple has taken steps to align its manufacturing processes with global emissions standards, which also enhances consumer perception of its products.

The legal aspect of the PESTLE model addresses the effect of laws and regulations on business operations. One of the principal legal external factors affecting Apple is privacy regulation, both nationally and internationally. Governments around the world are increasingly recognizing privacy issues related to the use of digital technology, and policies and codes of practice are continuously being deliberated, giving rise to stricter privacy regulations on companies such as Apple. This factor poses a significant threat to the business because it creates new challenges in the development of products and services that involve the transmission of private information. For instance, Apple faced considerable pressure from the FBI demanding access to private consumer information through the hacking of an iPhone. CEO Tim Cook's central argument was that Apple has given guarantees to consumers that their information will remain private and treated with the utmost confidentiality, and that disclosing such data to third parties constitutes a breach of contract and trust (Tibken, 2017).

A second legal concern involves expanding telecommunications regulations. Governments in the United States and internationally are imposing increasingly stringent telecommunications rules, which represent a substantial threat to Apple's business operations as they could restrict the broader use of Apple's product offerings. Additionally, from a legal standpoint, there is concern regarding the treatment of the outsourced workforce, who are at times reported to endure harsh working conditions. Labor rights issues are affecting the international business environment, and Apple has not been exempt. The company has, however, taken steps to improve employment practices throughout its supply chain in order to address this issue and enhance consumer perception of the brand. It remains critical for Apple to emphasize privacy protection and regulatory compliance across all its products in order to sustain its leadership across global markets (Yoffie and Baldwin, 2015).

Conclusion

Apple Inc. has grown to become one of the largest companies not only in the United States but across the globe. The primary purpose of this paper was to analyze the effect of the internal and external environments on Apple's business operations. The two analytical tools employed were PESTLE analysis and SWOT analysis. Based on these analyses, the key threats facing the company include the emergence of substitute products, intense competition in the marketplace, and patent disputes over proprietary technology. However, Apple also has numerous opportunities to capitalize on, including expansion into emerging markets, the development of more innovative products enabled by technological advancement, and the growing embrace of digitization and innovation by younger generations.

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