Apple Inc. Strategic Analysis: Five Forces, SWOT & PESTEL

Introduction and Company Overview

Apple Inc. is widely regarded as one of the world's most formidable companies. Through a deep dedication to innovation, it has grown into one of the most admirable corporations on the planet. The strategy of the last decade has revolved around the "digital hub" concept, which places the personal computer at the center of a broader gadget universe encompassing media capabilities and communication technologies. This strategy has produced tremendous success — yet that same success has created new obstacles for the company. This analysis draws on Apple's 2013 annual report to assess the company's current competitive position and to offer recommendations for its future strategy.

Apple designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players. It also sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The company's products and services include the iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a range of accessory, service, and support offerings (Apple Inc., 2013). Apple sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, and Mac App Store, as well as through a worldwide network of retailers — some company-owned and others retail partners. Apple sells its products to consumers, small and mid-sized businesses, and education, enterprise, and government customers. The company's fiscal year is the 52- or 53-week period ending on the last Saturday of September.

Mission and Vision

"To make a contribution to the world by making tools for the mind that advance humankind."
— Steve Jobs (The Economist, 2009)

There is considerable debate about whether Apple has an official mission statement. The quote above dates from Steve Jobs in the 1980s and, while inspiring, is not Apple's official statement. In fact, Apple's formal mission statement is unpublished — if it exists at all — which has led many observers to attempt to decipher it. One such attempt reads as follows (Blodget, 2013):

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

This version, however, is fairly uninspiring and is unlikely to be Apple's actual mission. The 2013 annual report also makes no mention of a formal mission statement. It does describe the business in the following terms (Apple Inc., 2013):

The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services. The Company's business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative design.

This passage reads more as a description than a true mission statement. It may simply be the case that Apple, so confident in its own capabilities, never took the time to formalize one. Whatever the reason, Apple's lack of a published mission is a genuinely interesting organizational characteristic — and, given that Apple is one of the most successful organizations on the planet, the absence of a formal mission statement is clearly not a predictor of failure.

Porter's Five Forces Analysis

Understanding Apple's competitive environment through Porter's Five Forces requires examining each force across the multiple markets in which Apple operates.

Current Rivalry

Apple's product mix is broad, so its competitive rivalry must be assessed market by market. In the PC market and related industries — where switching costs are relatively low — Apple faces fierce competition from major players such as IBM, Dell, HP, and Toshiba. In media content delivery, iTunes and the iPod face considerable pressure from other online sources as well as from illegal downloading. The iPhone competes constantly with devices running Android and Windows platforms, as well as with offerings from Motorola, Palm, and BlackBerry.

Threat of New Entrants

Because Apple operates across so many distinct markets, the threat of new entrants must be evaluated on a market-by-market basis. That said, the capital requirements for competing with a company of Apple's scale are so high that new entrants are effectively blocked from most of its core markets.

Bargaining Power of Suppliers

Apple's bargaining power over its suppliers is exceptionally high; most suppliers depend on Apple to at least some degree. At the same time, Apple must balance that power with the need to maintain a stable global supply chain. It is therefore in both parties' best interest for Apple to treat its suppliers and their workers fairly.

Bargaining Power of Buyers

Buyer power varies depending on how deeply a consumer is embedded in the Apple ecosystem. A customer who owns only a single Apple device could switch to a competitor's product without great difficulty. However, a customer who owns a MacBook, an iMac, an iPad, and an iPhone faces much higher switching costs because those devices are designed to work together seamlessly. This integration factor effectively "locks in" consumers to Apple's product mix, reducing individual buyer power significantly.

Threat of Substitute Products

Of all the competitive forces Apple faces, the threat of substitute products is arguably the most challenging. Apple operates on the frontlines of innovation, meaning that if a rival company brings a breakthrough product to market first, it poses a direct and significant threat. Apple must therefore continuously attract and retain world-class talent to remain the driver — rather than a follower — of innovation.

Works Cited

Apple Inc. (2013, September 28). 10-K for FY13. Retrieved from Apple Investor Relations: http://files.shareholder.com/downloads/AAPL/2846136282x0x701402/a406ad58-6bde-4190-96a1-4cc2d0d67986/AAPL_FY13_10K_10.30.13.pdf

Blodget, H. (2013, August 3). Apple's 'Mission Statement' Is Making People Worry That The Company Has Gone To Hell. Retrieved from Business Insider: http://www.businessinsider.com/apples-new-mission-statement-2013-8

Mortensen, P. (2010, January 27). The Dawn of Apple's Dominance: Digital Hub Strategy, Revisited. Retrieved from Culture of Mac: http://www.cultofmac.com/27810/the-dawn-of-apples-dominance-digital-hub-strategy-revisited/

O'Toole, J. (2013, December 12). Foxconn's worker hours still excessive — report. Retrieved from CNN Money: http://money.cnn.com/2013/12/12/technology/foxconn-labor/

The Economist. (2009, June 2). Mission Statement. Retrieved from The Economist:

Wailgum, T. (2011, June 6). Gartner Top 25 Supply Chain: Apple Tops, SAP Customers Abound. Retrieved from SAP News, Analysis and Insight: http://www.asugnews.com/2011/06/06/gartner-top-25-supply-chain-apple-tops-sap-customers-abound/

Wingfield, N. (2012, March 29). Foxconn Technology. Retrieved from The New York Times: http://topics.nytimes.com/top/news/business/companies/foxconn_technology/index.html