PESTLE and SWOT analysis of Apple Inc 2016-2017
Apple Inc. is an American technology firm founded by Steve Jobs in 1976, currently engaged in the design, manufacture and marketing of mobile communication and media devices, computers and portable digital music players, as well as related software, accessories and third-party applications. Key Apple products include iPhone smartphones, the iPad tablets, iPods and Mac desktops and laptop PCs. It also owns Beats headphones (Apple 2016; Mintel 2016).
2.0 Apple's current performance 2016-17
The company’s global turnover totalled $233 billion for the fiscal year ending in September 2015 (Apple 2016). According to Mintel (2016), Apple is the second largest and most profitable mobile phone company in the world and together with Samsung dominate the smartphone market, accounting for over 62% of this market. Despite recording breaking profits and sales, the last two years’ results have relied on the incredible performance of the IPhone range which saw sales increase by 12% and 52% in the 2013/14 and 2014/15 period respectively. In stark contrast, iPad sales fell 23% in the 2014/15 period, after a 5% drop the previous year (Mintel 2016).
Still, despite the fact that sales have been consistently falling throughout 2015/16, the iPhone 7 was Apple's chance to stabilize but its sales have been "sluggish" and far below the company's initial expectations which led Apple to cut back production numbers by 10% which is why Apple stocks were downgraded at the beginning of this year (Moore 2017; Jones 2017). Using PESTLE, SWOT, Apples BCG matrix and Porters Five Forces framework, the report will examine how Apple can take advantage of its strengths, and opportunities in the market created by a competitive mobile phone and tablet environment and faltering rivals like Samsung to benefit.
3.0 Apple PESTLE analysis 2016-2017
PESTLE is used in strategy to analyse the macro environment and identify how future trends in the political, economic, social, technological, environmental and legal environments might impact individual organisations within an industry. Firms then study the key drivers of change behind the PESTEL factors. This is only a starting point as often, other frameworks such as Porters Five Forces and SWOT will be used in conjunction to help Apple utilise internal core competencies so as to take advantage of opportunities while neutralising threats.
3.1 Political factors
The Brexit effect
In June 2016, Britain voted to leave the EU, a move predicted to cause both political and economic upheaval and uncertainty for the UK economy if it were to happen, at least in the short term. Unsurprisingly, Brexit has already sparked political turmoil across the UK with Scottish Prime Minister Nicola Sturgeon still calling for a second Scottish independence referendum to protect Scottish interests in the EU (Douglas and Gross 2016). The implications to leave the EU are many, not least the fact that it is already creating Brexit inflation as prices continue to escalate, in part due to a weakening pound against the dollar, a situation that will only get worse if Britain does leave the EU before 2020 (Davies 2017; Mintel 2016).
Apple has already raised prices on its UK App Store by almost 25% to reflect the sharp depreciation of the pound following June’s vote to leave the European Union (Hern 2017). The Brexit vote led the value of the pound to fall by 18.5% against the US dollar. Since the vote to leave the European Union, Apple has already acted to change other British prices. In October 2016, it for instance marked the launch of all new Macs with a 20% price rise across the line with the Mac Pro, seeing its price jump by £500 overnight. Similar price increases hit the company’s desktop computers meaning the Brexit effect on what British consumers pay for both new and existing Apple products is real (Hern 2016).
3.2 Economic factors
Following the Brexit vote in June 2016, the pound sterling plunged to its lowest for 31 years against the dollar (Toplensky et al 2016). The continued depreciation of the sterling since then has certainly led to inflationary pressures.The growing volatility in some economies, notably China, as well as in the currency and financial markets meant sales fell in some quarter one and two in 2016 (Apple 2016).
3.3 Social factors
According to Mintel (2016), there is a behavioural shift in the way customers are using smartphones that is progressively causing tablets to lose their Unique Selling Point (USP). The rise of phablets (smartphones bigger than 5 inches) has meant that phablet owners were more inclined to use their phones to perform more complex or time-consuming tasks, such as online shopping, gaming or watching video content. This has led to cannibalisation where phablets are quickly taking over tablet activity, and explains why IPad sales have been declining in the last 2 years.
3.4 Technological factors
The decelerating development and slowdown of smartphone penetration is continuing to open up more competition forcing traditional players in the smartphone market to come up with new innovations and upgrades that can increase or sustain revenues as evidenced by the emergence of virtual reality and 360-degree videos. Smartphone-based virtual reality headsets, like wireless charging technology may prove to be the next battleground of innovation as rivals hit the market with their own solutions and features hoping to differentiate themselves.
But as smartphone companies eliminate power cords, Apple is the only major player still not putting wireless charging capabilities in any of its devices despite interest among its customer base. In the long run, this will put further pressure on its IPhone market as rivals’ smartphones may offer more features, versatility and adaptability (Mintel 2016).
3.5 Environmental factors
Following a Greenpeace protest, Apple released a statement on April 17, 2012, committing to ending its use of coal and shifting to 100% renewable clean energy (McMillan 2013). By 2013 Apple was using 100% renewable energy to power their data centers. Overall, 75% of the company's power came from clean renewable sources (Burrows 2014).
3.6 Legal factors
On August 30, 2016, after a three-year investigation by the EU's competition commissioner that concluded that Apple received "illegal state aid" from Ireland, the EU ordered Apple to pay 13 billion euros ($14.5 billion), plus interest, in unpaid taxes (Kanter and Scott 2016). Specifically, the commissioner found that Apple had benefitted from Irish Department of Revenue tax rulings that allowed it to split the profits recorded by Apple Sales International internally between its Irish branch and a stateless "head office" entity lacking employees or premises (permitted under Irish law until 2013). Furthermore, Nokia has also filed a lawsuit in both Germany and the USA against Apple for patent violations (Swartz 2016).
4.0 Apple Five Forces Analysis
5.0 Apple Inc. SWOT ANALYSIS 2016-2017
6.0 Apples BCG matrix
After an analysis of the key drivers of change in Apples industry using PESTLE, we were able to see that the current macro environment has flashpoints that may define the competitive landscape in 2017. One of them was Brexit and as already stated, its implications are already shaking up various industries and firms that do business in the UK including Apple which has already hiked up prices for all its computer devices. The combination of Brexit and other factors such as new technological developments from rivals such as virtual reality and wireless charging, which Apple isn’t developing, means they may well face more competitive pressures regarding the smartphone market. How Apple handles the falling sales of the IPad and IPhone due to factors like market saturation, will be determined by how it takes advantage of current opportunities while neutralising threats which were looked at using Porters Five Forces and SWOT. Of critical importance is diversifying away from an over reliance on IPhone series as the ultimate cash cow because sooner or later, as Apple’s BCG matrix showed, cash cows do eventually turn into dogs.
Apple (2016) “Apple Reports Fourth Quarter Results” [Online] at http://www.apple.com/pr/library/2016/10/25Apple-Reports-Fourth-Quarter-Results.html [Accessed 26 January 2017]
Burrows, Peter (2014) “Apple Says Data Centers Now Use 100% Renewable Energy” Bloomberg Business Week, [Online] at https://web.archive.org/web/20131202223855/http://www.businessweek.com/news/2013-03-21/apple-says-data-centers-now-use-100-percent-renewable-energy [Accessed 26 January 2017]
Davies, Rob (2017) “Beer prices rise amid sobering threat of Brexit-related inflation” The Guardian [Online] at https://www.theguardian.com/business/2017/jan/24/beer-prices-rise-brexit-inflation-heineken-carlsberg-carling-budweiser [Accessed 25 January 2017]
Hern, Alex (2017) “Apple increases App Store prices by 25% following Brexit vote” The Guardian, [Online] at https://www.theguardian.com/technology/2017/jan/17/apple-ios-mac-app-store-prices-rise-25-per-cent-following-brexit [Accessed 27 January 2017]
Hern, Alex (2016) “Brexit hits Apple Mac customers hard as prices rise by up to £500” The Guardian, [Online] at https://www.theguardian.com/technology/2016/oct/28/brexit-apple-mac-customers-prices-rise-us-dollar-pound-sterling [Accessed 27 January 2017]
Jones, Michelle (2017) “Apple Inc. (AAPL) Stock Downgraded Ahead Of Earnings For Weak iPhone 7 Sales” Value Walk, [Online] at http://www.valuewalk.com/2017/01/apple-inc-aapl-stock-downgraded-earnings/ [Accessed 26 January 2017]
Kanter, J., and Scott, M. (2016) “Apple Owes $14.5 Billion in Back Taxes to Ireland, E.U. Says” The New York Times [Online] at https://www.nytimes.com/2016/08/31/technology/apple-tax-eu-ireland.html?_r=1 [Accessed 26 January 2017]
McMillan, Robert (2013) “After GreenPeace protests, Apple promises to dump coal power” Wired [Online] at https://www.wired.com/2012/05/apple_coal/ [Accessed 26 Jan. 17]
Moore, Michael (2017) “iPhone 7: Apple sales are NOT as good as hoped, report claims” Daily Express, [Online] at http://www.express.co.uk/life-style/science-technology/749318/iphone-7-sales-disappoint-apple-sale-figures-report-samsung-galaxy-note-7 [Accessed 26 Jan. 17]
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