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The Business environment is formed by combining of two words business and environment out of which business can be defined as the goods or products offer to the buyer by an organisation and the environment can be explained as the market in which an organisation sells. This business environment can be influenced by external and internal forces. In which external factors can be classified into Macro and Micro environments.
Organisation Description and Background
The history of Apple computers was quite fascinating, two high school drop outs Steven Wozniak and Steve Jobs, who had also worked with Hewlett- Packard and Atari invented Apple computers. On April, 1976 Steven Wozniak created first Apple computer and later Steve Jobs joined him and by the year 1977 they together launched their second computer called as Apple II and the rest is history. Now with their computers like iMac G5, Mac book, Mac book Pro, Mac book Air they are capturing market shares like never before.
According to Cnet news published byÂ Thad Boyd onÂ October 13, 2010, Apple computers become the third largest computer seller organisation in United States with market share of 10.6%. (www.news.cnet.com)
Apple Business Environment
Business environment is so dynamic that is very hard to predict, we can't change the business environment, we have to work with it to make progress. Whenever a multinational organisation like Apple comes into picture then the necessity of evaluating business environment becomes indispensable than any other national organisation. This is because in a multinational organisation they have to analyse the organisation market position, popularity not only in their country as well as across the globe.
Below are the Evaluation of Apple's Macro and Micro environment which are as follows:
Macro Environment: It deals with Political, Economical, Social, Technological, Environmental and Legal or legislative factors which are commonly known as PESTEL analysis, through this analysis organisation can interpret themselves that which factor is working in favour of them and vice versa. These factors cannot be curbed by the management and are as follows:
Marketing minefield, I. 30/3/2010, PESTEL Analysis- Marketing plan [online]. Available at: (http://www.marketingminefield.co.uk/marketing-plan/pestle-analysis.html) [accessed on 22/11/2010]
3.1 Political Factors: This means depicting aspects of politics which have its effect on the organisation. These effects can be within the organisation, within the region where the firm is based or it can be national and international political issues. (Teresa Williams and Adrian Green 1997)
The world is now local, so whatever alteration in the policies of one country has a direct impact on the other country, for example if a nation lifted import restriction on motor cars than it will create immediate opportunity to the other country to increase their exports and amplify their profits, but they can only take advantage of this situation if they have enough cars to export. That is why it is vital to conceive these political factors. (Teresa Williams and Adrian Green 1997)
When it comes to Apple industry the political factor works in favour to it like government policy of joining China with WTO (World Trade Organisation: This organisation mainly deals with the rules of trading between nations.) helps Apple to get a new potential market, in which they have cheap labour, low investment barrier, low market barrier i.e. they can use this penetrating strategy to enter a new the market with low initial cost and get less competition with the present companies in the field of computers in China. But on the contrary same opportunities are available for its competitors also, because if their rivals established their plants in china and Apple didn't respond to it than this opportunity will act's as a threat to the company.
3.2 Economic factors: These factors dealt with the financial aspects of the organisation it can be rate of inflation, rate of interest, level of employment and even demographic changes. Slight alteration in these factors can stimulate the organisation shares for example if a country increases its rate of interest than it will have direct impact on the organisation like it makes its goods and services expensive which will ultimately decrease working capital of the organisation and trammel them to invest into new products.
Apple computers was having a lot of existing competitors like Dell, Hewlett- Packard and Sony with even emerging of the new competitors like Advent, Samsung, Toshiba, Cray day by day the reason why there are so much of competitors in the market is that low searching cost of components. The heart of the computer is processor and very few organisations like Intel, AMD and Cyrix are making these processors so if an organisation wants to get into the competitions than they directly purchase these components from these organisations with fairly same price as the existing competitors were purchasing. Because of this low entry barrier it allows lot of competitors in the market.
The dilemma of Apple computers was that it has to choose whether it will provide cheap products and penetrate into the market and grab a bigger market share or it will provide premium products with smaller market share. Because most of the existing and even new competitors were targeting developing countries like India, China and South Africa and provide cheap products with targeted results to grab bigger market shares for their organisations.
But when recession strikes in 2008 every organisation in computer manufacturing field gets affected and then they are trying to reduce their production line because of low customer demand and expensive raw material but on the contrary Apple is registering profit for the year 2009 fourth quarter. Even Steve jobs at conference said "Recession? What recession?" because apple sells, record 3.05 million Macs which is 17 % more than previous year (2008).
This is all because of the reputation made by the apple computers with the customer
3.3 Social Factors: It deals with the lifestyle, age groups, fashion, religion and even habit of the people, so it is very vital to interpret these factors for the organisational growth. For example In India MacDonald's won't serve beef burger to the people because of the religious beliefs, but on the contrary they serve this in United Kingdom.
One more example is the change in the birth rate in Britain which enhances the number of children at school and reduced the number of children leaving the school, the benefit of this is that now organisation can make flexible contracts and offer jobs in the respective field of the
Such social factors has an impact on the profitability of Apple for instance people in the developed countries does a lot of travailing which intern increase in the demand for products which entertain them in there long hours of journey and Apple capitalize on such demands by providing efficient audio and video gadgets with long battery life's. For customer entertainment Apple provides faster central processing units with enhanced graphics card and superb audio quality. Because of all this improvements Apple is treated as the world's most reputable brand.
3.4 Technological Factors: Technological factor is defined as 'the sum of the knowledge of the means and methods of producing goods and services' (Penguin Dictionary of Economics). There has been a tremendous increase in the technology over the past 10 years. These changes include finding resources with satellites, increase production with highly efficient machinery, communication with people virtually through video conferencing, recording administrative data on computers or over the clouds, Transferring funds by EFTPOS (Electronic Funds Transfer at Point of Sale) this is a revolutionary step in the field of retailing because now most of the retail shops accepts card payments which results in customers won't have to carry huge amount of cash to buy expensive goods.
Technology advancement is quite important in Apple industry because of high customers demand and enormous competition. Apple produces computers which mainly consist of hardware and software. But because of high competition with AMD, Intel and Microsoft there is no option left for the company, except matching up standards or producing better products than their rivals. As a result apple design new hardware and software line like Apple MacBook Air, MacBook Pro and operating system like leopard 10 which are less prone to internet viruses which make them unbeatable amongst their rivals.
3.5 Environmental Factors: Environmental factors comprise of weather and climate change. Now a day's every organisation is concern about global warming, because even a slight increase in temperature of earth will have an adverse effect on farming, tourism, insurance and manufacturing industries. For example if the favourable condition for growing crops changed than it results in lesser production of raw materials and it will directly affected the food industries.
Apple industry is very much concern about environment as a result they took the initiative to give the entire green house emission from manufacturing, delivery, use and recycling of their products. To calculate this emission they use a sophisticated model called Life Cycle Analysis tool (LCA) which measures the impact of products on environment from manufacturing to recycling. These data was calculated by supply chain method from manufacturing phase to use phase. This Life Cycle Analysis tool also consider where there products sold and used because all apple appliances produce different green house emission.
For the year 2008 they report 9.4 million metric tons of green house emission to the environment. But for the year 2009 they reduced it considerably with the following judicious measures. (www.apple.com)
Manufacturing: Invention of revolutionary aluminium unibody for MacBook Pro and MacBook Air and reduce manufacturing emission by 9 percent. (www.apple.com)
Transportation: Reducing the packaging size by 53 percent help them to ship 80 percent more boxes through airline shipping container. Which help them to save one 747 flight for every 23,760 units and ultimately help them to reduce green house gas emission by 5 percent as that of year 2008. (www.apple.com)
Use: For this process they a new model which is based on draft industry standard which calculates how customer uses their computers and results in 7 percent reduction in green house gas emission. (www.apple.com)
Facilities: Apple employees use clean fuel for their products transfer and reduced emission by 24,000 metric tons CO2. (www.apple.com)
With this precaution they increase their revenue by 12 percent and unit shipped 11 percent which reduce green house gases by 2 percent as shown below.
Company Growth vs. CO2 Emission Growth [online]. Available at: (http://www.apple.com/environment/progress/) [accessed on 08/12/2010]
3.6 Legal factors: These are the factors which have a direct impact on the legal environment of the organisation. This includes sexual harassment, race discrimination, age discrimination, national origin discrimination, pregnancy discrimination, religious discrimination and disabilities discrimination.
Every organisation has to follow these rules and make their strategy and plans according to it like they have to give minimum national wages to the employee, they have to stop child labour for example in Germany NIKE a very well know sportswear brand all over the world employed child labour but when the company gets global discrimination they stop doing it. Also organisation has to give equal opportunity to all national origins and stops race discrimination and disability discrimination.
When it's come to Apple industry they are abide by the labour laws like giving minimum wages to the employ and also give equal opportunity to the disabled people. They also provide favourable surrounding to the employee to increase their productivity.
Micro Environment: SWOT analysis is the management tool used to assess organisation condition within the market place against its competitors. It can be used to identify corporate health at board level, at personal level to determine highly skilled worker and promote them to higher position and even use as an aid to originate new products and services. (Teresa Williams, Adrian Green 1997)
Here are the representations of Apple Strength, Weakness, Opportunities and Threats
By David J. Newlands, Mark J. Hooper, 2009, swot analysis of apple, pg. 20.
Strengths: Apple is a multinational organisation and exports its product to all parts of the world which shows its global availability. They have their brand image
Internal Environment: Internal environment consists of those factors which can be altering by the organisation according to the external environment. These factors can be evaluated by Michael Porter's five forces model, when this model is applied to Apple corporation the result are as follows:
Apple has a lot of rivals like Dell, Acer, HP, Sony and Toshiba which will affect its market share negatively by providing nearly same features with low prices these factors can be explained as:
Porter's five forces
Nova novriansyah, I. 01/10/2009, Porter's five forces [online]. Available at: (http://novriansyah.wordpress.com/2009/10/01/global-business-environment-analysis-of-apple/) [accessed on 25/11/2010]
Threat of New Entrant: Due to low entry barrier, Apple industry faces a high level of competition with its existing PC manufacturers (Dell, Sony, Advent, Toshiba and HP). This PC market does not have high level of brand loyalty because of which any new company can penetrate into the market and buy components from limited suppliers (Intel, AMD and Cyrix) and capture market shares. But Apple makes its brand loyalty through years of research and development and willingness to innovate new products make them win battle against their existing rivals. About cost advantage, Apple's position is quite strong and safe because of its rivals won't afford to venture into the market with such a high cost. But on the contrary bigger organisation like Dell produce computers at a large scale which pull down the market prices to a great extent which ultimately created strong entry barrier for outside rivals and make them restricted to small market share or promote them to take higher financial risk to produce computers at higher scale and make threat to Apple industry.
Rivalry among Established Companies: As stated above Apple is facing tougher competition from their existing rivals like pricing policies, developing new products, Advertising the product online or by electronic media (by Apple and Dell) which shows that earning profits in PC market is not easy. If we looked with a broader perspective whole PC market is occupied by some of large organisation (Dell, Sony and HP) which had an oligopoly over the market and decides the product price, Apple never intended to be the part of this oligopoly in terms of prices and continuing to provide its premium products at premium price.
High Bargaining Power of Suppliers: In computer industry a strict attention is required over the bargaining power of the suppliers which is treated as a threat for Apple and all PC industries. It doesn't mean that the available suppliers like IBM, Intel, Motorola and Cyrix provide low quality of products (only processor producers are concerned) but because of such a small number of suppliers they can control the market price and dominate the PC industries. Apple and its competitors often face high switching cost because of limited suppliers for example if Apple wants to change its processor supplier from Intel to IBM than it will face high switching cost and have an adverse effect on their production and customer demands because of only a few supplier have the capabilities and willingness to provide premium products to Apple as Intel is doing. Therefore bargaining power of suppliers in PC industry is high.
High Bargaining Power of Buyers: Buyers play a vital role in any business organisation. All the products and prices were decided according to the buyers and they are the one who is responsible for the company's profit or loss. When we look at the PC industry the bargaining power of the buyers is quite high because of the presence of lot of competitors which provides same product and with same hardware and software specifications as Apple computers were having in the market. Due to this small searching and switching cost buyers can easily switch from one product to another and restrict Apple to set high prices.
Threat of Substitute of Product: A lot of substitutes are available for the computer like Samsung galaxy Pad, Smart phones (Sony, Nokia and BlackBerry) with multitasking capabilities and new generation satellite TV's (Sony Bravia) with internet. But Apple was not directly affected by all these substitutes because of its Mac series line up and features like iTunes which differentiates it from common PC. But on the other hand most of the computer manufacturers like Sony and IBM, Dell were directly affected by these substitutions.
According to the studies Michael Porter's always amended by an extra sixth or seventh force, in this situation the sixth force will be complementors which will add value to the product. In PC industry these complementor often come from software industries which are third party organisations and add value to the product. In Apple computers these complementor are ITunes, Photo paint, MS project 03 and Coral graphics which are produced by freelancer organisation and provide these software's to Apple at very low prices and have an edge over Wintel (windows and Intel join forces) application which are designed by standard and professional program writers at a high price. So Apple which has all these freelancer applications with low price will obviously sells better than PC who had only MS office at high price. If we expect seventh force in Michael Porte's model than it would be the power of unions, government and stake holders who had a special interest in the Apple organisation.