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This assignment will analyse how Apple Inc. relates its competences to its environment, the impact of social, environmental, ethical and corporate governance factors that are currently affecting Apple and how effectively Apple is managing these factors in order to achieve its corporate objectives.
Steve Jobs and Steve Woznaik officially launched Apple Computer on April 01, 1976, Woz as a serious engineer and Jobs as the brash idea man and it is their initiation that brought the Apple that the electronic lovers in the world are proud of today.
Today Apple with its highly innovative and fancy designed products became an American multinational corporation that designs and sells several innovative and creative products. Apart from being present in US market, Apple sells its products in United Kingdom, Australia, Japan, China, Italy, Germany, Canada and Switzerland.
Its range of products varies from the simplest products to the most luxurious ones. Apple is the seller of personal computers, which involve in their production line: MacPro ,Macmini, MacBook, MackBook Air, MacBook Pro, iMac, Mac OS X. Apart from these Apple also is the seller of handy media players. Starting from the: iPod touch, iPod classic, iPod nano, iPod shuffle, and Product (RED)-type of iPod.
The iPhone is another outstanding product which has been introduced to the market by Apple including iPhone, iPhone 3G (the third generation iPhone), iPhone 3GS and the latest version iPhone 4.
Moreover, Apple provides media player applications such as iTunes, Quick Time, Quick TimeGuide, Quick Time Player and Quick Time Pro, ILife, and iWork.
Also the company sells Apple TV and other accessories including Magic Mouse, keyboards and Cinema Displays. Further, iPad which is launched in the market recently is one of the most advanced Apple products.
With the above product line Apple is focusing to satisfy personal consumer demands with its innovation and thinking differently strategies as critical key factors and its target segments mainly consist of professionals, students, corporate users and entrepreneurs
This assignment is purely based on secondary data collected from internet, internal reports, books, journals and news publications in the media.
6.0 Environmental Analysis and strategies
6.1 SWOT Analysis
In order to find out Apple's position and define the strategy SWOT Analysis could be used as a strategic tool to find out where the business currently is and where it could be tomorrow focusing on the strengths, minimizing threats, and taking the greatest possible advantage of opportunities available. Apple could also use it to have a better understanding of the competitors, which can give the insights it need to craft a coherent and successful competitive position.
Technical savvy -Integration with Microsoft products lines and Intel processors demonstrated Apple's ability and willingness to adapt to a diverse customer base. Apple's technical expertise is very costly to imitate specially when it exists within the socially complex entrepreneurial culture of Apple.
Financial vitality - Apple's cash reserves remained robust and stable despite stagnant market share growth in both computer hardware and software. Apple exploited this by resisting market pressures to reduce costs, tightly integrating product packages, and forming strategic alliances (i.e. securing the backing of all major music distributors in the support of iTunes).
Brand loyalty - Apple maintains the strongest brand loyalty in the market. Apple is about design, their electronic products are stylish, their advertising is stylish, and their hardware and software are stylish. Such brand loyalty is extremely costly and time-consuming to imitate.
Innovative Technology _ Apple's well developed Research and Development Department enjoys competitive advantage in the increasingly global market place by providing high quality and innovative products to its customers (i.e. Apple is currently the only authorized maker of hardware using the Mac OS) and most of the Apple's products made the complex technology easy to use and are customer friendly.
Market share - Apple has historically been strongest in the US geographical and educational vertical markets. With the educational market facing tightening budget constraints and the US approaching a PC saturation point, Apple may need to burn cash more quickly and succumb to market cost pressures on its products without a strategic innovation, integration, or divesture.
China is the world's largest mobile market and already Apple's second-biggest market overall, but the firm has been losing ground there to arch rival Samsung Electronics in smart phones (Apple CEO in China mission to clear up problems, 2012).
Social Network -With the application "Ping" Apple tried to enter in to the social network but Apple with its social network based around iTunes music, GameCenter, social gaming service aren't huge hits. It could have made "Ping" more useful by plugging it into non-music iTunes media, like apps and video also it should integrated Facebook or any other social networks into its products as some Android devices or Microsoft's Windows Phone have done.
Steve Jobs - Jobs is certainly a valuable, rare, and hard to imitate resource that Apple fully exploits. He had a remarkable prescience for predicting what consumers wanted. In his absence his aggressive drive to bring innovative visions to life was noticeably absent and painfully felt by stakeholders. Therefore, Apple's policy solely to rely on Job's was not a healthy long term strategy for sustaining its success.
Consumer electronics - Apple with its success of the iPod and iTunes, entered the consumer electronics market by expanding the iTunes concept to downloadable mobile phone features and movies (podcasts). The door is now open to develop new and potentially profitable strategic alliances with peripheral component manufacturers and media transmission giants (Disney, TBS, Verizon, etc.).
PC hardware and software market growth - With cross-licensing of operating system platforms in place, Apple entered the high-volume business environment traditionally dominated by Windows-based PCs. Introduction of Intel-based processors prompted businesses replaced PCs with iMacs. In order to gain a level of stability and reliability Apple must establish themselves as a credible player in business desktop applications to overcome the "desktop publishing" stereotype.
Additional carriers - Partnering with additional carriers could increase sales of the iPhone's which would in turn encourage consumers to try additional Apple products
Legal risks - In a market that literally changes at the speed of thought, patent and copyright infringement risks remain high. As long as operating systems and support software packages continue to converge and remain relatively easy to imitate, present and future lawsuits are inevitable.
Competition - This threat occurs primarily on two fronts: PC hardware/software and consumer electronics. For the same reasons discussed in the opportunities section, the threat of imitate (cloning, pirating, etc.) increases
Currently Apple phones are facing cut- throat competition among South Korea's Samsung Electronics Co Ltd.
Apple products are undeniably cutting edge, well-built and beautiful to look at, but ultimately they are commodities that now face tough competition. In order to sustain in this competitive industry Apple must continue to pursue product differentiation and economies of scope.
6.2 PEST Analysis
A PEST is one of the frameworks that help to understand market growth or decline, business position, potential and direction for operations (Kotler, 1998). PEST analysis is also useful when entering a new market or starting business operations in a new country and helps to tackle mere assumptions and adapt quickly and effectively to the realities of the new environment. PEST also ensures that company's performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985).
As most of the sales of Apple are from outside America, bad international relations, wars and terrorism might affect Apple's business badly and also most of its hardware and software components and products are produced from outside U.S., countries like Ireland, Czech Republic, Korea and China are some major states and conflicts between any of these states mayÂ have awful outcomes for Apple.
Apple nearly destroyed its business in the late 1980s by pursuing a suit against Microsoft claiming that Windows infringed the look and feel of the Mac desktop metaphor. Rather than competing, it litigated and lost the battle and finally its market share dwindled.
However, last ruling in the global legal battle on Friday August 24, 2012 a Tokyo court dismissed Apple's claim that Samsung had infringed on its patent.
Therefore patents are no longer a system of protection rather than they are a system of litigation that should have clear strategies.
The global economic depression might have immense impact on Apple. The inflation rate is high, while there isn't a significant change on consumer's income and the unemployment rate has increased, leading consumers to spend less on 'luxury products'.
Depreciation of U.S. dollar has not endangered Apple economically as it has purchased itself foreign currency, to minimize the economic effects of inflation on U.S. dollar's. Depreciation has in fact increased its revenue in the international market.
Globalization includes the interaction of people worldwide, for which technology plays the main role. Today's world cannot be imagined without technological devices as computers, mobile phones, internet etc. Apple is globally seen as the King of technology, not because of most usage, but quality and design.
Music industry is another big social influence, which over the last decade has become virtual and set itsÂ market to the cyberspace. Apple having developed the biggest virtual media store, iTunes,Â is well ahead any other competition of this direction. Web piracy might be a threat though most governments punish those behaviors.
Hence, Apple's image portrays the modern individual's lifestyle, combining functionality with design, leading to brand identification and loyalty. Therefore social influences will have a positive effect on Apple.
The technology market for computers and mobile phones has become huge, adding more competition in the market. Also technology innovations and changes are almost asÂ fast asÂ light, therefore the products lifecycle is very short.
While Apple regained its top spot as the world's largest smartphone vendor in the fourth quarter, for last year as a whole, it slipped to 5th place in China, overtaken by ZTE. Apple's China smartphone market share slid to 7.5 per cent from 10.4 per cent in July-September (Apple's iPhone loses China market share, CHINADAILY, 2012).
Investing largely in Research and Product Development, Apple is on top of the market, regarding innovative products. This includes making the work for the competition to follow, but it's still better because innovation is aÂ big part of the brand and hasÂ shown to pay out.
In order to avoid losing cases like Samsung, decisions to be made prohibiting the copying and falsification of Apple products by programming highly-advanced protection codes into the software.
7.0 Impact of social, environmental, ethical, legal and governance issues on Apple and how Apple is framing these issues in its strategy and operation
Corporate governance debate has concerned the relative merits of the different systems,
often with the assumption that the Anglo-American system with stronger security markets and higher levels of disclosure represents a more advanced and efficient mode of corporate finance and governance, and leading to the conclusion that inevitably there will be either an early, or more gradual, shift of the European and Asian systems of corporate governance towards the Anglo-American model (Hansmann and Kraakerman 2001; McCahery et al 2002; Hamilton and Quinlan 2005).
At its most general level, corporate governance can be conceived as a socially constructed force-field of driving and preventing forces that shape a firm's strategic behaviour (Lewin, 1951). A society's corporate governance system is part of a wider institutional structure that regulates the relationship between the executives who control the organization's resources and activities and those social and economic stakeholders that possess a legitimate vested interest in the firm's activities (Pfeffer and Salancik, 1978).
However, different routes were followed in this evolution and different destinations reached in corporate practice, company law, and associated institutional development of Anglo-American, European and Asian forms of corporate enterprise.
In the case of Anglo-American model of corporate governance it emphasizes the interests of shareholders. It relies on a single-tiered Board of Directors that is normally dominated by non-executive directors elected by shareholders. Within this system, many boards include some executives from the company and Non-executive directors are expected to outnumber executive directors and hold key posts, including audit and compensation committees. In the United Kingdom, the CEO generally does not also serve as Chairman of the Board, whereas in the United States having the dual role is the norm. In U.S. both the public and the government play important supervisory roles in the overall corporate governance system.
Likewise Apple's Board of Directors oversees the Chief Executive Officer and other senior management in the competent and ethical operation of Apple on a day-to-day basis and assures that the long-term interests of shareholders are being served. To satisfy the Board's duties, directors are expected to take a proactive, focused approach to their positions, and set standards to ensure that Apple is committed to business success through the maintenance of high standards of responsibility and ethics (Investor Relation Report 2012).
(Investor Relation Report 2012) further states that the Board has adopted various committees like the Audit and finance Committee, Compensation Committee and Nominating and Corporate Governance Committee charters and governance guidelines that, in conjunction with Apple's articles of incorporation and bylaws, form the governance framework for Apple. The governance structure is designed to foster principled actions, effective decision-making and appropriate monitoring of both compliance and performance.
However there has been intense criticism on Apple's corporate governance including Apple's previous reliance on autonomous reporting practice, its ability to manage its broader corporate image and its low level of transparency. It does not release a sustainability report, it does not reply to the CDP surveys and, until recently, it also didn't disclose the name of its suppliers or allow a third party to audit the working conditions in its supply chain.
Apple's tight grip on details of coming products has frequently been subject to criticism about its corporate governance, including operating with a small board and being parsimonious with disclosures about the late CEO Job's deteriorating health issue.
Samsung, Apple's most threatening competitor, angered by patent lawsuits counter sued Apple in Tokyo. While from Apple's point of view, taking legal action against competitors may seem necessary as a means of protecting innovation but public opinion may work differently. For multinational companies the legal victory can often end with a kind of zero sum game, leaving it with a reputation for arrogance and insecurity. Apple will have to worry more about future battles against competitors.
Moreover, it is believed that Apple's former CEO always maintained that equipping the public with the best technology is worth more than anything. Therefore, it's high time for Apple not only incorporate good governance and ethical statements but also to start being more strategically open and ethical about the way it does business.
Manufacturing Transportation Product use Recycling Facilities
(Environment Report 2012, Apple Inc.)
According to the facility report about Apple, since 2006 it has been working continuously to reduce greenhouse gas emissions (GHG) and Apple's strategy is to reduce energy, water consumption and waste production. Furthermore it is trying to communicate environmental, health and safety policy and programs to its employees and stakeholders(Environment Report 2012).
In its Supplier Responsibility 2012 Progress Report, the company states it is "committed to driving the highest standards for social responsibility throughout [its] supply base". It adds: "We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made." (Supplier Responsibility Report 2012)
However, during Apple's Chief Executive Tim Cook's visit to China in March 2012, an activist group based in Hong Kong published an open letter, demanding that Apple ensure decent working conditions at all its suppliers. Students & Scholars noted Against Corporate Misbehaviour listed grievances cited by employees at Apple suppliers including "poverty wages" and excessive and forced overtime. They described their daily routine as work, eat and sleep and themselves as machines that repeated the same monotonous motion for thousands (of) times a day. (Apple CEO in China mission to clear up problems, REUTERS 2012)
Though Apple claims it has a very progressive code of conduct, it also, as the New York Times reported, allows suppliers only the slimmest of profits, which often results in suppliers trying to cut corners, replacing expensive chemicals with less costly alternatives, or pushing their employees to work faster and longer. If Apple cannot establish a strategic way to engage with stakeholders it cannot survive in the long run.
Apple from not sharing information with Greenpeace about why Greenpeace got it wrong about the power consumption of Apple's North Carolina data centre to not responding at first to Chinese environmental groups investigating pollution issues in Apple's supply chain in China implied that Apple doesn't believe or is very reluctant to engage with stakeholders.
Any major organizational change is accompanied by insecurity. The transition from Jobs' approach to hiring and firing is bound to create uncertainty among employees, and in corporate environments uncertainty inevitably creates pernicious manoeuvring.
Therefore, It is expected the world's most valuable company to lead in all aspects of social responsibility and strive hard from inside, promoting trust and openness and integrity.
With all its success in the global marketplace, Apple undoubtedly has the ability to respond and rectify these issues.
Apple via its corporate strategies has taken action to address these issues. "Going deep into our supply chain, we are now monitoring compliance for over 700,000 workers. In July, 97 per cent of worker weeks were compliant with the 60-hour maximum work week specified in our code; this represents continued improvement from the 96 per cent that was reported in June." (Supplier Responsibility Report 2012)
According to recent media coverage, Apple's new CEO announced that Apple is interested in developing a new vision, one which includes CSR and Apple is evolving the way it perceives CSR.
Developing a CSR strategy around neither a sense of obligation nor calculation but rather around certain well-defined character virtues is highly effective. In particular, integrity, empathy and zeal, among others, are all critical factors and they need to be well coordinated and implemented. The new CSR initiatives should present both the company and its new CEO with a unique opportunity to promote an image of integrity and to differentiate the new leadership from that of the Jobs era and all Apple has to do is to address its CSR approach just like an iPhone or iPad and update it.
8.0 Conclusions and Recommendations
Apple has committed to bring the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and internet offerings. It also strives to make its customers masters of the products and also need to ensure that its employees understand the vision and strive to reach it. It has put systems in place to enable smooth customer interaction. It has put objectives in place to continuously move forward, implemented strategies to fulfil these objectives and ensured that the right marketing, financial and operational structures are in place to apply the strategies.
While doing this research I was able to understand how a global Company like Apple can function and have different strategies in this competitive environment. I also discovered its ability to remain competitive and stimulate customer demand depends heavily on its ability to ensure a continuing and timely introduction of innovative new products and technologies to the market. Furthermore, it should strengthen its relations between employees, manager and the directing board and also should promptly address the corporate governance and ethical issues under laying it.
In conclusion, Apple must make significant investments in research and development and should hold a significant number of patents and copyrights. Many of the Apple's competitors seek to compete primarily through aggressive pricing and very low cost structures. If Apple is unable to continue to develop and sell innovative new products with attractive margins or if other companies infringe on the its intellectual property (i.e. like Samsung did recently), Apple's ability to maintain a competitive advantage could be negatively affected, its effort to return back to number one in the market will diminish and its financial condition and operating results could be materially adversely affected.