Question

For the publicly traded U.S. company Apple (AAPL), analyze the current economic environment of the company and industry.

Answer 1

Going from the verge of bankruptcy to the most profitable company in its industry, in 2012, Apple Inc. was said to be the “most valuable company in the world”.

Apple consists of significant resources and considerable potential in the business world. Even though it consists of such capabilities there occur various trends in the general environment that causes the threats which pull down the progress and success of the firm. Let us see analyse the current Economic Environment of the company.

Booming Global Economy: With the recession now almost over, people now feel they can spend more on Consumtipon and can buy expensive goods. The Apple known for its brand, quality, Innovative technology and luxury has mislaid due to its supreme pricing position paves the way for its competitors the producers of less expensive products. However the consumers attracted more towards the valuable Apple's premium products during the economic upturn than its low pricing competitors.

Chinese Economy: Recent growth in Chinese economy catches the attention of several companies to sell their products in China. Due to the growth of the Increasing economy proportionally there is also increase in the labour wages. This may results the buying power which makes people to draw more attention towards the Innovative products such of Apple.

Apple’s external environment can be divided into macroeconomic, technological, demographic and social factors. The economic factors that can be seen as opportunities in the technological industry are the need for lower cost products that satisfy the consumers’ needs in the midst of a declining global economy. Socio-cultural trends include the move towards “smarter” and more portable devices that have a slick design and are more user-friendly. Apple did not follow the technological trend, it lead it.

Industry Environment

Porter's five forces that shape the industry: bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products or services, and intensity of rivalry. In the technology industry the bargaining power of buyers is high in the long-run since consumers can always “switch” to a rival device. In this industry, switching is a cost free concept which means that consumers can switch to alternative products at little to no costs. This factor makes the differentiation of products a necessary strategy that eliminates the risk of buyers bargaining power. When a product is differentiated, it is less susceptible to loss of sales as a result of any price premiums. This is because differentiation builds customer loyalty and customer loyalty makes products less sensitive to price changes. These factors are contributed largely to Apple’s differentiation strategy during the Jobs era.

The bargaining power of suppliers is another factor than can affect a firm’s strategy and that has affected the way Apple viewed its suppliers. The strategies that Apples implemented however, as will be explained later, reduced suppliers’ bargaining power and helped limit the cost of its products when faced with economic turmoil and increasingly demanding consumers. Finally, despite the innovative and leadership status of Apple, the company failed to set the proper barriers to eliminate the threat of new entrants in the industry and limit the availability of substitutes for similar products at a much lower price. Apples’ strategy towards its competitors has varied over the years. Yet, the company’s strategic group position amidst other technology giants such as Samsung and HP will not be sustained if Apple does not alter its strategy in the near future.