Apple Swot and Pestle Analysis
Swot and Pestle analyses help investors and managers analyze businesses and projects. The term Swot is an acronym for strengths, weaknesses, opportunities, and threats. Pestle is an acronym for political, economic, social, technological, legal, and environmental factors or forces that guide planning and decision-making. The results of a pestle analysis can help you perform your Swot analysis with greater ease. Both approaches encourage businesses to improve themselves continually, helping them to survive and thrive today and in the future. This piece attempts to examine Apple Inc. using Swot and Pestle analyses.
Apple Pestle Analysis
Apple is the largest tech company and the eighth biggest company globally. In May 2018, Apple ranked #1 alongside Berkshire Hathaway on the list of America’s Largest Public Companies. At that time, Apple had made sales of $238.8 billion, making $50.5 billion in profits. The company boasted a market value of $904.4 billion and assets amounting to $406.8 billion. That does make Apple a critical player in both the U.S. and global economy. Let us look at the political, economic, social, technological, legal and environmental factors that affect how Apple does business.
President Trump signed into law a new tax code early 2018. The new law has changed the way Apple handles the cash it holds outside of the United States. Before the law came into effect, the company held a staggering $252 billion abroad. Prior to this legislation, Apple had been deferring paying taxes for years.
The new law allows a company to arrange a one-time transfer to the U.S. of its cash held abroad. Corporate cash repatriation has seen the U.S. receive billions of dollars as companies move to take advantage of a lower tax rate. Apple, for example, planned to make a one-time tax payment amounting to $38 billion.
While this might seem like a purely legislative act, there was much political activity behind its formulation. Overall, the law had a positive impact on Apple and the U.S. economy as the company promised to create 20,000 new jobs.
Apple operates in many other countries. The company can and does get affected by political forces at work in those countries. Hopefully, the company’s leadership will keep making the right decision in each situation.
Apple heavily relies on China’s cheap labor and leverages the country’s relatively lower manufacturing costs. The company, therefore, remains vulnerable to potential social and political unrest in China.
The U.S. seems to have started waging economic wars against certain countries including China, Russia, and Turkey. The U.S. changing policies and attitudes toward trading partners might lead to anti-Americanism in those countries. In Quarter three of 2017, China accounted for 18 percent of Apple’s sales. Evidently, if anti-Americanism starts brewing in China and other countries, Apple would suffer great harm.
Besides, many Americans have started to adopt new attitudes that might hurt Apple’s sales. Minimalism affects how a growing number of Americans spend their cash. Minimalism supports frugality and emaciates unbridled consumerism. It is a growing trend that has people needing fewer and fewer possessions to survive.
Finally, Apple’s foray into the music industry has resulted in sharp criticism from some well-known music industry players and commentators. That could end up hurting the brand’s image. However, there is no indication yet that Apple has taken a beating from that.
In recent years, U.S. monetary policy resulted in a dollar whose value has been falling relative to other currencies. But things are looking up for the greenback. A stable U.S. economy, an economic war against rivals such as China, and corporate cash repatriation might end up strengthening the greenback ever further.
Experts expect the dollar to finish strong as 2018 comes to a close. A relatively stronger dollar would make Apple’s products more expensive in key markets such as China and even Europe.
Apple also potentially faces higher labor costs in China where it does quite a chunk of its manufacturing. If that happens, Apple products would become even more expensive than they are currently.
Finally, middle-class incomes are stagnating in the U.S. and other developed countries. Wage stagnation continues to be an issue that draws much economic analysis and commentary. There’s no consensus so far as to the specific causes of this situation. The highest income earners (the top 10 percent) are earning more than ever. Everyone else, though, would want to see a healthier paycheck. Mckinsey Global Institute found that up to 70 percent of workers in advanced economies have seen no growth in earnings between 2005 and 2014. Stagnating wages might translate into sluggish Apple product sales in the U.S. and other labor markets with similar characteristics.
Technology is changing rapidly. Other companies are quickly making products and services that are as good as or even better than Apple’s. Consider Apple Pay, for instance. Google has developed a similar service called Google Pay.
Apple still has its hugely popular Apple personal computers, though. But smartphones and tablets are getting better and sleeker. As a result, they are increasingly becoming popular, and that might eventually translate into diminishing personal computer sales.
Lastly, cybercrime is getting more sophisticated. In 2016, a third party unlocked an iPhone upon request by the F.B.I. The third party did it without needing the assistance of Apple’s engineers. Admittedly, that was an isolated case. But consumers might begin to ask if Apple systems and technologies are as impregnable as previously believed. While Apple might address such security issues, cybercrime remains a worrying technological factor.
Indifference defined Apple’s past attitude toward environmental concerns. For many years, the company refused to provide details regarding the environmental impacts of its products. Certainly, the company’s wildly successful products including iPads, iPods, iPhones, and MacBooks affected the environment. However, Apple hasn’t always been upfront about the resultant impact.
Since 2007, however, Apple has been making the effort to reduce its greenhouse gas emissions. The company is no longer concealing the environmental impact details of its operations. Recently, the company announced that its latest iPhone models including the XS, XR, and XSMax run on logic boards made from recycled tin. The new move will see Apple using 10,000 tons of tin less than what it has previously needed. The net effect, over time, could be enormous. Consumers continually demand sleeker, improved, updated models, though. That means the company must keep innovating to find “greener” ways to make its products.
Did you know that charging your lovely smartphone harms Mother Earth? Recent research showed that charging smartphones releases tons of greenhouse gases into the atmosphere. By 2019, this seemingly harmless and unavoidable activity will have given off 13 megatons of greenhouse gases.
Pollution has become an area of concern and focus for the Chinese government. The government is making every effort to reduce pollution even if that would mean slower economic growth. This development could drastically affect the operations of an electronics manufacturer such as Apple.
Good news: Apple has transformed itself from a seemingly indifferent, profit-led company to a business that deeply cares about Mother Earth. In April 2018, Apple announced that 100 percent clean energy powers its data centers, corporate offices, and retail stores run.
Through Apple Pay, Apple has entered the tightly regulated financial services industry. That subjects the company to an increased level of government oversight and regulation. Additionally, that decision potentially exposes the business to increased litigation.
Apple faces a growing number of lawsuits from different corners. In 2017, a U.S. District Court ordered Apple to pay University of Wisconsin a whopping $506 million for patent infringement. The court found that the company had infringed on a 1998 patent granted for improving processor efficiency. The judged confirmed that the company used processors that violated the patent. The specific processors in question were A7, A8, and AX8.
In 2018 alone, Apple faced three class actions. Two of the lawsuits were about the 2015 faulty “butterfly switch” the company uses in its MacBooks and Pro models. The charges amounted, according to the plaintiff, to “willful violation” of a number of consumer protection laws.
These laws included Song-Beverly, Magnuson-Moss, and certain California civil codes. In the third class action, the plaintiffs accuse Apple of having committed violations, breaches of contract, and fraudulent concealment.
One can reasonably expect other similar cases to happen in the future. If courts rule in the plaintiffs’ favor, Apple might lose a lot of money. A loss for Apple would likely mean diminished profits and a damaged reputation.
Apple is up against a tough set of challenges. While the company has successfully addressed some of the difficulties it faces, there is still much work to do.
Swot Analysis of Apple
In 1976, Steve Jobs, Ronald Wayne, and Steve Wozniak founded Apple Inc. Headquartered in Cupertino, California, Apple is best known for the personal computer revolution it started. In 2015, the company became a member of Dow 30, a pretty prestigious corporate club. The business produces and sells personal computers, mobile communications devices, portable digital music players, software solutions, networking solutions and, peripherals.
The company also sells third-party digital content and software applications. The iPhone, iPad, iPod franchises, Macintosh notebook, and personal computers, are some of the company’s top revenue generators.
Apple sells its devices mainly through its physical and online retail stores. Third-party cellular network carriers located all over the world also help Apple to distribute its products. Lastly, the business sells its digital content through Apple Store and iTunes.
The Swot Analysis of Apple
This section intends to analyze Apple’s strengths, weaknesses, opportunities, and threats. Hopefully, the analysis will reveal what the company needs to do if it wants to remain competitive.
Apple’s is one of the most financially stable companies on the planet. The company has seen four consecutive quarters of double-digit growth. On 31st July 2018, Apple announced its third quarter financial reports.
If the numbers are anything to go by, the company is in a good place financially. The revenue reported by the business for the third quarter ended June 30, 2018, was $53.3 billion. That figure was 17 percent higher than what the company had posted in the same period last year.
With a net income of $11.5 billion and an impressive operating cash flow of $14.5 billion, Apple stands on some pretty solid ground. The company paid investors $25 billion while buying back $20 billion worth of its own shares through its capital return program.
Financial stability means power. Economic might means choices. The company can easily acquire other businesses that can help it to increase its competitiveness. Apple can also easily expand into new industries, protecting itself from overreliance on its current main sources of revenue. Unsurprisingly, the company had managed to acquire a total of 101 acquisitions as of October 2018.
Apple’s growing suite of services including iCloud, iTunes, Apple Music, Apple Pay, and Apple Store work well with the company’s ecosystem, locking in users. One 2017 survey found that more than 90 percent of iPhone users were highly likely to upgrade to a new device from Apple in the coming 12 months.
Apple produces superior quality products that drive fierce brand loyalty. The customer loyalty the company enjoys gives it considerable pricing power. Unlike most other businesses, Apple can and does raise prices without significantly crimping sales. Only 15 percent of the smartphones sold in 2017 were from Apple. Interestingly, the company earned more than 70 percent of the profits in the smartphone market. Top-notch products that attract undying brand recognition and loyalty give Apple a solid competitive advantage.
Apple produces excellently designed products that find fast adoption in the market. Unlike similar products from the company’s competitors, Apple’s products are usually sleek. The company’s easy-to-use products feature attractive designs that users love. Take Apple’s desktop computer, for example. Apple computers and their screens are available as a single complete piece rather than as separate components.
Most other desktop computers, on the contrary, come with a separate screen and computer. They are a bit clunky and the design isn’t as pleasing as Apple’s. Consider the iPhone, too. The device features fewer buttons than other phones and feels great in its owner’s hand.
Fully 60 percent of Apple’s revenue comes from outside the United States. That means 40 percent of its revenue gets generated in the U.S. That is risky. It means that the business is significantly vulnerable to the ebbs and flows of the U.S. economy.
Also, most consumers especially those living outside of the U.S. view Apple products as being relatively expensive. That means the company’s products may not find as much acceptance there as they may do in America and other affluent countries. Most consumers in emerging markets prefer android-run devices over Apple products mainly to cost reasons. The company might need to re-think its product pricing in the future.
Also, the iPad franchise is struggling. That’s probably because Apple fans who own a Mac and an iPhone may not see the need to acquire a tablet. In early 2012, the iPad led the tablet market. Of all the tablets shipped then, six in every ten were iPads. That’s no longer the case thanks to the ever-growing competition from Lenovo, Hewlett Packard, and Samsung. Apple saw only 24.7 percent of the global tablets sales revenue in the fourth quarter of 2016.
Apple’s interest in audio products has grown over the last couple of years. The company paid a staggering $3 billion for Beats Electronics and Beats Music. That is the single largest purchase the company has executed. After the acquisition, the company developed AirPods wireless earbuds and Beats-branded headphones. The wireless earbuds have proven to have been a wise capital allocation decision.
The company is also working on Apple-branded over-ear headphones. The company intends to offer this product as a high-end alternative to the Beats line. But portable audio products aren’t the only opportunity available. Apple has also developed its first smart speaker, HomePod. The speaker isn’t perfect yet, and the price is a bit high. However, the new product commands a 70-percent share of the smart speakers market (speakers costing $200 or more).
Since Apple enjoys a strong brand loyalty, it can easily diversify into other markets. Its existing fanatical customer base is like a built-in ready market that can supply the demand for new products and services. Apple TV remains an idea the company is yet to turn into success. With a more developed web, however, success might just happen.
Apple Watch is another great opportunity for the company. The company recently launched a new version of its Apple Watch known as Apple Watch Series 4. The latest version comes with a number of improvements over the earlier Apple Watch Series 3. This is a category that’s proving quite successful. Apple was the # 1 wearables vendor by volume in 2017, gaining a market share of slightly higher than 15 percent.
Apple Music is another direction Apple could grow into in the near future. On June 30, 2015, Apple launched Apple Music, a music streaming service. The service has seen tremendous success, and there is no indication things could slow down soon. According to the Company’s CEO Tim Cook, Apple Music had grown by over 50 percent as at July 31, 2018. Apple Music is popular, and its acceptance is growing fast.
Apple has always benefited from relatively high prices even when the prices of similar products were falling. Samsung has been and continues to be a serious competitor to Apple, though. That’s likely why Apple seeks to enter the mass cell phone market. If Apple starts selling in that market, it will have to contend with appreciably reduced prices. If that happens, the company might lose its pricing power. Most importantly, such a move would adversely impact the gross profit margin and the bottom line.
Consumers who buy Apple’s MacBooks believe that Macs are less vulnerable to viruses and even hackers than other brands. Safety and security have in effect become the selling point for these machines. Apple has always told consumers that the iPhone is a fully secure product and only its owner can open it.
However, the much-publicized showdown between the company and the F.B.I. led many to question that claim. A third party was able to access an iPhone belonging to an Apple customer (a mass killer!) after Apple refused to help the F.B.I. to unlock the phone.
Security and safety are an area that potentially exposes the company to different risks. Fortunately, the company resolved to seal the security loopholes the third party used to open the iPhone.
Careful Pestle and Swot analyses of Apple reveal that the company is doing well. However, the company faces many challenges. Apple fights hard when it has to, like when it stood firm against F.B.I. in the 2016 iPhone-access scenario. Apple knows when to make adjustments and go with the flow. The company, for example, made enormous changes to its processes when the Chinese government shifted its focus to pollution control. The company realized that taking quick action was the best decision under those circumstances. Apple now uses 100 percent clean energy. The company is taking advantage of emerging opportunities while addressing the ever-present threats it faces. If Apple can seize a significant share of the mass cell phone market while guarding its current customer base, its future does seem bright.