Apple is a company that has made a huge impact on the way people use phones to communicate, take photos, listen to music, use the Internet, etc. The company offers a variety of products for consumers to purchase, and they have developed a loyal fanbase over the years. Apple designs, manufactures and markets mobile communication and media devices and personal computers, and sells a variety of related software, services, accessories, networking solutions and third-party digital content and applications.
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Their products and services include iPhone, iPad, Mac, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iOS, macOS, watchOS and tvOS operating systems, iCloud, Apple Pay and a variety of accessory, service and support offerings. There are several ways that a consumer can acquire these products and services. Apple sells and delivers digital content and applications through the iTunes Store, Apple Store, Mac App store, TV App Store, iBooks Store, and Apple Music (collectively Digital Content and Sevices).1 Apple has grown into a huge and very successful company by being able to accommodate to a wide range of consumers. The company sells to consumers, small and mid-sized businesses and education, enterprise and government customers.
Apple, like any other company, has to consider the several factors that could potentially have an impact on the organization. These factors include political, economic, social, technological, legal, and environmental factors. One of the political factors that could have an impact on the company attributes to the amount of money they have generated. Apple had $34.7 billion in the bank on June 30, 2015. This is generating calls for higher corporate taxation in the United States, where income inequality has become a major political issue. Apple having their products manufactured overseas is another political factor. Apple is heavily dependent on lower cost manufacturing in China.2 Social and political unrest in China could disrupt manufacturing or increase manufacturing costs in that country. Goods being imported from China is a topic that has been brought up in political debates, with the question of whether it’d be good or bad for the American economy. Throughout the years, there has been calls to restrict Chinese imports in the United States in an effort to boost American manufacturing.
Some of the economic factors are associated with the consumers that Apple is trying to push their products to. Stagnating middle-class incomes in some developed countries, including the United States, could shrink the potential market for higher-end consumer goods such as those marketed by Apple. Because Apple is a company that does business around the world, other countries’ economies is something they have to consider. A strong U.S. dollar could increase exchange rates, making it more expensive for Apple to do business in key markets like Europe and China.
Some of the social factors that could have a potential impact on Apple starts with the consumers and how they might perceive the products and services that Apple offers. There is a backlash against expensive and stylish products among some customers in the United States and Europe. Some consumers may feel that purchasing an iPhone is very similar to buying expensive clothes or luxurious cars. The products and services that Apple offers could be viewed as dispensable by those who are opposed to an opulent lifestyle. Another social factor attributes to Apple having their products manufactured in China. Ethical concerns about Apple’s manufacturing in China could limit its products’ appeal among socially-conscious consumers.
When it comes to technological factors, Apple has to consider the other organizations that serve as rivals, such as Google and Samsung. These competitors have demonstrated a strong ability to duplicate Apple’s product and services, such as Google developing their own payment app, Android Pay, which has the same capabilities as Apple Pay. Apple also has to consider the popularity with some of their products. Growing use of smartphones and tablets will lower demand for Apple’s popular personal computers.
There are several environmental factors that could have a potential impact on Apple. The biggest environmental issue facing Apple is the disposal of used or nonworking electronic devices. Disposing devices that contain lithium batteries in landfills could raise concerns and the expenses of disposing such devices could be high. Apple’s products being manufactured in China is also an environment factors that could have an impact on the company. Pollution and other environmental side effects from manufacturing facilities in China are a growing concern. This could lead to increased regulation and higher manufacturing costs at some point in the future.
The final factor that could have a potential impact on Apple are legal factors. With all of the products and services that Apple offers, there are several things to consider from a legal standpoint. Apple depends on a variety of products covered by intellectual property laws, such as software and music, for much of its income. This leaves the company highly vulnerable to both piracy and litigation.
Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry, and helps determine an industry’s weaknesses and strengths. Frequently used to identify an industry’s structure to determine corporate strategy, Porter’s model can be applied to any segment of the economy to search for profitability and attractiveness. If Apple wants to continue to grow and stand out in the industry, they should use Porter’s Five Forces to formulate strategies that will help them gain a competitive advantage and continue to succeed as a business.
One of the forces is the bargaining power of suppliers. Apple has managed a complex chain of suppliers that are spread globally over several nations including the United States, China, Taiwan, Japan, Brazil, Mexico and several other small and big nations. Because Apple has so many suppliers in several countries, they are not limited to a single one, which allows the organization to have options. In this way, Apple also maintains excellent control over its suppliers. There is no threat of forward integration by the supplier either, so Apple’s position against its suppliers is strong and their bargain power is weak.
Another force is the bargaining power of customers. While the bargaining power of individual customers in the case of Apple or its competitors is low, it is not so in the case of customer groups of markets. This is where Apple really needs to pay attention to its competition and what products or services they’re selling to consumers with the same interests. In the last couple of years, Apple has lost a huge market share in the Asian markets in PC industry to competitors like Lenovo, so the collective bargaining power of the customers in individual markets is high.4 However, Apple has a loyal fanbase which has led to high iPhone sales, so the bargaining power of customers can be considered as weak to moderate.
Another force is the threat of new entrants. The cost barriers to establishing a new technology company are very high and it would be very difficult for a company to generate Apple’s king of brand image and recognition overnight. This is something that can serve as beneficial to Apple as the threat of new entrants isn’t very strong. However, even though Apple has this advantage, it doesn’t mean that there aren’t threats out there. A big brand with lots of capital and good brand recognition can diversify into this area to challenge Apple’s market share.
The threat of substitutes is another force that is part of Porter’s Five Forces. Apple needs to provide their consumers with products or services that will keep them satisfied. If not, they will choose to start using other products that are offered within the industry. While the brand loyalty of Apple consumers is high, some of the models from Samsung and Google are a potential threat because of their efficiency and design. Apple can hardly do anything to mitigate this threat except to bring more products with great features, but overall, the threat of substitutes for Apple is moderate.
The last force that is part of Porter’s Five Force is the competitive rivalry between the existing players. The level of competition between the top players in the technological industry is very high. Apple has to take the competitors in the industry seriously if they want to continue to strive as a business. Some of the competitors of Apple in the industry include Google, Amazon, Microsoft, Lenovo, HP, Samsung and others. All these brands are engaged in intense competition where the loss of one can be the benefit of the other.
Value chain analysis is a process where a firm identifies its primary and support activities that add value to its final product and then analyze these activities to reduce costs or increase differentiation. Value chain represents the internal activities a firm engages in when transforming inputs into outputs. There are five primary activities that are within the value chain. They are inbound logistics, operations, outbound logistics, marketing and sales, and service. There are also four support activities, and they are technology/research development, human resource management, procurement, and firm infrastructure.
As mentioned earlier, Apple has a number of suppliers they do business with. CEO Tim Cook is known for his strategy of getting suppliers to compete with each-other and he has reduced the numbers of suppliers considerably after becoming CEO in 2011. The main sources of value in Apple inbound logistics relate to the economics of scale due to the massive scope and scale of business operations and the development of strategic relationships with suppliers.
When it comes to operations, Apple has operating segments located in many parts of the world. They include the Americas, Europe, India, Middle East and Africa, Greater China, Japan, and the rest of the Asian Pacific (Australia and other Asian countries). Outsourcing of manufacturing to locations with lower costs of resources is the main source of value for Apple operations.
Apple outbound logistics involves warehousing and distribution of ready iPhones, iPads, Mac computers and other products produced by the company.6 E-commerce sales are rightly acknowledged by the company as a massive source of value in terms of inbound logistics, because e-commerce is more cost effective compared to sales via Apple Store.6 Apple has been able to really succeed as an organization with their efforts. They have become the third largest retailer in the United States in terms of size of e-commerce business, only behind Amazon and Wal-Mart.
With their marketing and sales, Apple sells their products though seven sales channels. They are Apple retail stores, Apple online store, direct sales force, third-party cellular network carriers, wholesalers, retailers, and value-added resellers.
One of the reasons why Apple has been able to garner a loyal fanbase is because of their service. Apple is famous for exceptional quality of customer services during all three stages: pre-purchase, during the purchase, and post-purchase. The company maintains Apple experience centres in major cities around the globe where anyone can use its products to become convinced about the quality.
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