SWOT Analysis of Apple Inc.

1 SWOT Analysis for Apple Inc. Strengths Apple has a favorable brand perception by consumers all over the world. This has increased the sales of the company by great margins. For example, the company realized a sales increase for iPod products in 2005 and this caused the profits to rise to $320 in the second quarter of that year (Datamonitor, 2006).

The company enjoys a very high customer loyalty. Many customers are ready to re-buy products of the company because they are appealing. Apple targets both corporate and individual customers to market its products. The company has been able to overcome the high competition in the industry due to the high customer loyalty. Apple has been able to recruit many new customers as well as maintain the existing ones.

Apple has been able to operate in the global market. This strategy has expanded the market share of the company and the sales of the company have increased. Through the use of online retail stores customers all over the world can access the products of the company. The company operates in almost all the continents and has captured customer loyalty for its brands in majority of the countries.

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2 The product portfolio of Apple is synergetic. The company manufactures computer software, hardware and electronics. These products are inter-related and the brand image of one product promotes the brand image of the other product. In addition, production of a wide variety of products makes the company dependent of many products such that failure of one product does not cause total failure of the company (Marketing teacher, 2010).

Leadership of the company is very strong and the company has been able to achieve success due to the good management and leadership aspects of the company. Steve Jobs as the president of the company has been identified as a good leader and a manager. He has made the company achieve great things by introducing innovative projects (O'Grady, 2008).

Weaknesses The iPod product has been said to have defective screen. The screens have been identified to break under impact. This has caused a poor image of the products of the company. To solve this problem, the management of the company introduced a strategy to replace all defective products. Earlier, the iPod was alleged to have faulty batteries and the company had to offer free batteries to its customers (Jackson, 2006).

Apple is under pressure to raise the prices for all its downloadable music. This pressure has emanated from the music industry because the companies benefit a lot from the iTunes than from the original CD they sell. The management of Apple has remained stubborn and if the company gives in to the demands, this will be a commercial weakness (Marketing teacher, 2010).

In 2005 the management of Apple introduced the strategy of changing the suppliers of computer chips from IBM to Intel. IBM has been the supplier of the chips

3 for a long period of time and changing the supplier would confuse the customers.

This could affect the brand image as well as customer loyalty (Linzmayer, 2004).

The returns of the company have reduced in the recent past compared to the industry returns. In the financial period 2001-2005 the company experienced a 4.7 percent reduction in the total returns compared to the industry returns. The reducing returns have affected investor confidence and the company has to work hard to regain its normal operations (Datamonitor, 2006).

Apple has over-relied on IBM for the supply of main products. This has been too risky because a slight failure in the systems of IBM could cause huge losses to Apple. For example, in 2004/2005 Apple experienced a delay in the shipment of various products due to the technical problems experienced at IBM. Apple should diversify in its source of supply for the main products to ensure there are minimal losses incurred when some suppliers experience difficulties (Datamonitor, 2006).

Opportunities The iTunes and technologies in manufacturing music players can be used to develop mobile phones. Apple can form strategic alliances with Motorola to develop innovative mobile phone products. By adopting this technology the company will be able to come up with better products which are competitive in the market (Marketing teacher, 2010).

The introduction of Podcasts allows people to download radio shows and play them back on iPods as well as other MP3 machines. Users of the downloaded Podcasts are allowed to subscribe for free. Apple has the opportunity to sell other downloads which are supported by the Podcasts (Newlands & Hooper, 2009).

The lifestyle of people in both developing and developing countries is changing such that people prefer the use of computers and other electronics. The

4 demand for electronics and computers is predicted to increase in the future and this will provide Apple with more market opportunities (Jackson, 2006).

The demand for wireless products is expected to rocket in the near future.

The use of cables in electronics is becoming outdated and this provides more opportunities for Apple to sell its computerized products. Apple has wealth of technologies which can be used to manufacture wireless products. This provides the company with a cutting edge competition in the market (Daft, 2000).

The global market has not been fully exploited and there are many opportunities for Apple to exploit. For example, the market share for MP3 was rated to be 78 percent in the US market in 2007 while the global market share was below 50 percent in most countries. This shows that there are many opportunities which have not been exploited. These form a large potential for Apple to increase its sales (Datamonitor, 2006).

Threats There is high competition in the information technology industry. The high profits generated by companies in this industry have attracted many competitors.

Apple has been working on research and development to maintain a sustainable market position. The company adopts strong marketing strategies to overcome the stiff competition in the market (Marketing teacher, 2010).

The iPod and Mac products of the company have a very high demand in the global market today. However, decline in the demand can affect the amount of sales made by the company. This is predicted to happen because the economies are changing and there are changes in demand for different products (Newlands & Hooper, 2009).

5 Product substitution is a common scenario in the industry and this causes a major threat to the products manufactured by Apple. For example, iPod and MP3 have ruled the market today while in the recent past CD, DAT and Vinyl were on the top. Due to the fast development in technology there is a looming change in the demand when new brands will be developed (Marketing teacher, 2010).

Apple is at a risk of exposure of its business secrets. This can be explained in the case where confidential information was leaked to bloggers in 2005. The confidential information related to the launching of new products of the company.

The employees of the company had leaked the information about the Asteroid products. This is a clear indication that the company is still at risk of a similar event occurring in the near future (Datamonitor, 2006).

The global markets are turbulent and predicting the future condition becomes impossible. In the recent past global economies had been affected by an economic meltdown which caused many countries to encounter inflation. This has affected many industries and the computer industry is not an exception. Economic downturns form a major threat to all industries in the world (Jackson, 2006).

Strategies Proposed to Increase Market Share Adequate market research is required for Apple to identify the changing market trends in demand as a measure to reduce the risk of making losses due to demand shifts. this strategy can be achieved by using R&D department to conduct research about emerging issues in the market. The idea can be implemented by employing more professionals in R&D department and investing more resources in advancing the technologies of the company. This strategy has the advantage that the company will be able to develop products which match the market demand. on the other hand, the strategy will be costly to the company because a lot of resources

6 are required. The feedback mechanism that can be used to identify the success or failure of this strategy is by collecting data about satisfaction levels of consumers.

The changes in sales volume can also form a good indicator of the effectiveness of the strategy.

Another strategy that can be implemented is forming strategic alliances with other companies in the industry to reduce the number of new companies penetrating the market. This can be achieved by liaising with other companies to combine efforts as a means of eliminating entry of new investors. This strategy has the advantage that excess competition will be eliminated in the market. The disadvantage of this strategy is that the company will not have the independence of conducting its own developmental strategies.

7 References Datamonitor (2006). Apple Computer, Inc. http://www.alacra.com/acm/2009_sample.pdf.

Daft, R. L. (2000). Management. Dryden Press. ISBN 0030259673, 9780030259678.

Fred R. D. (2002). Strategic Management-Concepts and Cases. 13th Ed. New York: NY. Prentice Hall.

Jackson, J. B. (2006). First, best, or different: what every entrepreneur needs to know about niche. Dog Ear Publishing. ISBN 1598582917, 9781598582918.

Linzmayer, O. W. (2004). Apple confidential 2.0: the definitive history of the world's most colorful. No Starch Press, ISBN 1593270100, 9781593270100.

Marketing teacher (2010).SWOT Analysis Apple. Retrieved November18, 2010 from http://marketingteacher.com/swot/apple-swot.html Newlands, D. J. and Hooper, M. J. (2009). The global business handbook: the eight dimensions of international management. Gower Publishing, Ltd. ISBN 0566087472, 9780566087479.

O'Grady, J. D. (2008). Apple Inc. ABC-CLIO. ISBN 0313362440, 9780313362446.