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Strategic Vulnerability of Apple

Anonymous

BUS5117 – Strategic Decision Making and Management

University of the People

September 23, 2024

Strategic Vulnerability of Apple

Introduction

According to Andreea (2013), both small and big companies are susceptible to

challenging experiences. Fortunately, companies have become more open to others’ ideas and

opinions to reduce the vulnerability. With this understanding, this paper researchers Apple with

their information available on the web by performing a PESTEL and five forces analysis. Based

on the two analyses Apple’s strategic vulnerability is evaluated and two actions proposed to

reduce the vulnerability.

PESTEL Analysis

A PESTEL analysis is a strategic framework commonly used by organizations to evaluate

and monitor the external environment in which they operate. The analysis examines the Political,

Economic, Social, Technological, Environmental, and Legal factors in an organization’s external

environment (Matović, 2020). A PESTEL analysis of Apple would as follows:

 Political – Apple is a global company, which makes it a subject to political factors in the

countries where it has establishments, including governmental regulations, stability, and

trade policies. For example, Apple’s profitability can be significantly impacted by

changes in trade tariffs or tax laws.

 Economic – Apple is impacted by economic factors like economic growth, exchange

rates, inflation, and consumer spending patterns. For example, a recession reducing

consumer purchasing power can lower demand for Apple products.

 Social – Examples of social factors include cultural trends, consumer attitudes, and

demographics. Apple should adapt its products and marketing strategies to address the

changing consumer preferences and societal values.

 Technological – Technological aspects play a critical role in the success of Apple.

Apple should stay at the forefront of technological advancements, make investments in

research and development, and protect its intellectual property rights.

 Environmental – Some of the environmental factors that can impact Apple are climate

change, sustainability, and resource availability. Although Apple has made efforts

towards addressing its environmental impact, it should continue addressing other issues

like responsible sourcing and carbon emissions.

 Legal – Legal factors comprise of laws and regulations impacting the operations of

Apple. Examples are property laws, data privacy laws, and consumer protection. Apply

should comply with these regulations to protect its reputation and legal standing.

Five Forces Analysis

The five forces analysis is used in determining the shape of an industry in terms of

competition. The five forces are threat of new entrants, bargaining power of suppliers, bargaining

power of buyers, threat of substitutes, and intensity of the competitive rivalry (Goyal, 2020). The

following is the five forces analysis of Apple:

 Threat of new entrants – The technology industry in which Apple operates is

characterized by a higher entry because of the need for a significant capital investment,

economies of scale, and a strong brand recognition. Apple’s established brand, along

with its loyal customers, prevent competition from new entrants into the industry.

 Bargaining power of suppliers – Apple has a global supply chain for its components

and manufacturing. Suppliers would have high bargaining power if they are few in the

industry or if they significantly control pricing and quality. Apple mitigates the risk

through diversification of its supplier base.

 Bargaining power of buyers – There are multiple alternatives for Apple’s customers

in the market, which can significantly reduce Apple’s bargaining power. However,

Apple has a loyal customer base and a strong brand image, which it leverages.

 Threat of substitutes – The technology industry is primarily characterized by rapid

innovation. Additionally, new products constantly emerge. Substitutes like Android

products and other consumer electronic products threaten Apple’s market share. Apple

should continuously innovate and differentiate its products to effectively mitigate the

threat of substitutes.

 Competitive rivalry – Apple faces intense competition from other companies like

Google, Samsung, and Microsoft. The market in which Apple operates is characterized

by aggressive marketing, rapid product cycles, and continuous technological

advancements. To maintain its competitive advantage, Apple should engage in

innovation and quality and customer experience improvements.

Strategic Vulnerability and its Reduction

The strategic vulnerability of Apple can be evaluated using the findings of the PESTEL

and five forces analyses. As per the findings, Apple is vulnerable to factors like economic

downturns, changing political regulations, intense competition, and rapid technological

advancements. Apple should act in the following two ways to reduce vulnerability.

 Invest in research and development – Apple should continue its investment

campaigns in research and development as this will help it stay ahead of the risk of

technological advancements while maintaining competitive advantage. This will be so

because the company will be able to introduce innovative products and services into the
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market, which will ultimately reduce the threat of substitutes and enhance its position in

the market.

 Diversification – Apple should reduce reliance on a single market by highly

diversifying its products portfolio and revenue streams. The company can do this by

expanding into new product categories or even explore untapped markets in the

developing economies. With the company diversifying, it will easily mitigate risks

linked to the changing consumer preferences and economic downturns.

Conclusion

Although Apple is a well-established global company, the PESTEL and five forces

analyses have shown that it is also susceptible to political, economic, geographical, and societal

elements, which make the company strategically vulnerable. Without the company addressing

these elements, it can find it difficult to compete. However, from the findings in this paper, the

company can undertake some important actions, including the two discussed in this paper.
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References

Andreea, A. (2013). Vulnerability of Companies. Annals-Economy Series, 3, 6-10.

https://www.utgjiu.ro/revista/ec/pdf/2013-03/1_Armean%20Andreea.pdf

Goyal, A. (2020). A critical analysis of Porter’s 5 forces model of competitive advantage. Goyal,

A.(2021). A Critical Analysis of Porter’s, 5.

Matović, I. M. (2020, September). PESTEL analysis of external environment as a success factor

of startup business. In ConScienS conference proceedings (pp. 96-102). Scientia

Moralitas Research Institute.