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Analysis of Apple's Marketing Environment

3327 words (13 pages) Business Assignment

4th Nov 2020 Business Assignment Reference this

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Introduction:

Companies e.g. Apple are influenced by their macro environment (forces in the firm’s wider environment (Jobber and Ellis-Chadwick, 2016) and their microenvironment (actors in the firms’ immediate environment (Jobber and Ellis-Chadwick, 2016)). These organisations need to constantly use PESTLE or SWOT analysis to constantly understand its environment to be able to run their trades effectively and efficiently.

Microenvironment:

Suppliers

Suppliers are stakeholders in a business to which they provide goods or services to in order to achieve their own goals. For a supplier security, predictability and satisfactory margins are very important (Hooley et al., n.d.).

China:

Due to low labour costs, China is one of the biggest suppliers of Apple. Contract factories and the rest of Apple’s suppliers that sell other materials such as glass and cables are also expanding and becoming concentrated to far more locations in China than any other country. Among all suppliers, in 2015, the other suppliers were 44.9% in china which rose to 47.6% by 2019 (Chinadaily.com.cn, 2019). One of the problems that Apple can face due to the US-China trade war is that it has a real potential to effect Apple’s supply of both chips and fully finished phones.

Customers:

Customers are a group that has a potential or an actual interest or impact on the ability of a business to achieve its aims (Kotler et al., 2008).

Target audience

Apple is a premium brand which means that its target market are people from established families with a premium income level so people with more secure and financially stable jobs such as executives and managers(Dudovskiy, 2019) tend to buy these products. However, students are also targeted by Apple in the form of consumerism which means that parents/guardians tend to buy Apple devices for them. This is the reason why Apple tends to target younger and wealthier people such as Millennials (can be consumers and costumers) and teenagers (Gaille, 2015).

Usage on certain apps

Apple has a number of different apps to target different people such as gaming, music and social media apps for teenagers, note recording apps for college and University students, apps for sending documents, communication with clients for business people and touch screen for accessibility for kids where they can also use the platform to download apps for learning. Adults can also use iPhones for phone calls, map directions and camera (Saini, n.d.).

Distributors

Distributors can be a person or an organisation that’s involves in the selling of supplies of goods to shops and companies (Dictionary.cambridge.org, 2019). These tend to provide many valuable services such as breaking bulk, making products available to customers and providing specialist services like installation (Jobber and Ellis-Chadwick, 2016).

Low profit margins:

In India, retailers are concerned with the iPhone X profit margin to be being as low as 4.5% which can farther drop to 1.5% when card payments are involved. A managing director in India has stated that Apple provides the lowest margins compared to other brands such as Samsung which offer more than the double the margin at around 12-15%. Companies such as Oppo offer even more to grow their market (Aulakh, 2019).

Competitors

A competitor in the technological term means a company that is competing against another to maintain and increase its market (Dictionary.cambridge.org, 2019). For a company to be successful, a greater customer value and satisfaction has to be provided compared to the company’s competitors as stated by the marketing concept. Therefore, marketers has to take a different approach then to just adapt to the needs of target consumers, by gaining a strategic advantage by positioning their offering strongly against its competitors’ offerings in the minds of consumers (Kotler et al., 2008).

Androids:

Apple manufacturers’ premium products targeting high end markets only but this is a greater advantage for its competitors who sell their products for low and high-end consumers. In the second quarter of 2019, Samsung has an increase of 1.1% compared to 2018 while Apple suffered the biggest drop by selling a little more than 38.5 million iPhones in the same period which is a drop from 44 million sales made in 2018 (Woollaston, 2019).

Macro-environment:

Technological

These factors are concerned with innovations in technology that can have a direct affect with the operations of the industry and the market positively or negatively, such as level of innovations, automation and research and development (Jobber and Ellis-Chadwick, 2016).

Technological breakthroughs

(Reason: I wanted to explore the ideas used by Apple to increased its market)

Innovation has lead to companies earning a lot more than others who just relied on information technology. Apple has always been a trend setter in consumer electronics business due to its innovative ideas. In 2012-13, apple had 49% of its existing customers converted 20% to iOS. Apple also brought 760 subscribers after the cracked deal with China Mobile, giving it a greater competitive advantage in the world’s largest growing market (Khan, Alam and Alam, 2015).

Research and development:

(Reason: I wanted to investigate the effect of competition on the development of a product and how one company can be disadvantaged at some points)

More investment is required in the R&D as of competitive and short product life cycle nature of the industry (Khan, Alam and Alam, 2015). Even though the designing of the Apple’s products are very unique and innovative, consumers are also giving more attention to screen sizes therefore Apple needs to monitor the competition effectively and respond accordingly.

Social/cultural

Social and cultural factors focus on the factors such as demographic characteristics, cultural differences, and the influence of consumerism on marketing (Jobber and Ellis-Chadwick, 2016).

Demography:

(Reason: I wanted to compare Apple’s target market to its price range)

Apple products are known to be unique, innovative and are highly priced (Dudovskiy, 2019).These features make Apple one of the leading companies in the world as its becoming a symbol of social status and more desirable to its consumers. Majority of the people living in the third world countries do not have the proposed income to afford an Apple device, leaving Apple’s products to be targeted to more established countries such as the US, even though some Apple products are still sold to the affluent minority in the LEDCs.

Social groups with internet access:

(Reason: I was interested to see Apple’s approach to the increase in social media usage)

In March 2012, Apple had around 20 million iPhone users in the US which increased to about 70 million in 2015 (Miller, 2015). Since then Apple has continued to grow its user base and its power in the US, keeping their existing customers and attracting new ones by the use of new apps such as facetiming and providing an easier access to everything. Apple is also continuously building new partnerships with new social media apps to keep up with the new trends to increase the demand for its apple products.

Inclusion and Diversity:

(Reason: I wanted to explore cultural factors to further evaluate the macroenvironment)

Apple is a multigenerational company with employees from 18-87 with both female and males. 45% of leaders under 30 are women and 17% are under-presented minorities. The company also believes in pay equity and therefore in every country they operate, everyone gets the same wage (Apple, 2018).

Economic factors

Economical factors refer to the negative or positive aspects of a financial nature that has a direct influence on the overall profit made by a company (Kush, 2018). Few of these factors include:

Currency exchange rate

(Reason: Currency rates are always fluctuating and I wanted to see the effect it has on Apple)

US dollars are becoming increasingly powerful every single day, leading to a negative impact on the apple’s revenues as 63% of its total sales are from international markets. Tim Cook the Apple’s CEO launched a currency hedging programme in 2014 aiming at decreasing the effects of the current currency exchange rates of USD which only compensated to a certain loss, not making much difference to the current risk imposed by the foreign exchange rates (Dudovskiy, 2019). This affects Apple when doing any business with any country like India, China or Pakistan.

Cost of Labour

(Reason: Big companies always have a controversy of paying less to their labourers and I wanted to see whether Apple gives a fair wage to its workers)

China has Apple’s manufacturing units due to its cost effectiveness when it comes to resources in general but in 2016 the average hourly salary in China reached 3.60 dollars which is an increase of 64% since 2011(Dudovskiy, 2019). The labour cost is a very important economical factor that directly imposes a risk on the profit made by the business.

Political:

Political factors are concerned with the way and the degree at which the government intervenes in the economy of a business (Hirai, 2019). These factors include tax policies, trade restrictions or and foreign trade policies e.tc.

Impact of US-China trade war

(Reason: China and US are rivals and are mostly on the news and therefore was interested to see the effect it can have on companies such as Apple)

In 2018, Apple’s revenues were negatively impacted by Beijing’s retaliation. China imposed 60 million dollars worth of tariffs on American imports which was a response to Trumps 200 billion dollars worth tariffs on Chinese imports. If this war continues to escalate by adding exhaustive tariffs to all Chinese imports into the US, bringing iPhones into China could also be heavily taxed by Beijing, increasing their already extortionate prices and affecting Chinese consumer demand for Apple’s products. Apple has warned the US government that these tariffs will result in an increase in the costs of its American operations and raise prices to increase their profit margins (Kush, 2018).

Legal factors

These factors tend to have a certain level of an overlap with the political factors but legal factors are more specific to the current laws and legislation of a country that impacts a business’s economy. These laws include discrimination, employment and consumer protection laws (B2U - Business-to-you.com, 2016).

Affect of Brexit:

(Reason: Brexit is one of the major issues on the news and it can have a great effect on Apple which was something I was interested to research upon)

In October 2016, Apple increased its prices on many existing, static products in the UK after Brexit to minimise the effect of the drop in the value of the pound on the total sales made by the company. This was between 5 to 35%. Even though the foreign exchange rates change constantly by March 2017 the pound had lost nearly 20% against the dollar since the vote on 23 June 2016. This meant that consumers bought the same products with the same features but at a higher price when usually the prices go down eventually (Nimblefins.co.uk, n.d.).

Ecological

In the marketing mix, the ecological factors look at the relationship between people and the environment such as climate change, pollution control and energy conservation e.tc (Jobber and Ellis-Chadwick, 2016).

Recycling and non-wasteful packaging:

(Reason: Companies are constantly seeking ways to save and conserve the resources at hand and I wanted to see Apple’s contribution in this.)

In 2017, 100% of the paper in Apple’s packaging was from responsibly managed forests (wood fibre), controlled wood or recycled sources from their own products. Apple has also started to replace plastic components with bamboo, bagasse (by-product of sugar cane) and fibre. This can be seen in 2017, where the US product packaging used an average of 29% less plastic then the year 2016. This has been done by changing the plastic tray in the packaging for example with an all moulded fibre alternative or replacing the expanded polystyrene that is used during shipping with paper padding made from 100% recycled fibre (Maestri, 2018).

Energy and scarce resource conservation:

(Reason: Same as recycling, energy conservation is one of the main topics on the news and I wanted to see how much does Apple play a part in reducing electricity usage overall with so much offices across the world)

In the year 2015, apple started to use renewable sources which gave out and output of 93% of the energy. The Singapore facilities were powered by a 32megawatt solar project (Pratap, 2019).With more work done, Apple from 2018 has started to run completely on 100% green renewable energy with all its shops, data centres and offices across 43 countries including 9 of its suppliers.  In China, Apple has constructed solar and wind projects to eliminate carbon emissions produced during manufacturing process (Griffin, 2018).

Conclusion:

To summarise, Apple compared to other smart phone brands is looking for a boost in its sales in the next five years in spite of the forthcoming challenges which is due to its impressive ability to adopt to its challenging environment. Apple’s iPhones are unique and innovative giving it an advantage over its competitors which can be seen in its sales and revenues. However, Apple needs to alternatively plan political and legal factors such as the intention of reducing risk associated with outsourcing, import restrictions and trade control, to help itself further in its sales.

References:

  • Apple.(2018). Inclusion & Diversity. [online] Available at: https://www.apple.com/diversity/ [Accessed 21 Nov. 2019].
  • Aulakh, G. (2019). Apple cuts iPhone X retailers’ margins. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/tech/hardware/apple-cuts-iphone-x-retailers-margins/articleshow/61745641.cms?from=mdr [Accessed 21 Nov. 2019].
  • B2U - Business-to-you.com. (2016). PESTEL Analysis (PEST Analysis) EXPLAINED with EXAMPLES | B2U. [online] Available at: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/ [Accessed 21 Nov. 2019].
  • Chinadaily.com.cn. (2019). Apple supply chain depends deeply on China - Chinadaily.com.cn. [online] Available at: https://www.chinadaily.com.cn/a/201909/02/WS5d6ca907a310cf3e3556933b.html [Accessed 21 Nov. 2019].
  • Dictionary.cambridge.org. (2019). COMPETITOR | meaning in the Cambridge English Dictionary. [online] Available at: https://dictionary.cambridge.org/dictionary/english/competitor [Accessed 21 Nov. 2019].
  • Dictionary.cambridge.org. (2019). DISTRIBUTOR | meaning in the Cambridge English Dictionary. [online] Available at: https://dictionary.cambridge.org/dictionary/english/distributor [Accessed 21 Nov. 2019].
  • Dudovskiy, J. (2019). Apple PESTEL Analysis - Research-Methodology. [online] Research-Methodology. Available at: https://research-methodology.net/apple-pestel-analysis-4/ [Accessed 21 Nov. 2019].
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  • Gaille, B. (2015). 18 Key Apple Target Market Demographics. [online] BrandonGaille.com. Available at: https://brandongaille.com/18-apple-target-market-demographics/ [Accessed 21 Nov. 2019].
  • Griffin, A. (2018). Apple is now completely green. [online] The Independent. Available at: https://www.independent.co.uk/life-style/gadgets-and-tech/news/apple-renewable-energy-green-suppliers-uk-us-store-office-headquarters-park-campus-a8296751.html [Accessed 21 Nov. 2019].
  • Hirai, A. (2019). Political Factors in your PESTEL Analysis (Part 2 of 7). [online] Cayenne Consulting. Available at: https://www.caycon.com/blog/political-factors-in-your-pestel-analysis [Accessed 21 Nov. 2019].
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  • Khan, U., Alam, M. and Alam, S. (2015). A CRITICAL ANALYSIS OF INTERNAL AND EXTERNAL ENVIRONMENT OF APPLE INC. [online] IJECM. Available at: https://www.researchgate.net/ profile/Md_Alam136/publication/282274921_A_CRITICAL_ANALYSIS_OF_INTERNAL_AND_EXTERNAL_ENVIRONMENT_OF_APPLE_INC/links/56ff003908aea6b77468d502/A-CRITICAL-ANALYSIS-OF-INTERNAL-AND-EXTERNAL-ENVIRONMENT-OF-APPLE-INC.pdf [Accessed 21 Nov. 2019].
  • Kotler, P., Armstrong, G., Wong, V. and Saunders, J. (2008). Principles of Marketing.5th ed. Pearson Education Limited, p.183.
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  • Maestri, L. (2018). Environmental Responsibility Report. [online] Apple.com. Available at: https://www.apple.com/environment/pdf/Apple_Environmental_Responsibility_Report_2018.pdf [Accessed 21 Nov. 2019].
  • Miller, A. (2015). Apple’s Cultural Impact - Housatonic Horizons. [online] Housatonichorizons.com. Available at: http://housatonichorizons.com/2015/10/29/apples-cultural-impact/ [Accessed 21 Nov. 2019].
  • Nimblefins.co.uk. (n.d.). The Brexit Effect on Apple Prices. [online] Available at: https://www.nimblefins.co.uk/brexit-effect-apple-prices [Accessed 21 Nov. 2019].
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