In order to carry out strategic analysis of Apple Inc., its internal and external environments need to be studied. So, in this section, Porter five forces analysis and PEST analysis of Apple have been done whereas for internal analysis of the company SWOT analysis will be conducted.

1. Strategic Analysis of Apple
In today’s rapidly changing business world, the pressure on a business to take up a
proactive approach has increased due to factors such as globalization, rapid
technological advancement and changing needs of customers (Mazzero et al., 2015).
Businesses which have emerged as market leaders are devising their strategies in
accordance to the customer needs and environmental changes. Strategy is defined as
setting the future direction or goals of an organization and allocating the resources for
the attainment of those goals (Proctor, 2014). The strategic planning process involves
taking up a systematic approach in devising goals and strategies. Furthermore, the
process of strategic management involves identifying the opportunities in market and
experimenting in order to develop a competitive advantage in the longer run (Hill et al.,
2014). The businesses that have outperformed; have been successful in recognizing
the opportunities present in the market before their rivals could do. Apple is one such
business that has achieved phenomenal success due to its preemptive approach
(Rawlinson, 2017). Over the years, Apple has successfully developed a very strong
brand name and highly loyal customer base and has been ranked as one of the world’s
“most valuable brand” (“The World’s Most Valuable Brands List,” 2018). Therefore, the
purpose of this report is to carry out a strategic analysis of Apple and to make strategic
recommendations for its future direction. The report will firstly give a brief overview of
Apple Inc. and will then carry out the external and internal analysis of the company. The
report will then move to identification of Apple’s sustainable competitive advantage and
will then give recommendations based on analysis.
Strategic Analysis of Apple Inc.
Apple Inc. - Introduction
It is necessary to understand the brief background of the company, in order to conduct
its strategic analysis. Apple Inc. was founded in 1976, by Steve Jobs, Steve Wozniak,
and Ronald Wayne as “Apple Computer Inc.” for developing and selling computers
(Weinberger, 2018). The Apple computers were successful in achieving high number of

2. sales in the market, and in 1980 the company went public. As the demand for personal
computers grew, Apple computers being high priced, lost market share to low priced
personal computers, predominantly to ones that had Microsoft Windows as their
operating system. However, the company attained new level of success after Steve Job
became the CEO in 1997 (Weinberger, 2018). Under the leadership of Steve Jobs,
company was successful in rebranding its status. In 2001, Apple opened its first store
and also acquired various companies. The acquisitions were done to build an
assortment of software and altering some hardware that were used in Apple computers.
In 2007, the company was renamed as “Apple Inc.” and iPhone was launched which
achieved substantial success. However, in 2011 Tim Cook took the role of CEO due to
deteriorating health conditions of Steve Jobs (“Apple History — Apple Museum,” 2015).
In the fourth quarter of 2018, Apple has been able to generate revenue worth $93 billion
(“Apple Reports Fourth Quarter Results,” 2018). In terms of revenue, Apple is world's
largest IT business and is ranked as third largest mobile business in phone
manufacturing (Salinas, 2018). Currently, it has a workforce comprising of 123,000
permanent employees (Cina, 2018) and has approx. 504 retail outlets across 24
countries of the world (Fignas, 2018).
Environmental Analysis of Apple Inc.
In order to carry out strategic analysis of Apple Inc., its internal and external
environments need to be studied. So, in this section, Porter five forces analysis and
PEST analysis of Apple have been done whereas for internal analysis of the company
SWOT analysis will be conducted.
PEST Analysis of Apple
PEST is an abbreviation for Political, Economic, Social and Technological factors that
could affect a business (Shabanova, et al., 2015). In context of Apple, since it is a global
company therefore is affected not just by political situation in the home country but also
the political scenario of other countries where it is operating. The factors such as
political stability, taxation and tariffs affect the business operations of Apple Inc. Apple

3. faced high taxation due to high disposable cash in its bank account worth $34.7 billion
in 2015 (Hoxie, 2018). Due to high disposable income, it faces a constant pressure to
pay higher taxation, particularly in US, where the unequal income distribution is one of
the major issues (Hoxie, 2018). Furthermore, the components used in Apple products
are manufactured across the world. China, however, has been a prime location for the
manufacturing of its various parts as well as for assembling. Therefore, it is highly
impacted by political stability in China. Furthermore, the USA - China relationship could
also influence the operations of Apple Inc. The hostility and breaking economic ties with
China would lead to increased cost of manufacturing for Apple as, Apple benefits from
low-cost manufacturing in China (Yueh, 2018). Furthermore, there is a growing anti-
America sentiment in China as well which could lead to reduced sales for Apple
products (Yang, 2018).
The economic factors such as cost of labor in China, purchasing power of people
around the world, and dollar value impact the operations of Apple Inc. The increase in
the value of dollar can also impact the sales of its high-end products particularly in
developing countries (Wong, 2012), which is one of key factors influencing the strategic
analysis of Apple. The operations of Apple Inc. are also impacted by social factors. The
biggest backlash Apple could face is due to its unethical practices; Apple faces severe
criticism in regard to its labor practices such as child labor, overtime as well as working
conditions in its Chinese factories. Apple has recently launched an investigation to
inquire about these charges (Cuthbertson, 2017). Furthermore, Apple faces pressure
from its customers and activists to carry out corporate social responsibility (CSR) and to
invest in green activities. Though the company has taken green initiatives, however, it
still lags behind its competitors such as IBM, HP, Dell who all made to the list of
"Newsweek's 100 Green Businesses" till 2010 (Hayoun, 2017). In the year 2006, Apple
was targeted by Greenpeace in a customer campaign. Apple Inc. is also criticized for
maintaining a policy of secrecy. For instance, the critical condition and illness of Steve
Jobs was kept as a secret till Tim Cook took over (Bobrow-Strain, 2012). The
technological factors that impact Apple include the sophistication of ability of its
competitors such as Google and Samsung to replicate the features of Apple products.

4. Google replicated the idea of Apple Pay with its Android pay in less than a year’s time.
Furthermore, with the increased use of tablets and smartphones, the demand for
Apple’s personal computers will decline. Moreover, the increase in cybercrimes has
made Apple vulnerable to security and data theft which is the key strength of its
products (Savvides and Orellana, 2018).
Figure 1: PEST Analysis of Apple
Porter Five Forces Analysis of Apple
Porter five force model is used to assess the attractiveness of an industry. The first
force that affects the business operating in a particular sector is the degree of
competition (Dobbs, 2014). In context of Apple, there are numerous established players
in the market as a result this force is high for Apple. Apple inc. faces direct competition
from Google, Inc., Samsung Electronics Co., HP Company and Amazon, Inc. Moreover,
all the players in the industry have their focus on innovation and invest heavily in R&D
(Mourdoukoutas, 2011). The second force that impacts a business is bargaining power
of buyers. In context of Apple Inc., the low switching cost for buyers due to variety of
available options is significant. A customer can easily switch to other brands such as
from iPad to Kindle without investing substantially (Savvides and Orellana, 2018). The
Political Factors
•High Taxation pressures due to high disposable
income
•US-China relation moving towards hostility
•Anti-US sentiment in China
Economic Factors
•Cost of Labour in China
•Purchaisng power of people across the world
•Value of dollar
Social Factors
Increased criticism over ethical practices in its
Chinese factories
Pressure to invest in CSR and Green Activiities
Technological Factors
High ability of competiton to replicate ideas
Security breach and data theft
PEST Analysis ofApple
Inc.

5. third force of Porter’s model that affects the industry attractiveness is the bargaining
power of suppliers. This force is comparatively, a weaker force in context of Apple Inc.
Since, Apple chooses suppliers for its parts from the pool of suppliers from all the parts
of the world which implies that Apple has an upper hand over its suppliers (“Apple and
Procurement,” 2018). In addition, the switching cost related to changing a supplier is low
for Apple.
The fourth force of the Porter Five Forces Model is the threat of substitutes, which
includes all the products that could be indirect competition to a business (Dobbs, 2014).
In context, of Apple the probable substitute for a mobile phone could be a land line. This
force is low for Apple as the substitute products are lower in technology and offer less
convenience. The last force in Porter Five Force Model is the threat of a new entrant.
This is relatively low because of high capital required for setting up a business and high
marketing expenditure required for reaching out to the customers. In addition, the cost
associated with R&D is very high which is essential for the survival of businesses in this
industry. Also, the industry has many strong brands like Apple, Samsung Google etc.
therefore it is extremely difficult for a new entrant to gain foothold in the industry
(Mourdoukoutas, 2011). Therefore, it should be noticed in the strategic analysis of
Apple, that it is influenced by low threat of substitute products, strong rivalry, low
bargaining power of suppliers, high bargaining power of buyers, low barriers to entry.

6. Figure 2: Porter Five Forces for Apple Inc.
SWOT Analysis
SWOT Analysis is a strategic marketing tool, which is used by businesses to carry out
internal analysis. It allows businesses to identify the internal strengths and weaknesses
of a business, as well as the opportunities and threats present in external environment,
for formulation of effective business strategies (Shabanova et al., 2015). In context of
Apple Inc., the biggest strength of the business is its strong brand name, high quality
products, extensive product line, focus on innovation and global presence. Moreover,
the financial health and sales are also the key strengths of Apple. In a press release by
Apple, it reported a quarterly income worth $62.9 billion which is 20% higher than the
revenue of last year and a 41% increase in earnings per share. The global sales of
Apple also rose by 61%. Furthermore, the company has been successful in generating
an operating cash flow amounted to $19.5 and distributed dividends of $23 billion to
its shareholders (“Apple Reports Fourth Quarter Results,” 2018). In addition, Apple also
maintains a strong hold on its distribution channel in order to maintain the strategy of
exclusivity. The weaknesses are the internal insufficiencies faced by a business
(Shabanova et al., 2015). In context of Apple, the limited size of its distribution network
Porter
Five
Forces for
Apple Inc.
Degree of
rivalry - High
Bargaining
Power of
Suppiers -
Low
Bargaining
power of
buyers - High
Barriers to
Entry - Low
Threat of
substitutes -
Low

7. is also one of its weaknesses. Since, Apple maintains an image of exclusivity therefore
company selects and choose the authorized dealers with careful evaluation. This also
restricts the availability of Apple products to reach wider audience. In addition, the
company faces criticism over the unethical labor practices and lack of focus on CSR
(Hayoun, 2017).
The opportunities present in external environment for Apple include opening retail
stores in new markets. Furthermore, Apple can also increase its number of stores in the
countries where it already has its stores. The emerging markets such as Oman, India,
Pakistan, Malaysia, etc. have great potential of profit and Apple does not have any retail
store in these countries. Furthermore, it can also invest in the R&D related to designing
products with artificial intelligence which is an emerging technological trend. The
strategic analysis of Apple shows that its biggest threat is the high degree of
competition (Savvides and Orellana, 2018). Another grave threat faced by Apple is that
of imitation of its products. China is the biggest seller of fake apple product which has
remained as one of the biggest challenges faced by Apple Inc (Wong, 2012).
Figure 3: SWOT Analysis of Apple Inc.
Strengths
Strong brand name and customer loyalty
Extensive product Line
High Quality Products
Global presence
Competent w orkforce
Focus on R&D and innovation
Financial Health
Weakness
Criticsm over labor practices and CSR
Limited distribution netw ork
Limited target market
Opportunity
Increase number of stores in developing economies
R&D in emerging technologicaltrends
Threat
High Competition
Imitation
SWOT Analysis of Apple Inc.

8. Apple’s Sustainable Competitive Advantage
According to Porter, a business that outperforms other players in the industry in terms of
profitability is considered to have a competitive advantage. In order to gain a
competitive edge, businesses strive to attain a sustainable competitive advantage. A
business can achieve a sustainable competitive advantage through either having a cost
advantage or through differentiation (Riasi, 2015). Apple has a differentiation strategy
which is when a business is successful in delivering features and benefits that are better
than its competitors (Belton, 2017). Apple uses strategy of differentiation and focuses
on innovation to create superior value for its customers. The sustainable advantage of
Apple Inc. is primarily due to its strong brand name and Apple's enclosed ecosystem.
Figure 4: Apple’s Sustainable Competitive Advantage
Apple has an enclosed system which refers to the fact that all Apple devices are run
only by its own operating systems such as iOS and macOS. This implies that a
customer has to keep buying iOS devices if he or she wishes to stay within the
ecosystem of Apple (Worstall, 2012). On the other hand, Android users can switch to
various smartphones such as Samsung, Huawei, HTC etc. as they can all be synced
with their Google accounts across devices having Android operating system (Villas-
Boas, 2016). Moreover, the prices of Android devices also fall primarily because of two
Closed
Ecosystem
Strong
Brand
Name
Sustainable
Competitive
Advantage

9. factors. Firstly, Android is an open-source operating system which could be used by any
company for developing their smartphones. Secondly, companies like Qualcomm are
facilitating small companies to launch low priced smart phones. Due to this, premium
brands of Android Smartphones such as Samsung and HTC are losing their market
share (Tibken, 2018). On the other hand, the prices of iPhones do not fluctuate because
of Apple’s strategy of enclosed ecosystem. Furthermore, it is more difficult to develop
Android apps as they are required to be tested on large number of hardware devices as
compared to the iOS apps. Samsung has also tried to duplicate the Apple’s strategy of
protected ecosystem with its OS Tizen. However, it has not attained much of
acceptance by the customers (Tibken, 2017).
Another factor that has led to the attainment of sustainable competitive advantage for
Apple is customer loyalty and its strong brand name. The premium pricing strategy used
by Apple has also worked in its favor as it has resulted in customers to place the Apple
products higher than other brands in their minds (Mourdoukoutas, 2011). Apple
products are known for their high quality and aesthetic designs. Therefore, the
customers feel pride in owning an Apple product. Apple has a strong focus on
innovation and R&D; the company is known for its innovative and unique products
(Rogowsky, 2017). Furthermore, Apple has a diverse product line and is offering
products such as Mac, iPhone, iPod, iPad, HomePod, Apple Watch, Apple TV, Apple
Energy and Operating systems for its devices. The innovative approach of Apple to
provide its customers with high quality and unique products has resulted in creating a
strong brand image (Rogowsky, 2017). This has enabled Apple to sustain its success
over the period of time. So, the strategic analysis of Apple reveals that its innovative
policies favor the company over its competitors.
Recommendations
After carrying out a detailed strategic analysis of Apple, following recommendations are
proposed for strengthening the company’s position in the market:

10. ● It is recommended that Apple invests in the CSR activities. At present, it faces
criticism from the environmentalists and customers of not investing enough in
CSR and green activities. As a result, Apple will be able to build an image of a
brand that cares about the community and is concerned with the environment.
This will require Apple to allocate financial resources to the cause; which is not
significant for a business with the financial health as that of Apple.
● Apple Inc. is also criticized by activists for its labor practices in China, therefore, it
is also recommended that it should take up a transparent approach in addressing
and resolving these issues as these are negatively impacting the image of the
brand.
● Apple has a very high dependence on China; on the other hand, US-China
relations have become hostile. This is one of the biggest challenges faced by
Apple. Therefore, it is recommended that Apple should relocate its assembling
and manufacturing points from China to some other low-cost country. However,
this has to be done gradually as it would bring a financial crunch for Apple initially
but will be beneficial in the longer run.
● Apple can open its stores in emerging and developing economies as they have
great profit potential like India, Pakistan, Russia, Iran, Malaysia etc. It can open
more stores in countries like Turkey where it has only two stores (“Apple Retail
Store - Store List,” 2018). This will require capital however Apple has enough
disposable income to invest in such expansion strategies (Salinas, 2018).
● It is also recommended that Apple should maintain its focus on innovation and
should keep on investing in R&D. Apple should work on future technological
trends such as artificial intelligence in order to stay ahead of its customers.
● It is also recommended, that the company increases its distribution partnership
with more distributors; as currently it has very limited distributors across the
globe. As, Apple maintains a strategy of exclusivity so finding partners with right
capabilities could be costly and time consuming but will benefit as it will increase
the reach.

11. Conclusion
The purpose of this paper was to carry out an in-depth strategic analysis of Apple to
propose strategic recommendations. Apple is one of the most successful companies of
the world. The success of Apple is due to its innovative approach in developing unique
and high-quality products for its customers. Apple has been able to achieve a
sustainable competitive advantage because of its strong brand name and the closed
ecosystem. However, the hostile US-China relation has increased the political risk for
Apple. Furthermore, the forces such as, degree of competition and bargaining power of
buyers is high for Apple. Moreover, Apple can expand to new markets and can open
new stores in existing locations to increase its profitability and global presence.

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15. Appendix