External Ananlysis - Apple Corporation

Apple Computer’s 30-year history is full of highs and lows, which is what we would expect in a highly innovative company. They evolved throughout the years into an organization that is very much a representation of its leader, Steven Jobs. Apple made several hugely successful product introductions over the years. They have also completely fallen on their face on several occasions. (Burrows, Grover, and Green)

External Analysis:

1) Technological Change: Technological change creates both opportunity and threats. Apple’s products are trendy and stylish.HP, Dell and other manufacturers are pricing many systems under the $1000 threshold. “Apple is struggling to meet demand for its new MacBook Pro Laptop despite a $1900 price tag that is nearly that of garden-variety rivals.” (Burrows) Apple has only recently entered the low-end consumer market ($500) with the Mac Mini. Although the Mac Mini is a base model with few features, it comes encased in a very small and distinctive package that Apple portrays as – “small is beautiful”. Likewise, the iPod Shuffle was Apple’s first entry into the lower-end ($100 range) of flash-memory-based portable music players. (Apple) Although Apple competes directly with Microsoft for operating systems, the release of iTunes for Windows in 2002 was a key strategic move. This decision expanded the potential customer base to nearly all personal computer owners, even though Apple only has 2% - 3% of all personal computer sales. (Yoffie) Apple not only dominates the music player market, its iLife suite provides consumers with easy-to-use software for music and video composition. With “pod cast” a household word, Apple’s Garage Band application makes the recording of pod casts and music very easy. (Boddie)

2) Legal and Political Conditions: The legal and political dimensions of an organization’s general environment are the laws and the legal system’s impact on business, together with the general nature of the relationship between government and business.

While introducing new technologies, there is a persistent threat of legal action by competitors. For example, Apple sued Microsoft in 1988 for perceived similarities between Microsoft Windows and Macintosh audiovisual works. (Linzmayer, 172-4) Legal threats can surface from somewhat unusual sources. Apple Corporation Limited is the London-based company that owns the rights to the music of the Beatles. Paul McCartney and Ringo Starr recently sued Apple over the use of the Apple logo in iTunes, claiming that it violated Apple’s agreement not to produce music under an apple-based logo. (Associated Press) Research and development is a key component to Apple’s sustained competitive advantage. Apple is currently taking legal action against several popular technical web sites like appleinsider.com for releasing proprietary product research. (McCullagh)

For a firm seeking competitive advantage, it is important to evaluate its environmental threats identified as Porter’s Five Forces.

1) Threat of entry: The threat of entry is the first identified force of the environmental threats. Stiff competition among a few major players having equal strength and potential leads to intensive rivalry. In the case of Apple Corporation, Verizon is a threat because of its streaming audio and video with V CAST. Amazon is a threat because of its plan to start on demand online services to purchase music. Google and The �Next Google’ are the threats because Google has everything and The �Next Google’ is a new entrant with disruptive technology.

2) Threat of new entrants: A new entrant is the second and an important threat to the ability of firms to maintain or improve their level of performance. Entry in this industry is easy due to its huge potentials. Microsoft is a threat because of the operating system; Napster and Rhapsody are the threats because of they are a source for online music. Similarly Dell, HP and Lenovo are threats because they are an alternate source for computer hardware.

3) Threat of substitutes: Threat of substitutes is a third environmental threat in the five forces framework. Close substitutes for Apple Corporation