Apple (AAPL) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Apple (United States)

Based on various researches at Oak Spring University , Apple is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing energy prices, technology disruption, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Apple

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Apple can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Apple, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Apple operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Apple can be done for the following purposes –
1. Strategic planning of Apple
2. Improving business portfolio management of Apple
3. Assessing feasibility of the new initiative in United States
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Apple

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Strengths of Apple | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Apple are -

Highly skilled collaborators

– Apple has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Communications Equipment industry. Secondly the value chain collaborators of Apple have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Communications Equipment industry

– Apple has clearly differentiated products in the market place. This has enabled Apple to fetch slight price premium compare to the competitors in the Communications Equipment industry. The sustainable margins have also helped Apple to invest into research and development (R&D) and innovation.

Ability to recruit top talent

– Apple is one of the leading players in the Communications Equipment industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

Analytics focus

– Apple is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Communications Equipment industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Diverse revenue streams

– Apple is present in almost all the verticals within the Communications Equipment industry. This has provided Apple a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Ability to lead change in Communications Equipment

– Apple is one of the leading players in the Communications Equipment industry in United States. Over the years it has not only transformed the business landscape in the Communications Equipment industry in United States but also across the existing markets. The ability to lead change has enabled Apple in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Cross disciplinary teams

– Horizontal connected teams at the Apple are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Digital Transformation in Communications Equipment industry

- digital transformation varies from industry to industry. For Apple digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Apple has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

High switching costs

– The high switching costs that Apple has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

Learning organization

- Apple is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Apple is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Apple emphasize – knowledge, initiative, and innovation.

Operational resilience

– The operational resilience strategy of Apple comprises – understanding the underlying the factors in the Communications Equipment industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

High brand equity

– Apple has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Apple to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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Weaknesses of Apple | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Apple are -

Increasing silos among functional specialists

– The organizational structure of Apple is dominated by functional specialists. It is not different from other players in the Communications Equipment industry, but Apple needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Apple to focus more on services in the Communications Equipment industry rather than just following the product oriented approach.

Skills based hiring in Communications Equipment industry

– The stress on hiring functional specialists at Apple has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Ability to respond to the competition

– As the decision making is very deliberative at Apple, in the dynamic environment of Communications Equipment industry it has struggled to respond to the nimble upstart competition. Apple has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Low market penetration in new markets

– Outside its home market of United States, Apple needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Products dominated business model

– Even though Apple has some of the most successful models in the Communications Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Apple should strive to include more intangible value offerings along with its core products and services.

Interest costs

– Compare to the competition, Apple has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Employees’ less understanding of Apple strategy

– From the outside it seems that the employees of Apple don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Apple is slow explore the new channels of communication. These new channels of communication can help Apple to provide better information regarding Communications Equipment products and services. It can also build an online community to further reach out to potential customers.

Compensation and incentives

– The revenue per employee of Apple is just above the Communications Equipment industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

High dependence on Apple ‘s star products

– The top 2 products and services of Apple still accounts for major business revenue. This dependence on star products in Communications Equipment industry has resulted into insufficient focus on developing new products, even though Apple has relatively successful track record of launching new products.

Need for greater diversity

– Apple has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

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Apple Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Apple are -

Learning at scale

– Online learning technologies has now opened space for Apple to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Leveraging digital technologies

– Apple can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Communications Equipment industry, but it has also influenced the consumer preferences. Apple can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Apple to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Apple to hire the very best people irrespective of their geographical location.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Apple can use these opportunities to build new business models that can help the communities that Apple operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.

Buying journey improvements

– Apple can improve the customer journey of consumers in the Communications Equipment industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Creating value in data economy

– The success of analytics program of Apple has opened avenues for new revenue streams for the organization in Communications Equipment industry. This can help Apple to build a more holistic ecosystem for Apple products in the Communications Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Developing new processes and practices

– Apple can develop new processes and procedures in Communications Equipment industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Apple to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Using analytics as competitive advantage

– Apple has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled Apple to build a competitive advantage using analytics. The analytics driven competitive advantage can help Apple to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Low interest rates

– Even though inflation is raising its head in most developed economies, Apple can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Apple can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Apple to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Apple can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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Threats Apple External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Apple are -

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Apple in Communications Equipment industry. The Communications Equipment industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Apple will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Apple can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Apple prominent markets.

Technology acceleration in Forth Industrial Revolution

– Apple has witnessed rapid integration of technology during Covid-19 in the Communications Equipment industry. As one of the leading players in the industry, Apple needs to keep up with the evolution of technology in the Communications Equipment sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Environmental challenges

– Apple needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Apple can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.

High dependence on third party suppliers

– Apple high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Increasing wage structure of Apple

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Apple.

Regulatory challenges

– Apple needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Communications Equipment industry regulations.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Communications Equipment industry are lowering. It can presents Apple with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Equipment sector.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Easy access to finance

– Easy access to finance in Communications Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Apple can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Apple in the Communications Equipment sector and impact the bottomline of the organization.

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Weighted SWOT Analysis of Apple Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Apple needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Apple is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Apple is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Apple to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Apple needs to make to build a sustainable competitive advantage.

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