External Analysis of Apple Inc.

Contents
I. (Macro-environment) PESTEL analysis………………………………………………….2
1. Polictical factors……………………………………………………………………….2
2. Economic factors………………………………………………………………………3
3. Sociocultural factors…………………………………………………………………...4
4. Technological factors…………………………………………………………………..5
5. Environment factors……………………………………………………………………6
6. Legal factors……………………………………………………………………………6
II. (Micro-environment) Porter’s five forces…………………………………………..……..7
III. Strategic group analysis……………………………………………………………..….…8
IV. EFE (External Factor Evaluation) matrix…………………………………………..……..9
V. Conclusion………………………………………………………………………..……...10

Reference…………………………………………………………………………………..…...11

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 I. PESTEL analysis
1. Political factors
The degree to which Apple can achieve its main objective of maximizing profit depends on
several political factors. These include government stability, levels of governance, corruption,
press freedom, lobbying groups for the domestic market, etc. Additionally, the activities of labor
unions can be considered an important political factor for Apple.

Tax payment

• Tax payments are a notable political factor affecting Apple. The multinational technology
company uses complex legal measures to keep its tax payments as low as possible globally,
especially the US and Ireland. In the US, the tech giant keeps most of its cash overseas so it
can avoid paying corporate income tax in the US

Impact of global political factors

• Apple also has to deal with the impact of political factors internationally. A call by Dmitry
Gorotsov, a Member of Parliament in Russia, to prevent the country's lawmakers from
"using iPhones and iPads to protect them from eavesdropping by foreign special services"

The trade war between the US and China can be mentioned as another global
political factor affecting the iPhone maker's revenue and long-term growth
prospects. These cases can be understood as a clear illustration of the potential
impact of political factors on Apple's sales in Russia.

(Apple Avoided $40 Billion in Taxes, 2018)

(Kremlin tells officials to stop using iPhones, 2023)

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 2. Economic factors
Apple’s business is heavily influenced by economic factors, both at the global and local levels.

Economic Growth
•Economic growth in the countries where Apple operates is a positive factor for the company, as it
leads to increased demand for Apple’s products. When China joined WTO in 2021, Apple began
manufacturing there and since then, China has spent billions on roads, factories, power plants,
employee recruitment, and housing, all to help create Apple's supply chain. (The New York Times,
2021)
Exchange Rates
Apple generates approximately 59% percent of its total revenue from international markets outside
the United States. Accordingly, the company's revenue is negatively affected by the current stronger
USD trend. Apple CEO Tim Cook adopted a currency hedging program in 2014 to reduce the negative
effects of a strengthening USD
Unemployment Rate
•The unemployment rate is a factor that can affect Apple’s sales, as people with jobs are more likely
to be able to afford Apple’s products
Interest Rates
Changes in interest rates can impact Apple’s business. In particular, the UK has a bank rate to be
1.25% in June 2022, which is sometimes referred to as the interest rate (Bank of England, n.d.). With
the rate of 1.25% consumers spend more, and the prices of electronics are bound to increase thereby
production levels are increased to satisfy the rising demand for Apple items. Maintaining interest
rates low also helps in maintaining inflation at low and stable levels. As such, Apple Inc. can borrow
money to expand its operations within the UK confines.

Price stability
•Inflation rates can impact Apple’s costs and pricing strategies. In 2022, Apple’s gross margin for the
quarter was 43.7%, higher than analysts’ expectations, and the operating expenses for the quarter
were $12.58 billion, a nearly 19% year-over-year increase. High inflation may force Apple to adjust its
prices, potentially affecting its competitiveness in the market.

(Apple Reports Fourth Quarter Results, 2020)

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 3. Sociocultural factors
This aspect points to the social factors that influence customer behaviors and expectations.

Changing Demographics
The demographics of the countries where Apple operates are changing, with an increasing
number of people living in urban areas. This is a positive factor for Apple, as its products are
more popular in urban areas. For example, there is a growing middle class in India. These
demographic trends are likely to drive demand for Apple’s products in these countries.
People’s increasing dependence on digital systems is another trend that creates opportunities for
Apple to sell more of its products

Apple has huge opportunities in regions like Africa. They like to use branded products, which
provides a great opportunity for Apple. They can target these countries to up their revenue game

Rise of Nationalism
• The rise of nationalism in some countries is a challenge for Apple, as it can lead to restrictions
on trade and investment and even affect consumer’s buying decision. For example, the United
States has imposed tariffs on Chinese goods, which has made Apple’s products more expensive
in the United States. Or when you watch Korean dramas or music videos, you will mostly see
the characters using Samsung or LG products
Increasing Awareness of Mental Health
• Increasing awareness of mental health is a challenge for Apple. For example, there have been
concerns that using social media can lead to depression and anxiety. Apple has responded by
introducing features in its products that are designed to promote mental health, such as the
Screen Time feature

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 4. Technological factors
Technological factors heavily influence Apple’s business, as the company is a significant player
in the technology industry.

Technological Innovation
• Compared to Android, Apple's app offering is very limited. That's why most users are
switching to Android smartphones and tablets
Cybersecurity Threats
• Cybersecurity threats are a growing challenge for businesses in all industries. Apple has been
the target of several cyberattacks in recent years. The company has responded by investing in
its cybersecurity infrastructure and by educating its customers about cybersecurity best
practices
Development of New Technologies
• The development of new technologies can create new opportunities for Apple. Apple is
investing in artificial intelligence research, and has released several products that use AI, such
as the Siri voice assistant and the Face ID facial recognition system
• Various Android companies are competing fiercely with Apple. Continuously rising demand for
Android tablets and smartphones threatens Apple's sales. Furthermore, Apple is also facing a
decline in personal computer sales
Increased Regulation of Technology
• Increased regulation of technology is a challenge for Apple, as it can make it more difficult for
the company to innovate. The European Union has recently passed a law that requires
companies to obtain consent from users before collecting their personal data. Apple has
responded by updating its privacy policies to comply with the new law

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 5. Ecological factors
The company’s revenue can be affected badly because of varied environmental factors.

Disposal of used or non-working electronic devices

• Apple is facing huge issues while disposing of all the electronic junk that is not required
anymore or not in the condition of usage. Due to lithium contained batteries in its electronic
items the company is going through massive hurdles while discarding them. It may cost a
fortune to the company
Increase in costs of electricity
• Dependability of Apple upon data centers and internet infrastructure makes it more
susceptible to electricity rates. The company needs to carry out more expenses in the
manufacturing processes
• Rising electricity prices in China could also disrupt Apple's infrastructure
Climate change
• Climate change is a growing environmental challenge, and Apple needs to take steps to
reduce its carbon footprint. For example, Apple has committed to reducing its carbon
emissions by 75% by 2030. The company has also made a number of other commitments to
reduce its environmental impact, such as using more energy-efficient products and facilities
• China is trying to limit fossil fuels and greenhouse gases, which directly leads to increased
production costs due to increased electricity prices. This could ruin Apple's revenue game

(Apple unveils its first carbon neutral products, 2023)

6. Legal factors
Legal factors heavily influence Apple’s business, as the company is a global company with
operations in many countries.

Lawsuits
• Apple is facing several lawsuits, which can impact the company’s business and reputation.
For example, Apple agreed to pay $113 million to settle 'Batterygate' sase over iPhone
slowdowns

Apple has entered highly regulated financial services through ''Apple Pay''. It is
likely that this will increase regulations from the government

Apple relies heavily on its software and music platform because these areas are
highly profitable. However, this type of dependency leaves the company
vulnerable in any emergency or incident

(Apple Agrees To Pay $113 Million To Settle 'Batterygate' Case Over iPhone Slowdowns, 2020)
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 II. Porter’s five forces

The threat of new entrants

Power of suppliers
Competitive Rivalry

Threat of substitutes
•The high •High investment •Moderate to high •Low switching cost •Low buyer
Power of buyers

aggressiveness requirements number of suppliers •The availability of propensity to

of competitors and Brand •Moderate to high detailed comparative substitute.
in R&D and development overall supply information about Customers would
innovation cost make it's •High ratio of firm competing products’ rather use
•Low harder for new concentration to features empowers smartphones than
differentiation entrants to the supplier buyers to shift from go through the
of products industry concentration one provider to hassle of buying
•Low switching •There are large another and maintaining a
•Some large suppliers,
cost firms with the •Each buyer’s digital camera, an
such as OEMs and
financial purchase is small analog phone, and
producers of chips,
capacity to compared to the other devices
significantly
enter the influence the company’s total
market like industry revenues
Google,
Samsung...

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 III. Strategic group analysis

Apple’s biggest competitors in the global smartphone market include Samsung, Huawei, Xiaomi,
Oppo and Vivo.
In Q4 2023, Apple is the largest smart phone company in the world with a global market share of
23% and its main competitors are Samsung, Xiaomi, Vivo and Oppo with market shares of 16%,
13%, 7% and 7% respectively.
- Samsung is Apple’s top competitor when it comes to smartphones. As of Q3 2023,
Samsung had a global smartphone market share of 20%, compared to Apple’s 16%, these
two brands always follow close to each other in the race to win market segments. (Global
Smartphone Shipments Market Data (Q1 2022 – Q4 2023), 2024)
- The five competitive forces affect strategic groups differently. The threat of new entrants
is relatively low for Apple and Samsung compare to the lower mobility barrier group
(Xiaomi, Oppo, Vivo) because they have strong brand recognition, significant economies
of scale, extensive distribution networks, and substantial investments in R&D.
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 - The external environment affects strategic groups differently. During the pandemic crisis,
Xiaomi has experienced remarkable growth and has established a strong position in the
global smartphone market. In the third quarter of 2021, Xiaomi captured about 11.27% of
the global smartphone market share, ranking third behind Samsung and Apple, which
held 27.6% and 26.7% respectively (Mobile Vendor Market Share Worldwid, n.d.). The
other brands in the lower mobility barriers group also witnessed the increasing in global
market share with their affordable price in the context of crisis.

IV. EFE Matrix

Table 1 EFE Matrix for Apple Inc.

Weighted
Key External Factors Weight Rating
Score
Opportunities
1 Steady customer growth 0.1 4 0.4
2 High level of expertise 0.1 4 0.4
3 Expand distribution network 0.08 3 0.24
The trend of consuming smart technology products is gradually 0.1 4 0.6
4
increasing
5 Trendiness in using Apple products 0.1 4 0.4
6 Dominating the smart speaker segment 0.05 2 0.12
Threats
1 Consequences of the coronavirus outbreak 0.1 4 0.4
2 The level of competition in the industry is increasingly high 0.1 4 0.4
3 The rate of entering the industry is increasing 0.08 3 0.24
4 Chinese tariffs 0.07 3 0.21
5 Back door mechanism 0.05 2 0.12
6 Lawsuit 0.07 3 0.21
Total 1 3.5

Apple's total weight of 3.5 proves that Apple has effective strategies that can respond well to the
strengths and weaknesses of the business environment.

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 V. Conclusion
Apple Inc. is known for its innovation and high-quality products worldwide. In contrast to
the innovative products launched by Apple, not all of its products receive the same level of
recognition. Apple Maps, for example, was a failure while showing users unreliable navigation
and inaccurate locations of common landmarks.
The external factors described in this analysis suggest that Apple Inc. has key strengths that
can be used to address weaknesses effectively. With the help of its brand image and innovation
processes, Apple can successfully create and introduce new technology products. Apple also
faces the threat of fierce competition affecting the global market share.

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References
(n.d.). Retrieved from Bank of England: https://www.bankofengland.co.uk/monetary-policy/the-
interest-rate-bank-rate
(2021, 06 17). Retrieved from The New York Times:
https://www.nytimes.com/2021/06/17/technology/apple-china-doug-guthrie.html
Apple Agrees To Pay $113 Million To Settle 'Batterygate' Case Over iPhone Slowdowns. (2020,
11 18). Retrieved from NPR: https://www.npr.org/2020/11/18/936268845/apple-agrees-
to-pay-113-million-to-settle-batterygate-case-over-iphone-slowdowns
Apple Avoided $40 Billion in Taxes. (2018, 01 18). Retrieved from Yahoo Finance:
https://finance.yahoo.com/news/commentary-apple-avoided-40-billion-220403484.html
Apple Reports Fourth Quarter Results. (2020, 10 29). Retrieved from apple:
https://www.apple.com/uk/newsroom/2020/10/apple-reports-fourth-quarter-results/
Apple unveils its first carbon neutral products. (2023, 09 12). Retrieved from Apple:
https://www.apple.com/newsroom/2023/09/apple-unveils-its-first-carbon-neutral-
products/#:~:text=The%20Path%20to%202030&text=In%202020%2C%20Apple%20ach
ieved%20carbon,carbon%20emissions%20from%202015%20levels.
Global Smartphone Shipments Market Data (Q1 2022 – Q4 2023). (2024, 02 19). Retrieved from
Counterpoint: https://www.counterpointresearch.com/insights/global-smartphone-share/
Kremlin tells officials to stop using iPhones. (2023, 03 20). Retrieved from Reuters:
https://www.reuters.com/world/europe/kremlin-tells-officials-stop-using-iphones-
kommersant-newspaper-2023-03-
20/#:~:text=MOSCOW%2C%20March%2020%20(Reuters),agencies%2C%20the%20K
ommersant%20newspaper%20reported.
Mobile Vendor Market Share Worldwid. (n.d.). Retrieved from Global stats:
https://gs.statcounter.com/vendor-market-share/mobile/worldwide/#quarterly-201904-
202201

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