Prestcom Analysis
Summary
From the data collected from different articles and books, I discovered that Apple products are currently dominating the market because the company uses high technology to manufacture its products. Due to the competition Apple is facing ion the market it has implement several strategies to win customers from its competitors. These strategies have helped Apple to remain competitive in the market. The report was based on PRESTCOM and SWOT analysis. In addition, there was analysis of customer segmentation in the market. Customer segmentation helps the company to focus of different groups of customers making.
External environment
The external factors are evaluated using PRESTCOM because it is a valuable and strategic tool of identifying the business positions, growth, size, the feasible path for operations and classifying development and decline in the market.
Basic characteristics of the environment
Apple is the leading digital asset Management Company and worldwide Smartphone provider. It generates and runs both softwares and hardwares and allows consumers to buy and share contents like applications, music, and movies through Apple devices. Apple products are very efficient and effective in their tasks like the iPhone.
PRESTCOM Analysis
To get a good understanding of the Apples potential in business, the direction of operation and to know the situation of the future market we will make the use of PRESTCOM analysis. PRESTCOM analysis entails several factors that include political, economic, social, technological factors, organizational, regulatory, and competitive and market factors. These factors affect the sale of Apple products in the market as explained below.
Political factors
There are many challenges that cannot be controlled by the company such as uncertainties, war against terrorism, geopolitical work authority and health issues that will affect the sales of Apples product worldwide. In order to reduce the operating cost Apple Company has outsourced in different countries. These countries include Ireland, Korea, china, Czech Republic, and Cork. If at any time, these countries face any political instability or any problem that will cause delay in manufacturing operations, will spoil the Apples likeness in eye of its dealers and consumers (CNetnews 2012 p.54).
This will negatively affect the sales of Apple products in the market because there will be little or no production of the Apple products. Political stability is important in these countries to ensure smooth production of Apple product to ensure steady supply in the market. It is hard for any company to control political factors because they have external origin. Political instability has many disadvantages like delays in manufacture or marketing of these products.
Economic factors
Purchasing power of customers usually depends on the world’s economic conditions. According to the research in the past few years, the rate of unemployment is very high in many countries. This has caused significant decrease in the sale of Apple products (Datamonitor, 2011 Para 4). In addition, the increase in oil prices caused inflation in the world’s economy leading to decrease in the sale of Apple products. Due to these economic factors, the purchasing power of people decreased affecting negatively the sale of Apple products because of their high prices.
However, world’s economic factors are getting improving and the Apple Company has purchased foreign currencies causing the Apple revenue to increase in the global market (Apple Inc 2012 p.80). From the above explanation, it is clear that Apple sales are affected by the economic conditions in the world. The positive impact of employment is that the purchasing power of customers will be high increasing the sale of Apple products.
Social factors
There have been two major factors in the forefront of Apple products throughout the history namely the design and the quality. Apple products are manufactured using high technology making them to be of high quality. Customers require high quality goods and Apple is in the forefront of providing these goods. The purchasing of luxury Apple products has increased due to increase in the purchasing power of consumers in different markets worldwide. People prefer to purchase iPod, iPhones and the latest technological iPad.
The growth of the music industry has significantly led to rise in the sale of Apple products because of the main important music store iTunes. Music is the biggest social factor that has influenced the rise in the sales of Apple products. Apple has benefited a lot from the social factors because it defines individual’s modern lifestyle. There is significant rise in the purchasing power of customers that has led to increased purchase of Apple products. In addition, Apple is improving its products to sustain competition from competitors in the market (Steve, 2012 p.40).
Technological factors
It is clear that Apple usually takes advantage of its innovative and high technology products. A lot of effort has been invested in the research and development field and that is why Apple is toping in the new innovative products. Apple is well known for innovative technological products. This has significantly led to the increase in the sale of Apple products in worldwide markets (Steve, 2012 p.45). Majority of people prefer Apple products because of increased investment in high technology. This makes the products to be reliable and effective in certain purposes. In addition, the high technological products manufactured by Apple have made them to remain competitive in the market. The negative impact of these factors is that they take a lot of time and funds to develop. However, they are very beneficial once they are developed.
Competition
Apple faces a lot of competition in the market. Some of the Apple competitors according to cell phone are Samsung and Nokia. Apple should be keen of several competitive factors. Fist the intensity of rivalry in the industry. Apple Company has done a commendable job by providing technical support and creation of customer loyalty. Apple has no worry for this factor because its products never go on sale (Steve, 2012 p.50). Apple maintains its productivity by producing superior products like Android phones.
The other factor in competition is threat of new entrance. Entrance of many companies in the market generating similar products means there will be decrease in the market share of Apple. Apple maintains market share by differentiating its products. This makes it hard for new companies to compete with Apple. Apple has a strong product image, innovation, and good customer services. Competition is important in ensuring that the competing firms produce quality products. However, the disadvantage of competition is that some firms will lose their market share.
Market
Ever company has a market share for its products. However, there is difference in the level of market share for these companies. Apple is operating in a technology industry segmented in smack sectors such as computer industry and mobile industry. Currently apple is active in several market segments depending on the nature of the products. Apple products have a target population in the market. It targets people of each gender. Apple market stated to grow in 1997 after which it decreased slightly up to 2000. From there it has been growing. Apple has the largest market share compared to other companies producing similar products.
However, Apple has market segmentation (Steve, 2012 p.55) Apple has implemented several strategies to maintain market competitiveness. It has divided its market for mobile phones and computers. They make use of customer segmentation in the market to win and maintain customers. They have differentiated there brands in the market in order to attract customers. In addition, Apple is facing a lot of competition in the market share. The importance of market segmentation and product differentiation is to attract and maintain customers. However, the disadvantage of that the market may not favor the strategy.
Regulatory environment
While trying to introduce new technology, there is a continuous threat of legal action from competitors. For example, in 1988 Apple sued Microsoft for perceived similarities. Governments and federals have set regulations to protect companies from producing copying products. Each company is required to produce its products without copying. Apple takes this advantage of protection to continue producing quality products. However, companies will continue trespassing on Apple’s intellectual property rights. For example, Tex9 Company produced an open music program called xtunes similar to iTunes.
Apple took legal action to this company in 2009. However, Apple cannot use other company’s technology to produce similar products because of this legal regulation. The key component of sustained competitive advantage is research and development. Currently Apple is taking legal action against a number of popular technical websites for releasing proprietary brand research. Legal regulations are important in protecting companies from production of similar goods. The importance of intellectual property rights is protection from copyright. The only negative impact is that companies can sue others with no sufficient evidence of copyright.
Organizational factors
Apple Inc is considered as one of the most innovative and admired company in the world. It has well-organized system that attracts and retains employees. Employees motivation is the key factor for success of Apple Inc. Apple employees enjoy huge incentives to foster creative thinking. It rewards its employees as a method of encouraging them to continue venturing in research and development (McGrath, 2012 p. 20).
Maintenance of employee reward system is a vital element in encouraging the flexibility, quality performance, and competition for talent in the competitive labor market. In addition, Apple Inc employees offer products in discount with lower prices to its employees. This serves as motivation and satisfaction to employees. Importance of organizational motivation is that employees are determined to work hard to meet the organizational goals. However, the negative impact of this strategy is that the employees will not be willing to work without these incentives.
SWOT analysis
SWOT analysis entails analysis of the several internal factors that affect the sale of Apple products. These factors either affect Apple negatively of positively. These factors include strengths, weaknesses, opportunities, and threats that affect Apple as a global company.
Strengths
The main strength of Apple is that it has strong market position and consumer trustworthy that has raised due to the ecosystem of Apple. This increases the competitive advantage of the company. Second, it has a range of software, products, and apps that are interlinked maintaining each other. Third, the iTV and other superior products to be released soon. In 2012, Apple was chosen for the 3rd time as the most pioneering company worldwide (Masi, 2009 p.20).
By the end of 2012, Apple was holding approximately $10,000,000,000 in cash with no debts. The gross profit was higher than that of competitors. Still in 2012 Apple was named as the second valuable brand because of its value of $76.5 billion. The high quality customer service is a key role of Apples retail store because it provides customers with well-informed staff to ensure brand awareness. These strengths of Apple have led to significant rise in the sale of Apple products worldwide. Apple takes advantage of these strengths to continue dominating in the market.
Weaknesses
The high price of the Apple products is the major weakness of the Company because there is strong competition in the market. The factor is the high prices of apple products. The price of Apple Inc products is very high discouraging some customers. Consumers of Apple products can get similar products from competitors of Apple at lower prices. Apple Company is frequently blamed by other companies for disobeying their patents and has lost some of the trials (PAHL & Richter, 2009 p.102). Such things can destroy the reputation of Apple products in the market. The biggest loss in the Apple Company was the death of Steve Jobs who was the CEO.
However, Tim Cook became the CEO leading to the resignation of John Browett and Scott Forstall from the firm. This resignation affected the management of the Company negatively. Apple gross profit is the highest in the tech industry but there is fear that the current margin will not continue because of the increasing prices of Apple products and the tough competition. Apple products are very expensive compared to similar products from competitors. The advantage of these high prices is that it will make huge profits. However these prices have negative impact as it discourages consumers.
Opportunities
Apples market share is going to rise because of the high demand of iPad and iPad mini in the market for tablets. This will help the company to use competitive advantage. Apple TV sales are expected to rise due to the launch of iTV to be released soon (BO?HM, 2009 p.68). There is growth in Smartphone and tablet markets and this is a good opportunity for Apple to increase their market share in these markets. Because some companies violate Apples patent, Apple should collect these damages and use them to destroy the image of competitors in the market (McGrath, 2012 p. 30). In addition, collecting these damages will lead to increase in the cash reserves for Apple.
The growth of mobile advertisement is good opportunity because Apple allows advertisement on iPod touch, iPhone and iPad by development of a platform known as iAD advertising. There is increase in the requirement of cloud-based service and Apple can increase its services to relate to the iCloud and the software. Apple takes advantage of these opportunities to increase its sales and launching of new products in the market. The positive impact of these opportunities is that it gives Apple the chance to extend its market share. However, these opportunities require a lot of funds to implement because they involve launching of new products in the market.
Threats
Today the biggest threat facing Apple and its competitors is the rapid technological change. Customers are becoming more technology lovers and they want more and more new improved products within a short time. This requirement from customers is causing a lot of pressure to the companies. As a result, the level of competition is very high and the one who cannot sustain the demand from customers will not survive (McGrath, 2012 p.20). The increase in tax in US will affect the growth of Apple negatively. Samsung is the only company that provides application processors to Apple. This company has asked for higher prices for these services.
Apple has been forced to pay this price because there are no feasible substitutes to provide Apple with application processors (Jung, 2012 p. 90). There is threat that Samsung will continue to increases the prices of its applications. The main competitor of iOS in the mobile market is the OS. There is likelihood that Android OS will dominate the power of Apple IOS in the market. In addition, there is threat in the increased availability of wide range of music stores such as Wal-Mart, Amazon and online music companies. The above explanations show different threats facing the Apple. These threats will lead to reduced sale of Apple products. These threats are of great importance because they make the company to produce quality products. However, they reduce the sale of Apple products.
Strategies used by Apple in the market
Apple uses several strategies to win more and more customers to purchase its products. These strategies help Apple to remain competitive in the market by making its products unique. This uniqueness helps customers in differentiating Apple products in the market. These strategies have proved to increase the purchase of Apple products. The following are the two main strategies used by Apple to remain competitive in the rapidly changing market.
Product differentiation
Apple is using the strategy of product differentiation to attract customers from its competitors. It presents outstanding designs of its products, high quality products, and personalized services. This product differentiation makes the products to become unique (Williams & Green, 1997 p.124). I think product differentiation is important for Apple because it will help in withstanding the increased competition. It will help the company to remain competitive in the market. In addition, it will continue putting pressure to the competitors to come up with their new strategies in the market.
Value creation by focus and cost leadership
Apple has outsourced its production to reduce its operating cost to a third party through vast economies of scale. Apple has outsourced with the original equipment manufacturers company. Apple emphasizes on the user interface and industrial design to make a product that is highly innovative, user friendly and stylish in nature. In market, Apple has great command on higher prices than average prices because of its highly personalized and people friendly products. The prices of Apple products are very high but because of the quality of its products, it continues to make more sales compared to its competitors. Apple outsourcing has increased the sale of its products in the market worldwide.
Customer segment
Apple is operating in a technology industry that is segmented in smack sectors such as computer industry and mobile industry. Currently apple is active in several market segments depending on the nature of the products. It makes use of the customer segmentation to maintain customer satisfaction. This is achieved by creation of customer profiles. The following shows one of the customer profiles of Apple Inc. Heather is a 25- year old single, female from U.S. She is a solo entrepreneur.
She operates a graphic design business. She has already completed a degree in graphics and design at a local college. She is an expert designer using high technology for her business. She is a customer for Apple products like iPhones and tablets. She uses Apple products in designing for her customers. She makes approximately $37,000 every year but she has a dream of making $45000 in the coming years (Masi, 2009, p. 66). She dreams to get many dollars from her business, but recently she understands she has to develop a portfolio and systemize her business to achieve her goal.
Her worry is that she will always fight to fill the pipeline with new customers. She usually performs her job from home office, the third bedroom of a condo she purchased few years ago. She enjoys using Apple products in her office because she feels they are quite effective. She is a great customer of Apple products and she buy s them regularly for her business. She prefers to purchases Apple products in wholesale. The money she pays for these products is invested in other fields of the Apple products to generate high tech devices because she has high demand of high tech devices. Heather can be reached using her private address or through mails.
Apple Company prefers to use emails to contact Heather when her products are ready. Heather uses Apple products to keep herself busy. Some of the services she enjoys are the provision of internet services, iTunes, games, and sending emails from her office. She uses Heather Foundation as her customer profile name for Apple products in the market. Heather is known for purchasing personalized product (Collica, 2011 p.50). Apple Inc regularly contracts Heather to get a feedback on the performance of the products.
She claims that they give her the satisfaction she needs in her business. This means that apple products are successful in meeting customer needs and expectations. These products give customers the best product-experience available in the market segments. Heather uses some of her time taking photos using apple products like tablets. Later she avails them to the customers for viewing. This simplifies her designing job. She also records videos in ceremonies when she is called upon to do so.
However, she provides advice to new customers of Apple Inc products. However, attends gym sessions when she is not in office to shape her body while recording videos that she later uploads to her customers. Heather has proved to be an outstanding customer for Apple Inc products because she has helped in improving the quality of these products. In addition, she avails herself in Apple Inc product adverts. She is supportive, encouraging, hardworking, and principled woman. Apple Inc has enjoyed the partnership of Heather. Lastly, she has invited many friends to create their customer profiles with Apple Inc.
Importance of selecting this segmentation
The reason for choosing this market segmentation is that Heather is a great customer of Apple products. Apple products are very useful and effective to her business. He uses them to communicate with her clients. She is an outstanding customer who makes almost weekly purchases of Apple products in the market. From the data collected and analyzed, it was found that Heather was the leading customer for personalized products. Heather helps the company in designing new products through her feedback.
Conclusion
From the above explanation in part one and two, several factors affect the sale of Apple products. PRESTCOM analysis explains the external and internal factors that are beyond the control of the company. The political, economic, social, market, competitive, organizational, regulatory, and technological factors influence the sale of Apple products in the market. Political factors indicate those factors within a country that leads to instability in the country decreasing the sale of Apple products. Economic are factors within the economy like inflation. Technological factors are caused by the rapid change in technology while social factors are factors that deal with the quality and design of the Apple products.
SWOT analysis involves some internal factors that affect the sale of Apple products. Some of these factors are generated by the external factors. SWOT analysis entails strengths, weaknesses, opportunities, and threats of Apple Company. Apple can use these factors to improve its competitiveness in the market. The final part of this report is about customer segmentation whereby it explains about one of the customers of Apple products. Customer segmentation allows Apple to target specific customers in the market.
It helps the company to allocate resources effectively. Traditional customer segmentation identifies the groups of customers based on demographics and attributes like psychological and attitude profiles. From the above report, it is clear that Apple dominates the market despite producing expensive items. These items are of high quality and design making them to outweigh the competitor’s products.
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