UK Government and Economy

Apple Inc. is an American Multinational Corporation headquartered in California. It designs, develops and sells consumer electronics. Its main products include computers (Mac), music players (iPod), smartphones (iPhone) and tablet computers (iPad). In this study, we are focusing on one of its product line – iPhone in the UK market. The main software used by Apple in its product lines are OSX, iOS and iTunes. The first generation iPhone was released in mid-2007. The basic functionalities which an Apple iPhone possesses are multi-touch screen, virtual keyboard, take photos, play music, send and receive email, text messages , GPS navigation, record notes , visual voicemail , video games , social networking, reference work and download mobile apps (Mani & Stoyanov, 2015). The first iPhone was considered as revolutionary or game changer for the mobile industry. The further versions has captured appreciation and dominated the market. IPhone’s success has contributed a lot in making Apple one of the most valuable consumer electronics companies. The iPhone boosts the financials of Apple.UK market has multiple smartphone players like RIM, Apple, Samsung etc. The market is very promising for these well established players. The competitors try to offer new features and compete with Apple (Ying, 2016). Some of its major competitors are Samsung and Research in Motion.

The various sections for strategic analysis of Apple I Phone business can be discussed as:

Political Analysis

The UK government has taken monetary and fiscal initiatives to address the deteriorating economy. It is taking a lot of measures to aid banks and help providing employment to people. The tax rates are high for the higher income group. The government in UK is stable. It is very successful in terms of application of rule of law, corruption control, regulatory quality and government effectiveness. According to World Bank, the UK government ranks satisfactory.

Economic Analysis

Because of robust economic growth, the UK economy is continued to be benefitted. Services sector is majorly dominated in the southern part of UK where as industrial activity is more prominent in northern parts. There is decline in industrial sector but services sector has flourished. This resulted in increase in contribution of services sector in UK’s GDP. The UK banks try to increase the interest rate cut in order to boost lending. This further leads to increasing the money supply in the market (Campbell-Kelly & Yang, 2015). 

However the inflation rate in the country has been increased. The inflation rate is highly dependent phenomenon based on oil prices, political activities like exit from EU, housing services etc. All these things impact the transportation and Food and Beverage costs. The unemployment rate is high in UK. The UK has current account deficit since 1990.The value of currency is not very strong. The current price of smartphones is fair but there are some players like iPhones which are considered expensive.

UK’s Demographics and Economic Situation

Social Factors:

In UK, working age population lies between 15 and 64.This accounts for more than 60% of population of UK (Linge & Sutton, 2016). However, rapidly aging population is likely to become issue in the near future. This leads to relatively shrinking work population in the near future. The health care system of UK is one of the most powerful social ventures. The expenditure of public on healthcare system is very high in order to maintain the quality of life. Coming over to the education, it is considered to be very high quality in UK. The infrastructure is good also UK’s education is highly recognized around the world. There is relative disparity in the income of people. So the standard of living is depreciated. Government is looking out of measures in reducing poverty. Some mobile phone brands like Apple acts as status symbol.

Technological Factor:

A person in UK spends significant amount of time browsing the internet. The number of subscribers to internet is continued to grow. It is mixture of cables, fiber optics and radio waves. The mobile phone market will reach saturation point. The main competition is between Apple’s iOS and Android. Innovation is growing.

Legal Analysis:

According to European Union Labor Laws, the working week is 48 hours in 7 days. The Employment Act 2002, The Employment Rights Act 1996 and several other provisions outlaw race, sex, religion, disability, sex orientation and age discrimination (Bhagavatula & Savvides, 2015). Also there is increase in patent lawsuits among the smartphones players.

Environment Analysis:

Defra is the government department taking care of environmental issues. One of the key responsibility of Defra is to empower and aware people about environmental means. The environmental policy in UK is based on principles of command. UK has stringent law for the protection of environment. The company’s development strategy provides structure to its economic, social and ecological development. There are various initiatives for sustainable development. The foundation of sustainable development includes natural resources, bio- diversity, waste, health and quality of life (Clarke & Boersma, M. (2017). So it is the responsibility of manufacturers to comply with standard norms.

The micro environment is comprised of firm’s supplier, distributor and competitors.5 force analysis helps in determining whether the industry is attractive enough or not. The model consist of the five forces: Bargaining power of suppliers, bargaining power of Buyers, Threat of new entrant, Existing rivalry and threat of substitutes.

Mobile Phone Industry Competition

Threat of New Entrant (LOW)

Any new company planning to enter into this product line should have intensive capital, marketing and technological power to make an impact in the market. However, there are some key players like Google who work regressively in Software development services. So it is easy for them to enter into this product line. Many new entrants like Oneplus, ZTE have introduced themselves into the market .Thus there are many big players which makes this industry unattractive for the new entrant.    

Threat from existing rivalry (High)

The mobile phone industry has witnessed a significant change. Major players in the smartphone or mobile segment include Apple, Samsung, LG, and Research in Motion, Microsoft, and Google etc. Other indirect players are Cirrus Logic and Qualcomm. The credit of success of these companies goes to innovative and new modern approaches (McWilliams & Coughlin, 2015). These approaches help in improving user interface design and ease the use of hardware. The intensive competition has led to increase in patent technology. The majority of smartphone competition is related to touch screen, transmission of mobile data and data access. Research in Motion dominates the mobile data access cluster and however iPhone dominates the touch screen.

Threat of substitutes (low)

With additional features in smartphones like watch, camera, pagers, organizers along with phone calls, smartphones are here to stay for long. The added functionalities from other electronic devices make smartphones’ services sufficient for the mobile industry.

Bargaining power of Buyers (Medium)

The bargaining power of buyers’ is medium. Customers have relatively large amount of options to choose from due to more companies like OnePlus coming in and are appreciated by customers. Also there is always price war among the smartphone provider which gains good attention from customers. There are ranges of customers who are loyal to particular brand.

Bargaining power of Buyers (Medium)

Mobile phone manufacturers depend on the suppliers so this makes the bargaining power of suppliers medium. The manufacturers buy these quality components from suppliers at competitive prices. Some components like Android operating system are open source.

IPhone’s success is also contributed to its luxurious brand image globally. One of the biggest aspects is pricing difference between IOS phones and Android. The Android smartphones are considered to be affordable. Apple generally fills its pocket from high income group. It is necessary to make a unique distinction in the market by using integrated technology, attractive looks, good quality, value added services etc. Apple try to invest a lot in Research and Development to bring new and unique products that will help in retaining its brand image. Some customers are loyal to the brand. IPhones are considered unique and innovative. Apple’s tangible resources include talented employees, software, hardware, suppliers and retail stores (Piao & Kleiner, 2015). Its intangible resources include cash, brand name, knowledge, customer’s database, unique design capabilities, innovation capabilities, powerful brand image. Apple constitutes highly professional programmers, engineers and designers that produce award winning software like iOS. There are large amount of apps on the Apple store designed particularly for iPhone. They provide much functionality.

Apple’s Resources, Capabilities and Competitive Advantages

VRIO analysis of Apple iPhone

The VRIO analysis helps in analyzing company’s resources and capabilities. It checks whether resources and capabilities are valuable, rare, inimitable and the company is organized enough to exploit the resources or not. Based on this parameter, it evaluates whether resources provide sustainable competitive advantage (SCA), temporary competitive advantage (TCA) or competitive parity (CP) (Knott, 2015).    

Resources/Capabilities Of Apple iPhone	Does it have Value?	Is it Rare?	Is it Inimitable	Is the company Organized to exploit the resources	SCA, CP, tCA
Brand Name	Yes	Yes	No	Yes	SCA
Top Executives	Yes	Yes	No	Yes	SCA
Innovation and Technology skills	Yes	Yes	Yes	Yes	SCA
Supply Chain Management	Yes	No	No	Yes	tCA

SWOT analysis helps in summarizing both external and internal analysis. It reflects the strategic capability of the organization and issues from the business environment.

Strength:

Strong Brand Image: iPhone is considered as innovative product with high quality and outstanding design. Apple’s brand image is growing at fast pace worldwide. It is one of the recognized worldwide brands. The unique products and features reinforce its luxurious brand image.

Financial Performance: Apple’s financial reports reflect its strong performance. The company is generating good profits with its many key products like iPhone. In spite of its high prices the company has made mark worldwide. Strong financial performance leads to more investment in Research and Development which further makes it very rich in terms of large number of patents.

Innovation: iPhone is the result of innovation spirit. Steve Jobs, the former CEO of Apple, wanted to make a phone which consists of only one button (SHENG & CHEN, 2015). The result is iPhone. Being innovative help the company to emerge in smartphones market. Innovation’s spirit also contributed to Apple chain of high class retail, its iTunes stores. It is considered as one of the most innovative companies in the world. 

Weaknesses

Dependency on the new product: In order to stay relevant in the market, it is necessary for Apple to launch new version of iPhone in the market at fast pace. This sometimes led to pressure on the human resources to come out with new technologies and design which maintain its position of differentiation in the market.

Dependency on the name of Steve Jobs: Steve Job was smart and effective CEO of Apple. It was his vision which makes Apple one of the most renowned companies in the world. His absence may lead to the fall of the company. The company still uses his brand image to reflect company’s personality. Many people believe that post Steve Jobs the quality and the benchmark which company used to give have suffered a lot (Kane, Y. I. (2015).

Opportunities

Market Growth: The Company is planning to create a mobile search engine better than its competitor Google (Thao & Tsanthaiwo, 2017). It can improve the security of data generated on iPhone. It will help in maintaining the edge over the competitors. It also provides opportunity to improve the market growth for its products.

VRIO Analysis

Increase exposure in Market: With improving economy of many emerging markets, Apple has good opportunity to introduce its products in these new markets. Mobile phones also lead to increase in sales of its accessories. The company can make changes in the prices to attract wider audience.

Threats

Strong Competition

Technology changes at a very fast rate. IPhones have been created by using innovative technologies. This gives reputation to Apple in the iPhone industry. But Apple in this smartphones segment has lot of competitors.

 External forces

The government policies look very promising but certain legal and environmental laws may always act as threat for the Apple. Sometimes the government tries to boost home grown company and thus lead to increase in import rates. Also labor laws and environmental laws take priority.

The company uses Product differentiation strategy .It is committed to unique design and innovation that helps in differentiating it from the rest of the competitors. Few years back, the market of mobile phones was dominated by players like Nokia, Samsung etc. but Apple introduced iPhone which has created a revolution in the market. Its design, looks, user interface appealed to the customers (Sun & Cai, 2017). This has helped in gaining customer loyalty. Apple also sets itself apart from its competitors by proving different application and software in its iPhone’s hardware. The architecture of retail stores which is designed to attract the customers helps it in differentiating from its competitors.

Ansoff matrix determines the product and marketing strategy followed by the Apple for iPhone. It has 4 parameters (Dawes, 2018).

Market Penetration: It means selling existing products to existing markets. Apple tries to use this by various marketing efforts and promotion strategies.

Product Development: This involves developing new product to sell to existing market. Apple follows this as core growth strategy.

Market Development: It means finding new market for the existing products. Apple also looks at this strategy. It tries to enter in many attractive markets like South East Asia etc.

Diversification: Selling new products to new market. Apple does not follow this strategy. 

The study helps in analyzing various aspects of iPhones in UK market as well as globally. It is necessary that Apple maintains its position in this growing competitive market. This is possible only if it maintains the status quo of its product. Its recent launches, iphone8 and 10 are not very much appreciated by customers. This proves that customers have high expectation from this world class company in terms of design, quality and technology. The company which has Tim Cook as the CEO need to have innovative minds on the board who could replace Steve Jobs in terms of its technical and leadership skills. The company needs to reduce dependency on Steve Jobs’s Image. The company also needs to continuously monitor the growing competitors in the market like ZTE etc. It needs to create different strategy to outpace such competitors. Its new search engine against Google is good strategy to provide long term sustenance. Also company can upgrade marketing and selling efforts to attract large number of customers. This includes provide iPhones on installments, free accessories or apps etc. This may help customers to perceive that iPhones are affordable (Bonk, 2015). The company also needs to come up with fresh products with in reduced cycle team. This can be done by proper market research and investment in highly skilled human resources.

SWOT Analysis

Conclusion

IPhones are one of the most aspiring smartphones worldwide. The parent company Apple is highly recognized and renowned. In UK market also iPhones are able to make a big impact. They are one of the largest selling smart phones along with Samsung and RIM. The PESTLE analysis UK has shown that market is promising except during low economic growth time and various stringent laws for environmental and labor. It is seen that Apple has dependency on suppliers but since it has large networks of suppliers so it lies in medium, range. It has loyal customers. But this does not ignore the fact that market is competitive and customer’s switching cost is low (Hassouna & AbouTrab, 2016). The company can introduce Artificial Intelligence and Machine learning in its device to enjoy its dominance. However, there is no substitute of smartphones so the company needs not to worry about this aspect. There are multiple resources of the company which provide sustainable competitive edge to the company like its innovative spirit, its executives etc. (Minakov & Shiyanova, 2015). So the main threat to the company is its competitors. The company uses all three marketing strategies i.e. Market penetration, product development and market development. However, the generic strategy which company pays on is product differentiation.

References:

Bonk, C. (2015). The impact of Apple’s communication and French and Finnish consumers’ product perceptions: case of the iPhone product.

Bhagavatula, C., Ur, B., Iacovino, K., Kywe, S. M., Cranor, L. F., & Savvides, M. (2015). Biometric authentication on iphone and android: Usability, perceptions, and influences on adoption. Proc. USEC, 1-2.

Campbell-Kelly, M., Garcia-Swartz, D., Lam, R., & Yang, Y. (2015). Economic and business perspectives on smartphones as multi-sided platforms. Telecommunications policy, 39(8), 717-734.

Clarke, T., & Boersma, M. (2017). The governance of global value chains: Unresolved human rights, environmental and ethical dilemmas in the apple supply chain. Journal of Business Ethics, 143(1), 111-131.

Dawes, J. (2018). The Ansoff Matrix: A Legendary Tool, But with Two Logical Problems.

Hassouna, M., Tarhini, A., Elyas, T., & AbouTrab, M. S. (2016). Customer Churn in Mobile Markets A Comparison of Techniques. arXiv preprint arXiv:1607.07792.

Kane, Y. I. (2015). Haunted Empire: Apple After Steve Jobs. Harper Business.

Knott, P. J. (2015). Does VRIO help managers evaluate a firm’s resources?. Management Decision, 53(8), 1806-1822.

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McWilliams, T., Reimer, B., Mehler, B., Dobres, J., & Coughlin, J. F. (2015, September). Effects of age and smartphone experience on driver behavior during address entry: a comparison between a Samsung Galaxy and Apple iPhone. In Proceedings of the 7th International Conference on Automotive User Interfaces and Interactive Vehicular Applications (pp. 150-153). ACM.

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