1. Introduction
Being the world’s most valuable brand that is known for innovation, Apple Inc.’s success could be directly linked to its proactive response to the changing external environment. With efficient strategic management, Apple exploits the opportunities and mitigates the threats that challenge its market leadership position.
Apple pest analysis, or more comprehensively, Apple pestle analysis identifies the important external factors that Apple must strategically address to protect its competitive positioning in the market. Pestle analysis of apple discusses political, economic, social, technological, environmental and legal factors that shape Apple’s macro-environment. These factors act as opportunities or threats, and have important implications for Apple Inc.
2. What industry is apple in?
To understand the impact of macro-environment on Apple, we have to firstly see what industry is apple in?
On NASDAQ exchange, Apple Inc. is listed as a technology company that operates in computer manufacturing industry. As company has recently diversified its portfolio, it currently operates in three industries- consumer electronics, software services and online services.
3. Company overview
Customer centricity and innovation underpin the Apples business model, due to which people consider Apple synonymous with innovation. The company was founded in 1976 by Steve Jobs, and is known for manufacturing personal computer, smartphones, wearables, tablets and accessories. Recently, the company has started investing heavily on a range of services, including- Apple TV+, Apple News+, Apple Fitness+, Apple Care+, iCloud, Apple Card and Apple Arcade.
Apples business model innovation and its marketing strategy- both are two core reasons behind tech giant’s enormous success. We have discussed the secret behind Apple’s market leadership success in our previous article, and have also conducted SWOT analysis of Apple by taking an inward view. In this article, we discuss the Apples business model resilience by taking an outward view.
To do this, we conduct Apple pestle analysis, which is a useful framework to understand how external environmental forces are influencing the Apples business model, how company is responding to these forces, and what company can do to enhance its resilience in post-pandemic world.
Before we conduct external environmental scanning by applying PESTLE framework, have a look on Apples business model:
| Key Partners | Key Activities | Value Propositions | Customer Relationships | Customer Segments |
|---|---|---|---|---|
| Manufacturers/ App developers, publishers/ content creators, phone companies Total 345 partners, including- 275 tech partners, and 70 channel partners. | Manufacturing, product designing, software development, marketing | Think different Brand status Premium, high-end brand image Holistic use experience | Efficient customer support, quick customer service, loyal customer base, Apple self-service | Product buyers Service subscribers |
| Key Resources | Channels | |||
| Intellectual property, design culture, brand value | Apple stores Third party retailers Apple website | |||
| Cost Structure | Revenue Streams | |||
| Product development, staff, marketing, research | Product sales Subscription revenue Licensing, Apps and media | |||
Now, let’s discuss how each external environmental force is influencing different areas of Apples business model.
4. PESTLE Analysis of Apple
4.1. Political factors
‘P’ of Apple PESTLE analysis refers the ‘political factors’ that shape overall political environment in which Apple operates in. Here are some most important political factors that have strategic implications for Apple Inc. Each factor is classified as ‘Threat (T) and/or Opportunity (O)’:
4.1.1. US-China trade war (T)
As per CNBC, on-going political tensions between China and USA has become a serious political issue for Apple Company. Rapid increase in the US tariffs on Chinese imports and consequent rise in taxes by Chinese government on Apple products is shrinking the Apple’s market size in China. Apples business model heavily relies on low cost manufacturing in China. So, it can affect the revenue and cost structure of Apple Inc.
4.1.2. Taxation (T)
Apple benefited from the Trump’s corporate tax reduction from 35% to 21%. However, Bloomberg reported that Biden administration plans to end the corporate tax cuts, which can increase the Apple’s production cost and harm its profitability.
4.1.3. Political lobbying (O)
Apple Inc. heavily invests on political lobbying, which directly serves the Apple’s business interests. Apple Insider reports that Apple has become lobbying powerhouse, which shields the organization against antitrust threats. Following graph shows the Apple’s spending on political lobbying from 2009 to 2022:
Source: Statista
Bloomberg’s recent report considers Apple’s CEO as one of the most powerful and politically active corporate leader in the country.
4.1.4. Trade policies (O and T)
In post pandemic world, free trade agreements are on rise. Like, UK government is entering into free trade agreements with USA, New Zealand and Austria. Apple Inc. is likely involved in these free trade agreements, which will expand the company’s reach to target market. But, US-China political tension is limiting trade opportunities for Apple, as China is a big market for Apple’s products. So, this factor imposes both- opportunity and threat to Apple Inc.
4.1.5. Apple-Twitter tension (T)
The recent tension between Twitter’s Elon Musk and Apple signals a new possible war between two tech-giants. If this issue remains unresolved, it can hurt both companies.
4.2 Economic factors
4.2.1. Chinese and Korean manufacturers (O and T)
Emergence of Chinese and Korean manufacturers, and their growing popularity among smartphone users has become a threat for Apple. However, Apple’s strong brand positioning is proving to be a shield against intense competition. As reported by Telecom, Apple captured half of the total high-end smartphone sales in China. Despite the growth in Chinese and Korean high-end manufacturers, consumers are still preferring Apple due to its strong image.
Currently, Chinese and Korean high-end smartphones are unable to compete Apple. However, to preserve this opportunity in long run, Apple has to work really hard, or otherwise, it will be unable to preserve its leadership position.
4.2.2. Consumers’ purchasing power post-pandemic (T and O)
As reported by CNBC, Pandemic has negatively affected the consumers’ purchasing power. Apple Inc. targets both- upper and middle class segments. It has noted a decline in sales as consumers’ purchasing power has shrunk. However, a report by Reuters that this impact could be temporary, and consumers’ purchasing power will grow back as economies rebound. So, in short-term, consumers’ reduced purchasing power could be a threat, which may eventually turn into an opportunity for the company.
4.2.3. Inflation (T)
Inflation is negatively affecting the Apple Inc. as it directly increases the global logistics costs. However, as company operates in luxury market segment, so it will somehow be protected from the inflation impact due to luxury industry’s inflation immunity.
Source: Insider Intelligence
The graph shows that despite the inflation, the luxury sales will likely rise from 2022 to 2026 in USA, but the market growth rate will fall from 13.3 percent to only 1.3 percent.
4.2.4. Cost of production (T)
Apple’s production cost has raised significantly due to multiple factors (like post pandemic inflation, reduced purchasing power, increased tariffs due to US China tensions etc.). If production cost raises further, it can affect the Apple’s profitability.
4.2.5. Tagnating wage growth (T)
Due to stagnating wage growth, Apple workers are unionizing against the company and are demanding better work conditions. If Apple does not timely responds to workers’ demand, it can hurt the brand image.
4.2.6. Exchange rate (T)
As Apple has strong worldwide presence, the volatility in exchange rate of major currencies is directly affecting the Apple’s performance.
4.2.7. Emerging economies (O)
In post-pandemic environment, leading world economies are quickly recovering from pandemic effects. Like, US economy returned to pre-pandemic growth rate in second quarter of 2021, and Asian economy is expected to grow by 4.3% in 2023.
Following figure shows the Asian smartphone market growth projections 2020 to 2027:
Source: Research and markets
Other than Asia, many emerging economies from the Middle Eastern region also present growth opportunities to Apple Inc. and other smartphone manufacturers:
Source: Canalys.com
Strong re-bound of emerging economies and their positive growth projections ahead present exciting growth opportunity to Apple Inc.
4.3. Social factors
4.3.1. Longer upgrading time (T)
As reported by CNBC, the societal expectations of upgrading the phone every 1 to 2 years are on decline, as customers now wait for longer before upgrading their expensive smartphones. Apple is known for quickly introducing new models. So, this trend can negatively affect the company performance.
4.3.2. Growing love for branded products in Africa (O)
Luxury brands are considering Africa as the next market with high potential. Apple has potential to further penetrate into African market. As Apples business model targets affluent customer segment, Africans’ growing love for luxury branded products presents an attractive opportunity to Apple.
4.3.3. Growing tech-savvy, younger population (O)
The tech savvy youth is offering hope to the companies that have positioned themselves as innovative, high-tech brands. Apple can consider youth’s tech savviness and love for innovation as an opportunity, and develop products that meet their expectations.
4.3.4. Anti-Apple sentiments (T)
The anti-apple sentiments are growing for various reasons, like too high prices, poor communication and anti-consumer practices. If unresolved, this issue may harm the Apple’s brand reputation.
4.3.5. Generation Z less loyal (T)
Generation Z is more demanding and less loyal than previous generations. A study by Forbes indicates only 37% of generation Z falls in loyalist category compared to 56% baby boomers. They continuously look for the innovative solutions, and it’s harder for Apple to maintain loyalty as proportion of generation Z is growing.
4.4. Technological factors
4.4.1. Growing dependence on digital platforms (O)
In post pandemic environment, the digitalization trend has accelerated, which presents an exciting growth opportunities to the cloud service providers. As reported by Forbes, the Cloud spending has increased by 37% during 1st quarter of 2020. Apple can take it as an opportunity and expand its iCloud services to cater the businesses’ growing digital needs.
4.4.2. Growing demand for streaming services (O)
There is sharp increase in the demand for streaming services. According to PR Newswire, market size of online streaming services is likely to grow by 18.74% during 2020 to 2025. As Apples business model generates revenue from online services as well, so Apple can take it as an opportunity and grab bigger slice for its Apple TV+.
4.4.3. Growing cybercrimes (T)
Cyber security venture reports that the growing cybercrimes may cost world more than $10.5 trillion annually by 2025. Apple has high vulnerability to the cyber-attacks that can affect the millions of consumers.
4.4.4. Growing digital maturity (T)
The pandemic has accelerated the digital transformation process, and has compelled firms to build their technological capabilities. Apples business model mainly relies on the innovation and technology. Growing digital maturity and improving technological capabilities of other firms can threaten the Apple’s positioning as the ‘most innovative firm’.
Although, Apple’s eco-system is highly resilient. But other tech firms are quickly catching up, and are introducing their own innovative versions of tech products/services. So, remaining the king of innovation can be a serious challenge for Apple.
4.5. Legal factors
4.5.1. Data privacy laws (T)
Data privacy laws are getting stricter. Consumers are increasingly concerned about their privacy. Although, Apple claims it prioritizes the consumers’ privacy, but Guardian reported that Apple shared consumers’ data with the law enforcement agencies 90% of the times, and as per experts, Apple needs to work more to ensure privacy of its customers’ data.
4.5.2. Anti-trust legal actions (T)
The prevailing regulations discourage the monopoly. But, Apple has been receiving criticism for engaging in monopolistic practices. As per Verge, Apple recently faced lawsuit for having illegal monopoly over contactless payments. Such lawsuits hamper stakeholders’ trust, hurt brand image, and deteriorate the financial performance.
4.5.3. Patent infringements (T)
Apple faces the threat of reputation damaging lawsuits for patent infringements. Recently, Qualcomm sued Apple for using its patented technology. Inability to avoid infringement issues can not only damage brand image, but can also affect the company’s financial performance.
4.5.4. Legal conspiracies (T)
Recently, Apple was accused of intentionally slowing down performance of older phone models to push the sales of new models. Resultantly, it paid $500 million as compensation to its customers (Reuters). Any such conspiracy in future can hamper customers’ trust and threaten the Apple’s competitive positioning in the market.
4.5.5. Legal complexities (T and O)
The tensions between US and China and US and Russia have made legal environment much more challenging for Apple. However, Apple is handling these issues wisely. Recently, the legal complications compelled Apple to abide by Russian law offering government-approved apps. Users will opt out whether they want to install the government approved apps or not.
4.6. Environmental factors
4.6.1. Sustainability trends (O)
Forbes reports that consumers (particularly generation Z) are becoming more environmental conscious after pandemic. This growing environmental consciousness is compelling companies in invest on sustainability. Recently, Apple has expanded the use of recycled materials in product manufacturing, and to achieve the closed loop goal, company is investing on new disassembly technology. Apple can take further such initiatives and consider sustainability investment as an opportunity to reposition itself as an environmentally responsible brand.
4.6.2. Green technologies (O)
Use of clean, energy efficient and green technologies is on rise. Apple can take it as an opportunity to invest on green technologies and reduce emissions. Since 2016, Apple has issued three green bonds (worth $4.7 billion) to bring clean power and release pressure on environment.
4.6.3. E-waste disposal (T)
The e-waste disposal has become a serious environmental issue. However, as per Guardian, Apple is currently not playing an effective role in tackling its e-waste issue. Inability to respond to this problem can harm the brand image, and draw criticism from environment protection groups.
5. Apple PESTLE analysis summary
Here is a snapshot of Apple PESTLE analysis:
PESTLE analysis of Apple
| Political factors | Economic factors | Social factors |
|---|---|---|
| • US-China trade war • Taxation rate may rise • Political lobbying benefits Apple • Trade policies (free trade with some countries, restricted with China) • Apple-Twitter tensions | • Chinese and Korean manufactures (more competition) • Consumers’ decreasing purchasing power • Rising inflation • Rising cost of production • Stagnating wage growth • Exchange rate volatility • Emerging economies | • Longer upgrading time • Growing love for branded products in Africa • Growing tech-savvy • Younger population • Anti-Apple sentiments • Generation Z less loyal |
| Technological factors | Legal factors | Environmental factors |
| • Growing dependence on digital platforms • Growing demand for streaming services • Growing cybercrimes • Growing digital maturity | • Data privacy laws • Anti-trust legal actions • Patent infringements • Legal conspiracies • Legal complexities | • Sustainability trends • Green technologies • E-waste disposal |
6. Recommendations
• Apple should decrease dependence on China, and explore other low-cost areas
• Remain prepared for the possible tax increase.
• Introduce more budget smartphones to widen the reach to market
• Resolve workers’ concerns and improve their working conditions to avoid strikes / disruptions
• Expand operations in emerging economies, particularly Africa
• Take some time in introducing new models as consumers now take more time in upgrading their phones
• Understand unique needs of tech-savvy youth (generation Z)
• Resolve anti Apple sentiments by investing on public relations and improving communication
• Improve relation building strategies with generation Z that continuously looks for innovative solutions
• Expand iCloud services, and leverage opportunity offered by quickly growing streaming industry
• Win customers’ trust by ensuring security and privacy of customer data
• Proactively respond to the allegations, and take measures to win back customers’ trust after a series of law suits
• Adopt effective strategies for e-waste disposal
• Invest more on sustainability and green technologies to position Apple as environmentally responsible brand.
7. Concluding remarks
Apple’s case study shows how successful firms proactively respond to the macro-environmental changes. If you want to know more about Apple’s success, have a look on Apple SWOT analysis, or read story “Secret behind Apple’s market leadership”
Apple’s market leadership is directly challenged by Microsoft. To know more about “Microsoft marketing strategy”, click here.
8. References
Why Apple is the most valuable brand in the world. (n.d.).
Access Denied. (n.d.).
Leswing, K. (2019, May 14). Here’s why Apple is so vulnerable to a trade war with China. CNBC.
Bloomberg – Are you a robot? (n.d.-c).
Peterson, M. (2022, July 21). Apple has become a lobbying powerhouse amid growing antitrust scrutiny. AppleInsider.
Statista. (2022d, December 9). U.S. lobbying expenses of Apple 2009-2022.
Chen, X., Liu, Y., & Gong, H. (2021, December 15). Apple Inc. Strategic Marketing Analysis and Evaluation. Atlantis Press.
Telecom, E. T. (2022, July 3). Apple captures half of all smartphones sold during Chinese online fest. ETTelecom.com.
Bradley, S. (2022, February 24). Apple is a market leader, but can it keep its hold on creative hearts and minds? The Drum.
Leswing, K. (2022b, July 1). How inflation will affect Apple. CNBC.
Mutikani, L. (2022, October 28). Rise in U.S. consumer spending beats expectations; wage inflation slows. Reuters.
Feger, A. (2022, November 22). What’s happening with luxury in 5 charts. Insider Intelligence.
Peterson, M. (2022a, February 18). Apple Store workers are starting to unionize, citing stagnating wages. AppleInsider.
Regional Economic Outlook for Asia and Pacific, October 2022. (2022, October 13). IMF.
Ltd, R. A. M. (n.d.). Asia Pacific Smartphone Market 2020-2027 by Operating System, Display Technology, Screen Size, RAM Capacity, Price Range, Distribution Channel, and Country: Trend Outlook and Growth Opportunity. Research and Markets Ltd 2022.
Canalys Newsroom – Middle Eastern smartphone market to return to double-digit growth in 2023. (n.d.).
Ng, A. (2019, May 17). Smartphone users are waiting longer before upgrading — here’s why. CNBC.
Brooks, R. (2022, August 10). 3 Things You Need To Know About Gen Z And Brand Loyalty. Forbes.
Borcherding, B. (2021, April 27). The Future Of Cloud In A Post-Pandemic World. Forbes.
Keary, T. (2022, August 22). Why Apple products are more vulnerable than ever to security threats. VentureBeat.
Bhuiyan, J. (2022, September 23). Apple says it prioritizes privacy. Experts say gaps remain. The Guardian.
Clark, M. (2022, July 19). Apple’s getting sued for having a monopoly on the iPhone’s tap-to-pay. The Verge.
Brittain, B., & Brittain, B. (2022, October 3). Apple loses second bid to challenge Qualcomm patents at U.S. Supreme Court. Reuters.
Stempel, J. (2020, March 3). Apple to pay up to $500 million to settle U.S. lawsuit over slow iPhones. U.S.
Engadget is part of the Yahoo family of brands. (n.d.).
Paoletti, J. (2022, June 1). Gen Z And Environmental Issues: How To Earn Young Consumers’ Trust. Forbes.
Apple. (2022a, November 2). Apple expands the use of recycled materials across its products. Apple Newsroom.
Apple. (2022b, November 2). Apple’s $4.7B in Green Bonds support innovative green technology. Apple Newsroom.
Laville, S. (2020, November 26). Amazon and Apple “not playing their part” in tackling electronic waste. The Guardian.
