How Environment Influences Business Essay

Total Length: 6102 words ( 20 double-spaced pages)

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Effect of External and Internal Environment

Introduction

Organizations have both an internal and external environment. To begin with, the forces or circumstances within the borderline of the organization are the components of the internal environment. Notably, the internal environment comprises for the most part of the owners, employees, board of directors, stakeholders, and the corporate culture. On the other hand, factors that are extrinsic to the organization are the components of the external environment. It is imperative to note that these are elements that the organization bears no control of as they impact the entire the industry and therefore the organization cannot influence how such aspects will shape up (Nieuwenhuizen, Badenhorst-Weiss, and Rossouw, 2008). On the other hand, factors within the internal environment are those that the organization can control and have an effect on how they will turn out to be. The external environment is categorized into the general environment and the task environment. On the one hand, the general environment encompasses factors that may have an instantaneous direct impact on operations but nonetheless impact the organization’s activities. On the other hand, the task environment comprises of factors that have a direct impact and are also impacted by the operations of the firm (Nieuwenhuizen, Badenhorst-Weiss, and Rossouw, 2008). The main objective of this paper is to extensively analyze the effect of the internal and external environment on Apple Inc.

Brief Background of the Company

Apple, Inc. is one of the most renowned and successful companies in the markets. The prevalent company with a market capitalization of $656 billion is pervasive. Since its advancement by Steve Jobs, Apple has come to be one of the largest companies in the market and barely needs an introduction. Apple Inc.’s business operations encompasses the manufacturing and retailing of iPhones, iPads, and a sequence of unveiled laptops and desktops such as the Mac and the MacBook and MacAir. In addition, the company also manufactures the software that is employed in the running of these devices and its business also takes into account a variety of media such as movies, music, e-books, in addition to software applications. Most of all, the company has also integrated a cloud storage service in recent ties and an electronic apple payment processing system (Yahoo Finance, 2018).

PESTLE Analysis

Pestle analysis is delineated as a tool employed in the analysis and monitoring of the external environment of an organization. It is a framework that facilitates the comprehension of the external influences on an organization. These external factors or influences comprise of political, economic, social, technological, environmental, and legal aspects. Pestle analysis is beneficial in the appraisal practice of the dynamic and competitive business setting. It encompasses an evaluation of each of the fundamental factors, which directly and indirectly have an impact on the business performance (Zanoni, 2011).

Political

The political environment is linked with government policies and engagements. The magnitude to which Apple Inc. is capable of accomplishing its key objective of profit maximization is reliant on a variety of political factors comprising of government stability, corruption, extent of bureaucracy and also freedom. In the contemporary, the most significant political aspect that has influenced Apple’s operations is the company’s encounter with the United States Federal Bureau of Investigations (FBI). In particular, the company’s disagreement with the agency took into account the aspect of whether Apple should have been obligated to hack an iPhone account that has been utilized by one of the terrorists during the 2015 San Bernardino mass shooting. Subsequently, this emanated into a political deliberation splitting the general public into advocates and antagonists of the company (Tibken, 2017). This significantly impacted the company in that it had to incur costs as high as $5.46 million in the last financial year and also the revenue generated by the company declined from $58 billion to $50 billion owing to the decreased number of iPhone sales from $61.2 million to $51.2 million in the similar financial period (BBC News, 2016).

Economic

The economic environment takes into account financial performance, the level of demand and supply within the marketplace, levels of employment, and also consumer base levels. It is imperative for organizations to be economically sound in order to prosper. There is an extensive variety of economic factors that impact Apple Inc. both directly and indirectly. One of the key economic factors is the exchange rate in the market. It is imperative to note that Apple generates more than 60 percent of its entire sales from the global markets and for this reason its revenues are adversely impacted by the prevailing inclination of strengthening the dollar.
In the 2014 financial year, chief executive officer (CEO) of Apple, Tim Cook, espoused an approach of hedging the currency with the main objective of easing the adverse impacts of the dollar becoming stronger. Nonetheless, these practices can solely recompense the losses incurred owing to the exchange rate to a certain extent and therefore it is expected that Apple will continue to face foreign exchange rate risk (Adinolfi, 2015).

Another economic factor impacting the operations of Apple is costs incurred by the company. For a long time now, Apple has instituted its manufacturing facilities in China and outsourcing its operations there in order to attain cost efficiencies in terms of resources and also cheaper labor. However, in recent years, this has come to be considerably more challenging owing to the fact that the wage rates in China have experienced a 64 percent increase in the past five years to $3.60 hourly wage rates. This increase in costs has resulted in a decline in the profits generated by the company.

Nonetheless, not all economic factors negatively impact an organization. Another economic aspect that impacts Apple is the rate of taxation. All corporations are mandated to pay taxes, which diminish the earnings generated. However, in the past years, the tax reforms that were propositioned by President Donald Trump to facilitate the level of competitiveness of the companies in the United States in the international market are beneficial. The main objective of decreasing the mandatory corporate taxation rate from 35 percent to 20 percent is bound to positively impact the profits generated by Apple (Thrush and Rappeport, 2017).

Social

The social factor of the framework takes into account the social impacts on the behavior and expectations of consumers with respect to products, services, and organizations on a whole. One of the key social factors impacting Apple Inc. encompasses the significant and progressively increases in the use of mobile accessibility. In the present day, there is the inclination of the rising popularity of mobile access across the globe, which presents a prospect for Apple to continue with the provision of easy to use mobile devices. It is imperative to note that Apple has already taken substantial measures to capitalize on this prospect through the unveiling of such devices like the iPhone, iPad, MacBook, and Apple Watch. In addition, the company has continued to increase its expansion across the world to reach a more extensive consumer base. Secondly, the major rise and adoption of the internet and social media has and continues to have an impact on Apple. This is a major prospect for the company owing to the reason that it leads to an increase in the demand levels for digital products such as those manufactured and retailed by Apple (Lombardo, 2017).

Technological

The technological factor of the PESTLE framework takes into account the manner in which prevailing technologies and technological transformations have an impact on business circumstances. These technological aspects are not only an opportunity to the company but also a threat to its business operations. In the contemporary, one of the key technological factors that has largely impacted Apple is the predisposition of cloud computing. Imperatively, cloud computing had advanced to become prevalent amongst both individuals and organizations. In this regard, Apple has capitalized on the prospect and unveiled the iCloud for increased user storage. However, the company should continue making the most of this change by creating and unveiling devices and applications that are cloud-oriented. Another aspect that has an impact on Apple’s operations is technological integration and assimilation. One of the major trends in the present day amongst consumers is the demand for devices that can be integrated in terms of use. This far, Apple has been able to capitalize on this demand by unveiling the Apple Watch that is in sync with the iPhone for ease in use and also with Nike Plus to aid consumers such as sports professionals to track their activities (Lombardo, 2017).

Advancement in technology has also prompted the growth of the apps market. In the contemporary, there are apps for just about every activity ranging from social connectivity, cooking and fitness, to music, religious, educational and also productivity apps. In this regard, Apple has the prospect of further developing and growing its Apple Store with such apps to increase the number of consumers.….....

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References

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