term project

Part 2- Business type of two enterprises

1. Business type

Apple is working to develop the software and hardware’s services that are able to give a seamless experience to its users. Apple mainly designs, sells, and develops consumer’s electronics, online services, and computer software. Apple is the most recognizable company in world, with a large number of stores. Apple is a sole proprietorship; the business type of apple is sole proprietorship as this operates only by itself. It suggests that Apple cannot be affected by any other company; the decisions are only taken by Apple itself. The business market of Apple is also quite high as it gives good product differentiation to its consumer.

Meatier mainly gives consumers software technologies, which provide the most augmented reality solution to the consumers (Challoumis, 2018). It is a subsidiary of Apple, which is situated in Germany. The business type of this company is a subsidiary; a huge market is captured by the company. The target customers are helped to expand the market in an extensive manner. All the decisions are made by Apple and it has freedom to choose actions on its own.

Decision making process is quite complex due to its business type permission from Apple. The business structure of applies built in a way that enhances the organisation to for a rapid upheaval which adds to the success of any company. The company’s is designed with attributes including certain key elements conceived from other company’s structural forms, which help in creating strategies for a technological development. Where Apple holds a business that is hierarchically moulded, the organisation faces its drawbacks as well. The major drawback of the business structure in Apple is serviceable matrix, which collaborates with different inter-divisional operations.

Both the company belongs to the telecommunication industry, as both have good market share and target costumes. The product differentiation is the main factor which leads the both the company to more renown positions (Bebenroth & Froese, 2020). Apple works in the telecommunication industry in this industry and many other companies already exist in the market. Telecommunication industry is a highly competitive market but Apple has some product differentiation, which helps it get monopoly power. In the monopoly market, the product has huge differentiation and no company exists to complete that company. This gets the existing company huge monopoly powers it means that the company is price giver not taker. The same situation is also noticed for Apple to apple products are vastly differentiated with other telecommunication products. It can be suggested that Apple is only targeted at the high-income people. The price strategy of a product is never for middle class people. Its products are expensive and for its targeted customers. The products, which are produced by Apple, only work to reach its target costumes and never compromise with its quality. Therefore, it can be concluded from the above discussion that Apple has a monopoly power that can affect the market price consumers have to take the price. Consumers have no power to influence the market price.

Metaio is operated in an oligopoly market, in this market few firms exist in the market. The competition of this market is imperfect in nature, as not many firms exist in the market. No one has influential power to affect the price level the producers sell almost the same product. I9n these way consumers get few options to buy from the other buyers. The demand curve of metaio is kinked, it suggested, due to few firms the consumers cannot affect the price level in an extensive manner (Singh, et al. 2019). The competition between all the firms is limited in nature; it reveals that the companies can operate in a significant manner. Metaio business is also going smoothly as it has a limited number of rivals in the market. This affects the market to make the position of demand high. Operating in an oligopoly market helped the company to grow and increased the number of targeted audiences. From the entire discussion it can be argues that as a subsidiary Metaio has a low profit share that Apple, due to its monopoly power the company’s profit share is quite huge in number(Castaldi et al. 2019). It can also be observed that the market of Apple has captured the limited targeted people due to its huge piercing but Metaio keeps its price compared to lower level which help the company to capture a large amount of targeted people.

The matrix structure which involves of two or more companies in order to solve the problems aroused in the hierarchy brings the drawbacks in the company Metaio as well. Owing to the matrix structural business type of Metaio, involvement of more managers create a haphazard in the decision making of the company, thereby slowing down the growth. The pricing structure makes the products of Apple differentiated in quality. The business strategy of both companies is different as the company type is different. The share of the market for Metaio is large that Apple as Apple operates single-handed in the market. Three are similar companies, which produce it or homogeneous products, but due to its product quality, it has monopoly power in the market.

Controlled transaction refers to a transaction between two enterprises that are related to each other such as parent company and its subsidiaries. An enterprise indirectly or directly participates in the management, capital or control of other enterprises. In another case, the same person indirectly or directly participates in the management of the enterprise, capital and control of two enterprises. It needs basic requirements for participate in management of another enterprise the criteria is if one enterprise can exercise the control over another enterprise or not. In order started the transaction between two enterprises some basic terms and condition needs to follow by these two companies (apple.com, 2020). The worldwide market for telecom companies are aggressively competitive to one another that requires the companies to launch new product with the increasing rate of transaction. Apple as the whole organisation including its subsidiaries, such as Metaio, focuses in the expansion of the introduction of new products, in the form of ohones, tablets, laptops, etc. The company receives high rated transaction quarterly, where the first quater is noticeably receiving more benefits than others, in a fiscal year. This particular issue is to be addressed by the recurrent holidays. According the Securities Exchange Act formed in the year 1934, the company reports, its transaction of each quarter, as stated in the amendment of the act.

Apple is one of the biggest telecom companies in the telecom industry and one of its subsidiaries is Metaio that is an augmented reality start-up. Apple has acquired this enterprise in 2003 and this acquisition helps Apple to bolster its augmented reality and virtual reality efforts. This subsidiary company of apple is a well established and it produces impressive projects by using its tools. This company works in Germany and produces. Apple made a controlled transaction with this augmented reality start-ups to update its new model by adding some extra feature that satisfy the customers. This acquisition can allow apple to provide facility of augmented reality and virtual reality to customers. In ordered to controlled transaction between two enterprises it needs to abide by some criteria and both companies fulfil those criteria. Earlier Meatier worked eye-catching product for Ikea and Ferrari. Mateo’s advanced technology allows a customer to look at product in showroom and apply different flourishes and colours. The company, Apple after acquiring its subsidiary as Metaio, ceratin downfall is being experienced by the organisation. The shutdown of websites while Metaio cancelled a conference in San Francisco, questioned the marketers regarding the status of Apple. Since, Metaio did not implement the Silicon Valley capitalisation, but has been funded from the Atlantic Bridge, the main organisation; Apple had to face some challenges. Overall Metaio conforms to a huge number of 1000 customers in 30 countries, including 150,000 used all around the world. This particular step taken by the organisation has increased its capital thereby fulfing the demands of the shareholders There are different types of controlled transaction in which way two enterprises complete the transaction process. This controlled transaction process includes visible controlled transaction and invisible controlled transaction. Visible controlled transaction refers provision of services and supply of goods and invisible controlled transaction refers to a guarantee provided to a financial institution for a group credit facility. There are other types of controlled transactions that both enterprises uses for transactions such as supply of goods and services, financing, transfer of business, granting of license and support service. In case of transaction between apple and metaio they used financing and provision of management services transaction controlled methods. Apple follows financing transaction controlled methods and gives financing assistance and management services that help both companies to grow in the market.

Arms length principle is the fact or condition that the parties involved in a transaction are on equal footing and independent. Different countries have different tax rates and multinational company increase its profits to low tax countries compared to high tax countries. Apple always has international transaction and a local head quarter invoicing services and management fees. A parent company provides finance to subsidiary and operational company. A manufacturing enterprise supplies the complete finished product to a distributing part of this parent company. In case of acquisition apple are able to managing the terms and condition of these controlled transaction. A multinational enterprises has a power to control the terms and condition of transaction with another company. In a way this parent company can set the price and able to influence the due tax amount and table profit. In order to prevent this tax administration has establish the arm’s length principle. According to this principle, controlled transaction is done at normal market rates and every organisation has to follow this principle. However, there is some criticism in the Arm’s Length Principle and the main complaint is that it leaves too much scope for interpretation that results a huge discussion between tax administrators and taxpayers. Every brand has not same value and every product is not the same therefore discussion focuses on if the transaction are enough comparable or all condition and terms needs to be same.( Challoumis et al. 2020)

CPM method: The comparable profits method refers a transfer pricing method that based on a principle that suggests the same taxpayer’s needs to earn same return over time. In order to determine the transfer prices CPM methods are used. It is one of the best methods for determining arm’s length principle. US regulation and OECD guidelines have introduced this method rule and five freedoms to revenue authorities as well as to a taxpayer. The various terms that are used in this, method is ‘Earliest start date’, ‘Latest start date’, float and crash duration. In order to apply CPM method a taxpayer needs to first identify the traded companies that operates in a same industry. In order to test the transaction of another subsidiary company the financial data of comparable companies are used. As an example if a company has headquarter in United States this parent company has a responsibility of financing and establishing business strategies. Parent company also has a responsibility to own and develop the intellectual property such as trade names, trademarks, design and so on. This parent company wishes to enhance it business globally and establishing another subsidiary company. In this report, the parent company is apple that ha s a headquarters in United States and that wishes to expand its footprint globally is establishing a subsidiary in Germany. This subsidiary company has a responsibility to develop the Germany market by using the brand of parent company and selling their items to Germany consumers.

Tested party: Tested party refers an entity whose margin of profit is compared with the comparable. This tested party is a useful entity in order to measure arm’s length principle. It is an important factor to identify such entity that is known or point of reference. This entity is used to determine which enterprise is eligible for a trustworthy transaction. The tested party needs to fulfil the basic criteria of transaction so that an enterprise involves with another enterprise without any hesitation. The tested party choice needs to be consistent with functional analysis of the process of transaction. In short tested party is the one in which pricing of transfer can be applied to a smooth and reliable manner.

Part 5

Interquartile range

Table 1: Apple Quarterly revenue

(Source: Created by researcher)

It can be observed by the data that the interquartile revenue of Apple from 2020 to 2018 fluctuates over the year. It is further observed that in 2018 in the third month the revenue share was quite high but reduces that year again in the sixth month. Again in that year in the ninth month it again increased by $9000. It is again a reduced increase in the twelfth month thus, it can be concluded that when the income level of people increase consumers invest the money on the luxury items. In the last month of the year, the demand for apple products was high which is reflected on the revenue level directly. Again, in the next year it can be analysed that the same pattern is followed. In the boom prisons when people have enough money the revenue, scale goes into its peak but in the later portions, it loses its revenue shares. In table 1 the data for 2019 shows that in the 3rd month the profit level was high but in the sixth month it a again decreases but in the 9th month the revenue scale again incense around 2 percent again in the 12th month the revenue scale increase comparatively higher than the previous rate of growth in the revenue. Lastly, the revenue share of 2020 is elaborated as in the third month in the year, the revenue share was quite low after it increased in an extensive manner. In the ninth and in the twelfth month the revenue share is increased constantly as an expansionary form. The above scenario reveals the logic that in the recessionary period the demand level gets down comparatively. In the recessionary period, the table shows lower revenue in the boom period the demand increased which is reflected in its revenue share. In a year, the fluctuation was noticed and the demand functioned over the months. Accept income and share several factors, which influence the demand for apple products (Sarabi et al. 2020). New technology is supposed to be adopted by Apple then its demand will rise. In 2020, the revenue share will increase but not get so high compared to other years. It is due to current pandemic the demand for apple product increase but at a decreased manner. Decreasing level demand also decreed the profit share; the main adjustment is needed in those quartile ranges where the revenue orange is to love. From the above table it can be observed that in the initial months of a year the demand for this type of producer generally lies in its lie. Need to eliminate the factor, which negatively affected timid time of profit shares. The factors can be at the beginning of a year the people may not have enough money to buy such an expensive product so the demand is negatively impacted. Other adjustments can be the company can adopt a much advanced level of technology, which can help the demand to increase in an extensive manner. In this period to increase the demand, the company can adopt new strategies such as some offers, which leads all consumers to buy products at that period. More strategies can be better quality as the quality of apple products is good but higher quality leads the demand to increase in an extensive amount. Accept all these good sifts wars can raise the demand for apple products; it can be increased at the beginning of the year where the demand generally is low. All these strategies will help the company to increase the asset and reduce the liabilities as these factors mainly create the main loopholes in the company’s balance sheet. It can be concluded from the entire discussion that the main adjustment it needs to focus on is the recessionary period where the demand to its targeted people is also know. This can increase the revenue level in all the years this can help to maintain a balanced structure and earn more profit level. More profit earning helps the company to make more customer centric products with monopoly power. This intern helps the overall share of the company to grow in a rapid way.

In this report the topic is highlighted the business of a parent company that is apple and its subsidiary company that operates its business in Germany. However, these two companies operate such country that has different tax jurisdiction. In order to run successful business the company needs to operate a business in such country where a tax rates is low compare to such country where tax rates are higher. Therefore, it is concluded that apple operates its business globally and collaborate with such company in which country there are a fare tax rate. It is however suggested that there are several another company an apple is working with are different country and represent their product globally. Introduction of Apple maps in collaboration with Metaio, in the technological market, is going to be a great advantage in the world, for the company and also for the users. This strategy made by Apple, and its subsidiary is going to receive a great response from the users as they are to be helped in finding the accurate direction. The entire business depends on the tax rates of country. Several organisations make collaboration with such company whose headquarters are in such a country whose taxation process is smooth and know. In this report apple and its subsidiary has different taxation jurisdiction therefore apple can compare its business in home country to another country. Collaboration with this company allows apple to provide facility to the customer a real life experience. This company also works for a Ferrari and assist them top design unique product.

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