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LITERATUREREVIEW5.docxRunning Head: CASE STUDY ON APPLE INC,’S EXPANSION TO ASIA AND SOUTH AMERICA 1
CASE STUDY ON APPLE INC,’S EXPANSION TO ASIA AND SOUTH AMERICA
CASE STUDY ON APPLE INC,’S EXPANSION TO ASIA AND SOUTH AMERICA
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ABSTRACT
Telecom manufacturing companies in the United States experience difficult times with the fast-growing rate of technology. According to a 2015 inter-industry survey , the media ranks top with telecom companies coming second in the order of ranks facing possible massive digital interference in the next 12 months.
Apple company has full control of 100% of its' supply chain; it, therefore, can make operational expansions in any number of outlets globally. The company was founded in 1976 and built the type of personal computers that were made easy for customers to operate. Initially, the Apple software was facing a direct competition after the launching of the first windows operating system by Microsoft. Apple sued Microsoft from using the Mac technology in their introduced windows 1.0 and signed a treaty which resulted in Apple remaining manufacture of computer hardware full time.
INTRODUCTION
Due to the advance in technology, Apple has opened up supply chains globally, which has registered colorful amounts of profit and income. This was made possible by scouting on the variations of technology with time in addition to the eruption of new tactics to remain at the top in satisfying customer preferences and being the leader of the market. Apple introduced a new corporate strategy in the year 2000 to utilize the worldwide market in entertainment devices by adding value to the products- easy to use the software. Such products include the iMovie for professional cameras and CD players. There are different strategies to operate globally, and Apple is capable of utilizing all the procedures at once to give a chance of better growth against all the odds.
STRATEGY
Apple is currently the world's number one design company, and this is as a result of the cooperate strategy to outsource, which also brought in stiff competition among the telecom companies. Profit being the main Merit of most companies to grow, Apple viewed outsourcing as a stepping stone to being where it is at the global telecom manufacturers. This is a behaviour that has promoted better margins for the company, as discussed below.
STRATEGIC RISK
Foreign Outsourcing and Exporting
Outsourcing has been the most discussed topic politically in the United States; it has been dramatically discouraged as politicians view it as a stance to creating more job opportunities to the citizens in the United States. Although in the world of company expansion, outsourcing means opening up new manufacturing bases overseas, and this could help them in many different ways.
In the context of improving efficiency, outsourcing Apple to South America, India or China could in large part reduce the exporting costs, importing costs and the substantial tax duties that are imposed in the process.
The production costs would also be relatively cheap. It makes the Apple products be sold at the same price back in the United States as the outsources in this case; India, China and South America. A good example is the iPad which sells for $499 in all the countries instead of $14,970 (Gewirtz 2010). According to analysts', (Kane and Rohwedder, 2010), the introduction of Apple's iPod music players opened up new markets and increased the demand by consumers for related products from the company.
The different manufacturing bases could also increase the capacity to hold more experts who would substantially add value to the products the company offers.
Fast production is also employed since outsourcing globally means that the markets for Apple products in India and China, which are highly populated areas come with high demand. In addition to that, the company can share risks involved being the most essential factor. The company can improve the ability to organize and mitigate possible risks.
FINANCIAL RISK
Apple has maintained its growth and innovation over the years. It has been able to satisfy all the customer's preferences with its products across entertainment, personal computing and Smartphone. The financial risk becomes a burden to the future of the company.
In 2019, Apple unveiled the iPhone 11, which is undeniably expensive to most users but cheaper than the previous versions at the time of launching. This is a strategy that the company used in luring customers to buy the extraordinarily featured and powerful device since a trending technology makes consumers fickle. The company works on building essential digital tools with emerging digital capabilities to improve their sales and maintain the status of being the number one telecom company.
Without taking the financial risk to lower the products of its latest products, Apple could be facing a significant slowdown since more than half of their revenue is collected from selling the Apple products.
COMPLIANCE RISKS
On the 14th of December 2012, according to an article by duxes information and technology, Apple initiated an investigation into the misuse of office by its component suppliers. Apple Inc,' supplies the same parts in their products to different manufacturers. These parts are also acquired from the same suppliers that serve as competitors. This competition lights up a chance for corruption.
Since the Apple stores have a high number located in China and most part of Asia, and also the component suppliers, therefore it keeps close contact with the suppliers basically by sending scouts to their manufacturing bases. This situation gives a chance to the suppliers to involve in commercial bribery.
The cause of the investigation was as a result of the risk to establish direct conduct with the suppliers, which gave the opportunity of trade bribery among the employees and suppliers. The strategy was to help Apple reduce the procurement spending by allowing different manufacturers to supply a single component.
OPERATIONAL RISKS
Basel Committee (2003) defines operational risk as to the threat of failure caused by insufficient or unplanned processes, systems and people. They are also known as residual risks. It usually arises from the failure of digital systems and the dangers that occur from demographic structures and legal environment (Roman and Stefan, 2006).
According to the definition by the Basel Committee (2003), people, external events and systems are the causes of operational risks. The recruiting practices and working conditions; against the health and safety laws might be violated, biased employment, internal cons- turns down from misappropriation of property.
KEY PERFORMANCE AND RISK INDICATORS
By the year 2012, Apple Inc had 394 retail stores, more than half of them being in Asian countries and South America. The number of employees recorded to be 72,800 in the same year working full time and 3,300 working part-time (Zylla-Woellner, 2013). The success of the company is owed to its planned operations and good relations with the investors and customers.
However, in this case, study, the discussion is about the improvement of the company by opening up branches in India, China and South America, which it has already. In the chase for better quality, the company is limited to utilize performance indicators.
The Key Performance Indicator includes the structure and value that propels an organization in achieving 100% of its mission and vision. The measures available for Apple are the emerging trends in digitization which target the innovations in the future. These measures play a significant role in improving the quality, appearance and eliminating wasteful ventures. To some point, they help in motivating aspects of the world of employees. The company was wise to use the SMART acronym before developing any performance identity.
The key indicators that Apple should use are; Staff comfortability, revenue and supply chain management.
Employees in a company are the crucial assets; specialization and division of labour make them critical since some jobs are technical and cannot be executed by everyone. These jobs require profession, and it means that it would be catastrophic if the company lost those employees. Or in the case of such an event, it means that the competitors would be advantaged to offer those employees jobs. Recently the company was accused of providing poor working conditions for its employees, especially in Foxconn; its production plant. According to Samsonowa, the poor working conditions contributed to the suicide numbers increasing in the employees (2012). Therefore the company can satisfy customers by providing favourable recruitment.
The company can venture into satisfying employees by analyzing the rates of staff turnover. When the prices are too high, this is an indication that the worker's satisfaction is not being improved. Now, Apple Inc should dig deep and determine the cause of the problem, which could be a minor problem that is banking problems into the future activities of the company.
Apple Inc' could also conduct online surveys concerning the satisfaction of the employee. The best way is to give questionnaires to the respective employee since that is the best tool to employ on getting information about their attribute. Inquiries show some class of confidentiality since they are anonymous (Oakland, 1999). This gives the employees the freedom to communicate freely without fear. The relevant office analyses the questionnaire and determines the common problems.
Apple Inc,' being second to Samsung is considered the largest telecom company in the word in their revenues and third largest on its revenue potentials. In the past decade, the company has had a growth of income being high and then dropped recently. This could be an indication that the extension is not substantial. Based on statistics, the company can meet the same revenue it reached last year of $156billion (Lusted, 2012). In the case of a decline in the revenue, it means that the company is supposed to revisit some of its operations and better the services.
Supply chain management could also be a strategy to invest by the company to help in managing the quality of its production. The supply chain of Apple Inc,' includes suppliers of raw materials, producers, middlemen and consumers. This is by outsourcing the manufacturing activities to China.
A difference in opinions among the stakeholders is a way that data can be sampled. In Apple Inc, the conflict has been between Foxconn and the company. More than 5 million iPhones have been believed to have been returned to Foxconn for operational defects. In case Apple sold the phones to the middlemen, it would have brought a conflict between them too. Since the quality of the phone was not reached as expected by both parties, Apple was able to eliminate a part of the conflict. If it was not acted on earlier, the company’s operations could be jeopardized.
IMPACT
U.S. President Donald Trump hinted that he has plans to impose tariffs against China to $267 billion. The new duty would be an ad on the $200 billion in Chinese products that the U.S. is already taxing. These would make the prices of Apple products higher than the current estimates that are friendly.
Apple Inc,' now has it's bulk production done in China with a contract with Foxconn, its major manufacturer. The cost of producing in China is meager as compared to the United States, but these costs could sum up again if the U.S. raises its tariffs again on goods imported from China.
To maintain this, Apple will have to move its production to a different country; potential bases could be in India and South America. These would give Apple a duty to rework its suppliers and logistics, which is expensive. Therefore, the Company will opt to remain in China, and this means that the profit margin will be reduced and could affect the fall price estimate of Apple products.
Apple’s business in Asia could also be brought down in the case that a trade war escalates. The government of China will reiterate by making it hard for the Company to operate in the country by imposing heavy taxes and treating Apple as a proxy for their counterparts. Just in case the Apple sales fell by 10 million units in the previous Year, it could have reduced the Company’s revenue by 5%.
Another Impact on the revenue of the Apple Company could be the slowing growth of the GDP of the country. A falling economy is a sign of burden to the investors; they either have to improve on their planning or find a better solution in a place to invest. The trade war between the U.S. and China has had a more psychological effect; it gives negative attitudes to the investors and the customers.
The rising numbers of competitors in China have slowed down the growth of Apple; they offer more and cheaper smartphones that are of the same quality as Apple products. The Chinese people, therefore, prefer taking the affordable and efficient commodities instead of spending big on Apple products.
The Chinese Smartphone market has also grown to be one of the largest globally. Chinese had approximately 660 million Smartphone users in 2017 and Huawei being the larger share in the market because of its new models and features.
MITIGATION STRATEGY
Results from lawsuits could financially affect Apple. (Form10k, 2019) The laws of different sovereignties vary concerning Telecommunication technologies; this includes, the limits of production, network ownership rights, supply and usage. This will give a significant setback to the quality of the Company’s products and therefore risk losing the customers.
The laws and regulation changes might also create an unexpected cost on promoting the particular products since it increases the required adjustments to meet the requirement of the local authorities.
Since Apple deals with the original design of its products, it must make the right choice of its raw material all the time. The right choice could be the property, durability and price of all the parts required.
However, Apple relies on different sources which make it possible for them to choose the best products. In the case that there is a shortage in the raw materials for producing the items, the whole plan of production will be affected negatively because it depends on the Company alone.
With the expansion of global development, Apple needs to deal with the significant risks in the market of telecommunication. The profit rates and foreign exchange have significantly increased recently and this would otherwise pose a negative effect on the performance of the Company.
The key business of Apple includes personal computing, music player and Smartphone, which faces the highest competition in the global market. In all aspects of production, the competitors have aimed at displacing Apple. This made Apple spend a total $3.1 billion within three years on research and development, which shows the intensity and depth of the competition to Apple. The future of Apple depends on its ability to maintain the production of new and better innovative products and services globally (Form 10k, 2009).
The worldwide market for entertainment devices and related items is the most competitive and technology dependent market. If Apple fails to outshine the rest of the companies, it means that the financial condition and revenue results will be significantly affected (Form 10k, 2009).
Due to mass sales globally, inventory risk has become famous for Apple. The idea of a shortage of products is reasonable, not limited to the high demand, ability to produce, but also the inventory ability and operations. The massive market of Apple Products, especially in some time of the Year could be an offset which might pose a financially negative effect on the sales made by the Company which are also subject to cooperate fraud.
Apple needs to adopt corporate strategies that are fit for their strengths and weaknesses in relation to the market they operate in and the competitor’s game. It also has to cope with the changing decisions of its customers, including the prices of its products.
CONCLUSION
Apple is a company that aims at 100% customer satisfaction, which is a crucial strategy in the mission of digitization. This is what defines Apple and has built an over confidence on the brand and therefore the Company has failed to negotiate with other telecom companies. Such companies include Adobe which denied Apple from using its software and has made the customers feel limited to unnecessary software. The resources available to Apple are sufficient, mainly the human resource services, the capital and the investment in every part of its branches. Apple has designed software that sets the standards of its industry, in addition to the huge investment in the branding of Apple products.
REFERENCES
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