A Financial Crisis Presents a Number of Challenges to Businesses - Research Paper Example

? Amazon and Apple Amazon and Apple Financial crisis presents a number of challenges to businesses. These challenges are different depending on the products or services a company provides or on the size of the business. The challenges may include reduced profits and reduced sales. However, a business has to respond to these challenges if it has to remain in business by creating measures that address, for instance reduced profits or that increase sales. Apple and Amazon are examples of Multinational Businesses that faced the financial crisis of 2008; diversified measures implemented them and recovered from the reducing profits they were earning (Foster, 2009). Apple Inc, on one hand, is a multi national corporation in California that designs, develops, and sells computer hard ware, software and digital electronics. The best known electronics of this company are Mac, iPod, iPhone, and the iPad. The selling of these electronics and other products is through its online retail store, retail stores and direct sales force. Amazon.Com Inc, on the other hand, operates as an online seller internationally but headquartered in Seattle, Washington, in addition, this online seller company operates such websites as amazon.com and amazon.ca (Gutow, 2011). These websites enable retailers to sell their products through online advertising. In addition, Amazon offers other services such as website development, marketing, and company branded credit cards. In 2008, the financial challenges that faced the world led to reduced profits by these two tech companies. The profits reduced because the two companies’ products are not basic necessities that are compulsory for human survival. Basic necessities are food, housing, and basic health care. To the contrary, iPhones, iPod and iPad are that a human being can survive without and, therefore, forgone (Higham, 2009). Financial analyst and other world leaders, however, put in place measure that saw the crisis recede and thus an increase in consumer purchasing power. The measures worked because, in mid 2008, the crisis slightly diminished shown especially by improving sales in the New York stock market (Michalowski, 2011). Elsewhere, sales reports of leading multi-national businesses across Europe were picking up. Apple thus diversified four strategies to help it recover the lost profits. Apple marketing strategies were product design, price of products, promotion and their distribution. In product design, Steve Job, the Apple Chief Executive Officer, creativity contributed to more sales. He designed specifically, the operating system MAC OS X, which helped distinguish the Apple computer from other competing PCs. He was also responsible for the Mac Book Air, the first lightweight and thin laptop computer. More creative products developed were iPods, iPhones, iPad and iTunes. These products were bought in large numbers because the consumer enjoys media and entertainment at his or her convenience. Further, they substituted other devices like TVs and some laptops. Concerning the price, Apple products though expensive, are quality and durable. Various consumer research companies rated the products as the most fairly priced products in the world. Apple-loyal consumers also care little about the price they had to pay to buy an advanced release of Apple product. In addition, they bought Apple product whenever launched and released to the market regardless of the financial situation. In promoting its products, apple made its products known in conferences, meetings and in US trade expos where they would showcase these new gadgets (Buonopane, 2010). The final strategy is distribution strategy in which newly released products that customers are unaware of were located in specialized stores. In these stores, a customer who bought these new releases took some time with an Apple expert who was educating and providing customer service. The education on new products was to ease the switching to them. In comparison, other Apple’s less expensive products that required less consumer education and support were found in all stores. However, while marketing its products in Asia, Apple is criticized for partnering with Chinese firms that were paying the marketing staff low wages (“The Tech 100,” 2012). Further, the marketing firms overworked the staff forcing them to meet the targets set. This ill partnership was unethical and led to high critics especially by shareholder where some sold off their share. Amazon also introduced various strategies to win a part of the recovering market. One, the company brought Frustration- Free packaging that was to use recyclable packaging materials and eliminate plastic packaging. The packaging is environmentally friendly and cheap for the company. Secondly, the company created the Amazon MP3 music store, containing over 4 million copy right free music that could play in any MP3 gadget. Thirdly, the company launched an online books library to share the content globally. Fourth, the company launched the ability to install Ms Windows Server on Amazon EC2 and changed the flexibility of its internet protocol address (“The Tech 100,” 2012). Finally, the company enabled the customers’ charges to decrease as their storage volume grew on the data storage servers. In addition, all online stores had their servers upgraded to limit network congestion and increase efficiency in shopping. However, in the process of offering its services, Amazon has been blamed for unauthorized access to personal information stored within it data storage systems. Many customers have reported this unethical behavior to Federal Police by this company only that they have no enough evidence to instigate a law suit against Amazon. After the crisis, Apple products were demanded in varying quantities as reflected by sales revenues of varying products. Macintosh revenue, iPod revenue, iPhone revenue, iTune & Other, Software, and Peripherals & Hardware all recorded total revenue of $24,578 million in the financial year 2007/2008 that was unaffected by the financial crisis. However, in 2008, the fore named products recorded revenues in million dollars of, $10,430 in the 1st quarter, $7,980 in the 2nd quarter, $7,561 in the 3rd quarter and the 4th quarter $11,520. Therefore, the total profit was $37,491 million dollars, a slight increase in profit compared to the previous year. Economic analyst, however, described this increase in profit as insignificant bearing in mind the return per dollar invested. For example, a retail store recently opened China is said to have generated revenue of $200 in the financial year 2008/2009. The company, however, attributed the declining overall profit to reduced sales and rise in the cost of running business in the financial year 2008/2009. The declined profit was explained later in the Annual General Meeting as to the reason why the shareholders were not to receive dividends. However, in 2009/2010 financial year, the company recorded increased total revenue of 42,905 million dollars. The increase in profit was attributed to declining global financial crisis, decrease in the cost of running a business and increase in sales (Michalowski, 2011). Analysis of Apples’ total product revenues for the quarters of year 2007, 20008, and 2009 Since 2008, Amazon experienced significant changes in spending and behavior of American consumers and the world in general. As the economic crisis subsidized, analysts predicted many shopping trends and behavior such as increased internet use and decreased brand loyalty. Customers were also expecting substantial discounts. Amazon with this in mind adjusted it normal ways of doing business to attract this changed behavior, as well. A consumer behavior research by Gallup poll found that, 3 in four respondents had cut resumed spending on online entertainment as compared to one in 4 in 2008. However, Amazon, despite all the changes in consumer trend recorded increased demand in its products as reflected by the financial statement in 2009. According to the financial statements audited by PricewaterhouseCoopers, the net sales rose 29% to $19.19 billion compared with $15.02 billion in 2008 when there was the financial crisis. However operating expenses increased 28% to $868 million compared to $650 million in the crisis year 2008. Elsewhere, net income rose 35% to $640 million in 2009 compared to 2008, 498 million. North America stores reported revenue of $3.69 billion, an increase of 18% from the 2008 figure of $2.36 billion. International sales from U.K., Japan, Germany online stores, were $3.25 billion, up 19% from 2008. World wide media sales grew 9% to $4.64 billion, compared with $ $3.56 billion in 2008. Electronics and other related sales grew 30% to $2.89 billion, up $2.21 billion in 2008 (Higham, 2009). In conclusion, this paper introduces two tech companies, Amazon and Apple, and analyses how they recovered from the global financial crisis in 2008. The marketing strategies they used to increase sales to maximize on profit are also discussed. Finally, the paper also describes how consumers responded to the marketing strategies and the implications on the financial performance. References Higham, W. (2009). The Next Big Thing: Spotting and Forecasting Consumer Trends for Profit. New York, NY: Kogan Page. Gutow, A. (2011). Changes in Consumer Spending. Retrieved from http://www.billshrink.com/blog/12088/changes-in-consumers-spending/ n.a (2012).The Tech 100. Retrieved from http://www.businessweek.com/interactive_reports/it100_2010.html Foster, B.J., & Maqdoff, F. (2009). The Great Financial Crisis:Cause and Consequences. New York, NY: Monthly Review Press. Buonopane, P. (2010). My Techlife. Retrieved from http://www.techtalkz.com/blog/general/the-unlawful-unethical-underdog-2.html Michalowski. (2011). Attacking Currency Trends: How To Anticipate and Trade Big Moves In The Forex Market. New York, NY: Wiley. Read More