The Role of Globalization in Increasing Prosperity - Case Study Example

International business: Apple Place It is now an obvious fact that globalization has the profound effect on the lives of people as inrich as in poor countries (Schifferes, 2007). It transforms different areas from bust to boom. It is also the explanation of such main trends of global economy as low wages of employees and high profits for strong economies, migrants’ flows to the cities in poor countries and the level of inflation and the low interest rates. Despite the fact that globalization has played a tremendous role in increasing in prosperity in the last decades, and it gave the start to the growing economic integration of the world, the anti-globalists criticize the increase access to foreign markets have enhanced the poor-family income, resulting child labor. In addition, globalization increases poverty in the poor countries (Bhagwati, 2005). Trade is suggested to be one of the main engines of globalization with global trade in manufactured goods increased in hundred times, it assisted in the growth of the world economy. Trade opportunities have given multinational companies to become global and locate manufacturing plants overseas. Such foreign strategies have helped organizations to capitalize on cheaper labor costs and be closer to the new markets. Apple is the example of such multinational company outsourcing most of its production to other companies (Schifferes, 2007). Globalization of markets with its collaboration in consumers’ preferences in the markets enabled such companies as Apple to sell its products globally. For instance, iPad is the global product as it has highly standardized features and follows the company’s global marketing strategy and brand (Globalization, n.d.). The other key influence that globalization has had on the company’s performance is the number of employed people. Thus, according to Freeland (2011), the company gave work to twice as many people outside the country of origin to produce iPod. 12, 270 were employed in China and 4,750 in the Philippines. The overseas labor is cheap and it is disciplined and they are capable to maximize Apple’s profits. The global developments of Apple started with the return of Steve Jobs in 1997. The big intentions were to repolish the company which until that time was badly tarnished (Stone, 2011). Just before the bankruptcy, the company was losing the billions of dollars and if Dell ran the company, it would shut it and return all the money to the stakeholders. However, under the leadership of Steve Jobs, the company has gone from $3 billion at the start of 1997 to $350 billion in the present time, making Apple the second most valuable company in the world. Understanding that competition with such giants as Microsoft and Intel would not bring the expected results, and the era of rapidly evolving technology business could disrupt the new player, the company removed from technology products. Thus, Jobs banned separate numerical keypads and floppy disk drivers. There was designed the gleaming metals with rounded edges and cone-shaped Wi-Fi base sections. In addition, the CEO fired a dozen ad agencies and instead left Chiat/Day, the one that created Apple’s “Big Brother” commercial in 1984. In the second return of Steve Jobs in 1997, the ad agency prepared a campaign “Think Different”. Jobs have chosen such famous people as Albert Einstein and Martin Luther King Jr to appear in the ads. The campaign was a personal intention of Jobs to remind the company and its employees about the main goals. If one wants to measure the gap between the theory and the globalization which are confronted by the companies, there should be examined the effects of the increasing interconnection of production processes. The changes in the industrial organization have impact the change of patterns of comparative advantage in the different locales. In terms of Apple, its development, production and marketing of the iPod can be explained by the ability of conventional trade theory to be diminished in the market (Aldonas, 2009). For the American consumer of iPod, there is no involvement in international trade, as the company is in the U.S. and the final consumer is also American. However, it takes affordable price rests on the international rules when delivering the product to the consumer. It allows Apple to organize its production on a globally efficient basis. Even in such market as China, where its low labor costs and labor representation constitutes a significant portion, the iPod production process does not make the device relevant to the China’s consumers. According to Freeland (2011), a lot of overseas employees who are involved into the production of iPod are in China. Here the company transfers its funds to purchase and acquire physical capital, which is human capital. But in case of Apple, there exists certain disparity as U.S. the home country of iPod gives a job to only 7,789 people engaged in the retail and other nonprofessional workers, while there are 27,250 of non-American Apple employees. However, while there are also low paid workers in the foreign markets, Apple’s wins in terms of its engineers who work in the U.S. and made more than $525 million. That constitutes double of what the U.S. nonprofessional make and more of what Apple earns from all the foreign employees (Freeland, 2011). Buoninfante (2009) states, however, that there is also a negative relationship between profitability and the investment decision. In terms of Apple, it began to use third party vendors to produce iPod in 2000. While the main vendors were Chinese, it also sold the third party products to resellers. However, due to the economic weakness, many of the company’s resellers operate on the narrow product margins during the last decades. That wa the predisposition for the low profitability due to the weak economic conditions. However, later Apple invested on by transferring more manufacturing responsibilities to China. Another point to note is that profitability is negatively affected since the products are reproduced and sold for a cheaper price. That does not refer Apple; however, the company continues to invest into China as it has efficient manufacturing powers and cheap labor. Globalization as reported by Freeland (2011), can hurt certain countries, even if they have the advanced economies. In the case of Apple, that means that the growing disparity in income and employment is dictated by the level of education of workers who are able to enjoy opportunities and those who face declining of their skills. If the decline is not happening, the employee obtains the job where one is paid less than the person with better education and unique skills. Such condition predispose ethical dilemmas and the thing is not always in Apple. For electronics companies, the decision to conduct manufacturing operations to the developing world is not about cost-cutting. According to Jefferies (2014), the speed and flexibility of the Asian workforce, who assembles to build slick, shiny gadgets for consumers in the West, allows for turnaround times on new products. And by hiring production workforce to China Apple is closer to the hundreds of component manufacturers, engineers and material eco-systems that their products depend upon. Its a business model thats highly profitable, especially if to consider its latest financial highlight (Apple Reports Fourth Quarter Results, 2015). However, since the company was accused in violations in right of its workforce (Jefferies, 2014; Worstall, 2012; Moore, 2012), it creates more arguments to ask about the ethical behavior of the company toward its employees, especially those working overseas. As stated in the Apple Supplier Code of Conduct, the company is committed to the high standards of social and environmental responsibility (Apple Supplier Code of Conduct, n.d.). In being more ethically active, the company makes steps ahead by launching the environmental campaign. Thus, for the last six years, the company has dropped the power consumed by 57% with such innovation as Mac mini. In the present time, iMac uses 97% less electricity in sleep mode. When it comes to the technologies, the company succeeds in achieving environmentally friendly manner. However, there are still gaps in providing the ethical attitude toward the employees. In these terms, employees should be released from the overbooked conditions and what is more important, they should be ensured more safe conditions. To track ethical investment, there is a reason to use a benchmark and guide a business performance versus set targets. While the company has already made its corporate social responsibility report public, the other measure can be the certain KPIs of environment, food and local affairs. Letters of transparency about the corporate performance will enable people to understand the goals of the company and how it reaches targets. To best understand whether the company is worth investing in, certain considerations should be examined. Thus, Apple pays a 1,5% dividend to the one who owns a share. However, that is a small relative to other stocks. The decision of investment should be relied on the analysis from Wall Street, who predict the stock to climb to $150 or even higher (Apple stock is making regular Americans rich, 2015). As indicated by Wall Street Journal (Pleven, 2015), the company is the most valuable one in the world. References Aldona, G. 2009. Rethinking the Global Trading System: The Next Frontier, CSIS Apple stock is making regular Americans rich, 2015. Money CNN , [online] Available at: http://money.cnn.com/2015/03/03/investing/apple-stock-make-money/ [Accessed on May 5, 2015]. Apple Supplier Code of Conduct, n.d. Official website for Apple Company, [pdf] Available at: https://www.apple.com/euro/supplier-responsibility/b/generic/pdf/Apple_Supplier_Code_of_Conduct.pdf[Accessed on May 5, 2015]. Apple Reports Fourth Quarter Results, 2015. The official website for Apple, [online] Available at: http://www.apple.com/pr/library/2014/10/20Apple-Reports-Fourth-Quarter-Results.html[Accessed on May 5, 2015]. Bhagwati, J. 2005. In Defense of Globalization: It Has a Human Face, Oxford University Press Buoninfante, C. 2009. Motivations for US Foreign Direct Investment, [online] Available at: http://digitalcommons.pace.edu/cgi/viewcontent.cgi?article=1089&context=honorscollege_theses [Accessed on May 5, 2015]. Globalization, n.d. Global Business Environment, [pdf] Available at: http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/0273752634.pdf [Accessed on May 5, 2015]. Freeland, C. 2011. How iPod explains globalization, The New York Times, [online] Available at: http://www.nytimes.com/2011/07/01/world/asia/01iht-letter01.html?_r=0 [Accessed on May 5, 2015]. Jefferies, D. 2014. Is Apple cleaning up its act on labour rights? The Guardian, [online] Available at: http://www.theguardian.com/sustainable-business/apple-act-on-labour-right [Accessed on May 5, 2015]. Moore, M. 2012. Apple attacking problems at its factories in China, The Telegraph, [online] Available at: http://www.telegraph.co.uk/technology/apple/9043924/Apple-attacking-problems-at-its-factories-in-China.html[Accessed on May 5, 2015]. Pleven, L. 2015. The New Tech-Stock Temptation, The Wall Street Journal, [online] Available at: http://www.wsj.com/articles/the-new-tech-stock-temptation-1425675795 [Accessed on May 5, 2015]. Schifferes, S. 2007. Globalization shakes the world, The BBC, [online] Available at: http://news.bbc.co.uk/2/hi/business/6279679.stm [Accessed on May 5, 2015]. Stone, B. 2011. Steve Jobs: The return, 1997-2011, Bloomberg Business Worstall, T. 2012. Has Apple Become More Ethical Since Steve Jobs Death A Year Ago? Forbes, [online] Available at: http://www.forbes.com/sites/timworstall/2012/10/05/has-apple-become-more-ethical-since-steve-jobs-death-a-year-ago/[Accessed in May 5, 2015]. Read More