International Business - Apple Inc - Case Study Example

APPLE INC. Name: University: Course: Tutor: Date: Apple Inc. Introduction Apple is one of the world’s leading Smartphone manufacturers, competing with other market giants such as Samsung and Nokia. Apple Inc. is a company that is known for the creation of unique computers and Smartphone that run on the operating systems from the same company known as iOS and Mac OS respectively ('Apple Inc. SWOT Analysis', 2015). Over the years, Apple Company has been known for its innovative approaches that have kept it alive even though there have been times when the company has almost collapsed. Products of Apple Inc., include computers, mp3 players known as iPods, tablets, smartphones, and other accessories. This project will give an insight of the story of Apple Company as a multinational enterprise (MNE) operating in most of the countries of the world including America, Australia, Asia and The Middle East. The story will cover a brief history of the company, significant contributions of Apple to the global mobile phone and computer manufacturing and marketing, and strengths and weaknesses of the enterprise. The essay will also discuss the competitive advantage of Apple Company over its competition such as Microsoft, Samsung and others (Tetzeli, 2015). History Apple Company was started in 1976 by Steve Wozniak and Steve Jobs, who were college dropouts. The two came together with the vision and mission of changing people’s perspective of computers (Sacconaghi Jr., Yin & Garfunkel, 2006). The co-founders wanted to create machines that were user-friendly and could be used with ease in the small spaces at home and offices. The two began building their first products from the inside of the garage of Steve Jobs. In 1978, Steve Jobs and Steve Wozniak launched the first ever colour graphics enabled computers into the market. In 1980, after the introduction of the colour graphics, sales increased from 7.8 million dollars to 117 million dollars (Sacconaghi Jr., Yin & Garfunkel, 2006). In 1983, Wozniak exited Apple Company leaving Steve Jobs, who hired John Sculley from Pepsi to be the president of the company. Steve Jobs exited from Apple in 1985 to start his company. During the 1980s, Apple Company continued performing relatively well compared to its competition in computer manufacturing. Apple kept making huge profits through the 1980s up to the 1990s (Tetzeli, 2015). Nevertheless, most of the success of Apple was because of the plans made by Steve Jobs before he left in 1985. One of the deals initiated by Steve Jobs that boosted Apple’s earnings was the one with Adobe. Adobe is the manufacture of Adobe Portable Document Format, popularly known as PDF. Apple in collaboration with Adobe came up with what is now called desktop publishing (Tetzel, 2015). During the 1980s and the 1990s, Apples greatest competitor was Microsoft Company, which was founded by Billy Gates. Microsoft had requested Apple to licence its software in 1985, but Mr Sculley had rejected. Window, the Microsoft operating system had a graphical user interface that resembled that of Apple and gave stiff competition to Apple Company, leading to the declining of Apple’s market share in the 90s. As a matter of fact, by 1996, Apple Company almost collapsed due to stiff competition from Microsoft Company (Tetzeli, 2015). Bar graph showing Market share of the three leading Operating systems in percentages between 1985 and 2012 The decline in sales made Apple to collaborate with Microsoft to make a Mac version of Microsoft Office that would be compatible with the Mac Operating System. Shortly after the collaboration, Apple introduced laptops that were sold by the name iBook. The company also began diversifying its ventures into mp3 players called iPods, and a media player that traded by the name iTunes. As much as the computers continued to be the centre of Apple, the products related to music (iPods and iTunes) generated more revenue for Apple Company. Apple has recently ventured into a mobile phone and Smartphone business by the introduction of iPhone. As at 2015, Apple Company still deals in computers that use the Mac Operating system, mobile phones that use iOS, the AppleTV among other market leading products. Apple Company’s Role in the Global Pattern of Trade There has been a continual growth in the world economy since the Second World War. This change in the trade pattern has been facilitated by the global growth, and is a reflection of the structural change in the global economy. Some of the changes include rising of the regional trading blocs where there is a free trading environment between members. There has been the reindustrialisation of the economies that are advanced and the rapid increase in the participants of former communists. The changes also entail the emergence of India and china. These changes have been successful due to the contribution of various factors. Among the factors is the rapid increase in technology especially in transportation and communication sector. Apple Company lies within the technology factor that is contributing towards the global pattern of trade. The One of the greatest contributions of Apple Company to the communication sector of technology was the introduction of computers that are more advanced. This advancement in technology has had an influence in both the pattern and pace of the world trade in all essential dimensions since it signified a rebirth in the world economy. In terms of employment dimension, a lot of people are working in Apple Company. The company has devised strategies of entering into global markets. It has led to high level of revenue and profits for the company. The company utilized multiple strategies simultaneously hence enabling them to remain at the top despite the recovering world economy. One of the strategies employed by Apple entails opening wholly owned subsidiaries also known as Foreign Direct Investment (FDI). It is direct ownership of business facilities in a foreign country. The process entails transferring of resources such as technology, capital and personnel to a host country. The subsidiary firm can be obtained by establishing a new enterprise or acquiring an existing entity. This strategy is advantageous in that it has a high degree of control in operations. Besides, it increases the chances of knowing the consumers and the business competitive environment. However, high level of resources and commitment degree is required. Momentarily, china is being focused as the next global expansion. Apart from being an emerging market for apple, it has cheap labour as well as the strong economies due to its large populations. This could lead to china being the largest in the world. At the moment, Foxconn Company is responsible for the production of Apple’s iphone, ipads, among other products. This firm is the largest electronics maker in the world (Gewirtz, 2010). Apple also embraces use of joint ventures (JV) with other companies. The reason why a firms enter into joint ventures include market entry, sharing of risks and rewards as well as technology, joint product development and a means of conforming to a government regulations. The other benefits from this strategy are the development of political connections and channels of distributions that require this kind of relationships. Joint venture is an example of strategic. The other methods use by Apple entails foreign outsourcing of importing of personnel. The strategy lowers the production costs. For instance, it made an ipad to be sold at $500 instead of $15,000 (Gewirtz 2010). Although apple has a little market in countries outside US due to the high prices and limited distribution, analysts claim that the music ipods have made a breakthrough in the outside market hence raising the appetites of the consumers in the related products (Kane and Rohwedder 2010). Apple was in a position to make a major breakthrough after unveiling iphone4. This product was distributed to 88 countries. It was a major lag behind the United States introduction in the past (Kane and Rohwedder 2010). Apple has also engaged itself in the licensing and partnership strategies hence expanding its brand to market shares that were initially unreachable. The implementation of a supplier code of conduct has enabled a direct derivative on how to operate its business in foreign entities. The shift shows how the company has affected the global world trade due to its change in strategy. Exporting of products is the traditional method of reaching foreign markets. It is cheaper since it does not require goods to be produced in the target country. The only costs that might be incurred are the marketing expenses. Exporting usually involves the coordination between the four players who are the importer, the exporter, the transporter and the government. What Comparative and Competitive advantage does Apple have over Other Technology manufacturers? A company needs to enjoy both comparative and competitive advantage in order to survive within any environment. Comparative advantage is all about being able to produce a certain product at the lowest cost possible cost. The above is well stated in Potter’s Diamond. Competitive advantage is the ability of an organization having certain features that make it possible to gain an edge over other firms in an industry. The assessment of the comparative and competitive advantage of an organization is ell evidenced in the discussion below by covering the various challenges that are faced by apple to get its’ real position in the economy. Apple has survived for a long time in an industry that is full of uncertainty and constant changes. This has been attributed to the Company’s competitive advantage strategies. Competitive advantage is a factor that gives an enterprise advantage over its competitors. This may be by offering greater quality, lower retail prices or providing other additional aspects to the product that qualify the products from the prices or higher. Apple has been performing well in terms of establishing its advantage over other more or similarly dominant companies. There are some aspects that have conferred competitive edge to Apple and, therefore, defend it against being outcompeted (Sacconaghi Jr., Yin & Garfunkel, 2006). Comparative advantage according to the Porter’s Diamond of National strategy The assessment is done across 5 factors and how they affect the firm in the functioning in the economy. The set of factors include: Factor conditions, demand conditions, related and supporting industries, firm strategy and structure, and firm rivalry. The in-depth analysis of the factors will be done and the effect on the operations of Apple will be done. Factor conditions-Factor resources refer to the skills and the resources that are available to a firm to carry out the various production processes. An ample availing f the resources will be essential in the smooth running of the firm. The exit of Steve Jobs from the firm greatly affected the firm. He was highly innovative with a huge pool of entrepreneurial skills. He was a team player who led others through the various processes in the firm. The company has a great pool of resources at it’s’ disposal. However, the great pool of resources cannot be of any benefit to the firm if they are not deployed for the meeting of the various production processes within an organization. It is also necessary that upgrading of the various resources is to be done more often. The increasing competition has greatly necessitated the management to increase the scope of innovation in the organization. However, innovation has been limited reducing the company competitiveness within the environment. Demand conditions- The products that are produced in an industry are supposed to meet the various demand conditions among the consumers. The products need to be bought the end users. The resignation of Steve Jobs made certain economists to think that the supply levels of the company will exceed the demand conditions. However, according to the manager, there has been an increasing demand of the company products that has exceeded the level of the supply. The iPhones and the semi-conductors are among the products that have shown increasing demand levels. Such a strong trend has led to devotion of more resources to the research and development department to come up with more unique products for the various customers that exist in the economy. Related and supporting Industries-A good base and association between the suppliers of inputs to an organization and the users of the inputs is essential in maintaining productivity. How does Apple apply foreign direct investment policy and the application of Eclectic Paradigm? Apple has invested heavily in foreign countries such as India and China. There are several reasons why Apple has favoured Foreign Direct Investments to Local investments in the United States of America. Some of the factors that have lead to the Inc areas foreign direct investment in China and India, like other giant technological companies, is the low costs of operating in these countries as compared to manufacturing in the United States of America. The two countries are also known to have a low cost of labour compared to the US(Mallin, & Finkle, 2011). Apple assembles its iPhone smartphones in China. This is by the principles of Electic Paradigm. China is an attractive destination for manufacturers with the desire to improve their ability to export products. China has an elaborate export system from the policy that was formulated in the 70s to attract foreign company as a hub for exports. This led to the influx of over 200 technological giants to establish depots in China. China unlike the United States of America has a large number of engineers that are readily available. The country also has more accommodating labour laws and many factories which can be useful in increasing production with a short period. Companies and factories are also readily available, just like an Apple executive once said that the reason Apple favours China is that all the supply chain is there in China. If one needs a thousand rubber cleaners, there is usually a factory around the place. If a manufacturer needs screws, there is always a producer across the same street. If a plant requires small changes in the crew, only a few hours are enough (Mallin, & Finkle, 2011). China has proven to efficient in terms time saving, flexibility and low costs of production. A good example was made by an executive who worked for Apple Company. He narrated a story of how Mr Jobs one day produced a prototype of iPhone that had scratched from being carried in his pockets. Mr Jobs was furious and asked that the phone be made with scratch resistant glassware. An executive travelled to China and found suppliers for the glasses within three days. What are the Challenges that Apple Inc. Faces? According to Forbes, Apple faces four major challenges in the coming years. These challenges include the rapid technology change in the sector, leadership challenge, competition challenge and the inevitable economic challenge (Cusumano, 2013). Technology challenge, like most of the other technology companies, is a major limitation for Apple Inc. According to Forbes Magazine, the features of iPhone 4S show that Apple Company is running out on technology innovation. Most of the characteristics of the Smartphone are similar to those present in its predecessors. The phone resembles iPhone 3 in both software and physical outlook ('Apple Inc. SWOT Analysis', 2015). The challenge of effective leadership is another limitation that may be significant to the growth of Apple shortly. Without Steve Jobs, the man who handles the strategies that have seen Apple climb to its current status, the future of the company is quite uncertain. It would be hard for the technology giant to find another leader with the charisma like that of Jobs and with the knowledge of innovations concerning technology (Silva , 2010). Apple also experiences tough competition from other technology giants such as Samsung and Microsoft. Apple also faces more competition from Google because of the release of Android, which is compatible with many phones in the market including Apple rivals Samsung, Huawei and others. Android Smartphones lead the market share of smartphone operating systems compared to Apples Ios. Android is used in 43% of all smartphones while iOS is used in only 26 percent of the smartphones. Graph showing the trend of Apple PC market share in the US in percentages The economic challenge is the fourth challenge according to Forbes. As much as Apple brand name is favourable, with the changing times, there has been inconsistencies in market buying power as a result of tough economic times. The change in economic policies may also affect Apples (Gibbs, 2006) Recommendations Based on the challenges that Apple faces, it would be significant for the company to invest more money in more talent to come up with new ideas for their subsequent products from iPhone 4S. This is to refresh the customer experience and remain above the rest of the industry players like Samsung. Changes in management should take a smooth transition to avoid sudden changes in management that would make the absence of Steve Jobs more evident. Apple Company should also consider making products that are more affordable to the youths. This is because the youths are the biggest potential clientele of technology and smart phones. Bibliography 'Apple Inc. SWOT Analysis' 2015, Apple, Inc. 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