Apple Inc and China as One of the Largest Emerging Markets - Case Study Example

Title Instructor Date Introduction Globalization has been a great benefit for the multinational corporations (MNCs) that extend to other countries for economic and labour purposes. Globalization makes it possible for the successful multinational companies to extend into other countries and excel. There are various opportunities in the different countries in which they set up their companies. However, since extending into other results in compulsory interactions with the people of such countries, various critical decisions must be made with regard to the financial performance of such MNCs to ensure success in such countries. Countries such as China, for instance, have strict laws in relation to the setting up of multinational companies. Besides policies, there are other factors that pose as challenges and threats to MNCs in the different emerging markets. The economic activities of the countries, the performance of the local companies that produce similar products and how strict copyright issues are treated are other factors that determine the nature of the operation of the MNCs. This essay focuses on the case of Apple Inc. and China as one of the largest emerging markets. An analysis of Apple Inc Apple Inc. is an America-based company with its headquarters in Cupertino, California. It deals with computer hardware and software, consumer electronics, and digital distribution of various products such as iTunes, iCloud, and App Store among others. Its most successful products and services include the iPad, Mac, iPhone, and iTunes. It is considered one of the most successful electronics company[Ovi16]. This essay discusses Apple Inc. a MNC, in China. The essay discusses the threats and opportunities that face Apple Inc. in China, and the challenges that face the decision-makers involved in running such MNCs. Apple has such strengths as the manufacture and distribution of high quality products, global recognition, and a high profit margin[Whi16]. Apple busks in the glory of its strengths in advertising where it spends less with greater results as compared to strong competitors such Samsung. Besides its extensive distribution channels inside and outside the US, it also experiences extensive brand awareness and a reputation of good quality. It, however, has weaknesses in its over-dependence on the iPhone, its decelerated innovation, and incompatibility with other operating systems. [Gre161]Taking the Chinese market into consideration, the low production costs are a great opportunity for Apple Inc. There are opportunities in the fact that the market of the Internet of Things continues to grow rapidly. There is also the introduction of health gadgets within its products and separate wearable ones that are increasingly gaining popularity. The mobile payments market is also on the rise and the copyright protection that comes with Apple-related products encourages distributors and inventors to its use as a channel. The threats that directly face Apple include competition from related products and counterfeit products from countries such as China. The nature of its products is high-end but slightly overpriced which the competitors overcome by the use of cheaper raw products. There have also been lawsuits and sanctions recently that tarnish the reputation of the brand. This is especially so in China where Apple Inc. faced a sanction and international criticism for the employment of minors in its Chinese-based industries. The Impact of Globalization MNCs According to Blumentritt (2011), China exhibits radical changes over time and has recently exhibited an economic growth of 10% GDP with accompanying changes in its political and social spheres. The economic rise of China is the reason behind substantial price reductions of a variety of products consumed by Americans. The issue, however, has a negative impact on the products that maintain standard prices such as Apple products[Mat13]. Globalization brings difficult decisions in relation to the pricing of other goods. Some of that pressure comes from the consumers, especially if there are other goods of the same quality that are easily accessible to the consumers. China, for instance, manufactures numerous electronics, some of them mimicking original Apple designs but with different software and good functionality nevertheless. In addition to that, there is rapid innovation in the electronics sector and related services. One of the weaknesses of Apple Inc. is the lack of the adequate investment in research and innovation. The competition, thus, gives even more pressure to the brand in China which ends up depending solely on its brand reputation for popularity[Ian11]. The difficult decision lies in how to cope with the competition, the specific strategies to take to keep up with the rapid innovation and competition from major brands such as Samsung, and the local China-made brands such as Huawei, Oppo, Xiaomi, and Vivo. Although there is a tendency for the Chines government to overlook the compliance off multinational companies with the local laws, the international community still keeps watch of the activities of various multinational companies in various emerging markets[Wor16]. Figure 1: Macro-environmental factors that impact on globalization Decision-making in MNCs amidst globalization Decision-making by MNCs in the globalized community is faced by political, ethical, cultural, financial, and performance challenges. All need to be satisfied but different markets provide varying environments which affect the ease with which they are all achieved. As a result, the leaders must be agile and open-minded to manage such markets and ensure that the companies maintain their profit margins and overall success. Taking the current nature of the market for Apple and the competition and pressure from the Chinese and international markets into consideration, there is a dilemma for the leadership in relation to the best channel to take to reduce the costs involved in the manufacture of the Apple products. The complication lies in the balancing of the course of action between an ethical shift that involves respect to labour and environmental laws and the subsequent reduction of the profit margin of apple; the exploitation of cheap labour by whatever means possible to sustain the environmental measures and the profit margin; or a shift to a different supplier. All the decisions include issues that directly Apple and are a dilemma to Apple Inc. leaders because of the recent scrutiny of the operations of the company in China[Coh12]. Maintaining decent wages, observing the environmental laws through the reduction of emissions through the aluminium dust explosions, and the maintenance of the same profit margin only means an increase of the prices of the products and a more risky position in relation to its competitors. It is that reason that makes the leaders at Apple Inc. realize that a change is necessary but there has to be a compromise for the sale of the survival of the company and the maintenance of a good relationship with the government and culture of China while maintaining satisfactory profit margins. The decision makers have to consider a variety of factors in such emerging markets because of the need to integrate with the culture, gain favour with the local markets, succeed in the new market despite the pre-existing competition, and be at per with the politics and leadership of the different countries. There are opportunities for cheaper labour thus cheaper production costs. Others include a new market, larger market shares, and governance by more lenient laws depending on the country in which the MNC is set up. In return, the companies can afford to export their products to different countries and sell their products at affordable rates, thus creating a wider customer base. Figure 2: Globalization drivers Politics are among the most influential factors when it comes to the success of MNCs and the decision-making processes of the leaders. There is the issue of the numerous sanctions directed towards China by the US under the administration of Donald Trump. Most of the sanctions are directed towards the Bank of Dandong that is accused of laundering money for the facilitation of commercial activities executed by North Korea. The Dalian Global Unit Shipping Company is also subject to the sanctions. Such sanctions pose problems for American and other Western companies that actually comply with the Chinese regulatory requirements for MNCs. The sanctions also increase the chances of retaliatory actions by influential companies, politicians, and individuals upon the American companies based in China[Placeholder1]. The company has to conform to the authorities of the communist government despite instances of the lack of agreement with the policies. The company is currently undergoing a challenge in relation to access rights for its users after iTunes Movies and Iboooks were blocked by Beijing. There is the additional challenge of the ability of the employees in such MNCs to cope with the changing demands that come with the new markets. Introduction of firms and industries in other countries consists of change that ripples down to the employees at the headquarters or the employees that move with the company to the new countries. One of the most common complaint is the lack of effective communication in relation to impending change and the lack of adequate training prior to such change[Kar54]. There is the additional act by competitors such as Oppo to target the offline markets that are easily neglected in the current highly technological era. With the decline of the sales of the iPhone in 2017, there is need to quickly reach a decision in relation to the amount of investment that should be used in advertising and that which should be spent in outreach to the offline market. In such instances, the leaders have a difficult task on deciding on the best time to communicate such change and to predict the magnitude of expected change to its existing employees. In addition to the lack of adequate communication, the leaders have to decide on the extent to which they are willing to go as a result of the globalization and the new markets in which they establish their industries. Such affect the agility of the leaders and employees in relation to decision-making and reacting to change and various unexpected situations. Besides the pricing pressure experienced by the leaders of multinational companies, there is the issue of the selection of leadership in the various markets for the best interest of the company. The centralization of management with the top-most leadership in the US despite branching out into different countries leaves the companies ignorant of the actual situation of the market and adaptation of the company in the new market. Leaders must learn how too separate power and establish independent companies in the new markets where the leadership consists of people with enough knowledge of the market. In most instances, collaboration with locals is a common phenomenon. Lessons Learned by Apple Inc. Leaders as from working in China One of the most important is the need to get along with local authorities and influential competitors. The other is the need to conform to the environmental and legal laws that protect the people and environment of the international market as a result of globalization. There is increased awareness of the rights of the employees and with the extensive online platform used by most, unethical acts conducted by MNCs are easily reported and communicated to people in other markets. The lack of the practice of its Social Corporate Responsibility costs the company customers in the Chinese and other markets. One is the saga that conflicted with labour laws where Apple Inc. was accused of allowing child labour in an attempt to cut on production costs[Han12]. There are differences between the American market and the Chinese market in relation to the regulations and monitoring to ensure adherence to environmental and labour laws. In the local market, marketing strategies and the subsequent goals are easily achieved because of the familiarity with the culture, regulations, and operations. The Chinese law-makers have substantial power. The regard for traditional teachings is one of the reasons behind the closing down of iTunes in Chin. Unlike in America where the prohibition of the access of some services can be considered a breach of the rights of the users by the government, the perspective in the eyes of the Chinese market is different and requires a flexible mind set. The local Apple market generally favours Apple products, unlike the Chinese market that gives priority to its own local products over the international products. That comes with the improvement of the functionality of the other electronic devices made in China and priced fairly to cater for a variety of the Chinese population. Apple has also made efforts to provide the Chinese market with Chinese language software to overcome the weakness of language barrier[Jon162]. The most common lesson is that which all MNCs such as Apple Inc. should take into consideration is the need to be multinational but think like a local. The Chinese population consists about a third of the entire population of the world. Despite the great protection of the local market products by the government, gradual advancement in favour with the current needs of the population are essential for the survival and success working with Apple Inc. in China. The status attached to owning Apple products China is another opportunity that the leaders in the Apple Inc. have discovered could be used as a marketing strategy. There is the shortcoming of the fear of the products by the majority of the middle class because of the pricing where most do don’t even bother to inquire to know if they can benefit from any of the Apple products. Apple, however, delivers what it promises as in the case with the iPhone 6 which gains reasonable success[Ree151]. One of the most significant actions taken by the leadership by Apple Inc. in China is the change in the management structure by the appointment of a new position within the company to head the unit in the Chinese market. Isabel Ge Mahe, is the leader appointed to head the Chinese division and report directly to the CEO of the company. The new position is that of the managing director of the Chinese market, a position that does not exist in other offices located in the world. The decision to select her was not difficult given that she has worked with Apple Inc. for 9 years within the team of the wireless technology where she has been vice president. The decision to select a native for the role and even to consider the addition to the role is in response to the drop in sales in 2015 where Apple experienced a 33% market decline[Son17]. According to Shiqing (2017), Apple has worked its best to maintain a good relationship with the Chinese government. One of its obvious efforts is the construction of a data centre in China to cater for the special Chinese cyber security laws. There are also several special upgrades made to the Chinese Apple products to ensure that the threats and weaknesses are addressed. One is the intention to include special features in the iOS 11 such as the support for the QR code and additional protection to prevent against SMS fraud. It comes as a realization that building relationships, respecting the local culture, and localizing the management and manufacturing strategies must be in line with the market in which the company has its industry. That makes the great difference between the home and host countries in the emerging economies in terms of how to run their business, and the regulatory and adherence requirements. Other special experiences that Apple Inc. experiences in China as opposed to the United States include the craving for foreign products by the Chinese market in the belief that they are of higher quality. However, the past three years have been characterized by anti-foreignism as a culture instigated by competitors and the government in part. The culture is one that Apple Inc. does not have to face in its home country and requires special action which is a challenge thrown to the decision-makers. This is seen as a potential threat for the future of Apple Inc. in China. Taking the extent of investment in the China market, moving its operations back to the US could cost the company about $600 million which is an expense that Apple Inc. is not willing to undertake. It is the responsibility of the decision-makers to ensure they take actions to maintain good relationships with the Chinse market and lure them back to their product despite the challenges in place. The efforts must also be in line with the requirements of the operation of MNCs in China. The fact that the company governing laws are applied unevenly between the local and MNCs in China is another factor to consider in the decisions. It is also something that is not experienced in the American market from which Apple Inc. originates. Conclusion Globalization involves the interaction of cultures and ease of communication where people that are physically far apart can communicate and businesses have the ability to send out their services and products across their borders. With the benefits, globalization also comes with shortcomings in relation to the preference of certain markets because of the lack of resources to enforce the required labour and environmental laws in some countries. In addition to the lack of the ideal mechanisms to control MNCs in some countries, there are the government, cultural, market, and political challenges experienced by some MNCs that hinder their operations and put the leaders in difficult positions in relation to decision-making processes that can ensure that they are right with the aw as they maintain profitability within their organizations. Apple Inc. has most of its products manufactured in China and the Chinese market consists of a great market for the products manufactured by Apple Inc. However, there are various instances that have made it difficult to reach a decision in relation to the way forward and the need to make decisions and inventions customized for the Chinese market. Tis article exposes the various threats, opportunities, decision-making challenges, and the lesson learned by the leaders of Apple Inc. in relation to the Chinese market. Works Cited Ovi16: , (Jurevicius), Whi16: , (Zhao), Gre161: , (Shugar), Mat13: , (Shciavenza), Ian11: , (Ian Brooks and Wil), Wor16: , ( Worldwatch Institute; AFP), Coh12: , (Cohan; Lee), Placeholder1: , (Placeholder1), Kar54: , (Higginbottom), Han12: , (Chen), Jon162: , (Swartz), Ree151: , (Nasr), Son17: , (Shiqing), Read More