Abstract
Apple Inc. sells products in various markets across the world. Through online shops and trade outlets, the corporation vends services and commodities to the global customers. Apple Inc. similarly trades most computer products in the artistic, administration, and venture marketplaces found within its ecological division.
The markets are particularly crucial to third party developers of computer applications and hardware that are compatible with Apple computers. The expansion and computing performance of Apple products are the major attractions of consumers within this market. Despite its reputation across the globe, Apple Inc. has been facing various risks in its global operations.
The risks include global specific risks, country-specific risks, and firm-specific risks. The research report offered various risk mitigation strategies Apple Inc. can use while going global to remain competitive.
Summary: Apple Inc
Previously known as Apple Computer Corporation, Apple Inc is a global company that produces computers, software and consumer electronics. Its major products incorporate personal computers, software applications, iClouds, iTunes, iPods, iPads, iPhones, televisions, and iOS. The firm also offers digital appliances and components via Mac Appliance, iBook, Application, and iTunes Stores.
The company was established in 1976 under Wozniak and Jobs management who released the first computer called Apple 1. Since then, Apple store has dominated personal computer market through innovative products such as Power Mac and Macintosh but encountered marketing problems in 1990s.
Through Steve Jobs, the firm seeded innovative technologies that led to the introduction of new products such as iPod Touch, the iPhone, iPad and iTunes music store. The company became the new market leader in consumer electronics with the latest success coming from a range of innovative products (Apple Inc., 2011).
Presently, the company is the global leader in technology with revenue generated totaling to $60 billion after overtaking Microsoft in terms of market capitalization in 2010.
The environment in which Apple Inc operates
Macro-environmental analysis
Rivalry between competitors
While an industry characterized by few large manufacturers and very expensive products hunts for niche audience, the evolution of personal computers has caused an explosion in the industry. This currently includes dozens of companies pursuing millions of consumers across the globe. From the use of electronic equipment in the day-to-day lives, the systems are becoming more of commodities (Sony Corporation, 2010).
For most consumers economy is important than performance specifications. This has forced many manufacturers to pursue the best-cost and low-cost provider strategies. Moreover, scientific improvement presents augmented the rivalry between the industrial players.
Electronic products are becoming sophisticated and efficient, with less energy consumption. In order to hasten the situation, the industrial leaders such as Apple, Sony, Microsoft and Nintendo have always kept to this pace.
Supplier power
Suppliers have significant influence over the manufacturers of electronic equipment. Whereas several values in the industry seem unwrapped and made by collaborative or independent bodies like IEE, companies tend to depend on the principles held secretly. Often, the technology must be licensed to a paid membership. Moreover, the focus of dealers in the market mounts stress on market players.
Thus, incompatibility in design does not allow the company to switch to other suppliers. However, microchip producers are hardly found in the computer developing trade hence relying on the mainframe producers for most of such productions. As a result, price cuts are placed on the inimitability accords and mass purchases, thus alleviating stress from dealers (USSEC, 2009).
Buyer power
Similar to any other trade, customers offer the last opinion while exercising substantial control over producers. Various buyers with differing needs affect the manufacturers of electronics directly since they must react and adapt to the market by offering extensive product-lines.
Producers gain from the extensive application and approval of electronic goods, thus resulting into improved products demands. Product reliability and proprietary structures are drawn on to uphold clients (Suraj, n.d).
Threat of potential entrants
Fresh entrants enter into the electronic market through many avenues. However, several hindrances may prevent such entrance. The current market is comprised of entrenched players who enjoy brand loyalty and recognition, including Sony, Microsoft, Apple, Samsung, HP, Dell and LG (Sony Corporation, 2010). Thus, building a flourishing trademark in the presence of such players is difficult.
They maintain low overheads and lead through minimal production expenses that can hardly be realized by fresh market participants unless large sums of money are invested. The tendency is gaining reputation, thus taking corporations such as Dell, HP, and Acer into war with various industrial giants.
Threat of substitutes
The technology sector has substantially grown with the introduction of alternatives such as televisions, game consoles, Smartphone, virtual music stores and personal computers. There are now feature-rich smartphones and PDAs in an average living room. Such developments have resulted in consumers focusing their “technology money” away from computers, televisions, radios and game consoles.
Regardless of the focus, it may not be possible that stylish handsets could weaken the value of other products considerably. The only thing that product substitutes have influenced is the elimination of monopoly in the electronic market (Du Plessis & Beaver, 2008).
Micro-environmental analysis
Apple Inc is currently the leader in the electronic industry as the company offers innovative products to global customers at relatively cheaper prices compared to other market contenders. The firm is influenced by various micro-environmental factors. For instance, Apple and its competitors are expected to respond to the both individualistic cultures of the west and the collective cultures of the east.
Consumers are also becoming sensitive to prices and quality hence compelling Apple and its market competitors to be responsive through effective quality control systems. The involvement in Corporate Social Responsibility (CSR) measures is also a strategy that Apple and other market participants are using to improve their relationship with consumers (Du Plessis & Beaver, 2008).
Risks faced by Apple Inc in international market operations
Apple Incorporation faces a number of risks in its international operations. The risks need to be classified and defined to enable the firm to recognize, determine, and mitigate them effectively.
Firm specific risks
Governance and foreign exchange risks subsist as firm-specific risks that confront Apple Inc in its international marketplace operation. That is, governance risk incorporates the aptitude to apply effective power over the functions of SME like Apple Inc within the political and legal setting of a host nation. Most host nations hardly allow Apple Inc to operate freely without creating trade barriers.
Addressing governance risk is important for SME to evade the conflict between firms such as Apple Inc and government that inflict constraints on the firm’s international operation (USITC, 1995). Conversely, Apple Inc faces problems when negotiating on the venture accord that will help explain particular liabilities and privileges of the domestic administration and the overseas firm itself.
Thus, an investment insurance and guarantee program are usually perceived to be of great assistance to Apple Inc as it transfers such risks to a host nation hence protects investment. Nonetheless, the obligation of both the host government and the investor accrues through the investment agreement (Bardhan, Jaffee & Kroll, 2004).
Country specific risks
In the host state, the country-specific risks including transfer risk, institutional and cultural risks affect both the foreign and domestic operations of Apple Inc. Transfer risk is a state of limiting the ability of Apple Inc to transfer funds either in or out of the host nation. Apple Inc, as a result, faces the blocked funds limitation given that foreign trade resources can hardly be transferred outside the nation.
This is based on lack of extra finances from loans and shortage of distant venture by the host state. Similarly, concerning institutional and artistic differences, Apple Inc faces several demanding risks when venturing into the promising marketplace present in the developed states. In extremely cases, the host administration may formulate its non-convertible exchange rates into other legal tenders.
As a result, the transfer of funds becomes fully blocked to the foreign country. In the meantime, such situations appear as guiding principles that limit the scheduling and amount of overhaul charges, royalty, pay-off debit, and shares paid or received by Apple Inc (Ashcroft, 2011).
The corporation experiences protectionism. That is, the host governments tend to control various chosen domestic industries from foreign rivalry. Indeed, Apple Inc and its dealers have faced the violation of the intellectual property privileges from various international business dealings. Bribery, widespread corruption, and nepotism are other problems in the emerging international market-facing Apple in its global operations.
In addition, the regulations of a host country’s human resource might force the investing corporation to recruit a fraction of its citizens rather than the alien expertise. The situation affects Apple Inc and local competitors are given that it leads to lack of elasticity to downscale labor response, thus inhibiting the firm’s staffing principles.
Finally, several nations insist that Apple Inc must share with the citizens and local firms their foreign subsidiaries. This makes Apple to conduct its global operations only through mutual venture (Ashcroft, 2011).
Global specific risks
In the recent years, global specific risks have been affecting Apple Inc foreign-based operations. Other than war and terror campaign, global threats comprise of mainframe data or cyber assaults, malnutrition, ecological distress, and anti internationalization factions accruing within new marketplace. Cyberattack is both costly and a destructive domestic and global dilemma that affects Apple Inc.
It has visibility difficulties within the corporation’s interior information structure. In fact, several foreign subsidiaries owned by Apple Inc are operating in most nations having uneven allocation of income. Such states have meek elite populace with high percentage of other personnel living below poverty line.
Therefore, hindrance in the firm’s operations comes once the firm employs both the groups in an attempt to improve the country’s situation hence lack of competitive advantage (USITC, 1995).
Apple Inc has faced frustration due to the accusation of selling unfriendly ecological products to the host nations. The corporation undergoes difficulties in its marketplace operations since it faces the blame of encouraging activities that cause environmental problems in the host nations possessing less pollution controls.
Furthermore, the firm faces stiff challenge when it comes to anti-global movement, which ensures that Apple Inc fosters anti-globalism. The situation has actually created negative reactions to their processes in the emergent markets due to barriers created on regional trade.
Ethnicity, warfare, and terror campaign affect every business around the world hence render the workforce and foreign subsidiaries owned by Apple Inc susceptible to such risks (Bardhan, Jaffee & Kroll, 2004).
Recommendations on how to mitigate risks faced by Apple Inc
Initially, the best approach towards curbing governance risks is by bargaining, understanding and anticipating tribulations prior to signing the contract. Formulating threat reduction policies, purchasing of warranties and venture indemnity, and agreeing on the venture accords are some of the pre-agreement schemes employed once the company has decided to make overseas venture.
These ensure the bright future for both parties. In fact, strategies on managerial and financial subjects must be clearly elaborated in the investment agreement. A program on investment insurance and guarantee would protect Apple Inc investments and its employees during global operations.
According to country-specific risks, forced investment, getting hold of special dispensation and creating unrelated exports provide the best strategy to the blocked funds. In addition, loan frontage and the anticipation of blocked funds, as a pre-investment strategy is important for Apple Inc investment in the international market.
The retention of the domestic legal advisor and bribery disclosure strategy to the consumers and workers would enable Apple Inc to deal promptly with corruption and nepotism. Besides, using joint ventures will help the firm mitigate risks related to religious heritage and ownership structure.
The firm should encourage states to initiate regional market to deal with protectionism and create domestic staffing and management to foster the adherence to the HRM norms. The firm should also encourage international accord to safeguard such rights and seek legal action in the host country courts when dealing with the intellectual property rights violation.
Conversely, being sensitive to the ecological concerns and support governments in upholding the levels of controlling pollution will help the corporation to strategize towards environmental concerns (Suraj, n.d).
However, cyber attacks might be difficult to eradicate, but internet security efforts and support of anti-cyber attacks by the government is important. Moreover, to deal with anti-globalization, Apple Inc should realize that foreign firms are the main target; thus, it should support efforts to reduce trade barricades.
Finally, the formation of work-related and strict safety standards as well as the provision of stable jobs will help Apple Inc to offer strategies towards poverty eradication. The mitigation of war and terrorism might be a menace.
However, the integration of cross- border supply chain, proper plan on disaster management, and support of the administration efforts to curb war on terrorism would be the best strategy for Apple Inc to deal with war and terrorism during its global operations.
Conclusion
The changing consumer trends and market shifts require companies to institute strategies that will respond to these dynamics and ensure that the firms achieve competitive advantages. Among the tricky industry is the electronic industry, which is characterized by big firms that are swift in responding to the market changes.
In this industry, Apple Inc can only adopt the best-cost strategies and risk mitigation measures to increase its competitive advantage given that consumers are increasingly becoming price-sensitive while many competitors are pursuing low-cost strategies.
Conversely, from its humble backgrounds, Apple Inc has grown to be a market leader in the computer and electronics industry. With “a wide market”, the company has outdone the stiff competition in the industry, but must consider the government regulations, risks and issues that might affect its future global operations.
In fact, USSEC (2009) claims that Apple Inc should exploit the marketing opportunities created by the emerging economies to remain competitive. However, the company must devise proper strategies to mitigate the prevailing global market risks while seeking global ventures.
References
Ashcroft, J. (2011). Apple Inc: The case study 2000-2010. Web.
Bardhan, A., Jaffee, D. & Kroll, C. (2004). Globalization and a high-tech economy: California, the United States and beyond. New York, NY: Springer.
Du Plessis, A. & Beaver, B. (2008). The changing role of human resource managers for international assignments. International Review of Business Research Papers, 4(5), 166-181.
Sony Corporation (2010). Annual report 2009. Web.
Suraj, S. E-waste and environmental degradation. Web.
USITC (1995). Global competitiveness of the US computer software and service industries. Web.
USSEC (2009). Form 10-K: Apple Inc. Web.