Apple Inc. International Strategy: The Context of International Business

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Page count 8
Word count 2194
Read time 9 min
Subject Economics
Type Essay
Language 🇺🇸 US

Company overview

Apple Inc. is a publicly listed American multinational company specializing in the production of high technology electronic products, computer hardware, and software (Apple Inc. 2010). Under the electronic hardware category, the company products include personal computers, media devices, mobile communication, and portable-digital music players. In addition to high-tech hardware devices, the company produces a variety of software applications including third-party digital content applications and networking solutions (Apple Inc. 2010). Within the mobile communications category, the company has launched into the market a variety of Smartphones including iPhone and other android Smartphones that have significantly hit the world Smartphones market.

Currently, the company is listed on the NASDAQ Global-Select-Market with the AAPL symbol (Apple Inc., 2010). The company is currently the market leader in the android smartphones and computer technology market. The company operations are divided according to geographical locations. The North American, European, East Asia, Asia Pacific, and African divisions. The company majorly sells its products through established retail stores located in most countries across the world.

The company is committed to maintaining the highest standards of corporate governance and business conduct according to the approved corporate governance guidelines. The company also believes that these guidelines are essential in efficiently running the business and in serving the stakeholders as well as maintaining integrity in the marketplace (Linzmayer, 2006). The Board of Directors currently manages this company.

The directors’ responsibility is to oversee the day-to-day operations of the company. The directors run the company with the help of various committees including the executive compensation committee. Even though individuals founded the company, the shareholders currently own it (Dziri, 2011). The shareholders make the company’s major decisions and are composed of individuals, institutional, and mutual fund owners.

International operations

Apple Inc. is dedicated to providing clients with the best products that would give them the best usability experience. The peripherals and services have driven the company to open up its operations in the major emerging markets particularly in China (Apple Inc., 2010). Apples Inc.’s expansion approach is to create a balance between its exceptional capability to devise and build up its products that would provide its clients the best qualities that they are looking for and offering solutions to their needs (Apple Inc., 2010). Together with other expansion policies, Apple Inc. keeps on developing and advancing the stage for innovative products as well as offering third-party digital products and appliances all over the globe.

As a result, the company opened its operations in China due to the fast growth in GDP and the larger market share (Ruckman, 2004). Currently, China’s economic growth is surpassing that of the US and Japan making the country attractive for investments. The growing global digital products market is an opportunity for the company particularly in countries like China, which is experiencing an economic boom. Moreover, the huge population and increasing application of Apple Inc.’s products by the younger generation offer a potential market. Moreover, the innovative capabilities of the company are another opportunity to introduce new products into this large market (Gormley, 2010).

Besides economic growth and market opportunities, the international operations offer an opportunity for the company to produce commodities at a low cost (Alfaro et al., 2004). The company’s Chinese subsidiary operates at low wages compared to that of the US. In addition, the operations in China reduce the distribution cost thus enabling the company to offer its products at competitive prices (Shen & Lin, 2011). The Chinese subsidiary is strategically located to serve and meet the demands of the European, Asia, and African markets.

In essence, the company is taking advantage of the benefits the foreign country offers towards its operations while retaining its technological aspects (Moshirian, 2001). The country operation advantages include the cost of factors of production such as labor cost, factor endowment such as availability of spare parts as well as reduced distribution costs. The technological aspects that the company has retained include research and development along with the defining managerial procedures (Crespo & Fontoura, 2007).

External environmental issues

Political factors

Apple Inc. is a multinational company operating in many countries especially in North America, Europe, and Asia. As such, its products are sold in a wide spectrum of political environments. Moreover, Smartphones consumers are spread across the political divide found in all parts of the world. Therefore, political consideration is a very important factor, especially when introducing a particular product in the foreign country market (Arregle et al., 2006). For instance, most of the company’s Smartphones are manufactured in China. However, a majority are sold within the Chinese market. Thus, the company’s marketing strategies must be in line with the country’s policy where most of its products are sold (Arregle et al., 2006).

Economic factors

The current economic situation around the world has a profound effect not only on the company products but also on the general production capacity (Alfaro et al., 2004). The economic downturn has a considerable consequence on the company’s products market. Sales from Smartphones reduced as the majority of consumers switched to other essential products as their income reduced. However, this presented an opportunity for the company to introduce cheaper Smartphones in the market. Moreover, in such an economic environment, the company must increase its capital flow to avoid negative effects accruing from the economic shocks (Barrios et al., 2005).

Social and cultural factors

The company products are sold in an open cultural environment. Moreover, its target market of the younger generation pursues vogue and like cultures (Barrios et al., 2005). Their lifestyles are similar in almost all parts of the world. All the Smartphones that the company has launched into the market have been popular among the younger generations who have revolutionized the generation cultures.

With the current globalization where there are no cultural boundaries, the company’s Smartphones have been seen as the engine behind current globalization. The younger generation needs gargets that are simple and with wide applicability. Indeed, Apple’s android Smartphones have achieved that objective. The company’s Smartphones applicability, design, and style have cut across cultures (Bernard & Jensen, 2007).

Challenges and opportunities facing the company

The growing technology market is an opportunity for the company particularly in emerging markets like China, which is experiencing an economic boom. Moreover, the huge population and increasing application of Smartphones by the younger generation offers a potential market. The innovative capabilities of the company act as another opportunity to introduce new products into the market (Dziri, 2011). Besides, the growing use of Smartphones in the developing market such as Africa presents another opportunity to be exploited by Apple Inc.

The greatest challenge Apple Inc. and its products are facing is stiff competition from other firms and similar products (Alfaro et al., 2004). Besides the external competitive threat the company is facing on particular products, the technology used is also hard to maintain. Explicitly, the company finds difficulties in sustaining technological leadership in the industry. New technologies are highly pirated by other companies to produce competing products (Barrios et al., 2005).

Though the market is highly competitive with new models entering the market, Apple Inc. is venturing into unexploited markets and innovative products that increase its competitive advantage. For instance, the company’s innovative Smartphones are hitting the world market. The company is taking advantage of the worldwide smartphone market, which is rapidly growing. Apple Inc. is targeting the younger generation whose popularity with smartphones is ever increasing (Crespo & Fontoura, 2007). Apple Inc. expects that Smartphones will be contributing over ten billion dollars in revenue over the next five years

The international market entry modes adopted by the company

Apple Inc. has started its operating subsidiaries in the foreign market. Like most multinationals, the subsidiary’s main operations are controlled at the head office in the U.S. According to Arregle et al., (2006), these subsidiaries imply that Apple Inc. will have to hold a hundred percent allotment of the far-off units. For the firm to own a subsidiary, Apple Inc. must establish a new entity with full operations into this market or fully acquire an existing firm (Biswas et al., 2007).

The acquired firm must be well built within the industry. Apple Inc. stands to gain a lot from this mode as the company can easily promote its products and services. The firm has been in tight control over the subsidiary operations given the full ownership. In addition, compared to the other modes, the firm always implements its strategic plans and does not risk losing the competitive advantage as well as the technical skills to other firms. Apart from the full control and reduced risks, the firm also enjoys full benefits from internationalization. However, there are increased costs associated with this mode of entry (Blomstermo et al., 2006).

Compared to all other modes, a fully owned subsidiary is the best entry mode for Apple Inc. As indicated, the fully owned subsidiaries in the international markets make the firm have control over the enshrined competencies and initiatives that form the core of the business strategies. The strategy increases Apple Inc.’s geographical diversity while reducing both the political and economic risks associated with this expansion (Chen & Mujtaba, 2007).

The company’s structure and control mechanisms for its international business operations

Even though the company is expanding rapidly into the world market Apple Inc. has adopted the most modern methods of internal controls. The company’s horizontal structure enhances decision-making while enabling control over the company’s processes (Linzmayer, 2006). Besides, the general work environment that encourages innovativeness, the company’s inclusive culture, and friendly human resources management practices have enabled Apple Inc. to increase its internationalization and establish itself within the global marketplace.

The knowledge of personnel is the key positive feature of Apple Inc. Dziri (2011) claims that this is important in controlling the conduct of workers, bureaucrats, and executives. The corporate governance guidelines are set by the panel of directors to enable the management to function efficiently. The corporate configuration has also instituted both internal management and suitable financial control. Though this company rapidly expands, Apple Inc. upholds modest company management practices (Linzmayer, 2006).

The company has also put control measures towards financial management. The major controls are in the financial disclosures that must be by the set management procedures as well as the statutory regulations including the exchange act. The management must evaluate the financial control and disclosure procedures under the regulations provided in the exchange act. The financial disclosure control and procedures must be effective and should provide reasonable assurance that the information provided is reliable (Linzmayer, 2006).

How logistics have facilitated or hindered the company’s international business operations

Apple Inc.’s manufacturing depends on the components that are manufactured by other companies with the majority located in Asia and the Far East. Contracted companies convey these components to the manufacturing centers. These outsourced companies are majorly located outside the United States (Apple Inc., 2010). As a result, the company faces various challenges in terms of control. The outsourcing arrangement has led the company to lose direct control over its distribution and production. Moreover, Apple Inc.’s arrangement has a greater impact on the quality of the products, which has resulted in losing much of its control over technological know-how (Apple Inc., 2010).

However, outsourcing logistics has been perceived as a way through which Apple Inc. can reduce its operating costs. The arrangements with the outsourcing companies have provisions for service contract expenses compensation. The company claims compensations only if there are defects in supplies or manufactured products (Apple Inc., 2010). Even though the company looks ahead to its associates to stick to the set regulations, material contravention to the set of laws is likely to take place regularly. The failures in logistics have a gross effect on the manufactured products, which end up having various defects. Such defects resulted in Apple Inc losing market share particularly to the market competitors (Apple Inc., 2010).

The aspect that the company needs to develop in the future

The future of Apple Inc. lies in the development of its key competencies to enhance the expansion strategy (Blonigen, 2001). Since the company operates in a highly competitive market, innovative products, managerial competencies, and enhanced marketing are critical for Apple Inc.’s future success. Smartphones are categorized under various products that have promoted the company and have remained to be the source of the company’s strength.

Smartphone technology is the core company competency. Therefore, developing Smartphones that satisfy the needs of the targeted market will increase the firm’s internationalization strategy. The company’s growth potential in the emerging markets is quite high given the fact that these countries’ population consists of younger generation especially within the twenties that the company targets.

Moreover, the company must invest in the development of its own Smartphones brand and establish them to be the leading fashion brand. The brand development strategy will ensure that the company offers quality brands that add value to the customers (Antràs & Helpman, 2004). To attain the strategy, Apple Inc. should become conscientious with the general management strategies besides constantly spreading out of the retail areas to ensure effectiveness in attaining the profit margin. The profit margins can later be reinvested in pricing and customer propositions (Antràs & Helpman, 2004).

References

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Antràs, P, & Helpman, E, 2004, “Global sourcing,” Journal of Political Economy, vol.112 no.2, pp.552-580.

Apple Inc. 2010, 2010 annual report, United States Securities and Exchange Commission, Washington, DC.

Arregle, J, Hebert, L & Beamish, P 2006, “Mode of international entry: the advantages of multilevel methods,” Management International Review, vol.46 no.5, pp. 597-611.

Barrios, S, Görg, H & Strobl, E 2005, “Foreign direct investment, competition and industrial development in the host country,” European Economic Review, vol.49 no.1, pp.1761-1784.

Bernard, A & Jensen, B 2007, “Firm structure, multinationals, and manufacturing plant deaths,” Review of Economic and Statistics, vol.89 no.1, pp.103-204.

Biswas, R, Fraser, D & Mahajan, A 2007, “The international market for corporate control: Evidence from acquisitions of financial firms,” Global Finance Journal, vol.8 no.1, pp.33-54.

Blomstermo, A, Sharma, D & Sallis, J 2006, “Choice of foreign market entry mode in service firms,” International Marketing Review, vol.23 no.2, pp. 211-213.

Blonigen, B 2001, “In search of substitution between foreign production and exports,” Journal of International Economics, vol.53 no.2, pp. 81-104.

Chen, L & Mujtaba, B 2007, “The choice of entry mode strategies and decisions for international market expansion,” Journal of American Academy of Business, vol.10 no.2, pp. 322-344.

Crespo, N & Fontoura, M 2007, “Determinant factors of FDI spillovers – what do we really know?” World Development, vol.35 no.2, pp. 410–425.

Dziri, R 2011, Avoiding strategic drifts in a hypercompetitive market: analysis of apple’s position in the mobile phone industry and suggestions, GRIN Verlag, Munich.

Gormley, T 2010, “The impact of foreign bank entry in emerging markets: evidence from India,” Journal of Financial Intermediation, vol.19 no.1, pp.26-51.

Linzmayer, O 2006, Legend of Apple, Qinghua University Press, Beijing, China.

Moshirian, F 2001, “International investment in financial services,” Journal of Banking & Finance, vol.25 no.2, pp. 317-337.

Ruckman, K 2004, “Mode of entry mode into a foreign market: the case of U.S. mutual funds in Canada,” Journal of International Economics, vol.62 no.2, pp. 417-432.

Shen, C & Lin, M 2011, “The determinants of cross-border consolidation in eight Asian countries: Before and after the Asian financial crisis,” Journal of Multinational Financial Management, vol.21 no.2, pp. 89-105.

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EduRaven. (2022, April 7). Apple Inc. International Strategy: The Context of International Business. Retrieved from https://eduraven.com/apple-inc-international-strategy-the-context-of-international-business/

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EduRaven. 2022. "Apple Inc. International Strategy: The Context of International Business." April 7, 2022. https://eduraven.com/apple-inc-international-strategy-the-context-of-international-business/.

1. EduRaven. "Apple Inc. International Strategy: The Context of International Business." April 7, 2022. https://eduraven.com/apple-inc-international-strategy-the-context-of-international-business/.


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EduRaven. "Apple Inc. International Strategy: The Context of International Business." April 7, 2022. https://eduraven.com/apple-inc-international-strategy-the-context-of-international-business/.

References

EduRaven. 2022. "Apple Inc. International Strategy: The Context of International Business." April 7, 2022. https://eduraven.com/apple-inc-international-strategy-the-context-of-international-business/.

1. EduRaven. "Apple Inc. International Strategy: The Context of International Business." April 7, 2022. https://eduraven.com/apple-inc-international-strategy-the-context-of-international-business/.


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EduRaven. "Apple Inc. International Strategy: The Context of International Business." April 7, 2022. https://eduraven.com/apple-inc-international-strategy-the-context-of-international-business/.