Globalization and its Impact on Apple Inc.

Introduction Today the world has become a global village where each and every thing is interlinked. The concept of global village or global merger is based on the grounds of globalization. Now the question arises in ones mind what is globalization? Much has been written by the academic writers, analysts and economists on the concept of globalization and its impact on the economies, business, cultures and people. Some of the opponents regard it a way of destroying the cultures and societies while the proponents believe that globalization has increased the economic strength of the countries. But today, the globalization is growing by leaps and bounds. In our attempt to understand the concept of globalization and its impact on the business world, the following study was conducted to understand this notion on a limited scale. This study attempted to give understanding about the concept of globalization, its advantages and disadvantages on the economies of the world especially on the business world. In order to carry out this study, a multi-national corporation, Apple Inc., was selected. This study focused on the operations of Apple Inc. and the impact of globalization on the company. All the related information was obtained from the secondary data resources. On the basis of the findings of the study, some of the recommendations were made that can help the company to leverage its market position in the global scenario.

Globalization Everyone has its own understanding about this concept. Their definitions and understanding about the concept of globalization differs. The most unified definition of globalization explains that it is a concept in which the different economies of the world amalgamate or unify with each other by reducing the barriers like tariffs of international trade, fee related to export and quotas on the imports. The globalization focuses on maximizing the economic efficiencies of the countries that are related to the wealth, products, services, manufacturing, supply chain, labor etc. by developing and fostering international relations, understanding and competition. It specifies the processes and operations that can be utilized by the economies, cultures and businesses with the help of different modes like communications, supply chain activities, distribution networks etc. According to Bhagwati (2004) the term globalization is very closely associated with the term economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, the spread of technology, and military presence. While Sheila L. (2004) asserted that globalization is

usually recognized as being driven by a combination of economic, technological, socio cultural, political, and biological factors. It widely impacts the processes of a country that may relate to the political, social, cultural, technological, environmental frameworks as well as the economy of a country. The social and cultural system is widely affected by this concept as the amalgamation of other cultures tends to change the culture of home countries (Conversi, 2009).

This mighty concept is not new to the people; it dates back to the early nineteen century. From almost a millennium back, the people, and corporations as well are engaged in the process of buying and selling the goods and services in the other countries or lands that are located at a distance. Ahmed et al. (1993) explained that many studies measure these global activities on the base of country size and by the growth of the company. Recently there is advancement in the measurement methods that are based on econometrics and advanced computer technology. Over the past decades, it is been said that the international trade has grown too far which is the direct product of globalization. The trade around the world has been noted to be increased around thirty folds since the mid nineties (WTO, 2007). This resulted in increased benefits to the consumers around the globe with respect to the selection of the products. The increased financial linkage with the countries around the globe has increased the degree of diversification in the products and services offered by the companies and the countries are able to cope with the idiosyncratic shocks. Thus there is profound correlation between the level of risk sharing between the countries and the production specialization process (Kalemli-Ozcan et al. 2003). The tremendous increase of globalization has significant impact on the countries around the globe and the people living there. It has transformed various businesses like Detroits Big THREE or Bangalore to IT hub from small to large enterprises. It has played vital role in the increased prosperity of the world since 1950s which has now spread from United states and Europe to the regions like China and India, which were considered formerly as poor countries (Schifferes, 2007).

With the advent of globalization process, the world trade has increased much faster than the overall growth of the world economy since 1955. The globalization has helped to reduce the trade barriers like tariffs on the export of manufactured goods. The countries like Japan, Korea and China have witnessed increase in their living standards due to international trade. Many MNCs are outsourcing their manufacturing units overseas to enjoy cheaper labor cost and stay in the competition. Recently, Apple, Multinational giant, has considered outsourcing its production unites to the companies in Asia specially China and has become a virtual firm (Schifferes, 2007).

The globalization has not only changed the way of manufacturing to various organizations but also it has revamped various service sector businesses. Many services related jobs are under the continuous threat and fear of outsourcing as the global companies tends to master costs by shifting their functions to the other countries (Nadvi, 1995; Parthasarathy, 2004).

The above discussion has briefly explained the meaning, the definition of globalization and its impact on the world economies and trade specifically. The following discussion will consider Apple Inc., a multinational company, in respect of globalization to study its impact on the company at large.

Apple Inc. Apple Inc. is an American based multinational company whose stocks are listed in the New York Stock Exchange and NASDAQ (National Association of Securities Dealers Automated Quotations) under the symbol AAPL. The company specializes in the design, development and manufacturing of electronic equipments like computers, software and smart phones. The hardware related product line of the company is well known to everyone; including iphone, Macintosh and ipad and ipod respectively. While there are multiple range of softwares

offered by the company to its customers that ranges from operating system to the entertainment and educational based software suits.

By the end of year 2010, the company had over three hundred retail stores (Spence, 2010) in ten countries (Apple Inc., 2011) as well as an online store that offers its products to the customers across the globe. According to Heft and Vance (2011) the company is now officially listed as number one company that provides wide range of technology related products in the world after surpassing Microsoft as well as one of the largest company in the world.

The company was established in 1976 and was incorporated in the early year of 1977 (Apple Inc., 2011). It was first established as Apple Computer Inc. but later on, by mutual agreement, the company founders removed the world computer from its name in order to show their expansion strategies in the other consumer electronic products and markets (Form 8-k SEC Filing, 2007; Markoff, 2007). By the end of the year 2010, the company had over forty five thousand employees working on full time basis and around three thousand employees worldwide. It was noted that the company had earned the annual sales of around sixty seven billion US dollars from its worldwide operations (Apple Inc., 2010).

The company has due to varying reasons like its business strategies, operational philosophy, unique design and distinctive marketing campaign has achieved a distinct market position and reputation in the global electronic industries. This unique market position is due to its loyal and devoted customer base and its brand equity, especially in the markets of United States (MacNN, 2006). The company is listed as one of the most admired companies in the United States and in the World for four consecutive years (Fisher, 2008; Colvin, 2009; Fortune, 2010). It has also received lot of criticism from the people which is mainly related to its business

practices, relationship with supply chain partners and its impact on the environment (Musgrove, 2006; Gonsalves, 2008).

Apple and Globalization

Business Strategy According to Michael Porter (1998), a firm can use two basic types of business strategies to leverage its business by utilizing its strengths and combining them with the number of available positions to market its products. These business strategies are cost leadership strategy and differentiation strategy.

Apple is currently working on the differentiation strategy by putting unique elements in the design and development of its products. The differentiation strategy is defined as a strategy that aims to develop the products and or services that have unique characteristics that are well liked by the customers and are valued by them. This strategy enhances the market position of the companies with respect to their counterparts (Porter, 1998).

Apple Inc. strives hard to provide excellent usage experience to its customers by offering innovative products in terms of hardware, software products as well as other offerings. The company is using its ability to design unique products and operating systems etc. with its integrated business units and design units. The success of the company in the global markets is due to its extensive focus on the market research and development for the development of its products and services. With reference to its business strategy, the company is in a continues process to build and advance the robust platform that can enhance the listing of third party

content like mobile phone apps, games etc on its online stores or its iTunes store (Apple Inc., 2010).

Moreover, the company strategies also involve the expansion of its distribution network in order to improve its global reach by providing high quality products and services with after sales services to their customers. Therefore, the company is positioned uniquely in the markets to offer superior and integrated digital technologies and productivity solutions.

Markets and Distribution The customer segments of the company are divided into various categories. The needs of the main customers markets it caters are of small and medium businesses, education sectors, large corporations, government departments and other related markets. In order to meet the needs and wants of these consumer markets, the company is utilizing direct and indirect distribution channels including online sales services, retail stores and direct sales force as well as third party sellers, retailers etc. Using direct sales contacts with the customers is, believed by the company, leveraging its product sales and has demonstrated as an advantage to the company over its competitors. In order to maximize its sales and to make sure that the buyers are receiving high quality experience, the company is in a process to expand and improve its existing channel distribution network (Form 10-k SEC Filing, 2010).

Competition The company faces aggressive competition from the other market players. According to Hoover (2011) the top three competitors of Apple Inc. in United States are Fujitsu Technology Solutions (Holding) B.V., International Business Machines Corporation and MediaNet Digital,

Inc. respectively. The needs of the markets it caters are highly competitive in nature due to the ever changing and advancing technological environment and the rapid introduction of new technology based products. The main competitors of the company are following cost leadership strategies by reducing the prices of their products or by maintaining low profit margins to maintain their market share.

There are various forces that can impact the business and profitability of Apple. These factors may include the marketing mix product, price, place, promotion strategies, product performance, the quality and reliability of the product, innovative designs as well as the availability of up to date software services. Currently, the management of the company is focusing on the expansion of its business markets related to the smart phones and other media and communication devices. Therefore, it is expected that the competition in these markets will tend to increase for the company.

Moreover, some of the competitors of the company have number of resources which they can utilize against the company to provide the product and service offerings related to Apple at little or no margin and, worst for the company, can collaborate with one another to offer the business and consumer products and services similar to Apples products at low price range (Form 10-k SEC Filings, 2010).

Products and Services Apple is currently using in house manufacturing system for the production of all of its products. All the products like Mac, iphone, ipad and ipod etc. are designed, developed and marketed via its main manufacturing hub which is located in the USA. But, as mentioned earlier,

the company is outsourcing the production of some of its product parts to the various international and national supply chain partners; subcontractors. Some of the components of its products, ipod, are outsourced to its subcontractor in Hong Kong from where it is sent to the outsourced production plant of the company (Linden et al, 2007).

Some of these components are of high cost. While the other products like hard drive and flash memory etc. are sent to the other companies or outsourcing companies like Toshiba in Japan or Samsung in Korea. Large number of its components is of low cost. The metal components of the products are made by the outsourcing unit in Taiwan called Foxconn and the plastic components are products by the outsourcing units in Singapore (Brown, 1998, p.198). Finally these parts are assembled in the China and then transported to its sales outlets across the world (Kahney, 2008).

Source: Linden et al, 2008; Value Chain for Apple Ipod

The company offers various deals on the events like Christmas, Saint Peters day, black Friday etc. these offers are then expanded on a global basis. For instance, the company offered a customized deal on the black Friday event last year for its customer base in the United States. This specific deal was expanded for the European countries. This event was in the mid of the year in the United States while in the European countries it was in the November. This globalized offering increased the sales of company products not only in the US markets but also in the European markets (Smith, 2010). Outsourcing Plants

It has built its integrated manufacturing and design facilities in the various countries for example in California, Singapore etc. This global network allows the company to develop and launch the products in its markets of America, Asia and Europe. It produces its products, for example ipads, in the Shanghai, China which has given it a cost saving advantage and lead to the increased profitability for the company (Chaffin, 2002). But on the other hand, this outsourcing has increased the downsizing and unemployment rate in the home country (Rodriguez-Clare, 2011). As these outsourcing plants contribute to the success of the company in the global markets but these also have some issues linked with the manufacturing of its products. Some of the outsourcing plants managed by the company are showing troubled situations for Apple. Early this year, the company has released its supplier responsibility report in which it has specified the unethical practices performed by its suppliers. One of its suppliers had employed over forty minors at the outsourcing units. Moreover, the suicide cases at Foxcon plant and the waste release issue at one of its Wintek touch screen facility has badly affected the company

operations and its global image. The global manufacturers like Apple, Dell etc. and various others are vulnerable to the practices performed by its subcontractors. These unethical practices are accounted on behalf of the company and therefore have created problems and hindrances for the company in the global markets (Sherman, 2010, 2011). The company was recently alleged for paying very low monthly wages (almost $50 per month) for a 15 hour work shift. The company responded to these allegations that "Apple is committed to ensuring that working conditions in our supply chain are safe, workers are treated with respect and dignity, and manufacturing processes are environmentally responsible," said a written statement from Apple spokesman Steve Dowling. "We are currently investigating the allegations regarding working conditions in the iPod manufacturing plant in China. We do not tolerate any violations of our supplier code of conduct" (The Mail, 2008).

Conclusion The economy of the world has now become free from any boundary. All the countries are now considered integrated with one another as one global market for carrying out various activities like trade, relations, etc. At one side globalization is well appreciated and defended as a harbinger of large numbers of opportunities for the countries and corporations while on the other side anti globalization groups dislike this process that there are certain people who are not able to take part in this process and therefore faces the negative impact of on their economies, lives and businesses.

Every process or function has positive and negative impacts associated with it. If the globalization has so many positive influences on the world economy and trade, it also has some negative impacts on the social, cultural lives, and it has increased disparity within the people.

There are many critics that are continuously expressing their views against globalization. But the point to be considered is that it gathers the information about the global markets and companies to operate. On the basis of this information, the companies can excel in the markets by engaging into strategic acquisitions, developing markets etc.

Recommendations This study briefly discussed the impact of globalization on the world and on the Apple Inc. the study findings showed that the company is doing pretty well in the global markets due the integrated resources and operative capabilities that are outcome of globalization. On the basis of these study findings, following recommendations are made for the Apple Inc. which can be helpful for the company to improve its supply chain partnerships and associations: 1. Apple Inc. lags only in its outsourcing associations with the other companies at different countries of the world. In order to improve the outsourcing practices ethically, Apple can strictly ask its outsourcing partners to comply with the ethical rules, and regulations. 2. It can hire the team of internal auditors to conduct surprise visits in these outsourcing units to check out their operative practices. 3. The company can also enter into a contract with these outsourcing units that if they found guilty, the company will immediately terminate the working contracts.

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