In the contemporary business world, businesses are exceedingly embracing the trend of globalization. In this way, they stand to benefit from increased profitability due to a widened client base and other lucrative benefits. However, it is also important to note that maintaining a business that has clients from different spheres of the globe becomes the most prevalent challenge in the organization. One of the most recurrent problems that inconvenience global strategies of most organizations stems from the production, management, and financial entities of the organization. This paper is an assessment of the contemporary issues that affect Apple, one of the most successful companies in the technology industry, the counter strategies put in place to offset the inefficiencies that are borne by the contemporary issues and the possible recommendations that would provide lasting solutions toward these issues.
Over the years, Apple has continued to experience a shortage of supply of its products. From a business perspective, this can be a very destructive inefficiency that may lead to costly and disastrous effects, especially if response is not made as fast as possible. For instance, months after iPhone 6 was launched, Apple could not meet the demand of its worldwide market (Jefferies, 2014). A research revealed that only 58% of the product was available in Apple stores worldwide, hinting that the company had not met the demands of more than 40% of its market. For customers who shop for their Apple products through online platforms like Amazon, the research reported a delay of days, weeks, and even months for the delivery of their products. Admittedly, the chief executive officer at Apple, Tim Cook, confirmed the supply-demand difficulties in the company by stating that “As of today—and certainly as of the end of the quarter, where you’re looking at the data—we’re not nearly balanced. We’re not close. We’re not on the same planet” (O’Murchu, 2014). Moreover, the issue of supply shortage also recurred after the launch of the iPhone 7 plus. This was attributed to the move by suppliers of the various components of the iPhone 7 to restructure their business strategies to avert issues that may arise following low yield rates such as high production costs, and that would translate to a decreased supply of product to the consumers. However, this shortage was only expected during the first roll-out of the premier handset. It is thus noteworthy that the company repeatedly experiences the problem of shortage in product supply after the launch of a new product.
Consequently, the issue significantly affected the demand-supply chain of the company. Following the defect that comes with the faulty components of the iPhone 7, such as those related to the waterproof speaker and the dual camera, the California based tech giant saw a decrease in demand of the iPhone 7 (Wu, Debby, & Cheng, 2016). Besides, following the shortage in supply of iPhone 6 and iPhone 6 plus, the company also stood to contend with a revenue drop for two consecutive quarters following an unpleasant reception by the market. This was critical because it was a tragedy of its kind after 13 years of steady revenue increase in the company. Moreover, analysts and other interested also projected lukewarm reception of the iPhone 7 brand following a lack of improvement and introduction of new features in the premium model (Wu, Debby, & Cheng, 2016). Partners and other parties that were attached to the Apple supply chain also hinted at a drop in the general apple orders.
There are a number of contributing factors that lead to difficulties in the demand-supply chain at Apple. The poor labor conditions at Foxconn factory located in Asia have significantly contributed to the shortage of Apple products. Foxconn is a factory that offers a wide range of production activities for many companies, including electronic titans from all over the globe. Apart from cost-cutting, many big-name companies find it convenient to outsource from the factory due to the professionalism of the massive Asian workforce (Duncan n.p). However, this business model is mostly inconvenienced in poor labor conditions that stem from lax or non-existent laws that focus on providing optimum labor conditions in countries in which they are located. In this way, companies may fire large numbers of employees without notice, long working hours that lead to exhaustion, and also poor health conditions at the workplace. This is mostly done with organizations with tyrant leadership for the purpose of cutting on production costs. However, these poor labor conditions consequently limit the productivity of individual employees due to physical and mental exhaustion. At one point in 2014, 18 workers attached to Foxconn attempted to end their life. Only four survived. In this way, it is clear that poor working conditions at the facility contributed to the shortage of different apple brands.
However, the tech giant has not turned a blind eye to the problem. For instance, in a bid to counter the effects that may arise from a shortage of environment, health and safety professionals (EHS) in Asia, the company decided to launch the Apple Supplier EHS Academy (Apple Supplier Responsibility 2014 Progress Report, 4). From this platform, Chinese workers attached to the supplier factories that are part of the supply chain of Apple would be able to access an 18-month training related to the environment, health, and safety. This program attracted a large number of employees from various factories. In this way, the company sought to improve worker health and safety. The company also, through its Supplier Responsibility 2014 Progress Report, decided to launch a study that would assess the academic qualifications of 12000 interns from 200 plus vocational schools to minimize on cases of student exploitation by the suppliers. Lastly, the company decided to bolster her Supplier Code of Conduct. This required individual suppliers to train their workers on their fundamental rights. Collectively, 1.5 million workers were trained following the provisions of this code of conduct. Root causes of inefficiencies stemming from the suppliers were also countered through training and other specialized programs. All suppliers working with apple were required to comply with at least 95% of the provisions of the report. In this way, the company significantly countered the issue of shortage in the supply of its products.
Another outstanding challenge that stands to deter the growth of Apple as a brand is the United States’ trade war with China. The trade war dates back to 2016 when President Donald Trump was elected president of the United States. From his perspective, the United States president-elect perceived the economic relationship between the two economic giants as competitive. In 2018, his administration instigated a tariff on Beijing for Chinese imports $250 billion (Wilson, 2018). In response, china instigated a tariff on imports from the United States totaling $110 billion. These tariffs introduced an economic standoff between the two economies, and bilateral talks have not been able to provide lasting solutions towards the economic rivalry between the two countries. The United States alleges China of several charges, including forcing American corporations stationed and in china and having partnerships with Chinese companies to share their technologies and stealing trade secrets from American multinationals in China. Being the top economies, it is obvious that multinationals corporations specializing in different fields have a lot to lose if the economic tension between the two countries prevails.
Considering the basic information regarding the trade war between the United States and China, It is noteworthy that multinational organizations in the two countries stand to lose. However, considering the supply chain of Apple, one can attest that Apple stands to lose more than most business organizations from the United States for two main reasons. Firstly, as stated earlier, the company outsources from a Chinese facility for its components (Leswing, 2019). Although some American corporations are a part of the company’s supply chain, major assembling activities of the components of the company are done in mainland China. This implies that further imposition of taxes on Chinese imports will consequently lead to an increase in the production cost of the company’s products, which will lead to an increase n the price per share of individual products. For instance, analysts reveal that imposing a 25%tarif on iPhone Xs will subsequently lead to a $160 hike on the price of iPhone or earnings less 23% if the company decides to overlook the tariff. They also hint that the company cannot consider the option of sourcing it as components from somewhere else because of the low cost of labor in China, and the high level of expertise of the massive Asian workforce, which may be rare to find in other countries. Thus the company will stand to lose more if the imposition of tariffs by the two administrations is not discontinued.
In addition, the company, unlike other global economic companies in the United States, has a considerably large client base in China. Back in 2018, the tech giant reported$51 billion worth of revenue from what is called the “Greater China,” which is comprised of Asian economies such as Taiwan and Hong Kong. The influence of China on the net quarterly revenue of the tech company is substantial enough to disrupt its earnings. Earlier this year, Tim Cook pointed projected a slight decline in the quarterly revenue from the earlier expected and cited a bad economic climate in China as one of the major reasons for the decline. He also acknowledged that the climate was introduced by the trade war between the two countries. Tim cook has also openly shown a lack of support for the president’s bid to increase tariffs to Chinese products (Overly, McGill & Chen, 2019). This reveals how the trade war has affected the company and its revenue.
With the start of the trade war, most investors and companies did projected that the economic standoff between the large economies would not last. However, it soon became clear that the trade war would continue. Putting into consideration the fact that bipartisan talks between the two administrations had not paid off, the trade war was surely here to stay. Therefore, although the company did not want to vacate from china where it had created more than 3 million jobs through its supply chain, the idea was becoming worth consideration with every incoming year. It was clear that the Trump administration was not willing to lessen the trade war against China with over $300 billion of Chinese goods having been imposed a tariff. The Trump administration was clearly focused on bringing apple home. Thus the need for the tech giant had to find alternative ways that would create a serene environment for growth was becoming inevitable with the increasing period since the trade war took effect.
Firstly, the giant resorted to shifting its focus from manufacturing premier handsets to providing services. Considering the high production costs that came with the imposition of tariffs, the company decided to find a new market. Following this, the tech giant considered provision services instead of majorly focusing on the manufacture of communication devices. This gave birth to services such as Arcade, iPhone TV, Apple Music, and Apple TV. Users of these services from apple were required to subscribe to the services at subsidized costs. In turn, they would access content such as music, short videos, and movies .in this way, the company was assured of stable revenue that was not reliant on political factors such as the infamous trade war. Moreover, the United States population would stand to benefit from the numerous jobs that would arise from this counter-strategy. This is one of the major contributing factors that have led to a significant decrease in the price of major Apple products such as iPhone 11. From a business perspective, it is clear that this strategy stood to benefit the company as expected.
Secondly, the company sought to find alternatives for its sources. It was becoming clear that the company stood to lose more billions if it did not find a way to move out of China as the trade war expected to intensify in December 2019. If the trade war escalates, tariffs are expected to kick in, which will obviously lead to a shoot in the price of apple products leading to a decline in revenue. As such, the company is currently considering India due to its lower production cost. Many components of Apple products, such as iPhone X and SE, have been manufactured and assembled in India. With the help of Trump administration, the company is holding talks with the Indian government to cut on its 20% tariff on electronic companies (Chia, 2019). Another barrier to shifting its production to India is the consumer perception of the Indians toward Apple products. The company is also reporter to having only a 1.2% market share in the country (Chia, 2019). However, the company has resorted to creating a brand awareness platform through the “Made in India” campaign in order to change public perception of the consumers in the country, however long it will take. Although the shift will be time-consuming and would take long to return a profit, the company has shown determination to pursue the path in order to avert the costs that come with the trade war.
To counter the shortage of supply, it is important that the company finds ways to make sure all partners in the supply chain work in alignment with its business goal. For instance, the Company can decide to conduct a research and note the trend in the purchase of its product and present a request to the suppliers with a surplus number for the components. This will enable the company to have surplus components that may be used later to avoid the cases of insufficient components. Moreover, the company can find learning platforms through which it can teach Americans on how to manufacture the components, especially through benchmarking in supplier facilities. After learning and mastering these skills, the individual students can be inducted into the workforce in order to help in the manufacture of devices. By doing this, the company will have significantly combated the inefficiency.
Considering the costly effects of the trade war, the company can resort to sourcing expertise from other countries that are not in economic rivalry with the United States, just as it did in selecting India. This is, at least currently, the ultimate course to pursue for Apple and any other business organization that seeks to survive the trade war. Moreover, for those companies that do not consider the option as an alternative, they can decide to communicate how the trade war has affected their business operations to their clients that they do not feel exploited by the seller (Marks, 2018). Besides, the company can decide to seek new markets. As stated earlier, the company has a 1.2% market share in India. This implies that even if the company has gone global, it has paid a lot of attention to some markets and in the process overlooked others. While India has one of the largest populations, it is sad that the company has not exploited the market in the region. Thus one can explore such overlooked markets in order to boost its revenue during the trade war.
In conclusion, Apple is one of the most successful tech-giant with a massive client base in Europe and Asia. Despite putting strategic measures to boost its production and explore newer markets, the company continues to experience economic issues stemming from political, technological, and socio-cultural aspects in her vast client base (Lombardo, 2019). One of the contemporary issues affecting the growth of the company and its products is a shortage in the supply of its products due to factors like insufficient production of components from China, where it outsources and assembles most of its products. However, the company responded to this inefficiency by pushing for better working conditions of companies in its supply chain. This is after it was revealed that poor working conditions led to a decline in the productivity of the workers at the facility. Outstanding inefficiency is the trade war between the United States and China. Considering that the company outsources from China, it is considered as one of the companies that stands to lose a lot from the trade war. However, the company responded by seeking to establish a new production site in countries with no economic strife with the United States. This would enable the company to avoid the costs that come with the trade war. To bolster the productivity of the company, apple should consider producing her components from home. Companies that do not consider this as an ultimate solution, they can explore new markets in order to boost sales.
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