This is a bit unusual for a blog post, but since this piece was the culmanation of many hours of work for my MBA, and it was only seen by a professor I wanted to ‘publish’ it so to speak.
. and its wholly-owned subsidiaries (collectively “Apple”) founded in 1976 by Mr. Jobs and Steve Wozniak; design, manufacture, and market personal computers, mobile communication devices, and portable digital music and video players and sell a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force for education, and third-party wholesalers, resellers, and value-added resellers. In addition, the Company sells a variety of third-party Macintosh, iPhone and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content and applications through the iTunes Music Store. The Company sells to consumer, small and mid-sized business (“SMB”), education, enterprise, government and creative customers.
The current trend towards an increase in the number of entrepreneurs and competition amongst existing companies presents an opportunity for Apple Inc to penetrate the global international market. Our products will be positioned very carefully. They will be of extremely high quality to ensure customer satisfaction, supported by impeccable service to our customers. Our primary goal will be to establish and strengthen our license to trade, which will be bestowed by the global communities in which we function. As Apple Inc prospers and grows, these communities will continue to benefit from both the value created by Apple and its behavior as a corporate citizen.
Initial plans are to introduce the iPad
in Asian global markets. The iPad competes in three main lines of products; primarily focusing on netbooks, eBooks and tablets. The iPad will be sold in different configurations, sized appropriately and packaged with the consumer in mind. These products shall be extensively distributed globally to remote, yet extremely viable areas where the market is appreciative of readily available, hand-held computing devices.
To prosper there is need for Apple to be flexible and responsive, to delight customers by providing them with what they want, when they want it and before the competition. From product concept to goods dispatch we intend to ensure that every policy and procedure, system and process must have the objective of improving the flexibility and response of the whole company. There is a need for interaction between all functional areas, particularly between marketing and manufacturing, if the organization is to realize its full potential, with manufacturing being employed as a strategic weapon.
Our marketing strategy will be based mainly on ensuring customers know what need the products are able to fulfill, and making the right product and information available to the right target customer. Hence we intend to implement a global market penetration strategy that will ensure that we are well known and respected in our respective industry. We will ensure that our product’s prices take into consideration people’s budgets; and that consumers appreciate the products and know that it exists, including where to find it. However these prices will also take into consideration the cost of production and distribution so as to ensure that we remain viable and operational. The marketing effort will convey the sense of quality and satisfaction in every picture, every promotion, and every publication. Our promotional strategy will involve integrating advertising, events, personal selling, public relations and direct marketing. In the long term Internet marketing shall also be undertaken, details of which are provided in the marketing section of the following plan.
Our target markets will primarily constitute the Asian markets consumer, small and mid-sized business who appreciates good quality hand-held computing devices. It is important to recognize that we do not intend that our tangible resources alone will make us potent competitors but more so our intangibles, such as our ability to relate to consumers, management style, corporate culture and commitment. These elements will differentiate us from our competitors and contribute towards the development of a sustainable competitive advantage.
We intend to compensate our personnel well, so as to retain their invaluable expertise and to ensure job satisfaction and enrichment through delegation of authority. Our compensation will include health care, generous profit sharing, plus a minimum of three weeks vacation. As an equal opportunity employer, we respect the diversity and human rights of our people, and strive to achieve optimal productivity, while realizing each employee’s full potential. Awards will be given out to outstanding individuals, groups and plants for hard work and production so as to instill a sense of fun and promote the maintenance of high standards. By encouraging all employees close to our customers to
think tactically about what Apple Inc. service offerings should be, and by having enthusiastic, capable and empowered people interacting with our customers, we build the competitive advantage of being able to meet our customers’ needs better than anyone else.
Apple Inc. intends to provide the customer with more than just a traditional experience in hand-held electronics. We intend to provide a quality hand-held device that will not only be refreshing and pleasurable, but provide the best way to experience the web, entice communications and offer a user friendly interface with a good e-business service that is packaged with a combination of great hardware piece with great style, great software, and great performance. Our customers are assured of products that have been produced using the highest quality standards.
As we grow globally we want to grow right. Initially pursuing organic development and expansion we intend to undertake vertical integration in the future so as to be in total control of our raw materials and goods dispatch. For example, we realize that we have to be in constant touch with our stakeholders to ensure market knowledge at all times. This is the nature of the channels we deal with. Also, we intend to build our management team correctly. We need the right people, in the right place, at the right time if we are to ensure optimum growth. We intend to develop our team so that our people can grow as the company grows globally; a mutually beneficial relationship. We shall strive to attain our primary goal, which is to develop and strengthen our license to trade, bestowed by the communities in which we function. As Apple prospers and grows, these communities will continue to benefit from both the value created by Apple Inc. and its behavior as a corporate citizen.
In conclusion, this global international business plan will demonstrate how Apple Inc. is positioned to take full advantage of the opportunities in the international market, by preparing to launch a PDA product, the iPad, in a maturing global marketplace.
We are targeting specific Asian segments in consumer and business markets, taking advantage of opportunities indicated by demand for easy to use, wireless-enabled PDAs with expanded communications functionality. The primary marketing objectives of this plan are to achieve first-year Asian market share of 3 percent and unit sales of 240,000. The primary financial objectives are to achieve first year sales revenues of $60 million, keep first-year losses to less than $10 million, and break even early in the second year.
Apple Inc., formerly Apple Computer Inc., is an American multinational corporation with a focus on designing and manufacturing consumer electronics and closely related software products. Established in Cupertino, California on April 1, 1976, Apple develops, sells, and supports a series of personal computers, portable media players, mobile phones, computer software, and computer hardware and hardware accessories. As of April 2010, the company operates about 285 retail stores in 61 of which are in ten foreign countries and an online store where hardware and software products are sold (Allen, 2010). The iTunes Store provides music, audio books, iPod games, music videos, episodes of television programs, and movies which can be downloaded using iTunes on Mac or Windows, and also on the iPod touch, iPhone and now iPad. The company’s best-known hardware products include the Macintosh line of personal computers, the iPod line of portable media players, and the iPhone. Apple’s software products include the Mac OS X operating system, the iLife suite of multimedia and creativity software, and Final Cut Studio, a suite of professional audio and film industry software products. Emerging is their mobile OS X platform for the iPhone and iPad. For a variety of reasons, ranging from its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has engendered a unique reputation in the consumer electronics industry. This includes a customer base, particularly in the United States, that is unusually devoted to the company and its brand (Frost & Burnett, 2007).
2.1 Company History
Steven P. Jobs, Steve Wozniak and Ronald Wayne founded Apple Inc. on April 1, 1976 in a garage in Santa Clara, California. Their inaugural product was the kit computer Apple 1 which was sold at local computer clubs. Apple Computer, as they were called at the founding was incorporated on January 3, 1977. The release of the Apple II computer followed shortly. In these early years, Apple solidified its presence as a personal computer manufacturer and marketer of products to home, schools and small business. The company, incorporated January 3, 1977, was known as “Apple Computer, Inc.” for its first 30 years (Sanford, 2010). On January 9, 2007, the company dropped “Computer” from its corporate name, reflecting the company’s ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. Apple employs over 25,000 permanent and temporary workers worldwide and had worldwide annual sales in its fiscal year 2009 (ending September 26, 2009) of US$42.9 billion (“Apple inc. annual,” 2010).
2.2 Company Strategy
Apple’s business stretches worldwide. The company has offices in North and South America, Europe, Japan, and the Asia Pacific. In the era of 2009, Apple opened 285 retail stores in the US and 10 foreign countries (Allen, 2010). All of which are steadily increasing sales.
Ron Johnson, the senior vice president who leads Apple’s retail strategy, told the press on the sidelines of a news briefing that international retail presence would be an important driver of future sales. “Today, Apple is about 50 percent international revenue and about 50 percent in the U.S.,” he said, standing next to a large Apple icon hanging in the storefront that glows at night. “We increasingly want to get our retail presence out in the other countries.” Apple’s latest filings with the U.S. Securities and Exchange Commission (“Apple inc. annual,” 2010) show they operated 285 stores at the end of fiscal year 2009, compared to 177 a year earlier.
The Company is committed to bringing the best personal computing, mobile communication and portable digital music and video experience to consumers, students, educators, businesses, and government agencies through its innovative hardware, software, peripherals, services, and Internet offerings. The Company’s business strategy leverages its unique ability to design and develop its own operating system, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design. The Company believes continual investment in research and development is critical to the development and enhancement of innovative products and technologies. In addition to evolving its personal computers and related solutions, the Company continues to capitalize on the convergence of the personal computer, mobile communications and digital consumer electronics by creating and refining innovations, such as iPhone, iPod and the iTunes Store. The Company desires to support a community for the development of third-party products that complement the Company’s offerings through its developer programs. The Company offers various third-party software applications and hardware accessories for Mac computers, iPhones and iPods through its retail and online stores, as well as software applications for the iPhone and iPod touch platforms through its App Store. The Company’s strategy also includes expanding its distribution network to effectively reach more of its targeted customers and provide them with high-quality sales and post sales support experience.
2.3 Products & Services
The Company offers a range of personal computing products, mobile communication devices, and portable digital music and video players, as well as a variety of related software, services, peripherals, networking solutions and various third-party hardware and software products. Apple introduced the Apple Macintosh family in 1984 and today makes consumer, and professional computers. Their product matrix includes the iMac
, Power Mac, MacBook and MacBook Pro, the MacBook Air, iPod
, iPhone and now iPad, as well as a number of peripherals and software products. The biggest selling product is the iPod music player. Apple sells four variants of the iPod: the iPod shuffle, iPod Nano, iPod classic and iPod touch. The iPod is the market leader in portable music players by a significant margin, with more than 300 million units shipped as of April 2010. The iPhone has also seen strong sales since its release just over two years ago. The next generation iPhone OS 4 was recently announced in April 2010 and will deliver new features and services into the future for this product line. The iPhone first became available on June 29, 2007. The iPad was released April 3, 2010 and has sold over 500 million units in US during the first two weeks of launch. This touch based tablet device runs a similar operating system to the iPhone. It features a larger screen, Apple’s own A4 processor and new features like an Apple Book store for e-book sales. We feel the initial success of the iPad demonstrates its global viability and potential (Sanford, 2010).
2.4 Competition and Industry Overview
Apple competes in a number of computing device markets. Desktop and laptop computers, portable music players, cellular phones and now tablet based computers.
Apple has been producing personal computers since 1977 and is one of the original firms to do so. They face stiff competition from PCs running Windows. For Apple’s most recent quarterly data, their sales of desktop computers represent 8% of the industry sales for the period. (See appendix)
Competition in the Personal Computer Market
Dell, HP, Lenovo are the major PC firms Apple competes with. In reality, they compete with every Windows based system maker.
Apple reinvented itself with the release of the iPod music player. This device revolutionized a product category that had failed to take off. Presently, iPod sales outnumber the competition 3 to 1 (Frost, & Burnett, 2007).
Competition in the portable music player market
Creative, Dell, Microsoft are the major threats to the iPod. There are numerous smaller firms like with small market share like Sansa, Sony and others. The iPod with its related ecosystem of music and video has proven the leader in this market space.
Apple entered the smart phone market with much fanfare in 2007 (“iPhone premieres this,” 2007). It was widely thought that Apple, Motorola and Palm as the dominant players. The iPhone has now had three generations and has been very successful worldwide. Since its release, the iPhone has sold over 50 million units and has surpassed all other smart phone makers for dominant market share of this segment (Kraemer, 2008).
Competition in the smart phone market
Verizon isn’t sitting back and letting the iPhone win over millions of customers. They are coming after the iPhone with a variety of new smart phones to compete with Apple. The most promising are those based on Google’s Android mobile OS.
, once an Apple ally is now directly competing with Apple for the smart phone market. Google released its Android mobile OS in 2009 and many makers of phones have adopted its use. It is too early to tell, but the Android OS is producing good early sales although none as high as the iPhone. At present Google licenses its Android OS to other handset makers and contracts with HTC to produce their own handset. There are many benefits of the most recent Android OS over the existing iPhone 3.x releases. In April 2010, Apple fired back by announcing its iPhone 4.0 platform which eliminates any gains Android had over the iPhone (Kraemer, 2008)..
Palm is also a maker of smart phones. They have a variety of models that have their own Web OS to power such models as the Pre, and Pixi. While technologically interesting the Palm’s Web OS based phones have failed to impact the iPhone.
The BlackBerry was once synonymous with cell phone email, and is still widely used in business settings. In recent quarters the iPhone has taken a good share of market from RIM (Research in Motion) at the expense of the BlackBerry. RIM has recently released touch-based devices to their lineup to compete with the iPhone directly (Kraemer, 2008).
In April 2010 Apple released the first generation iPad. It is a touch based tablet system with a 9.7 inch touch sensitive screen. It comes with built in WiFi and storage of 16, 32 or 64 gigabytes of storage. It will run all existing iPod music and video files and all iPhone apps already owned. It is aimed as a device more powerful and flexible than a smart phone and most portable than a laptop. Steve Jobs is often quoted as saying that the ultra small netbook market was just a temporary fad and the iPad will fill that niche. At present a number of manufacturers make net books and tablet computers. These devices meet the needs of being very portable, cheap and great for email and simple work. Criticisms of the class of device are that they are often underpowered and not full laptop or desktop replacements (“Steve jobs on,” 2008).
Apple’s iPad does not mark the first entry into the tablet computing market, nor the last. Sony, Google, Microsoft, Lenovo and HP are all planning touch based tablet introductions in 2010. Apple’s iPad does represent a device that looks and functions like a large iPod Touch or iPhone, yet its potential is far greater. It has a faster processor and longer battery life than most netbooks and all smart phones. At about a pound and a half, the iPad is heavier than a typical e-book reader, one of its core functions. But the product is about more than that. It aims to deliver media in all its forms, from storing and viewing photos to watching high-definition movies. It is well designed for consuming digital media in the form of video, web, or print services. One of the most unique features of the iPad is that it also acts as an e book reader. Apple has expanded upon their model of the iTunes Music Store and added an Apple Book Store where iPad owners can download best sellers and over 260,000 titles in an enhanced digital format to read on their iPad (Weinman, 2010).
Competition for the iPad as an e book reader and tablet computer
This places the iPad in direct competition with Amazon’s Kindle, Barnes & Noble’s Nook and Sony’s e reader.
Apple’s iPad competes with other devices in three distinct segments: As a book reader, as a tablet computer and as a net book replacement. All of these segments are still in an early business cycle but offer a segment primed for growth. In the e-book reader category, Apple’s main competition is the Amazon Kindle. While cheaper, the Kindle lacks color and is limited to simple web browsing and media reading. The Kindle has access to hundreds of thousands of e books via the Amazon.com store site. While Amazon does not break out Kindle sales it is estimated they have sold 2.5 million Kindles since its release in 2007 (MacMillan, 2010). The B&N Nook is another e book reader and is associated with the B&N.com store.
As a net book replacement, Apple competes with the same main brands they do in the laptop sector, Lenovo, HP, Dell, and Toshiba. While most net books run a simplified Windows OS or even a full-blown version they are limited in power, storage and functionality. They serve a purpose for doing simple office work, web browsing and email for traveling market looking for ultra portability. The iPad and other tablet computers will probably obsolete this market segment as they evolve to do even more tasks in a faster and simpler manner.
As a relatively young market and one popularized by the Pad, many PC firms have products in this space: HP, Toshiba, Fujitsu, Lenovo and the upcoming Microsoft and Google devices. All share some similar traits like form and size, but vary greatly in processing power, input style, software, storage and capability. The trend towards a dedicated touch based OS seems to be the direction Apple, Google, and Microsoft are heading.
Apple has one huge advantage over Asus, HP, and other PC makers. The iPhone OS, iTunes, and the App Store provide an ecosystem that makes it easy for users to buy and consume content seamlessly and for software developers to get paid.
The Apple food chain is equally troublesome for software companies: The iPad runs on a mobile-phone operating system, not on Apple’s Mac OS, to accommodate the tens of thousands of apps that were built for the iPhone. The iPad could very well accelerate the ‘appification’ of computer software, in which little islands of software code designed to do very small; specific tasks overtake traditional, complex software programs such as Microsoft Office. There are rumors that Microsoft, which declined to comment, might be developing a slate device of its own, but Microsoft faces much bigger questions about how its existing operating systems and software programs need to evolve to serve customers who are increasingly mobile, and who “snack” on-and discard-software programs in an increasingly casual way (Copeland, 2010).
Perhaps the company best positioned to match the iPad in a holistic way is Google. The iPad did get Google’s competitive juices flowing: Days before Jobs’ announcement it released photos of a prototype Net appliance in an attempt to preempt the Apple tablet. Google has developed an app-friendly mobile operating system, Android, and its forthcoming Chrome OS will also make it easy for developers to create applications. Is a Google slate coming? Google will only say it plans to launch a netbook running its Chrome operating system. Google is the main competition for the future of the iPad as they are readying an Android based tablet OS. Microsoft’s Surface OS is also soon to be commercialized (Copeland, 2010).
Of these competitors, some compete in only one or two product lines, while others sell a broader spectrum of products competing with the company. However, the unavailability of comparative sales information and the large variety of individual products make it difficult to give reasonable estimates of the company’s competitive ranking in or share of the market in its product fields of activity. Despite strong competition, Apple can carve out a definite image and gain recognition among targeted segments. Its licensing arrangement allows it to provide the exclusive feature of a portable, virtual keyboard with loads of application accessibility, video and Apps with 64 gigabytes of stored memory, a critical point of differentiation for competitive advantage (Apple, 2010).
3.0 Planning the Global Business Enterprise
In the rapidly growing e-business market, the company is emerging as the leader in providing product solutions and support for the United States and is considering expansion, internationally. Apple recognizes that the marketplace is global, and has been working for some time to capture market share in high-growth markets abroad such as in China. For years, Apple maintained a skeletal operation in China, relative to its competitors. It wasn’t until 2008 when it opened its first Apple retail store in the country, even though the world’s most populous nation has long been the world’s biggest market for cell phones, and the second-biggest market for PCs, and has more Internet users than any other nation. Most technology companies; Hewlett-Packard, Dell and Nokia, etc have made China a top priority, and fought vigorously for market share (Chao & Ye, 2010). The iPad will not hit international markets until May of 2010, and only in limited areas. One of the largest potential markets for the iPad is China. In many ways, China is unlike other foreign countries Apple has entered. It’s the only developing country where Apple has its own retail store; the other countries outside the U.S. where Apple has opened stores are Australia, Britain, Canada, Italy, and Japan (Tschang, 2008).
One obstacle for Apple’s China sales has been the company’s approach to retail. For years it sold iPods and Macs through an authorized distributor network in China’s IT malls, shopping centers where most consumers traditionally would buy their electronics equipment. Starting in 2009, Apple began revamping its retail strategy in China by signing deals to sell through nationwide home appliance chains such as Suning Appliance and GOME Electrical Appliance. Apple also hired senior executives from Motorola, who have leveraged their connections in industry to get cell-phone retailers to sell iPods (Tschang, 2008).
3.1 Identifying Global Business Opportunities
The industry market for this business, is not new, however is wide open for new and expanding opportunities. With a purchasing- power parity GDP of more than $7.8 trillion in 2008, China ranks second in global economies behind only the United States, with a GDP of about $14.6 trillion in 2008 (Richarme, 2009). China’s growth rate of about 10% annually will allow it to overtake the United States in the next few years, assuming that China’s government allows the country’s hyper growth rate to continue and that the U.S. growth rate continues in the range of 2% to 4% per year. China has absorbed much of the manufacturing businesses formerly done in the United States, and China’s economic composition is now about 49% manufacturing and 40% services, compared with about 20% manufacturing and 79% services in the United States.
Doing business with China; either as a company that wants to utilize the country’s large, skilled labor force or as a consumer of goods made in China requires a higher level of understanding of the Chinese culture than most American firms currently possess (Richarme, 2009).
In addition to the iPad, Apple reached a deal with China Unicom to distribute the iPhone sometime in the first half of 2010. China Unicom has about 140 million wireless subscribers; nearly double the 78 million of Apple’s U.S. partner, AT&T (Martin, 2009).
3.2 Analyzing international Competitors
Apple faces some homegrown competition in China. Taiwanese manufacturer Asus and Acer are providing cheap consumer electronics to the world, but especially to China. Lenovo is another Chinese brand that sells domestically in the same category as the iPad. All three of these firms have the advantage of starting in Asia and knowing their home market well. In addition, Apple faces some potential competition from its manufacturers. The iPad is manufactured for Apple by Foxconn, a division of Hon Hai Precision Industry Co. Ltd. (Russel, 2010). This firm also makes a number of other Apple products like the iPod and iPhone. They also make computers for Dell and HP, Sony Playstation 3, and Amazon Kindle’s. They have their own retail arm called Leadtek and also produce a tablet computer in Chinese markets.
One of the largest risks is grey market and black market devices. Even before the US Launch of the iPad, China had the P88, a near look alike product made by Shenzhen Great Loong Brother Industrial (Chao & Ye, 2010). While no table to run Apple’s award winning software, it boasts similar technical specs and is priced less and is available now, while the official Chinese iPad may be months away. Of course, there is also a bootleg market for US products shipped into China. Just before the iPad showed up on Apple’s Chinese Web site, gray market sellers started taking orders; too, with plans to sell the $499 model for a markup of almost $450, promising to deliver the iPad within four weeks after it hits the market in the U.S. (Chao & Ye, 2010).
3.3 Assessing the Economic-Geographic Environment
Different economic measures will be utilized to assess China’s level of performance and potential. Some may be informal or idiosyncratic indicators in the country such as the number of wireless phones or circulation patterns of marketing materials. Apple will begin its analyses by looking at the monetary value of the total flow of goods and services in the economy of China. The overall analysis will be refine by considering issues like growth rates, income distribution, inflation, unemployment, wages, productivity, debt, and the balance of payments. Additionally by considering the Gross National income (GNI), the income generated both by total domestic production as well as the international production activities of the Asian nation, Apple can assess the value of all production in the domestic economy plus the net flow of factor incomes such as rents, profits, and labor income from abroad during the first year period of the iPad’s introduction in China (Kong, 2009). In terms of China, which is the world’s fifth largest economy according to its population and GNI, however ranks in the bottom tier of countries according to GNI per capita (Daniels, Radebaugh & Sullivan, 2009)
3.4 Assessing the Social-Cultural Environment
Apple must consider variables other than income and population when estimating potential demand for their products in different countries. Consumers in developing economies do not necessarily follow the same social patterns as those in higher income countries. In choosing locations for international operations such as China, Apple in addition to examining its objectives and competencies will need to also examine its corporate environmental fit with existing conditions in China (Kong, 2009). China’s social and economic conditions may lead to unrest if large sectors of the population have unmet aspirations. Apple’s awareness of frustrated groups in China that could potentially disrupt business by calling strikes and destroying property and supply lines could alleviate some of the dangerous conditions that foreigners in foreign countries often endure (Frost & Burnett, 2007).
3.5 Assessing the Political-Legal Environment
Apple recognizes that once it leaves its home country in efforts to expand globally, that it operates in markets with different political and legal systems. Although the business environments of some countries are similar to those of others, more importantly in other cases the differences are profound, however in either instance, political and legal factors contribute to the environment in which Apple’s international managerial decisions must be made. China among all countries have demonstrated changes in its nations political and legal environment that have forced companies such as Apple that wants to operate there to think and rethink the best ways to acquire resources, minimize risk, and adapt operating modes (Kong, 2009). Evidence shows how political policies and legal practices are integral parts of a nation’s operating environment and must be assessed carefully if Apple’s iPad is going to be successful in navigating different markets.
4.0 Organizing for International Business Activities
Companies adopt an international strategy when they aim to leverage their core competencies by expanding opportunistically into foreign markets. Apple’s international model will consider local subsidiaries in each country to administer business as instructed by headquarters. However ultimate control will reside with managers at headquarters whom will best know the basis and potential extensions of the company’s core competencies (Daniels, et al, 2009).
The business drivers of the company’s future performance in global markets include several factors that comprise, but are not limited to: Timing of a equipment upgrade and/or replacement cycle in mature markets such as the United States; high levels of deployment growth for new iPad products in emerging markets such as Asia Pacific; the company’s strong financial position; the company’s ability to successfully integrate acquisitions competitive pressures, including pricing pressures and technological developments; changes in the company’s relationships with customers, suppliers, distributors and/or partners in its business ventures; changes in political, economic or other factors such as currency exchange rates, inflation rates, recessionary or expansive trends, taxes and regulations and laws affecting the worldwide business in each of the company’s operations; acceptance of the company’s product and technology introductions in the marketplace; unanticipated litigation, claims or assessments; the timely completion of the company’s new manufacturing operation for iPad product and related components in the Asian region; and variations in consumer demand for e-business technologies, products and services (Apple Annual Report fiscal year ended September 26, 2009)
4.1 Selecting a Global Company Structure
Ultimately, a company’s choice of structure depends on many factors, including the configuration of the company’s value chain in terms of the location and type of foreign facilities, as well as the impact of international operations on total corporate performance.
Apple has two issues of which to consider: vertical differentiation, the matter of how the company will balance centralization versus decentralization, in decision making; and horizontal differentiation, the matter of how the company will opt to divide itself into specific units to do specific jobs. Initially Apple will access where in their existing hierarchy the authority to make decisions should go by working out the issue of centralization versus decentralized (Daniels, et al, 2009).
4.2 Financing Sources for Global Business Operations
Having a good product idea is not sufficient for success in global business. Firms such as Apple that invest and operate abroad access both debt and equity capital in large global markets as well as in local markets. Apple has a lot of capital but may also benefit from strategic partnership with local industries to further finance expansion. By determining the proper mix of debit and equity Apple can assure a strong capital structure as it expands its iPad product. By selecting, issuing, and managing long-term debt and equity capital, including location and currency as well as analyze its investment opportunities, Apple can assess its long-term financing abilities and capital budgeting. Again these alternatives to financing solutions does not alleviate Apple from accessing their internal and external sources of funds such as loans, investments through equity capital, inter-company receivables and payables and dividends (Brigham, & Ehrhardt, 2008). Additionally two major sources of funds external to Apple’s normal operations to consider are debt markets and equity markets.
4.3 Creating a Global Management Information Strategy
With competitive demands to produce high quality products quickly and efficiently, manage inventory levels profriciently, communicate effectively with suppliers, and meet customer demand adequately, Apple will need to rely on information technology to meet its needs. Information is vital to making a global information system sufficient. As Electronic Data Interchange (EDI) is becoming the norm in many inter-company transactions, particulary in ordering, distribution, and payables and receivables; Apple will consider using (EDI) to facilitate both efficiency and responsiveness as it links suppliers, manfacturers, customers, and intermediaries. Additionally EDI will support Apple’s efforts to link exporters with customs to facilitate the quick processing of custom forms, thus speeding up the delivery of products across borders. Another technology to consider is Enterprise Resource Planning (ERP). Apple can introduce software to integrate everything in the back office which is essential for bringing together the inforamtion inside the firm and from diferent geographical reasons.
4.4 Identifying Human Resources for Global Business Activites
The importance of qualified personnel to achieve Apple’s foreign growth and operational objectives is detramental to its success in foreign markets. The challenge of putting the right person into the right job in the right place at the right time for the right compensation requires Apple to staff its operations with people who can leverage its core competencies while dealing with the pressures of local responsiveness and global integration. More importantly opening and operating a business that expands foreign markets demands that Apple determine its human resource needs, hire people to meet those needs, motivate them to perform well, upgrade their skills so they can move on to more challenging task, and ultimately retain them (Daniels, et al, 2009).
4.5 Managing the International, Financial, and Business Risks
Apple like so many company’s competing in the industry of Technology, have to consider events and or risks associated with its social, political, economic and technological setting that may affects the company’s performance within the industry both domestically and overseas (Daniels, et al, 2009). The company is constantly evaluating current market conditions and understands the challenges being presented by the ongoing global financial turmoil. In addition to the typical business risks encountered in the market place, there is heightened concern regarding the impact of the worldwide fiscal downturn on the consumer, small and mid-sized business groups which are Apple’s key customer base. Growth forecasts might not accurately affect actual performance if financial institutions continue to see decreased revenue per customer and if the depository failure rate is not contained. Bank failures would present as deferred or cancelled orders arise resulting in reduced implementations of new systems and upgrades. Fluctuations in raw material costs, especially in the energy sector pose additional challenges. Typically the company attempts to pass the higher costs on to the customer, but heightened competition might prevent this from being actualized (Brigham, & Ehrhardt, 2008).
The Company’s financial condition and operating results also could be significantly affected by other risks associated with international activities, including but not limited to, economic and labor conditions, political instability, and changes in the value of the U.S. dollar versus local currencies. Margins on sales of the Company’s products in foreign countries, and on sales of products that include components obtained from foreign suppliers, could be materially adversely affected by foreign currency exchange rate fluctuations and by international trade regulations, including duties, tariffs and antidumping penalties. The Company’s primary exposure to movements in foreign currency exchange rates relate to non-U.S. dollar denominated sales in Europe, Japan, Australia, Canada and certain parts of Asia, as well as non-U.S. dollar denominated operating expenses incurred throughout the world. Weakening of foreign currencies relative to the U.S. dollar will adversely affect the U.S. dollar value of the Company’s foreign currency-denominated sales and earnings, and generally will lead the Company to raise international pricing, potentially reducing demand for the Company’s products(Daniels, et al, 2009).
The most significant factor is the CEO himself. Steve Jobs is a rare type of leader who embodies the company itself. His executive team has been preparing for the inevitable day Mr. Jobs is no longer at Apple, but the stock and future earnings are still at risk based on recent variation tied to news of his health (Hesseldahl, 2009).
5.0 Implementing the Global Marketing Plan
As part of our business strategy; the company frequently engages in discussions with third parties, regarding possible investments, acquisitions, strategic alliances, joint ventures, divestitures and outsourcing arrangements; and enter into agreements relating to such extraordinary transactions in order to further its business objectives. In order to pursue this strategy successfully, the company must identify suitable candidates for and successfully complete extraordinary transactions, some of which may be large and complex, and manage post-closing issues such as the integration of acquired companies or employees. Integration and other risks of extraordinary transactions can be more pronounced for larger and more complicated transactions, or if multiple transactions are pursued simultaneously. If the company failed to identify and complete successfully extraordinary transactions that further its strategic objectives, the company may be required to expend resources to develop products and technology internally, the company may be at a competitive disadvantage or the company may be adversely affected by negative market perceptions, any of which may have a material adverse effect on our revenue, gross margin and profitability (Sengupta et al, 2006).
Integration issues are complex, time-consuming and expensive and, without proper planning and implementation, could significantly disrupt our business. The challenges involved in integration into foreign areas include:
- Combining product offerings and entering into new markets in which the company is not experienced;
- Convincing customers and distributors that the transaction will not diminish client service standards or business focus;
- Consolidating and rationalizing corporate information technology infrastructure, which may include multiple legacy systems from various acquisitions and integrating software code;
- Persuading employees that business cultures are compatible, maintaining employee morale and retaining key employees, integrating employees into the company, correctly estimating employee benefit costs and implementing restructuring programs;
- Coordinating and combining administrative, manufacturing, research and development and other operations, subsidiaries, facilities and relationships with third parties in accordance with local laws and other obligations while maintaining adequate standards, controls and procedures.
5.1 Product and Target Market Planning for Foreign Markets.
Simplicity Sells: The elegance of the iPad lies in the fact that a 2.5 year-old can use it seamlessly, even without knowing how to read. The touch-interface is as natural to her as a simple hand gesture, and the navigation model is pared back to eliminate complexity. Some argue this isn’t such a great thing. As the folks over at BoingBoing put it, this video is “The perfect Rorschach test for liking or hating the iPad a user-interface so perfect and natural even a kid can use it.” (Jardin, 2010). In theory, Apple could also give users access to the more complex, higher-level functionality that some power-users crave. But if nothing else, Apple’s rise over the last few years first with the iPod, and then with the iPhone shows that selling simplicity is a powerful way to woo mass-market consumers.
While Apple’s iTunes Music Store dominates the music download market in the US with its impressive portfolio of music and video content plus software applications, the service has never quite taken off in the same way in Asia-Pacific (Wolfe, 2008). Blaming rampant piracy and file sharing plus a host of licensing agreement problems with record firms and movie studios, the iTunes Music Store was reluctant to avail its full suite of content and services to other Asian countries (Tschang, 2008).
Markets such as Hong Kong, Taiwan, South Korea, Singapore, Indonesia and Malaysia were probably deemed too small for the US tech firm and customers have begrudgingly had to find a way to get an American credit card number, just to make their purchases at the online store (Wolfe, 2008). The Asian market previously neglected is ideal for an Apple expansion.
The markets the company serves are dynamic and continue to grow. Financial institutions continue to place increasing strategic importance on their retail networks. Demand is increasing for integrated e-business solutions. The company’s brand is trusted by its customers. The company has a growing global footprint with a broad customer base that continued focus will be to sell to consumers, small and mid-sized business (“SMB”), education, enterprise, government and creative customers. Besides world-class products and services that offer a competitive advantage, one of the key features of the company is the commitment, energy and knowledge of its employees. As the company focuses on the future, its long-term strategic plan includes focusing on the customer to increase loyalty, improving product and service quality, strengthening the supply chain, enhancing communications through teamwork and rebuilding profitability (Frost & Burnett, 2007). The company announced restructuring activities in 2005 and 2006 that are in line with long-term strategic plans including Asian and U.S. manufacturing capacity optimization, realignment of global research and development efforts, reorganization of its global information technology operation and rationalization of product development.
Consistency Matters: Although some critics lament Apple’s heavy-handed approach to design, the consistency of the iPhone/iPad’s interface from one app to the next is a huge advantage for consumers. Simple things like uniform standards for buttons and sliders matter a lot. In essence, each iPhone/iPad app trains the user to use the next app. Initial feedback from marketing research notes that even a kid’s confusion when confronted with the First Words that splash across the iPads screen shows what happens when designers decide to stray from convention. The technology suddenly becomes non-intuitive, and thus harder to use. If you have to make a choice between Clever and Clear, more often than not clear is the best bet.
Apple must convince people who already have smart phones, laptops, e-book readers, set-top boxes and home broadband connections that they need “the iPad” that serves many of the same purposes.
5.2 Designing a Global Distribution Strategy
Apple has manufactured nearly all of its products in China since the late 1990’s. Apple’s iPad, iPhone and iPod are manufactured in Shenzhen
China (Russel, 2010). All of the components of these devices are also sourced from the Asian region. For example the Flash RAM is made by Toshiba in Korea, the touch screen by Wintek in China and the case, batteries and other components are also from the region.
Our channel strategy is to use selective distribution through our flagship Beijing retail store and the two planed regional stores in 2010. During the first year, we will add channel partners until we have coverage in all major Asian markets and the product is included in the major electronics catalogues and Web sites for the regions. We will also investigate distribution through electronic outlets maintained by major carriers such as Abt, Best Buy, Fry electronics and Tiger Direct. In support of our channel partners, Apple will provide demonstration products, detailed specification handouts, and full color photos and displays featuring the product. We will also arrange special trade terms for retailers that place volume orders.
5.3 Planning a Global Promotion Strategy
Marketing the iPad in China will take careful planning. By integrating all messages in all media, we will reinforce the brand name and the main points of product differentiation, especially our exclusive innovative features (Porter, 1998). Research about media consumption patterns will help our advertising agency choose appropriate media and timing to reach prospects before and during product introduction (Sengupta, et al, 2006). Thereafter, advertising will appear on a pulsing basis to maintain brand awareness and communicate various differentiation messages The agency will also coordinate public relations efforts to build the Apple iPad brand and support the differentiation message. To attract market attention and encourage purchasing, Apple will offer as a limited time special; software applications available in the Apps store for the Asian market. To attract, retain, and motivate channel partners for a push strategy, we will use trade sales promotions and personal selling to channel partners. Until the Apple iPad brand has been established within the Asian markets, our communications will encourage purchases through Apple’s flagship retail store in Beijing rather than from our Web site.
5.4 Selecting an International Pricing Strategy
Apple’s assessment identifies pricing as more complex internationally than domestically. Reasons such as government intervention, market, export price escalation, fluctuations in currency value, fixed versus variable pricing and relations with suppliers present potential obstacles (Daniels, et al, 2009). For these reasons the Apple iPad will be introduced in the Asian markets at a $500 wholesale, $650 estimated retail price per unit. We expect to lower the price of this first model when we expand the product line by launching the Apple iPad, to be priced at $450 wholesale per unit. These prices reflect a skimming strategy, where Apple will charge a high price for a new product for the early adapters willing to pay the higher price (Daniels, et al, 2009). For now, Apple is selling versions of the iPad that can only connect to the Internet using Wi-Fi. Those models start at $499 in the U.S. Versions that also have a cellular data connection will be available by the end of the month. They will cost $130 more, with the most expensive at $829.
We understand that perception of value and purchasing behavior can be greatly influenced by how much the consumer is able or desires to spend, and this will influence the image of the different products that we produce. Our marketing strategy will incorporate this information.
6.0 Controlling Global Business Activities
We are planning tight control measures to closely monitor quality and customer service satisfaction. This will enable us to react very quickly in correcting any problems that may occur. Other early warning signals that will be monitored for signs of deviation from the plan include monthly sales (by segment and channel) and monthly expenses. Apple Inc. is one of the oldest hardware MNE that keep control over their products by manufacturing both computers and their operating system. It is known that Apple has a high quality product that makes Apple different than its competitors. Apple creates its product with unique designs to attract the consumer’s eyes and increase its market share because Apple success is based on fulfilling customer’s desires (Frost & Burnett, 2006). The iPhone and iPad are no different. Apple’s vertical integration of the A4 CPU, the hardware, software and even the iTunes Music Store, and App Store demonstrate how the entire package is significant.
6.1 Determining Financial Results
The analysis of Apple’s financial statements will provide both key operating ratios and qualitative information for comparing the company’s performance with that of other firms in the same industry as well as evaluating trends in the firm’s financial position over a period of time. Major categories of ratios for review will include Liquidity to access whether Apple can make required payments, Asset Management to access whether Apple has the right amount of assets versus sales, Debit Management to access whether Apple has the right mix of debit and equity, Profitability measures to access whether sales price exceeds unit cost, and if sales are high enough as demonstrated in the PM, ROE, and ROA, Market Value to gage whether investors like what they see as shown with the P/E and M/B ratios. Apple does maintain highly liquid assets, which has some analysts speculating on what they will do with the additional cash (Apple Inc, 2009 Annual Report, 2009).
6.2 Measuring International Business Success.
As Apple looks to international markets for growth opportunities, cost reduction, and risk diversification within the context of satisfying the competing demands of global integration and local responsiveness; six key areas will be considered in measuring Apple international business success: its global management team, global strategy, global operations, global technology and R&D, global financing, and global marketing. Additionally quantatative data obtained from Asia regions quarter to quarter sales of iPads units will allow Apple to measure success for the future.
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Apple Store, Sanlitun
Building 6, No. 19, Sanlitun Road
The Village at Sanlitun
Chaoyang District, Beijing
Gartner’s Preliminary U.S. PC Vendor Unit Shipment Estimates for 1Q10 (Thousands of Units)
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