The ASEAN was founded in 1967 to promote the alliances of the countries in Southeast Asia. The current members of the ASEAN are the Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Indonesia, Singapore, Thailand, and Vietnam (ASEAN, 2010) Physical Environment
The physical environment of Southeast Asia is primarily a warm climate other than the high elevation areas (Andaya, 2009). The physical environment also differs from the ocean and jungle geographical areas. A primary concern within the physical environment is the availability of safe drinking water in many areas of Southeast Asia and the air quality. Political Stability
The political stability within Southwest Asia is very questionable in many areas of the region due to the terrorist activities; however with the support of the U.S. and other countries the threat is reduced just not eliminated. A scoring system was used to evaluate the region based on data that was provided by AMB Country Risk Reports. The rating system is; One – Very Low Risk, two – Low Risk, three – Moderate Risk, four – High Risk, and five -Very High Risk. The country leads the region with are risk score of one is Singapore followed by Indonesia two, Malaysia and Thailand three, Philippines and Viet Nam 4. The Philippines and Viet Nam have significant political risks that need to be taken into consideration (A.M. Best, 2010).
The economic risks within major countries of Southeast Asia are moderate at best. In the recent economic downward trend Southeast Asia is seeing the
effects the slowing economic trend with their major trading partners the United States and Europe. The demands for exports are decreasing and forecasts for 2009-2010 expect this trend to continue (A.M. Best, 2010). A scoring system was used to evaluate the region based on data that was provided by AMB Country Risk Reports the rating system is; One – Very Low Risk, two – Low Risk, three – Moderate Risk, four – High Risk, and five -Very High Risk.” The country leads the region with are risk score of one is Singapore, followed by Indonesia two, Malaysia and Thailand three, Philippines and Viet Nam four. The Philippines and Viet Nam have significant economic risks that need to be taken into consideration (A.M. Best, 2010). Financial Options and Risks
The financial system within the Southeast Asia region indicates a moderate to high risk on average other than the country of Singapore. As the global economy tightens credit requirements, this can have a significant impact on the financial stability in the region (Country Risk, 2010). A scoring system was used to evaluate the region based on data that was provided by AMB Country Risk Reports. The rating system is; One – Very Low Risk, two – Low Risk, three – Moderate Risk, four – High Risk, and five -Very High Risk. The country leads the region with are risk score of one is Singapore, followed by, Malaysia and Thailand three, Philippines and Indonesia four, and Viet Nam- five. The Philippines, Indonesia, and Viet Nam have significant financial risks that need to be taken into consideration (A.M. Best, 2010). Political stability
There is a constant threat of terrorism according to the U.S. Department of State diplomacy in action website: http://www.state.gov/r/pa/ei/bgn/2794.htm, but the political stability is stable because of the continued efforts of the U.S. and other international entities such as the International Monitoring team. Economic conditions
The economic conditions are stable; the Philippine government has been working over the past few years to reduce its deficits down to 0.2% of the GDP (Gross Domestic Product) and is continuously working to balance its budget. Finance options available
According to an article Philippines: Types of Business Organizations that Foreign Investors may Establish in the Philippines there are several financial options available that are: These include the establishment by a foreign corporation of a (i) local subsidiary through a domestic corporation, (ii) a branch office, (iii) a representative office, (iv) a regional or area headquarters, or (v) a regional operating headquarters. Entry into the Philippines can also be achieved through joint ventures with other domestic corporations (Manalastas, and Guinto, 2000).
Physical environment and its affect on trade
The locality of the Philippines creates some environmental issues that needs to be taken into consideration there are three main issues the first two are seasonal; the typhoon season from June through November, the monsoon rain season from July through December. The third issue that is unpredictable is the volcanic eruptions that can happen at any time (The Philippines, 2010). Social, health, and environmental conditions
The majority of the Philippine people do live in poverty and the mortality rate for babies is high; however the health care is improving the Philippines have been recognized for eliminating Polio (The Philippines, 2010). Although there is a pollution problem, the government of the Philippines is stepping in to help reduce pollution by enacting and enforcing laws that actually is helping clean up their environment. Cultural considerations
When doing business in the Philippines there is a couple of cultural consideration to keep in mind such as it is unacceptable behavior to correct a person in public, to cause a person to lose face by refusing or saying no to a person, and do not accept an invitation to a family meal when first asked, if the invitation is asked a second time then it is all right to accept (The Philippines, 2010). Organizational Description Apple Computer, Inc. is headquartered in Cupertino, California. The company is a worldwide producer, designs, markets, manufactures computers, digital music and video players.
Founded on April 1, 1976 by Steve Wozniak, Steve Jobs, and Ron Wayne, apple sells to all consumers small, mid-sized, and large businesses. The company sells its products through retail stores, online stores, and also third party wholesalers. The increase in awareness of value of the internet, and convenience it gives to its users will soon bring more to the table for the Philippines. Since the internet has been a big expansion for many markets many businesses have found use to this to expand their business overseas. Since 2000 to 2009 the internet usage has gone up from 2,000,000 (2.6%) to 24,000,000 (24.5%) in the Philippines. Apple’s line of digital music players has taken advantage by providing iPod users to download digital music files to their iPods.
Apple Inc., sales a line of iPod digital music and video players to both the Windows and Mac users that also provides online services that can, as described in this article Reuters Profile: Apple INC. (AAPL.O) which states; “distribute third-party music, audio books, music videos, television shows, movies, podcasts, and applications” (Reuters, 2010), through the iTunes Store. ITunes is a digital music application for downloading and playing digital audio and video files. Since Philippines have about 24,000,000 internet users as of June 2009 which is about 24.5% of the population in the Philippines there is potential growth for this market to grow. With new information about Netflix possibly signing an agreement with Apple Inc. sales can possibly increase since there will be more possibilities for iPod users to download through Netflix servers.
Risk Analysis Week 3
The purpose of this document is to analyze the risks that are involved in establishing a global business operation in a foreign country of the Philippines. The document will detail the risks of introducing Apple Incorporated and the iPod to the Philippines. The risks that will be covered include political risks, legal risks, exchange rate financial risks, and taxation risks. The document will also detail a variety of additional risks, specific marketing strategies and performance measurement that will impact the overall success of Apple Incorporated within the country of the Philippines. Political/Legal/Regulatory risks
The Philippines is a bureaucratic country. It has a complex network of regulations, permissions, procedures, and authorities with approval procedures. Many of these restrictions are designed to bar off newcomers entering the country’s existing industries. This will not be the case for Apple Inc. The political, legal, and regulatory risks of opening an Apple store in the Philippines vary. Apple’s plan is to acquire an existing retail store and moving under the Apple brand. Even though the political risk is high Apple Inc. is in no way threatening to the political climate in the Philippines.
The Philippines has been working in developing relationships with neighboring countries, “build close ties with neighboring countries in Southeast Asia through the Association of Southeast Asian Nations (ASEAN)” (A.M. Best Company, Inc, 2009).Legally, the risk associated with opening the store could be great, and the company must make sure it is in compliance with rules and regulations regarding the opening and operation of the store. The most immediate regulatory risk to business is because of mandated price agreements used by the government to combat inflation. Apple Inc. sees Philippines as a country poised for a great economic turn-around in the Internet and electronics market. Indicators such as World Stats forecast that the country is on a steady uphill swing. Exchange/ Repatriation of Funds Risks
Exchange rates and repatriation of funds needs to be considered with Apple opening a store in the Philippines. Philippines are very open to foreign investors as a way to grow the local economy. However on January 2007, in an ongoing effort to promote two key goals, “the Philippine government has issued the Seventh Regular Foreign Investment Negative List” (Baleva, 2007), protecting domestic industries and encouraging foreign investors to participate in certain areas of enterprise. Pricing will also be a factor if the company bases there pricing by US standards. Exchange rate on US dollars to Pesos needs to factor in. Competitive Risk Assessment
Apple’s key competitors are already doing business in the Philippines and creating a strong and profitable presence. Competitors such as Sony, Samsung, and Sansa have been doing business in the Philippines for many years. Apple’s target entrance into the market will give consumers more
options and encourage more competition within the market. Taxation/Double Taxation Risks
The agreement of double taxation outlines what taxes are covered, defines who the parties are and the context of the agreement and itemizes what is covered under the agreement. Underlining the rules under which a business’ profits are taxed and when double taxation comes into action. The double taxation agreement defines the establishment of permanent residence, which Apple Inc. would seek to have by opening a store in the country on a permanent basis. HM revenue & customs defines permanent establishment as, “a fixed place of business in which the business of the enterprise is wholly or partly carried on” (HM Revenue & Customs, n.d.). Based on the information contained in the agreement it is possible that Apple will be possibly doubled taxed. Market risks (four Ps price, place, promotion, and product)
One of the risks that every business needs to address when selling their product in a foreign country is pricing the product to high that only a small portion of customers can afford to buy the product. According to the article Manila’s living costs, wages among the lowest it states; “To illustrate, workers in Zurich are paid $22.60 per hour ($30.30 gross), while workers in Geneva are paid $20.40 per hour ($29.20 gross)—a far cry from what average workers in Manila are paid: $1.40 per hour ($1.60 gross)” (Victoria, 2009).
One of the ways to address this issue is to buy in large quantity, so that cost can be driven down. Currently the Philippines is experiencing a power crisis, which is a risk within itself in the article Philippines’ power at crisis point of the Asian Times it states; “Recent electricity outages in the Philippines has sparked concern that the country is on its way to its second power crisis in 20 years” (Rubrico, 2010). If there is no electricity, it will be hard to sell iPods to customers especially in the dark. Our company can purchase generators that can be used during the power outages.
The Ipods are very popular and expensive in the Philippines, which has created a market of iPod thieves. According to Davao Today article iPod Thieves on the Rise in RP that states; “iPods may now be joining wallets and mobile phones as attractive targets for thieves and pickpockets” (No author mentioned, 2010). Train both employees and customers how to avoid being a victim, this will show the customers we just don’t think of them as a sale but as a person. Marketing Research Approach
The marketing research approach for the Apple Store is a five step process that includes defining potential problems, developing a research plan, collecting relevant information by specifying data, developing findings, and taking marketing actions based on the analysis of data findings (Marketing Research, 2006). The research objectives will be to determine if there is a demand for the products offered by the Apple Store. The research plan will consist of surveying a minimum of 1,000 to 2,000 consumers in the target region of the Philippines.
Contact information will be gathered to later obtain positive or negative feedback on the products that are offered by the Apple Store. An online survey will also be conducted through the Apple Store via the internet. This will assist in later developing marketing strategies applicable to the products offer by the Apple Store that are in demand in the target region. Some types of questions that will be asked during the Apple Store survey are as follows: 1) What is your age? 2) What is your gender? 3) Would you purchase the products offered by the Apple Store? 4) What did you like about the product? 5) What did you dislike about the product? 6.) Was the product easy to use? 7.) What would you change about the product, if anything? 8.) Will you continue to use the product? 9.) Would you recommend the product to a friend? 10.) What would you consider a fair price for the product? Apple Store Marketing Mix
The marketing mix of product, price, place, and promotion is a crucial part of the introduction of the products being offered at the proposed Apple Store. A strong strategic marketing plan developed by the marketing team will assist the Apple Store in getting of to a positive start. The products offered by the Apple Store will include all items that a consumer can purchase through the on-line Apple Store web address http://store.apple.com/ph. The products include the wide variety of iPod products, iPhones, and Mac products.
The physical location of the Apple Store needs to be in a high traffic public area that will attract many customers. The pricing strategy of the products offered at the Apple Store in the Philippines will targeted to under cut the competition in the region during the first 6 months of operation while still maintaining reasonable profit margins on the Apple Store products. This strategy will help in initially establishing the presence of the Apple Store in the target region. Apple Store executives will consistently monitor the progress of the Apple Store in the Philippines during the first 6 months of operations and recommend solutions to any potential risks that come up during this time period.
After the first 6 months of operation in the region the product pricing strategy will be revisited. The location of the Apple Store will be critical to the overall financial success of the business. The attributes that are desirable for the physical location of the Apple Store include a highly visible location with heavy consumer traffic. An additional attribute is needs to be considered is the location of the store will be easily accessible for ease of the distribution channels to replenish inventory needs with minimal risk. In selecting a location with these attributes the Apple Store will have a higher probability of meeting or exceeding business goals and objectives.
The strategic marketing plan will identify specific dates that will provide the best dates for a promotional sale grand opening of the Apple Store in the Philippines. To start the promotional period the marketing team will start advertising the grand opening of the Apple store several weeks prior to the grand opening. Apple Store products will be advertised by using magazine ads, internet and television spots, and any other means of promotion detailed as a strong promotional tactic in the region. The marketing team will need to pay close attention to see how quickly the product inventory will move from the shelves during the first few weeks of operation if the Apple Store is approved for implementation in the Philippines. The marketing strategy also needs to verify that there is sufficient demand for the Apple Store products. Distribution and supply chain risks
There are a few items that make distribution and supply risky in the Philippines, as stated in the Spend Matters article Apple’s Risky iPod Supply Chain; What types of risk? Well, try an active volcano located less than 20 miles away, proximity within an earthquake zone (which makes San Francisco’s seismic activity look tame), and the very real threat of tropic storms and typhoons. And that’s not even considering that the area around the plants is “subject to regular flooding from storm water, blocking ingress of people and egress of goods … [the factories] even sends people home early when a serious storm is forecast, because of the risk that the roads will be impassable.” (Busch, J. 2006) No one can prevent Mother Nature from happening, but we can be prepared by staying updated on the weather reports and staying alert to nature’s surroundings. By staying prepared and knowing what to do in the event of a natural disaster, will prevent personal injuries to employees and customers as well as minimizing damages to our product. Distribution Channel Management
The marketing team will perform extensive research before the introduction of the Apple Store begins business operations in the Philippines. Determining a reliable distribution channel in a global business operation is an important formula for success. The main distribution channel will start in the United States and products will be distributed to the Philippines based on inventory needs transmitted through an electronic data base.
The distribution of the Apple Store products from shipping destination within the Philippines to the Apple store location is an addition characteristic that needs to be considered because of the threat of theft that exists within the target country. Once the store headquarters has been established then logistics such as shipping, receiving, and storage in smaller warehouses will be considered based on distribution risk factors have been evaluated. One prime objective of the Apple Store in the Philippines is to meet or exceed our customers’ needs. Physical and environmental challenges to entering and operating in a target market There are several physical and environmental challenges when operating a business in the Philippines, some of the physical challenges include political unrest, corruption, terrorism, and extortion these are just a few that needs to be address.
The environmental challenges include pollution (water and air), natural disasters (volcano eruptions and flooding), unemployment according to Index munbdi: Philippines unemployment rate that shows for 2010 to be an estimated 7.5% (No author mentioned, 2010). Staying informed is key to handling these types of risks, some things can be handled by local authorities and others will have to be dealt with the best way possible depending on the situation. Social and cultural risks
In the social and cultural circle, the risk of misunderstanding in many categories is very easily done such as those listed in the article Centre for intercultural learning: Cultural Information – Philippines that are: “Conversation, Communications Styles, Display of Emotions, Dress, Punctuality, Formality, and Decision Making” (No author mentioned, 2009). Not knowing how to address each of these items can lead to offending the Filipino people, which will cause problems in doing business in the community. Common sense and proper communications will just about handle each of these risk, also by participating in community events and helping the community during a time of crisis will promote unity between the company and the local people. Cyber or Technology
Stealing technology and cyber attacks are a big risks, the government of the Philippines still needs to catch up the laws concerning today’s technology. In the article, Experts Call for Stringent Laws against Cyber Crime in Philippines states that; “The security researchers states that these kinds of e-mail attacks occur more commonly across the Philippines since there aren’t any cyber crime laws in the country to catch and prosecute Internet criminals, particularly e-mail fraudsters” (No author mentioned, 2010). Common sense applies to these risks as well, making sure that our computer systems maintain the most recent updates on security programs and training the employees to never give out passwords and shut down the computer every night before going home are just some suggestions that will prevent problems down the road. Define and clarify mission and objectives
The Mission Statement of Apple Incorporated will remain the same as researches through multiple sources according to Investor Relation of Apple (located on the FAQ page) it states that; Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market this year with its revolutionary iPhone (Apple-History, 2010
6). Philippines Internet use has grown remarkably throughout the years. Internet World Stats estimated as of March 2009, there are 20.6 million Internet users coming to about 21.5% of the entire population in the Philippines. Apple Inc. has selected the Philippines to begin expansion providing stores and Internet downloading over the web for users to download digital audio, video, and podcast files.
The primary business objective is to establish a 15% profit margin in the first year of operation within the Philippines. In each subsequent year after the first a 5% increase to the profit margin has been established as a goal until the profit margin reaches a 30%. Additional objectives include obtaining a 10% market share of the products offered by Apple Incorporated and a 4% increase per year over the next 3 years. Customer satisfaction has also been established at a target percentage of 97%. SWOTT Analysis
SWOTT analysis is a useful tool to determine the strengths, weaknesses. Opportunities and threats that exist within a global business entity or region are being evaluated for risk factors. The team has developed a SWOTT analysis for the target region to identify these factors prior to engaging in any business operation within the Philippines. This will assist the team in identifying key characteristics in the structure and development of Apple Incorporated within the Philippines. Current Competitors Competitive Landscape
The competitive landscape for Apple Store are the following companies that have a strong hold on a large portion of the population that Apple Store will have to compete with in the global market place. These companies manufacture similar technology devices that Apple Store is competing for to increase global market share. Their products are known throughout the global technology market where competition is extremely competitive.
Competitors’ of the Apple Store include Dell Incorporated, Hewlett Packard, and Gateway. The engineering development of new improved technology will
assist the Apple Store in gaining competitive advantage over the competitors. Customer satisfaction is a primary objective at the Apple Store. A recent survey conducted in 2008 by the University of Michigan named the American Customer Satisfaction Index ACSI indicated that Apple had a ten point advantage over its closest competitor (Computerworld, 2010). The Apple Store that is being considered in the Philippines will have the same target goal in reference to customer satisfaction in the target region. Strategy Selection
The strategy selection of Apple Incorporated is to establish a base store that strategically reports back sales results and inventory needs to a home base location within the United States electronically. The strategy of the company will be to promote the iPod through lower price cost structures than existing competitors. The company will also launch a marketing campaign to promote this strategy through established marketing structures that exist within the Philippenes. This will assist Apple Incorporated in notifying consumers of company existence in the region while promoting our lower priced product.
The mode of entry to develop Apple Incorporated to enter the Phillipenes will be the direct investment mode. Apple Incorporated will be establishing a location within the country and then based on all business results will determine if additional locations within the country are needed to meet customer demand. Advantages of this mode of entry include high sales potential, low political risk, and the company could be viwed as an insider (Quick MBA, 2010). Because of some of the high risk elements that exist within the Philippenes Apple Incorporated will need to be cautious by limiting the amount capital that the company will spend in the direct investment mode.
Control and Evaluation
Specific measures will be monitored on a weekly basis to track the progress and continous improvement opportunities that exist to set up operations within the Phillipenes. The key characteristics that impact overall business results will be evaltated to establish a proactive approach
to issues that will have an impact these results. The key characteristics will include sales, inventory, taxes, and process limitations. This will assist Apple Incorporated in providing a quick responsive action to any underlying problems that need to be resolved. Sales goals and profit margins will also be evaluated to determine the overall success within the Phillipenes. Contigency Plan
Apple Incorporated will need a contigency plan to account for risk factors that have some probability of resulting in business profitability not reaching overall expectations. The contigency plan that Apple Incorporated has in place consists of closing the existing store if business objectives are not achieved with leaving options open for changing the mode of entry into the Phillipenes to exporting the product through established distribution channels. This contigency plan still allows the company to establish sales within the Phillipenes while reducing investment risk. Financial Overview
Apple has the possibility for a strong financial investment in the expansion into the Philippines. The risks associated with the investment into the Philippines do not outweigh the benefits that can realistically be achieved. After thoroughly researching the Pilipino market, the Ayala Group, one of the largest firms in the Philippines is supposedly involved in a project to put up an official Apple store in the Philippines (Technograph, 2009). This is beneficial because less money will have to be invested in research and development, as well as marketing and advertising since the organization is already known throughout the Philippines. The economy in the Philippines has not shown extreme changes or any sudden implications that the economy is getting stronger.
The Philippine GDP for the year 2009 has barely risen 1% but has, “weathered the 2008-09 global recessions better than its regional peers due to minimal exposure to securities issued by troubled global financial institutions” (index mundi, 2008). Operating Expenses
As projected for expenses for one apple store, the budget chart shows total operating expenses at $5, 482 and operating income at $11,740 and
other income and expenses at $326. There are many providers that impact operating expenses such as utilities, taxes, and advertisement. Apple has projected a total operating expense at $5,482 for one apple store. When assembling a budget chart, it is essential to take into account all factors to properly manage a business. It is important to trust that focused investments in Research and Development (R&D) are significant to a company’s future competitive and expansion position in a foreign market and are directed towards the development of new and improved products that are central to the company’s core business strategy.
As such, Apple expects to make further investments in R&D to expand and remain competitive in the Filipino market. Other factors of influence that can help expand Apple into the foreign market, is the company’s persistent expansion of its retail division in both international and domestic markets, top stock-based return expenses and higher spending on marketing and advertising (Apple Investor 2010). The chart below shows the estimated monthly general budget of the operation of one store in the Philippines, providing that the decision is made to proceed with the plans to set up and begin operations. This is a rough estimate, because of the many factors that may and will fluctuate either in a positive or negative way can cause a change on the expense side, however the further we proceed the more accurate our budget will become. Financial Overview General Budget
Foreign Exchange Risk
Studies have found that many Asian-Pacific businesses are exposed to one or more of the world’s major currencies: the Euro, the US dollar, the British pound, and the Japanese Yen. Some of the greatest dangers were produce by fluctuations in the US dollar. This impacted 58 percent in the Philippines, “currency fluctuations affected the profitability of companies whose financial assets and liabilities (most notably debt) were held in foreign currencies” (Vanderbilt, 2007). When choosing to invest in the Philippines, the foreign exchange risks associated with business ventures are significant because of an Asian financial crisis during (1996-1998), “more than half of the studied companies in Indonesia, Korea, Malaysia and the Philippines, and about a third of those in Japan and Singapore, were exposed to the dollar, and about a quarter of the firms in Singapore were exposed to the yen” (Vanderbilt, 2007). Risk Management
Transaction risk refers to the fact that the cash flow value of foreign currency contracts may change due to exchange rate fluctuations. Additionally, since the organization will be buying and selling goods in foreign currency to a certain extent, the foreign exchange risk increases. The potential negative aspects associated with doing business in the Philippines are significant since the business will be using Filipino Pesos, which has an inflation rate of 4.4 percent. As a result, there is a risk that the exchange rate as with any currency may change unfavorably before the currency is actually exchanged. However, these risks can be counteracted by utilizing forward hedging, which is a way to lock in an exchange rate on an agreed future date.
This will allow the organization to be completely aware of future cash inflows and outflows, as well as the value of the organization’s profits in US currency since the exchange rate will not change due to the purchase of forward hedging. Financing Given the current international economic instability, the choice of choosing from domestic or international financing is tough because there are significant risks associated with each. The European Investment Bank (EIB) has offered financing opportunities to the Philippines; currently the EIB has one billion euro allocations in 18 Asian countries including the Philippines. If the company chooses to move forward with the international venture, the company would choose to finance through the EIB. The EIB, “has provided over 600 million euros in funding for multiple projects in the country coursed through the government and private sector” (European Chamber of Commerce of the Philippines, 2009). Centralized versus Decentralized
The parent company and its iPod department within the parent company, both works as a centralized organization because having an effective control is essential to the everyday operations for both the domestic and global sectors. It would be essential for the parent company to make the final decisions regarding all aspects of the company’s operation, because every unit and sub-unit such as manufacturing plant located in Mexico and the shipping department located in the U.S. of the company has to report all information of their daily operations to the parent company allowing the parent company to know what the left and right hand is doing basically at the same time and can make an informative decision for whatever situation may arise.
Both the domestic and global units and sub-units operate as a decentralize company, because certain situations such as environmental changes, customer needs, or political unrest will cause problems and disrupt a part of the company operations or even all parts of the company operations these problems to be addressed immediately and cannot wait for the parent company on the other side of the world to make an informed decision, even if the problem had happened before at a different location because what may work domestically may not work globally and vice versa.
When making an informed decision whether at the unit, sub-unit, or the parent company level there is a need for a communication chain of command, starting with the employee who is out in the field working upwards to the parent company which may be the CEO (chief executive officer) who usually has the authority to make final decisions that will affect the company or the owner if there is no CEO available. The line of communications should always remain open, in the event of a minor glitch or a major emergency. Regardless of the value of the information, if the line is broken then a decision cannot be made in a timely manner or may not be made at all causing a problem to grow bigger or missing a profitable opportunity.
The communication chart below shows the chain of command from the field representative to the parent company, not all information will reach the top because some decisions can be made at lower levels, for example; the parent company should not be bothered with whether a field representative needs office supplies.
The future is unknown, even if there is a planned exit strategy years from now does not guarantee it will happen as planned. Depending on the situation that is either planned, forced or requires our business in the Philippines to implement its exit strategy would determine the best strategy to use. In the event of a political uprising or civil unrest that results in raising the level of possible war, then the shutting down procedure would be best since it involve very little (if any) paper work and is the fastest way for U.S. employees and their families to get out of the country. If there is no time at all complete abandonment might be forced, either course of action will involve a monetary loss. If time allows and there is no rush in exiting the Philippines, handing the business over to our joint venture partner would be the best, this exit does involve legal paper work and would minimize loss (if any), it would also leave the path open for possible future ventures back into the country based on a friendly and healthy transfer of the business. Recommendation
The Philippine iPod risk analysis team recommends proceeding with entering the Philippines market. After the exhausting task of finding the risks of entering the country, we had found that the benefits (profits) do exceed the risks (costs) even during the economic troubles that the U.S. is currently experiencing. Although we are not the first iPod and iPhone Company to enter the Philippines market, we still can become a major player and take a large percentage of the market. With the Apple Company creating a direct store that basically eliminates the middle man and develops a presence in the area that shows the potential customer that they will get the original iPhone without the worry of receiving a fake and less dependable copycat, which is a major problem in this region.
Having direct shipping, of iPhones and iPods from the parent company will help with the recovery costs and to make a profit quicker. The company will gain additional profits once the store becomes fully operational and service contracts are purchased by new customers. Finally with the current economic stability of the Philippines, this is a good time for Apple to enter into this market because like our domestic customers love to have the latest technology, the Filipinos consumers also love to have the latest technology too. Because no other local company can offer the security or the guarantee of authenticity of the iPhone products, this gives our company a very unique position in the Philippine market.
The company will be experiencing and dealing with many issues brought up by our customer base, because of the one on one contact with the customers this will help our operation on a global level allowing our technical department to learn from these new problems and coming up with new solutions this will make our product better and easier to sale globally. Conclusion
In analyzing the risks invoved with Apple Incorporated conducting business within the Philippines the company will be in a better position to achieve the financial success. The process of risk assessment provides a clearer picture of the obstacles that need to be overcome within the Philipines. Strategic marketing plans can assist the company in establishing positive sales results in the target country. Electronic communication to proactively respond to business needs and issues will lead to satisfied customers. The initial mode of entry and an alternate mode of entry detailed in the contingency plan also indicate the company’s preparation. Establishing key business characteristcs to monitor on a regular basis will identify continous improvement opportunities for the company in conjuction with items identified in the SWOTT analysis. The combination of these critical factors will guide Apple Incorporated to make a more informative decision based on all the factual information collected.
Andaya, Barbara, 2009. Introduction to Southeast Asia. Retrieved April 4, 2010 from http://www.asiasociety.org/countries-history/traditions/introduction-southeast-asia A.M. Best Company. Ratings and Analysis Center: Country Risk, Retrieved April 4, 2010 from http://www3.ambest.com/ratings/cr/crisk.aspx
ASEAN, 2009. ASEAN Member States. Retrieved April 4, 2010 from http://www.aseansec.org/18619.htm
Manalastas, J. M. and Guinto, B. L. 2000, Philippines: Types of Business Organizations that Foreign Investors may Establish in the Philippines.
Retrieved April 3, 2010, from website: http://www.mondaq.com/article.asp?articleid=9340&login=true&nogo=1 No Author Mentioned, 2009, TDS: Philippines Asia, Economy. Retrieved April 3, 2010, from website: http://www.traveldocs.com/ph/economy.htm
No Author Mentioned, 2010, The Philippines. Retrieved April 3, 2010, from website: http://www.everyculture.com/No-Sa/The-Philippines.html Internet World Stats. (2010). Asia Marketing Research, Internet Usage, Population Statistics and Information. Retrieved from http://www.internetworldstats.com/asia.htm#ph Thomas Reuters. (2010). Apple Inc. (AAPL.O). Retrieved from http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=AAPL.O Internet World Stats. (2009). Internet Usage Stats and Marketing Report. Retrieved from http://www.internetworldstats.com/asia/ph.htm
Kian, C.C. (2004). Internet market in the Philippines shows full potential for growth. IDC. Retrieved from http://www.idc.com.my/philippines/press/IDC%20Philippines%20-%20Internet.asp A.M. Best Company, Inc. (2009). AMB Country Risk Report. Retrieved from http://www3.ambest.com/ratings/cr/reports/Philippines.pdf Baleva, M. (2007). Philippines Issues Foreign Investment List for 2007-2009. ALBLegalNews. Retrieved from http://au.legalbusinessonline.com/law-firms/philippines-issues-foreign-investment-list-for-2007-2009/1076/23599 Busch, J. (2006), Apple’s Risky iPod Supply Chain. Retrieved April 10, 2010, from http://www.spendmatters.com/index.cfm/2006/11/3/Apples-Risky-iPod-Supply-Chain Hicks, R. (2009).
Philippines launches study on internet use. futureGOV. Retrieved from http://www.futuregov.net/articles/2009/jul/27/philippines-launches-study-internet-use/ HM Revenue & Customs. (n.d.). DT15354 – DT: Philippines: double taxation agreement, Article 5: Permanent Establishment. Retrieved from http://www.hmrc.gov.uk/manuals/dtmanual/DT15354.htm Rubrico, J.G.U. (2010), Philippines’ power at crisis point. Retrieved April 10, 2010, from http://atimes.com/atimes/Southeast_Asia/LD10Ae01.html Toby C. Monsod, (2009).
The Philippine Bureaucracy: Incentive structures and implications for performance (4th ed.). Quezon City, Diliman: Human Development Network. Victoria, E. (2009), Manila’s living costs, wages among the lowest. Retrieved April 8, 2010, from http://www.asianjournal.com/dateline-philippines/headlines/2767-manilas-living- costs- wages-among-the-lowest-.html No author mentioned (2009), Centre for intercultural learning: Cultural Information – Philippine. Retrieved April 11, 2010, from
http://www.intercultures.ca/cil-cai/ci-ic-eng.asp?iso=ph No author mentioned (2010), Experts Call for Stringent Laws against Cyber Crime in Philippines. Retrieved April 11, 2010, from http://www.spamfighter.com/News-13688- Experts-Call-for-Stringent-Laws-Against-Cyber-Crime-in-Philippines.htm No author mentioned (2010), Index Munbdi: Philippines unemployment rate. Retrieved April 10, 2010, from http://www.indexmundi.com/philippines/unemployment_rate.html No author mentioned, Foreign Market Entry Modes, Retrieved April 12, 2010 from
No author mentioned (2010) What is Apple’s Mission Statement. Retrieved April 12, 2010 from
Index mundi. (2008). Philippines Economy Profile 2010. Retrieved from http://www.indexmundi.com/philippines/economy_profile.html Technograph. (2009). Official Apple Store to Supposedly Open in the Philippines. Retrieved from http://technogra.ph/2009/05/05/official-apple-store-to-supposedly-open-in-the-philippines/ Apple Investor Relations Annual Reports. (2010). Investor Relations. Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=107357&p=irol-reports Bangko Sentral ng Pilipinas. (2005). Philippines-Central Bank of Philippines. Retrieved from http://www.bsp.gov.ph/ Vanderbilt. (2007). Foreign Exchange Risk of Firms in Asia-Pacific. Retrieved from http://mba.vanderbilt.edu/vanderbilt/About/faculty-research/featured-research