Apple’s Fdi and Globalization Essay
Apple’s Fdi and Globalization
Globalization- Today the world has become a global village where each and every thing is interlinked.The concept of global village or global merger is based on the grounds of globalization. Now thequestion arises in one¶s mind what is globalizationThe term globalization means the concentration of world economy in to a single international market rather than many national markets. For example, the APPLE INC, an American multinational corporation that concentrates in computer hardware and software components. It assembles its best known product i.e. ‘mac’ computer, best selling phone ‘iphone’ in china. This is because the cost of production is low due to cheap labour force. Thus globalization involves:- Free trade of goods and services
Free movement of labour and capital
Free access in technology
Now, we will discuss the above points with more details.
Free trade of goods and services- Based on APPLES INC business operation the company is selling its product such as the ‘iPhone’, ‘MAC’ computer in many countries in the world. Generally it is a US based company which is doing its business world-wide, there are no restriction for the company not to sell its product in any country. So its means free trade of goods and services. Free movement of labour and capital- In regard with APPLE INC it means, apple can move its labour force and inject capital in any country with no restriction. When talking about labour force it means the people who work for APPLE can travel from one country to the other. For instance, officers travel from one country to the other. We normally see in the news that APPLE has appointed new officers in the UK, Germany or the US. Technical team travel from one country to the other when there is a major problem where other technician can not figure out what the problem is. In terms of capital, it means APPLE has invested capital to make industries where its product are made and assembled.
They have factory in china and other countries in the world. Free access in technology- It means the the software of APPLE i.e. the ‘iOS’ are being used in many countries in the world. This is because the products that APPLE is selling use iOs software and these products are being sold in many countries in the world, so it means the technology is being freely moving from one country to the other. This encourages globalization. Another example is, a potential customer from Bangladesh looking to buy a shirt, he looks on the ‘New look’ website. It normally making the sense that, a customer can access the catalogue from any where of the world. This is commonly known as globalization. Apple Inc. is an American based multinational company whose stocks are listed in the New York Stock Exchange and NASDAQ (National Association of Securities DealersAutomated Quotations) under the symbol AAPL.
The company specializes in the design,development and manufacturing of electronic equipments like computers, software and smart phones. Business strategy: Apple is currently working on the differentiation strategy by putting unique elements in the design and development of its products. The differentiation strategy is defined as a strategy that aims to develop the products and or services that have unique characteristics that are well liked by the customers and are valued by them. This strategy enhances the market position of the companies with respect to their counterparts (Porter, 1998).The success of the company in the global markets is due to its extensive focus on the market research and development for the development of its products and services. With reference to its business strategy, the company is in a continues process to build and advance the robust platform that can enhance the listing of third party content like mobile phone apps, games etc on its online stores or its iTunes store (Apple Inc.,2010).
Markets and Distribution
The customer segments of the company are divided into various categories. The needs of the main customers markets it caters are of small and medium businesses, education sectors,large corporations, government departments and other related markets. In order to meet the needsand wants of these consumer markets, the company is utilizing direct and indirect distributionchannels including online sales services, retail stores and direct sales force as well as third partysellers, retailers etc. Using direct sales contacts with the customers is, believed by the company,leveraging its product sales and has demonstrated as an advantage to the company over itscompetitors. In order to maximize its sales and to make sure that the buyers are receiving highquality experience, the company is in a process to expand and improve its existing channeldistribution network (Form 10-k S EC Filing, 2010).
The company faces aggressive competition from the other market players. According toHoover (2011) the top three competitors of Apple Inc. in United States are Fujitsu TechnologySolutions (Holding) B.V., International Business Machines Corporation and MediaNet Digital,Inc. respectively. The needs of the markets it caters are highly competitive in nature due to the ever changing and advancing technological environment and the rapid introduction of new technology based products. The main competitors of the company are following cost leadership strategies by reducing the prices of their products or by maintaining low profit margins to maintain their market share.
There are various forces that can impact the business and profitability of Apple. These factors may include the marketing mix ± product, price, place, promotion strategies, product performance, the quality and reliability of the product, innovative designs as well as then availability of up to date software services.Moreover, some of the competitors of the company have number of resources which they can utilize against the company to provide the product and service offerings related to Apple,offer the business and consumer products and services similar to Apple¶s products at low price range(Form 10-k SEC Filings, 2010).
Products and Services
Apple is currently using in house manufacturing system for the production of all of its products. All the products like Mac, iphone, ipad and ipod etc. are designed, developed and marketed via its main manufacturing hub which is located in the USA. But, as mentioned earlier,the company is outsourcing the production of some of its product parts to the various international and national supply chain partners; subcontractors. Some of the components of its products, ipod, are outsourced to its subcontractor in Hong Kong from where it is sent to theoutsourced production plant of the company (Linden et al, 2007).Some of these components are of high cost. While the other products like hard drive andflash memory etc. are sent to the other companies or outsourcing companies like Toshiba inJapan or Samsung in Korea.
Large number of its components is of low cost. The metalcomponents of the products are made by the outsourcing unit in Taiwan called Foxconn and the plastic components are products by the outsourcing units in Singapore (Brown, 1998, p.198).Finally these parts are assembled in the China and then transported to its sales outlets across theworld (Kahney, 2008).Outsourcing plants:It has built its integrated manufacturing and design facilities in the various countries for example in California, Singapore etc. This global network allows the company to develop andlaunch the products in its markets of America, Asia and Europe.
It produces its products, for example ipads, in the Shanghai, China which has given it a cost saving advantage and lead to theincreased profitability for the company (Chaffin, 2002). But on the other hand, this outsourcing has increased the downsizing and unemployment rate in the home country (Rodriguez-Clare,2011).some of the outsourcing plants managed by the company are showing troubled situations for Apple. ConclusionThe economy of the world has now become free from any boundary. All the countries are now considered integrated with one another as one global market for carrying out variousactivities like trade, relations, etc.
From one perspective, Apple’s world could not be rosier and its future shinier. Rising from the rubble of a disintegrating company in 1997, Apple has reached the pinnacle of success in 15 short years. With a market capitalization of over $500 billion, Apple is amongst the most valuable and highly profitable companies in the world. When it comes to customers, Apple is a bold innovator that leads the industry into new directions and forces others to follow. However, when it comes to the management of its supply chain and treatment of workers in the Chinese factories that make its products, it hides behind the constraints of prevailing industry practices. Foxconn and its China-based subsidiaries are owned and controlled by the Taiwan-based Hon Hai Precision Industry Co., Ltd. Most of Apple’s worker-related problems were focused on Apple’s manufacturing partner Foxconn and its subsidiaries.
Reports over the past few years have described instances of Foxconn employees committing suicide, presumably from working in an extremely high stress environment. In addition there are reports of deplorable living conditions, underage workers, below-standard wages, involuntary labor, and health hazards associated with the use of toxic chemicals and inadequate air filtration systems Finally, in the closing days of 2011, Apple announced with great fanfare that it had joined the Fair Labor Association (FLA.
Over the concept , Chinese factories have honed their tactics in concealing problems from the auditors by keeping workers away from plants during audit visits, maintaining multiple sets of accounting books and workers’ personnel files, coaching workers to give right answers to the auditors’ questions in terms of working hours, wage rates, and overtime, et cetera, with promises of bonuses if the auditors were satisfied and implied threats of punishment if serious problems were identified. Thus a highly choreographed audit allows for certain violations—albeit manageable—to be disclosed and promises for corrective action to be taken. Cutting out excessive hours would entail additional costs. For example, a reduction in the average working hours from the current 60-70 hours per week to 48 hours per week would entail approximately a 30 percent + increase in the labor force to maintain the current rate of output.
The Indicators of Globalization
There are three main economic and ﬁnancial indicators of globalization, these are:
• international trade in goods and services
• the transfer of money capital from one country to another
• the movement of people across national borders.
Of the three, international trade and foreign investment are the most important. Each of the three indicators will be examined in turn. International Trade International trade means that countries become more interconnected through the exchange of goods and services, that is, through imports and exports. Multinational companies (MNCs) are major traders and account for a large proportion of international trade, with signiﬁcant proportions accounted for by trade between subsidiaries within the same company. So for example, Ford makes gearboxes in its factory in Bordeaux and exports them to its assembly plants in other European countries. Around one half of US manufactured exports and more than 60% of its imports ﬂow within MNCs. International trade has increased more rapidly than global output which has been increasing by around 3% per annum. 2004)
Foreign Direct Investment (FDI)
FDI is the main source of investment in developing countries. Recent year FDI has increased in these countries due to three reasons: –
• The rise of multinational companies
• Liberalization of world capital market
• Liberalization of world economies
As in regard to APPLE INC, it has built factories in china to make its product so it has invested in china which is foreign direct investment. In the recent years FDI has increased in this country due to three reasons: –
• The rise of multinational companies
• Liberalization of world capital market
• Liberalization of world economies
The advantages of these FDI are as the following: –
• This FDI will allow a country to invest more than their saving. It is a crucial source of investment in a country such as in china where it is difficult to encourage savings. FDI also helps to increase the import than the export. Again a FDI can be assumed as an injection which, in terms has a large multiplier effect in the economy. It creates demand in the receipent country and hence helps to increase real GDP. • FDI helps to increase the employment in a country. For instance, the investment by apple in chine has created jobs for Chinese people to work and earn a living. They, sometimes offer higher wages than other national companies which helps to increases the living standard of that country. For e.g. in 1999 30 million people were employed in the developing countries directly or indirectly by the multi national companies. This has a positive externality in the economy in the long run. • Sometimes FDI goes in the tradeable goods sextor of a country. Thus the countries export performance may increase and the country may enjoy higher competitiveness.
The disadvantages if these FDI are as the following: –
• Multinational companies, such as APPLE tends to send back their profit to their country. This may create a balance of payment deficit in the receipient countries if they fail to increase their export earnings. • Apple tends to use expertise of staffs from their country so the benefit that should come from employment becomes insignificant. • Multinational companies such as these APPLE tends to locate their factories in the urban areas so there may be an increase in inequality in the economy. Again it may create pressure in the urban sector. • There is a risk of tends that multinational companies such as APPLE tends to exploit the natural resources of a country like gas, coal, electricity. Thus in the long- run there may be an environmental degradation and the country may suffer from natural degradation. • Deficit in the long- run-
However, FDI may have positive impact on a country but they tend to be fuelled only in some developed countries.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 13 November 2016
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