When looking for business opportunities in global markets, there are potential risks that each company should be aware of and consider cautiously prior to finalizing their decisions. International trade can be profitable for a company due to the lower costs of production in other countries, but it can also create more complexities and involve a greater amount of risks (Kelly, & McGowen, 2011).
Apple Inc., an exceptionally successful firm has accessed the global markets and expanded its presence in ways that maximize the company’s revenues. The strategy options that Apple Inc. utilizes most frequently for global market development include foreign outsourcing and importing, as well as exporting. Foreign operations of Apple Inc. are conducted in the Americas, Europe, Japan, and Asia Pacific. Apple largely relied on foreign outsourcing in order to launch the iPod. Firms in China and Taiwan were depended upon to produce the iPod for a fraction of the cost of domestic production (Lo, 2008).
Most of the iPod’s components are low cost, and mainly produced in the Asia-Pacific region. The assembly occurs in Chinese factories by Taiwanese firms such as Inventee Appliances and Foxconn, the world’s largest make of electronic computers and the largest exporter in Greater China (Lo, 2008). Six out of the ten parts that comprise the Apple iPhone are supplied by Taiwan. Sourcing the majority of the parts from an individual country could be a beneficial strategy or could be a constraint in case there in any unrest in the political economy in Taiwan, which could disrupt the material and product flow (Abilla, 2007).
Apple Inc. imports parts from different companies in order to construct their own product. For example, IBM supplies the G5 processor that is used in the PowerMac products and Motorola supplies for the G4 processors. There is a possible threat to Apple’s differentiation strategy as the company is dependent on the availability of certain components from certain suppliers (Lliev, Lindinger, & Poettler, 2004). Apple only assembles a few of its products in the United States and Europe; most of them are assembled and manufactured in Japan, Taiwan and China, which are the countries that are focused on by Apple Inc. for reaching global markets. These countries, especially China, manufacture and assemble products for a much lower cost than others, have a well-educated and efficient work force, and have prosperous economies with huge populations and potential customers. In addition, Apple Inc. has numerous retail stores in various of these countries including Japan, China, and the United Kingdom, which are the focus for Apple Inc’s global market. It is estimated that 55% of iPhone sales are now made outside of the U.S (Kane & Rohwedder, 2010).
The company’s main competitors are Dell, Microsoft, and Hewlett Packard. These competitors engage in global markets to a great extent and to a similar market that Apple Inc. does worldwide. These companies make use of foreign outsourcing and importing, and exporting as well. They have many retail stores worldwide similar to Apple Inc. with a focus especially in Europe and the Asia-Pacific region (Lo, 2008). Apple Inc. has a competitive advantage from these three companies because of the creativity in innovation that they portray and the amount of consumer demand for their products. Apple Inc. has been extremely successful in making their brand popular and known worldwide as a premier company that offers exceptional products and has been successful in providing a lot of value and customer satisfaction.
Apple Inc. may be experiencing sociolcultural differences when interacting with global markets especially in the countries that they are focused on. The countries in the Asia-Pacific region are different in terms of attitude, values, and language so communication could be a problem. Apple Inc. can overcome this barrier by conducting research, and if the individuals leading the firm can make themselves aware about the market and that can result in a competitive advantage because they will understand the market that they are targeting. Economic and legal differences are something each company that is entering global markets should be familiar with and conduct research to get over such barriers and be knowledgeable about each country that they are interacting with (Kelly, & McGowen, 2011).
Abilla, P. (2007, January 18). The apple iphone supply chain . Retrieved from http://www.shmula.com/the-apple-iphone-supply-chain/304/
Kane, Y.I., & Rohwedder, C. (2010, June 8). Apple strives for global markets. Retrieved from http://online.wsj.com/article/SB10001424052748703302604575294530119152528.html
Kelly, M., & McGowen, J. (2011). Busn3. OH, United States of America: Cengage Learning.
Lliev, V., Lindinger, A., & Poettler, G. (2004, February 23). Apple computer inc.. Retrieved from http://www.andreaslindinger.net/downloads/strategicmgmts-lindingeretal.pdf
Lo, C. (2008, August). Global outsourcing of fdi: how did apple launch its ipod?. Retrieved from http://188.8.131.52/conference/Eng%20Paper/Global%20outsourcing%20or%20FDI--How%20Apple%20Launched%20its%20iPod-II(Prof.%20Chu-Ping%20Lo).pdf