Expert answer:Challenges of Expansion to a Foreign Location
Expert answer:NO PLAGERISM, MUST BE ORIGINAL WORK!!THIS ASSIGNMENT IS A CONTINUATION OF A PREVIOUS PAPER THAT WAS WRITTEN. SEE ATTACHMENT. . THIS ASSIGNENT MUST BE A MINIMUM OF 1750 WORDS( THIS WORD COUNT IS SEPERATE FROM THE ATTACHMENT)MUST CITE AT LEAST 3 PEER REVIEWED REFERENCES( ATTACH TO EXISTING REFERENCE SHEET)MUST INCORPORATE ALL BULLET POINTS BELOWThis week students will review and revise their Week 3 Research Analysis for Business Signature Assignment based on economic analysis and the feedback provided by their facilitator. Students will also expand their Week 3 analyses to evaluate the challenges of expanding their chosen company’s production to a foreign market.About Your Signature AssignmentThis signature assignment is designed to align with specific program student learning outcome(s) in your program. Program Student Learning Outcomes are broad statements that describe what students should know and be able to do upon completion of their degree. The signature assignments might be graded with an automated rubric that allows the University to collect data that can be aggregated across a location or college/school and used for program improvements. Assignment Steps Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products. Revise your Week 3 assignment, Research Analysis for Business, using the feedback provided by your facilitator. This Week 6 report should only include one conclusion, so you will need to rewrite the conclusion you included in your Week 3 assignment, Research Analysis for Business. Select a foreign market in which to expand your chosen product. If you wish, you may use one of the countries your team analyzed in their Week 5 Comparative and Absolute Advantage Assignment. Prepare a minimum1,750-word report addressing the points listed below. The use of tables and/or charts to display economic data over the time period discussed is highly encouraged, you may submit any economic data in Microsoft® Excel® format in a separate file. You may use the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), U.S. Dept. of Commerce’s Bureau of Economic Analysis (BEA), the Federal Reserve of St. Louis’s FRED data, the CIA World Fact Book, World Bank data, and World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library. The new sections of your report should:
Evaluate current global economic conditions and their effects on macroeconomic indicators in your selected country. Provide forecasts for population growth, gross domestic product (GDP) growth, GDP per capita growth, export growth, and sales growth.
Evaluate any competitors’ existing production in the chosen country.
Assess sales forecasts in the selected country by using the Federal Reserve of St. Louis’s FRED data, the CIA World Fact Book, World Bank data, World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library.
Categorize the type of economy that exists in your selected country as closed, mixed, or market. What is the difference between these types of economies and how might this affect your expansion?
Assess how your chosen country’s current credit market conditions, especially interest rates and the availability of financing, affect demand for your product or service and your planning or operating decision for your production in that country.
Analyze the role of the selected country’s central bank on that country’s economy.
Compare the availability, education, and job skills of the work force in the selected country. Discuss any additional challenges of international production, such as political stability, availability of government financing or other incentives, threat of capital controls, and exchange rate risks.
Explain any additional supply chain challenges you anticipate if attempting to make your product in your chosen country and selling the product in other countries.
Based on the data gathered and analysis performed for this report write a conclusion in which you:
Create business strategies, including price and non-price strategies, based on your market structure to ensure the market share and potential market expansions and explore global opportunities for your business in a dynamic business environment and provide recommendations.
Develop a recommendation for how the firm can manage its future production by synthesizing the macroeconomic and microeconomic data presented.
Propose how the firm’s position within the market and among its competitors will allow it to take your recommended action.
Recommend strategies for the firm to sustain its success going forward by evaluating the findings from demand trends, price elasticity, current stage of the business cycle, and government.
Recommend any comparative advantages your company will have over competitors currently operating in that country, and defend your position, either for or against, expanding your company’s production into your chosen country based on your research.
Integrate with the Week 3 Individual Assignment, and incorporate corrections and suggestions from the instructor’s feedback. The final report should be a minimum of 2,800 words. Cite a minimum of three peer reviewed sources not including the textbook.
apple_inc.docx
Unformatted Attachment Preview
Running head: APPLE INC. RESEARCH ANALYSIS
Apple Inc. Business Analysis
Jose Ramirez
ECO/561
January 4, 2017
Time Lockwood
1
APPLE INC. BUSINESS ANALYSIS
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Apple Inc. Business Analysis
Apple has since its founding in 1976, has established itself as a major leading global
player in the technology industry (Johnson, Li, Phan, Singer, & Trinh, 2012). The company
designs and produces consumer electronics including smartphones, personal computers,
computer software, and recently smartwatches and online services. Technology has become the
spine of today’s business as the world is becoming digitalized day by day. Technology is also
influencing how businesses in the technology sector are selling products they produce. In the era
where technology is growing exponentially, innovation plays a key role in the technology
industry where Apple thrives.
The market is characterized by the development of new products and markets nearly
every year. Products in the technology sector have been known to have the shortest product
lifecycle as through innovation; competitors are able to bring new products within a very short
period making the previous ones outdated (Johnson, Li, Phan, Singer, & Trinh, 2012). The
implication of this is that a company that wants to expand its competitive lead is required to
emphasize on research as well as development to innovate. Internet access has increased at an
increasing rate globally in the past few years. For example, more than 314 million people in the
US have access to the internet with more than 110 million owning some form of Smartphone.
Although the US can be said to be saturated with technology use, other areas of the globe
especially in Asia, the markets are yet to be fully saturated (Johnson, Li, Phan, Singer, & Trinh,
2012).
The market is also segmented economically in that there are low-class customers who
prefer simpler and cheaper products, and middle and high-class customer who prefer expensive
and highly advanced products for better life experience. The apple products are usually higher
APPLE INC. BUSINESS ANALYSIS
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priced and target the middle and high-class customers. Supply chain effectiveness is another
factor that plays a significant role in the industry. Apple has contracts with several suppliers
within the US and across the globe which makes the company earn great results of supply chain
without bearing the costs. To that end, the company is said to have the most effective supply
chain in the globe.
The tech industry has many players other than Apple who compete fiercely with apple.
The major competitors include Samsung electronics, Sony corp., LG Display Company,
blackberry, Google, Microsoft, HP, and even Amazon. In the 2014’s last quarter, Apple’s global
market share was approximately 20% but reduced to 18.2% in 2015. The company has remained
steady and strong maintaining average of 18.3% of the global market share in the tech industry.
Barriers to Entry in Tech Industry
There are several factors that limit the entry by new companies in the tech industry
allowing the established players to continue to dominate to the market. The first barrier is the
economies of scale. The established companies like Apple and Samsung can sell extra units of
products cheaply because overhead costs are spread over large number of units. This allows them
to reduce prices driving out potential competitors. The companies also enjoy economies of scope
since they can use their existing assets to launch new products, implying that the total costs for
launch of new products will be lower than those of new firms. Patents and copyrights are other
barriers to entry. Established companies have patented their processes meaning that if a new firm
should enter the market, then it must license processes and technology from the existing firms
which increases capital requirements. Lastly, there is the issue of brand loyalty and switching
costs. Established companies enjoy high level of loyalty from customers. Customers also find
APPLE INC. BUSINESS ANALYSIS
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costs involved in switching from one brand to another such as installation and learning costs too
high.
Apple enjoys all the above aspects which are barriers to entry for new firms. Its emphasis
on research and development and innovation coupled with the above factors makes the company
safe from new competition. To that end, it implies that the company’s only problem is to deal
with the existing competition. Therefore, in terms of competition, the company has a bright
future.
Macroeconomics Trends
Since the recovery policies of Obama administration in 2009, the US economy has been
in the expansion phase of the business cycle as the economy has been characterized by continued
growth (Amadeo, 2017). The value of financial assets has been rising over the years ever since.
Since there has not been any significant inflation, the expansion has not yet reached the peak.
The US dollar has been growing strong, an indicator of asset bubbles. Because the peak has not
been reached, the investors are hopeful meaning that Apple can raise enough funds to bolster its
growth and fund its research and development by issuing new shares.
The US economy has been growing the past few years. The estimated growth rate was
3.2% in 2015, by 2016, the growth rate was 1.6%, and in 2017, the most recent statistics show
that the growth rate is 3.3% (Focuseconomics, 2017). The growth rate is slightly above the ideal
rate of 2-3%. At ideal growth rate, there are enough jobs in the economy. 3.3% being above the
ideal rate shows that inflation is in the offing. Since the growth show that very few Americans
are unemployed, Apple should increase its production because there is sufficient demand for its
products in the market.
APPLE INC. BUSINESS ANALYSIS
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The US has been experiencing very low rates of inflation. In 2014, the rate was 0.7%
which was maintained through 2015. The rate, however, rose to 2.1 in 2016. There is the
likelihood that it will be higher in 2017 as the economy continues to grow beyond the ideal
growth rate (Focuseconomics, 2017). The implication here is that Apple can increase its profits
by increasing prices of the products.
The unemployment rate has also been low. It was 6.2 in 2014, 5.3 in 2015 and 4.9 in
2016. The 2017 rate is likely to be even lower as the economy has enjoyed tremendous growth
(Focuseconomics, 2017). Low unemployment rate indicates increased demand for consumer
products as people have enough money to consume and therefore the company should take
advantage of that to bring more products to the market.
Policy interest rates have been increasing since 2014. 2014, it was 0.25%, 0.50% in 2015
and 0.75% in 2016. In 2017, it is likely to be even higher so as to curb the inevitable inflation
(Focuseconomics, 2017). That means that next year, it will be more expensive for businesses to
raise capital from debt. Apple should, therefore, borrow now if it must enjoy low costs of
borrowing.
Domestic demand has been rising since 2014 except for 2016 majorly due to presidential
elections. In 2014, the demand increased by 2.5% while in 2015 it increased by 3.2%. In 2016, it
increased by 1.7% (Focuseconomics, 2017). In the first quarter Q2 of 2017, the increase was
2.2% while it was 2.3% in the Q3 (Focus economic, n.d.).
APPLE INC. BUSINESS ANALYSIS
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7
6
5
4
3
2014
2
2015
1
2016
0
Fig 1: macroeconomic variables in the US
Apple in has enjoyed an increase in sales for the past few years. In 2014, sales stood at
183.24 billion, 231.28 billion in 2015, 214.23 billion in 2016 and 229.23 billion in 2017. In the
first quarter of 2014, the average price of iPhone was $600. In the last quarter of the same year,
the price was $687 (Chowdhry, 2015). The sales reduced from 51.03 million in the first quarter
to 39.27 million in the last quarter (Statisca, 2007-2017).
Price elasticity of demand =
ℎ
ℎ
−0.3
= 0.13
= -0.2.3
The demand for Apple products, even though the company sales to high-end customers,
is price elastic in that a unit increase in price reduces demand by 2.3 units. To that end, for the
APPLE INC. BUSINESS ANALYSIS
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company to take advantage of the current favourable economic climate it must employ a price
strategy in that it must reduce the price of its products.
The company’s average costs have been on the rise. For example, the costs of sales were
112.5 billion in 2014, 142.26 billion in 2015, 131.51 billion in 2016 and 141.05billlion in 2017
(Marketwatch, 2017). Although there has been an increase in the global rate of inflation over the
years and the company has been expanding, there is need to cut costs by investing in improved
capital goods to reduce labour costs, hiring interns and freelancers for short-term jobs, and
negotiating lower prices with suppliers.
Conclusion
Apple has excellent opportunities to maintain its leadership place in the global tech
industry. Among the strategies that the company should consider include;
1.
Expand its markets reach: this will help the company reach the markets which are not
saturated with technology.
2.
Moderate prices: the company deals with medium and high-class customers. Slightly
lowering prices will absorb the upper-lower class increasing the revenues and profits. The
company, also, should consider discounts on products.
3.
Improve productivity: the company can improve productivity by increasing
productivity of employees through training and motivation and staff performance reviews.
4.
Decrease direct costs by ensuring that the company has reliable suppliers and
negotiate fair prices with the suppliers.
5.
Reduce overhead costs by ensuring cheaper energy and efficient energy utilization
6.
Reduce indirect costs by ensuring minimal wastage and errors by ensuring
employees are trained, and marketing are as low as possible.
APPLE INC. BUSINESS ANALYSIS
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From the microeconomic data above, although the economic growth is projected to
continue, the business cycle is at its expansion phase and nearing peak after which growth will
be stalled. Besides, the inflation is increasing, and it will increase even further after the peak
which will diminish customer purchasing power. Purchasing power will even reduce due to
increased unemployment rate after the peak of the business cycle. Interests rates are also likely to
increase diminishing the company’s efficiency to borrow. To this end, therefore, to be safe in the
impending hard business times, the company should increase its stock of fixed capital, borrow
and sell additional shares to raise capital now when the shares are selling at high prices and
invest in research and development. The increased stock of improved and efficient assets will
allow the company to produce efficiently in the future at low labour costs and therefore give
customers huge discounts to maintain the level of revenues.
The above strategies are well within reach of apple because of its position in the market.
In the first place, the company has a well-recognized brand across the world which will make it
readily acceptable in the new markets. Being a leader in the tech industry gives the company an
upper hand in negotiations with suppliers. The has reached several markets across the world
meaning it can make losses in a single market and compensate such loss in another in a bid to
popularise its products.
APPLE INC. BUSINESS ANALYSIS
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References
Amadeo, K. (2017, July 18). Where Are We in the Current Business Cycle? Retrieved
December 15, 2017, from www.thebalance.com/where-are-we-in-the-current-business-cycle3305593
Chowdhry, A. (2015, February 3). Average iPhone Price Increases To $687 And Android
Decreases To $254, Says Report. Forbes. Retrieved December 15, 2017, from
www.forbes.com/sites/amitchowdhry/2015/02/03/average-iphone-price-increases-to-687-andandroid-decreases-to-254-says-report/#2b715587539e
Focuseconomics. (2017, November 21). U.S Economic Outlook. Retrieved December 15,
2017, from www.focus-economics.com/countries/united-states
Focuseconomics. (n.d.). Domestic Demand in USA. Retrieved December 15, 2017, from
www.focus-economics.com/country-indicator/united-states/domestic-demand
Johnson , K., Li, Y., Phan, H., Singer, J., & Trinh, H. (2012). Theses, Dissertations and
Capstones Paper 418. Retrieved December 15, 2017, from
http://mds.marshall.edu/cgi/viewcontent.cgi?article=1420&context=etd
Marketwatch. (2017, December 15). Apple Inc. Retrieved December 15, 2017, from
www.marketwatch.com/investing/stock/aapl/financials
Statisca. (2007-2017). Global Apple iPhone sales from 3rd quarter 2007 to 4th quarter
2017 (in million units). Retrieved December 15, 2017, from
www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-2007/
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