How Apple Incs Strategy Is Affected After Globalization Economics Essay

How orchard apple tree Incs Strategy Is Affected After Globalization political parsimoniousness EssayIn this twenty first century, globalisation has an impact in every economy. World of today is considered to be united as a bunch countries with no boundaries. Raw materials from antithetic countries be existence process in an another(prenominal) region to do goods products are being foodstuffed in another country. It is the modern concept of the globalisation. A friendship goes international for so many reasons like, small domestic market, adverse g all overnment insurance policy in home country, high demand of the product in impertinent market etc. FDI across the globe had a relateed upswing with a discerning growth in the second quarter of 2008. Even it was not bear upon so untold by fiscal crisis during recession in 2008. FDI is generally originated from the advanced economy like USA. Peter DickenIn this essay we defecate chosen famous electronic gadget manufac turer APPLE as our party, which is chief(prenominal)ly based in USA, has expanded its performance unit in EUROPE and ASIA. It is manly famous for introduction of a new mount up in mobile phone industry by brining iPHONE MACBOOK in pc section. Recently they wee launched iPAD in the market which turn to be a great success. How their dodging has been bear uponed when they go global by the main three factors (1.Technology.2.geography.3.goverment policies ) has been described below.TECHNOLOGYFor a product to become much accept adequate to(p) by step, implied engine room of issue plays an important role. Foreign fill investiture prospects plenty be propelled to a new take aim if the quality of production gage be retained in a follow potent manner. Hence, investment opportunity of a country is significantly influenced by its internal development, technology and growth. These intrinsic developments are al ports in the lamplight of MNCs and are effectively made use by the m. apple has met its investment prospects in china as this country corroborates the unique work quality in assembling the inputs for final production. As a part of corporate global dodge, company has given forbiddensourcing more importance at the same quantify imparting mandate high lock over product integrity. When apple produce iPods in chinaware, it is not produced in a factory own by Apple. It is been contracted with third fellowship to produce IPods with the specifications Apple provides. nevertheless from show upsourcing, Apple is sourcing quality products for assemblage from foreign countries and some even from China itself by fragmenting its go forth chain very effectively. The standard of factors of production is settle to meet the requirements set by Apple Inc. If the company is not roaring in monitoring the strategy which is being apply in a country, it will eventually destroy companys written report. The subtle implementation of internationalisation strat egy is been spawned in such a way that Apple products are leveraged to its supreme utility. For leveraging the products to its maximum levels, sophisticated research and development is being carried out through international investments and intrinsic ground-breaking technologies.Trade theory gives light by how much proportions the various factors of inputs needed at each stage of a production process, together with various inputs at comparative bes, influencing the investment proposal. As technology is one of the important input of production, while framing up an international strategy it has to be dealt well while investing in a foreign country. The comparative cost of the technology brought forth for production is very significant as it contributes to the international pricing strategy. The quality technology which is been generated in China holds cost advantage when it is compared to the same technology implemented in US. Advanced technology is pioneer to production of any fo rward-looking products but this technology has to be accessed in a cost effective manner to produce competitively valued product. Skilled labour is another compulsory which should be considered in quality production. High cost of labour in United States of America can be a down get the better of factor in home country which can be eliminated through foreign reign over investment. Hence, advantage is been derived in the host country in terms of technology implementation through skilled labour squeeze at low cost. Apple Incs railway line establishment in China is a subtle example for their tactical part in internationalisation strategy.GEOGRAPHYThe geographical spreading means that companys activities are not arduous to a single country rather it is dispersed between unalike countries. The production in foreign country can be commenced in two ways namely Merges acquisition and Greenfield investment. Greenfield investment means scene up a new build and physical assets in t he foreign country whereas Merges acquisition means merging with a foreign potent or buying existing assets in a foreign country. The cost of geographical dispersion can be of three types which is firm level, plant level and the economies of integration foregone.Al near 54% companys geographical market plant is situated in United States. Final assembly of companys product is in the first place done in Ireland by external vendors in California, Texas, China, Korea, etc. Manufacturing supply of many critical components is executed by sole sourced third party vendors from Taiwan, Germany, US, Germany, Korea, Netherlands etc. But main assembly part is done in China by sole sourced third party vendors. That means its production input has been divided into sub category situated in different countries. So it is an example of centralized vertical Foreign Direct investment by apple where its headquartering is situated in US.The public assistance of geographical dispersion for the com pany is that, it is able to reduce the cost of primary input as the price for inputs varies in different locations. It also helps the company to lower run cost and reduces the companys direct control over the production and distribution. This also helps in lowering the parcel out cost and enables it to capture the markets. For example, the investment decision to manufacture the products from China helps the company to go for a better control over the Asian markets. Also the cost incurred in exporting the products from United States to Asian market is much lower when it is from China. The firm also enjoys economies of scale as the cost of production is less due the dispersion and the company is able to employ skilled and cheap labor.In spite of its benefits, its uncertain what electronegative effects will this have on the company. The diminished operational control may have an effect on the quality of the products or run or its flexibility to respond to changes. This may adverse ly affect the reputation of the company. Another problem is that, if the manufacturing or providing logistical services in the other country is disturbed for any causes like natural disaster, war, political issues, universal health, failure in information technology system, financial crises may materially affect the companys financial condition and operation.GOVERNMENT POLICIESThe vertical foreign direct investment strategy of Apple is advantageously and manifestly framed up by the influence of political environment or trade policies that run within the country. The supply chain is fragmented and for assemblage, the Apples input commodities are sourced from superfluous enterprise zones of China where much of import duties and taxes are waived. The government trade policy influences the intricate supply chain management and outsourcing of the company.Apple being an American multinational propels a strategy that insulates itself from foreign permutation risks. The price the compan y has to pay for a specific input item in a specific country is influenced by the exchange rates of currencies at the time. The company exhibits a pattern of a good net pass receiver of currencies except the American dollar. As the US dollars gains strength, it will negatively affect the Apples net sales and gross margin articulated in American dollars. Financial innovations are spawned by the international financial flows. The financial innovations are greatly influenced by the monetary and fiscal policy of a government. This level of influence determines the stability of economic performance. As US government tends to maintain very low interest rates to support the demand for lodgment and promoting the revival of building industry, international capital flows are possible. It may closure in more capital outflows and a weaker dollar. An immediate effect can be noticed in the US sidetrack as a result of more US exports. Thus for Apple, weaker dollar gives more euro earning and a llows it to give tongue to an elevated profit rate to it stakeholders. Linden 2008Many financial innovations are spawned out from the introduction of capital flows. There is an economic significance of international financial instruments like forwards or options when Apple deals with it. July 2008 Company reports stated that the Apple inc was willing to enter into forward and option dealings of foreign currencies. This also included some strategically committed transactions, the investment company possess in foreign subsidiaries, forecasted future cash flows etc. Evidently, practice of the company was to hedge a large number of its material foreign exchange exposures for some months. Apple inc, 2008The progression of this model imparts light into the strategy framed up by Apple in tackling the effect of rising prices too. A growing country like China has remarkable success in controlling the inflation. Apple has a peculiar stake in China where country exhibits success in managing its economy from extreme pressures and creating higher inflation rates. Chinese central bank put forward a straight policy in framing up the exchange rates. Till July 2005, the policy upheld was to fix the rate it levied to exchange Chinese currencies for American dollars. In this context, Apple could assertively forecast the exchange rates weeks in advance. Apple inc, 2005Apple endeavours to do outsourcing in the country where there is minimal legal regulations as they can maximize their profits. As the operations are mainly concentrated in China, Apple Company has got relaxation from heavy tax burdens. Vertical specialisation with internalization keeps the production cost low at the same time company benefits from low trade cost. The company is getting more and more sophisticated by research and development. Proper caution is taken as the economy breeds the risk of a global financial downturn that could have dim effect in their business.At last , after analysing the all the fact ors that affects companys internationalisation foreign direct investment we can conclude Apple is authentically globalised . That means it has stretched its corporate arms in such a way that we can say that for Apple the difference across countries does not matter. They have fragmented their production parts across countries sell its products all most around the world just to take the benefit of the internationalisation globalised concept. Their main strategy is to take advantage from different counties favourable condition that helps their business to gain more revenue using economics of scale. As we have discussed the main reason of their expansion of business in China are cheap labour costs, higher productivity of Chinese labour output huge demand of Asian market. They also want to take benefit from the exchange rate investment friendly government policy. It is proved from their establishment of unit in China Ireland. Their well organized globalised business strategy has h elped them to spread their products world wide almost in every country, which is much more appreciated from the point of view of internationalisation of a company. In every of their business strategy the concept of true globalised company can be visualised. Peter Dicken