Select an appropriate design for a company (one you know of preferably) that should have a change in structure based on the current structure of the organization that will be successful from the international or global perspective. Explain your thinking and reasoning in a paper of the length described below.
Deliverable Length: 1,000 to 1,250 words
Reference
Lynch, R. (2009, September).
International global business strategy
[Video]. Retrieved from the YouTube Web site:
Running head: INTERNATIONAL BUSINESS OPERATIONS: APPLE INC
International Business Operations: Apple Inc.
Name
Institution
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INTERNATIONAL BUSINESS OPERATIONS: APPLE INC
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International Business Operations: Apple Inc.
Apple Inc. is determined to enjoy the opportunities derived from optimizing international
and global markets. Aiming to reach larger markets in foreign countries, the company is highly
dependent on its contracts with international business enterprises and stakeholders. In its
international business operations strategies, the company combines global sourcing and
outsourcing strategies to facilitate the movement of goods and resources between international
countries and the company. Although Apple Inc. is committed to exploiting global markets, the
company does not seem to be interested in franchising. This paper mainly aims at examining and
discussing the benefits and risks that may be experienced by Apple Inc. in its international
business operations. The conclusion of this paper serves to summarize the primary concepts
discussed in the paper.
International Business Operations
In 2013, 97% of Apple’s procurement expenditures covered for the purchase of materials,
manufacturing, processing, and assembly of products that were finished from abroad (Zhang,
2014). According to the webpage, the company sold 120 million, 35 million, 60 million, and 15
million units of iPhone, iPod, iPad, and Macs respectively. The company’s evident high sales are
translated into its excellent performance in its international business operations. The company
relies on its global sourcing strategy to ensure that it is equipped with the necessary and
fundamental raw materials, personnel, and technologies. Many experts confirm that most of
Apple’s products are neither manufactured nor assembled in the USA. According to Chan, Ngai
& Selden (2015), Apple Inc. mainly depends on China as its main outsourcing country since the
INTERNATIONAL BUSINESS OPERATIONS: APPLE INC
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debut of the iPhone. The scholars assert that the choice of China was influenced by the
availability of raw materials as well as the availability of cheap labor.
The company greatly depends on its outsourcing suppliers and distributors in different
parts of the world. Considering that the company does not use franchising as an international
business operations strategy, the company benefits from its international outsourcing agents,
referred to as Apple Authorized Resellers (AAR) (Zamani, Kasimati & Giaglis, 2016). Apple’s
AARs are expected to represent the company as the company’s retailers. The company does not
sell its business model to its AAR and thus, does not use franchising as an international business
operation. The use of AARs enables the company to keep track of its international products,
gaining from all the revenues and profits from AARs. Whereas Apple Inc. uses outsourcing firms
for the production and manufacturing of its products, the company utilizes AARs for the
distribution and selling of Apple products in international foreign markets. Insofar, Apple’s
international business operations have yielded due to its choice of AARs over franchising in
international business operations. Considering that Apple’s management prefers control and
maximum profits, the company chooses not to opt for franchising (Libava, 2020). Franchising
would limit the company from full control and profits for the company.
Benefits
Inarguably, Apple aims at benefitting from the numerous benefits associated with
expanded international markets. Apple Inc.’s international business strategy restricts the sharing
of the company’s business model with international third-parties, thus protecting the copyrights
of the international business operator. Courtesy of its international business strategy, the
company enjoys its entire profit levels and controls all its operations. The company eliminates
INTERNATIONAL BUSINESS OPERATIONS: APPLE INC
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possible risks that may exist if they had shared their business models with international suppliers
and agents. The company’s AARs enables the company to enjoy its full rights as the owner and
distributor of Apple products.
Secondly, Apple’s international business operations strategies enable the company to
diversify its risks and build stable and robust supply and distribution chains. Using its numerous
global suppliers, the company not only reaches its global customers faster but also reacts faster to
customer feedback and issues in the global environment. According to Patel, Criaco & Naldi
(2018), the use of large and complex networks in global markets functions to facilitate
transactions in companies that aim at exploiting the opportunities from geographic
diversification. International business strategies help Apple’s management to have flexible
decision-making processes when facing disruptions in its global markets.
Moreover, due to the increasing demand for Apple products, the company needs its
international business strategies. As aforementioned, Apple’s significant unit sales are facilitated
by the company’s large network of distributors and retailers around the globe. In India and China,
for instance, the volumes of revenues in China and India increased from $2.4 billion in 2013 to
$26 billion in 2017 (Haenssgenn & Ariana, 2017). Therefore, an improved international business
distribution network functions to ensure that the company enjoys increased sales, revenues, and
profits. The company’s efficient international business channels help the company reach its
outsourcing firms and its customers in different parts of the globe. An efficient global
distribution network enables Apple to produce enough units for its demanding customers around
the globe. Apple Inc.’s international business operations help the company in capacity
management.
INTERNATIONAL BUSINESS OPERATIONS: APPLE INC
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Risks
Although international business operations are associated with many benefits, Apple
acknowledges that international distribution channels expose the parent company to numerous
risks. First, Apple faces existential risks due to the unpredictable political climates in different
parts of the world. For instance, the current USA-China trade-war may jeopardize the company’s
position in the Chinese market. This would be a blow to the company, considering that Apple
makes fortunes from the Chinese rich and populous market (Contractor, 2018). Considering that
the USA has already acted against China’s Huawei, China may retaliate by banning Apple
products from the country. Other risks subjected to Apple include intellectual property risks,
credit risks, foreign exchange risks, and shipping risks. These risks are common in contemporary
companies that operate in international markets.
Conclusion
In conclusion, Apple Inc. is determined to utilize its effective and efficient international
distribution channels to reach its stakeholders from different parts of the globe. The company
strategically relies on outsourcing firms for manufacturing and assembly of its commodities and
Apple Authorized Retailers (AARs) for the distribution and sale of Apple products. The
company does not use franchising, thus fully controlling and benefitting from the company’s
international business strategy. Other benefits include diversified risks and efficient capacity
management. On the other hand, the company faces risks surrounding their intellectual property,
political environments, foreign exchange, and shipping risks.
INTERNATIONAL BUSINESS OPERATIONS: APPLE INC
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References
Chan, J., Ngai, P., & Selden, M. (2015). Apple’s iPad city: Subcontracting exploitation to China.
In Handbook of the international political economy of production. Edward Elgar
Publishing.
Contractor, F. J. (2018). Ten quick facts about US trade: Deficits and discords. Rutgers Business
Review, 3(2).
Haenssgen, M. J., & Ariana, P. (2017). The social implications of technology diffusion:
Uncovering the unintended consequences of people’s health-related mobile phone use in
rural India and China. World Development, 94, 286-304.
Libava, J. (2020). Apple Store Franchises Will Never Happen And I Know Why. Retrieved 26
November 2020, from https://www.thefranchiseking.com/apple-retail-stores-applefranchise
Patel, P. C., Criaco, G., & Naldi, L. (2018). Geographic diversification and the survival of bornglobals. Journal of Management, 44(5), 2008-2036.
Zamani, E. D., Kasimati, A. E., & Giaglis, G. M. (2016, June). Response to a PR Crisis in the
age of social media: a Case study approach. In International Conference on
Contemporary Marketing Issues (ICCMI).
Zhang, Y. (2020). Apple’s Sourcing Strategy. Retrieved 26 November 2020, from
http://cmuscm.blogspot.com/2014/09/apples-sourcing-strategy.html
Global Business
Strategy
Evaluate differences in organizational designs:
Types of Business Strategy
International
1. Leverage competencies in market with low
pressure for integration and responsiveness
Multidomestic
1. Different markets, different demands
2. Strategic product placement vs. innovative
management strategy
Global
1. Little market differentiation across the globe
Transnational
1. Value activities coordinated
2. Location economics utilized
Market Expansion Strategy
Scanning: Examine markets
broadly. Consider:
1. Opportunities
2. Demographics
3. Economics
4. Cost
5. Infrastructure
6. Political incentives
7. Risks
8. Social conditions
9. Past patterns
Detailed analysis: Feasibility and
desirability of different markets
Data collection and analysis
shortcomings:
1. Availability of information
2. Information accuracy
3. Collection methodology
Data sources:
1. Government agencies
2. Studies
3. Reports
4. Service companies
5. Trade associations
6. International organizations
Reference
Daniels, J., Radebaugh, L., & Sullivan, D. (2013). International business environments
& operations. Boston, MA: Pearson.
Global Organizational Design
Overview
Industry structure interpretations rely on the five-forces model. The fiveforces model allows companies to determine how attractive a new market
may be for their products. The five-factor model takes a variety of factors
into consideration, including companies in an industry and how profitability
will be affected by competitors, buyers, suppliers, and product substitutions.
Technology costs in a new market also affect profitability forecasts and can
play a major role in the attractiveness and profitability of a given market.
The international business industry changes based on a variety of factors.
These include disruptions in competition such as major company merges,
disruptions in products such as new product innovations that render their
older counterparts obsolete, disruptions in processes such as market
management and production innovations, and disruptions of a political or
economic nature. The introduction of the assembly line in the automobile
industry created distinct competitive advantages for those companies that
adopted the technology. The use of the Internet has significantly altered how
international business takes place. It is important to understand, evaluate,
and implement these types of changes into organizational structure and
strategy to maximize profit.
Strategy and Competition
Strategy in building a profitable company can be instructed by the Industry
Organization (IO) paradigm. The IO paradigm espouses that markets have
what is termed perfect competition. Perfect competition occurs when all
factors in the market lead to equalized competition, and over time, no
business should outperform, make a higher profit, or expand more than
another. If this holds true, then all companies should perform in a
comparable manner.
If a market is not always perfectly competitive, companies can become more
profitable than their competitors by marketing more effectively or by
developing better products, which is termed great by choice. A variety of
software companies are excellent examples of companies that choose to
develop better products by consistently topping one another through new
innovations. Marketing more effectively relies on innovations in advertising,
whereas great by choice focuses on the quality of the products being
advertised. There are a variety of approaches to creating value in company
products. These include cost leadership and differentiation. Cost leadership is
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Global Organizational Design
used when a company aims to be known as the low-cost vendor of a given
product. Differentiation is used when product innovations are effectively
branded.
Value Chain
The value chain principle states that all parts of a firm perform activities that
further the aims of all. Primary activities are core business activities that are
performed within a firm and make up the value chain of a given company. To
manage the value chain, a company must balance configuration and
coordination as well. It is necessary to change the value chain as the market
factors change. For example, given the current American economic climate,
the value chain of companies marketing in America must change for those
businesses to be successful in the marketplace.
It is important to understand international business strategy, how to best
evaluate and select markets, and the different organizational structures of
international business. When all of these are effectively understood and
applied, a company can design its organizational structure, determine which
markets are best for its products (supplies, production, and marketing,), and
create business strategies that will increase the profitability of its business.
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Factors Influencing Change
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•
•
•
International business expansion
Internet
Management standards
Social contracts
Vertical Differentiation
Horizontal Differentiation
Centralized authority
Positions of individuals
Divisional Structures
Specify roles and relationships
according to output
Organizational Structures
Mixed Structures
The formal arrangement of roles,
responsibilities, and relationships
Mimic aspects of other
structures
Coordination Structures
Neoclassical Structures
Manage resources from a different
location and direct the flow of
materials, production, and sales
Apply new devices to avoid
issues posed by the classical
structure
Matrix Structures
Virtual Structures
Effective when responsiveness and
global integration pressures are
high
Temporary collection of companies
that work as a mutually
advantageous network
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