The Rise of Apple Inc: Opportunities and Challenges
in the International Marketplace
Garcia Marrero
The Rise of Apple Inc: Opportunities and Challenges
in the International Marketplace
Alberto Garcia Marrero
Florida International University
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The Rise of Apple Inc: Opportunities and Challenges in the ..., Exams of Information Technology
Apple, the world's largest information technology company has had its success but it has also had its failure.
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in the International Marketplace Garcia Marrero
The Rise of Apple Inc: Opportunities and Challenges
in the International Marketplace
Alberto Garcia Marrero
Florida International University
in the International Marketplace Garcia Marrero ABSTRACT Apple Inc. is one of the world’s leading multinational enterprises as measured by revenue, profits, assets, and brand equity. Its ascent has been rapid but not linear; it has experienced setbacks along the way. This paper will analyze Apple’s evolution over the past decade and future prospects, with an eye toward identifying opportunities and challenges for global expansion.
in the International Marketplace Garcia Marrero revolutionary iPhone and Apple TV. Jobs had not only ushered in the world of personal computers with the Macintosh but also brought an end to that same era with the introduction of the personal smartphone. With the introduction of the iPhone, Apple opened the world up to the ability to have a computer in one hand. The next four years under Steve Jobs, Apple launched the App Store, the iPad, the iPod Touch, the iPod Nano, the Macintosh OS Lion, the iPhone 4 and finally iCloud. Jobs would step down as CEO in August of 2011 due to health issues and Tim Cook became the new CEO of Apple Inc. However, it was after Jobs’ death in October of 2011 that Apple’s stock prices rallied to record highs. The following year with the introduction of the iPhone 5 and several other new products, Apple’s stock market value rose to a world record of $ billion (Rawlinson, 2017). At this time Apple also faced several intellectual property lawsuits with Samsung Electronics Co. and HTC Corp. which led to several deals that favored Apple. It was clear that beyond 2012, after the death of Steve Jobs, the technology industry’s greatest would finally challenge the monopoly that Apple had taken advantage of for over three decades. This renewed competition has led to the recruitment of several senior executives for Apple within the last seven years. The challenge facing Apple today is one of innovation rather than sales. Tim Cook is tasked with the future of Apple and following his predecessors innovative streak. To battle the major technology companies that are gaining on Apple. Samsung, Google, and HTC Apple will have to evolve once more as it has done in the past or risk falling back into the uncertainty that it faced during the 1990. Ultimately, Cook and his senior executives must re-evaluate the success of Apple and devise a strategy to move forward in a manner that will benefit Apple in the long run, not simply from a business point of view but also from that of social entrepreneurship and legacy. Jobs left behind a legacy, a company that brought about change to the world whether it be through their several community initiatives or their innovative devices that revolutionized the world. Nonetheless, it is a legacy that Tim Cook must now uphold if Apple and its brand is to survive. INTERNATIONAL OPERATIONS Apple is a global technology powerhouse. It owns 498 retail stores across 22 countries around the globe. It has expanded beyond a domestic company to a multinational enterprise that is rivaled only by giants such as Samsung, Wal-Mart, and McDonalds. However, Apple Inc. is not the main reason for this success, but rather its Irish subsidiary Apple Operations International. In 1980 Apple Operations International (AOI), was incorporated into Apple Computers Inc. and is based out of Cork, Ireland (Bloomberg). AOI is a subsidiary of Apple Inc. and is used to bypass the American tax system while running many of its operations across the globe. Alongside AOI are two other subsidiaries in Ireland: Apple Operations Europe and Apple Sales International. These three subsidiaries have no country of origin for taxing purposes and have been the main supplier of Apple’s unprecedented wealth and growth.
in the International Marketplace Garcia Marrero Apple Operations International is owned by Apple Inc. and is used simply to collect dividends from the various other Apple affiliations around the world. Under this umbrella is its very own subsidiary of Apple Operations Europe which manufactures a line of computers for distribution across the Europe Union. Associated with these two is Apple Sales International which works with third-party manufactures in China to make Apple products. However, AOI has various other subsidiaries that has allowed Apple to do business in Europe at the low tax rate of 2% that was brokered with the Irish government when AOI was established in 1980. Under the umbrella of AOI are Apple Distribution International (Ireland), Apple Retail Holding Europe (Ireland), Apple Singapore, and Apple Asia In- country distributors. Going further into the subsidiary of Apple Retail Holding Europe, there are eight other retail subsidiaries spread across Europe. These include Apple Retail Belgium, France, Germany, Italia, Netherlands, Spain, Switzerland, and UK. All of which pay dividends up to Apple Retail Holdings Europe, which in turn pays dividends to AOI, which ultimately returns those dividends to Apple Inc. all of which is done tax free. Aside from its subsidiary activities, Apple is beginning to shift its focus towards emerging markets, specifically in Latin America and India. As sales begin to flatline in developed nations and saturated markets such as the United States, Europe, and China, Apple now begins to shift its focus towards India, which has the largest emerging middle class in the world. Currently Apple is working with the Indian government to move manufacturing to India as part of a strategic move to expand operations in India. With hopes of lowering manufacturing costs Apple will be able to lower the price of their expensive devices to make them affordable for the emerging middle class in India.
in the International Marketplace Garcia Marrero EVOLUTION As Apple Inc. comes to the close of another decade of innovation and evolution, it must now look at how to continue to evolve and adapt to the changing global environment to ensure its continual growth and success. This year marks the tenth anniversary of the introduction of the iPhone by Steve Jobs in 2007. With that anniversary comes the introduction of the new and revolutionary iPhone X. However, the iPhone X is not the only new product that Apple has introduced in the last ten years. This segment of the paper will focus on the evolution of Apple’s portfolio, not only its product portfolio but also its investment portfolio, which today is valued at ⅓ of its entire market share value. Originally, in 2007 Apple was in various countries, however, it was not as diversified as it is today with 498 retail stores in 22 countries across the globe. It also had a rather limited product and investment portfolio that would see an exponential growth unlike any other company has seen. Below, is a table from the 2007 Annual Fiscal Report as required by the Securities Exchange Act of 1934. It is clearly visible in this table that Apple only had sales in the Americas, Europe, and Japan. It can also be seen that Apple only had sales and revenue for the Macintosh, the iPod, and the newly introduced iPhone. September 29, 2007 Net Sales by Operating Segment (a): Americas net sales $ 11, Europe net sales 5, Japan net sales 1, Retail net sales 4, Other Segments net sales (b) 1, Total net sales $ 24, Unit Sales by Operating Segment: Americas Mac unit sales 3, Europe Mac unit sales 1, Japan Mac unit sales 302 Retail Mac unit sales 1, Other Segments Mac unit sales (b) 528 Total Mac unit sales 7, Net Sales by Product: Desktops (c) $ 4, Portables (d) 6, Total Mac net sales 10, iPod 8, Other music related products and services (e) 2, iPhone and related products and services (f) 123
in the International Marketplace Garcia Marrero Peripherals and other hardware (g) 1, Software, service, and other sales (h) 1, Total net sales $ 24, Unit Sales by Product: Desktops (c) 2, Portables (d) 4, Total Mac unit sales 7, Net sales per Mac unit sold (i) $ 1, iPod unit sales 51, Net sales per iPod unit sold (j) $ 161 iPhone unit sales 1, However, when looking at the 2016 4th^ Quarter Annual Report it can be seen that there has been dramatic changes to the product portfolio as well as to the regions in which Apple is located now. Nearly ten years after the introduction of the iPhone sales have increased from a decent 1.389 million sold to an astounding 211,884 million units sold. Apple also incorporated its new iPad product and expanded into Greater China and other regions in Southeast Asia and the Pacific. 2016 Net Sales by Operating Segment: Americas $ 86, Europe 49, Greater China 48, Japan 16, Rest of Asia Pacific 13, Total net sales $ 215, Net Sales by Product: iPhone (1) $ 136, iPad (1) 20, Mac (1) 22, Services (2) 24, Other Products (1)(3) 11, Total net sales $ 215, Unit Sales by Product: iPhone 211, iPad 45, Mac 18, Apple, like any other major company, also invested to provide a steady supply of revenue and dividends for its stakeholders and stockholders. However, their investment portfolio in 2007 extremely different than what it is today. Below, is a segment from Apple’s 2007 Annual Report Balance Sheet. In this segment it can be seen that Apple held slightly over $6 million in short-term investments with a total of over $25 million in assets. Even though it seems as if Apple was spending a large amount of money on investments and had a large amount of assets, it is dwarfed by its total assets as of the 4th^ quarter of 2016.
in the International Marketplace Garcia Marrero glass touchscreen phone that lacked a GPS and even 3G data capabilities. It eventually was replaced by its big brother the iPhone 3G which introduced 3G data and GPS, however, even then the iPhone 3G soon became obsolete in a world in which technology was being created much faster than it could be used. The following year the 3GS was introduced which saw fixes to hardware and software of the 3G which made it the better model to own. Shortly after, the 3GS was replaced by the iPhone 4 which led to one of the largest battles in the technology industry when a prototype was lost in a bar and was leaked across the internet weeks before its launch. Soon after, came the iPhone 5, 5s, and its new more affordable low market entry device the iPhone 5c. Followed by the iPhone 6, 6 plus, and the subsequent 6s models. Getting to the newer generation iPhones which include the iPhone 7, 7 plus and its respective S models. Leading to the 2017 anniversary phones, the regular cycle iPhone 8 and 8 plus as well as the iPhone X. As part of their ten year anniversary Apple introduced the iPhone X, which has facial recognition capabilities and the slimmest look yet in an iPhone with no home screen, and the highest quality camera on an iPhone to date, matched with the fastest Intel processor yet. Each and every year Apple adapts to the demands of its consumers providing new and innovative technology in every device that they launch. However, it has become predictable and because of this competitors such as Samsung have been beating them every step of the way. It is time for Tim Cook and the rest of the Apple leadership to revolutionize the company once more as Steve Jobs did in 1997 when he returned to Apple. The past ten years have been nothing but success, but success will be followed by failure if changes are not made. At the close of 2016 Apple reported a decrease of sales by 5% (Bloomberg). This is a loss that cannot be tolerated as sales for androids, specifically Apple’s main competitor Samsung, continue to rise each year. The main issue is that the iPhone is far too expensive for the emerging markets that are giving Apple’s competitors such success. Luckily, Apple has a plan. Earlier this year Apple CEO Tim Cook presented the new developments in Apple technology and new segments of the technology industry that it will be expanding to, essentially these are the building blocks for the future of Apple for the next ten years. Beginning with Augmented Reality (AR), Apple unlike its competitors is not working on developing a new pair of AR glasses like Facebook or Google. Instead it has introduced an AR software update into its iOS 11 software update. This will allow for iPhones across the world to use basic AR which will help build a database of information and analysis for when Apple does decide to make the leap into fully AR devices. Second, Virtual Reality (VR) is a growing field in design and in the technology industry. However, Apple has not jumped on that train either, that is because the technology is still relatively new. Rather than focusing on developing their own VR devices, Apple has opted to develop VR software for their new macOS Sierra to allow developers and digital design artists to have the VR capabilities that they will need for their work. Apple has prided itself as the prefered choice for artists and digital designers and this will help to ensure that they do not abandon the brand for a competitor, in turn securing their consumer base.
in the International Marketplace Garcia Marrero Another area in which Apple hopes to advance is in artificial intelligence (AI). With the introduction of its new HomePod as a Wifi stereo Apple is able to introduce Siri into the average household, when a person is not connected to their phone or other Apple devices. Although Apple has had very limited exposure or development with AI technology in the form of Siri, the HomePod offers a way to turn Siri into a personal assistant at home by connecting it to various appliances, very much like the Amazon Echo device. Finally, Apple has also introduced its new iOS 11 software to the iPad making it more like a touchscreen Macintosh rather than an oversized iPhone. In doing this they are getting closer to completing Steve Jobs vision of creating a completely portable personal computer (PC). Apple under the leadership of Jobs ushered in the revolution of the PC and aimed at reaching its ultimate climax by creating the most efficient portable personal computer available on the market. Although no set plan has been presented by the executives at Apple, there is much that is being worked on within the walls of Apple’s headquarters in Silicon Valley. Additionally, with the creation of Apple University, it will be a matter of time before new innovative minds make their way to the company and bring about a new technological revolution unlike any before. Ten years ago when Steve Jobs unveiled the iPhone to the world, no one could have known the incredible effects that it would have on the world as a whole. Today, life would be impossible without it. It was the smartphone that started it all, it ushered in the era of the smartphone and irreversibly changed how we as humans do life. It is difficult to believe how any other innovation could change our lives as the iPhone did, but Apple must try if it is to survive. CONCLUSION Apple, the world’s largest information technology company has had its success but it has also had its failure. Over its lifetime Apple has introduced a new kind of personal computer, ushered in the era of the smartphone, and created its own demand for devices the likes of which the world had never imagined or dreamed of, outside of your typical Star Trek episode. However, Apple now faces a new challenge, adapt to an ever changing global consumer and changing demand or risk losing its domination of the informational technology industry. Over the past decade Apple has paved the way for new developments in smartphones and handheld devices such as the iPod and the iPad. But, as of late Apple has flatlined and its innovations have become a thing of the past. Year after year Apple produces only minimal upgrades to their devices not providing the shock and awe factor that Steve Jobs provided nearly 7 years ago. It is this lack of surprise and creative innovation that has driven loyal customers away from the brand. To survive this downfall and recover the lost ground Apple must adapt. It has to take into consideration the new factors that drive consumer buying around the globe. Those factors
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