This case study examines Apple's global business operations as of 2014, analyzing the company's presence in 16 nations and 444 retail outlets. The paper evaluates varied market and legal systems across Apple's operating regions, identifies key political risks including tariffs, counterfeiting, and labor unrest, and assesses stakeholder management strategies. A central focus is Apple's Supplier Responsibility Program and Code of Conduct, developed to address past criticisms of unethical working conditions and establish ethical standards across the international supply chain. The analysis concludes with recommendations for managing political risks and key performance indicators for future investment decisions.
Apple Inc. (NASDAQ:AAPL) is a global leader in the development, design, manufacturing, and marketing of smartphones, tablets, media devices, personal computers, operating systems, services, peripherals, and network solutions. As of December 2014, the company was operating in 16 nations, with 444 open Apple retail outlets (Apple Investor Relations, 2014). The company employed 92,600 people and generated $182 billion in revenue during their latest financial year ended September 30, 2014 (Apple Investor Relations, 2014), representing a 7% increase over the previous year. The company demonstrated strong profitability, generating $52.5 billion in profits that same year, also increasing 7.2% over 2013. Countries where the company operated included Australia, Brazil, Canada, China, France, Germany, Hong Kong, Italy, Japan, Netherlands, Spain, Sweden, Switzerland, Turkey, and the United Kingdom, with the majority of stores located in the United States (Apple Investor Relations, 2014).
The nations in which Apple operates vary significantly in their market and legal systems, with the greatest differences evident in France, Hong Kong, and Turkey. The French market and legal systems prioritize consumer protection, which makes it expensive for Apple to maintain stores and offices there. This cost structure is evident in the company's latest annual report and the various expenses associated with operating in France (Apple Investor Relations, 2014). Based on analysis of the company's financial reports and Securities and Exchange Commission filings, a clear pattern emerges: the more complex a market or legal system, the more expensive it is to operate in. Apple maintains an extensive supply network that operates in more countries than its retail stores (Brustein, 2014). The supply chain network is mentioned frequently in company annual reports as a core competency and an area in which the company takes pride for its ethics best practices (Apple Investor Relations, 2014).
The Supplier Responsibility Program is designed to promote and bring greater levels of ethics to each member of Apple's supplier network. This program emerged in response to criticisms the company had received regarding unethical working conditions in iPhone and iPad supplier and manufacturing locations. The Supplier Responsibility Program is required for suppliers who wish to do business with Apple, as it provides greater analytics and oversight of ethics in manufacturing and supplier activity management (Apple Investor Relations, 2014).
The greatest political risks that Apple faces include tariffs in France on smartphones, the potential for civil unrest in Turkey, and continued counterfeiting challenges in China affecting core products (Apple Investor Relations, 2014). Political unrest in China regarding working conditions and recent protests about pensions represent ongoing challenges for Apple in 2015. As a political consultant for the company, the recommendation is to partner as closely as possible with the Chinese government and lead in paying pensions for Apple employees immediately. This would position Apple ahead of many Chinese companies, which are dragging their feet regarding pension payments to factory employees. Additionally, Apple should ensure that operations in Turkey are staffed by nationals and begin developing plans for a completely separate, stand-alone Turkish operation in the event of increased regional conflict.
The key stakeholders for Apple include customers, employees, government agencies demanding supply chain ethics compliance, and foreign national governments concerned about Apple's pricing and distribution practices. Apple must also orchestrate suppliers, manufacturing operations, and distribution centers to maintain coordination during product introductions. The company excels at new product launches across all operating nations (Domanico, 2014). Given this strong focus on new product success, the pressure to keep all stakeholders informed is intense throughout the organization. Apple's approach to managing each stakeholder group involves providing frequent information updates and defining how and where new product introductions generate the fastest returns in terms of revenue and global growth (Apple Investor Relations, 2014).
Apple also maintains an extensive investor base supported by strong stock performance and operates an efficient system for communicating with financial stakeholders (Coy, 2014). The company recognizes that managing customer loyalty is essential, as many loyal fans nearly guarantee success for each new product based on existing demand alone.
Most significant to Apple's international operations is the company's Code of Conduct. Apple has faced frequent criticism for its lack of supplier ethics (Apple Investor Relations, 2014). In response, Apple created the Supplier Code of Conduct, which defines the company's expectations for how suppliers manage human and labor rights, deliver health and safety protections for workers associated with Apple products, and address environmental protection, ethics, and management practices. It is most important for Apple to maintain consistency with this code, because the company depends so heavily on international suppliers. The Code of Conduct ensures the company will have a stable supply chain for future operations, which is essential given Apple's rapid new product development and introduction approach.
"Measuring success across markets and regions"
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