An Analysis Of Apple Corporation's Global Expansion

1231 words - 5 pages

According to the AAA strategies, there are three main positions companies can use in foreign markets to their advantage. The first is aggregation and involves using regional groupings to minimize firms’ costs of adaptation and exploit larger markets to achieve scale. The second is adaptation and involves firms’ targeting their products to suit local markets. Finally, the third is arbitrage and involves firms taking advantage of foreign countries’ economic, geographic, cultural, economic and administrative differences to add value. Apple pursues several AAA strategies in China to maintain its large profit margins and efficient production process; however, it could do more in the way of ...view middle of the document...

Many regard Apple’s smartphone as its strongest business prospect, with projected shipments expected to reach 1.3 billion by 2016. In 2013, China became the largest smartphone market in the world and yet Apple has done nothing to bring down the cost of a majority of its phones, which are not subsidized by mobile phone carriers as they are in the United States. In fact, when Apple introduced the iPhone 5C – what is one of Apple’s cheapest phones in America- to the Chinese market, it introduced it at a price point much higher than the cheapest iPhones available in China. Knowing that Chinese consumers switch phones far more regularly than their counterparts in the West and that low-cost smartphones have been doing extraordinarily well in China, Apple’s disregard for the Chinese consumer’s preferences makes no sense.
Given the economic and demographic crisis in China that is threatening Apple’s success as a producer in its ability to maintain low production costs and its success as a retailer in its ability to sell products in the Chinese market, I think Apple should amend its current AAA strategy. It should focus more on adaptation to form partnerships with fellow electronic companies to manage its relationships with its suppliers and to cater its products to Chinese consumer demand. While Apple has historically had an incredibly productive relationship with Foxconn, recent developments are increasingly worrying that this relationship may no longer continue to favor Apple. Public pressure has caused the government to improve labor standards giving workers more rights and an increased wage. This has forced Foxconn to relocate many of its factories to inland regions where labor is cheaper and mechanize some of its processes, which hasn’t turned out to be very successful. It has presumably been a contributing factor into why Foxconn has begun to diversify its sources of revenues, relying less on Apple’s business. A cheap assembler is integral to Apple’s ability to maintain its incredibly high profit margins. To preserve its power over its suppliers and ensure that it continues to get the cheapest rate possible, Apple could use adaptation by forming a strategic alliance with another major technology company that Foxconn does business with to ensure that Foxconn caters to them and offers them the best rate. However, the worry remains that Foxconn may not be able to maintain its efficiency and low costs due to demographic trends. China’s workforce is poised to peak in 2015 and the total fertility rate needed to replace the population is well below what is required to maintain the labor force. Apple needs to be open to moving its production elsewhere if China cannot continue to give Apple its operations edge. Apple should also adapt its marketing strategies to cater more to Chinese consumer...

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