Apple, Inc. as a Multinational Corporation: Strategy and Management

Abstract

This paper attempts to review what Multinational Corporations’ roles and reputation. It will also attempt to review how they survive in the competitive world of all the Multinational Corporations out there. Apple, Inc. is an example of a Multinational Corporations and this paper will discuss the background and the strategies that Apple, Inc. to be able call themselves as one of the most successful company out there. In this paper, there will be a discussion on how Apple, Inc. adapts being one of the most successful Multinational Corporations out there. Next, in this paper, there will be discussions about the implications for management. Lastly, there will be recommendations that Apple, Inc. should take so that they can continue to be a successful corporation.

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Introduction

Apple, Inc. is a multinational corporation that started out with Steve Jobs. He and his friend, Steve Wozniak, were high school drop outs (MarketLine Company Profile: Apple Inc., 2019). They started Apple in Steve Job’s basement (MarketLine Company Profile: Apple Inc., 2019). They created the first Apple computer in April of 1976 (MarketLine Company Profile: Apple Inc., 2019). They introduced the 2nd computer which brought sales from 35,000 computers in 1979 to 78,000 computers in 1980. In 1980, the company had 1,000 employees and they went public. In the early 1990s they created the Macintosh which was extremely successful. There was a power struggle among the executives, so Steve Jobs left the company along with other executive. In 1997, Steve Jobs came back to the company as an advisor and then shortly after he became the CEO and introduced iMac. Ever since Steve Jobs came back, the company did very well.

Multinational Corporations, or otherwise known as MNCs, are huge industrial organizations that have multiple subsidiaries and facilities in multiple countries (Chen, 2018). The subsidiaries that are in multiple countries are run by a parent company. Multinational Corporations play a very important role in with economics for undeveloped countries (Chen, 2018). Multinational Corporations advance from outsourcing their parts for their products to low wage countries which keep producing cost low and achieve bigger profit margins (Boersma & Clarke, 2018).Multinational Corporations become successful by adopting  economic, political, and other factors in the respect of host countries (Sageder and Feldbauer-Durstmuller, 2018). Multinational Corporations have the responsibility to preserve their integrity of their value chain. They need to make sure they don’t have any unresolved human rights, environmental and ethical dilemmas.

Hypotheses

In the review of literature, I will begin to explain what a Multinational Corporations is and how they face a more intense competence and higher number of changes in the different countries that operate. Then I will continue to talk about Multinational Corporations’ roles and reputation. Next, I will talk about management control and how Multinational Corporations survive in today’s competitive world.  Executing management is crucial for Multinational Corporations. Next, I will talk about the sustainability of Apple, Inc. as a Multinational Corporations. Lastly, I will talk about the human rights, ethical and environmental dilemmas that occurred within Apple, Inc.  In the research findings, I will talk about the discussion of the disadvantages and advantages of Multinational Corporations.

Apple Inc. is an example of a Multinational Corporations. Apple Inc. is one of the most well-known Multinational Corporations in the world. They are one of the richest of the entire Multinational Corporations. They are a great example to use to explain how Multinational Corporations work. First, I will talk about their missions and values and how they implement it all in their business strategies. Using Apple Inc., we can then determine Multinational Corporations corporate social responsibility for actions by its suppliers.  Then I will discuss the SWOT analysis for Apple, Inc. I will then talk about Apple’s marketing strategy and how they make their company as successful as they are today. Apple, Inc. uses several different marketing and generic strategies for their business plan. I will analyze Apple’s financial situation. In the end, I will talk about the implications for managers that are used to motivate employees to achieve organizational effectiveness. Lastly, I will give Apple, Inc. recommendations that they can use to improve their business and become more successful.

Review of Literature

Apple as Multinational Corporations

Both Popsecu and Chen discussed in their article about what Multinational Corporations are and their roles. They both used qualitative data to find their research. Chen defined Multinational Corporations or otherwise known as MNCs, as huge industrial organizations that have multiple subsidiaries and facilities in multiple countries (Chen, 2018).

The subsidiaries that are in multiple countries are run by a parent company. For example, Apple has multiple subsidiaries in different countries. Their parent company (headquarters) is in Cupertino, California (Chen, 2018). Multinational Corporations usually get into joint ventures with other companies in other countries (Chen, 2018). In these joint ventures, MNCs make agreements regarding the production, the market, etc.

He concluded that Multinational Corporations play a very important role in with economics for undeveloped countries (Chen, 2018). Popescu mentioned that Apple play an important role of the governance of international environment matters (Popescu, 2016).  MNCs also play an important role for host countries because of the domestic labor. The domestic labor can bring about higher wages and have benefits for consumers by offering lower prices and better quality. The investments will create a more domestic investment (Chen, 2018).

Sageder and Feldbauer-Durstmuller about MNCs need successful by adopting o economic, political, and other factors in the respect of host countries (2018). They will have to fight through the geographical and culture divided so that it will be more easily manageable (Sageder & Feldbauer- Durstmüller, 2018). In order to do so, management control needs to come into play.

According to Segeder and Feldbauer- Durstmüller, management control (MC) is the systems, rules, practices and values that influence employee behavior, decisions, and actions (2018). MNCs need to have diverse mechanism, such as, planning, standard procedures, and training to control their subsidiaries that are in other countries. (Sageder, et al., 2018).

Using qualitative data, they concluded that MNCs have high complexity and they need to use MC to help them in making decisions that can greatly affect a company. Using MC can help a company find the internal activities that encourage employee behavior to predefined target (Sageder, et al., 2018).

Tseng uses his article to talk about internationalization in MNCs. MNCs have a high degree of internationalization (Tseng, 2018). A high degree of internationalization means that a company is to create goals and to evaluate performances (Tseng, 2018). Overall, it is concluded that Multinational Corporations can use management control to adapt to the environment and culture of the subsidiaries in different countries.

Hansen and Gwozdz mentions about the factors that affect Multinational Corporations and what makes them succeed in developing countries. Using qualitative data and the observation research method, there is a need for frequent communication in order to develop relationships (Hansen & Gwozdz, 2015). Therefore, other factors that can influence MNCs are location, economic development and growth, environment, and administrative of the foreign subsidiaries (Hansen & Gwozdz, 2015). Therefore, Hansen and Gwozdz concluded that MNCs need to fulfill these factors in order to be successful.

Apple, Inc. is one of the most well-known Multinational Corporations in the world. They are one of the richest of the entire industry of Multinational Corporations (Bereznoy, 2017).  In 2015, they became one of the world’s most value brands by reaching the first United States Corporation in history to get to $700 billion in market capitalization. This is twice more than Google and Microsoft combined (Bereznoy, 2017).

Apple products are very advanced and elegant in design (Bereznoy, 2017).  They were known to be “lifestyle transforming” (Bereznoy, 2017).  Apple has had steady competitive advantage over their competitors with their design and marketing (Bereznoy, 2017).  They did so well in their marketing campaigns that when a new Apple product is being marketed, people got so excited of the announcements and stood in line for every product that is launched. This shows brand loyalty lies well with Apple Inc. Overall, Bereznoy concluded that Apple’s customers are very faithful to them.

Sustainability

Brown talked about the effective protection of workers’ health and safety in global supply chains. Using qualitative data, he mentions that protecting workers’ health and safety has become a big problem especially in countries where governments don’t have the political will or resources (Brown, 2015).  Asia is a good example of country that does not protect their workers and sacrifice safety and health for foreign investment (Brown, 2015).

Apple is the most dominated company in the consumer electronic supply chain (Aguilera-Caracuel, Guerrero-Villegas & García-Sánchez, 2017).   They have created a closed ecosystem where they control different parts of the supply chains such as design and retail (Aguilera-Caracuel, et al., 2017).  Their combination of increasing gross revenues and maintaining their high gross profit margin for each of their product that they launch, they are getting big amounts of cash, They continue to be the best in the electronics component supply chain (Aguilera-Caracuel, et al., 2017).  This control of operations of business activities is defined as supply chain management. Value chain is about the full range of activities which are crucial to take a product or service through the whole entire process (Aguilera-Caracuel, et al., 2017).

Sustainable management of supply chains is the accomplishment of an organization’s social, environmental, and economic goals of the business process to progress long-term economic performance of corporations and their supply chains (Aguilera-Caracuel, et al., 2017).  Their supply chain plays a role in protecting workers’ health and safety. There has been a shift on concentrating on the issues relating to labor and workplace issues, which included low wages, working conditions and labor practices (Aguilera-Caracuel, et al., 2017).  Apple has had to handle the governance gap in global operations and to shut down this gap, code of conducts is essential to be made. Even though codes of conduct can advance the performance of the supply chain, it can cause companies to do unethical issues to meet the expectations (Aguilera-Caracuel, et al., 2017).

Multinational Corporations depends on corporate social responsibility (CSR) in supply chains and depends on the pressure of stakeholders. Stakeholders can really affect the success of an organization’s objectives (Aguilera-Caracuel, et al., 2017).  Multinational Corporations should try to develop their image positively and impact the corporate social reputation. By doing this, Multinational Corporations can grow their long-term performance. Overall, Aguilera-Caracuel, Guerrero-Villegas & García-Sánchez concluded how Multinational Corporations can advanced by reporting through corporate reputation to their stakeholders and other parties using information about their social and environmental responsibility in their supply chain. However, there are concerns that Multinational Corporations are more focused on making profits rather than focusing on their employees and communities (Aguilera-Caracuel, et al., 2017).

Human rights, Environmental and Ethical Dilemmas

Boersma and Clarke talks about human rights, environmental and ethical dilemmas in the Apple supply chain. They used observational research method and had qualitative data. They mentioned that since Apple is one of the biggest, most successful market leaders, they have the responsibility to preserve their integrity of their value chain. However, Apple had unresolved human rights, environmental and ethical dilemmas in China. Their products were produced by suffering of young workers in electronic sweatshops in China (Boersman, et al., 2015).

Multinational Corporations advance from outsourcing their parts for their products to low wage countries which keep producing cost low and achieve bigger profit margins (Boersma, et. al., 2018).  Apple is one of the common Multinational Corporations that outsource their parts. Most of their products come from Asia. Apple has 785 suppliers in total in over 31 counties worldwide. 349 of the 785 suppliers are in Asia (Boersma, et al., 2015). Without China, Apple would not be as successful as they are today because they have cheap labor and create quick profits.

Apple’s brand has never been expressed as ethical or sustainable. They never called themselves social and environmental responsible and are known to be as reactive (Boersma, et al., 2015).  Their values have been built using organizational legitimacy and their values been created to configure with the stakeholders (Boersma, et al., 2015). Multinational Corporations are likely to show governance gaps and weaknesses (Boersma, et al., 2015). In Apple’s case, these weaknesses included the existing Chinese labor laws and nonexistence of enforcement to give protection for workers. Apple has tried to fill this gap with independent audits and investigations (Boersma, et al., 2015). Consumers are still not aware of this process because the sales of Apple were unaffected even with the controversies. (Boersma, et al., 2015). Apple does not experience consumer pressure at all. The configuration that exists with stakeholder pressures has not stopped the human rights and employment rights that Apple’s supply chain from occurring (Boersma, et al., 2015).  Apple’s biggest concern is to approve their legitimacy with their consumers of their products (Boersma, et al., 2015). Luckily for Apple, their legitimacy is not a threat with their consumers.

Ryanget talks about the human rights abuses that Apple committed. Since Apple has high demands of their products, suppliers seem to find a way to cut corners in order to make a greater profit margin (Ryangert, 2018). This means they create lower wage for workers and have an unsafe production facility (Ryangert, 2018).

Due to technological advances, the products at Apple are more expensive to make. Apple pays toward to the cost of producing these products in exchange for rights to output which a discounted rate (Ryangert, 2018). This gives Apple the advantage of having access of more new advanced components before their competitors. Even when competitors do get access to those advanced components that Apple already has, Apple still negotiates to receive it at a lower cost due to the discounted rate (Ryangert, 2018). Therefore, Apple has become a monopsony which means the one buyer who can control the market (Ryangert, 2018).

The workers in this type of situation receive little to no protection of the government because independent trade unions and labor strikes are not allowed in China (Ryangert, 2018). There have been audits to uncover the working conditions in these facilities but these operations are in line with China’s formal regulations created by Chinese authorities (Ryangert, 2018).

Ryanget used qualitative data and concluded how China’s labor law gives their workers insufficient protection. China has every right to alter their laws but with the global economy, the Chinese government is hesitant of having stricter labor and wage regulation because it will decline their economy (Ryangert, 2018).

In the article “Apple bans chemical as opposition bites,” it talks about how Apple has been known for their bad reputation for their environmental policy. Gupta and Signh also talks about how Apple struggled with their environmental policy. Both articles used qualitative data and had research information from NGO and Greenpeace. There was a campaign from Greenpeace in 2006 to control consumer power, so that has made it more challenging for Apple to be more clearer about their environmental policies (“Apple bans chemicals as opposition bites,” 2014). This campaign has caused Apple to get rid of their most harmful chemicals in their product which ranges from Brominated Fire Retardants (BFRs) and Polyvinyl Chloride (PVC) (“Apple bans chemicals as opposition bites,” 2014). NGO has constantly criticized Apple for not having a more sustainable approach because they have used toxic materials in their production process and they lack of recycling and waste (“Apple bans chemicals as opposition bites,” 2014). In 2012, Greenpeace pressured Apple even more to pledge to renewable energy so their power would exclusively come from renewable sources (“Apple bans chemicals as opposition bites,” 2014).

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During protests and strikes, Apple was pressured by Chinese workers to get rid the chemical poison of hexyl hydride which is known to be a narcotic by the US Environmental Protection Agency (Gupta & Signh, 2014). This chemical can hurt the central nervous system and create vertigo and muscular atrophy. Apple said that they stopped using this chemical when the found out was making their workers ill (Gupta & Signh, 2014). To react to this whole situation, Apple put in in $850 million in solar power. They mandate and require environmental areas which include hazardous, substance management, and environmental permits and reporting (Gupta & Signh, 2014).

Pun, Shen, Guo, Lym Chan and Selden takes the topic further by including the issues with Foxconn with qualitative data. The research they used was the news sources. In 2012, they were exposed that the assembly workers at Foxconn (which is one of Apple’s largest supplier) was making $1.78 an hour (Pun, Shen, Guo, Lym Chan & Selden, 2016). Even though stuff like this happens, Apple still opposes that its business model is more than about a profit. They debate that they formed an ethical production model. Apple is in the position to refresh the current supply chain and to turn into a better example for everyone else. Foxconn is a contractor for many Multinational Corporations (Pun, et. al., 2016). Foxconn, unlike Apple, has decreased profit margin. However, they are well sourced (Pun, et. al., 2016).

Apple has been under fire about sourcing components from producers that have poor reputation (employment conditions and practices) since 2006 (Pun, et. al., 2016).  The assembly line workers were only making $50 a month while working 15 hours a day (Pun, et. al., 2016). Workers said it was like being in the army, they made them stand for hours and if they moved, they were punished (Pun, et. al., 2016).  After being exposed of this, Apple was undergoing a public relations nightmare. They were being linked to the horrible workplace conditions. In 2010, south of China formed mass strikes and protects for increased wages and for working conditions to be better (Pun, et. al., 2016). It was known that some of these workers were committing suicide due to the working conditions and the low wages (Pun, et. al., 2016).

There was an explosion at Foxconn in 2011 which caused three deaths and many injuries. There was also another explosion that caused the death of 61 workers at Pegatron which is another supplier of Apple (Pun, et. al., 2016). Both suppliers said that they were not keeping up with the maintenance and cleanliness of the factories and that has caused both explosions (Pun, et. al., 2016). After these explosions, the media researched even deeper to find out more about these suppliers and it was found that 86 labor rights was violated at Pegatron (Pun, et. al., 2016). Some of these violations included: women’s right violations, underage labor, poor working conditions, low wages, long working hours, etc. (Pun, et. al., 2016). Apple has started a supplier responsibility after this and this is when they created their Supplier Code of Conduct (Pun, et. al., 2016).  They have published a supplier responsibility report annually so that their audit findings are public (Pun, et. al., 2016).  If there were violations found against the Code of Conduct, then Apple gave their suppliers 90 days to fix the violation (Pun, et. al., 2016).  If the violation is not fixed, then the relationship with Apple is terminated. It was found that Foxconn violated some code of conducts in 2006 (Pun, et. al., 2016). Foxconn swore to make the changes to comply with Apple’s Supplier Code of Conduct (Pun, et. al., 2016). From 2005 to present, Apple has taken it serious by reporting and taking action on anything that has violated their supplier code of conduct. Apple hired independent auditor to investigate the production facilities. According to Apple, the audit was very thorough to avoid what happened in the past to happen again.

Research Findings

Apple’s Background

Apple, Inc. started out with Steve Jobs. He and his friend, Steve Wozniak, were high school drop outs (MarketLine Company Profile: Apple Inc., 2019). Despite them dropping out of high school, they both had very innovative and intelligent minds. They started Apple in Steve Job’s basement (MarketLine Company Profile: Apple Inc., 2019). They created the first Apple computer in April of 1976 (MarketLine Company Profile: Apple Inc., 2019). It is the perfect example of how a dream became a reality. Ron Wayne soon joined their team; however, he left the company (MarketLine Company Profile: Apple Inc., 2019). They introduced the 2nd computer which brought sales from 35,000 computers in 1979 to 78,000 computers in 1980. In 1980, the company had 1,000 employees and they went public (MarketLine Company Profile: Apple Inc., 2019).

In the early 1990s they created the Macintosh which was extremely successful (MarketLine Company Profile: Apple Inc., 2019). There was a power struggle among the executives, so Steve Jobs left the company along with other executive (MarketLine Company Profile: Apple Inc., 2019). In 1997, Steve Jobs came back to the company as an advisor and then shortly after he became the CEO and introduced iMac (MarketLine Company Profile: Apple Inc., 2019). Ever since Steve Jobs came back, the company did very well. Jobs kept introducing one innovative product after another.  Apple is most known for the products that they design and manufactures. They also are known for their software, their services, their accessories, and their applications (Apple, Inc., 2018). They sell these products and services all over the world through retail stores and online stores through consumers, businesses, and government, enterprise and education customers (Apple, Inc., 2018).  They also sell their products and services through direct sales force with third-part cellular network carriers, wholesales, resellers, and retailers (Apple, Inc., 2018).

Apple, Inc.’s Mission & Vision

Apple’s mission statement talks about how they design all their products like the Macs which are the best personal computers in the world (Apple, Inc., 2018). It also talks about how they lead the digital music revolution with their iPods and iTunes. Apple stated in their mission statement about how they reinvented the mobile phone and the future of mobile media (Apple, Inc., 2018). Their visions included that they believe that they on are on this earth make great products and how they are constantly focusing on innovating (Apple, Inc., 2018). They believe in simple, but they don’t believe in complex (Apple, Inc., 2018). Their vision stated they don’t believe in making a bunch of products, rather than just a few so that can truly focus on making the most out of those few products (Apple, Inc., 2018).

Supplier Code of Conduct

In Apple’s Supplier Code of Conduct, it states that they are required to give safe working conditions and treat their workers with respect (Apple, Inc., 2018).  It also states that they act ethically and be environmentally responsible. It also states that if a supplier violates this conduct they will terminate the relationship with Apple (Apple, Inc., 2018). Since Apple has high demands of their products, suppliers seem to find a way to cut corners in order to make a greater profit margin. This means they create lower wage for workers and have an unsafe production facilities (Pun, et. al., 2016). The technology is more advanced today, so they are more expensive to make. Apple pays toward to the cost of producing these products in exchange for rights to output which a discounted rate (Pun, et. al., 2016). This gives Apple the advantage of having access of more new advanced components before their competitors. Even when competitors do gain access to those advanced components that Apple already has; Apple still gets it at a lower cost due the negotiation of the discounted rate (Pun, et. al., 2016). Therefore, Apple has become a monopsony which means the one buyer who can control the market.

The workers in this type of situation receive little to no protection of the government because independent trade unions and labor strikes are not allowed in China (Pun, et. al., 2016). There have been audits to uncover the working conditions in these facilities, but these operations are in line with China’s formal regulations created by Chinese authorities (Pun, et. al., 2016). Apple and the EMS companies have decided to pledge to make changes so that they can comply with China’s labor laws. China’s labor law gives their workers inadequate protection (Pun, et. al., 2016). China has every right to change their laws but with the global economy, the Chinese government is apprehensive about having stricter labor and wage regulation because it will weaken their economy (Pun, et. al., 2016). As the global supply chains have become longer, consumers have no more influence on where the product they buy comes from and how they are made. However, there’s a big chance that a lot of the Apple consumers do not know about the circumstances of how their product is being made (Pun, et. al., 2016).

Apple’s Supplier Code of Conduct mentions that suppliers must support the human rights of workers and treat them with dignity and respect as understood by the internal community. They believe in antidiscrimination and fair treatment. They believe in prevention of underage labor, in juvenile worker protections, reasonable working hours, and fair wages and benefits (Apple, Inc., 2018). Apple thinks that having complete health and safety management practices into all aspects of business is important to have high morale and make innovative products (Apple, Inc., 2018). They intend to have a safe working condition and healthy work environment for all of their workers. They believe in occupational injury prevention, in preventing chemical exposure, and in emergency prevention, preparedness, and response. They also believe in occupational safety procedures and system and ergonomics (Apple, Inc., 2018). Apple considers environmental factors as an integral part of their business practices. They want to reduce the environmental impact of their designs, manufacturing processes, and waste emissions. They believe in hazardous substance management and restrictions, in solid waste management, air emissions management, environmental permits and reporting, and pollution prevention and resource reduction (Apple, Inc., 2018).

Apple wants to be committed of the highest standards of ethical conduct when dealing with workers, suppliers, and customers. They believe in business integrity, disclosure of information, whistleblower protection, and protection of intellectual property. Apple’s company statement should be posted in all languages and in all locations (Apple, Inc., 2018).

Marketing Strategy

Apple has one of the highest brand equities in the world. Apple marketing strategy is based on Steve Job’s philosophy that customers do not always know what they want. They focus on installing innovative features and capabilities in their products, so it makes customers to want Apple products (Apple, Inc., 2018).  For Apple’s marketing strategy, they rely on two different strategies: product placement with celebrities and popular shows and positive reviews in the media (Apple, Inc., 2018).  Apple has a unique value proposition. This gives Apple and their market share a competitive advantage. Apple does not see their competitors as competitors. They know their customers are willing to pay a high price for their products because they know that they are getting their money’s worth (Apple, Inc., 2018).  Apple keeps their products simple. Their advertising and promotions are successful when there is a new product launch which creates hype for their customers. Apple includes a full analysis in their reports (Apple, Inc., 2018).  Some of the major analytical strategic frameworks of business studies like SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, etc. (Devi & Jyothsna, 2015). The report also includes discussions of Apple business strategy, ecosystem and addresses issues of corporate social responsibility. Apple believes that they need continual investment in research and development in order to be successful.

Generic Strategy

Apple’s generic strategy is differentiation because they stand out in the market. They have a unique design and are user-friendly. They also have high-end branding and differentiate from other technological products. Apple always set itself from their competitors by their prices and competitive advantages. Their products are designed for everyone and are supported by a broad market reach (Apple. Inc., 2018).

Other Strategies

Apple emphasizes their retail strategy. They have over 300 stores in 11 countries. 87 of those stores are not in the United States (Apple, Inc., 2018). Using their retail stores, they can have face-to-face interaction with their customers. They encourage their customers to give feedback on their service and they use the feedback to improve their strategies (Apple, Inc., 2018). They also use protective strategy. They try to play it safer by really focusing on releasing products that are similar but more advanced. This strategy can be risky because they can lose their customers’ interest of having the same thing every single time. Apple uses blue ocean strategy and they continue to be the market most successful innovator (Apple, Inc., 2018). Apple continuously creates new products and they do so very quickly. Using the blue ocean strategy, they can create a new market and a new demand. Tim Cook balances between maintaining their most successful products/services and creating demand (Apple, Inc., 2018).

Apple, Inc.’s General Environment

There are a lot of factors associated with the general environment of a company which includes technological segment, demographical segment, and socio-cultural segment (Apple, Inc., 2018). In the technological segment, technology is the main key factor of the success of Apple. Their technological segment increases each year (Apple, Inc., 2018).  The demographic segment is also a main key to the company’s success (Apple, Inc., 2018).  The United States population is increasing each year. The world’s population is also growing quickly. They need to use the demographic segment to figure out which parts of the whole world is using their products the most and what ages is using their products (Apple, Inc., 2018).  The socio-cultural segment is important becau