In the contemporary business world, businesses are exceedingly embracing the trend of
globalization. In this way, they stand to benefit from increased profitability due to a widened
client base and other lucrative benefits. However, it is also important to note that maintaining a
business that has clients from different spheres of the globe becomes the most prevalent
challenge in the organization. One of the most recurrent problems that inconvenience global
strategies of most organizations stems from the production, management, and financial entities of
the organization. This paper is an assessment of the contemporary issues that affect Apple, one
of the most successful companies in the technology industry, the counter strategies put in place
to offset the inefficiencies that are borne by the contemporary issues and the possible
recommendations that would provide lasting solutions toward these issues.
Shortage of supply of products
Over the years, Apple has continued to experience a shortage of supply of its products.
From a business perspective, this can be a very destructive inefficiency that may lead to costly
and disastrous effects, especially if response is not made as fast as possible. For instance, months
after iPhone 6 was launched, Apple could not meet the demand of its worldwide market
(Jefferies, 2014). A research revealed that only 58% of the product was available in Apple stores
worldwide, hinting that the company had not met the demands of more than 40% of its market.
For customers who shop for their Apple products through online platforms like Amazon, the
research reported a delay of days, weeks, and even months for the delivery of their products.
Admittedly, the chief executive officer at Apple, Tim Cook, confirmed the supply-demand
difficulties in the company by stating that “As of today—and certainly as of the end of the
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quarter, where you’re looking at the data—we’re not nearly balanced. We’re not close. We’re
not on the same planet” (O’Murchu, 2014). Moreover, the issue of supply shortage also recurred
after the launch of the iPhone 7 plus. This was attributed to the move by suppliers of the various
components of the iPhone 7 to restructure their business strategies to avert issues that may arise
following low yield rates such as high production costs, and that would translate to a decreased
supply of product to the consumers. However, this shortage was only expected during the first
roll-out of the premier handset. It is thus noteworthy that the company repeatedly experiences the
problem of shortage in product supply after the launch of a new product.
Consequently, the issue significantly affected the demand-supply chain of the company.
Following the defect that comes with the faulty components of the iPhone 7, such as those
related to the waterproof speaker and the dual camera, the California based tech giant saw a
decrease in demand of the iPhone 7 (Wu, Debby, & Cheng, 2016). Besides, following the
shortage in supply of iPhone 6 and iPhone 6 plus, the company also stood to contend with a
revenue drop for two consecutive quarters following an unpleasant reception by the market. This
was critical because it was a tragedy of its kind after 13 years of steady revenue increase in the
company. Moreover, analysts and other interested also projected lukewarm reception of the
iPhone 7 brand following a lack of improvement and introduction of new features in the
premium model (Wu, Debby, & Cheng, 2016). Partners and other parties that were attached to
the Apple supply chain also hinted at a drop in the general apple orders.
There are a number of contributing factors that lead to difficulties in the demand-supply
chain at Apple. The poor labor conditions at Foxconn factory located in Asia have significantly
contributed to the shortage of Apple products. Foxconn is a factory that offers a wide range of
production activities for many companies, including electronic titans from all over the globe.
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Apart from cost-cutting, many big-name companies find it convenient to outsource from the
factory due to the professionalism of the massive Asian workforce (Duncan n.p). However, this
business model is mostly inconvenienced in poor labor conditions that stem from lax or non-
existent laws that focus on providing optimum labor conditions in countries in which they are
located. In this way, companies may fire large numbers of employees without notice, long
working hours that lead to exhaustion, and also poor health conditions at the workplace. This is
mostly done with organizations with tyrant leadership for the purpose of cutting on production
costs. However, these poor labor conditions consequently limit the productivity of individual
employees due to physical and mental exhaustion. At one point in 2014, 18 workers attached to
Foxconn attempted to end their life. Only four survived. In this way, it is clear that poor working
conditions at the facility contributed to the shortage of different apple brands.
However, the tech giant has not turned a blind eye to the problem. For instance, in a bid
to counter the effects that may arise from a shortage of environment, health and safety
professionals (EHS) in Asia, the company decided to launch the Apple Supplier EHS Academy
(Apple Supplier Responsibility 2014 Progress Report, 4). From this platform, Chinese workers
attached to the supplier factories that are part of the supply chain of Apple would be able to
access an 18-month training related to the environment, health, and safety. This program
attracted a large number of employees from various factories. In this way, the company sought to
improve worker health and safety. The company also, through its Supplier Responsibility 2014
Progress Report, decided to launch a study that would assess the academic qualifications of
12000 interns from 200 plus vocational schools to minimize on cases of student exploitation by
the suppliers. Lastly, the company decided to bolster her Supplier Code of Conduct. This
required individual suppliers to train their workers on their fundamental rights. Collectively, 1.5
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million workers were trained following the provisions of this code of conduct. Root causes of
inefficiencies stemming from the suppliers were also countered through training and other
specialized programs. All suppliers working with apple were required to comply with at least
95% of the provisions of the report. In this way, the company significantly countered the issue of
shortage in the supply of its products.
The trade war
Another outstanding challenge that stands to deter the growth of Apple as a brand is the
United States’ trade war with China. The trade war dates back to 2016 when President Donald
Trump was elected president of the United States. From his perspective, the United States
president-elect perceived the economic relationship between the two economic giants as
competitive. In 2018, his administration instigated a tariff on Beijing for Chinese imports $250
billion (Wilson, 2018). In response, china instigated a tariff on imports from the United States
totaling $110 billion. These tariffs introduced an economic standoff between the two economies,
and bilateral talks have not been able to provide lasting solutions towards the economic rivalry
between the two countries. The United States alleges China of several charges, including forcing
American corporations stationed and in china and having partnerships with Chinese companies
to share their technologies and stealing trade secrets from American multinationals in China.
Being the top economies, it is obvious that multinationals corporations specializing in different
fields have a lot to lose if the economic tension between the two countries prevails.
Considering the basic information regarding the trade war between the United States and
China, It is noteworthy that multinational organizations in the two countries stand to lose.
However, considering the supply chain of Apple, one can attest that Apple stands to lose more
than most business organizations from the United States for two main reasons. Firstly, as stated
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earlier, the company outsources from a Chinese facility for its components (Leswing, 2019).
Although some American corporations are a part of the company’s supply chain, major
assembling activities of the components of the company are done in mainland China. This
implies that further imposition of taxes on Chinese imports will consequently lead to an increase
in the production cost of the company's products, which will lead to an increase n the price per
share of individual products. For instance, analysts reveal that imposing a 25%tarif on iPhone Xs
will subsequently lead to a $160 hike on the price of iPhone or earnings less 23% if the company
decides to overlook the tariff. They also hint that the company cannot consider the option of
sourcing it as components from somewhere else because of the low cost of labor in China, and
the high level of expertise of the massive Asian workforce, which may be rare to find in other
countries. Thus the company will stand to lose more if the imposition of tariffs by the two
administrations is not discontinued.
In addition, the company, unlike other global economic companies in the United States,
has a considerably large client base in China. Back in 2018, the tech giant reported$51 billion
worth of revenue from what is called the “Greater China," which is comprised of Asian
economies such as Taiwan and Hong Kong. The influence of China on the net quarterly revenue
of the tech company is substantial enough to disrupt its earnings. Earlier this year, Tim Cook
pointed projected a slight decline in the quarterly revenue from the earlier expected and cited a
bad economic climate in China as one of the major reasons for the decline. He also
acknowledged that the climate was introduced by the trade war between the two countries. Tim
cook has also openly shown a lack of support for the president's bid to increase tariffs to Chinese
products (Overly, McGill & Chen, 2019). This reveals how the trade war has affected the
company and its revenue.
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With the start of the trade war, most investors and companies did projected that the
economic standoff between the large economies would not last. However, it soon became clear
that the trade war would continue. Putting into consideration the fact that bipartisan talks
between the two administrations had not paid off, the trade war was surely here to stay.
Therefore, although the company did not want to vacate from china where it had created more
than 3 million jobs through its supply chain, the idea was becoming worth consideration with
every incoming year. It was clear that the Trump administration was not willing to lessen the
trade war against China with over $300 billion of Chinese goods having been imposed a tariff.
The Trump administration was clearly focused on bringing apple home. Thus the need for the
tech giant had to find alternative ways that would create a serene environment for growth was
becoming inevitable with the increasing period since the trade war took effect.
Firstly, the giant resorted to shifting its focus from manufacturing premier handsets to
providing services. Considering the high production costs that came with the imposition of
tariffs, the company decided to find a new market. Following this, the tech giant considered
provision services instead of majorly focusing on the manufacture of communication devices.
This gave birth to services such as Arcade, iPhone TV, Apple Music, and Apple TV. Users of
these services from apple were required to subscribe to the services at subsidized costs. In turn,
they would access content such as music, short videos, and movies .in this way, the company
was assured of stable revenue that was not reliant on political factors such as the infamous trade
war. Moreover, the United States population would stand to benefit from the numerous jobs that
would arise from this counter-strategy. This is one of the major contributing factors that have led
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to a significant decrease in the price of major Apple products such as iPhone 11. From a business
perspective, it is clear that this strategy stood to benefit the company as expected.
Secondly, the company sought to find alternatives for its sources. It was becoming clear
that the company stood to lose more billions if it did not find a way to move out of China as the
trade war expected to intensify in December 2019. If the trade war escalates, tariffs are expected
to kick in, which will obviously lead to a shoot in the price of apple products leading to a decline
in revenue. As such, the company is currently considering India due to its lower production cost.
Many components of Apple products, such as iPhone X and SE, have been manufactured and
assembled in India. With the help of Trump administration, the company is holding talks with
the Indian government to cut on its 20% tariff on electronic companies (Chia, 2019). Another
barrier to shifting its production to India is the consumer perception of the Indians toward Apple
products. The company is also reporter to having only a 1.2% market share in the country (Chia,
2019). However, the company has resorted to creating a brand awareness platform through the
“Made in India” campaign in order to change public perception of the consumers in the country,
however long it will take. Although the shift will be time-consuming and would take long to
return a profit, the company has shown determination to pursue the path in order to avert the
costs that come with the trade war.
To counter the shortage of supply, it is important that the company finds ways to make
sure all partners in the supply chain work in alignment with its business goal. For instance, the
Company can decide to conduct a research and note the trend in the purchase of its product and
present a request to the suppliers with a surplus number for the components. This will enable the
company to have surplus components that may be used later to avoid the cases of insufficient
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components. Moreover, the company can find learning platforms through which it can teach
Americans on how to manufacture the components, especially through benchmarking in supplier
facilities. After learning and mastering these skills, the individual students can be inducted into
the workforce in order to help in the manufacture of devices. By doing this, the company will
have significantly combated the inefficiency.
Considering the costly effects of the trade war, the company can resort to sourcing
expertise from other countries that are not in economic rivalry with the United States, just as it
did in selecting India. This is, at least currently, the ultimate course to pursue for Apple and any
other business organization that seeks to survive the trade war. Moreover, for those companies
that do not consider the option as an alternative, they can decide to communicate how the trade
war has affected their business operations to their clients that they do not feel exploited by the
seller (Marks, 2018). Besides, the company can decide to seek new markets. As stated earlier, the
company has a 1.2% market share in India. This implies that even if the company has gone
global, it has paid a lot of attention to some markets and in the process overlooked others. While
India has one of the largest populations, it is sad that the company has not exploited the market
in the region. Thus one can explore such overlooked markets in order to boost its revenue during
the trade war.
In conclusion, Apple is one of the most successful tech-giant with a massive client base
in Europe and Asia. Despite putting strategic measures to boost its production and explore newer
markets, the company continues to experience economic issues stemming from political,
technological, and socio-cultural aspects in her vast client base (Lombardo, 2019). One of the
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contemporary issues affecting the growth of the company and its products is a shortage in the
supply of its products due to factors like insufficient production of components from China,
where it outsources and assembles most of its products. However, the company responded to
this inefficiency by pushing for better working conditions of companies in its supply chain. This
is after it was revealed that poor working conditions led to a decline in the productivity of the
workers at the facility. Outstanding inefficiency is the trade war between the United States and
China. Considering that the company outsources from China, it is considered as one of the
companies that stands to lose a lot from the trade war. However, the company responded by
seeking to establish a new production site in countries with no economic strife with the United
States. This would enable the company to avoid the costs that come with the trade war. To
bolster the productivity of the company, apple should consider producing her components from
home. Companies that do not consider this as an ultimate solution, they can explore new markets
in order to boost sales.
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