Apple Inc. (Apple) is a technology company headquartered in Cupertino, Califonia, the U.S. The company manufactures and markets mobile communication, media devices, computers, portable music players, software, accessories, applications, and networking solutions. Apple trades under the iPhone, iPad, Mac, iPod, Apple Watch, and Apple TV brand names. Operating systems include iOS, macOS, iCloud, Apple Pay, and watchOS. Apple Inc. operates in the US, Europe, and the Asia Pacific and sells its products in almost the entire world. The company reported US$229.2 billion in revenues for the FY ended September 2017 and a net margin of 21.1%. Apple Inc. is recognized for its unique product offerings such as the iPhone and the iPad. The two devices accounted for the 70% of the organization's total revenues in 2017. The smartphone uses explicitly iOS, which is an in-house operating system that no other phone company utilizes (Apple Inc, 1).
Two Key External Environment Factors that can affect Apple Inc. Success.
The geopolitical environment can adversely affect the company's sales and profitability. Apple's manufacturing centers are located outside the U.S. precisely in Asia. If these nations encounter any political instability, production of the leading revenue stream for the firm would have been negatively affected. Also, the regulatory environment could hurt the company's performance ( Hamilton & Webster, 2). For instance, in 2014, Apple had to ban two toxic chemicals (benzene and n-hexane) used in the manufacture of parts that make its products. The environmental organization Green America was instrumental in compelling the firm to stop using the chemicals because they had the potential to cause cancer, paralysis, and nerve damage on people. For this reason, Apple had to restore most of the products it had manufactured using the chemicals (Sparkes, 3).
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Changes in the economic environment can hurt Apple's success. If consumers lack adequate income to purchase the firm's products, then this will have an adverse effect on financial performance. According to Oath Inc, Tim Cook, Apple’s CEO indicated that the firm uses quality parts to manufacture quality products and this makes them expensive. During harsh economic times, consumers may opt for other quality but cheaper products than buying Apple’s products (4). Besides, the firm sells its goods in different geographical locations, so it is exposed to exchange rate fluctuations. Such changes may affect its desired profitability. High taxation of its products or related raw materials may increase the purchase price and this in return may reduce the rate of consumption (1).
Five ways in which the Primary Stakeholders can Influence Apple Inc. Financial Performance.
The primary stakeholders are persons or entities that have a functional or financial interest in the organization, and they include shareholders, employees, customers, suppliers, and creditors. Shareholders or stockholders own the organization so they can exert considerable influence over it. They have the right to vote the board, which in turn appoints the top management. Shareholders have the power to replace board members if the company does to operate in line with their expectations (profit maximization). They can also sell their shares if the company fails to produce better financial results. Relinquishing ownership rights could negatively affect the firm’s stock prices, and this has a direct effect on the overall financial performance (Dyck & Neubert, 5). Further, Apple’s management and the board of directors must seek shareholder consent before undertaking any strategic decision that may affect its future, for instance, increase in the number of shares or changes in the corporate charter. Typically, shareholders prefer the short-term benefits rather than the long-term, so they may dismiss certain proposals made by the management, which appear not to produce immediate gratification. Such objective and goal mismatches could have a negative effect on the organization’s long-term financial performance.
Employees and managers are also instrumental to the financial performance of the organization. This group of stakeholders executes the company's goals and objectives. Employees design, manufacture, and market Apple's products. Highly motivated and satisfied employees produce high-quality products and services, which attract potential consumers and retain the existing ones thereby boosting sales and profitability for the organization. On the other hand, the management is tasked with the day-to-day running of the firm. The management's leadership style serves to influence employee performance ( Dobre, 6). Steve Jobs was one of Apple’s top CEOs who set high standards of accountability, competence, performance, clarity, and direct feedback, which led to significant growth of the organization. As such, the former executive was able to influence positive employee performance, and this contributed to remarkable financial performance in the firm. The top management must also have the shareholders' interest at heart to propel the company to profitability; otherwise, failure to give their best could adversely affect the overall financial performance. Further, corrupt management is more likely to use organizational resources for personal gain leading to poor financial performance (5).
Customers are the lifeblood of any given organization. They directly affect the income of a company because the more the purchases, the higher the revenues while the failure to buy the company’s products would lead to losses or fewer sales. A good relationship with consumers stems from building strong, quality brands at reasonable prices (5) Although Apple employs the premium pricing approach, the firm has been able to build solid customer loyalty by creating aesthetic, high-quality brands that match the prices. It implies that consumers will always pay for a product if they establish they are getting value for their money. Organizations that effectively apply this concept will always generate high revenues because it will both retain and attract new consumers.
Suppliers can influence an organization's financial performance in four ways. First, they can lead to product manufacture and distribution delays if they do not deliver the raw materials needed to produce the given commodity promptly. This may negatively affect customer satisfaction since they expect the final product in their preferred places of purchase; failure to which they opt for alternatives. Loss of existing customers is a loss in potential revenues, and this adversely impacts organizational finances. Suppliers can also charge exorbitant prices on the raw materials leading to a sharp increase in the cost of production. High costs are passed down to ultimate consumers who are expected to pay premium prices to acquire the product. A rise in price often leads to reduced demand for a given commodity unless it is a basic need; so this has an inverse effect on a firm’s financial performance ( Monczka, 7).
Additionally, when suppliers fail to deliver quality raw materials, the ultimate product may not be of high quality. Therefore, companies that adore quality may be required to source for another supplier or wait for better materials, all of which lead to increased costs of operations and delays. The organization may, therefore, lose customers due to delays or produce unsalable commodities in its determination to recoup the costs. Lastly, consumers regard organizations that embrace sustainability and acceptable CSR ethics. For this reason, a company’s financial performance may be negatively affected if customers realize that it has a working relationship with suppliers who do not respect human rights. Consumers would prefer to purchase similar commodities from competitors, and this would reduce sales and profitability (7).
Creditors are part of the primary stakeholders that extend loans to firms. They can either impede or fuel the financial performance of business organizations. Typically, before extending loans to organizations, creditors ensure that the receiving enterprise agrees to their terms and conditions, which may be harsh, for instance, high-interest rates or fines on late repayments. Such constraints make it more difficult for the firm to perform better financially. On the other hand, lenders that offer friendly terms often catalyze financial performance in companies. Additionally, creditors should depict the willingness to extend capital to firms that show growth potential (Chroust, 8).
One Controversial Corporate Social Responsibility Concern Associated with Aple Inc.
Being the first American company to hit one trillion dollars in market capitalization, Apple is ranked among the largest and most profitable organizations in the world; however, behind this success lays deep-seated ethical issues. The company's supply chain is largely located in Asia, precisely China with Foxconn being the leading contractor. Employees in these companies operate under poor working conditions, hazardous environments, and with low wages. Apple has come under intense criticism for dealing with such partners. In 2012, Foxconn lost four workers while several others were injured due to an explosion that occurred in the iPad case room. Employees in the firm are also known to work for long hours without pay while in some instances; they were being forced to use dangerous chemicals to clean iPad screens without proper protection. Consequently, two people died, and several others were injured. Foxiconn and UniMicron have also been known to dump toxic waste into Huangcangjing and Hanputang rivers. The two rivers flow into Yangtze and Huangpu rivers that supply drinking water to Shanghai (Chong, 9).
While Apple has focused on enhancing supplier CSR initiatives by instigating the “Apple’s Supplier Responsibility Standards,” the aforementioned cases are still occurring in some of its Chinese contractors. According to Cnet, one of the most recent cases took place at the Catcher Technology Factory Located in Suqian China. The company manufactures iPhone casings for Apple. After interviewing approximately fifty employees, between October and January 2018, it was established that workers are expected to stand for ten hours a day for six days and are expected to work with toxic chemicals without proper training or protective gear. The company’s floor is also covered with oil, which increases the rates of slips and falls among employees. Workers live in ghastly conditions, for example, their restrooms lack hot water and are required to shower cold water even during winter (9). While cost reductions are instrumental in enhancing profitability, Apple should constantly scrutinize its Chinese suppliers before handing them contracts.
Source List
Apple Inc. 2018. Apple Inc SWOT Analysis. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=132280422&site=ehost-live
Hamilton, Leslie, and Philip Webster. 2015. The International Business Environment . Textbook .https://books.google.co.ke/books?id=lM4YBwAAQBAJ&pg=PA231&dq=the+international+business+environment,+state+institutions+establish+and+enforce&hl=en&sa=X&redir_esc=y#v=onepage&q=the%20international%20business%20environment%2C%20state%20institutions%20establish%20and%20enforce&f=false
Matthew Sparkes. August 14, 2014. Apple Bans Two Dangerous Toxins Used in Your iPhone. https://www.telegraph.co.uk/technology/apple/11033483/Apple-bans-two-dangerous-toxins-used-in-your-iPhone.html
Oath Inc. December 2, 2013. Apple CEO Explains Why Apple’s Products Are So Expensive (Sort Of). https://www.huffingtonpost.com/2013/02/12/apple-ceo-tim-cook-expensive-products_n_2670366.html
Dyck, Bruno, and Mitchell Neubert. 2010. Management: Current Practices And New Directions . Textbook. https://books.google.co.ke/books?id=wviB5P8FTbAC&pg=PA68&dq=primary+stakeholders+can+influence+the+organization%E2%80%99s+financial+performance&hl=en&sa=X&redir_esc=y#v=onepage&q=primary%20stakeholders%20can%20influence%20the%20organization%E2%80%99s%20financial%20performance&f=false
Ovidiu-Iliuta Dobre. 2013. Employee motivation and organizational performance. Review of Applied Socio-Economic Research . http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.473.4070&rep=rep1&type=pdf#page=53
Robert Monczka. 2011. Purchasing and supply chain management . Textbook. https://books.google.co.ke/books?id=fdxjM-Bqnz8C&pg=PA422&dq=suppliers+supply+low+quality+materials,+high+costs+of+operation,+loss+of+revenues&hl=en&sa=X&ved=0ahUKEwj9xYP6-6HeAhVwgM4BHbavCo8Q6AEIODAC#v=onepage&q=suppliers%20supply%20low%20quality%20materials%2C%20high%20costs%20of%20operation%2C%20loss%20of%20revenues&f=false
Sushil Chroust, G. 2015 . Systemic flexibility and business agility . Textbook. https://books.google.co.ke/books?id=9I3cBQAAQBAJ&pg=PA106&dq=primary+stakeholders+can+influence+the+organization%E2%80%99s+financial+performance&hl=en&sa=X&redir_esc=y#v=onepage&q=primary%20stakeholders%20can%20influence%20the%20organization%E2%80%99s%20financial%20performance&f=falseger .
Zoey Chong. 2018. Apple supplier guilty of unsafe work conditions, the report finds. Textbook. https://www.cnet.com/news/china-labor-watch-finds-harsh-work-conditions-at-apple-supplier/
