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Apple Inc.s Corporate Strategy and Global Ethics
A brief overview of the company
Apple Inc. is one of the leaders in the sphere of personal computers and other electronic devices globally. The company was established in California in 1977. Apple Inc. designs, manufactures and markets personal computers, mobile communication and media devices it also sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications (Profile: Apple Inc. (AAPL.O) 2015, para. 1). Some of the most famous and popular products of the company are Mac, iPhone, iTunes, iPad and numerous software applications. It is necessary to note that iPhone is one of the most popular smartphones in the world and millions of buyer worldwide are waiting for new additions and new products. Apple Inc. provides various services to its customers, which adds value to its products.
The companys revenue as estimated in December 2014 is 74,599 million US dollars. Apple Inc. has numerous divisions and facilities in all parts of the world. In 2013-2014, it acquired a number of companies such as WiFiSlam, Locationary Inc., Hopstop.com Inc., AlgoTrim AB, PrimeSense Ltd, Topsy Labs, Novauris Technologies Ltd., Beats Electronics LLC (Profile: Apple Inc. (AAPL.O) 2015, para. 1). These acquisitions have proved to be effective and the company managed to increase its revenue significantly.
As has been mentioned above, Apple operates worldwide. It has penetrated all markets though it faces certain competition, especially in developing countries where Apple products are less affordable for the population and people often buy cheaper replicas. However, the company keeps its leading positions in the world of computing and communication devices as it remains one of the most popular brands that are associated with quality, prestige and luxury.
Organisations environment
Clearly, the market of computing and communication technologies is developing rapidly and many organisations compete in this sphere. Major competitors of Apple are Samsung, Sony, IBM, Panasonic, Royal Phillips, Kyocera, LG, Casio Computer Co Ltd, and others (Apple Inc AAPL 2015). Clearly, Google, HTC and HPQ are also significant competitors of the company in question. These companies provide similar products and services. However, it is necessary to note that each of these companies competes with Apple in one sector or several sectors of the market. This is due to Apples choice to pursue excellence in software and hardware while other companies often focus on one of these segments (Hamel 2012).
The company is still penetrating new markets and faces new competition. It is necessary to note that this competition is manifested in many ways. First, companies come up with new products and services. They try to attract customers through new forms and materials, additional services, innovative technologies. Secondly, Apples competitors often try to win the competition by decreasing costs and cutting prices. As has been mentioned above, this strategy is especially popular in emerging markets.
Finally, companies try to develop a positive image through launching various incentives concerning social and environmental responsibility. This area is becoming one of the most significant especially when it comes to markets of developed countries. Social responsibility is becoming one of the major trends in the contemporary society. Thus, companies try to employ this opportunity to attract more customers.
The strategy Apple employs to respond to the challenges of its environment
Apples strategy has been efficient for decades and it has enabled the company to become and remain a leading organisation in the market. One of the components of the strategy is Apples focus on innovation. Hamel (2012) stresses that the company has always expanded boundaries. It rarely came up with brand new products but Apple changed the very way these products were seen (Hamel 2012). The company has always managed to challenge existing conventions and go beyond the limits. For instance, although smartphones existed before iPhone, the latter became a revolutionary product. At the same time, Apple sets certain boundaries and it is possible to get certain applications from the company only. Of course, there are countless applications that can meet all customers needs and people are ready to buy them from Apple only.
As for the price, the policy of the company is quite clear. They are committed to remain a provider of high-quality products that have their value and their price (Hamel 2012). The focus is also made on the brand rather than price. In other words, it is believed that people buying Apple are not simply paying for the product itself but become a part of a larger community of Apple users. Of course, only high-quality materials are used and the company does not try to reduce costs (though there can be attempts to optimise production, logistics, management and so on). Another component of the strategy is Apples use of a wide network of devoted developers of software.
The companys culture enables it to maintain high reputation among customers and partners. Apple pays special attention to its reputation and image and this is another important component of the company strategy. Apple reveals its commitment to make a difference and address social and environmental issues. This strategy has proved to be effective and the organisations attempts resulted in Apples number seven position among companies most trusted in the world in different industries (Karabay 2014). It is noteworthy that one of its competitors, IBM, is only number 19.
Issues Apple faces and the way it handles them
Social issues
As has been mentioned above communities are becoming more socially aware and customers force companies to be more socially responsible. Apple has been accused of inappropriate operations in its overseas facilities. Clearly, these issues often occur in companies operating globally as in many countries regulations, legislation as well as cultures are quite different. One of these cases was associated with Pegatron, an Apples Chinese supplier. Workers and activists accused the company of worker safety violations; withholding workers pay; and poor conditions (Pride & Ferrell 2015, p. 106). Another scandal involved Foxconn factories. Foxconn was also Apples Chinese supplier (Archer & Cameron 2013). Of course, such practice negatively affected Apples reputation as well. There were numerous protests and potential customers across the world, instead of buying Apple products, came to Apple stores to draw the companys attention to the issues concerning working conditions (Segall 2012).
It is necessary to note that Apple is not the only company that has faced such issues. In many cases, companies try to stop collaborating with organisations that violate some regulations and conventions (including legal and ethical). However, this approach is not very effective. Apple chose another strategy. First, the organisation started a wide auditing campaign and checked operations of all its partners. If some inconsistencies were found, the companies were asked to remove them. If the violations persisted, Apple stopped cooperating with the company. Secondly, Apple Inc. developed a Code of Conduct for its partners. Thus, companies who wanted to collaborate with Apple had to comply with its rules. This approach is beneficial for the company as it reveals its commitment to be socially responsible. Apple demonstrated its readiness to make a difference and make peoples lives better.
Environmental issues
As far as environmental issues are concerned, Apple is famous for its commitment to reduce peoples negative influence on the nature. It is possible to add that companies often find it difficult to find the balance between environmental responsibility and corporate governance (Barnard 2011). One of the companys mottoes is as follows: We want to leave the world better than we found it (Environmental responsibility 2015). The company has funded numerous projects aimed at improving environment in different parts of the world.
At the same time, it is necessary to note that the company has had certain problems associated with environmental issues. Thus, in 2011, Greenpeace noted that Apple relied heavily in highly polluting coal power at the sites that house its bank of servers (Carus 2011, para. 2). The environmental organisation stressed that Apples new facility was to use power supplied by Duke Energy and 62% of this was coal power and 32% was nuclear power. Greenpeace provided a report where reliance on coal was estimated. It turned out that Apple had a leading position (54.5%) followed by such companies as Facebook (53.2%), IBM (51.6%) and HP (49.4%) (Carus 2011, para. 6). Of course, the company had to respond to this challenge. Apple reconsidered some of its practices and changed some of its policies.
In 2014, Greenpeace issued a new report on the industry. According to this report, Apple is the leader in reducing environmental harm (though the industry itself is quite environmentally unfriendly). One of strategies used was the ban of two highly toxic chemicals that harmed the environment and could expose workers of Chinese factories to a significant risk of cancer (Sparkes 2014). Thus, Apple is the only company in the industry that eliminated the use of Polyvinylchloride (PVC) and Brominated flame retardants in all of its products (Sparkes 2014, para. 9). More so, the company is planning to build the first 100% renewable energy facility in China. iPhone screens will be developed there. It is clear that these strategies and plans helps the company to have high reputation among its customers. It contributes to the companys image of an environmentally responsible organisation.
Ethical issues
Apart from social and environmental issues. The company has faced ethical issues as well. Some of these ethical dilemmas are solved effectively while there are still questions concerning other ethical issues. One of effectively solved issues is the one concerning iPhone customers. In 2007, Steve Jobs announced that the price of iPhone would reduce from $599 to $200 (Brooks & Dunn 2009). That was really good news for those who wanted to buy a new iPhone. However, the company also received numerous emails where customers who had already bought iPhones complained that it was unfair.
This dilemma was solved quite easily and effectively. Apple decided to provide earlier buyers of the phones with $100 credit at the companys online and retail stores. The company did not lose as it encouraged customers to buy something to use the credit. At the same time, the customers could also be satisfied as they got certain compensation. Of course, the amount they paid was still bigger than the one new customers paid. However, they were using and enjoying iPhones for a longer period.
Another ethical dilemma the company is facing is still quite unsolved or rather solved in a less satisfying manner. The companys headquarters can be found in Nevada, which is known for its tax benefits. In Nevada, do not pay in income tax (Jennings 2014). There are quite many places in the world like Nevada. Thus, Apple steers as much of its earnings as possible into such countries as the Netherlands, Luxembourg and Ireland (Jennings 2014, p. 22). This is legal, but it is quite doubtful that it is ethical. Of course, since Apple is a corporation, it has certain responsibilities and it should try to increase stakeholders profits minimising costs. Hence, the company is preoccupied with its shareholders interests. At the same time, trying to pay less in taxes also means inappropriate attitude towards Americans as the taxes an American company gets should go to the American budget (Fisher 2014). It is noteworthy that the issue only starts attracting public attention.
Legal issues
It is possible to note that the company also has to deal with various legal issues. Obviously, in the highly competitive market, companies often (accidentally or deliberately) violate other organisations rights, which leads to legal actions. For instance, Apple accused Microsoft of copying elements of GUI (Macintosh graphic interface system) (Ferrell, Fraedrich & Ferrell 2014). However, Apple lost the case as the court decided that there were no such elements in Windows interface.
There was another lawsuit. It was associated with the use of a domain name. iTunes.co.uk had already been registered by Ben Cohen when Apple wanted to use it (Ferrell, Fraedrich & Ferrell 2014). Negotiations concerning the purchase of the name started. However, the negotiations failed. Apple went to court and won the case. It is necessary to stress that usually the one who registered the name first can use it. However, Cohen used the name to redirect users to Napster (one of Apples direct competitors). The court decided that Cohen violated register rules as he tried to take advantage of Apple. Clearly, such actions and decisions are not seen as very ethical as it appears that bigger companies are likely to win any case.
One of the latest cases involved Samsung and Apple. Apple accused Samsung of infringement of intellectual property rights (such as trademarks, patents, styles and interface). For instance, Apple stressed that Samsung was employing the same rounded corners and glass screens, which were protected under Apples patent. The court decided that Samsung was guilty and had to pay $1.049 billion in damages (Ferrell, Fraedrich & Ferrell 2014).
As seen from the examples mentioned above, legal cases are often associated with property rights. Clearly, innovative capacity as well as innovations can be seen as one of the companys major assets and any organisation has the right to protect its assets. Of course, Apple tries to protect its rights, but certain ethical norms have been violated. The company may lose some points and its reputation may be damaged, as Apple will continue such unethical practices.
Governance issues
As any corporation, Apple has certain governance issues associated with the conflict of interests. It is necessary to note that Apple has another problem associated with leadership. As for the leadership, Steve Jobs was an inspiring and even enigmatic leader (Hubbard, Rice & Galvin 2014, p. 373). When Jobs returned to the company in 1997, it was nearly bankrupt. In a few years, it became one of the most successful organisations within the industry. Jobs was creative and demanding. He had his vision, which made the company that successful. Now, the company is facing an issue of leadership, as there is not such an inspirational leader.
On the other hand, the company also has to overcome issues concerning shareholders interests. Stout (2012) claims that corporations are confined to the so called shareholder primacy where shareholders interests are put first. At that, there are two major types of shareholders: those focusing on short-term outcomes and those who are willing to wait for long-term benefits. Stout (2012) claims that some shareholders are willing to see the companys growth and increase in shares value. They do not think about long-term consequences of some decisions made, as they are likely to sell their shares within quite short period. Those who focus on long-term benefits tend to hold their shares for a long period and, hence, they consider long-term outcomes of the decisions made by the company. Stout (2012) argues that the shareholders concentrating on short-term benefits often win the battle and companies often make decision that can lead to quite undesirable consequences, in the long run. Clearly, Apple is not an exception and it has to deal with such challenges.
Finally, there is also another issue concerning governance. Shadab (2008) states that there is a strong (though subtly) connection between innovation and governance and companies have to adjust their innovative incentives to the corporate culture as well as legislation. For instance, the company released an innovative product, a computer with a chip that enabled users to use wireless connection (Shadab 2008). However, this innovation was not described or even mentioned by the company. Later, the company announced that those who want to use the innovation had to pay $1.99. The company explained that they were forced to charge for the use of this service due to the corporate regulations. Shadab (2008) also stresses that the SOX Act is another example of interference of corporate regulations into innovation. The researcher notes that innovative power of companies reduces if they are exposed to regular (and rather extensive) auditing and monitoring. It is necessary to note that Apple Inc. tends to focus on innovation, which is one of its priorities. The corporate culture is often adjusted to fit innovative incentives of the company.
Tensions between corporate responsibility and maximisation of shareholder value
It is necessary to note that the company also manages to find the balance between corporate responsibility and maximisation of shareholder value. First, it is important to add that many companies find it difficult to find this balance and tend to concentrate on maximising shareholder value even though their reputation may be damaged (Keay 2007). It is also clear that companies fail to focus on corporate responsibility under existing conventions and trends. Thus, a new creation aimed at bringing more benefits to the community seems to be rather ineffective (Sharfman 2013). This attempt is creation of, the so-called, benefit corporations that are to pursue social missions rather than maximise shareholders profits. However, Hasler (2014) argues that these organisations still tend to focus on shareholders benefit even though they proclaim their readiness to concentrate on the communitys welfare.
When it comes to Apple Inc., the company focuses on maximisation of shareholder value but it also invests into various projects aimed at increasing social responsibility (for example, improving working conditions, improving environmental situation and so on). Jones and Felps (2013) state that the company is able to do so due to its high innovative capacity and efficient management. The company manages to increase shareholder value through optimizing its processes, which is possible as Apple comes up with innovative products and innovative management approaches. It is necessary to add that the organisation pays a lot of attention to its reputation and image. This, inevitably, leads to quite significant attention towards social and environmental responsibility. This approach has proved to be effective, as the company remains one of the leaders in the industry. Henderson and Malani (2009) note that corporate philanthropy is the only effective approach to be utilised by corporations so far. Customers are more eager to buy from the company that invests into development of the community and environment. Even though Apple Inc. employs the shareholder value approach, people find its corporate responsibility efforts satisfying so far. Of course, there are certain trends that suggest that soon people will require more from companies. There are high chances that Apple Inc. will be able to respond to such new trends and challenges.
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