Apple Inc. is an American Company that deals in a broader range of technological products. The company designs and produces a wide range of computer software and hardware products. It also designs and makes computers, smartphones, and other accessories. Apple further deals in online services and is one of the leading companies in the tech industry. Its primary products include the Apple Watch, iPad, and iPhones. Its software products include OS, iPadOS, macOS, and watchOS. The company was founded by Steve Jobs and his colleagues Ronald Wayne and Steve Wozniak. Currently, it is under the management of Tim Cook.
The company has retained its culture of innovation and quality product tenets that have seen it rise to being a multi-billion-dollar company globally. Presently, it serves more than 510 locations in the world with a revenue of over US$274.515 billion (Kharayat, 2020). The company has 147,000 employees, and it operates in more than 25 countries (“Apple retail stores,” n.d.). The major countries include the United States, Canada, China, Austria, Belgium, Hong Kong, Italy, Japan, Switzerland, Taiwan, Thailand, Australia, Austria, China, France, Germany, Singapore, South Korea, and Spain.
International Expansion and Segmentation
International Expansion Strategy
International expansion is becoming a norm for competitive firms. There are numerous benefits of becoming a part of international companies. First, it is the best way to find new talents and fill the talent gap. On the international stage, a company becomes accessed by many people from different companies. They also acquire the right to operate internationally, allowing them to source talents from every part of the world. It injects new life in the company that is necessary for its growth.
Simultaneously, the expansion to the international market becomes critical as it increases the product’s sale life. Product has its cycle in the market. When it is introduced, there is a slow start followed by rapid sales and a decline phase. Further, expanding internationally comes with an opportunity to diversify the market presence, critical for business continuity and growth. Lastly, as the business continues to grow toward an international presence, it becomes necessary to adopt a similar strategy. The company can use it to match the competition in the industries.
The three-phase theory of international expansion elaborates more on the business expansion to the international stage. The three-phase theory postulates that expansion to the global market takes three approaches that define a business’s expansion strategy. The first is the negative slope or the cost and the expanding barriers to the international market. In this case, the theory state that the initial step to global expansion comes with challenges and obstacles. To overcome them, the company must define specific strategies that include understanding the company’s international and external strengths. Understanding gaps and SWOT analysis are vital tools to realize the organization’s strengths and weaknesses.
The next stage of the three-stage theory is the positive slope; the company’s stage realizes the international expansion’s benefits. At this stage, most of these company products and services are known by the global market’s customers. The most appropriate strategy is to define the best ways to sustain such an achievement (Sroka, 2018, p. 95). The last stage is the negative slope, or where the company has passed the threshold of international expansion. These stages explain the best strategies that the company can undertake to make expansion to the global market easy and beneficial.
Application to Company
Apple Inc. uses multiple strategies to expand its business. First, the company utilizes foreign outsourcing as a primary strategy for its international expansion. For instance, most of Apple Inc.’s tech products are manufactured in China and other countries. Therefore, it uses such a strategy to extend its branches to other states. The advantage that comes with such a strategy is the ease with which the company sells its brand. At the same time, Apple Inc. saves money through outsourcing while expanding to other countries. It makes it sell its product at a favorable cost. The company further uses importing and exporting as ways to expand. Apple Inc.’s critical raw materials come from China, Peru, and Africa.
For instance, it imports gold from Peru and copper from Chile to make an iPhones product. Import and export strategies are advantageous because they give Apple Inc. a platform to interact with many countries, thus selling its brand image (Almeida et al., 2021, p. 19). Foreign direct investment is another means of the international expansion strategy that Apple Inc. uses. It also acquires foreign licensing to operate in different countries. Making investments in foreign countries carries its flag, and this makes positive progress in the international market.
Despite the advantage of these strategies, they also come with numerous risks. Direct foreign investments come at a cost, creating a platform where Apple Inc. uses a lot of money for its operation. Such reflects on the price of its products as they come at a premium cost to the customers. Simultaneously, relying on the foreign market for imports and export carries risks that can affect the company. For instance, any change in the economic or political atmosphere could be detrimental to the operations’ company flow. For example, manufacturing products in China is a risk to Apple Inc., given the political tension that has existed between China and the U.S. regarding tariffs on different products.
Segmentation is a critical strategy for expanding to an international market. Segmentation allows the business to select a segment of the market positioning and establish distinctive features that make it unique. The aim is to create a distinction between the companies from the sea of competitors in the market. International segmentation calls for different strategies, which could also be a multi-domestic strategy, with each country having a unique market approach. Segmentation has become a critical tool in international business. In the global market, segmentation calls for the company to define a specific niche to operate. It also makes the firms choose a particular framework that makes them unique to expand into many countries. These include distinctive products, branding, and market positioning.
The segmentation theory postulates that a company can maximize outcomes by focusing on a specific market area. The theory further explains that such benefits only come where the company can distinguish itself in the market to create a unique market presence. The theory underlines four ways through which such can occur. First, the company can target a specific population and define its product or services to suit them. Second, it can target specific geographical locations such as a country or region and choose its product to meet their needs (Sroka, 2018, p. 99). There is also psychographic segmentation and behavioral segmentation. The latter applies when the company target consumers with specific taste and preferences with their products.
Application to the Company
Apple Inc. thrives due to its behavioral segmentation. Its strategy is the user experience, and this has allowed it to define its niche. User experience is a form of behavior segmentation because it targets users who taste quality and user-friendly products. By focusing on the user experience, the company majors on the quality of its products. Apple Inc. centers on premium products as a way to give the customers more excellent user experience.
It focuses on the product’s performance with the high level of design witnessed in its Apple watch and iPhones (Malfona, 2018, p. 56). At the international level, the user experience has a great advantage for the company. At this stage, it creates a unique mentality in customers’ minds regarding Apple’s products. They associate it with user-friendliness and customer satisfaction. Therefore, it gives the company an edge. Despite that, segmentation demands a lot of money and thus is cost-consuming. In this sense, quality means that Apple’s product is expensive, making it difficult for the company to penetrate low-income countries. In that sense, it leads to slow growth in the company in developing countries.
Market Entry Strategies
Company Market Entry Mode
Apple Inc. uses a careful analysis of the risk verse the returns as the mode of entering the major markets. Therefore, they apply numerous strategies that help them enter the market. In competitive markets such as China, Apple Inc. goes for contract manufacturing. In this case, the company can sell its brand and gain more information about the different factors that define success in the market. Contract manufacturing implies that the company relies on a specific, more significant, and well-established company that manufacturers some of its products.
In addition to contract manufacturing, Apple Inc. also uses wholly-owned subsidiaries to enter a considerable markets such as Canada, Chile, and Brazil. As Harrison, Vilchez, and Thiel (2018, p. 9) state, “A wholly-owned subsidiary is a corporation with 100% shares held by another corporation, the parent company”. Apple Inc.’s wholly-owned subsidiary includes Apple Operations International, Apple Sales International, and Apple Operations Europe (“Subsidiaries of Apple Inc., n.d.”). Through this approach to entry into the market, Apple Inc. has dominated the major markets.
Analysis of the Merits and Demerits
The advantage of contract manufacturing lies in the cost of the product. The company offloads the burden of manufacturing their product and put it on another contracted company. In this sense, they do not incur the labor cost and other changes that could make them spend a lot of money. At the same time, contract manufacturing creates a situation where the company does not need to take charge of the legal environment or risks, such as legal and economic challenges (Tien & Ngoc, 2019).
In that sense, it becomes cheaper than when the company manufactures its product alone. Understandably, Apple Inc. has created a loyal customer base due to its products’ quality and innovative nature (Philipson, 2020). Where they lose such an advantage to the rival company, it becomes difficult to outcompete them. Simultaneously, the company risks losing its manufacturing and production activities control, which is a disadvantage.
International Marketing Mix
The marketing mix defines the tools that the company uses to pursue its marketing goals. The marketing mix includes the product, placements, prices, and promotion. These are tools that a company can employ singly or combine with others to take advantage of the market and become competitive. The market standard theory defines a situation where a company chose one of the four marketing mix elements and counts on it as its priority tenet for marketing (Datta et al., 2017).
The theory implies that a specification is a critical tool in marketing. Therefore, when a company decided to specify its product or major on specific marketing elements, it can gain market mileage and advantage (Harrison, Vilchez, and Thiel, 2018, p. 6). The theory further states that in a situation where the company chose a particular tenet of the specific product or service such as the cost, it can match the world standard, which makes it competitive. In that sense, the theory holds that a company can modify specific product quality such as pricing to match the international standard, which would give them an edge over its rivals.
The innovative product is one of the areas that has pushed Apple Inc. products to the position of the preference in the world. Apple Inc. products such as the iPhone have specific features that rate high in the customers’ view. At the same time, the company modifies the product to be user-friendly. Therefore, its development, such as the Apple Watch or the iPhone, generates billion of revenue since their quality is high. Simultaneously, Apple Inc. modifies its product to an extent where they become luxuries to those who own them. They are the first-class touch, with the quality and durability being some of the standard features that make the customers seek the products (Malfona, 2018, p. 56). For instance, Apple’s development, such as the iPhone, retains its value and is viewed as a more luxurious item than most Android phones.
The Impact of Modification
The company’s product modification implies that it uses a lot of resources to make them. Customers’ desire for a quality product becomes a challenge since they must live to such an expectation. Therefore, Apple Inc. spends a considerable amount of money to make and modify a single iPhone. For instance, to make the Phone 11 Pro Max, the company spend more than $490.50 (Liberatore, 2019). Such include the prices of the sensors, holding material, and assembly. That is 50 dollars higher than the amount of closest competitors Samsung uses to make a signed Samsung galaxy (Almeida et al., 2021, p. 19).
Such a modification increases product sales chances because the iPhone is the best-selling product in the company and the industry. Despite that, such a price reflects the product cost, which sometimes eliminates those from the middle class. The retail price for such a phone is close to $1099 (Liberatore, 2019). Such a price is right for those who belong to the style and like quality and luxury. However, it is much higher for those belonging to the middle and those who earn a lower income. Such premium prices have made Apple Inc. progress slowly as it pursues its expansion in the world.
Global expansion remains a sensitive area for most companies. As demonstrated by Apple Inc., the global expansion comes with both challenges and benefits. However, it depends on the organization’s strategy that defines how it handles the international expansion, the challenge it faces, and how it can overcome them. The company must choose suitable segmentation and penetration strategies and specify its niche to succeed at such a level.
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