By: Michelle Bielak, Wally Henriquez, Sean McNeil, Alex Ogozaly, Elizabeth Rubino, Kevin Sullivan APPLE INC. PARENT COMPANY OVERVIEW Name: Apple Incorporated Location: Cupertino, California CEO/ President: Steven Paul Jobs Company Annual Revenue: $65. 2 billion (Fiscal year ended September 2010) Number of Employees: 49, 400 Employees (Fiscal year ended September 2010) Type of Business: Electronics, Entertainment APPLE’S MISSION STATEMENT ?“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store.
Apple reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices. ” PARENT ORGANIZATION CHART Company CEO President Steven Jobs Hong Kong China,VP: John Brandon Milano Italy,VP: Pascal Cagni Headquarters, California, USA Our Business Unit, New Delhi India Sales Marketing Products Customer Service Finance Music Electronics Educational Programs for children/ adults Games Software Engineering GOALS IN THE NEXT TWO-YEARS ? Company Annual Revenue: Increase revenue with new roducts and updated product to 65million ? Number of Employees: Increase the number of employees in all departments and expand the number of Apple Inc. stores location wide ? The main concern of Apple in 2011 is to be environmentally safe Apple’s Strategic Positioning: High Valued Electronics at a High Price ? Increase Profit, reduce costs ? Maximize Shareholder Value ? Enter New Markets Enterprise Valuation Reduced Costs Profitability Add Value and Raise Prices Sell more in existing Markets Profit Growth Enter New Markets LABOR LAWS ? “Workmen’s Compensation Act, 1923” ? “Payment of Wages Act, 1936” “The Industrial Disputes Act, 1947” ? “The Minimum Wages Act, 1948” ? “The Maternity Benefit Act, 1961” ? “Payment of Bonus Act, 1965” ? “Payment of Gratuity Act, 1972” FINANCIAL LAWS AND REGULATIONS ? The Reserve Bank of India ? “Banking Regulation Act, 1949” ? Banking Companies Bill passed on August 9, 1969. ? India Accounting Standards ? SEBI established in 1988. INDIA LAW ? Structure of the Indian Judicial System ? Supreme Court, High Court, Courts of Civil Jurisdiction. ? Based off of English common law. ? Criminal law in India based on the Indian Penal Code. ? Supreme Court recently grants right to counsel on
February 24, 2011. ? Important to consider Hindu Law in India. IMPORTANT ASPECTS OF INDUSTRY AND GEOGRAPHY ? Price lower with cheap labor ? Will population want to purchase our products? ? Indian Ocean ? Great trade opportunities ? 77% of trade done by sea ECONOMIC AND FINANCIAL CONSIDERATIONS ? Tenth largest in world (nominal GDP) ? GDP per capita in U. S. dollars expected to triple by 2020 (Goldman Sachs) ? Population is young – key because of our innovative products ? Time to invest is now (booming economy, great ROA) ? Safe place to invest – not greatly affected by downturn
POLITICAL CONSIDERATIONS AND DEMOGRAPHICS ? Shouldn’t be a problem politically ? From 1991-2006, foreign investment increased from 150 million to 9. 5 billion ? Youngest workforce (large economies) ? 17. 5% of world’s population ? 65% of population is below 35 LABOR MARKET AND COMPETITION ? Lower standard of living, cost of inputs decreases, cheaper wages ? Labor force participation rate= about 400 million out of 1 billion ? 30 million in organized employment, 340 in unorganized (organized private sector – 3% of employment) ? Compete directly with Microsoft ? (PC vs Mac) We own everything else PARENT COMPANY/ STRATEGY United States is Apple Inc parent country. ? International strategy for international business. ? Determined by cost of reduction and local responsiveness. ? Does not need to customize their products or marketing because it will raise cost overall. ? Two Competitive Pressures ? Cost of reductions. ? Pressure of local responsiveness. Global Standardization Strategy Transnational Strategy International Strategy Localization Strategy PARENT COMPANY/ STRATEGY ? Outsourcers face ? Telecommunications ? Information technology ? Language barriers ? Levels of culture dealing with our international business ? corporate culture ? ach organization has a distinct culture that is passed on from the older to new members and determines their way of thinking, doing and living ? with apple it would deal with the new upgrade of software and new gadgets they make CULTURAL DIFFERENCES Cultural Factors Religion United States Major religion is Christianity India Majority of the population is Hindu as of 2001. many Hindus do not tolerate any other religious differences Only about 20 percent of the population make it to high school and many don’t even make it to college Education Universal with strong public education system from kindergarten through graduate schools.
Most states require schooling until the age of 18. United states is market driven and capitalistic. GDP in 2010 was at $14. 5. 13% of our nation was below the poverty line. United States is a two party system. Based off three branches, federal government, executive judicial and legislative. It is known as a stable country lead by a President. Family size usually 4 people Economics India is known as a BRIC country and has one of the largest GDP, growing at a 8. 2% as of 2011. Politics of India are based off of the British system and a multi-party representative democratic republic.
Giving the Prime minister of India the power and the president of India holds reserve powers Family size is usually about 5 Politics Family CULTURAL DIFFERENCES PART 2 Cultural Factor Class Structure Languages United States Capitalist class structure English and Spanish India Based on a Caste System Indo and Aryan and many speak English as a 2nd language. Natural Resources/ Geography made up of 50 states and over 3,717,813 sq mi of land that is used for natural resources. 1. 269 million square miles and divided into 28 different states. Much of the land is reserved of oil and renewable water resources.
FOREIGN DIRECT INVESTMENT PLAN ? Entry Strategy ? Greenfield investment ? Wholly owned subsidiary ? Location and experience priorities FOREIGN DIRECT INVESTMENT PLAN ? Funding ? Inventory backed loans September 25, 2010 September 26, 2009 ASSETS: Current assets: Inventories Deferred tax assets Vendor non-trade receivables Other current assets Total current assets 1,051 1,636 455 1,135 4,414 3,447 41,678 1,696 1,444 31,555 Long-term marketable securities Property, plant and equipment, net Goodwill Acquired intangible assets, net Other assets Total assets 25,391 4,768 741 342 2,263 75,183 10,528 2,954 206 247 2,011 47,501
FOREIGN DIRECT INVESTMENT PLAN ? Funding cont. ? Discount incentives to intermediaries ? Fronting loans Deposit $1 Million United States Operation World Bank Loan $1 Million India Wholly Owned Subsidiary Pay 8% Interest Pay 9% Interest FOREIGN DIRECT INVESTMENT PLAN ? Foreign Exchange Rates Indian Rupee (INR) INR USD Rs. 50 $1. 14 Rs. 100 $2. 27 Rs. 250 $5. 68 Rs. 500 $11. 35 Rs. 1000 $22. 71 Rs. 5000 $113. 55 Rs. 10000 $227. 09 United States Dollar (USD) USD INR Rs. 44. 04 $1 Rs. 220. 18 $5 Rs. 440. 35 $10 $50 Rs. 2201. 75 $100 Rs. 4403. 5 $250 $500 Rs. 11008. 75 Rs. 22017. 5 ? Employment Benefits INTERNATIONAL BUSINESS METRICS Great risk and potential ? Achievable goals and accurate measurements ? Key Performance Indicators ? Alignment of all levels in organization ? Choosing the correct KPIs KEY PERFORMANCE INDICATORS KEY PERFORMANCE INDICATORS ? Market share ? Overhead costs ? Inventory Turnover ? Profit Margin ? Liquidity ? Employee Retention EVALUATING SUCCESS ? Achieving significant market share ? Positive profits ? Independent functioning ? 10% increase in customer satisfaction ? 80% employee turnover Michelle Bielak Wally Henriquez Sean McNeil Alex Ogozaly Elizabeth Rubino Kevin Sullivan APPLE INCORPORATED PARENT COMPANY DESCRIPTION: I.
PARENT COMPANY HIGHLIGHTS: Name: Apple Incorporated Location: Cupertino, California CEO/ President: Steven Paul Jobs Company Annual Revenue: $65. 2 billion (Fiscal year ended September 2010) Number of Employees: 49, 400 Employees (Fiscal year ended September 2010) Type of Business: Electronics, Entertainment II. PURPOSE OF THE BUSINESS: Apple’s Inc. is a multinational corporation designed to market electronics, computer software and personal computers. The mission statement is, “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software.
Apple leads the digital music revolution with its iPods and iTunes online store. Apple reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices. ” The purpose of Apple Inc. is to provide the leading technology in electronics for its customers in the US and worldwide. Their products are made to make life easier for their customers by combining everyday technology. Employers are determined to catch the attention of the public and the media.
In May 2010, Apple surpassed Microsoft and became one of the largest companies in the world. Apple Inc. has established a unique reputation for its customers. People count on Apple because of its uniqueness and ever-changing electronic ideas. They employ over 49,400 employees around the world. There are jobs held in marketing, finance, retail, engineering, legal rights, facilities, sales, and operations positions. Apple Inc. offers opportunities for all its employees and its mission is to be the best it can for its employees and its customers. III. ORGANIZATION: 1 Company CEO President Steven Jobs Hong Kong China, VP: John Brandon
Milano Italy, VP: Pascal Cagni Headquarters, California, USA Our Business Unit, New Delhi India Sales Marketing Products Customer Service Finance Music Electronics Educational Programs for children/ adults Games Software Engineering IV. PARENT COMPANY STRATEGIC PLAN AND GOALS: 2-year Goals: Company Annual Revenue: Increase revenue with new products and updated product to $65billion Number of Employees: Increase the number of employees in all departments and expand the number of Apple Inc. stores location wide Type of Business: Apple is participating in the same industries but they are inventing new electronics every year.
Their ideas are top secret and are not released to the public. Change Between Present and Two-Year Goals: The main concern of Apple in the next two years is to be environmentally safe. Apple has been criticized for not being a leader in removing toxic chemicals from its new products and for not recycling its old products. Shareholders, customers, employees and the industry have not been pleased with Apple’s policies in the past. Apple is looking to surpass its competition with the improvements it needs to become ego friendly. Apple plans to decrease or eliminate several of the dangerous chemicals from electronic products.
Although these chemicals are in small amounts, Apple wants to participate and do everything it can to keep the environment clean. For example, “Apple became the first company in the computer industry to completely eliminate CRTs. The effect has been stunning — our first CRT-based iMac contained 484 grams of lead; our current third-generation LCD-based iMac contains less than 1 gram of lead. ” Apple is not the first company to go “green” but it is not the last and it is one of the first United States based companies to do so. Apple is forcing rules and policies that all products must exceed too.
In order for this goal to be reached, Apple employees have been researching and developing new techniques that will not affect our environment. One of the major environmentally safe goals for Apple is that it plans to completely eliminate the use of arsenic and mercury by the end of this fiscal year. With Apple’s plan to recycle and eliminate toxins, they will be number one in the world for environmentally safe electronics, passing HP and Dell. Apple is improving everyday 2 with its success of going “green. ” As a company, we are delighted to say we will reach our goal by the end of 2012.
V. INTERNATIONAL BUSINESS STRATEGY OF PARENT COMPANY: When a firm decides to go international with their business they must face many competitive decisions. Two of the most important decisions a company will face are the pressures for cost reduction Global Transnational Standardization and pressures for local responsiveness. The pressure of Strategy Strategy cost reduction forces a firm to lower their value of the cost of creation. Firms can outsource to places where costs of their products are much cheaper or they can mass-produce a standardized product in one location.
A firm must have the feeling of local representation. Every International Localization country has its own way of life. If a company does not Strategy Strategy adhere to each country’s differences in traditional business practices, distribution channels, and the demands from the host government, there will be no reason going international. Customers in different countries all hold to their own ways of doings things. It is important for a multinational firm to become aware of all traditions and rules in the countries of entry.
There are four different strategies an international corporation can choose from. They are global standardization, localization, transnational and international. Each strategy leads to the deciding factor that firms will use to determine the amount of pressures for cost reduction and local responsiveness. Global standardization is used to increase profitability by obtaining cost reductions through economies of scale. A firm whom wants to pursue a low-cost strategy on a global scale will normally offer a product that can be mass-produced at a low cost.
A localization strategy offers a product that is custom to the host country. The product satisfies the countries preferences and taste. The third strategy is transnational. It is used when the firm is faced with strong pressures for both reduction and localization. This strategy is hardly used when competitors are in the market because it is hard for a firm to please the local tastes and preferences of its customers at a low cost. The last strategy is international. This strategy is used when firms are confronted with low pressures for both cost reductions and local responsiveness.
This strategy is scarcely used when competition enters the market. With each strategy, business can find which one works best for their organization. Companies will decide to go international depending on the country it chooses to enter and the amount of profit it can earn. In corporate strategy there are two types of diversification, linked and constrained. “Companies using linked diversification, enter new businesses when it relates in some way to another business they are already in but it does not necessarily have any connection to their other businesses.
If they are using constrained diversification, they only enter a new business if it is based on their core resources or competencies. Companies based on linked diversification have little coherence to their overall corporate strategy, while companies using constrained diversification tend to be more focused. Constrained diversification allows companies to maximize the effect of their resources because they are shared (100). ” Apple is a personal computer, hardware and software company, inherently leading to use constrained diversification because they utilize their competition and they share resources between businesses. For example iPods, iPads, iPhones, MacBooks and Apple TVs all run on the same operating system. This intends customers to link their music with laptops, TVs, cell phones and other Apple products. This allows for a more appealing product to the customer. Apple is saving money by sharing resources throughout their multinational business. The product of Apple has such a distinct business that competitors have not been able to match their techniques.
Each electronic device is unique, allowing for them to be used anywhere in the world and each is different from any of its competitors. Apple’s goal for a mobile business is to be fundamentally innovated and differentiable. It does not concentrate on the size of its industry because it maintains strong profit margins that have high percentages in the industry’s profit share. Apple does not focus on the quantity of its products but the quality and relevance. “. Peter Drucker wrote that “What makes the future happen is always a business’s embodiment of an idea of a different economy, a different technology, a different society.
It need not be a big idea; but it must be one that differs from the norm of today” (117). This means defining what the devices are (e. g. , a pocket-sized device, or a tablet-sized device), and what they do. Apple must do this through constant innovation. ” Apple has secured itself as the industry innovator and a position of strength by constantly defining what their products are and what their products do. Since Apple is continuously redefining the industry, they do not need an overwhelming market share.
Apple can dominate the market through their intelligence of inventing new electronics and the respect they have for their customers. Apple’s basic business model is to sell hardware; every other product, iTunes, Apps, operating systems, is to make their hardware more valuable. The main goal of this strategy is to maximize the value of the firm. Customers are willing to pay high prices to obtain products of high value and high quality. Within an international business setting, firms are competing to receive the highest profit against one another.
Apple is competing at a differentiation strategy. They increase the attractiveness of their products, making the products stand out so customers will purchase their products over another. Apple’s strategic positioning choice is to have high valued electronics that all customers want. Apple products are unique compared to the rest of the world. This allows Apple to charge a higher price. Many people are willing to buy Apple products because they are well produced, have a high quality and are known as a luxury item to the customers of Apple.
Apple’s main goal is to maximize all values for the firm. This includes increasing shareholder value in a legal, ethical and a socially responsible manner. “Managers can increase the profitability of a firm by pursuing strategies that lower costs or by pursuing strategies that add value to the firm’s products. Managers can also increase the rate at which the firm’s profits grow over time by pursuing strategies to sell more products in existing markets or by pursuing strategies to enter new markets” (Hill, 420). Apple is always looking at new ways to increase its value and shareholder profit.
Our main strategy to increase profit is to add value, raise prices and to enter new markets. 4 Reduced Costs Profitability Enterprise Valuation Profit Growth Add Value and Raise Prices Sell more in existing Markets Enter New Markets VI. BUSINESS ORGANIZATION CHART Our business Unit, New Delhi India Sales Marketing Products Finance Music Eletronics Educational Programs for children/ adults Software Enigeering Customer Service 5 VII. INTERNATIONAL BUSINESS ISSUES a. Labor laws There are several different labor laws that will affect our plan to enter the Indian market.
It is important for us as a branch of Apple to understand the labor laws so that when we enter India we won’t violate any of the laws that are currently in place. These labor laws will certainly have an effect on our ability to run our operations in India. Different studies conducted on Indian labor laws have shown that the Indian laws currently in place are highly protective of labor and the labor markets are inflexible. All of the different labor laws set in place within India have to be considered before we begin operations.
The Indian government has set in place several different labor laws that work to help protect their citizens, gives Indian workers added benefits, and does diminish some of the interest in deciding to invest in India. One important labor law currently in place in India is the “Workmen’s Compensation Act, 1923”. The purpose of this law is to provide compensation to an injured employee or compensation to the dependants in the case that a death takes place. An employer will be forced to pay compensation if personal injury is caused to an employee because of their employment.
The employer will have to pay compensation to the worker if within 30 days of the injury or they will have to pay added interest or penalties to the injured party. An employer is not liable if the employee is disabled for only three days or less. Also if injury or death is the result of consumed alcohol or drugs or by disobedience to safety rules then the employer is not liable to pay for the damages (Workmen’s Compensation Act, 1923). If there is a disagreement about the payment of damages then the case will be brought before a Commissioner who will bring down the final verdict in the case.
This is definitely one law that Apple has to be aware of when beginning operations in India as one of the employees could eventually claim they deserve compensation due to injury and as a company we will be forced to know the how this process plays out. Another law that Apple Inc. must be aware of when entering operations in India is the “Payment of Wages Act, 1936”. This act works to make sure that wages are paid to employees in a timely fashion, without unfair deductions, in current coins and currency, and ensures that employees have a place to file complaints about payment of wages.
This act is important for Apple to understand because it applicable to the employees of any factory, railway administration, or industrial establishment and because we are looking to create factories in India this law will pertain to our employees. The act enforces the policy that a company must pay wages no less than once a month in the current local currency. The only acceptable reasons for deducting pay from an employee are official fines, absence from work, damage to company property, housing-accommodation, payment advances, income tax, and these deductions approved by the employee (Payment of Wages Act, 1936).
This act will make it so that we will have to contact a local bank to make sure we have a substantial amount of local currency on hand in order to be able to pay our employees. Another effect this act has on the operations is it shows what offenses give us as employers the right to deduct from an employee’s pay check. The labor law that probably has the greatest effect on our ability to start operations in India is “The Industrial Disputes Act, 1947”. The main focus of this act is to protect the Indian worker from the hardships of being layoffs.
The most important aspects of the act are two amendments, the first being made in 1976 and the second in 1982. The first amendment put into law a policy that if firm employed 300 or more employees then the company must get permission from the Indian government to start laying off employees and begin closing different plants. The second 6 amendment in 1982 changed the 300 employee barrier to only 100 employees in a firm before the company had to consult the government before layoffs and closing of factories (The Industrial Disputes Act, 1947).
This is a very important labor law for Apple Inc. to understand before starting up operations because it as soon as over 100 employees are hired our company will lose the right to decide for ourselves if we want to cut losses and start to both close plants and begin the process of layoffs. The other important elements of IDA are compensation for employees who experience a layoff and the elements of unfair labor practices. An employee will have the right to compensation when experiencing a layoff if they have been working with their respective company full-time for one whole year, and the ompensation will be 50% of the wages they had received when employed. The penalty for a firm committing unfair labor practices is a punishment of up to six months imprisonment or a fine of one thousand rupees and possibly both (The Industrial Disputes Act, 1947). These aspects are important for the company to understand because they establish the punishments that will be enacted against a company for violating certain workers’ rights. The next labor law that will affect our operations in India is “The Minimum Wages Act, 1948”.
This act’s purpose is to ensure that workers receive a minimum wage for their efforts. A recent increase in the national minimum wage level has brought the new floor level nationwide to an all time high of 115 Rupees a day. Much like in the United States this is the absolute lowest minimum wage can be nationwide, however certain states inside of India can raise their floor level to a higher wage than the national minimum wage. The only restriction is that no state is allowed to go below the nationwide floor level of 115 Rupees a day, which would only be about $2. 60 a day (The Minimum Wages Act, 1948).
While the fact that India has raised the minimum wage to a new high may seem like a bad thing for a company creating factories in India the fact remains that employment cost per employee can be as little as under $3. 00 for a whole day. Compare this to the United States where the federally mandated minimum wage is $7. 25 for just an hour of work. So there is clearly a competitive advantage for a company to use Indian labor, especially when compared to the price of American labor. One labor law that helps protect the rights of women workers in India is the “Maternity Benefit Act, 1961”.
This act helps regulate the employment of women in the workplace before and after child birth and helps provide benefits for maternity. This law is consistent throughout the whole country of India. In order to be eligible for the benefits, including maternal leave, the woman must have been working for her employer for no less than one hundred and sixty days in a twelve month period prior to expected delivery (Maternity Benefit Act, 1961). Another labor law that is important to understand is the “Payment of Bonus Act, 1965”.
This act works to provide bonuses to people have directly helped a company gain profits through their productivity. The minimum bonus that can be paid to any employee is 8. 33 per cent of the employee’s current salary or one hundred rupees, whichever one of the two is higher. While some might view minimum required bonuses as a negative, they can also have a positive effect in motivating the employees to be more productive. The final labor law that will affect our ability to run operations in India is the “Payment of Gratuity Act, 1972”.
This act will make sure that an employee will receive a payment when they retire, resign, or are disabled if they have maintained continuous service for a period of no less than five years (Payment of Gratuity Act, 1972). This law will play an important role in the employment decisions of the company because firing an experienced employee could potentially hurt the company in two forms. The first would be the fact that the company will be forced to pay the gratuity fee and the second way 7 in which it could potentially hurt the company is the fact that they are losing an experienced employee who has knowledge of how the company is run. . Financial Laws and Regulations There are several different financial laws and regulations in India that must be considered before beginning operations in India. All of the different financial laws and regulations will have different impacts on how we will be able to undertake our operations in India. The Financial system in India is much younger than in many of the other large economies and is not quite caught up to the more advanced economies. One of the most important financial institutions in India is the Reserve Bank of India which is the central bank of the country.
It was established in April 1935 and then was nationalized in 1949 with the “Banking Regulation Act, 1949”. The reason that the Reserve Bank of India was created was to regulate banknotes, maintain reserves to help stabilize the monetary supply, and operate the credit and currency systems. The main function of the central bank is to issue the different bank notes, the Reserve Bank of India is the only financial institute that has the power to issue bank notes in India. Currently the bank is required to hold a certain of gold and foreign exchange reserves in a system that is referred to as the minimum reserve system (Reserve Bank of India).
Another important function of the Reserve Bank of India is to act as a banker to the government. It makes loans and advances to the States and local authorities and it also acts as adviser to the Government on all monetary and banking matters. The next power that the bank has is the ability to lender of last resort to other national banks (Reserve Bank of India). Finally the bank is controller of credit, which means it is able to change the amount of credit which is created by the banks in India by changing the bank rate.
An important banking law is the “Banking Companies Bill” which was passed on August 9, 1969, this bill helped nationalize 14 major banks and really helped the banking industry in India grow in a way in which the country would prosper from (History of Banking in India). Another important aspect of the financial regulations in India is the Indian Accounting Standards. The accounting standards are used to create common accounting policies and practices throughout the country. The first act that helped bring Indian accounting standards to a higher level is “The Companies Act, 1956”.
This law was the first in India that required financial statements should, “…give a true and fair view of its financial position and working results” (Indian Accounting Standards- A Perspective). Accounting standards help to create both appropriate accounting treatment of business transactions and also creates greater market transparency and market stability. On April 21, 1977 the Accounting Standards Board, ASB, was created to help make common accounting practices and to help integrate certain international accounting standards into the Indian accounting system.
One of the groups that influences the ASB is the Securities Exchange Board of India, SEBI. The main objectives of SEBI are to protect the interests of investors in securities, promote development in the Securities Market, and regulate the securities market (SEBI). c. Political Laws, Common Law, and Statuary Law India is made up of a union of states and a secular, democratic republic with a Parliamentary system of government. Much of the government is based primarily off of Britain’s Parliamentary government system. The capital of India is New Delhi and this is where the federal government of India is primarily located (Political Structure).
The judicial system in India is made up of a Supreme Court, High Court, and Courts of Civil Jurisdiction. The Supreme 8 Court is the highest level court in the country and its rulings override the decisions made in the courts below it. In India the Supreme Court is made up of a Chief Justice and then no more than 25 judges who are appointed by the President and will serve until the age of 65. The High Court is the highest level of a state’s judicial court systems and has a good deal of power. The Courts of Civil Jurisdiction are the ones on a local level who take handle smaller local cases (Political Structure).
This judicial system set up is based off of England’s common law structure where judges determine the law through their decisions in court. Criminal law in India is based off of the Indian Penal Code which has been in place since 1860. One recent decision handed down by the Indian Supreme Court is the “right to counsel”. On February 24, 2011 the decision was made to give criminal defendants in India the right to counsel (Zeldin). This is a very important decision made to increase the liberties afforded to the citizens of India, but it does show how India is still decades behind some of the other advanced countries.
The final aspect of law that must be considered when operating in India is Hindu Law. Hindus make up approximately 83% of India’s population so any company coming into India must respect Hindu Law (Population of India). Hindu Law is becoming less important in current day India as modernization occurs, but Hindu Law which refers to a system of personal laws is still a topic that a company should be aware of (Aspects of Hindu Law in Indian Society). d. Things important to your particular industry/business We have to determine whether or not India is going to want to purchase Apple products and have the money to do so.
Apple’s products are on the high end relative to prices of other electronics. However, with cheap labor we will be able to price these lower than usual. Also, India’s economy is booming right now therefore the citizens will be willing and able to buy our quality products. e. Things Important to your geographic and environmental interests India’s geographic location leads to considerable trade by sea with other countries. Quite obviously, it is located right on the Indian Ocean and this leads to great trade opportunities with countries around the world. Also, about seventy seven percent of India’s trade is done by sea.
Apple will benefit greatly from their geography and location because of the easy access to the ocean and other surrounding countries. We can export our product and import goods with relative ease. India exported 201 billion in goods and imported 327 billion in goods. This shows how much trade they do and the ease at which they do it. India’s geography and location provides a huge benefit to Apple and its operations. f. Economic Considerations Currently, the economy of India is the tenth largest in the world by nominal GDP. In regards to purchasing power parity, India is fourth in the world.
According to economy watch, India’s economy will grow by 8. 43 percent in 2011 which is sixth in the world. India’s economy is obviously growing at a rapid pace. As a result of this, we expect our business to thrive there. According to Goldman Sachs, India’s GDP per capita in U. S. dollars will quadruple from 2007 to 2020. Also, they state that the Indian economy will exceed the United States by 2043 in U. S. dollars. Although they may continue to be a low income country, they can continue to help drive the world economy if they fulfill their potential. India’s retail sector is flourishing as well.
This will help out Apple significantly. However, there are a few economic challenges to doing business in India. We must pass through many regulations regarding real estate. Also, management may be more difficult in India because they are loss skilled. These may drive our 9 costs up but overall India’s benefits far outweigh the costs. India is also a considerably young country. Apple’s products are new and popular and trendy with younger adults. Consequently, the youth in India will be inclined to purchase our products. These are all great benefits to doing business in India. g.
Financial Considerations India is a country that is currently in the midst of rapid development. This means doing business over there will not be as expensive. However, it also means Apple will have to develop with the economy. This is not a problem because we believe the country’s upside is absolutely tremendous. Because India’s economy is starting to boom and grow rapidly, businesses are investing long term there. They are doing this because they know they can get favorable returns because the economy is growing so much, India was not as affected by the economic downturn as other countries were.
This makes it pretty safe for Apple to go in and do business there and at a relatively low cost. Domestic and foreign investors believe India to be a very secure place for investment because of its balanced profit and loss approach. It is tough to lose money in India. There are definitely a few other things to consider about India. However, their growing economy and relatively safe investments make it an easy decision to do business in India considering Apple’s finances. h. Political Considerations of working in India When doing business in another country, there are always many factors to take into account.
A largely important factor to consider is the country’s political factors and risk. In certain countries, a company may have to pay off politically powerful entities in a country before the government allows it to do business there. The need for certain fees and bribes is much more prevalent in closed totalitarian states than in open democratic societies. In our case, India is a democratic society so fees would not be much. Along with political costs that accompany doing business in another company such as India, there also political risks as well.
Political risk is, “the likelihood that political forces will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a business enterprise” (Hill 77). In countries experiencing social unrest and disorder, political risk is considerably greater. Risk is also greater in countries where the underlying nature of a society increases the likelihood of social unrest. Social unrest can be seen in certain events such as violent conflict, strikes, terrorism, and demonstrations. This unrest is usually found in countries with more than one ethnic nationality.
IN these countries, competing ideologies are battling for political control. India has one ethnic background so I do not think social unrest should be a problem. India welcomes foreign investment as evident by the increase from 150 million in 1991 to 9. 5 billion in 2006 (Hill 73). Since 1991, India has happily welcomed investment by foreign enterprises. Doing business in India will not have any political risks. i. Workforce Demographics India’s workforce demographics are extremely interesting. They have the youngest workforce among large economies and this is very important for growth.
A young workforce means more motivation to work hard. They will also be more technological savvy which is critical for our company. With India’s economy already thriving, their workforce demographics will only add to the value of doing business there. However, these young adults do not have the education that they should have for young people. On the other hand, India has enough young 10 people and technological people to help us succeed. India’s young workforce may hurt them as a country in the future but right now, it will be extremely helpful to our business.
India contains 17. 5% of the world’s population and is projected to surpass China by 2025. 50% of its population is below the age of 25 while 65% of the population is below the age of 35. These numbers are all very promising for Apple in India. j. Labor Market The labor market is defined as an informal market where workers find paying work, employers find willing workers, and where wage rates are determined. The labor market in India will be extremely promising. There will be no problem finding educated workers as evident by the workforce demographics.
Apple will have to find willing workers and determine a wage rate. These educated workers will make good money because we are a successful company. However, India’s standard of living is lower than that of America’s. Therefore, our cost of inputs will be lower and we will be able to pay them cheaper wages. India’s labor force participation rate is a low 400 million of a 1 billion population. The majority of the labor force is unorganized employment at 340 million while the other 30 million is organized employment. 269 million people are below the poverty line. 3% of the labor force is in manufacturing. This is where our company will do the majority of its work. And of the organized employment, 26% is in manufacturing. We can pay low wages. Our employment will be organized as unorganized employment is full of low productivity. The organized private sector only makes up 3% of employment. This is what Apple will fall under. There are many other regulations and rules we will have to deal with in the labor market but it looks very promising. k. Competition Apple is such a dominant company on the rise right now.
Competition is not a particular thing to be worried about. However, we will have to deal with Microsoft. Microsoft is the biggest American based company in India that we will have to deal with. We directly compete with them on many items and the sales of computers being the most important. We already own the market as far as digital devices go such as the iPod, iPad, and iPhone. However, the personal computer is a different story. Mobile operating systems account for nearly 3% of internet traffic and that number is doubling every eight months or so.
This is due to the increased number of iPhones and Ipads out there. There is no denying Microsoft’s dominance of the PC. However, we will be able to compete with them with our macbook and hope to gain a good percent of the market. This is important but the bulk of our sales come from our other digital devices and we dominate the market with that. Therefore, competition in India will not be a huge concern for us as we feel wherever we go we will succeed. On the contrary, we will have to deal with Microsoft though. VII.
IMPACT OF PARENT COMPANY’S INTERNATIONAL BUSINESS POLICIES The impact of the parent company’s international business policies is dealing with all future foreign units, which would lead us to have a good team of employees. Apple in India would make us go internationally and would have to insure that the international business is in compliance with already existing company strategies and goals. Apple is known to retain approximately the same strategy for our products worldwide. Apple is based in the United States and is known as a global standardization strategy for their international business.
By acting upon the global standardization Apple does not need to 11 customize their products or market them different internationally, because if they did it would raise the prices of cost. Also, Apple would have to be aware of the country regulations for international business. For example, in India it’s dealing with national security, protecting jobs and industries and human rights. In the United States to outsource a company, the company is going to face significant investment in telecommunications and information technology to prove an offshore presence.
Nevertheless, larger companies can better take advantage of economies of scale to offset high fixed costs, which leads the company larger than smaller. There are two competitive pressures that a company trying to go internationally would face which are known as cost of reductions and pressures of local responsiveness. Cost of reductions would change because being based of a strong economy in the United States the price has to vary from country to country to be able to attract the majority of a population to the product.
Pressures of local responsiveness is being able to make more of a profit on each unit of production and being able to use different sources. It is said that your business success will greatly depend on your understanding of the cultural differences in the region it tries to expand to. Apple is based in the United States as stated before and has various culture factors and ways of working compared to India. There are about 8 Cultural Factors that affect a company, which are religion, education, economics, politics, family, class structure, languages, and natural resources/ geography.
For example, most of the United States population is known to practice Christianity as their religion. The education system in the United States is universal with strong public education from kindergarten through graduate school; in many states it is required schooling until the age of 18. For many young adults in the United States they need a high school diploma to have a paid job, compared to India when a child can work as young as 10 years old. The Economy of the United States is known to be market driven and capitalistic. The countries GDP level in 2010 was 14. , but yet 13 % of our nation is still below the poverty line. Politics in the United States is broken into a two party system and also made up of three branches the federal government, executive judicial and the legislative, these branches have lead the United States to be known as a stable country lead by a President. The regular family size is about four people per household. The class structure in the United States is hard to examine because it’s an open class structure with opportunities for anyone to advance and move up. The language in the United States is English but many are starting to speak Spanish.
Lastly, the United States natural recourses and geography is made up of 50 states and over 3,717,813 square miles of land that is used for natural resources. In the United States many companies measure their success through goals, cost to the business, business retention, employee capacity, market shares. Apple trying to expand to India is going to have to be very cautious as to how it adapts to all the cultural factors and policies in India versus the United States. Below are a few of the cultural considerations Apple will need to take into account in its new India operations.
Cultural Factors Religion United States Major religion is Christianity India Majority of the population is Hindu as of 2001. many Hindus do not tolerate any other religious differences 12 Education Economics Politics Family Class Structure Languages Natural Resources/ Geography Universal with strong public education system from kindergarten through graduate schools. Most states require schooling until the age of 18. United states is market driven and capitalistic. GDP in 2010 was at $14. 5. 13% of our nation was below the poverty line. United States is a two party system.
Based off three branches, federal government, executive judicial and legislative. It is known as a stable country lead by a President. Family size usually 4 people Capitalist class structure English and Spanish made up of 50 states and over 3,717,813 sq mi of land that is used for natural resources. Only about 20 percent of the population make it to high school and many don’t even make it to college India is known as a BRIC country and has one of the largest GDP, growing at a 8. 2% as of 2011. Politics of India are based off of the British system and a multi-party representative democratic republic.
Giving the Prime minister of India the power and the president of India holds reserve powers Family size is usually about 5 Based on a Caste System Indo and Aryan and many speak English as a 2nd language. 1. 269 million square miles and divided into 28 different states. Much of the land is reserved of oil and renewable water resources. IX. FOREIGN DIRECT INVESTMENT Apple, Inc. will make a greenfield investments in India as their capital investment plan. Greenfield investments may be more risky, but the return from successful operations will be high.
Luckily Apple, Inc already has a worldwide notable brand image, so there is less risk for failure. Direct investment in India will decrease the costs associated with transportation and trade barriers which normally limit a country from exporting (260). Our strategy is to create opportunity for India and make sure benefits outweigh the costs. After initial entry into India, we plan to operate as a wholly owned subsidiary, in which we own all stock in the company. In choosing an entry strategy we looked at the advantages that were relevant to our business goals.
Our technological competence gives us a competitive advantage with the products we make for customers, and we would like to remain in control of that upper hand. Products like the Mac and iPod have unique qualities that set themselves apart from other brands. In the United States, the Apple brand is dominant for both consumers and business to business (Ribitzky, 2011). We want to transition this demand to the investment in India, and having a wholly owned subsidiary where we can remain in control of the technical specs will allow for an easy transition. 13
In addition to tight control over the operations in India, Apple can also meet their location and experience priorities which can be costly in other countries. India is known to be a tech savvy location, and this will provide value for us. Indian employees might have skills and ways of doing things that are more efficient that the United States operations. It will be the responsibility of our expatriate manager to recognize these talents and bring forward the value of this skill to the company (432). Funding for our investment will come from multiple channels.
Apple has a large amount of liquidity in with its inventory which can be used to back a loan. Inventories in the 2010 balance sheet amounted to $1,051 million (see chart below). Assets are increasing dramatically and inventory alone has more than doubled over the past year. This makes up a small percentage of their total assets which shows that there are multiple places that we can use liquidity. Because we are a wholly owned subsidiary, we will not be using any stockholder’s equity to fund the business, and a lot of the startup costs will have to be funded internally.
CONSOLIDATED BALANCE SHEETS (In millions, except share amounts) September 25, 2010 September 26, 2009 ASSETS: Current assets: Inventories Deferred tax assets Vendor non-trade receivables Other current assets Total current assets Long-term marketable securities Property, plant and equipment, net Goodwill Acquired intangible assets, net Other assets Total assets $ 1,051 1,636 4,414 3,447 41,678 25,391 4,768 741 342 2,263 75,183 455 1,135 1,696 1,444 31,555 10,528 2,954 206 247 2,011 $ 47,501 A second strategy to fund the investment will be to give a discount incentive to intermediary companies who want to sell our products.
This should not take a lot of convincing to companies since the demand for Apple products is already high. A company like Best Buy could serve as an intermediary. We can offer a lower price to them so that they can make a profit selling the product at a higher price. We will be dealing primarily with banks in India who in turn will have to deal will banks in the United States. Our plan is to receive a letter of credit from that bank to finance large costs. Once we get the letter of credit, we can enter contracts with other companies and get bills of lading to get the goods.
There are multiple people involved in this way of financing the company. Apple wants to be known as a company with good credit, meaning that repayments are on time and all parties involved are satisfied. The third and most common way Apple will have funding is through fronting loans. This is a loan between the parent company and its subsidiary which comes from a large financial intermediary (696). Unlike a direct intrafirm loan where the parent company loans to its foreign subsidiary and is repaid later, an intermediary bank is involved in the process.
Our plan is to take a loan from World Bank. In the fronting loan, our parent company will deposit an amount in the bank and World Bank then lends the money to our operation in India. The advantage to this loan 14 is that it is risk free for the bank since it has collateral already. Both entities will have to pay interest, so the bank makes a profit (687). India tends to have strict rules when it comes to FDI, so this type of loan will prevent problems with foreign exchange rates or the capital inflow source. The chart below describes the entities involved in the fronting loan.
Deposit $1 Million United States Operation World Bank Loan $1Million India Wholly Owned Subsidiary Pays 8% Interest Pays 9% Interest Looking at the exchange rates between the United States and India is crucial in determining our cash flows. India uses the rupee as its currency. Below is a chart of the conversion rates as of April 10, 2011 between India and the United States. As you can see, 50 rupees equals about $1. 14. One thing that businesses have to look out for is fraudulent money which circulates when people buy from unauthorized currency exchange dealers.
Apple will be dealing with the bank for exchange rates, but they must be cautious in any petty cash transactions. Indian Rupee (INR) INR Rs. 50 Rs. 100 USD $ 1. 14 $ 2. 27 Rs. 250 $ 5. 68 Rs. 500 $ 11. 35 Rs. 1000 $ 22. 71 Rs. 5000 $ 113. 55 Rs. 10000 $ 227. 09 United States Dollar (USD) USD $ 1 $5 INR Rs. Rs. 44. 04 220. 18 $ 10 Rs. 440. 35 $ 50 Rs. 2201. 75 $ 100 Rs. 4403. 5 $ 250 Rs. 11008. 75 $ 500 Rs. 22017. 5 FDI in India will bring many employment benefits to the country. Because they have such a large population, many people will be looking for employment.
Apple wants to fit in with the Indian culture, so having employees from India will help smooth the transition. We can offer lower wages to citizens of the country because the cost of living is lower in India than in our parent country. Job creation is a positive influence for India to allow us to invest. X. International Business Metrics As we focus on expanding business internationally, especially in India, there is both great risk as well as great growth potential for our operations. One of the major challenges we face as we expand is the need to evaluate performance and accurately measure results.
Business metrics will play an important role in this evaluation process of our international business operations. We feel 15 that it is particularly important both to set achievable goals and have the ability to accurately measure our progress along the way. The primary method in which we will measure our progress toward the achievement of specific business objectives is through Key Performance Indicators, or KPI’s. According to Kent Bauer, managing director or the Performance Management Practice at GRT Corporation, KPI’s are “quantifiable metrics which reflect the performance of an organization in achieving its goals and objectives. One of the many positives of using key performance indicators is that they align all levels of an organization to ensure that everyone is operating under the same strategic plan. By using these indicators, both management and their employees are able to point to specific goals and objectives that are actually quantifiable, not simply a task which “came from above. ” The success of implementing such a plan is entirely contingent on selecting the correct performance indicators which suit both the short and long term goals of the company’s strategic business plan.
Because of the vitality of selecting the correct performance indicators, there are a few key challenges that we will face when selecting our KPI’s. Among the most important include how many indicators should we have, who is accountable for these metrics, and how do we ensure that the metrics reflect strategic drivers? Bauer also stresses the importance of strategic alignment in the creation process of Key Performance Indicators. Below is the strategic pyramid we used when determining our KPIs. More than any other measure, we are particularly concerned with costs in our business.
Because we are in the business of making electronics, it is imperative that we keep overhead costs down in order to maintain a healthy profit. One of the challenges we face expanding to India is the adjustment to overseas costs. Mostly likely we will be hiring ex-patriots to be managers of our new business in India, and as a result we will incur significant costs sending them and their families overseas. It is imperative that we eliminate all unknown variables in our cost equation in order to accurately project both our future earnings potential and hidden 16 expenses that could be incurred due to our inexperience in the global marketplace.
Often times, these expenses, although seemingly small, can add up to huge sums and result in net losses on the income statement. It is our responsibility to maximize and increase shareholder value to the greatest of our abilities. Another important indicator used to evaluate our performance is inventory turnover. Inventory is a key issue in the international business environment because like in the United States, inventory stuck on the shelves is a huge cost to the business. In a world where technology is constantly changing and evolving, customers are seeking the newest product or gadget.
Therefore, our company must be careful to not overstock products in our retail stores because most likely, a newer and more innovative product will be introduced a year later. Keeping good control over our inventory levels will lead to a higher profit margin, another of our key indicators. By focusing on keeping costs down, we will in turn produce a higher profit margin for our shareholders. Liquidity is also an important indicator we will use. In order to be successful as an international business, we must have the necessary amount of cash to make investments and pay our expenses.
As a result, we must watch our liquidity ratios to ensure that we both we have the amount we need for daily operations, but also not keeping too much cash, which could be invested and earn a higher return than sitting in a savings account. Finally, employee retention is important to management and our business. Spending the time to train employees is expensive for any business, so we will work hard to retain hired employees as well as performing thorough background checks on new employees to sure that we are hiring people of high integrity and honesty.
By doing this, we are putting procedures in place to protect ourselves from a high employee turnover rate and the associated costs of having to train another set of new employees. XI. EVALUATING SUCCESS Ultimately, we will have to look at ourselves in the mirror and evaluate the job we have done in India. While there are many factors to consider in this evaluation process, one of the biggest we will consider is our market share among Indian citizens. If we can gain 30-40%share in the first year of business and then 10-15% increases in each following year, we will dominate the technology market.
And considering Apple’s global presence in countries worldwide, we believe that these goals are fully attainable. We are also looking to post positive profits in each year, while maintaining a current ratio of 2:1. This will ensure that we stay in sound financial standing when dealing with our creditors in the case that we might need a loan to finance a specific business objective. We would also like to be fully independent from direct corporate influence within three years of our existence.
It will obviously take a significant amount of help from corporate to get the operation off the ground; nevertheless, we are hoping to create sustainable profits so that we have the ability to run the India unit efficiently and effectively. Customer satisfaction is also extremely important to our business environment, and as a result we would like to see a 10% increase in customer satisfaction for the first six years of operation. By establishing a stable and loyal customer base, we are then able to sell more products to a greater amount of customers who know and trust our product.
Finally as mentioned above, we would like to maintain at least an 80% employee retention ratio in the first three years of business. Doing so allows us to build employee morale, keep rehiring costs low, and groom domestic managers in the business. We feel as though all of these objectives are both realistic and achievable by setting the tone at the top of the organization 17 for a corporate culture of ethics and compliance. By following our strategic vision and following through on our key performance indicators, we are ensuring that our India operation will be both sustainable and profitable. XII.
EXECTUIVE SUMMARY Apple’s mission statement is, “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. ” , Which shows that apple cares for their customers and their commitment to innovate what today’s technology can make possible. Apples success can be seen through their annual revenue of $65. 2 billion dollars for the fiscal year of 2010. Apple has tried to make it their purpose to provide the leading technology in electronics for customers worldwide. The corporate structure is headed by company CEO and President Steve Jobs and headquartered in Cupertino, California.
Apple. has established a unique reputation for its customers. People count on Apple because of its uniqueness and ever-changing electronic ideas. The international business strategy the parent company uses is to maximize the value of a firm by high prices and high value. Apple’s basic business model is to sell at high prices because customers are willing to pay to obtain the products of high value and high quality. Due to the large size of the venture in India, an international business strategy will be used, because the products of apple are universal meaning the product can be easily used worldwide with change of language.
In the marketing planning for the next two years the main concern for apple is to become environmentally safe and become ego friendly. Apple plans to decrease or eliminate several of the dangerous chemicals from electronic products. Apple also wants to increase revenue with new products and update products to 65 billion dollars. Also, increase the number of employees in all departments and also explain the number of Apple Inc. stores location wide. In addition to, Apple is looked into several key laws in India including the major labor laws, banking regulation, accounting standards, the Indian judicial system.
The Apple brand is dominant for both consumers and business to business (Ribitzky, 2011). Nevertheless, apple wants to transition demand to a Greenfield investment in India and have a wholly owned subsidiary where apple can remain in control of the technical specs to allow for an easy transition. Apple is going to need to meet the location and experience priorities of India, which can be very costly. There are several ways in which Apple would be fund their investment which would come from multiple channels such as Inventory backed loans, giving a discount to intermediary companies, fronting loans from world banks.
Lastly, some key consideration for FDI plan is foreign exchange rates from the Indian ruby and the United States dollar. Nevertheless, FDI would bring some new employment rates to India and FDI would help the growing economy. Key Performance Indicators are crucial in measuring Apple’s success in India. By evaluating and measuring market share, overhead costs, inventory turnover, profit margin, liquidity, and employee retention, Apple will have measureable results in which to evaluate the business.
It is important to keep costs low in the expanding business environment in India, and by doing so Apple will create a sustainable and profitable business with a large market share. 18 Work Cited “APPLE INC (AAPL:US): CEO & Executives – BusinessWeek. ” Investing & Stock Research by Company and Industry – BusinessWeek. 26 Apr. 2011. Web. 26 Apr. 2011. http://investing. businessweek. com/research/stocks/people/people. asp? ticker=AAPL:US “Apple Inc. | Company Profile from Hoover’s. ” Hoovers | Business Solutions from Hoovers. 2011. Web. 2 Mar. 2011. http://www. hoovers. om/company/Apple_Inc/rtjcci-1. html APPLE INC. Form 10-K. EDGAR, Securities and Exchange Commission. Government of the United States of America. 25 Sept. 2010. 21 Apr. 2011 http://www. sec. gov/Archives/edgar/data/320193/000119312510238044/d10k. htm “Aspects of Hindu Law”. Date Accessed April 23, 2011. http://www. lexvidhi. com/article details/aspects-of-hindu-law-in-india-454. html Currency Converter. Yahoo Finance. Yahoo! 15 Apr. 2011 http://