Research, discuss and identify how ‘globalization’ impacts business today, and what international managers must know to stay ahead of the game. Identify and discuss how outsourcing and off shoring contribute to globalization using a company case study to identify the challenges, opportunities and problems that globalization presents.
Globalization can be defined as a process of interaction and integration among companies and people together with government of diversified countries in which international trade is developed through outsourcing and off shoring. Intellectual communication skills and enhanced technology systems are key drivers of globalizations through which most of the organisations benefits in today’s era. Environmental, political and cultural impacts can be realised from globalization of companies that effects the developments of human and society in both positive as well as negative manner (Herrick, 2017). Globalization, outsourcing and off shoring are older methods in which companies had been seen trading in overseas countries along with making investments in distant countries. The present technological developments and consideration in diversified work cultures have made globalization process increased where most of the companies are being observed undertaking it. Since last few decades, world trade volume has increased 20 times and in between 1997 and 1999 alone and the flow of foreign capital has been increased nearly double as compared to previous years (The Levin Institute, 2016). Through cross border trade and migration, world has entered qualitatively into a new phase where economic development of nations is been observed greatly. To make this process more risk free, government have implemented various negotiable contracts and regulations to keep a close watch on outsourcing and off shoring companies so that breach of governmental compilation is minimised. Taking opportunities of business in fresh markets, corporate companies have built foreign industries for establishing production and marketing arrangements with diversified countries. Therefore, globalization can be interrelated with international financial business and industrial structure. The process of globalization impacts poor countries positively where economic growth and increased standard of living is supported by multinational company investments. For making accurate benefits out of globalization, organisations need to blend cost effectiveness associated with internationalisation together with sound managerial capability to mange globalization process (Faria, 2007).
International managers are the ones who work for the organisations with or through individuals across country boundaries to accomplish objectives and goals of global corporate. International managers needs to manage effectively in a diversified environment and shall be aware of cultural differences so that benefits of internationalization is realised to its maximum (Adlabjarnardottir, 2005). Surveillance of barriers related to global processes is also significant for which global managers are expected to be meticulous with models and principles related to globalization. An international manger should be able to manage groups while taking advantage of cultural varieties in teams for developing innovative and unconventional solutions. Such solution often brings success in organisation through global teams and diversity in work groups in addition to results in removal of cultural barriers. Inefficient managers does not realises significance of different cultures and therefore loses competency within organization. To gain superior competency power, cultural awareness along with team bonding is required to carry international projects efficiently (Tiwari, 2017). Comprehensive studies on leadership that was carried on the scaffold of global management defines leadership as a person’s ability to motivate, influence and enable others to give effective work results for the success of organisation. This means, attributes of global managers like charisma, willingness to change and communicational skills are highly required during globalization of companies. Negative leaders having qualities like asocial, loner, egocentric, dictatorial are the ones who provides negativity in workplaces and hence are the barriers of internationalization process. High-quality managers are always aware of consequences existing in industry as well as possess qualities to decide accordingly, keeping in mind the sensitivity related to the situation. Skills, traits and competencies are few keys to gain sound management quality that allows managers to provide with effective guidance to its subordinates (Szymura, n.d.)
Globalization had made many companies turn into multinational corporations while providing continuous development in the economy of countries. With outsourcing and off shoring activity, multinational firm do businesses at many countries across borders. Global business is perhaps the most significant factor in today’s world as it has made remarkable changes in the quality of businesses that are carried globally. World economy and management processes have been highly affected by radical changes and developments in international business standards through globalization. In order to utilise marketing opportunities, many companies went global by realising their business potential and have successfully established sustainable competitive marketing position in foreign markets (Golson, 1977). Transnational exchange of technology and demographic movement have been an important factor related to outsourcing and off shoring that has enabled many companies enter into foreign markets (Anon., 2013). This essay will make a study about the topic in a critical manner in which opportunities, challenges and problems faced by a company in its globalization process will be identified. Apple Inc. has been selected for a detailed analysis related to globalization, outsourcing and off shoring functions. The world is changing into a global village that has interlinked each and every aspect of businesses with each other through technology and media networking. Globalization has even helped people in getting desired products and services present anywhere in the world. The concept of outsourcing and off shoring has made globalization possible where a company outsources services and goods to another business to do particular task or processing (Zynczak, 2012).
Apple Inc. is an American multinational company that has stocks listed under NASDAQ and New York’s stock exchange. The corporation specialises in the development and designing of electronics along with manufacturing of smart phones, computers and software’s. There are multiple ranges of products and operating systems that deal in entertainment as well as educational software developed by the company that are extremely liked by people. The company had successfully established more three hundred retail stores in ten countries till the year 2010. Along with it, Apple Inc. offers online store dealing in company’s products to customers present across the globe. According to a recent survey, Apple has been nominated as top company dealing in technology and software related products even surpassing Microsoft. Apple Computer Inc. was established in the year 1976 and later was incorporated as Apple Inc. in the year 1977. By mutual consent, the founders of the company removed the word Computer from its name so that they can show their expansion in the world of software developers and other electronic products in the market.
Challenges faced by Apple Inc.
Although being top electronic company presently, Apple has to face constant challenges in global market. Aggressive competition and other market player’s gives company tough challenges which affect company’s sale and profits. Fujistu Technology Solutions, Media Net digital Inc. and International Business Machines are few direct competetors of Apple Inc. Rapid growth of technology and ever changing demands of people have made the needs of market more competitive in which survival without enabling sound management systems becomes impossible (Secretariat, 2000). In order to match up with the market, Apple had to reduce the prices of its products many times and have to maintain low profiteering business. This factor impacts company’s globalization process also since making huge investments for low profiteering business becomes very difficult. Product quality and placing factors in marketing mix strategy of Apple becomes more challenging for which making innovative designs along with latest software’s becomes necessary for the company to sustain in market. Presently, the company is focussing more on its expansion strategy to related business marketplace of smart phones and different communication devices. Moreover, the company has number of competitors who have enough resources that are capable of providing similar products like Apple Inc. in lesser price.
All the products of the company are designed in home country but Apple outsources few of its manufacturing parts in other countries also. Few of its costlier components are even manufactured by other brands and outsourced in various countries like Singapore, Taiwan, and Korea which are further assembled under one single unit. On the other hand, this outsourcing strategy has increased unemployment and downsizing in its home country. Along with providing success to other companies in global market, outsourcing has brought many manufacturing troubles to Apple. Some of its manufacturing units has shown managerial issues within them and have even been suspected of carrying unethical practices by suppliers. Suicidal case at Foxconn is one of the ethical blunders faced by Apple which has badly affected the reputation of the company (Lak, 2017). Unethical practices performed by subcontractors have also challenged the company during its globalization phase for which the company had to face breakdown in market shares many times (Sohail, n.d.). Manufacturing and design defects are major risks faced by high tech companies that often results in losing end users and customers. Apple has faced similar challenges while providing with new technologies even though it has been key player in technology industry. About 90% of the market uses Microsoft operating systems which has challenged the company in entering the present market. Many new companies are becoming globalized for which giving best price according to the market becomes difficult for the company (Pinto-Cardoso, 2016).
Why does Apple Inc. have vital accomplishment in global market?
The company have always focussed on highly innovative and technical products for developing consumer technology. Apple from the beginning has provided with limited editions in each category of product and wants to become leader in every consumer related technology field. Therefore, more attention has been provided by the company for gaining remarkable customer experience which has even made the company improve its products related to both hardware and software components. For Apple, globalization proved very advantageous as it brought force to the company for making faster innovations. Companies use global resources not only to make things happen faster but also to save money. Outsourcing manufacturing function of few expensive components to other brand manufacturer gave the opportunity to the company in reducing costs. Global companies are aware that economic resources of diversified countries can provide speed to their business by enhancing sales (Hovivian, 2017). The classic example is Apple Inc. where products are enabled through technological advanced way and is been outsourced to various countries by using effective supply chain. The countries in which Apple deals in are mostly developed or developing which has made the company realise fast sales along with speedy growth in those regions. Apple entering strategies allows the company to enter those markets where economic system of the country and its people allows them to purchase expensive products. Therefore, company can utilise its global resources in more enhanced manner. Innovation and creativity have also provided the company a base behind entering fresh markets. In global marketplace, global companies need to identify strengths of other competitors and combine the best possible resources for becoming the leader (RajaRajeswari, 2010). Apple with its efficient global team and sound management systems have always studied the country’s present organisations before entering that has provided a strategic plan for the company (Froud et al., 2012). By outsourcing few of its functions and giving franchise outlets ownerships to local authorities, entering became easier for Apple. Even the social networking of the company provides it with strong recognition in global market along with providing consumer preferences (Francis, n.d.). By sharing information about company’s resources and innovative designs, Apple has gained many customers choice for buying Apple’s products over the others. Apple has even gained opportunity during globalization phase through outsourcing manufacturing units in those countries where rival companies are present. This strategy of Apple seems to be more effective as the company gains attention of local people within fewer times. Moreover, by outsourcing functions, local people become indirectly attached with the company and start feeling a sense of ownership for the company (Temple Media Institutions, n.d.).
With distinctive business strategies and unique designs, Apple Inc has achieved reputation in global marketplace and has successfully developed loyalty among its customers. The products of the company transformed the business processes carried across borders by making them handy and easily accessible to each part of the world. By employing 43,000 people in America along with 20,000 employees in global units, the company has been able to expand its wings effectively. Presently, the company outsources its manufacturing function in Asian and European countries. Company’s global market success depends on extensive prominence on market exploration and development to cater diversified markets present in global marketplace. Companies expand its distribution network and outsourcing function to reach in global countries by offering best quality products according to the requirements of people (Kapoor, n.d.). Apple follows a system of house manufacturing that means all its products are designed and marketed in its home country which is US. For the production part, the company uses outsourcing strategy where products are manufacture in different countries with the help of global supply chain associates. For example, Foxconn in China are outsourced for production of metal components, subcontractor in Hong Kong produces iPod parts and Macs hard drives are manufactured by Japan and Korean subcontractors (Froud et al., 2012).
Problems faced by Apple Inc.
Like all global companies, Apple also had to face many problems in its growth phase. Although the company has many strengths and capabilities, responsibilities and reputation in technology industry has always made the success trail difficult for the company (Gurnani, 2015). Obligations and promptness faced by Apple while dealing with clients and its suppliers have made company make alteration in internationalization strategies many times. Samsung is one of its toughest competitors who have brought additional problems in the company by making similar products like Apple in more user friendly and cost effective manner. Costly products of Apple even have to face issues where customers prefer buying other brands rather than spending their entire salary in it. There are few countries that believe in home country productions and therefore restrict entry of foreign brands. Apple was also rejected by many countries and has to limit its operations in those countries due to which it started outsourcing and off shoring activities in those countries in relation with production part. Another factor that restricts Apple’s sales is its rigid operating systems that do not allow engaging other operating systems. Many people finds this feature frustrating and many potential buyers switch to other brands. Apple’s own operating system may bring monopoly to its company while providing strong point in technology business but, its weaknesses that Apps working in Apple phones can be downloaded only through Apple Inc. operating network makes other distribution channels against it. Steve Jobs tried his best to be ahead of the game and revolutionized the technology industry by making Apple ahead of all. With his death, people started believing that Apple will lose its charm and innovative ideas and therefore, the incident brought issues in its products marketing.
Problems related to production have given constant impacts to the company. Since the company is highly depended on outsourcing third parties and suppliers, any defect within them affects the overall name of Apple Inc. Licensing agreements and country laws makes difficult to find out when the materials will be available and since few of the Apple’s components are highly regulated by government, reliability on it has delayed the production scale many times (Jackson, 2013). Pricing has always been the biggest concern for the company as many competitors have been providing similar or better products in lower prices. Economic stability of the countries is highly responsible behind growth of global companies. Since Apple outsources its business functions to many countries, any political change or economic instability has affected the sales of the company’s products in those regions. Governmental policies have also affected the entry strategies of Apple where the company had to face many troubles. In relation to logistics and supply chain, this issue is huge. Apple follows written statements regarding policies towards ethical performance and supply chain. But have many times seen neglecting them (Sin, 2016). Lack of ethical governance added to the problem where suppliers of Apple followed abusive labour practices along with non compliance with country law. Therefore it can be said that ethically the company needs to work out more on its supply chain areas and outsourcing functions to remain sparkling in public image.
Globalization has cleared the way for global development of countries and holds benefits for all the members of global community. Looking on the impacts of globalization, both negative and positive effects of it are realised by companies as well as the nations. The positive influence of it is mostly recognised by developing nations where economic developments are made possible through foreign investments. More organisations are implementing globalization into their work force to remain ahead of their competitors. By making diversified global teams and efficient management strategies, global companies have been able to realise benefits of being global. In the above essay, outsourcing and off shoring functions of international companies have been discussed that shows that outsourcing and off shoring plays significant role in globalization process. After making a close study of Apple Inc. and its globalization strategies, this essay has provided with an example about the way global companies work and possible challenges and opportunities realised by them during their growth phase. Since Apple had efficient management with strong leadership control, the company flourished remarkably in global market thereby giving example to others who are still planning for implementation of globalization in their firms. On concluding note, Apple Inc. can be called as a leader of high end market who have not only provided a great example of successful global company but also helped many other taking idea regarding challenges and problems faced by global companies.
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