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Apple Swot Case Study

Autor:   •  August 3, 2018  •  Case Study  •  2,710 Words (11 Pages)  •  39 Views

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Steve Jobs and Steve Wozniak founded Apple in 1976 with the mission “to make a contribution to the world by making tools for the mind that advance humankind” (The Economist, 2009, p. 2). Today, Apple is the most recognized brand and largest technological company in the world (Badenhausen, 2016, p. 1). Despite the company’s success, Apple has caused much controversy as the European Commission has accused the company of exploiting cross-border tax laws. The commission claims that the Irish government is owed 13 billion Euros in unpaid taxed, despite the fact that Ireland does not want the money (Bershidsky, 2016b, p 1). Furthermore, Barry Chang, the Mayor of Cupertino, has accused the company of tax avoidance, stating that “Apple is not willing to pay a dime” (Statt, 2016, p. 1). The purpose of this paper is to analyze the environmental business of Apple and to provide an in depth analysis of the issues facing the company with actionable recommendations.

One of the greatest challenges Apple is facing is the political and legal environment within the European Union and China. As discussed above, Apple is accused of tax avoidance within the EU. Moreover, the OECD is leading the way globally, to minimalize tax avoidance (The Economist, 2016a, p. 2). Apple is further faced with the uncertain political and legal unrest within China. The economic downturn and rising expectations for increased wages and labour rights has caused significant labour unrest within the nation (French, 2016, p. 1). This could be problematic as Apple is heavily reliant on the lower cost manufacturing within China (Blodget, 2012, p. 1). This social and political unrest has led to ongoing strikes and protests, which can lead to major costs for businesses (French, 2016, p. 2). Furthermore, increased wages will increase the cost of manufacturing within China.

        In addition to the political environment, Apple has further complications due to the global economy. Apple is heavily dependent on global sales. CNN reported that two-thirds of the company’s sales are produced outside of the US (Long, 2016, p. 1). Apple CEO, Tim Cook, noted that major markets “have been impacted by slowing economic growth, falling commodity prices, and weakening currencies” (Long, 2016, p. 2). In addition to a slowing economy, the US has continued to maintain a strong American dollar (Long, 2016, p. 2). This can be problematic. The strong American dollar, combined with the economic uncertainty of Brexit and the depreciation of the pound, has caused Apple to increase the cost of its products by 25 percent within the EU (Hern, 2017, p. 1).

        Perhaps the most important influence on Apple’s successes comes from the company’s international relationships. As noted above, two-thirds of the company’s revenue is produced outside of the United States (Long, 2016, p. 1). For Apple, the current tax dispute within Ireland threatens the company’s relationship with the EU (Clovin & Derousseau, 2016, p.1). If relationships are not repaired, this may harm sales within the region and may diminish Apple’s reputation. Thus, it is imperative that Apple continues to maintain a good working relationship with the EU.

        The following table outlines Apple’s strengths, weaknesses, opportunities, and threats.

Strengths

Weaknesses

  • Strong brand awareness and reputation (Badenhausen, 2016, p. 1).
  • Customer loyalty.
  • Strong financial position (Badenhausen, 2016, p. 1).
  • High levels of cash flow allow the company to invest into acquisitions, research and design, and marketing.
  • Reliance on China’s economy and manufacturing capabilities (Blodget, 2012, p. 1).
  • Concerns regarding international relations with the EU (Cloven & Derousseau, 2016, p. 1)
  • High product cost.

Opportunities

Threats

  • The Internet of Things presents many opportunities and is expected to have rapid growth by 2020 (Business Insider, 2016, p. 1).
  • Enhanced services, such as Apple Pay, iHome, and Apple TV (Tilley, 2015, p. 1).
  • Increase distribution in foreign nations.
  • Brexit.
  • Strong American dollar (Long, 2016, p. 2).
  • Lawsuits and accusations of tax evasion, which could harm brand reputation. (Bershidsky, 2016b, p 1).
  • Rising labour costs in China.
  • Strong competition (Bershidsky, 2016a, p. 2).

The primary issue affecting the future of Apple is the raising concern of the company’s ethical standpoint on key organizational decisions. The company has taken a defensive approach in regards to tax avoidance and labour laws. Jones, George, & Haddad (2016) describe this approach as ensuring that employees behave legally and do not harm others (p. 111). The authors’ further note that when making ethical decisions, these managers put the claims and interests of the shareholders first, often at the expense of other stakeholders (p. 111). For Apple, this holds true in several instances. First, Apple is being scrutinized for its stance on corporate taxes and tax avoidance. Second, the company’s decision to manufacture its product in Chinese factories may be viewed as unethical compared to the standards of working conditions in developed nations (Blodget, 2012, p. 1). With a rising concern of lawsuits and damaged international relationships, Apple must change its ethical standpoint or the company may face further scrutiny.

The situation with Ireland is complex as the company is abiding by the law. The American tax system allows corporations to setup headquarters in low-tax countries such as Ireland (Statt, 2016, p. 2). Fast Company’s tax expert, Matt Gardner, stated that Ireland allowed Apple to create a complicated web of subsidiaries that allowed the company to avoid paying taxes (Sullivan, 2016, p. 2). In this instance, the EU could argue that Apple has taken an obstructionist approach and that Apple has taken advantage of the situation. The Economist (2016a) states that the arrangements made with Ireland violated the EU’s state laws (p. 1).

In addition to the European tax scandal, Apple faces accusations of tax avoidance within the United States and the city of Cupertino. Despite any resolution in Cupertino, the city’s Mayor, Barry Chang, has been very vocal about this issue. The Mayor stated that Apple pays a tax rate of 2.3 percent due to loopholes in the system and that the company should be required to pay more (Statt, 2016, p. 1).

Further complicating the matter, Apple is a publicly traded company on the NASDAQ (NASDAQ, 2017). Thus, Apple’s obligations are to please the interest of its shareholders, which in most corporations is to maximize profit. Apple’s shareholders are likely against paying these taxes, as it directly affects the company’s bottom line and return on investment. The same could be argued with its operations in China. While working conditions in China can be seen as unethical due to long working hours and little pay, the company is abiding with the law (Blodget, 2012, p. 1). Furthermore, manufacturing products within a developed nation would significantly lower the company’s profit margin (Blodget, 2012, p. 1). Many shareholders are likely against this action.

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