Apple Inc. Case Study

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Executive Summary

Apple Inc. is an American multinational company that designs, manufactures, and sells consumer electronics, computer software, and personal computers. The 5 year total return performance on Apple stock has been 370%. The reason for this growth is two-fold: the technology sector has transformed and Apple has capitalized on this wave of technological dependence. Apple has captured the market through improving existing technology and creating demand for new products through pervasive transformative innovation. While Apple is enjoying market dominance in the United States, its growth depends on the production of new and improved technology for emerging and developed markets.

Apple has yet to demonstrate true multinational flexibility; however, Apple’s iPhone is an initial attempt to penetrate emerging markets with a product aligned with local customer demand and buying power. Forecasts show that the iPhone is where the international growth opportunity exists. But Apple needs to open its software to outside hardware to compete in the global market. Unless Apple addresses the needs of low and middle of the pyramid markets, global penetration will be challenging. Apple needs an array of models from low to high-end to compete in emerging markets. Apple should disrupt these markets by leveraging its core capabilities to come up with “frugal innovations.”

The purpose of this report is to inform Apple executives why it would be vital to expand their technology in a diverse manner in emerging markets like Brazil or China that is continuing to advance in its financial & corporate business ground. Brazilians and Chinese are known to be personal and committed to the organization, thus building a strong relationship can last for many years. Throughout the report, each component of CAGE framework reflects direction providing details about the respective variables and how Apple can benefit expanding their business in Brazil or China. Furthermore, the different parameters allows Apple to see how to interact with different countries and how the company can leave an instrumental impact on the culture and continue to thrive as an enterprise.

China offers a wealth of opportunities for business expansion. Though the country maintains a large gap between the wealthy and the impoverished, China’s upper middle class represents a growing consumer population expected to increase from about 14% of 256 million in 2012 to 54% of 357 million by 2025, an increase in upper middle class consumers from 36 million people to 193 million people (as per Ref.). While China represents a vastly different culture from the U.S., Apple has significant experience dealing with such cultural dimensions through its foray into other Asian countries.

Brazil is forecast to be among the world’s fastest-growing economies for the next several decades. By 2050, Brazil is predicted to be the world’s fifth-largest economy. The country possesses vast natural resources, sizable pools of labor, growing productivity and high investment rates. The economy still remains relatively less open to trade compared with other fast-growing emerging market countries. Brazil has gradually been opening up its markets and lifted barriers to trade. While still primarily a domestically-focused economy, a boom in the global demand for raw materials and increased openness has improved the share of imports and exports to a quarter of GDP in 2007. Going forward, a combination of capital accumulation, population growth, and total factor productivity should continue to boost growth. In terms of productivity, increased human capital associated with a growing middle class should be a significant driver of economic expansion. This should help move Brazil rapidly up the value chain in terms of its commodity and raw materials sector and further expand its manufacturing base. However, it is widely believed that corruption is siphoning billions of dollars from Brazil annually. Foreign direct investment is also affected, if not relatively discouraged, by the so-called Brazil cost – the combination of state inefficiency, corruption, economic instability, among others.

Taking this into consideration below is a brief description that explains the CAP and the CAGE factors. This is followed by providing a recommendation based on the Adjusted CAP graph and the CAGE scoring as to which country should be selected by Apple executives for further market penetration. It is also important to recognize the attractiveness of a product by understanding the local competition, buying behavior of the consumers within each of these country.

Brief description

The attractiveness of the Apple’s iPhone market indicates the desirability for the company to enter and compete within each market ‘Brazil’ and ‘China’ that are being analyzed. Factors that indicate an attractiveness of country include growth rate of the market, potential for short term as well as long term profitability, limited market competition within the country, and good infrastructure etc. ‘Glocalization’ proves to be effective in reaching the top and most importantly the middle segments of the market in the developing world by innovating customized product for the consumers in these countries.