Essay Sample on Apple's Impact on US Economy: $350 Billion Investment

Introduction

According to Petro (2019), businesses have a far-reaching impact on the economy of the countries and regions in which they operate. Managerial decisions of companies, including Apple, have a profound effect on the political and economic stability of their respective countries. Therefore, Apple's decision to give over $350 billion to the U.S economy in the next five years has a far-reaching impact on the country and the company (Wakabayashi & Chen, 2018). This paper discusses the implications of Apple's decision on the U.S policy, jobs, and other economic factors while considering that the company is already facing the challenge of declining innovation.

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Analyzing the Problem at Apple and its Significance

Moorman (2018) ascertained that Apple's decision to contribute $350 billion in the U.S economy over the next five years is a strategic response to addressing some of the substantive issues that it faces. The main problem at the company lies in its diminishing profitability due to the decreasing demand for its products. For example, Apple is increasingly recording a low demand for iPhones, which, in turn, culminates into lowered profits. The company faces the challenge of declining innovation, which limits its success in the technological industry (Raghunath, 2019). Also, most of the new products that Apple attempted to produce in the last three to four years face stiff competition with a plethora of potential substitutes and imitations.

Apple's leadership turned to increase the prices of its products, including iPhones, as a solution to this challenge. However, the price increment is not a sustainable strategy for growing the business of Apple (Petro, 2019). Many customers interpret the high pricing model as an exploitative strategy instead of associating it with the high-quality products and services offered by the company. Hence, addressing the current challenge is highly critical in ensuring that Apple goes back to its original operations. Apple's decision to bring $350 billion in the U.S economy is crucial because it will lead to the creation of approximately 20,000 new employment opportunities alongside opening a new campus to steer innovation (Balakrishnan, 2018). Hence, it is viable to undertake the decision of funding the U.S economy to realize such vital benefits.

Background Analysis

Petro (2019) ascertained that Apple was a highly innovative organization that achieved rapid growth in the global technological and retailing industry following its foundation in April 1976. Apple recorded a remarkable increase in its size alongside this rapid growth. Apple was the first public company in the U.S, with a total valuation of more than $1 trillion in August 2018 (Moorman, 2018). The tremendous growth that the company recorded in the global technological and retailing industry also allowed it to reach a total size of 504 retail stores located in approximately 24 countries in the same year (Raghunath, 2019). Currently, Apple employs more than 123,000 employees on a full-time basis (Zhang, 2018). Apple's highest profit-generating business is the iTunes store, which also doubles as the largest music retailer across the world. Apple's rapid growth also came as a result of multiple acquisitions that led to a tremendous increase in the demand for its products and culminated in high profits and sales revenues. For instance, the company acquired Shazam at the cost of approximately $400 million in 2017 (Satariano & Chapman, 2017). Shazam is a music application that almost doubled its revenues by identifying music, television shows, and movies basing on a short sample played by the customer.

However, different factors contributed to the current problem of declining innovation experienced at Apple. First, the company experienced a reduction in demand for its products and services across its major markets (Zhang, 2018). Secondly, Apple is suffering from declining investment in innovation, which implies that the company can no longer develop high-quality and competitive products rather than improving the existing ones by launching new series. Lastly, Apple suffered from reduced sales revenues and profitability resulting from stiff competition from major industry players such as Google, Microsoft, Amazon, Huawei, and Samsung (Stoller, 2017). However, Apple also faces numerous acquisitions, including participating in anti-competitive behaviors, tax avoidance in some jurisdictions, rash litigation, environmental destruction, and labor exploitation. For instance, the Institute of Public and Environmental Affairs (IPE) in Beijing found Apple liable for participating with its suppliers in China to discharge polluted waste alongside highly poisonous metals into the adjacent communities and threatening public health (Raghunath, 2019). Such accusations also contribute to Apple's challenge of declining innovation and reducing profitability.

Legal and Economic Issues

According to Kubilay (2015), Apple operates in an industry characterized by multiple legal issues, such as the government antitrust policies that have a remarkable effect on its sustainability. Antitrust policies are a set of laws and statutes created by the U.S federal government to provide adequate protection for its citizens and other consumers against exploitative business activities. These laws promote fair competition in a free-market economy. The violation of these policies can affect business operations through increased lawsuits, fines, and damaged reputations (Raghunath, 2019). For instance, in 2013, Apple lost an appeal against the U.S Department of Justice's decision that found it liable to the unethical business practice of fixing the prices of eBooks. The technological firm paid a total of $450 million in damages in case that contributed to a damaged brand image and reputation (Palmer, 2019). The department of Justice interpreted Apple's behavior as exploitative.

On the other hand, different economic theories can help in analyzing the challenge facing Apple. For instance, the concept of price elasticity, which is a measure of the link between a shift in the quantity of a product demanded and a corresponding change in price (Kubilay, 2015). Analytically, Apple's declining profitability is a result of failing to respond to changes in the demand for the product (Wakabayashi & Chen, 2018). The consumer demand for most of Apple's products is declining due to the availability of cheap substitutes. Therefore, the company must develop unique strategies to fix its prices and, in turn, increase demand. Another critical theory is the need to understand the impact of supply and demand on Apple's operations. In economics, an increase in demand for a product may lead to the rise in its price, which in turn ensures that the quantity of a product supplied equals the demand (Palmer, 2019). However, declining demand may be a result of multiple substitutes in the market, which may require the organization to reduce its price to attract customers, as seen in the case of Apple.

Recommendations

Apple's decision to bring $350 billion in the U.S. economy is a vital move. However, the company should consider different legal, economic, and political realities associated with its decision (Wakabayashi & Chen, 2018). There are various recommendations that Apple must consider. First, the organization must address its legal issues of labor exploitation and environmental pollution such as that experienced in Beijing to build its reputation and create a positive brand image before its customers. Secondly, Apple should conduct a detailed analysis of the forces of demand and supply to come up with appropriate prices of its products to solve the issue of reducing profitability. The company should also come up with new products and services to increase its profitability and, in turn, address the issue of declining innovation (Moorman, 2018). Lastly, Apple should analyze its decision to fund the U.S economy and the involved political realities such as competitors viewing it as a way of trying to blackmail the government in its favor.

Conclusion

Apple's plan to release $350 billion in the U.S economy over the next five years comes with multiple economic, legal, and political issues. The company should ensure that this decision solves most of its problems and repositions it as a sustainable organization. For instance, Apple is already experiencing declining profits and sales revenue alongside its diminishing focus on innovation. Finding new ways to develop more products and attract customers can help Apple to solve its problems, as discussed in this paper.

References

Balakrishnan, A. (2018). Apple announces plans to repatriate billions in overseas cash, says it will contribute $350 billion to the US economy over the next 5 years. CNBC. Retrieved from https://www.cnbc.com/2018/01/17/apple-announces-350-billion-investment-20k-jobs-over-5-years.html.

Kubilay, I. A. (2015). The founding of apple and the reasons behind its success. Procedia-Social and Behavioral Sciences, 195(1), 2019-2028. Retrieved from https://www.sciencedirect.com/science/article/pii/S1877042815037015.

Moorman, C. (2018 January). Why Apple is still a great marketer and what you can learn. Forbes. Retrieved from https://www.forbes.com/sites/christinemoorman/2018/01/12/why-apple-is-still-a-great-marketer-and-what-you-can-learn/#1b0885ea15bd.

Palmer, B. (2019 May). Understanding antitrust laws. Investopedia. Retrieved from: https://www.investopedia.com/ask/answers/09/antitrust-law.asp.

Petro, G. (2019 June). At its Core, Apple is no longer innovative. Forbes. Retrieved from https://www.forbes.com/sites/gregpetro/2019/06/07/at-its-core-apple-is-no-longer-innovative/#433885c1196d.

Raghunath, A. (2019 September). Apple eyeing Foxconn's labor violations for iPhone 11. Market Realist. Retrieved from https://marketrealist.com/2019/09/apple-eyeing-foxconns-labor-violations-for-iphone-11/.

Satariano, A. & Chapman, L. (2017 December). Apple buys Shazam to boost Apple music. Bloomberg News. Retrieved from https://www.bloomberg.com/news/articles/2017-12-11/apple-buys-early-iphone-app-hit-shazam-to-boost-apple-music.

Stoller, K. (2017 May). The world's largest tech companies 2017: Apple and Samsung lead, Facebook rises. Forbes. Retrieved from https://www.forbes.com/sites/kristinstoller/2017/05/24/the-worlds-largest-tech-companies-2017-apple-and-samsung-lead-facebook-rises/#4986491ed140.

Wakabayashi, D. & Chen, B. X. (2018 January). Apple, capitalizing on new tax law, plans to bring billions in cash back to U.S. The New York Times. Retrieved from https://www.nytimes.com/2018/01/17/technology/apple-tax-bill-repatriate-cash.html.

Zhang, Q. (2018). Research on Apple Inc's current developing conditions. Open Journal of Business and Management, 6(1), 39-46. Retrieved from https://file.scirp.org/pdf/OJBM_2017122515255786.pdf.