Challenges Faced by Apple Inc.: Risk Management and Strategic Planning

This report analyzes the challenges faced by Apple Inc. and the measures taken by the company to mitigate the risks and uncertainties. It also discusses the adverse selection and principal-agent problems faced by the company and the tools used to increase profitability. The report concludes that effective strategic planning and risk management are crucial for the survival of any organization.

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Apple
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Table of Contents
Introduction................................................................................................................................1
Recent activities in Apple Inc....................................................................................................1
Adverse selection by Apple and its implications.......................................................................1
Principal-agent problem.............................................................................................................2
Tools to increase the profitability..............................................................................................2
Organizational structure.............................................................................................................3
Conclusion..................................................................................................................................3
References..................................................................................................................................4
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Introduction
In this report, research has been made to analysis the company to evaluate its business
risk, adverse business condition principle-agent problems which company could have from its
business operations. The Apple Incorporation company has been chosen for preparing this
research. Apple Inc. is the biggest brand and company having wide coverage in the market
with the successful product line. Apple is considered to be as the most reported revenue-
earning company with $74.6 billion and with an outstanding profit of $ 18 billion in profits
for a single quarter. The company has faced many wars in the competitive world. In these
wars, the major include the clashed with the Samsung over design partners and market share.
Another example can be taken is of the Android acquired and promoted by Google. All these
conflicts have been resolved by winning Apple but the company is facing the problem in its
recent time which affect the mind-blowingly success of the company (iMore, 2018).
Recent activities in Apple Inc.
The recent activity done in Apple Inc. includes the launching of the new series of iPhone
which takes the sales of company downside. The company is found with decreasing sales in
the last few months which is considered to be the biggest issue faced by the company. The
company has faced many uncertainties and risk due to this. The uncertainties and risk faced
by the company include the lower sales by the company which is not expected (Lean Method
Groups, 2018). This launching of new product not only allows company to introduce its new
life cycle of product in business but also allow company to cope with the adverse business
market challenges.
From the research, it has been analyzed that the iPhone 8 series is not the problem but the
main reason for decreasing in the sale is the high price of the phone. Another issue that the
company is facing is the production challenges with the iPhone X (Forbres, 2013). Due to
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defects in the phone camera, people are switching towards the iPhone 8 and are not
demanding the new series in the market which is considered to be the big loss for the
company. As it new production is going in waste in recent time. Due to this issue, Apple has
received cutting orders from IPhone X suppliers. The effect of all these is reflecting in the
share price and the earning capacity of the company. The AAPL stock is showing the nature
of uncertainty and risk which the investor and shareholder in doubt whether to invest their
amount in Apple or not (Venture Beat, 2017).
To improve the performance in the market, Apple has taken steps in order to remain
competitive in the market. The measures have been chosen in order to manage the risk of
overproduction by Apple of iPhone X. the defects in the product has been solved on the
highest priority by the Apple (The Mac observer, 2010).
Adverse selection by Apple and its implications
Apple Inc. has found while taking an adverse selection of things which can take the company
in the wrong direction but due to the internal controls, it has been controlled. The proper
check has been started by the company on the production of iPhone X and sale of iPhone 8
(Forbes, 2013). For increasing the sale of iPhone 8 in the market, Apple decreases the price
of the product in the international market so that company will not lose their market share
globally and able to maintain their position in the market.
Another thing that Apple Inc. able to do this is making the defects in the camera of iPhone X
from it by setting and arranging a proper team of research and development department. This
makes the defects in phone corrected from which the company gets the good image in the
market again. By implementing these activities in the organization, Apple regains its image in
the market and its share value also (The Motley Fool, 2017).
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The steps taken by Apple are the best suit in their industry and are considered to be the best
way to simplify the wrong decisions (Liu, et al. 2011). To reduce this effect on the company
and its operations, Apple has taken many steps in order to control the effect. Like Google,
Apple has also its lean innovation programs fine-tuning and improving its internal process.
Make the step of control at each step so that the accountability and responsibility both get
increased in the organization. Not only this apple formed the senior and subordinate
relationship and establishes a span of control in which every staff has been reviewed by one
of the seniors. Senior is also reviewed by the other head level management in the company.
This has made the hierarchy in the organization and establishes good control in the
organization (Quora, 2018).
Principal-agent problem
Moral hazard is a situation faced by the company when one party gets involved in the risky
event by knowing that the other party will bear the cost, but both the party have incomplete
information about the risk and uncertainty, parties are going to face. Apple is also facing such
type of issues in the company (Khan, Alam, & Alam, 2015).
The biggest moral hazards faced by Apple have been done in paying the tax payment to the
Australian government. Apple has estimated pre-tax earnings in Australia of only $88.5
million after it has sent an estimated $ 2 billion of income from its Australian sales to Ireland.
Apple pays no tax in Ireland and managed in California also. As Apple pays no tax in the US
as there is a law in US registration of the company in the US is eligible for paying the tax
(Sama , et al. 2014). This has been considered as the moral hazards done by the Apple in the
country by taking advantage and saving their tax and increases their profits amounts (Forbes,
2011).
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The best practices used in the industry to have a safeguard from the moral hazard is that
registration should be done in the country where the company is operating and another step
can be taken is that both the parties should have complete information about the risk
associated in the event. This can know when both the parties decide in advance all their
information with each other (Silva, Rodrigues, Coronado & Saleem, 2015).
The principal-agent problem is common in all the companies irrespective of its size and
nature. Apple is also facing the same issue with their shareholders and management. In apple,
the shareholders are found to have more power than the management has in the company.
Due to this, they have a monopoly in the company and has the capability to take the more
share of profits from the company (Attest, 2018).
Tools to increase the profitability
There are many tools used by Apple in order to improve productivity and aligning the
incentives in the company. Major role in increasing the productivity of the employees goes to
the human resource department which are recruiting the most efficient candidates in the
organization. Another way to improve work in the organization goes to the management level
in which the allocation of work in which manner. The allocation of work in Apple is done in
accordance with the level and experience of staff from which the best performance is the
result (Sunyaev, et al. 2014). As it has been analyzed from the research that the leadership of
Tim Cook and Steve jobs are working best in the organization as their direction are working
in the right direction and people are getting their job and work right in which the organization
wants (Forbes, 2013).
Increasing the productivity in the organization will also contribute to increasing the bonus
and incentives to the staff and other level employees? High productivity leads to the high
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revenues which in turn results in the incentives to the employees for good performance
(Investor Place, 2017).
Organizational structure
The organizational structure of Apple is found to be hierarchical in nature while having the
divisional characteristics and a weak functional matrix. However, the matrix project is also
promoted in organization structure in which expert from the different team come together to
work and undertake particular project. This means that all the information must be a move in
a uniformed direction from top to bottom and vice versa. Divisional characteristics in Apple
Inc. refer to the product based grouping within the Apple, such as for IOS and macOS (The
Monthly, 2014). This is helpful to mitigate the complex issues and challenges in effective
manner (Eng, & Lee, 2013).
The structure of Apple Inc. is found to be hierarchical in nature but other measures can also
be taken by the company to improvise their organizational structure. By changing the
structure, profitability can also be increased in Apple. As the new structure will able to
promote productivity and ultimately the revenues in the company. As productivity and
revenues are directly related to each other. Apple always makes a new way to deal with the
problem by making the new policies and ways implemented in the company. From these
steps, Apple Inc. management and shareholders try to control the problem faced by the
company in the market (Computer world, 2015).
Conclusion
From the above discussion, it has been analyzed that Apple Incorporation has hierarchal
characteristics of a divisional structure. Apple Inc. is considered to be the top brand in the
international market but is facing certain challenges in the recent time. In all its hard time,
Apple has faced many risks and uncertainties which include the risk of wrong selection,
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overproduction, decreased sales and many more. But Apple faced all the issue and grabs its
area in the market. Due to some selection and adverse market situation, problems have been
faced by Apple. From the report, it has been analyzed that certain moral hazards issues have
also faced by the apple but proper action has been taken in order to reduce it for the next time
by undertaking the company in a registration process. The crux of this research is that every
organization should use effective strategic planning and risk management plan to mitigate the
issues and challenges of the adverse situation which company could face. It not only increase
the overall return on capital employed but also allow company to survive in long run.
References
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https://www.askattest.com/blog/home/biggest-challenges-facing-brands-in-2018
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successful-company-in-history.html
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Forbes. (2013). The 5 Big Problems Facing Apple - None Of Which Is Too Much Cash
[Online] Retrieved from: https://www.forbes.com/sites/ericjackson/2013/02/26/the-5-big-
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