Managing Risks: US Trade Policy's Impact on Apple's Operations

This report examines the implications of US trade policy on Apple Inc.'s global supply chain and business operations. It begins with an executive summary and table of contents, followed by an introduction that highlights the significance of managing strategic resources and operations in the context of a changing global trade environment. The report then provides an overview of Apple Inc., discussing its products, mission, and market orientation. The core of the report analyzes the risks associated with US trade policy, including the impact of tariffs on Apple's accessories, the fears raised by suppliers regarding the US-China trade war, and potential worldwide implications. It explores the linkages between Apple's operations and the LB5230 theory, focusing on capacity planning and its importance in the company's strategic approach. The report concludes by summarizing the key findings and recommendations for mitigating the identified risks and sustaining smooth trading proceedings with foreign nations. The report utilizes various sources to support its arguments and provides a comprehensive analysis of the challenges and opportunities faced by Apple Inc. in the context of global trade and supply chain management.

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Executive Summary
For a long period Apple Inc has been recognized as a shining example for business enterprises’
seeking to efficiently create user-friendly as well as well-designed products. Apple’s successful
supply chain relied greatly on maintaining strong associations with their suppliers thus providing
them to provide a platform to show extensive flexibility at time of releasing any of its new
models in the market. Substantial rate of evolution as well as changes have been catered for by a
considerable level of production capacity which has been fed by Apple’s revenues and profits.
However the supply and demand chain has been currently threatened by the US trade policy
change by the US President which has serve an influential role in the trade and business
operations of Apple Inc. The paper provided comprehensive information about the way US
Government’s evolving position in relation to global trade has posed risks to Apple’s global
business processes and further provided set of recommendations in order to mitigate such threats
and sustain smooth trading proceedings with foreign nations.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Overview of the Apple Inc..........................................................................................................3
Risks associated to US trade policy to Apple’s Business operations..........................................4
Apple accessories facing risks from US policy tariff threat........................................................5
Apple’s Suppliers Raised fear over US-China trade war............................................................6
Potential US Trade Policy Evolution bringing Worldwide Implications....................................7
Linkages between the Apple Inc’s operations and LB5230 theory.............................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
Every business enterprise executes their business operations with the help of their level of
competence, capability as well as knowledge of Managing Strategic Resources and Operations
Management. All companies have to compete in similar forms of business environment which
tend to influence the course of business operations. Companies which can best utilize its
resources typically attain a higher competitive advantageous position in the market. Such
utilization, however, can be efficiently maximised by reducing waste and expenditure and also
through the increase of productivity as well as a rate of operation (Pisano, 2015). Apple Inc, an
American multinational company has been identified for involving the application of decisions
of operations management in order to ensure that the wide-ranging aspects of the business
execute in an efficient manner (Higgins & Rothstein, 2018). The following report evaluates the
way risks associated to US trade policy have its implications on the business operations of Apple
Inc in its supply and value chain management. In addition to this, it will analyse the responses of
the global government to US trade policy and risks and threats posed to Apple Inc’s supply
chains and operations.
Discussion
Overview of the Apple Inc
Apple Inc incorporated in the year 1977 designs, manufactures as well as markets mobile
communication along with media devices and portable digital music players. Apple founded by
Steven Paul Jobs has exhibited its commitment in bringing exceptional personal computing
experience to educators, students, customers as well as creative experts across the world through
its highly innovative hardware, software and digital offerings (Apple.com, 2018). The
company’s mission statement further exhibits an exclusive core value and superiority by being

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the most efficient and distinctively purpose to outperform their competitors in the market.
Regardless of extensive evolution that has been produced in the industry, the level of
commitment and efficiency in offering innovative products have remained significantly constant.
The company’s core purpose essentially centres on providing a highly comprehensive computing
experience to its targeted customer stakeholders which correlates with the company’s mission
statement to provide exceptional computing products for everyday customers (Apple.com, 2018).
Apple constitutes a strong market orientation because of its innovative decision making that
relies on customers’ needs and demands. The company has obtained huge achievements as it had
been able to anticipate customers’ actual demand and expectation before a market exists for it.
This level of competence has been distinctly signified in the development of iPad (Cline, 2018).
The company has obtained substantial prominence for its marketing of a wide range of
related software, services, third-party digital content and applications and other networking
solutions. The company successfully sells and delivers digital content as well as applications
through iTunes Store, Mac App, iBook Store, television APP Store and Apple Music. Apple Inc
sells its broad range of products through its retail stores, online as well as the direct sales force in
the course of third-party cellular network carriers, value-added resellers, wholesalers as well as
retailers (Apple.com, 2018). Apple further sells a range of third-party Apple compatible goods
and products which includes application software and accessories through retail as well as digital
stores and sells to consumers along with small and mid-sized businesses, ventures and
government consumer base (Barrabi, 2018).
Risks associated to US trade policy to Apple’s Business operations
As the US President has initiated his administration as the 45th President of the United
States, several market investors, as well as policymakers, have been speculating implications of

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the occurrence of Trump’s implicit threats of a trade war with China. Waters, (2018) reveal that
the materialization of trade wars between the two largest economies of the world tend to pose a
greater degree of harm to American companies in comparison to the Chinese business
enterprises. Wide-ranging companies listed on the MSCI U.S index have a higher level of
reliance for at least 10% of their sales as compared to Chinese enterprises which extensively rely
on the United States for similar amount of business (Waters, 2018). Furthermore, US business
firms with substantial percentage of sales are reported to generate from China and thus have
higher propensity to have threats ranging from the effects of trade war. This current export issue
has been identified as a critical factor for Apple’s business operations (Cline, 2018).
US-China Trade War
Source: (Waters, 2018)
Apple accessories facing risks from US policy tariff threat
Apple’s rapid growing division which incorporates Apple Watch, AirPods earphones and
other digital accessories have been experiencing severe threats because of US President Donald
Trump’s current policy proposal. The policy significantly mentions striking a 10% tariff on
goods received from Chinese importation. Though Gaus, (2018) reveal that the tech group’s

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produced merchandise such as iPhones and Mac computers have been exempted from any forms
of US levies or taxation processes. However, the digital devices which constitute the
massiveness of Apple Inc’s vast ranging product unit have been experiencing extensive threats
from the recent intimidating trade war posed by the US President. Furthermore, marketing
analysts indicate that the company could further be forced to elevate its price range that is
offered to the US consumer base (Barrabi, 2018). The price increase has been proposed to
recompense for higher taxation duties relied on the Chinese manufacturing products or to exceed
profit margins.
Reuters, (2018)further explored that the emerging trade rhetoric between US and China has
been posing extensive threats to supply chain process of Apple Inc thus leading to the company’s
share price for its next manufacturing of iPhone. However, marketing analysts are of the opinion
that the strike of US policymakers can also pose impacts on Apple’s competitors such as Google
Home, Amazon’s Echo and Sonos along with the product range of Fitbit’s smartwatches. With
the sudden deliberate growth of Apple’s iPhone, its digital accessories range has been identified
as a vital source of revenue (Bbc.com, 2018). With the company’s expansion into the domain of
wearable technology as well as audio accessories, Apple is expected to execute its business
operations strongly into the division. However, reports by White, (2018)state that the US
policymakers have pointed Apple as an important beneficiary of Trump’s policies whereby
Apple’s current strategy to repatriate major proportion of its $260 billion investment and
revenues much of its shareholders through the process of share exchanges.
Apple’s Suppliers Raised fear over US-China trade war
Apple Inc as an international company has been executing its operations in over 14
countries outside the United States with its fundamental focus on high end products which

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determinedly establish its home market in the United States as a country constituting substantial
consumer expenses. The revenue growth of the company has increased considerably in China
over the past year with a rise of around 30% (Reuters, 2018). However, the recent emerged US-
China trade war is seen as a new challenge for suppliers of iPhone components which could
greatly distress the Apple supply chain. While Taiwan Semiconductor Manufacturing Co Ltd is
responsible to manufacture major proportion of Apple’s core processor chips at its
manufacturing plant in Taiwan, half of its $34 billion in gross incomes are generated from its
mobile devices (White, 2018). This revenue generation, however, has the propensity to be highly
impacted by the threats of the US Government’s trade policy.
Meanwhile, Barrabi, (2018) distinguished that Apple Inc’s suppliers without major
production sites outside China have been encountering extensive risks in which electronic
manufacturers like Foxconn, Wistron have also been anticipated to be under serious pressure.
However, even if the taxation rate has been formulated to curtail the impact on business
enterprises such as Apple Inc, it is of a high potential that a significant section of Apple’s
component supply chain will face serious challenges in the export market (Gaus, 2018). Though
Apple’s end products may develop the potential to escape the strict tariff net has been discarded,
however, it is highly inevitable that there will be a certain degree of impact on its supply chain
process as many of the company’s components involved have the tendency to get affected
(Paquette, 2018).
Potential US Trade Policy Evolution bringing Worldwide Implications
Paquette, (2018) indicates that US law provisions could facilitate the US trade policy
changes in order to elevate taxation charge and further restrict imports or departure from US
trade agreements without congressional acceptance. However, less divisive actions might involve

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stimulating the US International Trade Commission to seek trade resolutions as well as
enforcement actions under current US countervailing taxation law. Businesses which essentially
depend on open trade with nations which could be positioned high on US trade policy changes
for unilateral trade assessments like China and Mexico will have to take such policy evolutions
into utmost consideration (Hedrick-wong, 2018). Business enterprises, as well as investors which
further rely on Foreign Trade Agreement between the US and other nations due to investment
sources or other factors of current or strategized business operations, might have the tendency to
be exposed to the US trade policy changes. However,(Gress, (2018) anticipate that in such an
inconsistent trade environment, competitive companies are seeking for alternative options for
their supply and demand chain and exploring areas of opportunities for legal resources such as
World Trade Organization (WTO) proceedings.
The ability to emerge economies such as China to compete with rich financial systems
primarily depend on their ability to successfully avail as well as adapt the most effective
technologies in the world. These conditions have led the United States to initiate these measures
in the process of retaliation for China’s poor statistics on intellectual property rights protection
that involves requiring multinational companies to transfer their expertise as a provision of
investing in Chinese markets (Long, 2018). As a result, there has been a substantial threat for
both the US and China. However, the US-China trade war would not be consequential as being a
saviour for US technology or facilitate US MNCs like Apple with improved accessibilities to
Chinese markets (White, 2018). Furthermore, it has been observed that though China has kept
negotiations open for the United States, however negotiation can only take place when there is an
importance of mutual respect with equality good faith as well as credibility.
Linkages between the Apple Inc’s operations and LB5230 theory

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Apple Inc fundamentally focuses on extensive capacity planning to effectively achieve
the company’s strategic business goals and objectives. The company has been using capacity
development approach in terms of the expansion of demand (Apple.com, 2018). This strategy,
however, signifies that a rise in capacity essentially relies on factors related to strategic
objectives, cost of development and operations. According to Higgins & Rothstein, (2018),
Apple asked its smartphone suppliers to produce between 85 million and 95 million units
combined of two the newly launched iPhone models with 4.7 inch and 5.5-inch displays in 2015
(Ians, 2018). These new iPhone models have been identified as the next generation of phones
following to the exceptional success of the iPhone 6 as well as iPhone 6+ that has made a
substantial contribution to Apple in developing as world’s most profitable business enterprise.
The company currently depends on two primary assemblers for manufacturing its smartphones.
However, the capacity expansion of Apple needs to be strongly aligned with new product
development. Pisano, (2015) reveal that Apple Inc has launched new iPhone models in a
“ticktock” cycle in which in a tick year (2014) the company released a major design change such
as the larger screen displays which featured in the models of iPhone 6 and iPhone 6+.
Meanwhile, in the next ‘tock’ year (2015) Apple improved its previous strategies and designs to
produce more significant transformations to the software (Higgins & Rothstein, 2018).
Conclusion
Therefore, from the above discussion, it has been stated that Apple must publicize its
investments in the Chinese financial system and purposefully create as well as support over 5
million jobs in China to maintain smooth relation with the country.
The company must focus on providing a substantial level of iOS developing related
employment along with iOS ecosystem-based jobs to increase the level of employment in China.

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Furthermore, on the basis of monetary investments in China that incorporates around
$500 million assurance in setting up R&D centres in China, Apple must exhibit a substantial
level of enthusiasm to appreciate Chinese regulators in comparison to other business enterprises
like Alphabet along with a high level of understanding towards public opinion.

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References
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