Apple is one of the most forward-thinking company in the world today and is always looking to expand its operations to different countries depending on what these countries stand to offer. Given that India is foreseen as one of the biggest consumer markets come to the end of 2025, it would be a great destination for Apple in its endeavors. With a population of over 1.2 billion people, India cannot be overlooked as both a means of boosting sales as well as a source of manpower. The Indian government has also been known to support foreign direct investment and therefore would be willing to welcome a company that brings jobs to its residents which makes the venture a win-win situation for both sides. Therefore, as Apple seeks to expand its operations, Indian is among the most beneficial definition where it stands to gain most by not only introducing its products but also setting up a firm that can conform with the culture of the country.
1. Introduction
Company basics
Ever since Apple Inc. was founded by the brilliant minds of Steve Jobs, Ronald Wayne and Steve Wozniak, it has become one of the most successful companies in the world. As a result of its success, the company has been looking to expand to other parts of the world especially in the Middle East countries where its stand to improve its operations and gain in terms of profits made (Yoffie and Penelope Rossano, 2012). Currently, the company operates in most parts of the globe including the United States and Europe, but as competition continues to blossom, it will have to enhance its position in the market by entering the less unpredicted markets. Apple deals with computer software and hardware, digital distribution of electronic products as well as consumer electronics such as watches and smartphones. Having expanded in most parts of the world, it is the high time that the company tries out the Indian market by fully entering it and challenging the domination of rival brands such as Samsung, Huawei and Nokia.
Country basic
India has been foreseen to be the biggest consumer market come to the end of 2025. The latter idea is based on the fact that India boasts one of the largest markets for consumer products especially based on its populous stature. India’s middle class which may provide for the largest market for Apple’s products is 300 million people thus equaling the whole market provided by the European Union. With the continuous improvement of the country economy, any visionary company would ensure it associates itself in the region to ensure that it takes advantage of the increased opportunities as a result (Majumdar & Chhibber, 2008). Located in the middle of South Asia, India stands second among the most populous country in the world after China as it has a population of 1.2 billion nationalists. The country also provides a wide range of skilled, unskilled and semi-skilled labor as a result of the extensive population with its labor force amounting to more than 520 million people. The labor is also known to be available at a considerably lower price compared to other countries especially in Europe thus making India a perfect locale to expansion operation for Apple (Dollar, Iarossi & Mengistae, 2012). The highly expansive population would also provide a large market for the company’s product as Apple looks to increase its sales and consequently some profits that it makes.
Purpose of expansion and project specifications
By taking its operation to India, Apple does not stand to be a failure but stands to reap the huge benefits posted by the expansive country. First, the company will gain from the expansive market provided by the 1.2 people in India and therefore will be able to increase the number of sales it makes in any given period and consequently increase on its sales. Additionally, Apple stands to gain from the availability of both skilled and semi-skilled labour from the Indian market which will help it to lower the costs of operations given that it incurs a lot of money in the companies established in the United States as well as Europe. Apple will also be looking to beat competition who have already established themselves in the Indian market given that it will be able to deal with the end consumers without having to consult the middlemen (Yoffie and Penelope Rossano, 2012). Furthermore, expanding to India will help the company understand the culture of the people in a more precise manner which will, in turn, help the company to lower cases of ambiguity and therefore produce the right and most accepted products for the customers. Additionally, given that Apple acquires most of their raw materials from the Middle East countries, it will be easy to lower the cost of transporting them by setting a production firm near the source of the raw materials thus lowering the cost and time spent to produce the goods. The company will also be able to understand the Middle East market in a better manner which will help it to target their products to people in these locations. This project will provide a deep analysis of why Apple should expand their operations in India, how they stand to gain from the investment, how the industry in India stands at the moment and the entry strategy that is most effective for the company.
2. Country evaluation
Economic structure, indicators and risk
The Indian economy can be described as a developing mixed economy, and the country has emerged as one of the fastest growing major economy in the universe. In the next 10 to 15 years, India is expected to be among the top three economic powers in the universe especially since its economy is backed by strong partnerships as well as a strong democracy (Majumdar & Chhibber, 2008). Currently, the country is at position six among the largest economies in the world based on nominal GDP while it stands third in terms of purchasing power parity. In terms of per capita income, India is ranked 139th across the globe. The country’s GDP is estimated to grow to 7.3 percent in 2018-2019 up from 6.6 percent in 2017-2018 (Dollar, Iarossi & Mengistae, 2012). Having retained its position as the third largest start-up base across the globe, the country is highly attractive to companies seeking to expand their market stake.
Risk
However, despite remaining as world-beating economic growth, India has a number economic risks that companies like, Apple, seeking to come in must beware of. First, a rise in oil prices and policy paralysis following the country’s federal element stands to push the rupee even lower. The country may also face emerging market stress given that the era of easy money is near (Dollar, Iarossi & Mengistae, 2012). At the moment, the rupee is performing very poorly in Asia which stands to dampen the optimism that has been key in propelling the local stock market too high levels. With such factors in place, investors must understand that the country’s economy is yet to get out of the woods and therefore chaotic situations may occur in future.
Financial structure, indicators and risk
The Indian financial structure plays a key role in mobilizing resources for development and economic growth in the country. Along with expanding a country’s financial services, the financial structure in India also plays a key role in deciding volatility and economic growth. The Indian financial system is mainly dominated banks as well as scheduled commercial banks. The countries rate of inflation stands at 3.77 percent while its consumer price index is at 140 Index points. GDP Deflator, on the other hand, is at 129 index points while the producer prices stand at 121 index points (Dollar, Iarossi & Mengistae, 2012).
With the introduction of new programs put in place to encourage economic growth and support the markets’ needs, the financial sector of India is poised to change. While there are increased efforts to lower vulnerabilities, the regulators are forced to ensure a close look into the domestic developments and come up with an effective and prompt response when called upon. One of the key financial risks facing India is growth given that high economic growth seems at odds with low credit growth since there is a lower flow of resources in the commercial sector thus lowering capacity utilization (Dollar, Iarossi & Mengistae, 2012). Another risk is the consumer price index based inflation which is expected to increase to approximately 6 percent. In recent years, the country has been facing a declining domestic saving and investment trends which may result from a reduction in the household saving rates.
Political structure and risk
The India government is also seen to be open for any company seeking to base operation within the country as it looks to ensure that its economy grows a move that can be hugely contributed to by increased operation from international companies. The Indian government has ensured that the economy is open to foreign investors as it ensures that its tax policy fits the bill and is attractive for any company that seeks to invest with the borders. The country’s economy is seen to be open for investments from different companies with the little bureaucracy involved when a company seeks to enter the region. India also boasts a reliable infrastructure that comes in handy in different operations which may include distribution and transfer of raw materials from the sources to the base of operation (Majumdar & Chhibber, 2008). Roads, power stations, waterways, seaport railways and airports in India are being funded by the country’s Planning Commission which ensures a good future for the country’s economy. Apple sells extremely prestigious and classy products thus require a well up society to ensure that makes reasonable sales a state that is provided by the Indian market. India has also experienced a long spell of political stability thus making the climate in the country favourable for any company’s operation as the production, distribution and marketing process seem to be smooth. The good relationship between India and the U.S. (Apple’s home country) also forms a good basis for the company to thrive (Majumdar & Chhibber, 2008). The two countries seek to increase their trade relations thus making such a move a highly encouraged venture for both countries.
Risk
The political stature of India seems to be highly attractive to businesses seeking to set their operation in the country. However, there are a number of political risks that investors have to consider before making such a huge decision as the company may have little or no commercial viability to future business and investment in the country. One of these risks is the increased unpredictability or adverse changes of pricing and tax standards in the country. Corruption and bureaucratic inefficiency risks are also pertinent in the country, and therefore any business seeking to set its operation in the country must consider how they operate in the country to ensure that they are not caught up in danger (Mehta, Armenakis, Mehta & Irani, 2016). Another risk that Apple must consider is the unexpected cost-overruns and delays that may result from the overlapping government jurisdiction. Analysing the political risk in a country helps in identifying, analysing and predicting major risks before making the actual commitment or investment and thus ensuring that the company does not end up making poor decisions leading to losses and quick turn-around.
Geography, natural resources and existing industries that impact current conditions
The country is diverse and has a distinct and varied geographical region where each has distinct festivals, customs, and language. India’s position in the Middle East can also come in handy for Apple as it looks to enter these new markets as the company can have a base from where it tries to penetrate into the other countries which offer similar benefits such as China and Pakistan. The country population has also been rapidly growing thus ensuring that the market will always be available. Presently, 70 percent of the people in India live in villages while they do agriculture while 13 percent in the industrial sector while service sectors comprise 17 percent (Majumdar & Chhibber, 2008). India also boasts a reliable infrastructure that comes in handy in different operations which may include distribution and transfer of raw materials from the sources to the base of operation. The existing industries in India including automobiles, consumer durables, aviation and banking will come in handy in enhancing the company’s status in the country by complementing the current conditions. The government of India has also been known to encourage innovation in its industries which can come in handy for a company like Apple whose main strength is based on innovation (Mehta, Armenakis, Mehta & Irani, 2016).
Risks
However, while Apple stands to benefit from the geography, natural resources and existing industries in India, it faces a risk of cultural differences and difficulties in adaption in the new country. Not every aspect of India is similar to that of the United States and Europe similar to the case of India especially due to cultural differences and therefore it is not easy to take advantage of these factors. The government may also be protective of the resources as it may fear that the foreign companies may end up dominating the local companies (Mehta, Armenakis, Mehta & Irani, 2016). Therefore, Apple may take time before settling in the new country which may derail its ability to take over the market and start making profits in the new region.
Overall risk indicators
Among the key risk indicators in India include the company’s ability to settle in the new country in a short time, corruption and political upheavals, culture differences, inflation rate, and failure to attract abled employees to enhance the company efforts to push their agenda forward. To ensure a smooth transition and settlement in the foreign country, it is important that Apple finds a way of mitigating these risks. This can be possible by ensuring that the company conducts sufficient research before making its way to the new location and set up the best way of ensuring that it does not fall short of the risk (Majumdar & Chhibber, 2008).
3. Industry evaluation: Describe the industry in the country.
Regulatory structure
The legal and ethical business environment in India is appropriate for Apple’s operation. Businesses in India must be operated under certain rules and regulation that are stipulated in different laws in the country. Some of the main laws in the country that affect business in India include the Indian sale of good acts 1930, Industrial Dispute Act 1947, Minimum wages Act 1948, Foreign exchange regulation act 1973, Consumer protection act 1986, and the Commissions for Protection of Child Rights Act 2005 (Majumdar & Chhibber, 2008). Most of these acts apply to the case Apple as it seeks to establish itself in the Indian market. According to the minimum wages act, 1948 require any company operating within the country’s borders to pay a certain minimum wage to their employees. The legislative protect workers in the country as it stipulates and can be considered as a hallmark for any developing country.
The minimum wage act can be considered as one of the basic premises of decent work and has provided for fixation and enforcement of its stipulations in respect of scheduled employment. The act plays as prevention for workers from being exploited while working in both the informal and formal sector. Currently, the minimum wage in the country increased from 100 rupees per day to 137 rupees per day which came into effect in 2007 (Majumdar & Chhibber, 2008). Apple would find such a regulation reasonable as the company can be able to acquire quality labor for considerable costs of labor. The Commission for Protection of Child Right on the hand provides for the children’s protection from cases of exploitation from any company that may decide to operate with India. In India, every individual under the age of 18 is considered a child and should not be under any formal employment (Bajpai, 2003). Thus, Apple will be forced to ensure that its employees are above the age of 18 to ensure that its operation is as stipulated by the Indian government.
Competition
While setting its operations in India, Apple will face both minor and major competition from other existing companies dealing with similar products. The company will have to deal with competition from both international companies and also those within the host country’s borders. Some of the major competitors that Apple will have to deal with while in India include Samsung, Nokia and Huawei who have already established themselves as players in the company (Yoffie and Penelope Rossano, 2012). Most of these companies have also been in competition with Apple in other markets such as in the United States and in Europe. Apple will also have to deal with local companies such as Micromax, Spice and Karbonn Mobile although these companies will offer minor competition given Apple’s financial status and ability to influence the market. However, the key competition will be Samsung which has been the major competitor for over a decade now as the two companies seek to expand their operations in new areas. Both Apple and Samsung are highly innovative and are known to come up with quality products, and therefore the fact that Samsung is already present in India will have to be considered given that they may have already controlled the available market thus making it hard for a new company to come in. all in all, given Apple’s capability in terms financial possessions, innovativeness, customer loyalty and ability to read the market, it will have an easier time settling in a new market despite the increased competition from existing companies.
Local financing options for the expansion
As Apple seeks to expand to the Indian market, it will be looking for local financing options to ensure that it has an easier time settling in the new market. One of the key financing options that the company can consider is the Indian government which is clearly encouraging the international company to settle in the country as it looks to expand its capabilities and improve its economy. The Indian government has a reputation of providing a politically enabling environment which ensures that international business is able to thrive within a short time of coming to the country (Mehta, Armenakis, Mehta & Irani, 2016). Furthermore, the Indian government can offer the tax incentive to Apple to ease the company’s penetration in the Indian market. Therefore, the government can form an excellent financing option for Apple given its financial muscle and connection in the country.
Another local financing option which Apple can access in India is through merging with an already established company in the country. Currently, some of the major players in the Indian smartphone markets include Micromax Mobile, Spice Telecom, I-Ball Mobile and Lava Mobile. While most of these company may feel threatened by an international company coming in to take a share of the market, they would be open for a company seeking to work with them to penetrate the market even more. Therefore, Apple should take time to understand the current players in the market before settling on the best merging plans in order to set off in the market (Mehta, Armenakis, Mehta & Irani, 2016). By colluding with an already existing player, it will be easy to reach the market as the existing company may have already created a ready market. Furthermore, Apple will not be forced to incur a lot of finances to settling its presence in the new market which will ensure an easy flow of activities in the new country.
Entry strategy
The best mode of entry that Apple can employ in India is having a joint venture with an already existing player in the market. In most cases, a joint venture tends to be equity-based where the new company set up with existing parties owning a proportion of the new business. For Apple, it would be better to form a joint venture with a company like Old Spice, an already established player in the Indian market, which has a similar focus in the market like Apple (Yan & Luo, 2016). Joint ventures are key for any business seeking to penetrate a new market, especially in an international scene. First, the foreign company is able to gain access to technology as well as core competencies from the local company. With such access to the technology, the cost settling in the new market is reduced as the host company stand to have done all the research required while the incoming company only has to provide positive advice to ensure that the settling in is done with ease (Yan & Luo, 2016). Joint ventures also provide access to distribution channels which ease the easy for a company seeking to make it in the electronic market.
The partnership that will be formed
By forming a joint venture with Old Spice, Apple can adapt to the Indian culture with ease and still target the same customers as it does in the United States and Europe. Currently, Old Spice is focused on the younger market especially people aged between 18-24 years and this could be easy for Apple given that Apple also tends to target customers within the same age group. Furthermore, Old Spice has already established a strong distribution channel which could be detrimental to the success of Apple given that it is going into a new country. With Old Spice also looking to establish their product to other parts of the world especially in the United States and European countries, the two companies will make a good team as both will be looking to acquire similar benefits from the joint venture. Old Spice is well known for its product quality which is also the same strength that Apple depends on to penetrate the market and therefore it will be easier for the two company to come together and work towards achieving a bigger market in the country. With Old Spice trailing behind Micromax in terms of market control in India, Apple will have an easier time convincing them to join their course of taking over the India electronic market.
A joint venture will also fasten the speed of expansion in the Indian market which will ensure that the competitors do not get a chance of making moves that would limit the effectivity of the company. The host company also stand to provide new insights and expertise in operation which will be key given that the incoming company does not fully know about the existing market (Yan & Luo, 2016). It will also be easy for the incoming market to understand the legal requirement of operating in the new country since the host country will provide guidance on how this will be achieved. The two companies can also share risks of loss by agreeing on how to share the profits and losses which will ensure that the incoming company will be at ease while engaging in the business (Yan & Luo, 2016). The two company can sign a contract which holds both in a temporal arrangement through which they agree to back off from the agreement in case it does not work.
5. Recommendations
Summary of findings
Given the huge opportunity presented by the Indian market, Apple stands a great chance of succeeding in the market in case it chooses to exploit these opportunities. The company has had an ever-growing urge to ensure that it can take its operations to other countries and produce the products in a way that will conform with the customers urge. By expanding to India, Apple stands to enjoy different benefits including sales expansions, increased profits, the growth of the company’s brand name while the company will successfully seize the chance to beat off competition in their own yard. With the large market as well as sufficient supply of labour that India offer as a country given its large population, it is an easy choice for a company like Apple that is currently looking to expand its operations. Factors such as good relations between the United States government and the Indian market, good infrastructure as well as the rich source of raw materials will also be key in enhancing Apple’s stay in the Indian market. All in all, Apple stands to leap big in case it decides to venture in the Indian market, and it will not regret such a huge decision despite the fact that there might be a number of hiccups in place making the company’s settlement a little hard.
Recommendations
In case Apple realizes that joint venture turns to be a difficult entry strategy especially since a company like Old Spice may fail to live up to the expectation, I would recommend that the company take over direct exporting as an entry strategy. Through direct exporting, the company can establish a sales program using agents and distributors who in turn represent it in the market. These agents or distributors can be chosen from the country to ensure that Apple understands the state of the market more keenly before making major moves that might end up backfiring. Furthermore, I would recommend that the company consult the government of India on every move they make to ensure that they do not find themselves at the wrong side of the law since the government of India has been known to frustrate efforts of companies that fail to operate in line with the required setting. Furthermore, it is important that Apple conform with the Indian culture in all their processes given that the people in India are more likely to stick to their culture in every aspect.
Plan
To learn more about the country and how Apple can thrive in it, the company should send representatives to meet different representatives in India as well as to research on the best move that the company can make. The plan should be made as early as possible, but it should be well rehearsed to ensure that no time is wasted on unimportant factors. The company’s representatives should ensure that they meet government representative from India to ensure that all the requirement are underlined and explained to the detail. Apple’s representatives should also set up a meeting with Old Spice representatives to discuss the deal for a joint venture and identify all the requirements needed for the deal to go through. The travel plans should be in the next three months and should include a set of budgets for the trip including the travel costs, hotel costs and meal costs based on Apple’s choice.
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References
Bajpai, A. (2003). Child rights in India: Law, policy, and practice. Oxford University Press, USA.
Dollar, D., Iarossi, G., & Mengistae, T. (2012). Investment climate and economic performance: Some firm level evidence from India. Center for Research on Economic Development and Policy Reform, Stanford University, Working Paper, (143).
Majumdar, S. K., & Chhibber, P. (2008). Are liberal foreign investment policies good for India? Economic and Political Weekly, 267-270.
Mehta, A., Armenakis, A., Mehta, N., & Irani, F. (2006). Challenges and opportunities of business process outsourcing in India. Journal of Labor Research, 27(3), 323-338.
Yan, A., & Luo, Y. (2016). International Joint Ventures: Theory and Practice: Theory and Practice. Routledge.
Yoffie, David B. and Penelope Rossano. (2012). Apple, Inc., 2012. Harvard University.
www.harvard.edu.
