Apple Business Strategy in China

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  • Summary:Reference:
  • Summary:Apple Inc. (formerly Apple Computer, Inc.) is an American multinational corporation that designs and sells consumer electronics, computer software, and personal computers. The company's best-known hardware products are the Macintosh line of computers, the iPod, the iPhone and the iPad. Its software includes the OS X and iOS operating system; the iTunes media browser; and the iLife and iWork creativity and production suites. Apple is the world's third-largest mobile phone maker after Samsung and Nokia.[4] Established on April 1, 1976 in Cupertino, California, and incorporated January 3, 1977,[5] the company was named Apple Computer, Inc. for its first 30 years. The word "Computer" was removed from its name on January 9, 2007,[6] as its traditional focus on personal computers shifted towards consumer electronics.[7]Fortune magazine named Apple the most admired company in the United States in 2008, and in the world from 2008 to 2012.[8][9][10][11][12] However, the company has received widespread criticism for its contractors' labor practices, and for Apple's own environmental and business practices.[13][14][15]As of July 2011, Apple has 364 retail stores in thirteen countries[16] as well as the online Apple Store and iTunes Store.[17] It is the largest publicly-traded corporation in the world by market capitalization, with an estimated value of US$626 billion as of September 2012.[18][19] The Apple market cap is larger than that of Google and Microsoft combined.[20][21] As of September 24, 2011, the company had 60,400 permanent full-time employees and 2,900 temporary full-time employees worldwide;[3] its worldwide annual revenue in 2010 totaled $65 billion, growing to $108 billion in 2011.[3]Reference:http://bullishcross.com/apple-the-most-undervalued-large-cap-stock-in-america/
  • Summary:Referencehttp://www.bloomberg.com/news/2012-04-24/apple-profit-rises-94-on-growing-global-demand-for-iphones.htmlhttp://seekingalpha.com/article/689541-3-companies-that-can-benefit-from-apple-s-growth-in-chinahttp://seekingalpha.com/article/689541-3-companies-that-can-benefit-from-apple-s-growth-in-china
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  • Summary:Making 10,000 iPhones per dayNot possible for US to compete“What U.S. plant can find 3,000 people overnight and convince them to live in dorms?” 230,000 employees working 6 days a weekgroup atmosphere versus individual drive. They are flexible to eat in cafeterias, live in dorms, work and live in unison. Reference:
  • Summary: The materials are all made in China or nearby in other parts of AsiaGetting components to the factory for assembly is cheaper and fasterReference:
  • Summary: means more money in consumers’ pocketshaving cheaper production costs means cheaper products which means the consumers have extra money left in their pockets to put back independently into their country's economiesAccording to an article, "100 million iPhones have been made, at an average savings of $65 each. That's $6.5 billion in extra consumer value, which gets split between Apple's shareholders in the form of higher profits, and Apple's consumers, in the form of lower prices."Reference:
  • Summary:Reference:
  • Summary:in 2003, the rate in China was 17% compared to the US's 40% and Japan's 42%Technology and knowledge-incentive projects enjoy a tax exemption of 15% (half of the current 30% in 2011) and other indirect incentives like refunds based on level of investmentChina has 83 tax treaties currently and growingEnterprises in the following regions (sectors) are subject to corporate income tax at the halved rate of 15 per cent:4. Technology- and other knowledge-intensive projects launched by FIEs in old urban districts of SEZs, economic and technological development zones and coastal economic open areas approved by the State Council, with long investment recovery periods and foreign investment exceeding US$30 millionDirect incentivesTax exemption: no income tax during a certain period of timeInfluenced by the amount of investment, locations, numbers of employeesPreferential tax rateTechnological investmentIndirect incentivesAccelerated depreciationInvestment refundsRequire investors to qualify for refunds on the basis of a certain amount of investing which acts as a guarantee to lessen the risk for host countryCarry-over lossChina has 83 bilateral tax treaties and growingCHAPTER 4 Tax Issues regarding FDI in China Current Tax AvoidanceProblems in Tax Collection and Administration System Unify the Income Tax Law for all the enterprises located in ChinaCHAPTER 5 Unified Corporate Income Tax Law of PRC Reform to Unify the Corporate Income Tax Law A Major Step towards Compliance with National Treatment Principle ofWTOReference:The legal environment of corporate income taxation for FDI in China : policy, changes, risksAuthor: Jin , Zhe Publisher: University of British Columbia 2011-03-07T20:49:45Z 2011-03-07T20:49:45Z 2007 2011-03-07T20:49:45Z http://www.worldcat.org/title/legal-environment-of-corporate-income-taxation-for-fdi-in-china-policy-changes-risks/oclc/752403362&referer=brief_results
  • Summary:China graduates more than 3x the number of engineers per year than the US (600,000 per year)Ph.D.s in China are hired at 1/10 of the cost as in USChina’s government is offering huge relocation allowances and salaries to Chinese-born, US-trained scientists and engineersChina’s new Five-Year Plan targets 22 areas where it hopes to promote increased R&D spending. (For 2013 estimated $220 billion.)China's new five-year plan targets 22 urban development areas where it hopes to promote increased R&D spending."The R&D expenditure goal of three percent of the GDP was set up by the Chinese government as a target," said Richard Jun Li, China research director at Lux Research. "But in 2010, the R&D expenditure in China was around $110 billion, which accounted for only 1.76 percent of the Chinese GDP of $6.218 trillion.”the United States, which is expected to spend approximately $405.3 billion in 2011U.S. firms can also hire Ph.D.s in China at one-tenth of what they cost in the U.S. Expanding R&D and joint manufacturing in China also makes it easier for U.S. companies to develop products and services aimed at Chinese consumers. U.S. tech and drug firms do this by hiring Chinese staffers who have a homegrown sense of what local consumers want. China's government is wooing many top Chinese-born scientists from the U.S. with relocation allowances up to $146,000 and annual salaries of $250,000, the Christian Science Monitor reported in May. Reference:http://www.smartertechnology.com/c/a/Business-Agility/China-Plans-Increased-RD-Spending-/http://bbs.chinadaily.com.cn/thread-655399-1-1.html
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  • Summary:Reference:
  • Summary:Apple’s Operational Tactics in manufacturing in China1.Apple minutely distributes projects among several manufacturers2.Suppliers are brought in at the absolute last minute to keep leaks to a minimum3.Custom designs on parts ensures no reuse of spares left in the inventory 4.No reliance on any Single supplier5.Assembly line workers have little clue on the finished product6.Apple contracts come with a strict confidentiality clause with very strict penalties in the event of a breachReference:
  • Apple Business Strategy in China

    1. 1. New York UniversityApple Business Strategy in China Fall 2012 1
    2. 2. Team A Jessica Aguirre Lauren Challman Lukas Karwowski Manas Puhan Partha Mitra 2
    3. 3. High-level agenda Overview Product Lifecycle Business Advantages in China Strategy & Constraints Conclusion Question & Answer 3
    4. 4. Overview 4
    5. 5. Why Apple ? Founded April 1, 1976 Revenue US$ 108.249 billionLargest publicly-tradedcorporation in the world bymarket capitalization Net Income US$ 25.922 billion 364 retail stores in 13 counties US$108 billion Growth in 2011 Estimated value US$ 626 billion 5
    6. 6. Apple’s Growth in Greater China Revenue US$ 7.9 billion 20% of companys net revenue Up from 9% a year ago There is tremendous opportunity for companies that understand China – Tim Cook, Apple CEO 6
    7. 7. Market Share Of China in Tablet PC 78.3 % Market Share in Tablet PC 7
    8. 8. Product Lifecycle 8
    9. 9. Product Release 9
    10. 10. Product Maturity I-phone sales Stabilized market Pressure to lower manufacturing costs 10
    11. 11. Business Advantages in China 11
    12. 12. Speed and flexibility of Chinese workforce Tough for US employers to compete 230,000 employees working 6 days a week Group atmosphere versus individual drive 12
    13. 13. Cheaper Materials and Proximity to Supplies Materials are all made in China Cheaper and faster Less waste Less risk and challenges 13
    14. 14. Cheaper Production Costs More money in Put back into their consumers’ pockets country’s economies $6.5 billion in extra consumer value 14
    15. 15. Promotes growth in Chinese consumer market 15
    16. 16. Chinese Government IncentivesTax exemption of 15% Chinese tax treaties growing 16
    17. 17. Research and Development In China Salaries are cheaperRelocationallowances China’s Five-Year Plan to promote R&D 600,000 engineering graduates per year 17
    18. 18. Strategy and Constraints 18
    19. 19. OutsourcingPoliticalReputationApple ResponseNew Opportunities 19
    20. 20. Slow MoversGoogle’s move to Chinalessons 20
    21. 21. Loose lips sink ships In China, Apple runs a tight ship with no loose lips FoxConns Operational MethodsFingerprint World ClassRecognition Metal Detectors Security Cards FacilitiesScanners 21
    22. 22. Operational Tactics Distributes projects Suppliers are brought among several in at the absolute last manufacturers minute No reliance on any single supplier Strict confidentiality with penalties Custom parts prevents reuse Assembly line workers have little clue on the finished product 22
    23. 23. Apple leading the way Stay Hungry Stay Foolish Leveraging increasingly Adaptability and lack globalized economy of complacency Hidden opportunity and tremendous success Stay Globalized Stay in Business 23
    24. 24. Question and Answer 24
    25. 25. Contact: Lukasz Karwowski: jc4212@nyu.edu Lauren Challman: lc2639@nyu.edu Jessica Michelle Aguirre: jma534@nyu.edu Manas Puhan: mp3155@nyu.edu Partha Mitra: Partha.Mitra@nyu.edu New York University 70 Washington Sq South,Image Credit: Apple Inc. New York City, New York, 10012 25

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