Planning for System Implementation
Planning is the first step involved in system implementation. It is the very basic function which describes effectively the very basic questions of how, where and when the objectives can be realized or it serves as a guiding framework. Planning equally involves a careful assessment of the available resources and the challenges which the team […]
IT-Governance and Why it is Important
Introduction: What is IT governance and why it is important? It is not enough for corporations to have IT systems and expect them to deliver strategic value to them. Instead, there needs to be a mechanism in place to regulate, monitor, and govern the value creation efforts of the IT systems. This governance mechanism of […]
Is Globalization to Blame for the Economic Crisis ?
The global economic crisis that started in 2008 has engulfed the entire world and has laid waste to the process of globalization that was blamed by many as being the root cause of the crisis. After the American Investment Bank, Lehmann Brothers filed for Bankruptcy in September 2008, the entire global financial system was at […]
Information Technology as Driving Force for Innovation
Introduction Last two decades have seen great stride in information technology. The development in information technology has changed the way business is getting conducted. One of the striking points about information technology is innovation. Information technology has been a driving force for product, service and process innovation. Innovation in Last Decades It has brought forward […]
The Resource Curse: The Problem with Commodity Dependence
A large number of developing countries across the world are dependent upon commodities. About 135 of these developing countries were surveyed, and it turned out that more than 94 of these countries are commodity dependent. This means that primary commodities like food grains, oil, etc. account for more than 60% of their total exports. Prima […]
Apple is a well-known brand since it is the most valuable firm in the entire world! Apple can attribute a large part of its success to being one of the few American firms that have been able to gain a significant foothold in China. However, this foothold could be the very reason that Apple is in the eye a storm now. The growing sales in the Greater China region gave Apple a competitive edge over its peers. However, now these falling sales from Greater China could also be responsible for substantial markdowns in the company’s profitability as well as revenues.
In this article, we will have a closer look at the slowdown in the Chinese industry as well as how it ended up impacting Apple.
China is a major market for products being sold by Apple. At the present moment, around 15% of the sales generated by Apple are from the Greater China region. Apple has spent a lot of money and has done a lot of work to become the darling of Chinese consumers as well as the government.
Apple products are used by consumers in China to show off their new found wealth. On the other hand, all the apps in Chinese iStore are compliant with China’s internet policies. Even the data related to Chinese iPhones is stored in a server which is based in China.
It is no surprise that Apple is so focused on it’s China strategy given that China is one of the few high growth markets left in the world for Apple’s products. Since other markets are saturated, a slowdown in China has a huge impact on the Chinese economy.
First, we need to ascertain the basis on which we are claiming that the Chinese economy is in a slowdown. This is because even though the world believes that Chinese growth has slowed down, China simply refuses to believe it. However, numbers do not lie.
Consumption tax is paid by Chinese consumers whenever they buy any goods or services. The amount of this tax collected is indicative of the quantum of economic activity that is going on in a given region.
China has witnessed a steep drop in these tax collections in the past few months. In some months, the consumption tax had seen a downfall of close to 70% from the previous year.
Apple CEO Tim Cook has revised Apple’s revenue expectations to $84 billion from $90 billion because of this expected slowdown.
Apple is known for charging a premium because it has a superior Operating System and proprietary apps. However, the Chinese market is known to be different. WeChat an app made by Tencent is widely used in China for everything from hailing taxis to reading restaurant reviews.
The popularity is WeChat is so much that consumers are willing to forego apps such as FaceTime. Slowly but surely, the competition is catching up to Apple, and the results are reflecting in Apple’s financials.
The problem with Apple is that it is viewed as a Chinese company in America and as an American company in China. This is because it is an American brand which manufactures most of its products in China.
Right now, there are negative sentiments related to Apple products in the people of both countries. This is what has created a dent in sales. In future, if the trade war between China and the United States escalates, Apple may become one of the first casualties.
Ever since Apple’s results came out, the entire investor community has been worried. This is largely because they believe that Apple’s problems will also spill over to other tech companies. However, analysts are pretty sure that is not going to be the case. This is because, amongst the FAANG companies, i.e. Facebook, Apple, Amazon, Netflix and Google, Apple is the only company to have significant exposure to the Chinese markets. Since other tech companies do not have sizeable business interests in China, they are unlikely to be affected by this slowdown.
However, there are other American products which may be affected. For instance, Starbucks has more than 3000 cafes in China. Also, General Motors is using brands like Cadillac and Buick in order to capture the automobile market share in China. These companies, just like Apple are vulnerable to ups and downs in the Chinese markets. If a company as efficient as Apple, couldn’t manage this crisis, it is unlikely that the others will.
The bottom line is that Apple’s exposure to the Chinese market is a liability for the company as of now. Apple can only hope that the Chinese economy picks up once again so that its sales are also revived in the process.
Your email address will not be published. Required fields are marked *
What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
