IB BUSINESS STUDY GUIDE PAPER 2

Price Skimming

Charging the highest possible price that buyers who most desire the product will pay and then lowering the price over time

Gross Profit Percentage

Gross Profit/Net Sales

Net Profit Margin

Net Income/Sales

P&L account

- required by law

- review net income

- small business loan

- making business decisions

- subtract all expenses with revenue

Working Capital

Current Assets - Current Liabilities

External sources of finance

Finance which comes from outside of the business such as a loan or share capital

- debentures!

venture capital

Bank overdraft (for expenses of day-to-day)

Trade credit (businesses can delay their loans for a certain period)

Recruitment

- potential

- ability

- adaptability

- engagement

Aspirations

niche market

targeting particular customers in defined locations or by particular services

Debenture

An unsecured debt, usually with a maturity of 10 years or more

Pricing Strategies

Psychological pricing setting prices that take account of customers perception of values of a product

Loss leader products sold at very low price to encourage customers to buy other products

Price discrimination occurs when a business sells same product to different consumers at different prices

Promotional pricing special low prices to gain market share or cell of excess stock includes buy one get one free

Predatory pricing deliberately undercutting competitors prices in order to try to force competitors out of the market

Cost-plus Pricing Adding a fix mark up for profit to what the unit price of a product

Price-based Costing

Penetration pricing: Setting a relatively low price auto supported by selling strong promotion in order to achieve a high volume of sales

Apple - Globalization

Apple Inc. is a creative corporation, not a production company. Although Apple has profited over $400,000 dollars for each employee in 2011, it has provided few opportunities to work in America (Bello, 2012). For example, Apple mainly relied on foreign outsourcing in order to market the iPod (Lo, 2008). In 2006, Apple employed nearly twice as many people outside of America to produce iPod. The workers were 13,920 in the United States, and 27,250 abroad; 12,270 were in China and 4,750 were in the Philippines (Freeland, 2011). Apple has gradually become a visional company that offers work to people outside of America. On the other hand, those 13,920 American workers earned nearly $750 million, but the 27,250 employees outside of American Apple took less than $320 million (Freeland, 2011) home. Thus, in this institution, the biggest winners are Apple and Apple's shareholders who earned significant money from globalization.

In addition, there are almost half of the iPod overseas workers (12,270) are in China (Freeland, 2011) This is because Apple favored China with large amounts of cheap and disciplined labor. However, based on Marxism, which is the theoretical root of ideological analysis, the core of capitalism is exploiting workers in order to maximize profits (Croteau et al., 2011). In order to find more efficient and cheap forms of production, Apple bargains hard to allow its contractors to have slim profits. This often leads to suppliers often cuting corners by using cheaper alternatives and exploiting laborers' interests. One former Apple executive said, "If you squeeze margins, you're forcing them to cut safety" (Bello, 2012). A number of workers have to face security and survival problems because they have to work in an unsafe working environment with gradually increasing workload and less remuneration, including explosion, poisoning and suicide.

The Nobel economics laureate A. Michael Spence explains the same phenomenon: "Globalization hurts some subgroups within some countries, including the advanced economies. The disparities in income becomes much and employment has been reduced across the U.S. Highly educated workers enjoy more opportunities and workers with less education are facing declining employment prospects and stagnant incomes" (Freeland, 2011).

Furthermore, with the globalization of culture, use of Apple products have caused a culture phenomenon-fetishism. More and more people think it is a trend and fashion to use Apple. They overstate the meaning of Apple products. Some media often report people want to buy an Apple product for selling their body apparatuses, such as kidney. The brand effect causes consumers to blindly pursue for a certain product with an undeserved price. Sometimes, Apple would adopt restriction on purchases while the new products launched. Then, people will be willing to pay twice or triple the price for a new Apple product. For instance, the two pictures below (ZhongXin newspaper, 2012) shows Chinese market in Beijing on January13, 2012 when the iPhone 4S came out for the first time. Apple officials had implemented restrictions on iPhone 4S before it started to sell, but there were still too many frenzied buyers, including Apple fans and scalpers, who snapped up the iPhone 4S with a smashed accident caused when Apple officials stopped offering products for sale. Out of frustration, consumers had to buy iPhone 4S from scalpers with a higher price.

Apple - Change

Change management is a structured approach to transitioning individuals and organizations from a current state to a future state. Apple has mastered this concept that so many managers and organizations have failed to do. Unlike many other companies, Apple has managed to build a following of users, introduced new concepts and new technologies, and have gained nearly complete adoption of changes.

Introduce new features slowly

Apple follows their own release cycle. They don't release any feature or function pre-maturely just to beat out their competition or to catch up with the industry. Apple isn't a perfect company and they do make mistakes. However, in general, they release features only when they are ready. For example, when the first iPhone was released, the App Store was not yet a function. They wanted a fully tested environment before releasing it to the general users.

Updates and changes happen often, couple times a year. Unlike Windows where version releases take years, Apple's iOS changes functions often but slightly. Since 2007, the iOS system has not undergone any major upgrades.

Not being caught up in fads

When their competitors were releasing larger screens, all types of functionality, all in one devices with everything including the kitchen sink, Apple was releasing features slowly. Apple released 3G when it was ready. Apple still refuses to release a larger screen while everyone else is rushing out to have the biggest screens. Apple doesn't claim to have 8 megapixel cameras when it knows that average users don't even use all those pixels. Apple builds systems for the general population, not niche groups.

Making design and user experience a priority

The iOS has grown slowly from version 1.0 to the current version 4.0. Each release include very subtle and very minute changes. As users adopt the system, Apple is slowly introducing the users to a common system that works across all its devices: iPods, iPhones, Apple TV, and soon Macs.

Notice how these devices don't come with extensive user manuals. It doesn't require instructions. A well designed operating system and applications should be so intuitive that a user can pick it up and simply use it.

Apple - Innovation

Apple is widely considered as the #1 innovative company in the world. The company's innovation strategy involves terrific new products and innovative business models.

The company delivers consumers with a succession of presents - great software in fabulous hardware in beautiful packaging ("really good ideas wrapped up in other really good ideas," as Michael Lopp, senior engineering manager at Apple puts it). Apple also pioneers into a new business spaces and creates new market niches. The company created game-changing innovations such as the iPod, iTunes, iPhone, and iPad.

Apple innovation leaders think in terms of platforms and pipelines and relentlessly push the pace of innovation. Competitors that chase Apple's latest release find themselves behind when just a few months later Apple introduces its latest and greatest offering.

Focusing on where they can make a significant contribution Apple hires → great innovators who want to make the best things in the world.

Innovative Business Models

Apple doesn't just focus on building innovative and beautiful products. It builds innovative business models too. The iPod and iPhone would not have had nearly as much impact if they hadn't been matched with iTunes and the App Store respectively... More

Apple's Innovation System

Apple's commitment to innovation is cultural, not process driven. The most successful products at Apple were started with only a few people with no formal structure or hierarchy and little corporate oversight. Yet, "to turn really interesting ideas and fledgling technologies into a company that can continue to innovate for years, it requires a lot of disciplines," advised → Steve Jobs. Apple has built an effective innovation system to harnesses creativity in its people, stimulate new ideas, streamline the design process, and launch successful, profitable new innovations.

Apple - Culture

Apple is widely considered as the #1 innovative company in the world. The company's innovation strategy involves terrific new products and innovative business models.

The company delivers consumers with a succession of presents - great software in fabulous hardware in beautiful packaging ("really good ideas wrapped up in other really good ideas," as Michael Lopp, senior engineering manager at Apple puts it). Apple also pioneers into a new business spaces and creates new market niches. The company created game-changing innovations such as the iPod, iTunes, iPhone, and iPad.

Apple innovation leaders think in terms of platforms and pipelines and relentlessly push the pace of innovation. Competitors that chase Apple's latest release find themselves behind when just a few months later Apple introduces its latest and greatest offering.

Focusing on where they can make a significant contribution Apple hires → great innovators who want to make the best things in the world.

Innovative Business Models

Apple doesn't just focus on building innovative and beautiful products. It builds innovative business models too. The iPod and iPhone would not have had nearly as much impact if they hadn't been matched with iTunes and the App Store respectively... More

Apple's Innovation System

Apple's commitment to innovation is cultural, not process driven. The most successful products at Apple were started with only a few people with no formal structure or hierarchy and little corporate oversight. Yet, "to turn really interesting ideas and fledgling technologies into a company that can continue to innovate for years, it requires a lot of disciplines," advised → Steve Jobs. Apple has built an effective innovation system to harnesses creativity in its people, stimulate new ideas, streamline the design process, and launch successful, profitable new innovations.

Apple - Strategies

Apple's organizational culture is effective in supporting the firm's leadership because of key features that fit the business. Different businesses have different requirements for their culture. In Apple's case, the following characteristics are the most significant in its organizational culture:

Top-notch excellence

Creativity

Innovation

Secrecy

Moderate combativeness

The combination of top-notch excellence, creativity and innovation in Apple's organizational culture supports the firm's industry leadership. These characteristics of human resources empower Apple to stand out and stay ahead of competitors. These features of the company's organizational culture are key factors that enable success and competitive advantage. Creativity and excellence are especially important in Apple's rapid innovation processes.

Drawbacks and Weaknesses. Apple's organizational culture brings challenges because of the emphasis on secrecy and the moderate degree of combativeness. An atmosphere of secrecy limits rapport among workers. Also, the moderate combativeness that still exists in the firm today has the disadvantage of limiting the morale of some employees. These issues indicate that Apple's organizational culture has room for major improvements to strengthen the firm's human resource capabilities.

Apple - ethics

Apple Supporting Local Communities

'Global Volunteer Program' was launched in 2011 to encourage employees to volunteer in local communities. Since its launch more than USD 78 billion was donated to charities and non-profits around the world.

Apple Educating and Empowering Workers

Apple education and development program is offered free of charge by 18 factories and more than 280,000 workers took various courses in 2016

Labour and Human Rights at Apple

Apple enforces The Supplier Code of Conduct that is claimed to be the toughest in the electronics industry

Company has achieved an average 95per cent compliance among suppliers to maximum 60-hour workweek

Apple has investigated cases of abuses of foreign workers and the company has required suppliers to reimburse affected "foreign contract workers USD3.9 million in excessive fees paid to labour brokers, bringing our total reimbursements since 2008 to USD16.9 million"[4]

Employee Health and Safety at Apple

The company has launched Apple Supplier EHS Academy, an 18-month program that aims to improve employee health and safety in the industry throughout the globe. 240 suppliers and 270,000 workers have participated in this program.

Apple and Gender Equality and Minorities

Apple employees are 32 percent female, 9 percent black and 12 percent Hispanic. Out of a global workforce of 125,000, 37 percent of new hires in the last 12 months were women. Out of a U.S. workforce of 80,000, 27 percent of hires came from underrepresented minority groups in the last year.[5]

The company reached equal pay to employees in 2016

Tim Cook is the only openly gay CEO of a Fortune 500 company has been praised as a strong champion of workforce diversity[6]

Energy Consumption by Apple

Apple is often praised for its environmental records that include decrease of total power consumption of Apple products by 57per cent , introduction of Mac mini as the world's most energy-efficient desktop computer and exceeding ENERGY STAR guidelines

Apple emerges as the only company that has been awarded with a Clean Energy Index of 100per cent , according to Greenpeace's Clicking Clean Report.

Apple Inc is sourcing or generating enough renewable energy to cover 96% of the electricity used at its facilities worldwide

The company is now 100 per cent renewable energy in 24 countries. Each Apple data centre around the world runs on 100 per cent renewable energy

The multinational technology company has committed to bring 4 gigawatts of renewable power online by 2020

Waste Reduction and Recycling by Apple

Apple offers recycling programs in 99 percent of the countries it operates and the company has diverted more than 508 million pounds of electronic waste from landfills since 2008.

In 2016 the company introduced Liam, a line of robots that can disassemble an iPhone every 11 seconds and sort its high-quality components so they can be recycled,

In 2015, more than 99% of Apple product packaging was done from recycled paper or papers sourced from sustainably managed forests.

Carbon Emissions by Apple

In 2016 Apple's comprehensive carbon footprint was 29.5 million metric tons, compared with 38.4 million the year before. As it is illustrated in figure below, the company's CO2 emissions per product has been consistently decreasing during the last four years to reach 97 kg in 2016.

Apple Corporate Social Responsibility (CSR)

Changes in Apple CO2 emissions per product (kg)[1]

Apple and Sustainable Sourcing

More than 99% of paper used in packaging is prepared from recycled wood fiber

The company partnered with The Conservation Fund to protect 36,000 acres of sustainable forest in North Carolina and Maine and more than 13,000 metric tons of wood was harvested responsibly

Apple aims to contribute to transition up to 1 million acres of forest, across five southern provinces, into responsible management by 2020