Exploitation of Workers in Developing Countries

Exploitation of Workers in Developing Countries Since the time, plans were being made to implement free trade we were guaranteed it would be a win/win situation.This was one of the very important step for the pioneering of Globalization. First world consumers, manufacturers,industrialists, farmers, laborers everyone would benefit. Not only the first world countries, the whole world would benefit. It would pull the developing world up because there would be plenty of good, well-paid jobs that would be created . When borders opened to the free flow of goods and services, consumers would have more variety, and at cheper prices. Even agricultural goods could move around the world to new markets, sluggish farm prices would also rise. The farmers in developing countries would now have new markets for their goods, and they would bow out of piteous poverty.It seems like the perfect idea and sounds great too, doesnt it? But like most things that sounded too good to be true, it quiet was. The American/British/European workers who had jobs that paid pretty well in the scheme of things found that their employers could clear up the factories and move to a country where the workers werent so well paid. A country where there are no tariffs, so goods could be shipped back into the First world countries and sold, often cheaper than when they were made in the rich countries. Not only was labor cheaper, but environmental laws were generally more lenient in, say, Mexico, India or China. The companies could use child labor too and there were no laws forcing a 40-hour workweek.Drive your workers to the point of exhaustion and pay them as little as possible. If they complain, replace them-This is the formula adopted by all the third world factory bosses for success. All the consumers care for is low prices from their favorite clothing stores and supermarkets. So is this what Globalization called for ? To exploit the labour in third would countries all for the benefit of the rich countries like America , Europe,etc.Consumers in th e first world countries found goods were economical when they were made overseas. The foreign workers did not have the high-paying jobs as promised. They had poverty-wage jobs and the sweatshop was back. They were under paid and working in poor conditions with masses of eager workers waiting in line for them to quit. My argument in the essay is How Globalization has resulted in Labour Exploitation and Child Labour in many third world countries. An International Confederation of Free Trade Unions report said, MULTINATIONAL corporations remained the main beneficiaries of globalisation as more than 1,3-billion people around the world lived on less than $1 a day.(Globalisation: the plight of billions stressed ,By Reneà © Grawitzky, Business Day, 30 March 2000) The widening inequalities should be addressed as part of a broader strategy by unions in dealing with the effects of globalisation. What does globalization mean to working people? Ask a member of UNITE and shell talk about the thousands of good paying jobs that were taken overseas. Talk to the young woman in Bangladesh who gets 20 cents for making a shirt that sells for $30 at The Gap. Ask the 14- to 16-year-old women in Central America who are forced to swallow birth control pills in front of their bosses so the company can keep them on the job, since it doesnt pay for health care. Ask the laid-off steelworker about the foreign imports, made by U.S. corporations abroad and exported to the U.S. because they make more profits. Or ask Iqbal Masih, the 12-year-old rug maker from Pakistan who was enslaved from age 4 and forced to learn a trade. (What globalization means to working people, John Gallo, Peoples Weekly World, 20 April 2002) .What is the reason for all this wretchedness ? Everywhere, the lives of working people are degenerating. If theyre not working from dawn to dusk,Slogging all day, for not enough to live on, they are made dispossessed and being bombed. Is it due to globalization, or greed, or laziness? Or is there something more fundamental, something less obvious, behind the worlds current problems.(What globalization means to working people, John Gallo, Peoples Weekly World, 20 April 2002). In the name of competition, employers try to produce cheaply in bulk and sell larger volumes. One way to put together cheaper labour and still make greater profits is by keeping salaries as low as possible -by any means necessary. Since all wealth is produced by human labor, the fruits of that labor, or value, go either to the workers or the owners. The less workers get, the more the owners get. That accounts for the long, brutal history workers have faced when trying to form unions or improve their livelihood. (What globalization means to working people, John Gallo, Peoples Weekly World, 20 April 2002) The third world Countries such as Indonesia, Malaysia, India and Brazil have become more capitalized. The small farmers in these countries now work in factories and mills. They have become workers and in a number of ways find themselves similar to U.S. workers 70 years ago. As poor as they had been, these new workers now have less. They are concerned in trying to form unions to fight to improve their wages and working conditions.They are no more cut off in their country and continue to making ties of solidarity with their fellowmen all over the world. They are the workers who will change the face and the power of the working p eople in the world. Globalization has impulsed a number of interrelated concerns with respect to its social repercussions. The impact on labour employment, income distribution and labour standards are some of the issues included. Global competition has led to job losses or flexible job arrangements in many countries. Compared to the regular jobs these are often less secure and provide fewer social benefits. Economies all across the globe are more volatile now because of short term capital movements. This has resulted in severe economic and financial crises that further leads to unemployment and poverty. All these have created a sense of diffidence among workers and created resistance to globalization from various quarters. A well designed system for social protection is critical for long term growth prospects in open economies. The extent of social protection remains low in Asia, Africa and Latin America. In terms of social protection, there are increasingly unpredictable and fragmented employment relat ionships that lead to more and more workers not being covered by cash sickness benefits. There has been establishment of global labour standards by organizations like International Labour Organization (ILO) which work to promote rights at work, enhance social protection and encourage decent employment opportunities. But can these regulations actually improve lives of workers in LDCs? Will the anti sweatshop campaigns raise labour standards ? Will WTOs imposing trade sanctions on countries that violate standards actually help ? With economic globalization accelerating in the past few decades these questions have just got more complex and controversial. Trade and investments may not be the best way to pull up and help workers in poor countries. Labour standards and free trade are interdependent rather than competing ways to improve welfare. Unions based in first world countries play a eminent role in the dispute over globalization and labour standards whereas workers in LDCs are rarely heard from. The cause for this gap is that these poor countries, mainly those with non d emocratic governments, do not provide the necessary freedom of association or the legal protections for collective bargaining. If the workers from poor countries had been given little opportunities to protect their own interests and voice their concerns, there would be less need for activists from advanced countries to intercede on their behalf. International labour mobility has also increased due to globalization and the growing economic interdependence of states. This has also resulted in the deregulation and exploitation of labour migration. Even the migrant workmen are devoid of legal protection in the foreign countries. Even though many states have put down strict barriers on the legal entry of labour migrants, there are still a large number of irregular and illegal migrants working in low paid sectors lacking the benefits of a national worker. Most of todays migration presents characteristics that converge with concerns for labor migration policy. In short, most permanent immigrants and refugees as well as migrant workers seek remunerative activity, participate in the labor force, and face discrimination and xenophobia directed at foreigners in host countries. (Globalization, Labor and Migration :Protection is paramount, Patrick Taran Eduardo Geronimi , 22 november 2002) The LDCs face serious social and economic dislo cation associated with persistent poverty, growing unemployment, loss of traditional trading patterns, and what has been termed a growing crisis of economic security. (Globalization,Labor and Migration :Protection is paramount, Patrick Taran Eduardo Geronimi , 22 november 2002) The concerns will only increase because since 1975 the figures have only been doubling, from a 75 million in 1975 to 150 million in 2000, these figures represent the migrants living outside their home countries. The other issue in this article that needs to be focussed on is Child labour in light of Globalization. Apart from labour exploitation, Child labour is a serious concern for the consequence of Globalization. It is a grave and extensive problem in LDCs today. It was revealed in a very recent International Labour Organization (ILO) report (ILO, 2006) that approximately 166 million children in the age group of 5 14 years were classified as child laborers in 2004. That accounts for 14% of all children in that age group. These children are engaged in precarious work which adversely affects their growth, moral development and health. They are concentrated mainly in the developing countries. More than half of these children were from the Asian pacific region . The others being from Latin America and Sub saharan Africa.They work in the carpet marking factories, pornography, glass blowing, fireworks, prostitution,etc. Child labour came under the limelight in the 1990s when the campaigns were started by industrialized worlds on why such large number of children were working when they should be gaining knowledge. In November of 2000, ten children earning around $11 per month burned to death in a garment factory in Bangladesh. The exits from the factory were chained shut. Images of children chained into factories, sold as slaves, or forced into prostitution stain the popular imagination about child labor. Fortunately, while many children work in the developing world, relatively few experience such atrocities.(Globalization and the Economics of Child Labor, Eric V. Edmonds,n.d) Of course the world organizations like UNICEF, ILO and governments initiated policies to check child labour globally. But did it help enough is the big question ? Globalization increases employment opportunities specially in developing countries due to the rapid increase in foreign investment. This therefore surges the demand for local labour and higher wages. These changes in the developing economies springing from globalization could further lead to child labour due to earning opportunities. To illustrate how trade policy and globalization can have an affect on child labour, I would like to take Vietnam as an example on how its increase in the price of rice led to a decline in child labour. Vietnam restricted its exports of rice starting in 1989. These quotas suppressed the domestic price of rice. Between 1993 and 1997, Vietnam gradually relaxed this export quota so that by 1998, Vietnam was completely exposed to the international price of rice. During this period of liberalization, the price of rice increased by 30% relative to the rise in the consumer price index. Rice is an important commodity in Vietnam. It is the primary staple in the V ietnamese diet, the largest single component of household expenditure, and 70% of households produce rice. Moreover, in 1993, before the liberalization of rice prices in Vietnam, 26% of children between 6 and 15 worked in rice production in Vietnam, and rice production was far and away the largest employer of adults. Thus, rice price increases should affect both children and adults.The study finds that rice price increases can account for 45% of the overall decline in child labor that Vietnam experienced in the 1990s. This corresponds to approximately 1 million fewer working children in Vietnam. (Globalization and the Economics of Child Labor, Eric V. Edmonds ,n.d) In India child labour has become an accepted practice. It is believed to be a necessity to overcome poverty. The carpet industry, for example pays these children extremely low wages since adults refuse to do these jobs. Even MNCs exploit child labour in poor countries. Nike is accused of using child labour in countries like pakistan, india, bangladesh, china, etc. These children were all in the age group of 4-5 years. More than 200 children were involved in each production processes. The Nike soccer balls in Pakistan are accused to be stained with the harsh truth of child labour. More than half of the soccer ball production is done in Pakistan and every step of its production has child labour involved. So is a reputed company like Nike helping or exploiting these developing countries? In china, the members of a chinese minority group mainly young girls aged 15-18 were employed in the Longfa Shoe factory in the Guangdong province. Longfa Shoe factory supplies Nike , Inc. These compani es get down to the extent of illegally swapping IDs, making fake birth certificates, illegal migration, etc. Even the chocolate industry is accused of using child labour. In Cà ´te dIvoire,West Africa thousands of children are forced to labour in the production of cocoa. Even the well established companies like Puma, Wal-Mart, Hanes are believed to use child labour. Allegations were made against Harvest Rich factory in Bangladesh, which is a contract supplier to these US and European companies. Young children were found sewing clothes for these companies. There were at least 200 children involved, some as young as 11 years. These children work upto almost 12 hours a day. They were reported to be beaten, slapped and forced to work for 19-20 hours sometimes. They get horribly low wages which could be as low as 6.5 cents per hour. The Firestone Tire and Rubber Company is operating the worlds largest rubber plantation in Harbel, Liberia for the last 80 years. They exploit labour and al so use child labour. The rubber tappers are forced to bring their wives and children, they use toxic pesticides without protection. The children are forced to carry about 70-80 pound buckets of rubber on their shoulders for miles. These laborers live in shacks which exist since 1920s. All these cases, which are just a few to illustrate, include big companies from the developed countries who use child labour only to their benefits. Is this what globalization has called for?

Racism and Racial Profiling are Better than Political Correctness :: Sociology Racism Prejudice Essays

Racism and Racial Profiling are Preferred Over Political Correctness I am beginning to detest political correctness! Perhaps I just want to know how people really feel. It's not that negative opinions don't hurt - of course they do. But I would take a cross-burning-hate-spouting-hood-wearing Ku Klux Klan member over a person who thought the same things, but never dared to express those thoughts until sometime in the future when it could hurt me more (i.e. job hiring). At least with the KKK member, I know what I am getting. As a black female born and raised in the South, I have dealt with racism and discrimination all of my life. But I expected (or hoped for) a little more from our university. Yet what is the first thing that happens when I come to campus? The "ghetto party!" What followed were anger, discussions and learning. But was anything really learned? Every year, there is another incident of some kind: the "luau party," Jewish hate mail, vandalism on the door of Asian students, and most recently, the incident at the fraternity, just to name a few.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   So I have a new idea. If the university wants to strengthen community, it does not need to just have discussions where people learn what not to say or do. People need to feel the effects of their words and actions. So I propose we build a machine that transforms the "offender" into the "offended." Instead of hearing how their words and actions hurt someone else, let them walk in that person's shoes.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Think you know someone who is racist? Put her in the machine and let her know how it feels to be a person of color for a lifetime. As part of the experience, she will be followed in stores as if she's about to steal something. As a child, instead of having teachers help her in school, they will write her off as a lost cause, label her a delinquent, or prematurely put her in a special education class. Or when she does not understand, people will act surprised and say, "Aren't all of you good in math?" When people insult her race, her objections will be judged as over-sensitivity (considered a common attribute of people like her). Her success will be seen as a threat to others. When she tries to show pride in or help others have pride in their race, she will be labeled

Learning Team Internal and External Factors Paper Essay

Amongst today’s societies The McDonalds Corporations is considered one of many; that has successfully in so many ways used a combination of various marketing strategies and skills to become a globally known successful origination. McDonalds a global business in most countries around the world can also face a lot of challenges and issues. The McDonalds Corporations has learned and brought about changes according to the needs of its consumers per hour and should always remain flexible to changes within the environment that deals with current customer trends, government and or legal restrictions, and the development of technology. The McDonalds Corporations technology structural and also its financial assets of the company are perfect marketing positions. McDonalds without a doubt is completely abundant with many aspects in structure, finance and of course technology. To help, identify and implement majority of these assets within the proper directions towards the improvement of the corporations would be all that is needed. The McDonalds Corporations overall is producing their main product, creating items within their own kitchen, and cooking on their own grills. This means the use of equipment, certain control devices, the regulation of temperature, the business point-of sales system, inventory process, financial and communication information are all linked into different technology that impacts the corporation. Now with public awareness of technology and cultures more people are starting to become a little more health conscious, and have access to finding out about certain quality ingredients, and knowing the lack of minerals that may have an overall negative impact on what all fast foods have done to those who consume them. Along with maximizing knowledge on internal and external factors this will have a large impact on the four major function of management within a corporation. The McDonalds Corporations has goals that are reflected in its mission statement to become for some customers a favorite place to eat. There are several internal and external factor’s McDonald’s faces in the decision they made to go Global. External f actors  for the decision to go Global include the following. 1.)The growing heath trends of consumers 2.)The ability to expand into new markets such as India and China 3.)The diversification and purchase of other fast food restaurants 4.)The global growth of the fast food industry 5.)Worldwide deregulation (Salem, Abdullah, 2009) These external factors impacted the four functions of management for McDonald’s managers, by forcing management to adjust the planning function and information to include a mission that was based on a global demand and competition. The organizing function of management with in McDonalds was also affected by the decision to go global. Management now has to organize information, people, and financial resources crossed countries and cultures to achieve one common goal. The function a leading for a management changed also. Now, styles and type of leading and motiving had to be localized and customized around the culture rather than one specialized way of doing things. Controlling or measuring achievements in with in the global industry also changed as franchisees are now faced with measuring success based on others in different markets. Internal factors also played a part in McDonald’s decision to go global and those factors have also affected the four functions of manageme nt for their managers. Some internal factors include: 1.)The desire for a strong brand name, image, and reputation 2.)A large market share 3.)The desire for a global presence 4.)A stronger financial performance and position 5.)Introduction of new products 6.)Customer focus (Salem, Abdullah, 2009) These internal factors also had an effect on the planning, organizing, leading, and controlling functions of management within McDonald’s. Competing in a Global market makes managers think, act, gather and process information on a larger scale to achieve a goal. Diversity The evolution of McDonald’s Corporation toward diversity as a business objective began in the late 1970’s, when the corporation officially  established an Affirmative Action Department, which today is known as the Diversity Initiative Department (Anonymous, 2005). Numerous factors can affect the four major functions of management; this section will focus on how diversity can affect planning, organizing, leading and controlling within the McDonalds Corporation. Diversity in the workplace is more than a person’s race or ethnic background it also includes personality, gender, education, position in the organization, etc. The major obstacle for McDonald’s management continues to be age, gender, ethnic background and education. Diversity management involves a three-stage process: (Tetteh, 2014) †¢Identification Stage †¢Implementation Stage †¢Maintenance Stage McDonald’s management must identify where the diversity mixture is and decided on the appropriate action to ensure workplace harmony and productivity. This will be accomplished through proper training and communication with all employees. Learning to effectively communicate with the various groups within each location will be very important to the success of the team within each restaurant. Implementing effective processes that ensure each diverse group is accommodated is crucial to the process. McDonalds as a corporation does a great job helping and engaging their management and employee’s to ensure proper implementation by offering education and career development seminars, various gender based seminars, second language courses etc. Maintain and improving these processes will ensure that McDonald’s stays current and relevant to the groups each manager has identified within their department. McDonald’s continually re-evaluates its initiatives to ensure they are in line with their business and current employee base. McDonalds ensures diversity is properly managed within their organization by including diversity in the business planning process. This allows the company and its managers to treat diversity as an initiative rather than a program; it’s naturally incorporated into the business plan (Anonymous, 2005). Ethics When it comes the Functions of Management, you must condsider which parts may be corrupted by ethical issues. Two areas that maybe prone to be affected  are the Leading and Organizing Funtions. In building a dynamic organization you must find a diverse group of people, with different ethical baskgrouds, to fill the different postions in it. You would also want to get them up to speed with you organizations ethical views. If you take a company like McDonald’s you can find out what they do to ensure this. Now McDonald’s is committed to conducting business ethically and in compliance with the letter and spirit of the law. This commitment is reflected in McDonald’s Values. Inherent in each value is our commitment to be ethical, truthful and dependable and this is reflected through their Standards of Business Conduct, which serves as a guide to making good decisions and conducting business ethically. Each year McDonald’s employees are required to re-certify that they have read and will abide by the standards that McDonalds has set through the Standards of Business Conduct. Employees complete regular training on the Standards, anti-bribery laws, and various other laws, regulations and company-specific policies. McDonald’s and its employees in all countries must comply with the U.S. Foreign Corrupt Practices Act (â€Å"McDonalds: Standards Of Business Conduct For Employees†, n.d.). References Salem, F., Abdullah, M., (2009) McDonalds case study. http://www.scribd.com/doc/16050821/McDonalds-Case-Study McDonalds: Standards of Business Conduct for Employees. (n.d.). Retrieved from http://www.aboutmcdonalds.com/mcd/investors/corporate_governance/codes_of_conduct/standards_of_business_conduct.html Bateman, T. S., & Snell, S. A. (2011). Management: Leading & collaborating in a competitive world (9th ed.). New York, NY: McGraw-Hill Irwin. Anonymous, . (2005, November). Diversity at McDonald’s: A way of life. Nation’s Restaurant News, 1(), 92, 94-95 Tetteh, Vanessa A. (2014, January 1). Diversity in the Workplace. Research Starters, p. 1.

PC Industry in 2007 - Free Essay Example

Sample details Pages: 9 Words: 2588 Downloads: 5 Date added: 2017/06/26 Category IT Essay Type Narrative essay Did you like this example? PC Industry in 2007 The personal computer (PC) market is bifurcated with the top four vendors HP, Dell, Acer and Lenovo commanding 50% of worldwide PC shipments. The next two biggest players Toshiba and Apple capture only 4.1% and 2.6% market share respectively. Using an average of the top four vendors financial performance as a proxy for the PC industry, ROA and ROS on aggregate is 6% and 5% respectively putting them in line and below the overall economic average. Don’t waste time! Our writers will create an original "PC Industry in 2007" essay for you Create order An analysis of the industry forces according to Michael Porters model would indicate that value creation is hampered by high buyer power and high supplier power while value capture is often difficult given the high level of rivalry and the increasing commoditization of PCs. However, Apples line of Macs has been able to buck the trend of falling ASPs (average selling price has fallen 8% since 1999) and consistently been more profitable than its rivals earning 35% gross margins vs. 19% for Dell and 24% for HP. This intra-industry difference is due to consumers higher willingness to pay (almost 40% higher net sales per unit) as further discussed below as well as Apples strategy to not participate in the low-price volume segments of the PC industry. Apple Incs Competitive Advantage (i) Apple Design Apple has been well ahead of the curve from a design perspective, with the company placing a large emphasis on style as far back as the early 90s with the launch of the first generation iMac. Apple figures out what consumers will most want from the devices and engineers the devices to serve those wants and it does so reliably (Apple is well known for the reliability of its Mac OS and customer focus). HP and Dell have both undergone a â€Å"de-commoditization† strategy validating Apples decade long strategy although neither HP nor Dell has been as successful. As consumers gravitate towards notebooks from desktops, Apples design strategy will increasingly pay more dividends with consumers becoming more style conscious as devices become more portable. (ii) Ownership of Software Apples high quality bundled software creates a more inelastic demand for its hardware as those accustomed to Apples ease of use and interfaces are unlikely to purchase another PC when its time for an upgrade which creates a recurring hardware venue for Apple. This is unlike the Microsoft-based PC world, where similar experiences can be found across virtually all vendors. Apples proprietary software is a key differentiator as it is the only major hardware vendor that can provide a fully integrated solution to consumers. As users become more familiar with and accustomed to Apples software (such as Macintosh OS X and iTunes) and user interface, it increases customer loyalty making them less likely to switch to a Dell or HP. (iii) Product ecosystem The strength of Apple is its ability to create Apple-Centric ecosystem where all its products and functionalities are inter-connected. For example, the Mac operating system (OS) is not available on non-Apple PCs, and while iPods can connect to non-Apple PCs, the only software management option is Apples iTunes (i.e. iPods cannot synch with Windows Media Players and iTunes cannot synch with non-Apple mp3 players). Apple has further expanded this strategy into its distribution by launching a network of retail Apple stores that again promote the entire Apple user experience. This tactic of controlling the user experience from hardware design to software applications, services and point of purchase are keys to Apple distinguishing itself from its competitors. (iv) Apple Brand Apple has mastered the technique of using its brand as leverage into new consumer electronic markets witnessed by the interest that surrounds any potential new product launches and the hype is usually all positive. Apple does an outstanding job of integrating new products into the existing ecosystem, where Apple was once a computer company, the release of the iPod has expanded the company into media and entertainment, and the iPhone has done the same into mobile communications. This creates the so-called halo effect where consumers who try one Apple product become more likely to try another. The halo effect can have significant impact on Mac sales if purchases of other Apple products then try Macs instead of PCs. In summary, Apple has managed to buck many of the negative industry forces by positioning itself mostly in the consumer PC market and converging computing with entertainment and communications. Apples tight control of its value chain (hardware, software, applications an d retail distribution) differentiates its user experiences and its ecosystem approach raises the competitive/switch barriers allowing it to charge premium prices relative to the industry. Mac Share of World PC Market While easily forgotten today, with the successes of the iPod and iPhone, Apples history is deeply rooted in personal computers since the companys inception in the mid-1970s. In the 20-plus years since, the Mac has become an accepted member of the PC industry with strong appeal to educational and creative professional markets, but limited adoption in the broader PC market. The primary reason for Apples limited market share is its adherence to using Apple-only products, which limits interoperability with other software programs (although Macs have been able to run Microsoft Office beginning in 1997). However, in recent years, Apple has opened up with the compatibility of iPods and iTunes on Window-based devices and the availability of the Windows operating systems on Macs could be drivers for market share gain. A simple calculation shows that by gaining an additional 1% of the worlds PC market, Apple could add $1.3B to its operating margins (currently at $4.4B at the end of 2007). Industry Change Innovation drives market share in most industries and this is especially salient in the PC industry. Quite often the efforts have revolved around making computer components smaller but more powerful with the ultimate goal of making computing ubiquitous no matter where the user is. With the first PC displacing the â€Å"mini-computer† in the 80s, to the advent of the laptop and now netbooks gaining in popularity, computers marketed today are becoming more compact as soon as the technology and economics allows it. Going forward, the miniaturization and the eventual gutting out of the PC will continue first with more universal adoption of the smart-phone as its functionalities converge with those of the PCs, to the eventual migration of software and application online removing the need for processing and memory hardware that are currently used in PCs. Wireless as a computing platform and digital convergence Consumers bought 1.1 billion handsets in 2007 compared with 269 million PCs worldwide. While tradition wireless users have simply been utilizing their handsets for voice conversations or for SMS, a number of industry dynamics are coming together that have changed consumer usage of wireless handsets. The combination of advanced wireless handsets, advanced 3G and mobile WiFi and numerous mobile applications it allows significant opportunity for wireless and handset providers to drive mobile multimedia content. With decreasing cost of processing power, storage, display technology and battery technology handset, vendors are creating smart-phones that have the computing and storage power similar to a PC just a few short years ago. Additionally smart-phones are equipped with a substantially larger full color screens that enable far superior viewing characteristics relative to traditional wireless handsets. Although wireless networks are slower than many consumers may like, wireless carri ers across the world are upgrading their networks to 2.5G and 3G technologies that allows immense data transfer. A second cross current sweeping the industry is the increasing trend towards digital convergence (the ability to transfer all forms of digital content from the Internet, to home entertainment centers and to portable devices) culminating in cloud computing where all software and application are stored and accessed online. Customers will be willing to pay a premium for the benefit of seamless integration of various products, particularly as devices grow in complexity and the performance benefits become more pronounced. Can Apple shape the change The handset vendors are likely to be the biggest beneficiaries at the early stage of this architectural change similar to how PC vendors were the first obvious beneficiaries of the growth in the personal computing market. Early success stories created from this trend include RIM and Apple. In previous upgrade cycles, consumers chose their wireless phones primarily on the form-factor and price of a mobile handset, software applications and features although important were generally viewed as secondary functions that were nice to have but not critical to the purchase decision. Indifference was largely due to the lack of sophistication as mobile games were limited and music consisted of low quality ringtones. In todays market, the technological architecture underlying mobile handsets is finally catching up to meet the needs of more sophisticated software applications. Consumers and professionals alike can now browse the Internet, e-mail colleagues and friends, play the latest racing g ame and listen to music and watch video all from a single device and there is no device that does it better than the Apple iPhone. The iPhone has changed the dynamics of not only the smart-phone market but also the broader handset industry with its sleek design and intuitive user interface and excellent performance of its touch-screen software. The ability to effectively integrate software applications into mobile handsets in a manner that is intuitive to the end user will provide a critical factor and a huge value propositions for end users. Also while digital convergence is still in an emergent phase Apple is well positioned to capitalize on the trend. Apple already has a number of the pieces in place, including being the sole hardware vendor with a proprietary operating system (Mac OS X), market leading portable video device (iPod) as well as other nascent complementary product offerings (AppleTV). Apples digital environment sets the company apart from its competitors as it can provide hardware and software that is more seamlessly integrated. Apples iTunes will likely be at the epicentre of this convergence as it syncs multiple devices and holds access to Apples enormous customer base. Macs: Beginning of the end? (Maybe not) While the disruptive technologies borne out of smart phones and cloud computing has the potential to change the core assets of the PC industry, it does not necessarily mean PCs are destined for obsolescence at least not anytime soon and not in its entirety. However, it does mean innovation in the PC market that will capitalize on these trends. Apple has been a frontrunner with the release of the ultra subcompact MacBook Air that has minimal hardware requirements perfect for cloud computing as well as the iPhone which is fast becoming the industry standard for smart-phones. Furthermore, the continued proliferation of iPhones creates a ready-made installed base of new Apple consumers who could be converted to Mac purchasers in the short term. If Apple does meet its 10 million target in its first year of sales (highly likely given preliminary sales data) and making an assumption that of the 10 million 50% are non-Mac users, a 30% penetration of this non-Mac iPhone base would turn i nto 1.5 million additional number of Macs sold. Using the simple earnings accretion calculation as above this would lead to an incremental gain of $735 million in pretax income which would surely increase as iPhone adoption accelerates. Macs still drive revenue and GM Although the iPhone garners the most attention from investors and the media given the long term impact on the companys results, Macs continue to be the main growth driver at Apple. Macs still account for 43% of total sales and its gross margin is in line with corporate gross margin (both at 35%). Looking at its suite of products, iPod margins are below the corporate average (30-35%) and the iTunes business is a loss leader used as a reverse razor and blade strategy. While iPhone gross margins are the highest (around +45%) its revenue and margin contribution is minimal given iPhone sales is 1/10 that of Macs. Central to Apples ability to drive above industry growth comes from its reinvestment of â€Å"excess gross margin† into aggressively priced products and emergent technologies such as AppleTV so if Apple divested its PC unit, it would cut off a significant source of funding. In order to succumb the high initial cost curves associated with new product introductions Apple n eeds to retain the steady cash flows generated from Mac sales. Recommendations (i) Short term: Focus on core products Premium products = stable and attractive gross margins. The growth strategy for Macs should continue to be sell well designed and premium products that provide a great user experience. As a premium product provider, Apple maintains a healthy gross margin (30% +) and emphasizes high-quality product design over cost-saving measures. Apple has made necessary trade-offs by eschewing the low-end portion of the market and focuses only on the middle and high end segments. Geographically, Apples market share is strongest in North America. The company still has opportunity for further penetration within the US market and it should continue its retail strategy that broadens the availability of Mac products. However, the low hanging fruit over the next decade may lie in its under penetration in markets abroad offers a significant opportunity (such as non-Japan Asia and Latin America). A more aggressive push into international markets could be a source of growth primarily driven by high vol ume sales of core products (portable computers, desktops, iPod) supplemented by strong-selling new products (i.e. iPhone) which transition over time to become core products. (ii) Medium term: Continue to invest in software and application While Apple generates its earnings and cash flows from selling devices, the software and applications it builds for its devices are crucial. Specifically the unique features of the Mac OS, the simplicity of iTunes, and the innovation of the App Store are all part of what holds together the Apple ecosystem. iTunes is one of the key Apple products for driving the halo effect. It is the software that connects devices within the Apple ecosystem and by controlling software Apple is better able to integrate applications that matter most to its customers. By delivering added value and differentiating itself, Apple may be able to buck the overall decline in PC sales through market share gains. With the technology shift into cloud computing gaining traction and the high capital expenditure required for development, Apple would benefit from alliances with infrastructure cloud companies such as Cisco as well as on the application side with Microsoft and Google. Apple should learn from its mistakes in the early 1980s when it lost significant market share by closing its operating system to outsiders. (iii) Long term: Emphasize culture of risk taking To ensure that it continues to create innovative designs and content, Apple must emphasize its culture of risk taking and be unafraid of expanding new markets even at the risk of cannibalize existing products. While the PC accounts for more than 40% of current sales and overall industry PC sales growth still stand at low single digits, it is not unthinkable that smart-phones can ramp up faster than desktop connection as more users connect to the internet via their phones than the desktop PC within the next decade. The PC cycle is entering its mature phase while mobile computing is still in its early stages and Apple is currently leading the charge in mobile innovation. It must continue to develop its application ecosystem, push the envelope on RD, and enhance user experience even at the expense of cannibalizing PC sales because otherwise new entrants will. Apple has had a history of disrupting markets and creating new ones and this has to continue especially if it transforms itself to a consumer electronic company. Apple Mac Swot Analysis