The Importance of Trade Policy to the United States
Discuss about the United States Trade Policy and Possible Effects.
The organizations of international trade policy have changed considerably since the conclusion of World War II, led majorly by the United States of America and the European counterparts. The importance of trade to the United States has increased since the formation of the policy in line with the wider extension of international trade over a specified period. However, it is alleged that the decline of the United States in manufacturing has been attributed to the policy effects especially on the development of Asian imports (Galiani, Schofield &Torrens, 2014). For this reason, the current United States leadership withdrew in one of the parts of the foreign trade agreements (TPP) and had also criticized the policy as they advocate for bilateral trade.
Momentous activities across the globe have heightened awareness of how detrimental risk can be to a business. As a result, supply chain risk management has become top of mind for many companies around the world. When disasters such as earthquakes and hurricanes hit, single disruption creates disruptions along the whole supply chain (Ková? & Žigi?, 2014). Therefore, an all-inclusive risk management strategy must incorporate steps to identify, evaluate, and execute risk mitigation strategies that handle potential disruptions around multiple nations. The focus, in this case, is Apple Inc.
Apple is among the top American corporations that manufacture computer software and other electronics for consumers. The company is well known for its products such as Macintosh group of computers, the iPhone, iPad, and iPod. It currently has over 35 stores in different countries across the globe as well as an online store that provides the hardware and software. Apple has been ranked at some point as one of the largest organization in the world about market capitalization. It, therefore, means that it is an organization with the largest market internationally about both profits and profit creation. Apple was established in 1976 and later incorporated the following year. The existing name reflects the continuing improvement in its range of products and market diversification.
Apple is an organization based on items and competes in the market with different other consumer goods organizations. Nevertheless, to cultivate a competitive benefit over its competitors, the organization runs an exceptional marketing strategy for its products. The unique establishment of a wide range of its products has made the company enjoys a huge base around the whole world (Haraburda, 2017). It has diversified the market and variety of products to expand its profits and market share. Some of the Apple’s highest traded products are the iPods which enjoy worldwide acknowledgment.
Supply Chain Risk Management
Risks associated with current and future US trade policy posed to Apple’s value chain; supply chains, operations, and demand chains
The Trade policy is the regulations and conformities that manage the imports and exports to foreign nations. Companies must first recognize those risks to maintain global supply chain risks. The two trends impact the dynamics of global supply chains; consolidation and globalization of the organizations resulting in increased ambiguity in logistics operations at the tactical, outfitted and strategic levels.
US Trade policy has effects on different companies especially those that mainly rely on the raw materials and consumers from outside the United States of America. Trade policy is characterized by tariffs that are also known as customs duties (Evenett & Meier, 2013). These are the main the essential tool of the trade policy. These trade tools make up the finance charges on the imported products levied by the governments and collected by the concerned customs authorities. The primary role is to protect the internal processes from competition amounted to cheaper imports. All the nations involved in the trade base their tariffs on a harmonized scheme, which contain 99 chapters that cover more than 5,000 personal product descriptions and several divisions (Creelman, 2016). In every product, the government apply the chosen rates of tariff or sometimes not applicable. In most cases, the government does apply a tariff export of an item which is a precious and vital national resource, to daunt exports and maintain domestic supply.
America as a nation gains a lot from foreign trade; however, despite all these gains, there are changes costs for employees displaced by imports. The leadership of the US has been critical of these trade policies, and that has created uncertainty concerning economic policies which is likely to lower global trade and investment, along with connected gains (Cokins, 2013). Therefore, Apple being of one the companies that are primarily engaged in international business is affected by economic uncertainty risk.
Economic circumstances caused by the Trade policy could significantly and adversely affect the organization. The uncertainty of the international economic environment creates an enormous risk to the corporation through consumers and business features. The imports that are deemed to be ruining the domestic cost-effective status may possibly reduce the demand of the corporation’s goods and services, as a result of the declined revenue and insufficient self-assurance, such as strict credit strategy, unemployment rise, depressing economic news and reduction of quality values (Blaikie, Wisner & Cannon, 2014). Again, the need could be anticipated to be significantly dissimilar and diverse from Apple, due to the overall prices increase of products sold out of the United States marketplace to compensate the intensification outcome of the American $. Other elements most likely affect organization’s operation by the rise of gas prices, adverse circumstances in the housing and finance markets enhancement of work and healthcare expenses, firm access to credit, and other several macroeconomic aspects that may influence customer expenditure behavior (Levenson, 2015).
Overview of Apple Inc.
In a bid to handle the production uncertainty as a risk, Apple shifted its assembly /manufacturing activities to China. If the demand improved, production amenities could speedily recruit more employees at a inferior price rate than in the United States. Finished goods could then be transported by ship, via sea cargo to the storehouse in US, California.
Nevertheless, Apple’s products created severely elevated and unexpected preliminary order. At the same time as Apple’s manufacturing capacity was competent to deal with the demand, a setback in delivery of rigorously impinged on production as well as, consequently orders reaction duration. Due to the quantity included the manufactured products were transported by the sea which, as a result of the climate in the Pacific Ocean, impacted transportation durations (Yawar & Seuring, 2017). As a result, lost sales restricted the benefits and enlarged market distribution, Apple or else would have accomplished.
This scenario shows that, even though supply chain of Apple was not multifaceted, the improbability implicated in sea shipping made by supply chain agility of Apple was low due to the stumpy momentum and suppleness with which manufactured goods may perhaps be brought to market. Momentous activities across the globe have heightened awareness of how detrimental risk can be to a business. As a result, supply chain risk management has become top of mind for many companies around the world. When disasters such as earthquakes and hurricanes hit, single disruption creates disruptions along the whole supply chain.
Another risk identified is the political and dogmatic uncertainty which generally characterizes the US trade policy. Laws and rules in various regions connected to mobile infrastructure and software protection requirement usually transform as well as the limitations on creation, manufacture, set of connections carry that right, division, software roles and practice, which cause an adverse impact on the corporation’s design and manufacture drawing and application know-how. These changes generate additional expenditure on the productions support since it improves the connected modifications cost to meet the needs of the domestic regulations that is not involved in the initial value. Besides, a vast trouble concerning regulatory uncertainties is the restriction and obstacles to gain entry into the markets (Najjar et al., 2017). On the other hand, this status is currently improving, it is still harmful to organization’s productions and services promotion or marketing in these nations, such as the incompetent audit system, for example, and China reduces the marketing rate or promotion charges of organization’s products and services. Lastly, it is apparent that tax policy could unswervingly influence the performance of the Apple. Various nations have different tax rates, and even change at a specific point in time, which raise the tax risk for Apple
Marketing Strategy of Apple Inc.
Global government’s responses to US trade policy and the risks posed to the Apple’s supply chains, operations, and demand chains
The United States of America, through her leadership, has vowed to raise tariffs concerning the trade policy issues as a means of reducing the trade deficit. What’s the effect of this on United States investments in other countries? What impact will it have on the companies who depend on the imported raw materials? And what will happen to companies such as Apple? Before looking into the implications or response to these questions and how other nations respond, it is essential to examine the fundamentals and underlying economics of what determines the trade position of a country. The United States contemporary account deficit depicts the fact that the United States government and private sector sponge to sustain investment and consumption.
In response to the U.S tread policy, China has come out to issue a stern reaction targeting the big companies such as Boeing, soybeans and much more. China is the largest consumer of soybeans, a product that produced and sold by the United States, and they hit back through their ministry of Commerce that it was planning to increase tariffs for US imports, especially on steel and aluminum (Rajeev et al., 2017). On the other hand, apart from this direct response, corporations such as Apple and others are set to a loss in such situations. These companies depend on the import and export to run their operations, in terms of transport, it, therefore, means that supply chain would be profoundly affected despite having been seen to be one of the few corporations that have the best supply chain. This means that every action or activity from production to supply.
The trade policy is seen as an issue that can result in the unstable worldwide economy. Issues of the constant sovereign debt issues, spiking fuel prices and unemployment are a threat to corporations such as Apple. Credit markets could congeal up and get rid of Apple’ supply chain. Following the harsh time that comes with trade effects, consumers, especially from other directly affected countries China, would buy cheap products from Apple’s rivals (del Rosario et al., 2017). The amount of money that Apple spent on designing is overwhelming and such effects of the trade policy mean no good, the corporation is set to make a loss, and if it continues, Apple might end up sinking completely.
Risks Associated with US Trade Policy on Apple’s Value Chain
Similarly, due to lack of competition from the suppliers of Apple, as a result of the tariff increase, the companies may decide to charge Apple more for their products or components; in that case, they will definitely do that since Apple has no any other option. This will, in turn, hurt the Apple, and it means that there will be losses as the cost of production rises.
The risk is a reality that is always present in any business. It has been part of the supply chain, and therefore it is not a surprise. It is still essential for the corporations to have comprehensive ways of handling the expected risks. This include upstream and downstream in supply chain. Agency theory widens the risk sharing and involves agency problem that takes place when assisting or cooperating groups have different objectives. Agency theory entails that defined prevarication policies against risks can have an immense influence on institutional value. Apple’s risks, in this case, are mainly determined by the US trade policy and are set to impact its operations across the world. Upstream, in this case, are merchants who generate goods that are being used in the organization’s functions (Harrison, Hoek & Skipworth, 2014). These materials or raw components move into direct manufacturing. The downstream supply chain effectively distributes the products and services of the organization to the customers. Therefore, both downstream and upstream ought to be proactively controlled to reduce operational, fiscal, image and lawful risks.
Supply chain leaders of Apple should make a safe but a high-operational supply chain. It is intellectual risk organization. Apple’s manufacturing plant being located in Southeast Asia, strategic needs for trader insurance and restrictions of legal responsibility is recommended. Using of exterior or outdoor supplier or transporter needs an evaluation of potential liability exposure. For instance, the case of a delay that took place in the early 1990s as mentioned earlier is a clear indication why Apple needs to evaluate strategic requirements for supplier insurance. This will help in curbing delays that may sometimes lead to the delay of orders that may, in turn, take the company into losses.
On the other hand, Apple as a multinational corporation should also set up manufacturing plants in various countries, not in one specific place. The trade policy is likely to create an unfavorable environment for Apple to operate in Asia, especially in China. If the current United States leadership increases the tariff as they are about to, it, therefore, means that many US companies may face hostility and at the same time taxed more than other competitors (Clark & Monk, 2011). Therefore, setting up other manufacturing plants in various locations may help Apple in minimizing loses or risks that are related to tariff issues.
Global Government Responses to US Trade Policy and Risks to Apple’s Value Chain
The proponents of the agency theory state that agency connection comes between two or more groups when one is chosen as “the agent” and represents or acts for in place of another two who is chosen as the “principal” (Delbufalo, 2018). Agency theory widens the risk sharing and involves agency problem that takes place when assisting or cooperating groups have different objectives. Agency theory entails that defined prevarication policies against risks can have an immense influence on institutional value. Apple’s risks, in this case, are mainly determined by the US trade policy and are set to impact its operations across the world. Withdrawing of the United States’ government from trade agreements and also increasing tariffs are risks contributing factors and practices that definitely create more harm to corporations such as Apple if other nations revenge on the same.
List of References
Galiani, S., Schofield, N., & Torrens, G. (2014). Factor Endowments, Democracy, and Trade Policy Divergence. Journal Of Public Economic Theory, 16(1), 119-156. doi:10.1111/jpet.12057
Ková?, E., & Žigi?, K. (2014). International Competition in Vertically Differentiated Markets with Innovation and Imitation: Trade Policy Versus Free Trade. Economica, 81(323), 491-521. doi:10.1111/ecca.12093
Evenett, S. J., & Meier, M. (2013). An Interim Assessment of the US Trade Policy of ‘Competitive Liberalization’. World Economy, 31(1), 31-66. doi:10.1111/j.1467-9701.2007.01081.x
Blaikie, P. M., Wisner, B., & Cannon, T. (2014). At Risk: Natural Hazards, People’s Vulnerability and Disasters. Florence: Taylor and Francis.
Creelman, D. (2016). Strategic Analytics: Advancing Strategy Execution and Organizational Effectiveness. People & Strategy, 39(2), 70-71.
Haraburda, S. S. (2017). SUPPLY CHAIN MANAGEMENT Maturity Level Assessment. Defense Acquisition Research Journal: A Publication Of The Defense Acquisition University, 24(4), 656-681. doi:10.22594/dau.16-772.24.04
Cokins, G. (2013). Performance management: Integrating strategy execution, methodologies, risk, and analytics. Hoboken, N.J: Wiley.
Levenson, A. R. (2015). Strategic Analytics: Advancing Strategy Execution and Organizational Effectiveness. Oakland: Berrett-Koehler Publishers.
Yawar, S. s., & Seuring, S. s. (2017). Management of Social Issues in Supply Chains: A Literature Review Exploring Social Issues, Actions and Performance Outcomes. Journal Of Business Ethics, 141(3), 621-643.
Najjar, M., Shahwan, R. M., & Yasin, M. M. (2017). Supply Chain Social Sustainability: From the Perspective of a Supplier Operating Under a Restricted Operating Environment. Competition Forum, 15(1), 8-14.
Rajeev, A., Pati, R. K., Padhi, S. S., & Govindan, K. (2017). Evolution of sustainability in supply chain management: A literature review. Journal Of Cleaner Production, 162299-314. doi:10.1016/j.jclepro.2017.05.026
del Rosario Pérez-Salazar, M., Lasserre, A. A., Cedillo-Campos, M. G., & González, J. H. (2017). The Role of Knowledge Management in Supply Chain Management: A Literature Review. Journal Of Industrial Engineering & Management, 10(4), 711-787. doi:10.3926/jiem.2144
Harrison, A., Hoek, R. I., & Skipworth, H. (2014). Logistics management and strategy: Competing through the supply chain. Harlow (UK: Pearson.
Clark, G. L., & Monk, A. B. (2011). The Political Economy of US-China Trade and Investment: The Role of the China Investment Corporation. Competition & Change, 15(2), 97-115. doi:10.1179/102452911X13025292603598
Christopher, M. (2016). Logistics & Supply Chain Management. New York: FT Publishing International.
Delbufalo, E. (2018). Agency Theory and Sustainability in the Global Supply Chain.
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