TRILLION DOLLAR APPLE
Technological magnate Apple became the first company whose market value had reached thousand billion dollars. There are constantly louder critics that Apple, and many other leading IT companies, abuse their market influence and contribute thus to bigger global capital concentration.
January 2007 was written about when the founder and long-time Apple CEO Steve Jobs ambitiously declared: “Today, Apple is going to reinvent the phone.” It was at the presentation of new products of his company, among which the honorary place was given to an innovative smart device, called “iPhone”. Eleven years later and after more than 1,4 billion soled iPhones, Apple became the first company reaching billion dollars market value. Not even Steve Jobs who led Apple until 2011, could have not even dreamed of.
Today, only fifteen countries in the world, based on the nominal GDP, are worth more than this Californian company. With thousand billion dollars of market capitalization, the Apple is, for example, in the rank of economies of Indonesia and Mexico, and bigger than economies of Turkey or Switzerland. Observing from our perspective, market value of Apple is more than twenty times bigger than nominal GDP of Serbia.
Many believe that such unimaginable amounts are actually “virtual”. However, a fact that one Apple share is sold at price of 207,05 dollars and that they are tradable on the market.
One of the leading world investors who trusts Apple, is Warren Buffet, whose Berkshire Hathaway trust had continuously invested in technological giant from Cupertino and became the biggest individual shareholder. “It is an incredible company”, Warren Buffet briefly answered the question why he invested so much money precisely to Apple.
Only twenty years ago, a company founded by Steve Jobs was at the verge of bankruptcy, and its actions were, at that time, traded at price of one dollar. Ever since iPhone emerged on the market for the first time in 2007, company share prices have increased eleven times. Even tough Apple is not the biggest smartphone producers- according to the number of sold telephones, it is headed by Korean Samsung and Chinese Huawei- company “sits on the mountain of 285 billion dollars cash reserves and in 2017 it achieved net profit in the amount of 48,5 billion dollars”, states British “Guardian”.
Although many thought that Apple had for quite some time needed an entirely new product in order to continue the growth trend of sales and profit, Apple CEO Tim Cook said that precisely thanks to excellent sales of the existing premium smartphone iPhone x, but also higher income from sales of services from Apple’s online app stores, the magical trillion dollar limit was crossed. iPhone x, which is by several hundred dollars/euro/pounds more expensive than previous iPhones, went particularly well
in Chinese and Japanese markets, even though total number of sold Apple phones worldwide had not changed significantly comparing to previous year. They have “only” become more expensive, and that is where profit growth came from. For the time being, company products have not been hit by customs was between the US and China.
EMOTIONAL BOND: Nevertheless, it is not only iPhone success the one that contributed to the real renaissance of Apple’s operations. Although its business results and strategies are often the topic in all meridians, it is a fact that for decades this company has been cherishing business model which is quite different from its competition. A part of such a huge success – apart from being essentially based on the “vision of future” and recognizing needs of new generation of users- it is based on Apples creating of the entire platform of different products and services, i.e. strictly controlled technological eco system of this company. It spans from Apples online app store, where consumers, among other things, can subscribe to music and other kinds of services, then introducing one’s own operative system, as well as system of cash-free payment; then, there are, also, cloud services, as well as departments for different hardware and production of numerous devices and gadgets, such as computers, phones, tablets, television sets, music players, smartwatches etc.
A part of the financial success is in a fact that nothing is, actually, for free in Apple. An illustrative example of such a corporate politics are also (too) expensive accessories, chargers, cables and similar “requirements” which enable even better experiencing of basic devices. Despite that, enthusiasm and fantastic users’ loyalty to this brand encouraged the scientists to seriously address also psychological reasons of such a success of Apple in the market.
The “Forbes” Magazine states that “Apples bond with consumers went along the path of a “simple emotional relationship” to a level where it “managed to truly connect with their minds”. Such a “neurological connection”, says “Forbes”, happens when “brand or service create a strong psychological and emotional response which operates at the subconscious level of consumers and in a way that cannot usually be easily understood or the user can necessarily recognize it”.
Observing from the marketing point of view, in previous period Apple managed to successfully unify and deliver several important massages to its consumers: apart from mentioned emotional bond, there are also minimalistic and functional design of devices, that underpin the simplicity of their use – whereby they are amusing, which is especially appreciated by younger generations of users.
Additionally, the company also carefully cherished a concept of Consumer Relationship Marketing (CRM), which contributes to the users’ feeling that Apple recognizes and understands then, and that it speaks to them in their own language. Thanks to that, the company managed to build a “hardcore” base of its fans- which can be rarely seen anywhere in the world or in any other company. Many authors with not such a small doze of cynicism, compare such loyalty with some sect affiliation.
This is, certainly, contributed by an intentionally created aura of mysticism that surrounds Apple – about what they are doing, what new products would be like, what they are going to surprise the market with – because future strategic business moves of this company are being meticulously kept under the strict veil of mystery. Precisely such a holistic approach to business, processes and activities, implemented by
this company for all these years, is woven into the foundations of Apple’s success on extremely competitive market of digital and technological innovators of the 21st century.
NUMEROUS CONTROVERSIES: Stories about global Apple’s successes could be told for quite some time, but in case of this company, great successes were also followed by numerous controversies, as of the
It is familiar that technological magnate, with head office in California, has been outsourcing for years hundreds of thousands of jobs in countries like China, Taiwan, Japan, Singapore. There constantly loud criticisms about extremely bad working conditions in those huge electric component factories Asia wide, that provide service to technological magnates.
Harsh treatment of employees, miserable wages and excessive overtime work are just some of the accusations that cast a shadow on Apple’s success, and Amnesty International’s reports even mention cases of otherwise strictly prohibited child labor in production facilities. Although US President Donald Trump, for example, ignored accusations of poor working conditions in factories that produce parts for Apple, he had repeatedly discussed with Tim Cook about bringing the company’s production back to the US. Although Apple did not receive guarantees from the first man that iPhone production would move to America, in order to please the head of the White House, Tim Cook announced a capital expenditure of 30 billion dollars in the US over the next five years and creation of 20,000 new jobs.
In addition to the new headquarters of the company and the Apple Campus, which resembles a spaceship, Tim Cook also announced that new investments and consumption will directly contribute to the American economy with some 350 billion dollars in the next five-year cycle.
In addition to seriously working on the quality of life and work of its employees, especially in Asia, the American technology giant was recently forced to cover itself with ashes and apologize to its users when it was discovered that it was deliberately slowing down the work of older iPhone models, in order to force customers to get newer (and more expensive) ones.
CAPITAL CONCENTRATION: Those “historical” thousand billion current values of Apple point to another growing problem of the world economy: the increasing concentration of enormous capital in the hands of only a few technological companies and individuals, who use that money to achieve an ever-increasing global influence. The problem, however, arises when that influence does not benefit the majority of the community, on the contrary. The New York Times states that “economists are beginning to consider whether the rise of so-called superstar companies is contributing to already underwhelming wage growth, a shrinking middle class and widening income inequality in the United States.” “The large social and political influence of these mega-companies,” according to an analysis by the US newspaper, “has prompted some lawmakers to demand greater regulation to rein them in.”
The same newspaper reported the results of research by professors from the University of Arizona and Ohio State, which stated that “in the past few decades, there has been a major shift in the distribution of corporate profits among American companies.” The research states that “in 1975, 109 companies reaped half of the profits on the stock market. Today, only 30 companies do that.”
Even more incredible is the fact that this year only five technology companies – Facebook, Apple, Amazon, Google’s umbrella company Alphabet and Netflix – made approximately half of the total profit achieved in the Standard & Poor’s 500 stock market index. The British “Guardian” also reminds that the total value of these five companies today amount to an incredible 19 percent of US GDP.
TAX EVASION: The European Commission is increasingly using a similar tactic of “restraining” large corporations, mainly from the IT sector. It focused on the fight against tax evasion by companies that transfer their fabulous profits to tax havens, often to the EU countries themselves, such as Ireland or Luxembourg. Two years ago, for example, the Antimonopoly Regulatory Agency of the EU ordered Apple to retroactively pay thirteen billion euros in taxes to the Republic of Ireland, where it enjoyed “illegal” tax benefits for years. Then the public was stirred by the report of the American branch of the non-profit organization Oxfam, which revealed that the fifty largest American companies, including Microsoft, General Electric, Apple and Google, hid as much as 1,400 billion dollars in foreign tax havens.
One should not forget that Google was recently fined five billion euros in the EU for “abusing” its market position, forcing companies that produce mobile phones to install Google applications on their devices. Due to similar violations, Microsoft also once paid draconian fines and was eventually forced to comply with EU instructions.
TOTAL DOMINATION: Given that Apple and Google together today provide software solutions for almost 99 percent of the smartphone market and that companies such as Facebook, Google, and Amazon have absolute dominance in the online advertising market (some studies show that 85 cents of each dollar which was spent on online advertising goes to the account of these companies), the question arises as to how to deal with the increasingly strong monopolistic tendencies of the leading technology corporations in the world. It is therefore not surprising that some world leaders are considering the introduction of the so-called “digital” ambassadors to establish closer relations with the American giants from the IT sector, because they have such a large influence on the global economy.
Citizens and service users are left to hope (probably in vain) that at least the horrific practice of mass surveillance and collection of citizens’ personal data and its sale to large advertisers, companies or even governments – which is continuously carried out by the most powerful technology companies – will be reduced, if not already there is a possibility that such a practice will be completely banned.
* * *
Annual salary in nine seconds
Just a few days before Apple reached a historic market value, another story that seemed to come out of the “Believe it or not” column about the concentration of huge capital in private hands made headlines around the world.
Namely, the personal wealth of the founder and owner of Amazon, Jeff Bezos, reached new records and his net worth exceeded 150 billion dollars, making this entrepreneur the richest person in recent history. This year alone, thanks to the rise in the value of Amazon shares, Bezos’ personal fortune has increased
by more than fifty billion dollars. The fact that it takes the CEO of Amazon less than nine seconds to earn the average annual salary of his employee sounds amazing.
(This text was published in weekly magazine “Vreme” on 9 August 2018 )
