Introduction
Information technology and consumer electronics are the most competitive and demanding in the United States. Despite that, one company has managed to crack the code and be the most successful out of other competitors despite selling its products and services at a higher price than theirs. That company is Apple Inc., an American consumer electronics company that also offers information technology products and services to its target market.. The company was founded on April 1st, 1976. Since then, it has successfully expanded into various business segments, such as designing, developing, producing, and selling software, hardware, smartphones, and online services/cloud computing.. As of now, Apple Inc. is the largest and most successful smartphone manufacturer that is considered state of the art and purchased by high-end customers who are related to high quality and expensive electronic products, especially the iPhone.
One of the strategies the company uses to stay relevant and experience significant growth in market share and revenue is innovation and the development of new products. Apple Inc. periodically launches a new iPhone updated over the previous one regarding efficiency and technological advancement. In 2020, the company launched the iPhone 12 series, which was made up of the iPhone 12, iPhone 12 Pro Max, iPhone 12 Pro, and iPhone Mini, which were selling in the price range of between $699 to $1099. This price range was set for the new series to get the attention of the large customer base through a price differentiation strategy. . This price range meant customers could purchase the iPhone 12 series product based on their preferences, needs and budgets. As usual, the customer got an upgrade from iPhone 11 by having a 5G network, an upgrade in performance, improved OLED, and a high-resolution camera.
However, this time, there was a surprise in the packaging and accessories that accompanied the new iPhone series. The surprise was that the power adapter was excluded from the iPhone package, and the main reason presented by the company is that it was an approach to reaching the company’s environmental goal and abiding by the sustainable development goals. Customers were given the option of purchasing the charger adapter separately if they needed it. Since this is something customers were surprised to find out, it was received with mixed attitudes, which could have a mixture of positive and negative impacts on the company’s reputation, brand image, market share and even revenue. As a result, this paper will research the extent to which revenue is affected by Apple Inc.’s decision to exclude power adapters from iPhone 12 series packages.
Methodology
Research Method and Design
The research objective of this paper will be determined by the procedure used to collect relevant data. The first step for this research is choosing the mixed research method, where qualitative and quantitative methods will be used to collect data. After that, the next step is to select thematic analysis methods as the study design to identify and select secondary data from published sources of information relevant to the research objective. Peer-reviewed articles, business journals, and news articles on the subject matter will be selected, especially those published in the past three years. After they have been selected, they will be reviewed, and information that can offer data to answer the research question will be retrieved.
Research Question
The research process will be guided by answering the research question, which is;
- To what extent does Apple’s change to exclude a power adapter affect them
revenues?
Main Results and Findings
Saved Cost
Firstly, it is imperative to acknowledge that Apple Inc.’s revenue is affected by excluding the adapter charger in the package, which saves production and operation costs for the iPhone 12 series product. According to the available data and report presented by the Bill of Materials, Apple Inc. saved $4.2 on every iPhone 12 series product the company shipped to customers and its stores worldwide.. While this might appear as a small amount of cash considering the general cost of making the product, when looking at the bigger picture, it has a significant impact on saving costs. Apple’s financial report and statement in 2020 show that the company shipped approximately nine (89) million units of iPhones annually.. Thus, by taking this unit and saving costs and put into the calculation, the business strategic decision of removing the charger adapter from the package saved the company from spending over three hundred and sixty-four (373.8) million dollars.. This reduction is significant for the company to save, especially when considering the incremental cost of upgrading the iPhone 12 series product.
Justification for Package Exclusion
One of the reasons justifiable reasons that Apple Inc. offered as to why the charging adapter was not included in the packaging is that it was a business strategic approach to reaching the goal of protecting the environment. This exclusion of the charger will protect the environment by lowering carbon emissions while transporting the product to different market segments. Also, it will help the company reach its goal of environmental protection by aligning with sustainable business practices.. This exclusion of the charger also meant that the company was reducing electronic waste since there were billions of charger adapters sitting in individual’s homes from the previous iPhone products that they had purchased. Thus, there was no need to have another one and those who didn’t have one could easily purchase new ones from the shop.
Additional Cost in development of iPhone 12.
This justification is reasonable, but other customers believe it was just a hoax and that the company’s decision to exclude charging adaptors is a way of meeting its financial bottom line. This argument is presented by existing data showing the additional cost the company incurred through updates that the iPhone 12 series included. For instance, the development of the iPhone did cost the company 21% more than what was used in the development of the iPhone 11. Financial analysis conducted by the company in developing the iPhone 12 determines that the company will be spending $ 25.5 more on new display systems and $19 more on RF components for 5G connectivity. In addition, there are features of improvement like PMIC, UWB chip, and A14 bionic, which make up a 16% cost increment. Also, the shift from LCD in the iPhone 11 to OLED used in the iPhone 12 led to a 23% increment in cost.. These improvements and new features led to an increase in the production cost by 21%. Since the company had already promised its customers that the iPhone 12 series product would be sold at the same price as those of 11, the company would make a significant los. Thus, to cut some of the cost, the company excluded the cost of making charging adaptors. This approach worked out well because, despite the increased cost of producing and selling iPhone 12 series products at the same price as the previous model, the company significantly increased profitability.. As shown in Figure 1, the revenue collected by the company improved between 2021 and 2022 when the company decided to exclude charging adapters from the package of the iPhone 12 series products. The revenue collected in 2021 was $191.9 billion, which went up to $205.4 billion; both are revenue growth compared to the $137.7 million recorded in 2020 when packaging wasn’t changed..
Analysis and Discussion
Corporate Social Responsibility
As much as there are several opposing opinions as to why the company excluded the charging adapter from the new iPhone 12 series packaging, the truth is that it is related to the alignment of environmental conservation and sustainable business practices that contemporary businesses are taking. This practice aligns with the corporate social responsibility strategy that Apple Inc. is taking and its commitment to the community and people who consume its products and services.. The cost of developing the 12 series was more than that of the 11 series, but the reality is that more chargers exist out there than consumers have from purchasing the previous iPhone products.. Thus, by excluding them from the package, it created an incentive for customers to reuse existing charges, which will eliminate electronic waste. At this point, not only is Apple Inc. is cutting production costs, but also helping in the process of preserving and protecting the environment by eliminating electronic pollution as part of CSR. In the long run, this will mean that there will be a reduction in plastic, ceramics, and metal wires. Also, with less production and packaging of new charging adaptors, there is a reduction in the process of generating the same function, which will lead to a reduction in carbon emissions and the saving of natural resources.
Market Share & Revenue Impact.
The move by Apple Inc. to exclude charging adapters positively impacted revenue by increasing the market share of the company’s product. This strategic decision resonated with environmentally conscious customers who only want to purchase from companies that offer eco-friendly products. Thus, more customers became attracted to the new identity of Apple Inc. associated with environmental conservation, and that is one of the reasons why sales increased.. It is already known and proven by statistics that Apple Inc. is the market leader in consumer electronics and sells its products to 29.64% of the market. The change in the packaging resonated with all customers committed to sustainable development goals and environment conservation.. With the increase in the market share, so does sales and, ultimately, the revenue that Apple Inc. recorded. Currently, there are approximately 1.5 billion active users of iPhones, and this number is expected to increase as the company attract more consumers and inspires customer-brand loyalty. One also has to consider the fact that revenue also increased due to the fact those who didn’t have the charging adaptor had to purchase it at the price of $20-$30. Contrary to what others might assume for revenue to decline, the decision to exclude charging adaptors from the packaging increased revenue recorded by Apple Inc.
Conclusion
In conclusion, the decision taken by Apple Inc. to exclude charging adaptors from the packaging of the new iPhone 12 series products did have a positive impact on the revenue. It improved the company’s revenue by cutting production and operational costs, influencing and increasing market share, and aligning with sustainable business practices. An increase in market share and, ultimately, sales and revenue are also tied to the fact that the decision has an ethical aspect for the business. Customers are more intrigued by businesses that consider what is best for the future by preserving the environment. The justification for the action taken by Apple Inc. shows the commitment to environmental conservation and sustainability by eliminating electronic waste and reducing carbon emissions. What is clear is that in the contemporary business setting, taking ethical actions and decisions positively impacts revenue even though the decision might appear costly to the company.
Bibliography
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Appendices
Figure 1. Table showing the financial performance of Apple Inc. https://www.businessofapps.com/data/apple-statistics/
Figure 2. Market share of companies selling smartphones
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