Company A: Apple Inc.
Overview of the Company
Apple is company based in the United States and which deals in a wide variety of products and services including product designs, mobile communication, and manufacture of personal computers, sale of software and accessories, provision of networking solutions and sale of music players, digital content and applications. Some of the products provided by the company include iPad, Apple Watch, iPhone, Mac and operating systems. The company’s headquarters are in Cupertino, California.
Risks the Plan Describes and Covers
Technology Changes
With the production technology advancing at a faster rate and speed, Apple faces the risk of its products becoming technologically irrelevant in the market or effectively meeting the needs, demands and preferences of the consumers of its electronic products. Moreover, since the company relies heavily on e-business marketing and transactions to advertise and sell its products, it faces the risk of sudden drop in sales if it does not put in place measures to respond adequately to these market dynamics. According to Cerullo and Cerulo, “the risks of business interruption expand as companies become more dependent on information technology (IT) infrastructure” (70) The contingency plan seeks to put in place measures that will allow the company to cope with technological advancements.
Low Sales and Stiff Competition
As competition becomes stiff in the mobile communications and electronics industry, Apple faces the greatest risk ever of reduced sales volumes as the market becomes flooded. It faces competition from other companies producing similar products like Google which occupies an almost monopolistic position in the market. The contingency plan should help the company to keep competition at bay by engaging in aggressive product innovation and promotion.
Legal Challenges
Apple Inc. has been experiencing a myriad of legal suits in the recent past that have dented the company’s organizational reputation and image. Some of these legal proceedings border on intellectual property rights infringements and anticompetitive practices. The contingency plan should help the organization to strengthen its legal advisory team to give advice on matters that are likely to lead to civil suits.
The contingency plan adequately covers these risks by recommending various action plans. It also excels in the area of competition reduction measures but is inadequate in product improvement segment. The plan does not however address risks such as taxation rate and law changes, credit risks on accounts receivable, market portfolio fluctuations, volatile stock or inventory, currency value depreciation or changes, natural disasters, terrorism, US government laws and policies, and supply chain management risks. The best way to minimize business risks as Shrivastava, Payal, Kumar and Tiwari (84) is to come up with a business continuity plan that evaluates and reviews risks and put in place measures to mitigate them.
Leadership Challenges
The company is currently experiencing transitions and changes in its top leadership which has brought about uncertainty concerning the future operations of its affairs. Within innovative leaders like Steve Jobs exiting the company management, Apple is exposed to experience unexpected and sudden drop in profitability given the strategic role that he and other corporate managers played in marketing the company and innovating its products. The contingency plan will ensure that the organization comes up with a program that nurtures leadership innovators among its current managers to ensure seamless transition that does not adversely impact on its operations when some leave the company.
Unstable Economy
With the current economic downturn being experienced in parts of Europe and US which are Apple’s main market, the turn over from sales is set to marginally drop to unprecedented levels hence it needs a contingency plan for alternative markets . The contingency plan will enable the company to source other alternative markets to ensure diversification.
Decrease in Product Quality
With reduced innovation and the fact that it depends entirely on its iTunes Store to sell its products like movies, music and books, its products may be negatively affected if tis loses third party digital content rights to host these products. The contingency plan seeks to ensure that the company obtains the right to acquire full third party digital content rights in order to avoid any losses in case of loss of those rights.
Organization B: Samsung Company Limited
Overview of the Company
Samsung is an electronics multinational company based in South Korea and founded in 1969. Its headquarters are in Suwon. The company deals in the information technology or telecommunication equipment, consumer electronics, phones, hard drives, and home appliances such as fridges.
The Risks the Contingency Plan Identifies and Covers
Stiff Market Competition
The company faces immense competition from other firms in the global electronics market such as Sony, Apple and Huawei Technologies Co Ltd. The contingency plan seeks to ensure that the company deals with this competition through aggressive product advertising campaigns, product redesign and innovation.
Foreign Currency Fluctuations
Being a multicultural company, Samsung is experiencing drops in the value of currencies in Europe where it has the main market. This has eroded the demand for consumer electronics for the company over the last few years. The contingency plan is meant to ensure that the company has a fall back plan through diversification of its markets to other places like North America and Africa.
Low Profits
According to Lee (online), Samsung is headed for a drop in its profits in 2016 due to declining demand for its consumer electronics such as smartphones and memory chips. The author also associates these challenges with financial risks that exist in the electronics market.
The contingency plan for Samsung Electronics excels mainly in the area of reduction of low profits as it seeks to ensure that the company enhances its marketing activities by exploring other markets in Asia, US and Africa in order to increase the profit base. However, the contingency plan is inadequate where it does not set out the implementation plan and program management which, according to Simpkins (108), are some of the most important ways of managing and mitigating unforeseen risks. According to this author, the best way to plan for business contingencies or risks is to measure the likelihood of occurrence, developing proactive plans to reduce risk impacts and identify alternative resources that will be required to manage the risks (107). It is also important to come up with financial impact assessments of the nature and scope of the risk. Moreover, as Cerullo and Cerullo (71) suggest, it is important that the business organization carries out business impact analysis, training and testing.
The contingency plan also does not address risks that the company faces such as supply chain management risks, natural disasters such as fire and earthquakes, financial risks, management risks and risks associated with human resource management. Hence, the best way the company may minimize these risks is to come up with a risk assessment plan that identifies the possible risks and devices the most appropriate mitigation mechanisms and approaches.
I prefer contingency plan A since it shows a clear picture of how each and every risk is to mitigated and managed by the company.
Works Cited
Cerullo, Virginia and Michael J Cerullo. "Business continuity planning: A comprehensive approach." Information Systems Management (2004): 71-77. Print.
Lee, Se Young. "Samsung Electronics at risk of 2016 profit drop on components headwinds". Reuters. 5 Jan. 2016. Web. < http://www.businessinsider.com/r-samsung-electronics-at-risk-of-2016- profit-drop-on-components-headwinds-2016-1 >
Shrivastava, Ankur Kumar, Nitisha Payal, Abhinav Kumar and Amod Tiwari. Business contingency planning: A road map to protect company from unforeseen threats. International Journal of Engineering and Advanced Technology (IJEAT 1.6 (2012):84-87
Simpkins, Robert A. "How great leaders avoid disaster: the value of contingency planning." Business Strategy Series 10.2 (2002): 104-108. Print.
