Risks and business
Risk has its origins both within and outside a given organizational environment. For example, many of the risks businesses face lie outside their control because they arise outside the business’ realm of operations. Government regulations fall into this category. Companies that produce hazardous substances, for instance, chemical companies, are always concerned that government will change environmental laws in such a way that it becomes difficult to produce their products cost-effectively. Other examples of external sources of risk include the actions of competitors for example, they have just introduced a new product that makes one of the company’s product lines obsolete, demographic trends for example, the aging of the population reduces demand for youth-oriented products) or acts of nature for example, a sustained drought causes a dramatic drop in the output of agricultural products. Because external risks lie outside a company’s control, they are limited in the direct actions they can take to handle them (Frame 2003).
Nonetheless, organizations can still manage these risks by developing strategies to deal with them effectively once the untoward risk events rise. Other risks lie more directly in the company’s realm of control because they occur within a particular organizational environment. These are internal risks. Examples include risks associated with using aging equipment, risks posed by employing an incompetent workforce, and risks associated with organizational politics. Many of these risks, particularly those associated with carrying out operations, can be mitigated by fixing the source of problems. Old equipment can be replaced, employees can be trained, and competent workers can be hired. Even within a defined organizational environment, however, there are internal risks that are difficult to handle directly. Office politics is an example. Still, there are defensive steps a business can take to deal with them indirectly. For example, it can nurture good relations with two parties who are at political loggerheads, thereby avoiding some of the flack that might arise when they join each other in battle (Frame 2003). The situation of taking and facing risks can happen to any organization. Risks can be based from the internal or external environment. One company that was exposed to risks is Apple Computers Inc. Apple Computers Inc is considered to be one of the businesses that created a huge amount of change and improvements in the computer industry.
It brought about different changes to the industry; these changes are still visible in the present and it still provides benefits to different people even at this times. The products of the company provide benefits not only to the clients but to competitors as well. The company’s products were used as a basis by other computer company’s in designing the specifications and physical characteristics of their product. It also serves as a meter of how products are designed. The company offers various products for the different market it targets. Apple Computers Inc. has made products for its consumers found in various parts of the world. It has reached places not reached by its competitors and it tries to satisfy all the needs the needs of their clients wherever they are.
Major risk of apple
Traditional anti-competitive concerns with respect to the formation of strategic alliances stem from the conviction that these transactions usually facilitate reducing output and fixing prices. In other words, strategic alliances are thought to be like cartels. In network industries, nonetheless, competition is based on quality features far more than prices. The collusion concerns should be put on the risk of decreasing innovation when competitors form strategic alliances (Gottinger 2003). In network industries, the markets are often oligopolistic rather than competitive owing to the enormous irreversible costs, economies of scale, sophisticated as well as compatible technologies, and network effects. As a result, for example, in the semiconductor industry, a dominant CPU producer can enter into cross licensing or grant back agreements with other semiconductor firms to obtain the next generation microprocessor technology developed by these semiconductor firms (Gottinger 2003).
The dominant firm thus can easily leverage market power in the existing CPU market into next generation's microprocessor market. This is particularly true when the market power of existing product is reinforced by the network effects. That is to say, the existing CPU has technical compatibility with a computer operating system and the applications software desired by a significant number of computer users. For a new entrant it must be very difficult to attract support from software developers who are generally unwilling to consign development resources to an unproven demand. At the same time, consumers that already have many existing software applications that were written for particular microprocessor architecture would be reluctant to switch to a new and incompatible microprocessor architecture. Computer system manufacturers also would not risk alienating such consumers (Gottinger 2003). Risk will always be a part of business, when one doesn’t take risk he/she might not achieve his/her goals. Businesses who doesn’t take risk may lose the competitive edge it has and it may not have to change to gain a better standing in the industry. When businesses fail the problem is not because they took the risk, the problem lies on the subsequent actions they have done after experiencing the effects of the risk.
For different kinds of business there are different kinds of risks that are dictated by the situation in the environment. For apple the major risk involves conquering the aggressive competition in its market. The company has to find means to conquer its competitors. The company is continuously making products that they know will give them advantage over their competitors. The company is exposed to such risk because the industry the company belongs to has diverse kind of business. Each business in that industry offers something different and it offers something new to clients. The diversity of products creates a harsher competitive environment, for the company to survive in this kind of environment it has to make sure that their products are much better than others. Apple is vulnerable to the continuous improvements in the products of their competitors. This can be prevented through the company jumping the gun on competitors and creating more innovative products.
Other risks that the company has to face
In general terms, risk management is the process by which an individual tries to ensure that the risks to which she is exposed are those risks to which she thinks she is and is willing to be exposed in order to lead the life she wants. This is not necessarily synonymous with risk reduction. As indicated, some risk is simply tolerated, whereas others may be calculatedly reduced. In still other instances, some individuals may conclude that their risk profile is not risky enough (Culp 2001). A man who is extremely late to an important meeting and about to watch his bus pull away from the curb may not only willingly fail to look both ways at a cross walk, but he/she might perhaps quite rationally conclude that the risk of being late is so much higher than the risk of being hit by a car that bounding across the intersection when the light is green seems like the right judgment call. The process of risk management can differ based on both the risks being managed and the agent managing them. First and foremost, risk management is a problem faced by individuals. Although organizations are just collections of individuals, organizations face a set of risks all their own (Culp 2001).
Unlike individuals whose risk management objectives are clearly defined with respect to personal well being, however, organizations have a muddier risk management mandate. One factor that blurs the clarity of the problem is whose risks an organization is managing. If the interests of all the participants in an organization were perfectly aligned, the risk management objective of an organization would not matter so much (Culp 2001). But the interests of various stakeholders in an organization are not only rarely aligned, but often in actual conflict. In conventional corporate risk cultures, risk management is perceived as a cost center whose primary purpose is the reduction of financial risks that are seen to be undesirable virtually a priori. Risk reduction is usually achieved with the aid of expensive analytical systems and costly risk transformation products provided by swap dealers, insurance companies, exchanges, and clearing houses products that appear to have little or no value to shareholders aside from helping companies avert catastrophic losses (Culp 2001).
Aside from conquering stiff competition other risks that Apple has to face includes lowering the prices of their products to meet the financial capability of their client. Part of the stiff competition is the battle of products that costs less. The company has to take some risk in having products that have low prices but with the same standard as their other products. Another risk is introducing systems or processes that will ensure that their products cannot be imitated. Piracy and imitation of products is prevalent in today’s world. Almost everything can be copied and can be sold at a much lower price, this is one of the causes of businesses closing or lessening its employees. Apple can take a risk in introducing systems that will prevent their products to be copied. The company is exposed to these risks because the financial capability of clients is changing. Clients have been looking for products that cost less. Apple is vulnerable due to the changing economy of the countries they operate in.
Risk and its evaluation
Risk can occur in any situation in the company. Risk can appear at any given situation in the business’ operation. A company can determine its potential risk area when there are many choices with regards to making decisions and all this choices can give benefit to the company. Organizations know that taking risk is a crucial activity for the company. Any wrong move in taking risk can lead to more problems for the company. Organizations also believe that following the steps in risk management is important so that they can focus on the goal of overcoming the risk and so that they will maintain a culture of time importance wherein the lesser time should be used in undergoing necessary risks. Organizations need to adhere to the steps in risk management to survive the negative effects of the risk they have to make. Organizations create a risk assessment summary through gathering various information about risk and the different effects it can create to the company.
The different information about the risk comes from situations or events that other companies encounter whenever they have to take certain types of risk. The organizations base their actions on the risk with what was done by other companies who experienced such problem, combining the risks together with the effects and threat levels they have against the company can help in summarizing, compacting and determining which risk can create the worst effect to the company. A company then formulates strategies for management of risk and it involves various activities. Organizations first know the risks they have to take; they determine which risk would give their company more problems and which risk may have a negative effect to their operations. The organizations then determine the strategies that they can use in risk management. These strategies should at least relate to risk management and it should be effective enough to counter the effects of taking risk. Organizations then match the different strategies with the different risk identified. This ensures that for every risk taken, an appropriate strategy is readily available to counter its effects. The next thing organizations do is to organize the risk together with the strategies so that proper use of risk can be made. Organizing the risk together with the appropriate strategies lessens the effect of the risk.
Evaluation of the data obtained from the risk assessment involves a number of steps. This process includes the calculation of risk factors for the workforce as a whole, identification of high risk groups and individuals, understanding the links between exposure and consequences, and an assessment of the acceptability of the risks identified (Clarke & Cooper 2004). Organizations know that there is an impending risk they have to make after creating any decisions. Companies believe that decision making entails risk evaluation wherein after the effect of the decision is felt the next thing that happens is knowing if there are risks to be taken and whether such risk is beneficial. The risks that Apple can take should help the company gain a better position in its market and have a better standing against competitors. Taking calculated risks can lead to better things for the company.
References
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