Apple has hit a snag in China with recent reports suggesting that Chinese government workers have been instructed to stay clear of iPhones. This news has caused Apple’s shares to tumble for two consecutive days, wiping off almost $200bn (£160bn) from its market valuation. Now, why is this a big deal? China isn’t just any market for Apple; it’s their third-largest, contributing to 18% of the company’s total revenue last year. Plus, let’s not forget, most Apple products are birthed in China, thanks to its major supplier, Foxconn.
Now, for our young economists, here’s a term to grasp: “stock market valuation.” It’s the total value of all a company’s shares of stock. It gives an idea of the company’s overall worth. Apple, for instance, boasts the world’s highest stock market valuation, nearing a whopping $2.8 trillion. But this recent hiccup in China shows how geopolitical tensions and market decisions can impact a company’s valuation.
This situation offers a lesson in the interconnectedness of global markets and geopolitics. Apple’s stock dip, following the iPhone ban reports, underscores how decisions in one country can ripple across the world, affecting global businesses. It’s a testament to the delicate dance of international business, where companies must navigate not just market demands, but also political landscapes.
THINK LIKE AN ECONOMIST!
Q1. Define total revenue.
Q2. Explain the link between this story and Apple’s share price plummeting.
Q3. Evaluate the benefits and drawbacks of multinational companies operating in overseas markets.
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