Value Chain Analysis of Apple

Table of contents

Apple Inc., a consumer electronics firm, is more perceived as a marketing company than a technology company.  This turnaround is brought by the experiences of the company throughout the years by learning with its business mistakes, retaining the core principles, and expanding operations through extensive partnerships.

This paper analyses of the firm’s primary and secondary activities that led to a transformative, profitable company outwitting its competitors’ moves.  The primary activities of the company includes the inbound logistics, operations, marketing and sales while the secondary activities includes purchasing, human resource management, and technology.  Apple Company has the following value chain.

Apple Inc.’s dedication in its own manufacturing operations starts with the right moves in the acquisition of raw materials.  The company has realized that outsourcing raw materials that are core ingredients in a product that is otherwise already available in the market is a step to their competitive advantage.  This cuts down the cost in research, manpower and technology, the major setback is the high procurement cost of the supply.  The company then turns to look at a long term perspective where the technology can immediately return the profit at a short period of time.  This is of course a gamble to the company who is starting this strategy.  Hiring supplies externally raises the issue of control and risk that is equated to a cost to the company.  Since the company will be relying heavily on its suppliers, it had developed a control system called Suppliers Code of Standard that can measure manufacturing standards, labor related issues, sourcing of raw materials, and ability to meet deadlines.  The expertise of a supplier is an advantage since they focus on the quality of a certain product that serves as a raw material in the packaged hardware that Apple Inc. manufactures

One move made by Apple is the partnership with Intel that reaped rewards not just for profit but for the delivery of products.  Before, the company’s chips called PowerPC and supplied by Freescale (previously Motorola) and IBM    took years to integrate the technology and offer to the public.  With Intel, the transition period commenced earlier than expected and had its PCs available to the market before target date.  This move is an advantage for the company where most of its competitors are already using Intel chips and its latest Intel Core Duo during that time.  This helps the Apple Macs at par with its competitors and added value to its customers Apple Inc. also made use of vertical integration where it purchased NeXTstep, a company with the technology of a multi-tasking operating system.  This helped in the development of the now available in the market, Mac OS X.  This venture, helped lower down the cost of developing the same technology and is now readily profitable and multi-branded (Leopard and Tiger) in the market.

The forging of partnerships with meaningful improvements with its suppliers had contributed to Apple Inc. turnaround from its past failures in the computer manufacturing market.  Investors have responded positively in the new ventures and diversifications of Apple Inc. from its core computer lines.  It increased shares to $14 in 2002 and catapulted to $120 in May of 2007.  Winning the trust of the shareholders increases value to its public in a long term perspective. Apple should adopt collaborations that is involving a number of processes that are considered to be important. The processes to be considered includes the customer finance operations and people. In this objectives, collaborations processes is defined and you will find issues like design of the product outsourcing configuration of the project and product development.

If Apple operates worldwide without collaboration they will find themselves out of business in a  short while. Business managers world wide today, are thinking collaboration and are adopting of globalization and outsourcing. Its open secret that in corporate world today whether business is family or owned by many management of innovation has become real issue. In the past many have been talking of strategic alliances which is part of collaborations only collaboration is a new idea which means

Me + My team                                   =                     We.

We + our family                                =                     Corporate.

Corporate + surroundings             =                     Community.

Community + communities          =                     Country.

Country + All                                    =                     World.

World = You & I                              =                     Each one of us

Therefore collaboration means Apple and another company somewhere in world form part of the business for purposes of sharing resource.    Collaboration has improved profitability market share, and the time at which the product reaches the market for a company like Apple incorporated. What is remaining currently is to look ways in which collaboration can be improved to increase production and increasing the market share for a number of products which is being sold.

Apple incorporated ejoys a number of favorable factors. There are disadvantages as well. The long term success of the company entails consolidation of those favorable factors while focusing upon and overcoming the weaknesses. The company must continue with the following that ensured its success in the past.

  • Strong market position
  • Robust financial performance
  • Product development
  • Strong focus on innovation
  • Mergers and acquisitions wherever relevant

The company has done well to establish the permanent goal of 20 percent growth, and all its activities must be geared to this end through thick and thin. The company can make the best use of available opportunities to further its advantages. These are:

  • Acquisition of Sightline Technologies
  • New product launches
  • Aging population in the U.Sand world over

However, it is critical to success that the company addresses some of the weaknesses that can be fixed with a focused approach. As of now these weaknesses have surfaced in the following forms:

  • Weak sale of PC
  • Geographic concentration
  • Low operational efficiency

Apart from these weaknesses the company also needs to handle the threats that can cause considerable problem for the company. These are: Industry consolidation: The electronic industry has undergone dramatic consolidation in the last few years. Larger players have attempted to increase market share and product portfolios through mergers and acquisitions. This could lead to a price war, thereby reducing the operational cost of the company. It could also reduce the company’s share in the global market.

Evaluation and Conclusion

The company is among the top ten players in the industry riding high on its philosophy of helping and connecting to millions of customers the company has worldwide. The other strong point of the company is coming out with solutions to smart challenges in the form of marketable innovations. Notwithstanding weak sales of PC the company is optimistic about its long-term growth.

Apart from the U.S market the company has made a significant presence in the global markets like Japan and Pacific. The company has partnered with or acquired the other companies to come out with better and state of the art products in the frontier areas.    Apple incorporated is also slowly and gradually reaching out globally, and is hopeful of its recent foray in the Indian market.

References

  1. Johnson & K Scholes; (1999); Exploring Corporate Strategy: Text and Cases, Fifth Edition, Prentice-Hall, 1999, ISBN 0-13-080740-0.
  2. Mintzberg H.(1979); The Structuring of Organisations, Management Science, Vol 24, 1979, pp 937 – 948.
  3. Porter M. E.; (1980); Competitive Strategy, MacMillian.
  4. Value Chain Dynamics in the Communication Industry available at www.cfp.mit.edu/docs/core-edge-dec2005.pdf accessed on 15th October, 2005.
  5. Outsourcing and climbing a value chain available at www.kellogg.northwestern.edu/faculty/greenstein/images/htm/Columns/Outsourcing.pdf  accessed on 15th October,2008.

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