Apple Case Q1-4 :)

History background of Apple

The History of Apple, in 2 Minutes
https://www.youtube.com/watch?v=9k-yfW6uPKQ

Supply Chain of Apple

Story of an iPhone: Analytics in Supply Chain Decisions

https://www.youtube.com/watch?v=YbM_LydRlnM

1) Analyze the following areas of Apple.

1.1 Strategy

Apple has been very successful because of the strategy implanted in the company and the first one is division of labor at different location. Different departments are located at different region or even different countries. The Research & Development (R&D) department is located at the United State (US) and the design team is located at California where Apple is very proud of the design. Apple invests heavily in both R&D and design, therefore they are located in the US. For the assembly operation development, it is located in China because of the low wage payment. Secondly, compare with the traditional product lifecycle, the new product development cycle is short and close to one year. Apple has invest heavily in the R&D to make sure the products are innovative and attractive to the market.

1.2 Supplier

Apple owns a global supply chain as the company purchases from different suppliers in different countries to search for the best parts for making products. Though some think it is risky to do so, Apple works closely with suppliers and ensure the stable supply for manufacturing the products. The designers work with suppliers to develop new products and the engineers update manufacturing processes and technology to suppliers. Engineers also keep updating about demand forecast with suppliers for the production. To cope with the huge demand from the market, Apple sign exclusivity agreements with suppliers to secure steady supply of the key parts. The company will purchase production capacity from the suppliers in advance. It also pay for machinery for suppliers.

1.3 Distribution

Unlike other competitors, Apple used air-freight as a transportation option to ensure products for any holiday rush. Moreover, the iphone is shipped directly to consumers from its suppliers assembly plants in China which the transportation cost is lower. For the reverse logistics system, Apple can handle the product return from customer within 48 hours. Apple improved customer satisfaction, lowered the number of calls to its technical support services and eliminated the likelihood of customer error when processing a return.

1.4 Retail

Apple has three retail channels, including online Apple stores, own retail stores and third party resellers. For the physical Apple stores, they locate at high-traffic locations in quality shopping malls and urban shopping districts. Apple aims at providing high-quality buying experience for customers to make them come again in the future. Moreover, experienced and knowledgeable personnel are employed to offer good product advice, service and training. Customers can get plenty of information about the products and function. Therefore, their job title is not salesmen but technicians. There is Apple Premium Reseller Program. The products sales data is monitor by store by hour which helps to make adjustment for production forecasts.

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2) What differences set APPLE apart from its competitors?   

a. Innovation

Apple thinks differently when it comes to creating new products for the market and this factor is what makes them the market leader of smartphones today. They persist in doing what they plan to do and avoid what other companies are doing impact them. They aim at impacting other companies through their own creations and developments. For example, Apple developed its own unique iOS system for all the products and transferring R&D knowledge from Mac Computer to iPhone, iPad or iPod which is a closed ecosystem.

b. Service

Apple is known to provide one the best customer services that any other store, as their key players are people. They always put people first no matter what the crisis is. For example, at each Apple store, there is a Genius Bar, specifically to answer any questions or fix any problems concerning the Apple products one owns. Before a customer gets to the Genius Bar, there are several other technicians that would help the customer out with a super nice and friendly attitude. From the case, the reverse logistics system is another example bring excellent customer retail experience and satisfaction. Unlike the traditional method, customer can register online for the defects and there will be a box sent to the customer’s home to collect it for repair.

c. Management

Apple runs differently when compared to those of its competitors. The management layers of Apple are structured different, where they have one central executive committee that helps the company move forward while works closely towards the design products. There aren't many silos, meaning that all the decisions are made by a single executive committee, rather than have several different ones with different flow of information. For the external management, Apple works closely with the suppliers and they will cooperate with trust-worthy suppliers.

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3) What are the challenges that Apple faces in the future?

There are five main aspects of challenges that Apple is going to face, including technology, leadership, competition, economy and mass production challenge.

For the aspect of technology challenges, the IOS system need to be updated frequently in order to maintain the service quality. However, the new model launched this year is same as the previous one. Only the design of the system has been changed. Therefore, Apple needs high research and development investment to maintain the update of its IOS system.

For the leadership aspect, the transition of management from Steve Jobs to Tim Cook creates uncertainty to Apple. Some people may say that the products form Tim Cook may not be innovative enough to attract more users and gain higher market share.

       For the competition aspect, there are many competitors among this industry. For example, Samsung is the biggest competitor which sells similar products and innovation. However, the innovation of Apple seems declining now.

For the economy aspect, the sales sensitivity seems to down turn now. It is a big challenge for Apple to maintain its high level of economy.

For the mass production aspect, use of labor is a big problem. Apple uses sweatshop labor like Foxconn to drive down the cost. However, it adversely affects the image and branding of Apple since there are more and more scandal from this kind of factories now.

For the new production development aspect, Apple devotes attention to IP lawsuit. They put much effort on latest technology development. Therefore, Apple is able to keep developing new products and hence maintain its product quality. However, the application for paten of newly technology is not fast enough because there is high potential that other companies will steal ideas from Apples. High cost is needed on law suit.

For the procurement aspect, there is a concern increased in material availability issues and supplier management. Apple needs to put much effort on communicating with the suppliers and maintain a good relationship with them.

For the product assembly aspect, it is difficult to manage the subcontractors. There is a brand image on production issues. “The China factory” is more and more important than before. Apple internal decision in supply chain and production are much more determined by labor cost, land cost and purchasing power of China.

For the retail aspect, the difficulty in demand forecast is increased. The keen competition among digital gadgets market results in instability. At the same time, there is increasing retail competition among other brands such as Samsung and LG. In order to fulfil the customer expectation, Apple highly utilizes the 3PL and Express company. It leads to high cost pressure.

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4) As Jessica Group, what recommendations would you make to the company’s VP? Explain.

First, it can still invest in Apple which has good reputation. Since the after sales service is good, it retains lots of loyal customers. Therefore, it can maintain a stable sale.

Secondly, it can focus on the huge Chinese market which brings lots of advantages. The consuming ability of Chinese people increases due to the rapid economy development in China. It hence creates high market demand on the Apple’s products. Also, the transportation cost is much more lower in China where the factories are located.

Thirdly, Apple has better product quality control. Compare with the other competitors’ products, Apple’s products have higher quality and more unlikely to break down. Also, Apple has well research and development performance which is a first mover advantage.

Moreover, the IOS system of Apple is unique. Customers who originally use the IOS system are difficult to adopt other OS system. The friendly and simple design helps Apple to retain many loyal customers.

Finally, Apple has strong bargaining power. Although Apple is facing the refuse of reserving capacity may lead to unstable supply, it still have strong bargaining power because its demand of order is high and its investment in factory is attractive

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Reflection

Most likely, people believe that innovation is the reason of the success of Apple. Undoubtedly, innovation is an important factor but we should also consider the supply chain management is a significant reason of success. After reading this case, I am impressed by the supply chain management of Apple. The company work closely with the suppliers and they do extra miles to secure the steady supply to the huge market demand. Without the supply chain management, Apple cannot be so successful as it is today because the company cannot fulfill the market demand and may suffer a loss due to the dissatisfaction of the consumers. All in all, to be a successful multi-national enterprise should be innovative to attract consumer and to manage the supply chain.

Reference

https://www.youtube.com/watch?v=YbM_LydRlnM

https://www.youtube.com/watch?v=9k-yfW6uPKQ