To understand how Apple is competing against others, we need to understand firstly what the requirements are to enter the market and how Apple's products differentiate the company from its competition. This Essay explores strategic actions of Apple Inc. and what they have to do with holding their competitive advantage in the market and explains how they achieve to have the best supply chain in the world.
Written Assignment for Operations Management semester 1 2016/17 Case Study: Apple
QUESTION 1
How does Apple compete in its major markets: iMacs, iPod and ¡Tunes?
To understand how Apple is competing against others, we need to understand firstly what the requirements are to enter the market and how Apple's products differentiate the company from its competition.
Therefore we will take a look at Apple's “Qualifiers” and “Order winners”. These two aspects of competition are closely related to the competitive factors in business (e.g. price, quality, delivery speed and so on) (Hill and Hill 2011, Greasly 2013). Hill and Hill (2011) further assert that in order to win orders you firstly need to qualify for your specific market. These are criteria that “get a service or product onto a customer's shortlist”. Agreeing with this statement, Greasly (2013) elaborates that following to the qualification, is the identification of your products'/service's competitive factors which will win orders in the market. These will then differentiate your company from your competition and how do they win orders for you.
Firstly: how Apple qualifies its product for the market. Stratēģos (2016), an engineering consultancy, suggests that Apple has quality and price as a qualifier. To meet market standards it is important that the software runs smoothly and is easy to handle. As the company's products are in the premium pricing range they so not compete on a low price, meaning it is on the market's standard (Stratēģos 2016, Nielson 2014).
Secondly: the order-winners. In these factors it outperforms its competitors and gains a competitive advantage over them. Sam Gustin (2012) identifies Innovation, Opportunity and Execution as Apple's three main winners. There are many different opinions published over the years, but most of the theories include innovation or a variation of the word as one of the main winners.
Apple renews its product regularly over one to one-and-a-half years, as mentioned later on, which shows how fast and effectively their work on their new products is. (Apple 2016) This is especially true for the iMacs and iPods, which all vary in shape and size but are upgraded and improved whenever the new generation is released. The service ¡Tunes (or now called ¡Music) provided an easy access to music anywhere you are, enabling purchases of single songs and albums. It helped to gain orders as no other company provided similar services at the time (Apple 2016).
Apple's biggest order-winner for all their products is their outstanding customer relations and the service that comes with it. Opening over 400 stores all over the world that offer trainings, advice, information and repair services directly and quickly make it stand out as no competitor successfully implemented something like that. (Apple.com 2016)
QUESTION 2
How has operations designed its supply chain to support these markets?
The online businessdictionary (2016) defines a supply chain as the “entire network of entities, directly or indirectly interlinked and interdependent in serving the same consumer or customer.” This includes vendors for raw material, delivery services to and from factories, production and the retailer who ultimately sells the product to the consumer. In Apple's case the supply chain is on such a high level, that it was voted the world's best by the research firm Gartner each year from 2010 to 2013 (tradegecko.com, 2014). This means that Apple has a very good supply chain management, to achieve such a high level of performance. This is how they changed and achieved this:
1. Shred % of their suppliers and put them into direct competition to get best quality for lowest price
2. Cut down on warehouses to lower inventory and higher turnover (as little as 5 days)
3. Outsource delivery to third parties and deliver straight from factory without storage time
These massive changes in how the supply chain works was implemented by Tim Cook who became “COO in 2005 and CEO in 2011”. (tradegecko.com, 2014). He managed to follow the theoretical supply management process Steve Brown, John Bessant and Richard Lamming (2013) mentioned in their book “Strategic Operations Management”. Turning many suppliers, retailers and Apple itself from “a disorganized group of organizations and intermediaries” into a supply chain that “work[s] the way [he] want[s] it to.”
QUESTION 3
What must Apple do to maintain its competitive position in the future?
Competition is “a situation in which someone is trying to win something or be more successful than someone else.” (Cambridge Dictionary, 2016) This relates to the competitive factors mentioned earlier on. The company, Apple in this case, has to stay better and be more successful in terms of their competitive factors than its competitors, such as Samsung, HTC and other technological companies to be able to stay successful in the market. The sector Apple is satisfying, is changing in a fast pace and requires a high level of innovation and research to be able to create new and better products every 12-18 months. (Apple.com, 2016) Apple has its own strategy, just like every other company to manage that. With their broad spectrum of products and their wide customer base they are able to develop and sell new and higher developed products in a high turnover speed. Another big part of their strategy is expanding and exploring new markets. Tim Bajarin (2016) wrote an article earlier this year about the research and development of the company. It makes clear that Apple is spending money on sectors where it currently does not have a stand but wants to have. One of which is the transportation sector (Bajarin, 2016). “Apple recently invested $1 billion in Didi, a Chinese ridesharing company that competes with Uber” helping them to get a foot into the sector and exploring possibilities to provide an again wider range of products and possibilities to create profit. But Apple's ultimate key to success is keeping up their outstanding customer support and relations in their stores and its fast pace of innovations to always find the “one more thing” Tim Cook appraised in his speech on September 9th 2014 while announcing the Apple Watch.
Reference List
BAJARIN, T., 2016. Why apple is spending crazy amounts of money on new ideas [online]. TIME.com [viewed 11 October 2016]. Available from: http://time.com/4339940/apple-rd-research-development/
BROWN, s., BESSANT, J. and LAMMING, R., 2012. strategic operations management. 3rd ed. London: Routledge.
Cambridge Dictionary., 2016. Competition meaning in the Cambridge English dictionary [online]. © Cambridge University Press [viewed 11 October 2016]. Available from: http://dictionary.cambridge.org/dictionary/english/competition
Cook, T., 2014. Apple keynote: IPhone 6 & apple watch (September 2014 special event - HD - CC) YouTube. 11 September.fviewed 24 November 2016]. Available from: https://www.youtube.com/watch?v=OD9ZQ9WylRM
GREASLEY, A., 2013. Operations management. 3rd ed. Chichester, England: Wiley, John & Sons.
GUSTIN, s., 2012. Why apple is winning: Innovation, opportunity and execution I TIME.com. TIME [online]. April, [viewed 25 October 2016]. Available from: http://business.time.com/2012/04/25/why-apple-wins-
innovation-opportunity-and-execution/
HILL, A. and HILL, T., 2011. Essential operations management. New York: Paigrave Macmillan.
INC, A., 2016. Apple (United Kingdom) [online]. Apple (United Kingdom) [viewed 7 October 2016]. Available from: http://apple.com/uk
LU, c., 2014. Apple supply chain - the best supply chain in the world [online], [viewed 11 October 2016]. Available from:
https://www.tradegecko.com/blog/apple-had-the-best-supply-chain-in-the- world-for-the-last-four-years-here-is-what-you-can-learn-from-it
NAIR, s., 2014. Apple’s premium pricing strategy and product differentiation. Market Realist [online]. February, [viewed 25 October 2016]. Available from: http://marketrealist.com/2014/02/apples-premium-pricing-strategy-product- differentiation/
PERMISSIONS., 2007. What might have been for apple- A u.s. Manufacturing strategy ...{Stratēģos} [online], [viewed 25 October 2016]. Available from: http://www.strategosinc.com/articles/apple-foxconn-strategy- 3.htm
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- Marcel Strangmueller (Autor), 2017, A short Case Study on Apple, Múnich, GRIN Verlag, https://www.grin.com/document/417198
