Supply Chain Management

Supply Chain Analysis :

Apple Inc.

Assignment 1 : Group 7

1. A. Bhargavi (182001)
2. Adesh Maurya (182009)
3. Amalesh P (182013)
4. Subham Sharma(180291)
5. Suraj S Pattanaik(182093) ​16 April 2020

 
 

1. The Competitive Strategy used by Apple Inc.

Apple.Inc is a company that provides high-quality tech products to customers. Being in the field
of technology and innovation, they face competition from other companies like Microsoft,
Samsung etc. To compete with these tech giants, Apple’s main competitive strategy is
differentiation. Also, they have a very focused competitive strategy as they are targeting only
high-class people as their customers. They engage a single company to provide the operating
system and hardware. Thus by doing so, the company can concentrate on its product’s unique
design quality and marketing.​[1] They keep their designs simple and elegant, by doing so the
product speaks for itself. ​The products in this business have a very short market life, due to
aggressive technological developments and often due to cannibalisation by its successors.​[2]

For distributing its products, they have established retail stores all around the world. The services
that they offer are unique and superior. They provide the best possible technical support as well
as continuous and dedicated customer service. They allow their customers to sample their
products directly before buying them.​[1] ​Other than that, the operating system of the apple
products is different from others. The operating system “macOS’ belongs to apple only and this
is one of the main features that differentiates Apple from its competitors.​[3]

These strategies and decisions give Apple an edge over others. Thus we can conclude that
Apple.Inc uses focused and differentiation strategy as their main competitive strategies to gain
market share.

2. The key customer needs that Apple Inc. aims to fill in its business-

Apple is a highly customer centric company that is counted among a handful of firms of such
class. The customers of Apple have started expecting very premium qualities in their products,
for which Apple had served with best results. Here are few aims that the firm aims to fulfil-

● Design - What differentiates Apple from its rivals is its product development process.
Apple has always kept product design as its first priority and is successful in attracting

1 
 

people from all over the globe to choose apple. And as the data says almost 54% of
people who own an iPhone, say their last cell was also an iPhone. This was possible
because of the company’s unique product development process, which is, the design team

Fig.1 Apple’s Product Development Process​ ​ ​[4]

works any constraints from the manufacturing and finance sections of the company. The
picture above says it all, how the design of the apple’s iMac has evolved over years, from
using plastic to acquiring aluminium to build its products. Apple had emerged as the best
in class in its domain.

● Security- When it comes to Apple’s security it’s not only about the technology, but also
the policy of the company. From best in class security features to the promise of data
security. This has been an attribute of the closed security model, rather than android
which is an open source platform. Company’s policies are so strong that even in 2016,
when the FBI wanted Apple to unlock a phone of a convict, Apple declined to do so ​[5]​.
● Services- Apple is shifting its focus towards services. Back in time, the company has
offered its consumers seamless services like Apple music, Apple pay, iTunes, iCloud,
Apple store, Siri. This levitates the utility of the powerful device a user is already holding
in his hands. Recently, the company has started expanding to OTT services via Apple Tv
and News.
● HealthCare & Fitness- The launch of the Apple Health Record and Apple Watch with a
single-lead ECG is the evidence for the motives of the firm towards the healthcare &

2 
 

fitness industry. In addition to these, Apple has also patented many healthcare products
and services, like its own hearing aid and connecting patients to doctors via telemedicine
etc ​[6]​. This will provide the company with an opportunity to explore the untapped sector
of the ever-growing and crucial healthcare and medicines. The recent rise in smartwatch
shipment by 48% and acquisition of the worldwide smartwatch market share of 36%,
clearly shows the appreciation of customers towards Apple’s entrance to this sector ​[7]​.

3. Analysis of Supply Chain of Consumer Electronic business of Apple Inc.

There are mainly two sets of consumer electronic devices that Apple Inc. has classified for the
market namely the root devices like iPad, iPhones, Macs and iWatches, the second set are the
basic set of support accessories like fast adapters, Earplugs and Cable adapter etc that do not
come handy with devices that buyers of these devices would need​[8]​. This shift in product
strategy has made the firm follow a robust supply chain exhibiting multiple views, minimising
the inventory.

● Cycle View- Every Apple product follows a complete cyclic view of the supply chain as
shown below, ranging from the most premium product to a basic accessory. Here Apple
Inc. has a very niche set of retailers. i.e The Apple Stores, Few Retail giants like Walmart

Fig.2

and BestBuy and currently the online sales platforms​[9]​. As a brand, Apple has a strong
impression of maintaining high secrecy of the upcoming models, which is an attribute of
such a supply chain.

3 
 

● Push/Pull View- As per the market research, the supply chain structure of Apple Inc. is
the most robust and profitable among its peers, the firm uses both push and pull
mechanism depending on the product type. The push mechanism is used while releasing
new devices to the market as the demand is very unexpected, as the policy of the firm is
to have no extra units in stock, the production of these units are very much precise to the
best forecast and then the book and wait strategy comes into act for the customers. The
company does not take risk of extra production and shows inclination towards the book
and wait attribute of its customers post-release in the market. This character somehow
adds up to the premium quality of its product.

Now, hereafter the pull mechanism is used by Apple for the basic needs that the
customers are going to need in order to use the premium devices they have bought earlier
and now the firm exactly knows the demand it is going to face in the market and
therefore plays a sure goal. The premium impression and ultimate quality of the Apple
products has helped the company achieve such a robust strategic fit in its supply chain,
which in case if used by any other firm may result in huge losses.

For Example- In 2018, the Apple Inc. released iPhone XR with a 5-watt adapter and an earplug
without an adapter and device protection in the pack. During that time the basic normal adapter
speed was 12-15 watt, this clearly shows the customers with iPhone XR would need to buy the
basic accessories for even a marginally high experience. Lack of universal adaptability of the
Apple devices is also a reason for the pull mechanism the firm is able to use in its supply chain.

4. The variations and analysis of Demand uncertainty faced by Apple Inc.

The rate of innovation is on the rise and customers are becoming lovers of innovative products,
but more innovative products are putting a different type of pressure on the supply chain
uncertainties. Thus a company like Apple faces uncertainties related to the demand for new
innovative products.

4 
 

If Apple launches a new product, there can be a very high increase in demand, then it is hard to
cater to the demand due to suppliers’ limitations due to short notice. But this is not always the
case, there have been times when the demand for a newly launched product is lower than the
estimated figures. Also in such types of industries, there is always a threat of competitors and
technological disruptions. For example, in the case of iPhone 5, iPhone 6 and iPhone 7. Apple is
continuously introducing new iPhones into the market. But the response of the market towards
the iPhone 7 was not as good as it was for iPhone 5 and iPhone 6. So here we cannot take
decisions on the basis of past data. Each new product will come with its own uncertainties.​[10]

Thus most appropriate will be to place the demand faced by Apple on the Right side of implied
demand uncertainty spectrum i.e. it’s products have very high demand uncertainty.

5. The Responsiveness shown by Apple Inc. towards its market.

Apple being a company with very high demand uncertainty, on mapping Implied-uncertainty
spectrum and Responsiveness spectrum, being highly responsive will be appropriate for Apple’s
supply chain.

Also according to Fisher’s Framework (1997), Apple products fall into the category of
innovative products. Therefore, an appropriate supply chain strategy is to be responsive.​[11]

Fig. 3 Apple’s Supply Chain Strategy ​[11]

5 
 

Apple has been practising a more sophisticated “agile supply chain strategy” i.e. it aims at being
responsive and flexible to customer needs while the risk of a supply shortage or disruption is
hedged by pooling inventory and other capacity resources. Moreover, Apple’s agility allows it to
be responsive to the changing, diverse and unpredictable demands of the customer on the front
end while minimizing the back end risks of supply disruption. Also as it has high demand
uncertainty, thus it’s product margins are set very high as evident in all the Apple products.

References

1. https://ivypanda.com/essays/business-level-and-corporate-level-strategies-in-apple/
2. https://neilpatel.com/blog/7-key-strategies-that-you-must-learn-from-apples-market
ing/
3. https://www.apple.com/in/macos/what-is/
4. https://www.interaction-design.org/literature/article/apple-s-product-development-p
rocess-inside-the-world-s-greatest-design-organization
5. https://www.macworld.com/article/3513379/apples-security-and-privacy-is-good-but
-could-be-even-better.html
6. https://www.cbinsights.com/research/apple-healthcare-strategy-apps/
7. https://www.forbes.com/sites/johnkoetsier/2019/05/02/smartwatch-shipments-up-48-
apple-36-samsung-11-imoo-9-fitbit-5-5-of-market/#7f0c37294397
8. Constantinides, E. (2006). The marketing mix revisited: Towards 21st-century
marketing. ​Journal of Marketing Management,​ ​22(​ 3-4), 407-438​.
9. https://www.apple.com/in/
10. https://nptel.ac.in/content/storage2/nptel_data3/html/mhrd/ict/text/110107074/lec8.p
df
11. https://www.academia.edu/30915118/Apples_Supply_Chain_Strategy

6 
 

7