1.

What are the advantages and disadvantages to Apple of outsourcing its

production to factories in China?

- Benefits of Apple outsourcing its production to factories in China

 In Apple's example, strategic outsourcing is aimed at strengthening the company's
competitive edge as well as profit in its existing industry and commerce
 Superior scale and flexibility is a typical advantage. According to the case, 8,000
workers slept in dormitories at the factory. They were woken, given a cookie and a
cup of tea, and were at work fitting glass screens into their beveled frames within
30 minutes
 The diligence and high industrial skills advantage are that China has an so many
people who are at the age of working. In the case, there were about 200.000
assembly-line workers needed to be supervised by 8.700 skilled engineers. It could
take about 9 months to find this amount of workers in the US instead of 15 days in
China.
- There are also disadvantages:
 Apple fails to provide employment in the US
 Risks involving with intellectual property.

2. What factors influence the choice of countries to which a firm might outsource its
production?
1) Cost Savings
outsourcing needs to improve your business bottom lines through reduced operational
costs. We have to see is whether outsourcing will help us reduce a significant amount of
your capital in hiring employee and equipment. At the same time, we will also need to
maintain a balance between the quality and quantity of the services provided by the
outsourced firm.
2) Pricing
We already discussed how cost-cuttings by hiring talent in a low price tag is one of the
most common factors why companies outsource. We’ll get several vendors offering their
resources at a competitive price. However, instead of going for the cheapest vendor,
compare and find out what are you going to get from other vendors as well.
3) The Resources and Technology
Technology and resources are two considerations that are essential when choosing to
outsource. Ask the vendor about the tools and technologies they are going to use for your
project and how capable are they of handling all your outsourcing needs? What about the
resources? Are they well trained for the assignments?

4) The Ability To Meet Deadlines

Timeliness in outsourcing is as important as the costs. For instance, if a vendor fails to
toe the deadlines, it can lead to major bottlenecks. That alone will nullify any cost-saving
benefits that you had anticipated while hiring them. We need to ensure that the vendor
adheres to the promised quality and timeliness. One of the ways to do this is by making
all your queries beforehand.

3. Is there anything that might cause Apple to eventually shift production back to
the United States?

Currently, there can not be anything that might change Apple’s mind to shift the
production back to the US. Because when Apple began making the $3,000 computer in
Austin, Tex., it struggled to find enough screws... In China, Apple relied on factories that
can produce vast quantities of custom screws on short notice. In Texas, where they say
everything is bigger, it turned out the screw suppliers were not. After creating months of
delay, Apple ended up ordering the screws from China. Eventually, Apple found a
supplier in Texas that could produce 28,000 custom screws, although they weren’t the
exact screws needed nor in the right quantity. And they were delivered over 22 trips,
often in a Lexus driven by the maker’s owner.
No country, and certainly not the US, can compete with the scale of the Chinese supply
chain, the sheer number of skilled workers, the infrastructure that can move things around
quickly, or the relatively cheap labor pool. Those jobs aren’t coming back any time soon,
if ever. Ironically, it was Tim Cook in his former role as Apple’s chief operating officer
that helped lead the global shift to foreign manufacturing some 15 years ago with the
outsourcing of iPod assembly to Foxconn.

4.  Why is Apple more vertically integrated than many other computer makers?
 - Apple is vertical intergrated than any other computer makers because:
 Apple produced its own software, hardware and sold these products in their own
retail stores
 The company spent billions of dollars in supplying these factories with the best
equipments and technology. In return, the factories must commit to be the
exclusive suppliers to Apple. The investments allow the factories to hold excess
capacity that would enable rapid scaling.

5.  What factors will help or impede Microsoft in matching the advantages Apple
gains from its vertical integration strategies?

- Superior quality, lower product cost, and updated technology from the competitors will
impede Microsoft in matching the advantages of Apple gains from its vertical integration
strategies.

- Vertical integration is a process of management in which a company monitors and

controls its final products as well as the components of this product. Apple has mastered
this process over the years and has gained a competitive advantage through it.

- If Microsoft is able to decrease its cost structure and maintain technological modernity,
then it can enjoy some advantage.