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Apple Value Chain Analysis

Apple Value Chain Analysis:

It was Michael E Porter of the Harvard Business School who introduced the concept of value chain. The value chain includes the entire range of activities from the beginning to the end involved in bringing the product to the market and the end user. Starting from the raw material till marketing, sales and after sales service, all these stages add value to the product.  A value chain analysis provides an analysis of all these steps for a company and how they are adding value to the product. An analysis of the value chain helps at optimizing these activities for better results. Through the optimization of the value chain, the companies cannot just reduce their costs but also improve their operational efficiency. Such optimization brings efficiency and can be a source of competitive advantage. This is an analysis of the value chain of Apple Inc.

There are two kinds of activities in the value chain, the primary and the support activities. Both of them are discussed below:

Apple value chain
Value Chain Analysis

Primary activities:

Inbound logistics:

Apple has a very large supply chain and when it comes to obtaining raw material, it has several options before it. Its top 200 suppliers include component providers and others that represented at least 97% of its procurement expenditure in 2016 for materials, manufacturing and assembly. A very large number of its major suppliers are located in Asia in China and Japan. Some of its major raw material suppliers include 3M and Foxconn. Based on its financial clout Apple enjoys high bargaining power with respect to its suppliers. It has set quality standards for its suppliers so that they maintain the highest quality standards for their goods and services. Apart from these things Apple has adopted smarter methods to reduce its storage requirements and speed up the procurement process.

Operations:

The manufacturing of the Apple products takes place in several nations. However, it is mainly China where its products are assembled and that is why several of them bear the tag of Made in China. Apple has also engaged the Indian government in talks and manufacturing may soon start from there. While a large part of the assembly takes place in China, a smaller part takes place in the other nations too.  Labor costs have been lower in the Asian nations which reduces the manufacturing costs for Apple. Apart from it, Apple has also focused on reducing the use of toxic substances in the manufacturing and assembly of its products. Recyclable material is now more in use at Apple. However, by outsourcing production, Apple has been able to manage its production costs too.

Outbound logistics:

Apple has managed a very large distribution channel consisting of both direct and indirect channels. From retail stores to online retail and its sown branded stores, Apple has managed a very large channel for the distribution of its products to the customers. Over time it has focused on improving its distribution channel and added to its number of brand stores. Apart from these things the focus has also remained on green packaging and eliminating wastage.

Marketing and sales:

Apple is a famous brand whose products are known for quality, design and technological innovation. Any new product from Apple is like news that is highlighted not just by media but several other sources including small and big websites. However, that does not mean Apple does not spend on marketing its brand. While its products are publicized heavily in the media, Apple also makes unique ads that engage its customers. It has acquired remarkable brand loyalty by the use of creativity and imagination in its advertising strategy. Apart from television and online commercials, the brand also makes use of print ads for the marketing and promotion of its brands.

Products and services:

Apple provides comprehensive after sales support to its customers. Most of the products from Apple come with a 90 days complementary support and a one year limited warranty. Apart from it, there is online store help available for the Apple customers. They can check their order status online. Customers can chat with experts or call Apple for help. Customers can get their phones or other Apple products repaired at a local Apple authorized service provider or an Apple store with genius bar.

Support activities:

Technology/Research and development:

Apple spends heavily on research and development. Its brand is known for technological innovation and for the great quality and unique designs of its products.   In order to maintain its competitive advantage the brand has to invest a lot in R&D. In 2016, it spent more than 10 billion dollars on R&D and 11.6 Billion USD in 2017. Since 2014, Apple has increased its R&D spending by higher than 5 Billions. There are three key factors behind this push. They are its growing product range, expanding ambit of Apple’s services and increased focus on the in-house technology development.

Human Resource Management:

Human Resources management is also a key part of the value chain activity of firms. Apple focuses both on hiring and paying well. This has been the norm since the times of Apple founder Steve jobs. Apple has always hired the best. However, the style of HRM has changed a little in times of Tim Cook. Apart from inclusion and diversity, the new CEO has brought several changes that are aimed at changing the reputation of Apple in terms of HR.

 Procurement:

Procurement is also a key focus area at Apple. It has managed excellent relationships with its suppliers. The suppliers are required to provide the workers with safe working conditions and to provide products and services as per the standards. All these factors influence its relationships with the suppliers. However, Apple is also a major buyer for most of its suppliers and therefore it is a mutually beneficial relationship for the two.

Firm Infrastructure:

Any organization’s infrastructure has a key role in the success of the organization. From management to financial and other resources plus the culture and structure, all these things form the infrastructure of any firm. The better the management of a firm’s infrastructure the higher the ability of creating profits for any firm. In the case of Apple, it underwent a major cultural change recently.

Sources:

https://www.businessinsider.com/apples-cfo-explains-the-companys-10-billion-rd-budget-2017-2?IR=T

https://www.apple.com/supplier-responsibility/pdf/Apple-Supplier-List.pdf

 

Written by Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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