Case Studies Flashcards
R: Cost Leadership
Apple has reduced its operations costs by outsourcing operations processes with manufacturers such as Foxconn in China which assembles 40% of the world’s consumer electronics, which is able to achieve economies of scale due to the large number of skilled workers.
As reported by New York times: “Executives estimated that about 8700 industrial engineers were needed to oversee the guide the 200 000 assembly line workers who manufactured the iPhones” which would’ve taken 9 months to find that many qualified engineers in the USA. -> Skill shortages.
Apple has also attempted to achieve cost leadership by developing lower cost models such as the iPhone 5c and iPhone SE, as well as targeting emerging markets such as China and India with older models of the iPhone
R: Differentiation
Product Features: The focus on iTunes and apps has been key to Apple’s success in establishing itself as a market leader for smartphones. In 2014 apple introduced Apple pay to be compatible with selected devices, including the latest models of iPhone. Apple pay provides a platform for online banking, like PayPal, initially launch only in the US. Market
Quality: Quality Issues in the production of the iPhone5 (scratched casing) led to this model being discontinued in 2013 and replaced with the iPhone5c using a low-cost plastic casing. This represented a shift in Apple’s approach to quality, and the low sales for this model would suggest it was not a successful strategy
Apple watch is another example of an add-on which can only be used with a compatible iPhone. Such addons create loyalty towards a brand such as Apple as they are expensive to replace if a customer chooses to switch to a competitor brand. In this way, add-ons have an effect of product differentiation
R: Interdependence
Operations and HR:
In Preparation to produce the iPhone 6 and 6+ in 2014, Foxconn was reported to have employed an additional 100 000 factory staff to ensure they could meet production targets for the launch of these models.
I: Technology
New technologies can also be problematic for Apple due to flaws and defects with components and software, especially in the introductory phases of the product life cycle. This was evident during the media launch of the iPhone X in 2017, when Apple executive Craig Federighi was unable to demonstrate the 3D- sensing face recognition system, a signature feature of the new model.
I: Quality Expectations
In 2013 strategy of replacing the iPhone 5 with the 5c was viewed by some customers as a compromise in Apple’s commitment to quality. The relatively low sales achieved by the iPhone5c indicate that this model did not meet the quality expectations of customers. Sales for the iPhone 5s were far greater, suggesting that iPhone customers value quality above price. As a result, quality expectations led to greater sales of the iPhone 5s than the cheaper model, the 5c
I: Legal regulation
Sydney morning Herald: 2015
“Just over a week ago after Samsung paid Apple more than $754 million for infringing the patents and trademarks of the iPhone, Apple has asked a US court to force Samsung to cough up even more, this time on the charges of supplemental damages and interest”
I: Environmental Sustainability
In 2016, Apple launched its Renew initiative, allowing customers to return old iPhones to the company. Depending on the age and condition of the iPhone, it is either sent to a recycle contractor or sale on the second-hand market, or a recycling plant.
According to the company’s 2015 Environmental Responsibility report, Apple extracted 999kg of recycled gold and recovered more than 29 000 tonnes of other materials, including steel, plastic, glass, aluminium, copper, etc
P: Inputs
Transformed Resources: Customers:
The popularity of larger screens amongst Apple’s competitors acted as an input in the design of the iPhone since the release of the iPhone 6 and iPhone 6+ in 2015.
Transforming Resources: Facilities:
Foxconn can achieve economies of scale and cost leadership due to large scale factories that can employee up to 200 000 factory workers
P: Transformation
Monitoring, Control and Improvement:
Foxconn faced issues when a lack of assembly worker training led to uses with quality control and cost $1.5 billion to the company.
P: Outputs
Warranties:
In 2018, the Australian Federal court ordered Apple to pay $9 million in penalties for making false or misleading representations to customers with faulty iPhones and iPads about their rights under the Australian Consumer laws. Apple admitted it had represented to at least 275 Australian customers affected by error 53 that they were illegible for a warranty if their device had been repaired by a third party.
S: Performance Objectives
In 2014 Apple launched the iPhone 6 and 6+ with larger scenes in response to successful design of competitors phones. This is flexible for Apple, who has long claimed that the smaller screen size of the iPhone was specifically designed for optimal usability.
Costs:
Examples where apple has made cost a performance
objective:
- Outsourcing manufacturing to Foxconn in China
- -Designing low-costs models, the 5c, using cheaper components such as plastic casing in response to scratching complaints on the iPhone5
S: Supply Chain Management
In 2015, Apple had 785 suppliers in 31 countries, 349 of which were based in China. However, 97% of its supply chain is accounted for by approximately 200 suppliers. This reflects Apple’s supply management strategy of having multiple suppliers for the same component. The company is thus able to gain a comp. adv. Over its competitors by securing the exclusive supply of certain components, reducing costs by increasing the competition between suppliers and preventing delays in production.
S: Technology
In 2016, one Foxconn factory reported to have reduced its number of employees from 110 000 to 50 000 with the introduction of robotics. Considerable cost savings of $30 million were achieved within the first year.
Apple received negative publicity in 2014 when hackers gained access to exposed private information (nude photos) contained in celebrity iCloud accounts
S: Quality Management
Quality Control:
According to China Business in 2013:
“ Apple returned at least 5 million iPhones to Foxconn in 2013 due to some kind of unnamed defect” “Foxconn will use $1.6 billion to cover the cost of making replacement phones”
