Apple Value Chain Analysis

Apple value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. Figure 1 below illustrates the essence of apple value chain analysis.

Apple Value Chain Analysis

 Figure 1. Apple Value Chain Analysis

 

Apple Primary Activities

Apple Inbound logistics

Inbound logistics primary activity refers to receiving and storing activities of raw materials for their consecutive use in manufacturing. Apple works with hundreds of suppliers around the globe and maintains a highly sophisticated supply-chain management as illustrated in Figure 8 below. Apple does not practice Just-in-Time principle in inbound logistics.

The multinational technology company’s purchase commitments typically cover its requirements for periods up to 150 days[1]. CEO Tim Cook is known for his strategy of getting suppliers to compete with each-other and he has reduced the numbers of suppliers considerably after becoming CEO in 2011.

Apple value chain analysis

Figure 2. Apple operations roadmap[2]

The main sources of value in Apple inbound logistics relate to the economies of scale due to the massive scope and scale of business operations as discussed below and the development of strategic relationships with suppliers. Moreover, Apple Inc. exercises an immense bargaining power in dealing with its suppliers and as a result, the company is able to secure cost advantage in the purchase of resources.

Apple Operations

Apple operations are divided into the following reportable operating segments:

1. Americas segment includes North and South America. This segment accounted for 42% of total net sales in 2018 and 2017.[1]

2. Europe segment comprises European countries, India, Middle East and Africa. Europe segment accounted for 24% of total net sales for 2018 and 2017.[2]

3. Greater China segment consists of China, Hong Kong and Taiwan. Net sales from Greater China amounted to 20% of total net sales in 2018 and 2017.[3]

4. Japan segment generated income equal to 8% of total net sales in 2018, 2017 and 2016.[4]

5. Rest of Asian Pacific segment includes Australia and other Asian countries. This segment accounted for 7% in 2018 and 2017.[5]

Apple operations are conducted by 132,000 full-time equivalent employees worldwide.[6] Outsourcing of manufacturing to locations with lower costs of resources is the main source of value for Apple operations. Specifically, only some models of Mac computers are manufactured in USA and Ireland and the majority of Apple products are outsourced to manufacturing units based in Asia.

Apple Outbound Logistics

Apple outbound logistics involves warehousing and distribution of ready iPhones, iPads, Mac computers and other products produced by the company. The company ships finished products to Apple Stores that are typically located at high-traffic locations in quality shopping malls and urban shopping districts. Apple outbound logistics also facilitates deliveries to the warehouses of wholesalers and retailers.

E-commerce sales are rightly acknowledged by the company as a massive source of value in terms of inbound logistics, because e-commerce is more cost effective compared to sales via Apple Store.  Due to the efforts of the company in this direction, Apple Inc. has become the third largest retailer in the US in terms of size of e-commerce business, only behind Amazon.com and Wal-Mart Stores Inc. Specifically, Apple Inc. has e-commerce sales of USD 12 billion and this figure accounts to about 5.1 per cent of company’s total sales.[7]

Moreover, a greater level of market penetration into Asia in general and China in particular can be specified as an additional source of value for Apple Inc. from outbound logistics point of view. This is because selling in this particular geographical market would not involve massive outbound logistics expenses and this cost advantage can be passed to customers to increase the overall appeal of offers.

Apple Marketing and Sales

Apple sells its products through the following seven sales channels:

  1. Apple retail stores
  2. Apple online store
  3. Direct sales force
  4. Third-party cellular network carriers
  5. Wholesalers
  6. Retailers
  7. Value-added resellers

During 2018, the Company’s domestic and international net sales accounted for 37% and 63%, respectively, of total net sales[8] Moreover, during the same period, the company’s net sales through its direct and indirect distribution channels accounted for 29% and 71% of total net sales respectively.[9] Apple has been increasing its focus on enterprise sales during the past few years and CEO Tim Cook announced an extensive reliance on Channel Partners to further increase the volume of enterprise sales.

Apple Service

Apple is famous for exceptional quality of customer services during all three stages: pre-purchase, during the purchase and post-purchase. The company maintains Apple experience centres in major cities around the globe where anyone can use its products to become convinced about the quality. Apple sales assistants are usually trained and polite young males and females who are technically savvy and happy to demonstrate product features and capabilities.

Post-purchase customer service is also impressive with unique iPhone trade-in programs that allow iPhone users to upgrade their phone to newer models with additional payment. Customers can return to Apple only items that they purchased directly from Apple, either online or at an Apple Retail Store. Products can be returned within 14 calendar days after the purchase.

Apple Inc Report contains a full version of Apple value chain analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Ansoff Matrix and McKinsey 7S Model on Apple. Moreover, the report contains analyses of Apple leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of Apple marketing strategy, ecosystem and addresses issues of corporate social responsibility.

Apple-Inc.-Report-1

References
[1] Annual Report (2018) Apple Inc

[2] Annual Report (2018) Apple Inc.

[3] Annual Report (2018) Apple Inc.

[4] Annual Report (2018) Apple Inc.

[5] Annual Report (2018) Apple Inc.

[6] Annual Report (2018) Apple Inc.

[7] Annual Report (2018) Apple Inc.

[8] Zaczkiewicz, A. (2016) “Amazon, Wal-Mart Lead Top 25 E-commerce Retail List” Available at: http://wwd.com/business-news/financial/amazon-walmart-top-ecommerce-retailers-10383750/

[9] Annual Report (2018) Apple Inc.

[10] Annual Report (2018) Apple Inc.

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