Apple Value Chain Analysis

Apple Value Chain Analysis
The more value an organization creates, the more profitable it is likely to be.
And when you provide more value to your customers, you build competitive
advantage.
Understanding how your company creates value, and looking for ways to add
more value, are critical elements in developing a competitive strategy.
Michael Porter discussed this in his influential 1985 book "Competitive
Advantage," in which he first introduced the concept of the value chain.
A value chain is a set of activities that an organization carries out to create
value for its customers. Porter proposed a general-purpose value chain that
companies can use to examine all of their activities, and see how they're
connected. The way in which value chain activities are performed determines
costs and affects profits, so this tool can help you understand the sources of
value for your organization.
https://www.mindtools.com/pages/article/newSTR_66.htm
A value chain is a set of activities that a firm operating in a specific industry performs in order to
deliver a valuable product or service for the market. The concept comes from business management
and was first described and popularized by Michael Porter in his 1985 best-seller, Competitive
Advantage: Creating and Sustaining Superior Performance.[1]
The idea of the value chain is based on the process view of organizations, the idea of seeing a
manufacturing (or service) organization as a system, made up of subsystems each with inputs,
transformation processes and outputs. Inputs, transformation processes, and outputs involve the
acquisition and consumption of resources money, labour, materials, equipment, buildings, land,
administration and management. How value chain activities are carried out determines costs and
affects profits.
IfM, Cambridge[2]
The appropriate level for constructing a value chain is the business unit,
[5]
not division or corporate level. Products pass through a chain of activities in order, and at each
activity the product gains some value. The chain of activities gives the products more added value
than the sum of added values of all activities.[5]
References[edit]
1.
^ Jump up to:a b Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining
Superior Performance. New York.: Simon and Schuster. Retrieved 9 September 2013.
2.
^ Jump up to:a b "Decision Support Tools: Porter's Value Chain". Cambridge University:
Institute for Manufacturing (IfM). Retrieved 9 September2013.
3.
^ Jump up to:a b Michael E. Porter (1985) Competitive advantage: creating and sustaining
superior performance. The Free Press
International production, trade and investments are increasingly organised within so-called global value chains
(GVCs) where the different stages of the production process are located across different countries. Globalisation
motivates companies to restructure their operations internationally through outsourcing and offshoring of activities.
Firms try to optimise their production processes by locating the various stages across different sites. The past
decades have witnessed a strong trend towards the international dispersion of value chain activities such as design,
production, marketing, distribution, etc.
https://www.oecd.org/sti/ind/global-value-chains.htm
If you are searching for a way to gain an edge on your competition, consider one of the
business world's most valuable tools: the value chain analysis.
Value chain analysis relies on the basic economic principle of advantage companies
are best served by operating in sectors where they have a relative productive
advantage compared to their competitors. Simultaneously, companies should ask
themselves where they can deliver the best value to their customers.
To conduct a value chain analysis, the company begins by identifying each part of its
production process and identifying where steps can be eliminated or improvements can
be made. These improvements can result in either cost savings or improved productive
capacity. The end result is that customers derive the most benefit from the product for
the cheapest cost, which improves the company's bottom line in the long run.
Advertisement
What is a value chain?

To understand how to conduct a value chain analysis, a business must first know what
its value chain is. A value chain is the full range of activities including design,
production, marketing and distribution businesses go through to bring a product or
service from conception to delivery. For companies that produce goods, the value chain
starts with the raw materials used to make their products, and consists of everything
that is added to it before it is sold to consumers.
The process of actually organizing all of these activities so they can be properly
analyzed is called value chain management. The goal of value chain management is to
ensure that those in charge of each stage of the value chain are communicating with
one another, to help make sure the product is getting in the hands of customers as
seamlessly and as quickly as possible.
Porter's value chain

Harvard Business School's Michael E. Porter was the first to introduce the concept of a
value chain. Porter, who also developed the Five Forces Model that many
businesses and companies use to figure out how well they can compete in the current
marketplace, first discussed the value chain concept in his book " Competitive
Advantage: Creating and Sustaining Superior Performance "

(Free Press, 1985).
"Competitive advantage cannot be understood by looking at a firm as a whole," Porter

wrote. "It stems from the many discrete activities a firm performs in designing,
producing, marketing, delivering and supporting its product. Each of these activities can
contribute to a firm's relative cost position and create a basis for differentiation"
According to LearnMarketing, Porter suggests that activities within an
organization add value to the service and products that the company produces, and that
all of these activities should be run at optimum level if the organization is to gain any
real competitive advantage. If they are run efficiently, the value obtained should exceed
the costs of running them for example, customers should return to the company and
transact freely and willingly.
http://www.businessnewsdaily.com/5678-value-chain-analysis.html
Value chain analysis is the process of looking at the activities that go into changing the
inputs for a product or service into an output that is valued by the customer.
Read more: The Basics Of Value Chain Analysis |
Investopedia http://www.investopedia.com/articles/investing/111014/basics-value-chainanalysis.asp#ixzz4PKOzqLoj
Follow us: Investopedia on Facebook
Value chain analysis is designed to improve profits by creating a product or service that is
so superior that customers are willing to pay more than the cost to create it.
Investopedia http://www.investopedia.com/articles/investing/111014/basics-value-chainanalysis.asp#ixzz4PKP6rKU2
Rather, a company should decide why it wants to improve its value chain in the context of its
competitive advantage- how would the company like to differentiate itself amongst its peers.
Two common competitive advantage strategies include low cost provider or
specialization/differentiation of product or service.
Low Cost Provider-value chain analysis focuses on costs and how a company can
reduce those costs.
Specialization-value chain analysis focuses on the activities that create a unique

product or differentiation in service.

Investopedia http://www.investopedia.com/articles/investing/111014/basics-value-chainanalysis.asp#ixzz4PKPN9iYh
Apple has completed thirty years in the market. It has been one heck of ride for
organization. This thirty year journey has been full of ups and downs. And that's
pretty obvious with innovative organization like Apple. Leader of this organization
Steven Jobs has been responsible for Apples rapid progress. Several successful
products have been launched by Apple. But on several occasions they had to bare
huge losses. Apple was struggling badly to survive during 1996-1997. Within 13
years share value of apple rocketed through skies and 2010 was miraculous for
Apple as share value of Apple went ahead of Microsoft. This has been fairytale to
say the list. (Singh et al, 2009)
pple rightly gives all the credit to its ipod in single year of 2005 y 32 million ipods
were sold figure like these never been herd before. (Griffin, 2007)
Value chain analysis played important role in Apples progress. Apple never played
pioneer in the market they always have been excellent second movers in the
market.
Apple always tries to find drawbacks in other products and then they tend to
introduce their product which is free from these drawbacks. (Grant, 2005) For
example, in earlier days there were excellent music players available in the market
but they all lacked one important factor that was portability. People ware not
comfortable using products with limited facilities like walkman. (Haberberg & Rieple,
2008) People were looking for a portable music player with considerable storage
capacity and excellent music quality. Apple ipod satisfied all those needs, it was a
portable music player with excellent music quality and large storage capacity. No
wonder sell of ipod broke all records and had earth shattering following. (Karki,
2008)
We can also see brilliant use of value chain analysis incase of Apple when they
provide substitution for their own products. Apple introduces such a wide range of
products, because of this; possibility of consumer moving towards other products
gets reduced considerably. (Monczka, 2009)
Apple is did exceptionally well in value chain analysis due to factors mentioned
below;
Inbound logistic, where primary operations are controlled which includes activities
like, receiving the materials from suppliers, storage of this material and the way it is
handled inside any organization.
Operations, in this section process related to production and services are handled.
Apple gains loads of ground in this factor. In case of apple production and services
are so complicated and vast in nature that many subdivisions are created for
distribution of work. (Apple Inc. Strategic Management Analysis, 2008)
Outbound logistics, where end product is provided to common users, distribution
system of any organization should be excellent to do better in this department
(Grimm, Lee, & Smith, 2006). In this sector Apples stores which are devoted only for
Apple products are excellent examples. Where not only distribution system is up to
mark but product monopoly also plays its part.
Sales and marketing, Apple score heavily in these sectors because of their
aggressive campaigning, slick looking products, creating heavy buzz in the market
during launch of new product, and long range of products. Apple always has been
seen innovating new products according to user's requirements and to understand
requirements of users in authentic manner Apple consistently carried out some
rigorous market surveys, made accurate predictions, and then produced products
which fulfilled consumer's requirements. (Martin, 2009)
Complete service, complete service always has been forte of Apple where they have
certain provisions which work excellently for their growth such as user have to use
Apple software if they are using any Apple gadget. This not only develops product
monopoly but also increases products base and increases consumer's loyalty.
(Wood & Murphy, 2002)
Store for only Apple products

Apple always has been troubled by big box staffers, due to this Apple always found it
difficult to introduce or demonstrate new and unique products which were different
from the existing crowd in the market. Need to deal with this problem introduced
concept of Store for only Apple products where products are only devoted to Apple.
Apple could introduce any product according their convenience in these stores.
https://www.ukessays.com/essays/marketing/analysis-of-apple-according-to-valuechain-analysis-marketing-essay.php
Apple is famous for innovation and design. But few people know that
the way Apple handles inventory is also a factor that led to success.
As a matter of fact, research firm Gartner ranks Apples Supply Chain
as the best supply chain in the world every year from 2010 to 2013.
Tim Cook, the current CEO of Apple, a company that reached 170.9 billion in revenues
last year, was before the companys Chief Operations Officer. He had joined Apple in
1998, the same time Steve Jobs re-entered the company, and he transform Apples
messy operations into a success, becoming COO in 2005 and CEO in 2011.
Tim Cook believes that when it comes to technology such as smartphones, tablets and
laptops, inventory deprecates very, very quickly, losing 1-2% of value each week inventory is fundamentally evil he says. "You kind of want to manage it like you're in
the dairy business. If it gets past its freshness date, you have a problem."
A comparison of how tech companies managed their inventory in 2011 shows Apple
was performing much better than Dell, HP, Blackberry (RIM) and Motorola. Using the
Inventory Turnover formula that shows how many times a companys inventory can be
sold and replaced over a specific time period (so the higher the number the better), in
2011 Apple performed 2 times better than Dell, 5 times better than HP, 4.5 times better
than Blackberry, and 5.5 times better than Motorola.
In July 2011, Apple sold every ipad 2 it could make, creating no wastage with unable to
sell inventory.
In its recent quarterly reports, Apple introduced a bit more details on their inventory: in
Q1 2014 Apple had $2.1 billion in inventory (a good number compared to $170 billion of
sales in fiscal year 2013), split in $1.6 billion in finished goods and $525 million in
components. And they are planning again to not have any inventory unsold in time.
Also according to reports, Apple exited the Q1 2014 with inventory almost in balance
with demand for both the iPhone as well as the iPad, unlike last year when the iPhone 5
and the iPad mini were highly supply-constrained.
How does Apple run its supply chain operations?

In a nutshell, Apple purchases components and materials from various suppliers, then
gets them shipped to the assembling plant in China. From there, products are shipped
directly to consumers (via UPS/Fedex) who bought from Apple's Online Store.
For other distribution channels such as retail stores and other distributors, Apple keeps
products at Elk Grove, California (where central warehouse and call center are located)
and ships products from there. At the end of product's life, customer can send products
back to nearest Apple Stores or dedicated recycling facilities.
How did Apple manage to have such a great inventory

management?
Tim Cooks mantra was from the very beginning to slash inventory, cut down on
warehouses and make suppliers compete between themselves.
"When Cook initially took over Apple's supply chain, he cut down the number of
component suppliers from 100 to 24, forcing companies to compete for Apple's
business," writes San Oliver from Apple Insider, "He [Cook] also shut down 10 of the 19
Apple warehouses to limit overstocking, and by September of 1998 inventory [stock on
hand] was down from a month to only six days."
In 2012, Apple was said to turn inventory every 5 days! And that was part of the reason
the research firm, Gartner, placed Apples supply chain the best in the world, with Dell
and Samsung ranking next in the electronics category, turning their inventory aprox.
every 10 days, respectively 21 days.
Keeping as little inventory on hand as possible is very important. Why? Because of

costs with warehouses and competitors possible hits. Technology manufacturers cant
afford to keep too many products in stock because a sudden announcement from a
competitor or a new innovation could change everything and suddenly bring down the
value of products in inventory.
By 2013, Apple was dealing with 154 key suppliers (way lower than Amazon for
example), which facilitates better supplier relationships) and kept only one central
warehouse in perfect data sync with the aprox. 250 owned stores.
Foreseeing sales levels accurately and not having excess inventory is absolutely crucial
in the computer industry, especially when new products quickly cannibalize the old.
Not having too many SKUs helps correct forecasting (in 2013, Apple had 26.000 SKUs,
way less than other technology manufacturers). Another facilitating factor is having a
longer product life cycle and Apple has more than 12 months for its key products.
And forecasting demand doesnt come only in the form of what products your customers
will buy, but also on what kind of technologies will be in demand for the next coming
years, allowing the company to reduce costs with suppliers by placing orders for longer
term. This also leads to creating enough demand for suppliers, so that other competitors
cannot order the components and hence limiting imitations.
Although Apple was always pushing to have fast inventory turnover, it made a change in
2011 of not rushing selling. The change was implemented with the launch of the ipad 2
and consisted of selling the much-awaited products the second day after they were
delivered to shops, despite the customer ques in front. This measure was taken to make
sure inventory tracking runs smooth and there are no errors to lead to inventory
inaccuracies.
If you are manufacturing or distributing electronics, you might have something to learn
from the above. We are also curious to hear your stories too! Contact clara [at]
tradegecko.com if you want your story to be covered here.
https://www.tradegecko.com/blog/apple-had-the-best-supply-chain-in-the-world-forthe-last-four-years-here-is-what-you-can-learn-from-it
Apple Inc., Statement of

Financial Position, Inventory
USD $ in millions
Inventories
Source: Based on data from
Apple Inc. Annual Reports
Source: www.stock-analysison.net
Sep 24,
2016
2,132
Sep 26,
2015
2,349
Sep 27, Sep 28,

2014
2013
2,111
1,764
Sep 29,
2012
791
Sep 24,
2011
776
Copyright 2016 Stock

Analysis on Net
Inventory turnover measures how fast the company turns over its inventory within a year. It is calculated as cost of
goods sold divided by average inventory. Apple Inc's cost of goods sold for the three months ended in Sep.
2016 was $29,039 Mil. Apple Inc's average inventory for the quarterthat ended in Sep. 2016 was $1,982 Mil. Apple
Inc's inventory turnover for the quarter that ended in Sep. 2016was 14.66.
http://www.gurufocus.com/term/InventoryTurnover/AAPL/Inventory-Turnover/AppleInc
http://csimarket.com/stocks/singleEfficiencyit.php?code=AAPL
Apple Value Chain Analysis

Posted on March 7, 2016 by John Dudovskiy
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 value chain analysis.
Figure 1 Apple Value Chain Analysis
Primary Activities
Inbound logistics. Apple works with hundreds of suppliers around the globe
and maintains a highly sophisticated supply-chain management as illustrated in
Figure 2 below. Apples 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.
Figure 2 Apples supply-chain management [2]

Operations. Apple operations are divided into the following reportable
operating segments:
1.
Americas
2.
Europe
3.
Greater China
4.
Japan
5.
Rest of Asian Pacific
6.
Retail
Apple operations are conducted by 92,600 full-time equivalent employees and an
additional 4,400 full-time equivalent temporary employees and contractors.
Majority of Apples hardware products are currently manufactured by
outsourcing partners that are located primarily in Asia. A significant
concentration of this manufacturing is currently performed by a small number of
outsourcing partners, often in single locations[3].
Outbound logistics. Apples net sales through its direct and indirect
distribution channels accounted for 28% and 72% of total net sales
respectively[4]. Apple strives to minimize the volume of its inventory due to cost
considerations. Accordingly, in Q1 2014 Apple had $2.1 billion in inventory (a

good number compared to $170 billion of sales in fiscal year 2013), split in $1.6
billion in finished goods and $525 million in components.
Marketing and sales. As it is illustrated in Figure 3 above, Apple sells its
products and services via four channels of distribution. Apple marketing budget
of USD 1.1 billion[5] is spent on utilization of marketing communication mix that
integrates advertising, public relations, events and experiences and direct selling.
No single customer accounted for more than 10% of total sales for 2014, 2013 or
2012.
The company 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 is taking concrete steps
in this direction. For example, Apple and Cisco revealed a partnership August
2015 to optimize Cisco networks for Apple iOS-based devices and apps while also
working to create a better business integration between Cisco voice and video
environments and the iPhone.[6]
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 centers 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.
Apple Inc. Report contains a detailed discussion of Apple Value Chain Analysis.
The report also illustrates the application of the major analytical strategic
frameworks in business studies such as SWOT, PESTEL, Porters Five Forces
and McKinsey 7S Model on Apple Inc. Moreover, the report contains analysis
of Apple marketing strategy, leadership and organizational structure and
discusses the issues of corporate social responsibility.
http://research-methodology.net/apple-value-chain-analysis/
APPLES VALUE CHAIN ANALYSIS
MAY 29, 2015 | REBECADELPINO
Apple Inc. is a
multinational technology company born in America and it has
its headquarters in Cupertino, California. Apple is responsible
for designing, developing, and selling consumer electronics,
computer software, online services and personal computers.
Initially founded by Steve Jobs, Steve Wozniak and Ronald
Wayne on April 1, 1976. It was created with a main purpose
of developing and selling personal computers but then
evolved into different type of electronic devices.
Apple is nowadays the worlds second-largest information
technology company by revenue following after Samsung
Electronics.
What makes Apple so special?
The very first thing that comes to your mind when you talk
about Apple is Steve Jobs, who became synonymous with the
brand name and as famous as the brand itself. Jobs opened
up several new vistas for the company and actually redefined
the whole concept of mobile, during his time. He came up
with new and innovative ideas that would please the
voracious minds of new-technology-hungry users all over the
world.
Not only was Jobs the main force behind manufacturing new
products into the market, but he also took an aggressive lead
in marketing those products. Once he was appointed the CEO
of Apple, he was the responsible to further the company and
bring it to the front-row of mobile market.
Apple has released a number of diverse products ever since
the late 1970s. The company that started with humble
beginnings grew at a steady pace, introducing the Apple II
series of personal computers, the Mac and then the
iPod, IPhone and Ipad. Now, each new release of the iPhone
and the iPad cause the public to go into a crazy state ,fiercely
demanding the product. Very few other products in the
market have achieved this cult status.
Another one of the major reasons for Apples success is its

dynamic, constantly changing business plan. Jobs studied the
market and tried to learn the needs of the audience. Apple
originally started as just another computer company. But Jobs
always knew that it was meant for much
bigger things.Apple had to widen its approach if it had to
grow to great heights. The team, therefore, changed its
business plan to introduce many more different products. Jobs
also changed the name of the company from Apple Computer
Inc. to Apple Inc., which gave the company a much broader
spectrum and vision.
I guess that with so many innovations and with such a great
leader owner of such a unique perspective of the business, is
it any wonder that Apple is in the top of the
line?
Now if we want to analyze its value chain we must first
understand what value chain stands for. Value-chain analysis
is an analytical framework that assists in identifying business
activities that can create value and competitive advantage to
the business. Here we have an illustration that can help us
understand more easily Apples value chain.
Primary Activities
Inbound logistics.
Apple is
known for working with hundred of suppliers from all around
the world and for maintaining highly sophisticated supplychain management as you will see in the next figure. Apples
commitments to their purchasing normally cover its
requirements for periods for 150 entire days.
Its CEO Tim Cook is known for his smart strategy of getting
suppliers to compete with each-other and has managed to
reduce the number of suppliers considerable after becoming
CEO in 2011.
Operations.
Apples operations are carried out by 92,600 full-time
equivalent employees and an additional 4,400 full-time
equivalent temporary employees and contractors. The
majority of Apples hardware products are currently being
manufactured by outsourcing partners that are situated
primarily in Asia. A significant concentration of this
manufacturing is currently performed by a small number of

outsourcing partners, often in single locations.
Outbound logistics.
Apples net sales through its direct and indirect distribution
channels accounted for 28% and 72% of total net sales
respectively. Apple attempts to minimize the volume of its
inventory due to cost manners. Accordingly, in Q1 2014 Apple
had $2.1 billion in inventory (a good number compared to
$170 billion of sales in fiscal year 2013), split in $1.6 billion in
finished goods and $525 million in components.
Marketing and sales.

As you can see in the illustration above Apple has four main
channels of distribution through which it sells products and
services. Apples marketing budget is spent mainly on the
use of a marketing communication mix that entails
advertising, public relations, events and experiences and
direct selling.
Service.
We all know that Apple is famous for exceptional quality of its
costumer services ( all the three stages: pre-purchase, during
the purchase and post purchase). You can find Apple
experience centers in major cities all around the world where
anyone can try out the Apple experience and fall in love with
the brand and what it stands for. Apples sales assistants are
especially trained and educated young adults with
technological knowledge that are delighted to demonstrate
product features and capabilities. The costumer service post-
purchase is commonly known to be impressive and has some

unique iPhone trade programs that allow iPhone users to
upgrade their IPhone to newer models with additional
payment.
Sources:
https://prezi.com/a23yvk0pbhbc/apples-value-chain/
http://www.mindtools.com/pages/article/newSTR_66.htm
http://ba201w2012.blogspot.com/2012/01/close-look-atapples-value-chain.html
http://research-methodology.net/apple-value-chainanalysis/
http://en.wikipedia.org/wiki/Value_chain
https://perpetualtravellers.wordpress.com/2015/05/29/apples-value-chain-analysis/
Market Research
In an interview with Fortune a few years ago, Steve Jobs explained that Apple
never does market research. Rather, they simply preoccupy themselves with
creating great products.
-We do no market research. We dont hire consultants. The only consultants Ive ever hired in
my 10 years is one firm to analyze Gateways retail strategy so I would not make some of the
same mistakes they made [when launching Apple's retail stores]. But we never hire consultants,
per se. We just want to make great products.
And when asked about the market research that went into creating the iPad, Jobs
responded, "None. It isn't the consumers' job to know what they want. It's hard for
[consumers] to tell you what they want when they've never seen anything
remotely like it."
Apple does engage market research
Every month, Apple surveys iPhone buyers and Joswiak explains
what Apple is able to glean from these surveys.
The surveys reveal, country-by-country, what is driving our customers to buy Apple's
iPhone products versus other products such as the Android products that Samsung
sells, what features they most use, our customers' demographics and their level of
satisfaction with different aspects of iPhone.
And as you might expect, Apple conducts similar surveys with
iPad buyers.
the Wall Street Journal highlighted some of the types of questions
and answers that appear in these research reports:
One chart lists responses from customers in seven different countries, asking them why
they bought an iPhone after considering an Android device. Trust Apple Brand
emerged as the first or second most popular reason in most regions, including in the
U.S and China where 54% of respondents cited it as a factor.
Some 67% of Chinese respondents said they bought the iPhone because they liked the
physical appearance and design, the highest percentage across the group, which also
included Japan, the U.K., France, Germany and South Korea.
Least important, almost universally, was the ability to easily transfer music and other
media across multiple devices. Greater availability of apps I am interested in was a
significant factor in South Korea, where 47% cited it as a reason.
Joswiak notes that Apple's iPhone and iPad research data is only circulated to a
small select group of Apple executives.
http://www.networkworld.com/article/2222892/wireless/how-apple-conductsmarket-research-and-keeps-ios-source-code-locked-down.html
Apple surveys its customers to supplement their own internal data and thinking. This
came to light in 2012 when, during a legal scuffle with Samsung, the companys VP of
Product Marketing submitted a document to the court explaining why documents relating
to Apples market research (specifically iPhone surveys) should be kept secret..
https://www.flexmr.net/blog/consumer-insight/2016/8/steve-jobs-marketresearch.aspx
Research & Development
https://ycharts.com/companies/AAPL/r_and_d_expense
One of the hallmarks of Silicon Valley companies is that they tend to

increase their research and development (R&D) budget during tough
times, not shrink them. Facing a slowdown in iPhone sales and other
tribulations, Apple is on track to spend $10 billion on R&D this year, a
30% increase from 2015.
Thats quite a leap. If you look at Apples recent financial report, you
know the Cupertino, Calif. company had phenomenal earnings last
quarter. But what spooked Wall Street is that its clear that Apples
iPhone sales trajectory has leveled out. Sales of iPhones during the last
quarter were only about 54 million, compared to over 70 million in the
same quarter a year before. Investors, who panic if they dont see growth,
have penalized Apples stock in a big way for the slowdown.
So what could Apple be working on? Here are a few ideas.
Apple recently invested $1 billion in Didi, a Chinese ride-sharing
company that competes with Uber. This investment is further evidence
that Apple has a serious interest in transportation. This particular
investment will help Apple gain greater insight into one of Apples most
important markets, as well as signal to Chinas government and its
people that Apple believes in that countrys growth.
Given the rumors that Apple is working on some form of a car or at the
very least working on ways to make cars smarter you can bet that a
significant portion of this R&D spending will be in the automotive space.
Apple CEO Tim Cook believes that virtual reality (VR) is not a
passing fad, signaling that Apple has great interest in this area. I
suspect that Apple has multiple VR projects in the works, including one
that most likely has the iPhones fundamental technology built into a VR
headset.
Apple is highly committed to the iPhone, iPad, Mac lineup and the
Apple Watch, as well as its lucrative services businesses. I suspect that at
least $4 billion of this R&D budget will be used to bring more innovation
to these devices and Apples services platforms to keep them competitive.
Cook made a comment late last year during an earnings call that
Apple is working on various
things unknown to the outside world. More recently, Cook has said that
he is highly excited about the products Apple has in the pipeline, adding
that he has no concern about Apples future and its ability to continue to
innovate and delight its customers. Clearly a portion of this R&D will
be aimed at these mystery projects.
http://time.com/4339940/apple-rd-research-development/
Apple's R&D expense saw a significant bump up beginning in mid-2014. It

was clear Apple was up to something big. However, after looking at Apple's
2Q16 results, it appears I underestimated the situation. As depicted in
Exhibit 1, Apple is now on track to spend more than $10 billion on R&D in
2016, up nearly 30% from 2015 and ahead of even my aggressive estimate.
This is a remarkable feat considering that Apple was spending a little over $3
billion per year on R&D just four years ago.
Exhibit 1: Apple R&D Expense (Annual)
Project Titan will lead to Apple actually shipping an electric car. At this point, I
peg odds of Apple selling its own electric car to be at least 80 percent. There
is one very simple reason for my high degree of confidence: Project Titan is a
long-term pivot. I don't consider Titan to be just another project that Apple
has been tinkering around with in the lab for years like an Apple television
set or Apple Pencil. Instead, Project Titan is much more about building a
foundation for Apple that will literally represent the company's future.
It was recently revealed that Apple has set up a web of Project Titan
buildings and infrastructure spread across Santa Clara, Sunnyvale and San
Jose. This means that it is incorrect to think of Project Titan as just being
about one product or one feature. Instead, Apple is building an entire startup focused on the electric car industry, giving me a high level of confidence
that Apple's efforts will lead to products. When diving deeper into Project
Titan, this is where there is greater unknown as to whether a certain
technology will ever ship, such as various autonomous driving features,
different features for new internal passenger compartments, unique car
materials, and the list goes on. Each one of those items should be thought of
as an individual project that may not see the light of day.
Apple has likely spent upwards of a few billion dollars on Project Titan so far
when including real estate and stock-based compensation. When considering
that Apple will likely be spending upwards of $14 billion per year on R&D by
2017 or 2018, Project Titan could easily end up being a $10-$15 billion
project before Apple even ships a product. This is uncharted territory not just
for Apple, but for the entire auto industry.
https://www.aboveavalon.com/notes/2016/5/11/apple-rd-reveals-a-pivot-is-coming
Avalons Neil Cybart, a longtime financial analyst, Apple-tracker,

and one of the more accurate predictors on the companys earnings,
has released an in-depth investigation into the companys research
and development efforts. His findings show that
Apple AAPL 0.96% is ramping up its R&D spending at a rapid
rate, suggestingthat in just a few years, we are no longer going to refer
to Apple as the iPhone company.
Cybart dug through Apples financials to look back at how the

company has invested in research and development over the years. He
found that Apple spent more than $4 billion on it in 2013 and then $6
billion in 2014. By 2015, the R&D costs had risen to $8 billion. Now,
he believes that Apple is on track to spend more than $10 billion this
year on research and development in 2016 and more than $12 billion
next year.
This is a remarkable feat considering that Apple was spending a little
over $3 billion per year on R&D just four years ago, he wrote.
The ramp up in research and developmentan unprecedented one
when compared to its expenditures dating all the way back to 1996
suggest something big might be up at Apple, Cybart argues. While he
acknowledged that its possible the increasing spending is due to a
broader product line or Apple could try to get into more product
categories, he believes the most likely reason is that Apple wants to
turn into a different kind of company.
Get Data Sheet, Fortunes technology newsletter.
Apple is ramping up R&D because they have a few big bets that
require a massive increase in investment, Cybart writes. The two
most logical areas for these bets are wearables and personal transport
initiatives. In both cases, Apple is moving well beyond its comfort zone
of selling pieces of glass that can be held in ones hand. Instead, Apple
is literally building a new company with additional capabilities and
strengths.
Apple did not immediately respond to a request for comment.
Cybarts comments come as rumors continue to pile up that the
company is working on a electric car. Although Apple itself has not
said for sure that its planning to a car, the company has hinted at such
plans and made strategic hires in that market.
Tesla TSLA 1.32% CEO Elon Musk says Apples car ambitions are an
open secret in the industry.
Meanwhile, Apple seems committed to the idea that its wearable,
Apple Watch, could be the leading device for what is expected to be a
booming industry. While Apple has yet to share sales figures on its
wearable, most analysts believe the company is leading the pack by a
wide margin.
The idea that Apple would pivot, as Cybart claims, seems rather
bold. However, in the companys last-reported quarter ended March
26, its iPhone business, which takes up the largest chunk of its
operation, saw revenue slide 18% year-over-year to $32.9 billion.
Meanwhile, Apples iPad and Mac sales also fell. In total, Apples
$50.6 billion in revenue was down 13% year-over-year.
Those issues, coupled with disappointing performance in China, has
prompted worry among investors. Meanwhile, Apple CEO Tim Cook
has been forced to allay fears, saying that the trouble is only
temporary. He has also promised big things for the future, but wont
say exactly what they are. He has even pitched the idea of
possibly spending more than Apple ever has on a major acquisition.
Simply put, major changes could be afoot.
For Cybart, however, the R&D expenditures make the prospect of
those major changes seem real. He argues that the company will
indeed get into the car business, and all thats required to guarantee
that prediction is looking at how its spending money.
Apple is not spending $10 billion on R&D just to come up with new
Watch bands, larger iPads, or a video streaming service, he wrote on
his blog. Instead, Apple is planning on something much bigger: a
pivot into the automobile industry.
Cybart added that by pivot, he means that Apple will take what it has
learned from other markets, like Macs and iPhones, and use it to its
advantage in cars.
Apple is designed to move from product to product, industry to
industry, Cybart said of the companys organizational structure. We
see the company do just that by entering the smartphone market,
followed by the wearables market and soon, the auto market.
Given all the data and the expenditures, Cybart says that Apples
chances of selling its own electric car are 80%. Ultimately, he says,
while the iPhone will remain important to Apple, it will eventually be

less important to the company.
Apple wants to move beyond the iPhone, he predicts.
http://fortune.com/2016/05/12/apple-research-and-development/
Sourcing
Our suppliers employ more than 1.6 million people in 20

countries.
http://www.pcmag.com/article2/0,2817,2422763,00.asp
Apple assembles almost all of their iPhones in factories in China. PC Magazine attributes this
outsourcing decision not on purely on labor cost-savings but on the fact that Chinese factories are
able to produce smartphones in large volumes very quickly. Of the 70 million iPhones sold in 2011,
none were manufactured in the U.S. while 85 percent of all iPhone 5s were assembled in China. For
2011, Apple outsourced an estimated 700,000 workers abroad.
"Steve Jobs once said that the iPhone jobs won't be coming back to America not because of cheap,
labor, but because Asian factories product fast, really fast, and at a much larger scale and flexibility,"
the infographic stated.
Not only is Apple sourcing most of its assembly jobs from China, many of its iPhone parts - including
its screen, glass polishing, speakers and vibration unit - come from rare Earth minerals that mostly
come from China. iPhones are also equipped with a product called Gyroscope from French-Italian
company STMicroelectronics designed to shift the screen display from portrait to landscape view.
http://www.strategicsourceror.com/2013/08/how-apple-and-google-differ-in.html
The success of the worlds biggest technology company has come on the back of a robust supply chain
network. Foxconn, a Taiwanese company, is one of its strategic supply partners that churn out tens
of thousands of its flagship products each day. Manufacturing for Apple isnt easy. Sales estimates
are difficult to forecast, and for such complex products, the time to market is extremely short. As
Apple needed Foxconn and Foxconn needed Apple, the relationship was mutually beneficial. It was a
fine example of procurement playing an instrumental role in managing growth.
Pegatron. This company already manufactures iPad Minis and some versions of the iPhone.
Based on the ranking from Gartner, Apple is the top of supply chain excellence,
followed by McDonald and Amazon. At least 97% of Apples procurement
expenditures for materials, manufacturing and assembly of products are finished
worldwide in 2013.
None of these iPhones were produced in the US, expect vital components, and
nearly 85% were assembled in China.
Why Apple obsessed to outsource its production line to other countries, especially in Asia?
Steve Jobs once claimed that it was not because of the cheap labor in Asian countries, but those
factories could produce much faster with quite a large scale and flexibility. One of Apples wellknown suppliers is Foxconn, which is a Taiwan company. They can produce thousands of
iPhones each day with relatively lower cost of labors. Apple also found another supplier,
Pegatron which is also a Taiwan company, to produce iPad and some versions of iPhone. Apple
has already had so much outsource suppliers, why the scales of suppliers still keep increasing?
There are four reasons.

Risk Diversification. With the aim to build a stable supply chain, multiple suppliers can
help Apple react faster to problems or disruptions and become more flexible.
Capacity Management. The demand of Apple product has increased, especially from two
large emerging markets, China and India. 10 million units of iPhone 6 and iPhone 6 Plus were
sold in the first weekend. Apple needs to increase its capacity more quickly to meet the demand.
Margins Sustenance. With multiple suppliers, Apple could increase the bargaining
leverage in order to maintain the low cost and high level of profitability.
Supplier Innovation. New suppliers are more willing to invest capital to improve
operation efficiency and high quality of product to obtain reliance from customers. Apple can
easily benefit from the growth of new suppliers.
http://cmuscm.blogspot.com/2014/09/apples-sourcing-strategy.html
Production
Foxconn, Apples biggest supplier, which assembles the iPhones mostly in its facilities in China,
has installed robots (nicknamed Foxbots) for the first time to meet its iPhone production quotas.
The biggest difference Apple has from other manufacturers is that it

sources its materials and components from other manufacturers that
operate throughout the globe. For example, its displays are mainly made
in Japan by Japan Display and Sharp, and some are still made in South
Korea by LG Display; whilst the Touch ID sensor found in its recent iPad
and iPhone models are made in Taiwan by TSMC (Taiwan
Semiconductor Manufacturing Company) and Xintec. In fact, its list of
suppliers for 2014-2015 stretches to more than 200 various suppliers
located throughout the world.
This brings up a lot of interesting facts about Apple's supply chain, where
it has to manage a huge number of suppliers and funnel their work into a
single device. This is what makes Apple a fascinating company to
research and understand. In order for it to operate economically, it has to
source parts from various different countries and continents,
manufacture and assemble the parts in another, have warehouses
located around the world to supply enough devices for the whole world
and finally be able to distribute it to its customers at a reliable speed.
Where are Apple products made: Which companies make the iPhone - and
where?
Let's dive into the individual parts that make up an Apple device. More
specifically, let's look at Apple's iPhone line. Here's a breakdown of the
components that go into the iPhone 5s and the iPhone 6:
Content continues below
Accelerometer: Bosch in Germany. Invensense in the

United States.
Audio Chipsets and Codec: Cirrus Logic in the United
States (outsourced for manufacturing).
Baseband processor: Qualcomm in the United States
(outsourced for manufacturing).
Batteries: Samsung in South Korea. Huizhou Desay Battery
in China.
Cameras: Sony in Japan. OmniVision in the United States
produces the front-facing FaceTime camera chip but
subcontracts TMSC (in Taiwan) for manufacturing.
Chipsets and Processors: Samsung in South Korea and
TSMC in Taiwan. Alongside their partner GlobalFoundries in
the United States.
Controller Chips: PMC Sierra and Broadcom Corp in the
United States (outsourced for manufacturing).
Display: Japan Display and Sharp in Japan. LG Display in
South Korea.
DRAM: TSMC in Taiwan. SK Hynix in South Korea.
eCompass: Alps Electric in Japan.
Fingerprint sensor authentication: Authentec makes it in
China but outsources it to Taiwan for manufacturing.
Flash memory: Toshiba in Japan and Samsung in South
Korea.
Gyroscope: STMicroelectronics in France and Italy.
Inductor coils (audio): TDK in Japan.
Main Chassis Assembly: Foxconn and Pegatron in China.

Mixed-signal chips (such as NFC): NXP in Netherlands.
Plastic Constructions (for the iPhone 5c): Hi-P and Green
Point in Singapore.
Radio Frequency Modules: Win Semiconductors (module
manufacturers Avago and RF Micro Devices) in Taiwan.
Avago technologies and TriQuint Semiconductor in the
United States. Qualcomm in the United States for LTE
connectivity.
Screen and Glass (for the display): Corning (Gorilla Glass)
in the United States. GT Advanced Technologies produces
the sapphire crystals in the screens.
Semiconductors: Texas Instruments, Fairchild and Maxim
Integrated in the United States.
Touch ID sensor: TSMC and Xintec in Taiwan.
Touchscreen Controller: Broadcom in the United States
(outsourced for manufacturing).
Transmitter and Amplification Modules: Skyworks and
Qorvo in the United States (outsourced for manufacturing).
As we're able to see, Apple's manufacturing and outsourcing of products

is very diverse and sprawls across numerous countries around the
world. This goes without mentioning a lot of the other suppliers and
manufacturers that are within the supply chain of some of the companies
listed above!
It should be noted that the design, development and marketing work, not
to mention the creation of the software, are all done in-house by Apple in
the United States. The company remains a huge employer in its home
country.
And so we return to the original question: Where is an iPhone (or

an iPad, or the component parts of any Apple device) made?
The answer is: everywhere. Due to the complex supply chain within each
of these companies, the number of countries involved in the
manufacturing and even assembly process of Apple's devices is
impossibly diverse.
The reason Apple sticks "Made in China" on its devices is because the
majority of the parts tend to be sourced from China, but they are
frequently made elsewhere (in Taiwan, for example). The assembly of
Apple's devices is for the most part done in China - which is why we will
continue to see "Made in China" despite a lot of these companies,
including Apple, creating their designs in countries like the United States.
Looking more closely at the Chinese assembly line, it's also made
people questionwhy Apple has chosen to outsource and even assemble
its devices outside its domestic territory and choose China as its primary
location. The simple answer is: China allows greater flexibility and even
has the natural resources to cope with high-demand manufacturing.
According to research firm IHS, the iPhone 6s Plus (Apple's current
flagship phone, at the time of writing) costs Apple $236 to manufacture
(once manufacturing costs are added), whilst it retails at over three times
the price at $749 for the 16GB model. What's even more interesting to
note is the extra storage found in the 64GB model costs Apple around
$17 extra to make, while it charges its customers an extra $100 for the
extra storage space.
This all goes to show how complex and yet how successful Apple is as a
logistical engine, keeping down costs and managing a vast and
complicated supply chain with links around the globe.
It is known as one of the most talked about brands in the technology
space and has an ever-increasing popularity with investors. Apple is
quite simply one of the most successful companies of our times, and yet
it barely manufactures its own products and still manages to sell them for
a higher price, despite often featuring slightly lower hardware
specifications.
http://www.macworld.co.uk/feature/apple/are-apple-products-truly-designed-incalifornia-made-in-china-iphonese-3633832/
Apples Product Development Process may be one of the most

successful design process ever implemented. With the company verging
on becoming the worlds first $1 trillion business organization theres a
lot that designers can learn from Apple and introduce into their
own design environments.
t Apple they put design at the forefront.

Jony Ive the British designer that is the Chief Design Officer (CDO) at Apple and
his design team lead the company and they do not report to finance, manufacturing, etc.
They are given free rein to set their own budgets and are given the ability to ignore
manufacturing practicalities.
At the heart of the design department is the Industrial Design Studio where only a select
few Apple employees have access.
Its a simple concept that allows for the creation of incredible products.
Design Teams are Separated From the Larger Company
When a design team works on a new product they are then cut off from the rest of the
Apple business. They may even implement physical controls to prevent the team from
interacting with other Apple employees during the day.
The team is also removed from the traditional Apple hierarchy at this point. They create
their own reporting structures and report directly to the executive team. This leaves them
free to focus on design rather than day-to-day minutiae.
The Apple New Product Process (ANPP) information is given to a product development team
when they begin work. It details every stage of the design process and it goes into elaborate
detail. The idea is to define what stages the product creation team will go through, who will be
responsible for delivering the final product, who works on which stage and where they work and
also when the product is expected to be completed.
one of the keys to Apples success is that they dont work on hundreds of new products at once.
Instead, resources are concentrated on a handful of projects that are expected to bear fruit
rather than being diluted over many lesser projects.
The EPM is the engineering program manager and the GSM is the global supply
manager. Together they are known within Apple as the EPM Mafia. Its their job to take
over when a product moves from design to production.
As you might expect, these people are usually going to be found in China, Apple does
very little of its own manufacturing. Instead it relies on contract outsourcing companies
like Foxconn (one of the largest employers in the world) to do this for them. This
removes much of the headache of manufacturing for Apple whilst keeping production
costs as low as possible. There is a significant market advantage to this approach and
its one that many other electronics manufacturers are emulating now.
The EPM Mafia may sound scary (and they probably are to the suppliers) but their real
job is simply to ensure that products are delivered to market in the right way, at the right
time and at the right cost. They may disagree at points but their guiding principle is to
act in the interests of the product at all times.
The final step in Apples product development is product launch. When the product is
considered to be as good as it can be it enters an action plan known as the Rules of the
Road. This explains all the responsibilities and actions that must be taken prior to a commercial
launch of the product.
https://www.interaction-design.org/literature/article/apple-s-product-developmentprocess-inside-the-world-s-greatest-design-organization
Marketing
Immediately after college dropouts Steve Jobs and Steve Wozniak founded Apple in April
1976, the duo initially sold some 200 circuit boards that they produced inside an unused
garage. They subsequently introduced the 8-bit fully functional home computer Apple II in
1977 and it eventually became one of the first highly successful commercially produced
microcomputers in the market.
But the company did not rest alone with designing and manufacturing computers. Apple
expanded its product portfolio and successfully emerged as an innovative and influential
multinational technology company. The introduction of iPod in 2001 and the online music
and app store iTunes have revolutionised the music industry through the promotion of digital
music. These two products created and supported an emerging ecosystem for selling and
purchasing music via the Internet. The company was also instrumental for ushering in the
era of smartphones and tablet computers with the introduction of iPhone in 2007 and iPad in
2010. These two consumer electronic devices have reimagined the way manufacturers
develop and produce mobile devices.
Understanding the success of revered and culturally iconic products such as the iPod and the
iPhone nonetheless requires an appreciation of the overall marketing strategy of Apple.
After all, this prudently and intricately crafted strategy has played a critical role in hurling its
brand and products toward an unprecedented level of popularity and approval.
ESTABLISHING THE COMPETITIVE ADVANTAGE OF

APPLE THROUGH PRODUCT STRATEGY
Jobs left Apple in 1985 and around this time, the Apple II and Macintosh series of home
computers were pitted against PC computers from IBM. The competition was tough and
Apple was at the losing end. The company struggled with maintaining sales and it finally
succumbed to defeat as Windows-based personal computers from Microsoft gained a
stronghold in the market.
The poor performance of Apple stemmed from its poor product strategy. Apparently, the
company was producing and selling an array of computer products that were redundant and
confusing. When Jobs returned in 1996 to lead the company, his first order of business was
to discard all unprofitable products and realign the product strategy based on the concept of
simplicity and premium user experience.
Today, product strategy is at the core of the marketing strategy of Apple. Furthermore, it
has become the competitive advantage of the company and its flagship products to include
the MacBook, iPod, iTunes, iPhone, and iPad. One of the reasons why these products have
become successful is that they are user friendly and highly intuitive compared with their
competitors. They are also unassuming because of their simple and uniform built and
design.
Of course, despite this simplicity, these products provide a premium user experience
through innovative features and design considerations. It is important to remember that
these products were not original. There were already ultrathin laptops long before Apple
introduced the MacBook Air. Portable media devices had existed prior to the popularity of
iPod. Moreover, there was already a market for smartphones and personal digital assistants
before the iPhone and iPad revolutionised mobile computing and the consumer electronics
industry. However, these products have outcompeted their predecessors and some of their
counterparts because they provided an innovative and unique overall product usability and
consumer experience.
Apple employs a retroactive and proactive approach as part of its product strategy.
Essentially, the company develops its products based on the existing products of
competitors but it improves them by removing undesirable qualities and integrating
differentiating features. The results are products that appear new and innovative but are
still familiar or recognisable.
CREATING AND SUSTAINING BRAND LOYALTY

THROUGH COMPLIMENTARY PRODUCTS
The extensive but controlled product portfolio of Apple creates a uniform and unique product
usability and consumer experience. An iPod or an iPhone would be incomplete if not paired
with an iTunes or the App Store. The sleek metal-based aesthetics of a MacBook also signals
a sense of uniformity when used alongside the iPhone. The user interface of these consumer
electronic devices also employs the same functional and design principles centred on
simplicity thereby creating a strong sense of familiarity.
It is also important to note that a particular user of different Apple devices can take
advantage of this homogeneity through the Apple ID. This all-access account allows users to
manage their digital identity, files, and device preferences across different devices thereby
allowing seamless transition.
Apple products create a halo effect. Because each product complements another product,
consumers would usually choose to stick with the Apple brand rather than buying different
products from different manufacturers and create a hodgepodge of varying product and
consumer experience. Considering the fact that the company has a large pool of loyal
consumers, they tend to buy all products under the Apple brand. This halo effect coupled
with deep brand loyalty complements the sales performance of each Apple product.
The development and promotion of complimentary products and services are undeniably
part of the marketing strategy of Apple. With iconic and relevant products coupled with
industry tenure and established branding, the company now enjoys legions of loyal
consumers that comparable to fandoms of popular celebrity.
MAINTAINING BRAND IMAGE THROUGH PREMIUM

PRICING STRATEGY
The products of Apple are relatively expensive when compared with similar products from
competitors. An iPhone can be twice or thrice more expensive than the flagship Android
smartphones of other manufacturers. The same is also true for MacBook Pro and MacBook
air. One MacBook laptop can even buy three to five Windows-based laptops from OEMs.
But premium pricing is also part of the marketing strategy of Apple. This high price point or
premium pricing strategy has helped the company promote and maintain a favourable
perception among its loyal buyers. After all, there are consumers who believe that
expensive products enjoy an exceptional reputation or represent exceptional quality and
distinction. Thereby, Apple products are positioned as superior over their competitors
through this pricing strategy.
It is also important to consider the fact that luxury has a psychological association with
premium pricing. Undeniably, Apple products are luxury goods because of their high price
points and consumers of luxury good are willing to pay extra in order to maintain a sense of
indulgence or a status symbol.
Of course, there are reasons to believe that Apple is not merely exploiting their existing
consumer base or its target luxury market. As mentioned, part of its product strategy is to
provide a premium user experience and one of the ways the company does this is through
its product design considerations. Take note of the iPhone as an example. Unlike other
Android smartphones with lower built quality due to its plastic components, Apple has
designed and built its product using premium materials to include glass and aluminum.
THE UNIQUE MARKETING AND ADVERTISING

SITUATION OF THE IPHONE
Despite its record-breaking sales performance and a high level of popularity, there are no
extensive marketing strategy for the iPhone apart from product and pricing strategies and
publicities coursed through tradeshows and media relations.
It is worth noting that there is minimal advertising budget for the iPhone. Apple has never
advertised this product through print and broadcast media, although it occasionally
produces contents for online and social media distribution. For traditional media, consumers
are still exposed to advertising messages related to the iPhone delivered through different
traditional mediums simply because they are created and paid by network carriers.
Whenever a new iteration to the iPhone series arrives, network carriers are eager to
announce to their existing consumer base and target market that they are already offering
the product under several service plans. Although it seems they are doing Apple a favour,
these carriers are actually marketing themselves using the iPhone as bait, thereby luring
customers or the target market toward their respective mobile and data services.
However, these network carriers are not free from restrictions. Apple has maintained
stringent branding guidelines that essentially dictate the manner in which carriers develop
and implement their advertisements. The company does this to maintain and protect its
brand and promote uniformity in its established marketing message. iPhone ads virtually
look the same even though they came from different advertisers.
This unique marketing and advertising situation of the iPhone demonstrates the
effectiveness of the overall marketing strategy of Apple that moreover, centres on product
and pricing strategies. The product is highly valuable because of its popularity and if
network carriers want to capitalise on its success, they need to advertise that they have it.
http://www.versiondaily.com/the-marketing-strategy-of-apple-a-concise-analysis/
was voted the overall winner of the 2012 CMO Survey Award for Marketing
Excellence yet again. Apple has been selected as the winner or co-winner for
five consecutive years by the sample of top marketers. So why is Apple a great
marketer?
When Apple, Inc. (then Apple Computer, Inc.) incorporated in January 1977, its
investor/advisor, Mike Markkula, assembled a 3-point marketing philosophy.
Amazingly, thirty-five years later, this philosophy remains at the core of what
makes Apple so effective at creating and profiting from loyal customers. This, in
my view, is the definition of a strong marketing capability. Here are Apples
original three points:
1.
Empathy We will truly understand their [customer] needs better than any
other company.
2.
Focus In order to do a good job of the things we decide to do, we must

eliminate all of the unimportant opportunities.
3.
Impute People DO judge a book by its cover. We may have the best product,
the highest quality, the most useful software, etc.; if we present them in a
slipshod manner, they will be perceived as slipshod; if we present them in a
creative, professional manner, we will impute the desired qualities.
Apple has used these principles to become the worlds most valuable company
(measured by market capitalization) and one of worlds most valuable brands.
Here are ten strategies Apple has used to become one of the worlds greatest
marketers:
http://www.forbes.com/sites/christinemoorman/2012/07/10/why-apple-is-a-greatmarketer/#230b1f056cb0
Competitive advantage in the Marketing strategy of Apple
Apple has several competitive advantages over its competitors

1.
Superior technology products Macbook and Iwatch are clearly leaders

in their market space because of the OS and the technology used.
2.
Brand equity Apple has repeatedly taken the top spot for its brand
equity and has a cult following since ages.
3.
Revenue over time Apple has deep pockets due to its high margins.
4.
R&D A major competitive advantage of Apple is the amount it spends
on R&D keeping its eyes on the future rather than on the present.
Tagline Think Different is one of the best slogans in the tech industry.
Many people assume that Apple launched the slogan Think different in
response to IBMs slogan Think. However, since 2002, Apple stopped using
the slogan in its marketing. But from time to time, the slogan has bounced
back on Apples website or in their marketing and it has never left the mind of
Apple loyal consumers.
http://www.marketing91.com/marketing-strategy-apple/
swot
Strengths in the SWOT analysis of Apple
1.
2.
3.
4.
5.
6.
7.
8.
Innovative products One of the key strengths of Apple over the

years has been its innovative product line up. Apple has presented hit
products after hit products and thats been the major strength of Apple.
Initially it came with the MacBook, then the iPod, the Iphone, the Ipad, the
Iwatch. In short, Apple has covered almost everything that
an individual desires.
Leadership position As per Wikipedia, Apple is the leading
technology company in the world with regards to revenue generated. It is
also the second largest mobile phone manufacturer. It become the first US
company to cross 700 billion dollars and in 2014 was the largest publicly
traded company in the world. If that does not define leadership, then
nothing else can. Apple is far ahead in the leadership game.
Brand equity Naturally, being in the leadership position requires
that your brand equity be high. The brand Apple is the number 1 valued
brand amongst all the companies in the world as of 2016. The brand value
in 2015 was estimated to be 118.9 Billion dollars!!
Design & Technology The best part of Apple, and the reason for its
fantastic brand equity is its design as well as the technology it uses. Apple
has always been suave and elegant in its design. And at the same time,
beneath this exquisite design is a machine powered to give ultimate
performance. All this runs on the MacOS which is another software known
for its efficiency.
Distribution Apple has 470 of its own stores across 17 countries.
Besides these stores, it sells through trade partners, online channels as well
as through other premium retail stores. Entering an Apple owned retail
store is a fantastic experience. Additionally, Apple also launched the Apple
genius bar to directly solve customer issues within the retail store itself.
Thus, the concentration of Apple on its sales and service distribution is
legendary.
Steve jobs One of the key factors and the leader of Apple is also a
loved person in the technology Industry. He is an inspiration to all
marketers in the way that he led his own people and the way he carried his
life and the brand Apple along with him. Since 2011, his departure from
this world, Apple has been led by Tim cook who is also showing his genius
in growing Apple as a company.
Margins One of the core advantages of Apple as a company is the
margins that it commands over its products. Being a technological leader
with a top brand equity, Apple keeps a hefty margin for itself to invest in
R&D and brand building. Furthermore, its pricing strategy is such that the
price does not break in the market and you will always find Apple selling at
the same price in various retail stores.
Consumer focus Apple always designs its products with a focus on
consumers while keeping their mind in the future. They always try to
imagine the things which even the consumer has not imagined yet. As per
Steve jobs if you ask the consumer what he wants, by the time you give
him the same thing, he will want something else. This ideology is the
reason of success for Apple.
Weaknesses in the SWOT analysis of Apple
With a company which is a market leader and innovative, we can expect very
few weaknesses. Still, here are 3 weaknesses which Apple might be facing.
Table of Contents [hide]
o
o
o
o
o
1.
2.
3.
1 Let us discuss the SWOT analysis of Apple as a company

1.1 Strengths in the SWOT analysis of Apple
1.2 Weaknesses in the SWOT analysis of Apple
1.3 Opportunities in the SWOT analysis of Apple
1.4 Threats in the SWOT analysis of Apple
1.5 Related Posts:
Matching Customer expectations Being a leading company since
1980s Apple has a major market share and the consumer expectation is
going through the roof. People expect great things from apple year after
year and maintaining these expectation levels is not easy for anyone.
Incompatibility A key issue in Apple as a company is that many of
its products are incompatible with third-party software / accessories. So
overall, when you buy a product of Apple, you enter the Apple universe and
you have to continue with Apple only. That makes a huge impact on
consumer decision-making.
Dependency on few products Apple has only 7-8 products in its
portfolio in comparison to the various products that its closest competitors
Microsoft and Google have. Hence the dependency of Apple on each of its
products is very high. If one product fails, then that is a 10% loss to Apple.
Hence, there is a common demand from Apple to increase its product
portfolio.
Opportunities in the SWOT analysis of Apple
1.
Apple cars Naturally, with Facebook expanding with Instagram,

Occulus rift, Whatsapp and others and Google expanding in 10 different
ways, Apple wanted to find out some new products which Apple could
launch. Apple is now fixated on Apple Car which is supposed to be
launched in 2020. Like any other product of Apple, we can expect great
things from the Apple car as well.
2.
Technological advancement In the technology industry,
technological advancement is always an opportunity. And the one brand we
can expect to leverage technology to its best is Apple. We can expect even
more advanced MacBooks, Iphones, Ipads and Iwatches in the coming
years.
3.
The growing market Apple is a growing company in a growing
market. Equally important to the company is the rising GDP of developing
countries, thereby increasing consumption of such premium brands like
Apple. Any company which is growing needs a larger market base and the
market base is slowly being built via territory expansion for Apple.
4.
Iwatch and Apple TV Two products which can increase the

presence even further are the Iwatch and Apple TV, both of which are
aimed at the future, for when the digital presence increases. Apple Iwatch
already has a 50% market share of Smart watches in US.
Threats in the SWOT analysis of Apple
Apple as a company does not have any threat. But as products, each of the
products is facing strong threats from the competition. Being the number 1
company in the world is not easy and you are going to face competition
especially from other brands.
1.
Market penetration in Smartphones One of the key threats to

Apple is the market penetration by other brands in the Smartphone
market. Android is eating market share like anything and currently has
47.5% of the market share whereas Iphone is at 42% market share. Android
is being used by Samsung, HTC, Lenovo and practically everyone who
wants to enter the smart phone market. Naturally Android being of Google
(2nd most valued brand), Apple has to be ready for Smartphone
competition.
2.
Laptop competition MacBook is obviously the best there is. But so
is Dell, and so is Sony and so is Lenovo. The competition is ever-increasing
in the laptop segments. Dell has introduced some beautiful models over the
years including the Alienware model. So, although Apple as a brand is
loved by everyone, MacBook is facing stiff competition from other brands
as well.
Smartphones replacing Ipod In 2014, Ipod suffered a major decline of 52%
in its sale over 2013. Overall, Smartphones have replaced music players
altogether because of the various ways that you can utilise music and carry it
around. Hence the functionality of Ipod is no more unique. (Other Only
music players are also finding it hard to exist in the market).
http://www.marketing91.com/swot-analysis-apple/
Apples Products (Product Mix)

Apple Inc. has continued to expand its product mix. This component of the marketing
mix determines the outputs of the business organization. In Apples case, the following
are the main product lines:
1.
2.
3.
4.
5.
6.
7.
Mac
iPad
iPod
iPhone
Apple TV
Apple Watch
Software
These Apple products currently available in the market show the firms diversification in
this component of the marketing mix. However, as part of its product development
intensive growth strategy, the company continues to develop new products, such as
the Apple electric vehicle, which is under development through collaboration with firms
like Tesla Motors. This product mix shows that Apples marketing mix is extensive in
terms of product variety to address customers needs in different areas of their lives.
Distribution or Place in Apple Incs Marketing Mix

Apples marketing mix involves a holistic approach to distribution, taking advantage of
different distribution channels. In general, the company uses a selective distribution
strategy, which involves some degree of exclusivity that could limit market reach.
Apple authorizes sellers to ensure control over this component of the marketing mix.
The following places are included in Apples distribution strategy:
1.
2.
3.
4.
5.
Apple Stores
Online Apple Store and App Store
Authorized retailers
Telecom companies
Fulfillment services
Apple Stores are the most visible places that sell the companys products. The online
Apple Store and App Store are also highly visible. However, these stores are not the
only places in the firms marketing mix. For instance, Apple also uses authorized
retailers, such as Walmart, Target and Best Buy. The company also includes telecom
companies like AT&T, Verizon, and Sprint, which sell iPhone units. In addition, Apple
uses fulfillment services from companies like Amazon.com and eBay, through which
third parties sell Apple products online. Thus, Apples marketing mix is comprehensive in
exploiting different types of online and non-online distribution channels.
Apples Promotions (Promotional Mix)

Apples marketing mix includes promotion activities that emphasize the premium image
and quality of the firms products. The promotional or marketing communications mix
supports business position in reaching more target buyers. In Apples case, this
component of the marketing mix includes the following elements:
1.
2.
3.
4.
Advertising
Personal Selling
Sales Promotion
Public Relations
Apples marketing mix includes advertising through the companys website and Apple
Stores, as well as advertising through other firms, such as technology news sites. The
company also uses personal selling in the form of Apple Store employees who provide
product-specific information in the aim of convincing store visitors to make a purchase.
In addition, the companys marketing mix involves sales promotion, which usually
happens at the Apple Stores. For example, some Apple Stores offer old models at
discounted prices when bundled with larger and more expensive products. Moreover,
the company uses public relations to optimize its corporate image. For instance, Apple
Events, leaks of new product features, press releases, and exclusive interviews are
carefully implemented to maximize positive publicity. Thus, Apple has mastered the
promotion component of its marketing mix.
Apples Prices and Pricing Strategy

Apple uses a premium pricing strategy. In this component of the marketing mix, the
emphasis is on how prices represent the company and its products, while meeting
consumer expectations. In Apples case, the premium pricing strategy involves relatively
high prices. This pricing strategy helps maintain the high-end image of the company and
its products. Another effect of this pricing strategy is that Apple products attract a
smaller market share composed of people from the middle and upper classes.
Nonetheless, the company maintains profitability because premium prices entail higher
profit margins. Thus, Apples marketing mix is aligned to the companys premium
product development strategy.
http://panmore.com/apple-inc-marketing-mix-4ps
distribution
Apples retail stores are a huge success, generating more revenue per square foot than any
other retailer in the United States, including Tiffany. During the companys last earnings call,
CFO Peter Oppenheimer said Apples 372 stores collectively generated $4.1 billion in
revenue.
In the U.S., Apples retail stores, along with the companys online storefront, sold 47 percent
of the Macs and 40 percent of the iPads purchased by the survey sample during December
2011 and August 2012. But they only sold 21 percent of the iPhones. AT&T and Verizon
stores both sold more than Apple, with 28 percent and 26 percent shares of sales,
respectively. And Best Buy and Amazon (via fulfillments) together sold nearly as many
iPads as Apple itself.
From its direct and channel pricing strategy to its retail and online storefronts, Apple sells its
products like no other company in the consumer electronics space. If you know the
channel, you know this is by no means an easy trick. What makes Apples sales and
channel strategy unique: Apple never discounts through its direct channel. It does discount
refurbished products and, of course, there are price changes, but theres no sale pricing,
say on a holiday, for example. Apple keeps reseller pricing stable. While its illegal to set
dealer pricing (to its customers), Apple still manages to keep retail pricing remarkably
stable. It probably does that by keeping dealer margins slim, offering no volume discounts,
and keeping terms consistent between resellers of the same product. Apples retail and
online storefronts are unique. Theyre more about education and support than selling.
Theyre simple, even austere, with minimal signage and crystal clear messaging. The
pervasive feeling is that lots of folks are there to help you and nobody is there to sell you
anything. Apple products are positioned as unique categories. To the extent that its
feasible, Apple likes resellers to sell its products as unique categories, as opposed to sideby-side next to competitors, either on storefront shelves or online. For example, Best Buy
online has a section called iPad and Tablet PCs. Theyre distinct and separate. Now, the
strategy of positioning a product as unique relative to competitors and maintaining tight
channel control and pricing to manage that positioning is nothing new. In fact, its sort of the
holy grail of selling. Many companies have tried to do it with various products and with
varying degrees of success, including Intel processors, Microsoft software, , Dyson
vacuums, and certain premier manufacturers of watches. In each case, it really comes
down to the same five factors that enable that holy grail of sales strategy: 1. Perceived or
real high demand and limited supply 2. Unique and superior value proposition or brand
perception 3. Perceived or real monopoly 4. High enough margins to support a robust

channel support infrastructure 5. Clear, top-down sales / channel strategy and disciplined
execution Having said all that, the practical matter of maintaining the practice over an
extended period of time is almost impossible.
https://mpk732.wordpress.com/2015/05/16/apples-sales-and-channel-strategy-keyto-its-success/comment-page-1/
after sales service
AppleCare+
AppleCare+ provides additional hardware service and technical support from Apple,
including coverage for up to two incidents of accidental damage per device covered.
AppleCare+ is available for Apple Watch, Apple Watch Sport, Apple Watch Edition, iPad,
iPhone, and iPod touch.
Remote Access Technical Assistance

Repair
Express Replacement
iPhone Upgrade Program
Apple call center: Apple call center has 20000 telephones, is the
world's largest call center, the incoming calls are more than
1800000 every day and the numbers are increasing.
It can be seen Apple's after-sales service is also one of his
strengths
Customer Loyalty
At a very general level, loyalty is something that consumers may
exhibit to brands, services, stores, product categories, and
activities. There are two advantages of customer loyalty
programs. One is to increase sales revenues by raising purchase
levels, and increasing the range of products bought from the
supplier. The other is more defensive by building a closer bond
between the brand and current customers it is hoped to maintain
the current customer base. While loyalty programs can have
many other peripheral goals such as furthering cross-selling,
creating databases, aiding trade relations, assisting brand

PRpublic relations, establishing alliances, etc.
Apple Inc. is an American multinational technology company headquartered in Cupertino, California,

that designs, develops, and sells consumer electronics, computer software, and online services.
Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in April 1976 to develop and
sell personal computers.[5] It was incorporated as Apple Computer, Inc. in January 1977, and was
renamed as Apple Inc. in January 2007 to reflect its shifted focus toward consumer electronics.
Apple (NASDAQ: AAPL) joined the Dow Jones Industrial Average in March 2015.[6]
Apple is the world's largest information technology company by revenue, the world's largest
technology company by total assets,[7]and the world's second-largest mobile phone manufacturer.[8] In
November 2014, in addition to being the largest publicly traded corporation in the world by market
capitalization, Apple became the first U.S. company to be valued at over US$700 billion.[9] The
company employs 115,000 permanent full-time employees as of July 2015[4] and maintains 478 retail
stores in seventeen countries as of March 2016.[1] It operates the online Apple Store and iTunes
Store, the latter of which is the world's largest music retailer. There are over one billion actively used
Apple products worldwide as of March 2016.[10]
Apple's worldwide annual revenue totaled $233 billion for the fiscal year ending in September 2015.
[3]
This revenue generation accounts for approximately 1.25% of the total United States GDP.[11] The
company enjoys a high level of brand loyalty and, according to Interbrand's annual Best Global
Brands report, has been the world's most valuable brand for 4 years in a row,[12][13][14]with a valuation in
2016 of $178.1 billion.[15]

Apple Value Chain Analysis

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Apple Value Chain Analysis

Uploaded by

Copyright:

Available Formats

Apple Value Chain Analysis

What is a value chain?

Porter's value chain

Advantage: Creating and Sustaining Superior Performance "

"Competitive advantage cannot be understood by looking at a firm as a whole," Porter

Specialization-value chain analysis focuses on the activities that create a unique

Read more: The Basics Of Value Chain Analysis |

Store for only Apple products

How does Apple run its supply chain operations?

How did Apple manage to have such a great inventory

Keeping as little inventory on hand as possible is very important. Why? Because of

Apple Inc., Statement of

Sep 27, Sep 28,

Copyright 2016 Stock

Apple Value Chain Analysis

Value-chain analysis is an analytical framework that assists in identifying

Figure 1 Apple Value Chain Analysis

Figure 2 Apples supply-chain management [2]

Rest of Asian Pacific

considerations. Accordingly, in Q1 2014 Apple had $2.1 billion in inventory (a

APPLES VALUE CHAIN ANALYSIS

MAY 29, 2015 | REBECADELPINO

Another one of the major reasons for Apples success is its

it any wonder that Apple is in the top of the

manufacturing is currently performed by a small number of

Marketing and sales.

purchase is commonly known to be impressive and has some

Research & Development

One of the hallmarks of Silicon Valley companies is that they tend to

Apple's R&D expense saw a significant bump up beginning in mid-2014. It

Avalons Neil Cybart, a longtime financial analyst, Apple-tracker,

Cybart dug through Apples financials to look back at how the

while the iPhone will remain important to Apple, it will eventually be

Our suppliers employ more than 1.6 million people in 20

There are four reasons.

The biggest difference Apple has from other manufacturers is that it

Content continues below

Accelerometer: Bosch in Germany. Invensense in the

Main Chassis Assembly: Foxconn and Pegatron in China.

As we're able to see, Apple's manufacturing and outsourcing of products

And so we return to the original question: Where is an iPhone (or

Apples Product Development Process may be one of the most

t Apple they put design at the forefront.

ESTABLISHING THE COMPETITIVE ADVANTAGE OF

CREATING AND SUSTAINING BRAND LOYALTY

MAINTAINING BRAND IMAGE THROUGH PREMIUM

THE UNIQUE MARKETING AND ADVERTISING

Focus In order to do a good job of the things we decide to do, we must

Competitive advantage in the Marketing strategy of Apple

Apple has several competitive advantages over its competitors

Superior technology products Macbook and Iwatch are clearly leaders

Strengths in the SWOT analysis of Apple

Innovative products One of the key strengths of Apple over the

Weaknesses in the SWOT analysis of Apple

1 Let us discuss the SWOT analysis of Apple as a company

Opportunities in the SWOT analysis of Apple

Apple cars Naturally, with Facebook expanding with Instagram,

Iwatch and Apple TV Two products which can increase the

Threats in the SWOT analysis of Apple

Market penetration in Smartphones One of the key threats to

Apples Products (Product Mix)

Distribution or Place in Apple Incs Marketing Mix

Apples Promotions (Promotional Mix)

Apples Prices and Pricing Strategy