The value-chain analysis is a systematic framework that is used in the identification of business activities that are capable of creating value and competitive advantage to the business. In the analysis of the value chain of Apple Inc., the company’s internal activities that add value to its final products and the impact of these activities on the reduction of costs or the increment in differentiation will be investigated.
Inbound logistics is an important aspect of business operations for a manufacturing firm that involves reception, storage and distribution of raw materials for the use in production. Apple collects its raw materials. However, its products, are manufactured overseas. Moreover, the company is famous for its big supply chain globally. Topmost 200 suppliers of Apple are inclusive of component providers that constitute at least 97% of the corporation’s 2016 procurement expenses for supplies, manufacturing and assembly (Kraemer, Linden, & Dedrick, 2011). Besides, most of Apple’s main suppliers are situated in Asia, Japan and China. One of the main raw material suppliers includes Foxconn.
Apple has a high bargaining power in relation to its suppliers; hence, due to its financial power the company has established quality standards for its suppliers to ensure that they maintain the highest quality standards for their products. Apple has also embraced smarter methods of reducing storage needs and facilitating the process of procurement (George, 2013).
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The company outsources production to its manufactures from different countries. Nevertheless, the manufactured items are assembled in China mainly. A small part of the goods is assembled in other states too. The chief source of value for operations of Apple is the outsourcing of manufacturing to the places where the cost of resources is lower.
Additionally, Apple has concentrated on the reduction of toxic materials in the manufacturing and assembly of its products. Through its outsourcing of production, Apple has managed to lower its production costs as well. Furthermore, the corporation maintains a simple product line to decrease the manufacturing cost (George, 2013).
Outbound logistics are the processes involved in the movement, storage and the manner in which related information flows from the company to the consumer. The outbound logistics of Apple comprises warehousing and distributing of wares such as iPads, Mac computers and iPhones produced by Apple.
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Apple acknowledges that e-commerce sales as a huge source of value with regard to inbound logistics e-commerce in comparison to the sales through the Apple stores are more cost effective (Grant, 2016). Additionally, a significant percentage of the market penetration into Asia and China is an extra source of value for the company in terms of outbound logistics. Thus, this is because trading in these markets does not entail considerable outbound logistics expenses. Therefore, this cost advantage is transferred to the consumers to ensure the increment of the whole appeal of offers (George, 2013).
Marketing and Sales
Marketing and sales are connected with the provision of a means for clients to purchase products and inducing them to buy the manufactured items. The company’s main distribution channels encompass its retail stores, online stores, wholesalers, direct sales force, value-added resellers, retailers and third party cellular network carriers. In 2016, Apple’s online sales both direct and indirect constituted 25% and 75% of all the sales (Grimes & Sun, 2016). Apple is taking huge steps in enterprise sales. For instance, in 2015, Apple and Cisco partnered to optimize Cisco networks for Apple devices and applications (Grant, 2016).
Service activities are associated with the provision of services to improve the value of goods. The company is well known for its distinguished quality of customer services during pre-purchase, purchase and after purchase periods. Apple has experience centers in the main cities worldwide to allow any person using its products to get good experience with their quality (Kraemer, Linden, & Dedrick, 2011).
The sale assistants of the corporation are normally trained and courteous young persons who are technically shrewd and glad to illustrate features and abilities of manufactured items. After purchase, the customer service is also remarkable for exceptional iPhone trade-in systems that give iPhone consumers the option of upgrading their phones to newer models for extra payment. In addition, most of Apple products have a 3 months complementary support and 12 months limited warranty (George, 2013).
Global and Domestic Value Chains
Global value chains are the activities with span international boundaries. Modern technology and distribution have provided the favorable conditions for global value chain. Being a multinational company, Apple sources, markets, and manufactures its products in many countries for the purpose of minimizing costs, maximizing profits, ensuring customer satisfaction and improving social welfare. Global value chain of Apple comprises of a great number of firms in various states that are involved in the production and distribution of Apple wares at a global level. The manufacture and assembly of most Apple products is completed in China. The raw materials are sourced from Asia and other nations. The distributers are located in almost every country worldwide. Apple has 198 companies globally and 759 subsidiaries. Out of the 759 subsidiaries, 336 are situated in China, 115 in Taiwan and 84 in the US and Europe. Customers of Apple are reside all over the world and approximately 60% of the revenue is generated outside the US (Grimes & Sun, 2016).
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Domestic value chain includes the activities aimed at creating value and competitive advantage to the business with the state. Apple has almost 500 retail stores in America to distribute various products (Kraemer, Linden, & Dedrick, 2011). The manufacturing of some Apple products such as Mac Pro is done in the US. Moreover, almost all of the research and development of the corporation are conducted in its home country.
One of the global changes that have impacted the global value chain environment is the international value chain and the new arithmetic of value-added trade. Over the last 10 years, most global value chains have undergone a change in manufacturing from the North to the South in the world economy. Major developed economies are playing a key role of new markets and exporters in these businesses.
Many intermediate products are still traded in big regional economic blocks such as the EU and not across them. However, the connections of Asia to the EU and North America characterized the two largest inter-regional import movements of intermediate products in 2008. China has gained a lot from this high level of focus in supply chains, and its supply chain cities perfectly demonstrate the manner in which China is changing a scale-focused specialization into a determined competitive advantage (Elms & Low, 2013).
The second change embraces shifting end markets and regional supply chains. As the world trade bounces from the economic crisis experienced in 2008 and 2009, developing markets are slowly becoming the key engine of international economic recovery. Furthermore, demand is sharply increasing in the South, especially in modern economies, particularly in Brazil, China and India. The developing economies boosted their product imports much faster (Elms & Low, 2013).
Differences between Supply Chain and Value Chain
Apple performs its supply chain operations through purchasing components and materials from different suppliers. The company ships the components and the materials to the assembling plant situated in China. The products are then taken directly to the clients through Fedex. For other channels of distribution like the retail stores, Apple stores its products at Elk Grove where the company’s main warehouse is located. The products are transported from there.
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Apple’s value chain involves the network of main and support processes that describe the flow of inputs, resources and financial dealings from the beginning to the end (Locher, 2008). Apple adds value to its products through marketing and quality customer service, among other things. Its customer service includes complementary and warranty services as well as upgrading options for iPhone users. Apple markets its products through online platforms and partnerships with firms such as Cisco.
The difference between supply chain and value chain exists because supply chain deals with the activities, which entail processing of raw material into finished products while value chain presupposes the business operations as a result of which value is added to goods and services (D’heur, 2015).
Firms enjoy benefits such as customer satisfaction and profit maximization when they apply the principles of value and supply chain management. Value chain represents all the activities such as operations, marketing and services that a venture resorts to in order to add value to their products. Supply chain includes the activities since sourcing of raw material until the final product is delivered to the consumer. Apple Inc. engages in both domestic as well as global supply and value chain activities, as it operates both internationally and within America. Finally, various changes that have impacted the global value chain environment, namely the international value chain, the new arithmetic of value-added trade, shifting end markets and regional supply chains.