Strategic and Operational Management of Apple Inc - Essay Example

A case study on the operations strategy and performance of Apple Inc Number) Word count The research will be acase study of operations strategy and performance of Apple Inc. The company founded in 1976 by Steve Jobs and Steve Wozniak has its headquarter in Cupertino, California. In line with the study objective, the research assessed key factors such as critical success factors of the company, core competencies and the efficiency of the organizational strategy in ensuring organizational performance. Apple Inc.’s unique supply chain model and inventory management are also assessed in the studies with the researcher giving a few recommendations for change and efficiency. Contents Chapter 1: Introduction 4 Chapter 2: Operations Strategy and Competitiveness 5 2.1 Critical Success Factors and Core Competencies 5 2.2 Operations Strategy 7 2.3 Efficiency 8 Chapter 3: Operations Management Consolidation 8 3.1 Long-term Operations Management 8 3.1.1 Design of Products 8 3.1.2 Design of Operations Process 9 3.1.3 Recommendations for Improvements 10 3.2 Short-term Operations Management 10 3.2.1Internal Methods 10 3.2.2Management of Inventory 11 3.2.3 Recommendations for Improvements 11 Chapter 4: The Ongoing Management of the Supply Chain 12 4.1Impact of Suppliers on Operations Strategy and Management 12 4.2 Impact of Consumer on Operations Strategy and Management 12 4.3 Issue in the Supply Chain 13 4.4 Possible Solutions 14 Chapter 5: Conclusion 15 References 16 Chapter 1: Introduction The research will be dedicated to analyzing the operations strategy and performance in an organization. For purposes of the study, a case study approach will be used with Apple Inc. being the company that will be used in the study. An overview of operations management as well as in-depth analysis of operations strategy as well as performance at Apple Inc. will enable the researcher examines contemporary business approaches as well as problems. Apple Inc., a multinational corporation, was founded by Steve Jobs and Steve Wozniak in 1976 and has its headquarter in Cupertino California. The company created its first computer in the same year, Apple I, and has continued to produce a string of consumer electronics such as personal computers (Mac Book), smart phones (iPhone), tablets (iPad) and also sell software among other products. Apple Inc.’s organizational Structure for a long time appeared to be radial with the CEO of the company being at the epicenter of management. All decisions and everything in regards to the operations of the company had to actually flow through Steve Jobs. However, according to various reports, the company has been adopting a number of collaborative approaches after the death of Steve Jobs. Current CEO Tim Cook is encouraging collaboration of both software and hardware teams. This is a better organizational structure as the previous one made Apple face a number of bottlenecks since everything had to pass through Steve Jobs. The company does not own any subsidiaries and sells its products mainly through company owned retail stores. In the report, the researcher will present findings that were collected from review of literature such as books, journals and credible websites to provide content and data analyzed within the report on the case study. Chapter 2: Operations Strategy and Competitiveness According to Hill & Jones (2012) operations management entails the activity of managing a company’s resources which are devoted to the production and delivery of services and products. At Apple Inc., the focus of operations management has always been geared towards ensuring efficiency, product design and innovation to ensure competitiveness of products. 2.1 Critical Success Factors and Core Competencies The most critical success factor at Apple Inc. is solid and unique design in products. Over the past decade, the company has been able to prove that is can find ways of getting market share and consumer preference regardless of software or hardware production. For many years now, consumers, competitors and researcher have tried to investigate what exactly makes the products of Apple Inc. sell the way they do. Many have tried to investigate if it’s the product design or if there is any mystique related to using products designed and manufactured by Apple Inc. Many researchers are still puzzled with the success of Apple when it comes to non-PC devices (Furrer, 2011). It is evident that Apple Inc. lost the war long ago to Microsoft when it comes to the PC market (Microsoft Corporation, 2013). However, the company’s decision to create the iPod and iPhone was a move in a new direction which has proven successful to the company. Visiting an Apple store would makes one experience customer standards from Apple’s staff which represent the gold standard for supporting and selling the tech gadgets being manufactured by Apple Inc. beyond this, the reasons of Apple’s success still remain a mystery to many individuals. Research shows that Apple Inc.’s critical success factors include simplicity in design, ease of use of products, great customer service, memorable in-store experience and staying ahead of competition (Bhusan, 2014). Apple has only one mobile handset the iPhone as compared to a number of different brands and models from competitors. This simplicity enables staff at outlets and re-sale shops to master all aspects of the device. In addition, consumers have limited options to choose from and can thus experience the best from the device. Apple has throughout the year’s ensured simplicity in design and use of its products. If a product is not considered easy to use, then it is considered as worthless to the consumer (Gobble, 2012). At Apple’s retail store, the personnel understand the conundrums of technology well and offer customers with great and memorable customer service (Gobble, 2012). Finally, Apple Inc. has been able to succeed by ensuring that it is ahead of competition by at least two years. Products are worked on two years in advance and are only released once they are in perfect shape. This not only works to the competitive advantage of the company but also gives Apple Inc.’s competitors nightmares. The core competency at Apple Inc. is ensuring differential advantage in product design through innovation. This core competency streamlines with the organization’s operational performance objectives as the company is able to produce and release high tech devices and software by keeping them unique. The company has also had an input of high premium in creating its machines which offer both cutting-edge and tightly integrated user experienceto customers. 2.2 Operations Strategy The operations strategy at Apple Inc. is geared towards ensuring that manufacturing, distribution and sales of products are all coherent with research and development forming a critical aspect of the company’s operations. Within Apple, operations strategy is implemented to ensure that the operations performance objectives are met. The strategy is implemented at the manufacturing stages through outsourcing processes of manufacturing. All design and conceptualization of products takes place in California at the company’s headquarters while the processes of manufacturing are outsourced from China enabling the company enjoy the economies of scale. The company does little customization of products enabling it to focus on few product lines which gives the company a huge advantage in terms of capabilities of manufacturing and cost reduction. The company maintains an outstanding network of efficient distribution. This distribution function is responsible for supporting the marketing efforts of the company. Matters such as leakages in product distribution are taken seriously at the company. The Apple retail stores usually form the last leg in its distribution chain and often play a strategic role in achieving anonymity and ensuring ultimate buyer experience. Due to the high volumes, the company can negotiate discounts from airlines and ensure responsive supply chain. Research and development is one area that Apple Inc. has invested heavily. Periodically, the company’ management and design teams have been able to create a line of innovative products which have created an image of the company being very innovative among the eyes of the consumers. The company actually applies a philosophy of spending excessively in areas where such spending is required and reaping benefits in later stages. The innovation at Apple Inc. is not only limited to features of products only but also includes operational improvements also. 2.3 Efficiency The organization strategy at Apple is very efficient in meeting the needs of its customers. The company ensures that it maintains competitiveness of its market segment by creating and manufacturing products that are different from those of other companies (Sinha, 2014). In doing so, the company also ensure that the quality of the products is not compromised. The prices of Apple products remain competitively high as compared to those of other competitors but the company has always made considerable sales of its products. The philosophy at Apple Inc. is that a consumer not only purchases a product, but also, the user experience that comes with the product itself. As such the company ensure that it creates and maintains this user experience in two ways. The first method employed by the company is ensuring that customers receive the best service from the attendants at its retail stores. Based on the simplicity of the products and limited variety in brands, such personnel usually possess the full knowledge in relation to a product. The individuals thus serve customers well at the Apple Retail Stores (Yukari & Rohwedder, 2010). The second way in which Apple Inc. ensure that it creates good user experience is by keeping the design and architecture of its products both hardware and software simple and easy to use. By ensuring this, the company meets the needs of the customers who keep buying other products manufactured by Apple Inc. Chapter 3: Operations Management Consolidation 3.1 Long-term Operations Management 3.1.1 Design of Products All products at Apple start with the design. The company treats designers with royalty, a polar opposite of the practice in most other companies. All aspects of product design at Apple Inc. conform to the will of the design department which is headed by JonyIve as opposed to the manufacturing or finance department (Apple Inc., 2013). The designers at Apple have literally no contact with such departments as Finance. As such, these individuals are considered to be unlimited in terms of manufacturing practicality or cost of materials used. The Industrial Design studio at Apple is the womb of all products by the company. 3.1.2 Design of Operations Process Once the design team comes up with a product that has been decided on, a number of steps are taken to ensure the successful production of the same. The first step is the organization and segregation of a selected team from the rest of the company. This is ensured by secrecy agreements and at times physical barriers. The team is only responsible to the executive management and works in isolation. After the design of a product begins, the ANPP (Apple New Product Process) is put into action. This is a document which outlines in detail all the steps of the development process. The products are reviewed every Monday by the Executive Team (ET). This is accomplished as the company has only a few products being developed at any given time. The engineering program manager (EPM) and the global supply manager (GSM) work hand in hand overseeing the production process in China (Panzarino, 2012). When the product is completed, it is once again designed, built and tested. This process happens a number of times until the final product is out(Panzarino, 2012). The products are then packaged in a tightly secured room with security that matches that of the design and production rooms. Finally, the launch of the newly designed product is controlled by an action plan that is known as “Rules of the Road.” This documents also highly secretive and contains all significant milestones of a product’s development from design till launch. Any leakage of the file results to the firing of the responsible parties. 3.1.3 Recommendations for Improvements Even though Apple upholds a highly secretive design and production process, the same is responsible for unnecessary costs and waste of time during the processes.The design, production, reproduction and testing of product a number of times only means that the company builds the actual product and not a prototype. This method can be abandoned by the company to cut down on production costs significantly. Alternatively, the company can only produce and reproduce prototypes and only start actual production of outputs once the final product has been decided. The company should also involve more executive members in overseeing production as opposed to only two individuals who are prone to making biased decisions at times that may impact the company negatively. Lastly, due to the current global financial crises and ongoing volatility in markets, Apple Inc. should ensure that it regulates the functions and activities of the design team to ensure that the designs created remain feasible. 3.2 Short-term Operations Management 3.2.1Internal Methods In forecasting of demand for products, Apple uses a number of internal methods such as demand forecast updating (Kamauff, 2010). The company does product forecasting for the scheduling of production, planning of capacity ad control of inventory. Exponential smoothing is one such demand forecasting method that is used to forecast demand. Based on the retail system of the company, it can successfully forecast the demand of new products such as iPads by constantly updating future demand as daily demand data is recorded. 3.2.2Management of Inventory The management of inventory at Apple is also a critical factor to the success of the company. Apple uses inventory turnover formula which indicates how many times the company’s inventory can be sold and also be replaced over a specific period of time (Mahadevan, 2010). The company purchases the components of products directly from a number of consumers after which the same are shipped to a central assembly factory in China. From there, the final products are built and shipped directly to customers after completion. These customers comprise of individuals who purchased the items online and shipping is normally done via Fedex/UPS. The distribution channels such as retail stores and other distributors of its products, the company keeps the products stored at Elk Grove in California which houses the central company warehouse and call center. The products are then shipped from this facility. At the end of a product’s life, customers can send their used products to their nearest Apple stores or facilities dedicated to recycling of products. The good inventory management practice by Apple was a result of Cook’s initial strategy of cutting down on warehouses and making suppliers compete between themselves. 3.2.3 Recommendations for Improvements The practices of inventory management by Apple can be improved in a number of ways. For instance, to keep abreast with the demand for products, Apple can fast track production to ensure that it limits the amount of products held in stores. Furthermore, efficiency in inventory management can be achieved by selling items at stores on the second day after arrival of the same to stores to ensure that errors leading to inventory inaccuracies are minimized. Chapter 4: The Ongoing Management of the Supply Chain 4.1Impact of Suppliers on Operations Strategy and Management The suppliers of Apple Inc. have an impact on the operations strategy and management of the company. Being a company that designs and manufactures consumer electronics, Apple is tasked with the burden of constantly producing these devices in mass production. As a result, the company constantly purchases materials such as mother boards, processors and microchips to mention but a few. These components are critical to the manufacturing of the electronic devices and any change in their prices has a direct effect on the retail price of the devices being manufactures. As such, Apple Inc. is tasked with ensuring that it maintains good relations with its suppliers to ensure that the company avoids any unnecessary variations in prices of materials as a result of strained relations. The good rapport that the company maintains with its suppliers has for a long time enabled the company to successfully have a negotiating edge with its suppliers. Furthermore, the huge volumes that the company produces give it more leverage when negotiating prices with suppliers thereby enabling the company to have relatively stable prices for their commodities and avoid any fluctuations. 4.2 Impact of Consumer on Operations Strategy and Management The consumer is also responsible for impacting the operations strategy and management of Apple Inc. significantly. By being the direct users of items manufactured by Apple, the consumers’ contribution to the company’s operations strategy and management is invaluable. For instance, demand from consumers for a specific product may mean that the company needs to ensure increased production of the same. Complaints by consumers on a product or service received may also mean the management of the company may need to change the operations strategy and focus on more research and development to improve the quality of the products. In line to survive delivery, complaints may force the management to deal with non-performing employees by such measures as training or giving warning the individuals. 4.3 Issue in the Supply Chain The supply chain model at the company is very distinct from that of other companies in the consumer technology business (Mallin& Finkle, 2011). The supply chain model has been structured to enable the company have maximum visibility and control over the design and assembly of its products to ensure that even the smallest components can be monitored. Over time, Apple Inc.’s management has sought the increase in control over the company’s supply chain through investing in the manufacture of components by itself (Wingfield, 2006). The company has also placed considerably large orders in a bid to ensure they possess the key supplies used in the manufacture of components. In addition, the company has recently resorted to recruiting talented Asians who promise to speed up the product development of the company to enable it compete with the increased volume of mobile devices that come from China and Taiwan. Even though Apple’s supply chain model has served the company well for quite some time, recent shifts in the supply chain of mobile devices are enabling rival companies produce similar products at a much faster rate. This has put the supply chain at Apple under very high pressure. According to Cohan (2014), a Forbes analyst, the stock of Apple is trading at 14 percent below its all-time high. The death of Steve Jobs is attributed to have led to the loss of Apple’s source of innovation. Supply chain expert Tim Cook seems to be doing little justice to the company as the company still falls short of meeting the market demand. The fall in the company’s stock price is attributed to the company’s inability to keep up with demand and manufacture enough devices. This is largely a consequence of the supply chain model used by the company. Reports according to the Journal echo that the company can sell over 10 million iPads in a year if they can be able to produce them within that timeframe. The company finds itself in a bad situation in regards to supply chain issues. For example, Apple has only one supplier for the displays of iPads meaning that any delays or internal issues with the supplier will further worsen the scenario. The idea of having limited options of suppliers is not smart nor is the idea of depending on a large competitor for supplies. Samsung, for instance which also holds a substantial share of the electronic devices market has been the main supplier of displays to Applefor a long time. The patent lawsuit between the two companies has strained relations for Apple leaving it to rely on one supplier, LGD and an untested supplier AUO. Due to the lack of experience and inability to keep up with speed by AUO, Apple finds itself in a sea of hurt when it comes to meeting consumer demand. 4.4 Possible Solutions To respond to the threat of nimble innovators erupting from the Asian region, Apple needs to devise ways of increasing the agility of its supply chain so that it can have swift responses to market feedback and ensure that it is less critical for the business to back the right technologies. Apple should also consider adopting a more agile approach in the future that will guard against the aforementioned industrial-scale risk in supply chain. For instance, the company could ensure that it always has a second plan or alternative that it can fall back on. Such would include having investment in an alternative technology. Such a move can allow the company to switch the focus of development in response to occasional hiccups or market feedback that often arise in the event of developing cutting edge technology. Chapter 5: Conclusion Apple is a company that maintains a high level of secrecy in regards to the processes of production, design and product development. At the company, innovation and design play a critical role in the success of the company’s products. Simplicity in design and ease of use of products is a critical success factor that the company has for a long time maintained to ensure competitiveness in the consumer electronic markets. Research and development is strongly embedded to the company with all aspects of product design and consumer use being researched at the company. Customer user experience is perhaps the most important aspect of Apple products. Apple outsources majority of its assembly and manufacturing functions. The company maintains a unique supply chain system that gives it control and monitoring of components being supplied. This system, however, needs to be revised to curb any challenges that arise from strained relations with suppliers. The company spends significant amounts in product design and development which should also be regulated due to intensive competition, fragile global economy and shifts in consumer attitudes. Consideration of the same may enable the company reduce the prices of its products and remain competitive in the long-run in a market that is presently flooded by cheap products from the Asian markets. References Apple Inc. (2013). Apple Inc. Annual Report - Form 10-K . Retrieved from: http://investor.Apple.com/secfiling.cfm?filingID=1193125-13-416534&CIK=320193 Bhusan, S. (2014). Key Success Factors of Apple. Retrieved from: http://mba- lectures.com/management/strategic-management/1203/key-success-factors-of-apple.html Cohan, P. (2014). 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