Interconnectivity of Apple and Cofco's Strategic Resources - Case Study Example

Compare and contrast Apple and COFCO Part 2: Compare and contrast Apple and COFCO (2000 words) Explain the interconnectivity of their strategic resources and operations to achieve a global supply chain advantage Sourcing of raw materials Apple Apple Inc. is among the most innovative technological companies that have emerged in the last thirty years. The company stands out for their Macintosh desktop computers, the iPod, iTunes, and their latest innovation, the iPhone. The company is very successful and this success is attributable to Steve Jobs, its founder. In the technological market, Apple is one of the companies with the most distinct competitive advantage. The competitive advantage pegged to the emerging resource-based view. Over a decade ago, Apple’s attribution of success was on a formal strategic planning that was very clever. This involved an appraisal of the company’s SWOT analysis in addition to other frameworks applied. This aimed at promoting the company to a position where its relations with other rival companies, suppliers, customers and stakeholders was favourable. This is because a company’s competitive advantage links directly to a company’s advantageous position (Paper E2, 2011). In recent years, the emerging resource-based framework has changed the way Apple positions itself to gain an advantageous position. The strategy development shifted to the inside-out view from the outside-in focus. This new approach focuses on the development and exploitation of the company’s core capabilities and resources rather than trying to position the company in the best possible spot in the environment. The resource-based approach views the company as a collection of capabilities and resources, which are very rare and unique. These resources are the ones that provide the competitive strategy basis (Paper E2, 2011). The fusion of the tech industry with the business environment gave rise to strategic tensions between investing in exploitations of short-term value appropriation and the long-term value creation of digital artefacts. The competitive pressure and the relentless innovation make firms to keep adapting the artefacts to technological conditions and changing markets. Sustainable profitability requires interfaces that are stable enough to support integration across diverse ecosystems of offerings that are complementary, architectures that are scalable, and those that can serve a huge customer base (Woodard, Ramasubbu, Tschang & Sambamurthy, 2013). Thus, Apple outsources most of its manufacturing from Taiwanese companies that have factories in China mainland. Apple incurs some switching costs when changing its manufacturing service providers. Apple reduces these charges by synchronizing the switch with product revisions. Therefore, the relationship’s power is mostly on Apple’s side (Dedrick, Kraemer & Linden, 2010). COFCO In china’s trade regime, state trading is a very important feature especially in the international trading of agricultural products. COFCO is an example of a State Trading Enterprise (STE). The COFCO and the exclusive rights it enjoys, as well as a market structure that would come into existence if COFCO were absent, are important factors when determining the welfare and trade effects of COFCO. This is the government’s objective. The calibration exercise applied to the Chinese wheat import regime for wheat showed the interaction details between the private firms with licenses to import and COFCO matters when it comes to drawing conclusions on COFCO’s size of trade distortion. In particular, COFCO’s actions are that of an import tariff. This reduces the exporters’ and imports welfare of China. These changes in China’s net welfare and in other exporting countries depend on the trade distortion’s extent and on the terms of trade effect that are associated with it (McCorriston & MacLaren, 2010a). Global manufacturing strategy Apple Jobs’ philosophy from the beginning was to create new products that consumers would find very easy to use and at the same time integrate technology, which is innovative. Apple has been accomplishing these goals since the company came to existence. Any Apple product released to the market faces great competition for the market share. Top competitors include Microsoft, Dell and Nokia, just to name a few. People who use Apple products are fickle. This is one of the reasons behind the revolutionary products like iPods giving way to the iPhones, which are the latest technologies. All this became achievable within five years. According to Mallin & Finkle (2011), “The ability of a company to assess and forecast the consumer demand is the difference between a company’s profits and losses.” Apple’s manufacturing strategy has always been to create the best computing, mobile communication and portable music experience to its consumers. Its consumers include educators, students, businesses and even government agencies. Apple provides these experiences via its unique hardware, software and other services created to meet all user needs, even before the consumers realise that they need the products. This strategy enables the company to leverage its unique abilities of developing its own hardware, software and other services in order to provide its consumers with new solutions and products with innovative industrial designs, seamless integrations and superior ease of use. Mallin & Finkle (2011) argue that Apple’s continuous investment in research and development of new products has been the main support of capitalizing on the convergence of the digital electronics and mobile phones market. Modern globalized firms have an advantage on both the logistics systems for pursuing lower cost, higher quality products, product differentiation, evaluation, selecting global manufacturing strategies that are appropriate and the global manufacturing resources by putting into consideration issue from logistics and global manufacturing. This has become a critical and difficult issue (Tzeng & Huang, 2012). Apple’s management team utilizes the product portfolio analysis to evaluate all the company’s products to determine the products that are most likely to be profitable to the company in future. The analysis is very important as it influences the allocation of different resources, funding other Apple products in addition to signalling shareholders the direction that the company should follow (Mallin & Finkle, 2011). According to Mithas, Tafti & Mitchell (2013), researchers in information systems, industrial economics and strategic management argue that the industrial environment in which a company belongs to influences its strategic actions. Steve Jobs comprehended that his company’s future rested in its ability to maintain its strategy of developing new innovative products. Even after his death, Apple continues to do exactly what Jobs had in mind. The difference between Apple and other technological companies is that the other companies conduct market researches and focus groups while Apple does not conduct any market research to find out what the consumers want. Instead, Apple tells its consumers what they are going to require or want next. The main challenge facing Jobs’ vision is the ability to assess all product portfolios periodically and remaining competitive to maximize its earnings (Mallin & Finkle, 2011). Apple’s success is overwhelming. This success derives from Apple’s most innovative products marketing and distribution strategies. iPod and iPhone are Apple’s arguably most innovative products. Apple’s overall approach of marketing its products is by producing imaginative and fresh products that are stylish and sleekly designed and that communicate directly to the consumer. Apple depicting its products as trendy, hip and cool has been an effective advertisement strategy. Thus, owning Apple products has the consideration of being prestigious and cool by its consumers (Mallin & Finkle, 2011). COFCO The state owned COFCO, with government support backing, seeks to become direct competitors to other multinational traders. To do this, COFCO has been acquiring huge percentages of stakes in other agribusinesses. Its current moves of purchasing other companies are part of its overseas investment strategy. COFCO plans to use $10 billion in overseas investments. This is part of a very large trend of China investing in global agriculture (Matacic, 2014). It is not clear how a firm at the corporate level in the international business can withdraw and expand its international activities over a period and the extent that different clusters or patterns of strategies are distinguishable between sectors and among such processes (Fortanier & van Tulder, 2009). In the context of a set-up, which closely relates to the environment in which COFCO operates and the change in the market structure following the WTO Accession Protocol, the most important of these factors is the bias of government policy. It is of course difficult to attach a precise weight or measure to this bias. The use of state trading in China reflects a range of objectives including food security, ensuring food supplies and stabilising markets. However, it appears that in recent years, the bias of agricultural policy in China has tilted towards favouring producers. This is evident in recent Producer Support Equivalent (PSE) measures for China. In the mid 1990s, the aggregate PSE measures were negative, reflecting a bias towards consumers; more recently, the bias has switched to producers with the average PSE measure now positive. The PSE data are broadly consistent with the more recent data from the project coordinated by the World Bank on measuring trade distortions in agriculture (McCorriston & MacLaren, 2010b). China has moved away from the taxation of agriculture to one of either ‘mild’ support or parity with world market prices. With respect to individual commodities, for wheat the nominal rate of assistance is positive as it also is for maize. Reflecting on the recent trends on the Chinese policy biasness towards agriculture, there is the assumption that there exists a ‘mild’ bias towards consumers (producers) for the wheat and maize sectors. These assumptions are consistent with the OECD data. However, reflecting the trend in the direction of Chinese policy in recent years towards increased support for producers, the trade distorting impact of COFCO is the bias of policy changes. These policy changes have enabled COFCO to gain a competitive advantage over other private firms in the agriculture industry (McCorriston & MacLaren, 2010b). Their people Apple Possessing resources is not the only basis for Apple gaining a competitive advantage. Apple also gains a competitive advantage may by the way it integrates its resources with each other to come up with new products. Therefore, the knowledge and skills of its employees are very important resources to the company. The employees influence the business operations and determine the company’s success. These people had their employment over time thus deeply embedded to Apple’s corporate culture. Apple’s organization culture refers to its system of relational contracts, which exist both externally and internally. The relationship among the employees is the internal architecture and the company’s relationship with its suppliers and consumers is the external architecture. Apple has also chosen to engage in a collaborative relationship with Microsoft, its rival. This is a very clever business strategy (Paper E2, 2011). Reputation is very important in any market because consumers gauge the quality of new products from experience. The company gains a distinctive capability once trust is established. Apple’s consumers have a legendary brand loyalty that has taken advantage of this when entering new related markets. Some theorists even argue that a company being able to innovate successfully is very important for gaining a competitive advantage. Apple is an example of a company that has achieved successful innovation. This is attributable partly to its internal architecture since its processes have their anchoring in the company’s routines. Apple has sought copyrights and patents to protect its innovative products to ensure it gains full value from its investments. For example, in 2012, Apple sued Samsung and Samsung got an order to pay Apple billions of dollars because the court found Samsung to have copied Apple’s products willingly (Cusumano, 2013). COFCO Most internationalization studies have grounding in the developed countries paradigms. These theories are adapted in China in order for the state owned firms to gain competitive advantage in the agriculture industry. It is unique even among transition economies witnessed today in terms of the social market economy that is emerging. The government directives, institutional constraints and the market forces uniquely control it. Research on COFCO internalization presents an opportunity for extending the western-based knowledge that exists. COFCO has to meet the host country’s institutional requirements. In some countries, COFCO faces greater barriers than other companies from different countries do. This is because of COFCOs reluctant stemming, and its possible political objectives search rather than a commercial one. The demand and supply market forces govern COFCO but the Chinese government political agenda aids and supports it very much. This is perhaps one of the reasons behind its success (Quer, Claver & Rienda, 2012). Part 3: Sustainable operations and global supply chains (800 words) Identify the criticality of integrated sustainability concepts around globalisation of inbound logistics, operations and outbound logistics Apple Sustainability Apple’s distinctive architecture creates organizational knowledge that supersedes its employees combined efforts. For Apple to remain sustainable, its relational contracts are very hard for its rivals to copy. These relationships are complex, implicit and subtle. Not formalising the relational contracts makes imitating very difficult and ensures that Apple’s architecture remain a source of competitive advantage. This is why Apple is very secretive when it comes to guarding the development processes of its products. Apple’s ability to surprise its consumers with products that are innovative is a testament to its success in this particular area (Paper E2, 2011). Moreover, safeguards like copyrights and patents may not be enough in the competitive high-tech markets. Thus, Apple’s current strategy for ensuring sustainability in the competitive high-tech markets is by applying realistic courses of action that involve continuous development of products that enable the company to remain ahead of its rivals. COFCO Sustainability COFCO has succeeded to remain Chinas largest trader in grains. According to the wall street journal, to maintain its position in the market, COFCO has formed joint ventures with other agribusiness operations in other countries. The joint ventures provide a boost to COFCO’s net profit (Thomas, 2014). Moreover, while the domestic deregulation has left the exclusive imports and exports rights of COFCO untouched, the state trading role is very important to China and was a key issue in its accession to the WTO. The accession to the WTO made sure that the COFCO would continue to exist. During the negotiations on the accession, parts of the negotiations aimed at influencing COFCO’s impacts on world markets. The main means for achieving this was permitting greater roles for the private firms so that they could be able to compete for the imports. This was through restricting the tariff quota share that COFCO could retain exclusively. Regardless of this, COFCO has managed to be dominant especially in managing exports and imports of agricultural commodities on the domestic market. Thus, COFCO is a significant player in the world commodity market (McCorriston & MacLaren, 2010a). Apple Global supply chains and Logistics models of delivering goods and services to customers According to Sako (2011), supply chains are increasingly global. Since globalization has created a new set of competitive imperatives, and because firms are turning to global operations with greater frequency, firms must be able to build a sustainable competitive advantage by ensuring it has global supply chains (Tzeng & Huang, 2012). Apple’s primary distribution strategy for its products is retail stores; the stores that also go by the name “tech shrines”. This is because they give consumers a chance to feel and touch Apple products. Retail consultants are also present in these stores to answer any questions that the consumers might have and the consumers are able to consult experts at the “genius bar” in the Apple stores. Consumers are able to view and try out new devices and all that the company has in store. It is clear that Apple is getting it right as other tech companies like Microsoft are imitation Apple’s distribution strategy by mirroring its retail stores (Mallin & Finkle, 2011). In recent years, Apple has established a reverse supply chain that is well rounded. Its effective handling of the returns gives Apple a competitive advantage in the competitive tech industry. This is achievable by cost reduction and customer satisfaction. With Apple’s green supply chain, customers can participate in Apple’s Recycling Program. When customers are purchasing new products, they receive recycling of any products free. Apple established a section on its website for special deals whereby there is selling of products returned by the customers due to dissatisfaction, and have not ended their lifecycle. The products get repairs, if need be and are of cheaper prices. Through this, Apple managed to take the right measures of offering customers recycle incentives, as they become customers for new product life cycle (Kumar, Teichman & Timpernagel, 2012). COFCO Global supply chains and Logistics models of delivering goods and services to customers Under the central planning, COFCO managed to gain an almost complete control of the main imports and exports of agricultural products. COFCO’s sole purpose was balancing the domestic demand and supply via management of imports and exports to stabilise prices, ensure food security and meet all the government agendas with respect to the agricultural sector. The level of exports and imports determination arose through a complex hierarchical process. COFCO essentially acted as an agent over prices and trade volumes for all the decisions taken. The Commission for National Planning and Reforms, in consultation with the State Council and the Foreign Trade Ministry are responsible for determining the volume of exports available and the level of imports required. This is after a consultation with the regional and central authorities involved with domestic requirements. To ensure that all the exports and imports met the central planning process requirements, COFCO received exclusive rights over all exports and imports. This gave COFCO monopoly and monopsony powers the Chinese agricultural trade (McCorriston & MacLaren, 2010b). References Cusumano, M. A. (2013). Technology Strategy and Management: The Apple-Samsung Lawsuits. Communications Of The ACM, 56(1), 28-31. doi:10.1145/2398356.2398366 Dedrick, J., Kraemer, K. L., & Linden, G. (2010). Who profits from innovation in global value chains?: a study of the iPod and notebook PCs. Industrial & Corporate Change, 19(1), 81-116. doi:10.1093/icc/dtp032 Fortanier, F., & van Tulder, R. (2009). Internationalization trajectories--a cross-country comparison: Are large Chinese and Indian companies different?. Industrial & Corporate Change, 18(2), 223-247. Kumar, S., Teichman, S., & Timpernagel, T. (2012). A green supply chain is a requirement for profitability. 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