The Supply Chain and Logistics Management Strategies of International Brand - Case Study Example

Introduction

Apple Inc. is a multinational company that operates in the technology sector. Apple mainly deals with consumer electronics, online services, and computer software. Its headquarters are located in Cupertino, California in the United States (Apple, 2016). The hardware products that Apple Inc. deals with have performed really well in the market over the years. It is imperative to note that the company has managed to be one of the best if not the best technological company in the world. The company has a wide range of products ranging from hardware products to software products. Certainly all the current success can be accredited to Steve Jobs’ management and innovative ideas.

The company was founded by Steve Wozniak, Ronald Wayne, and Steve Jobs in 1976 (Apple, 2016). Through the years, it has developed from a small company that dealt with the development and sale of personal computers to being an international brand recognized globally. Research evidence shows that the direction that Apple has taken through the years in terms of strategy has contributed a lot to attaining the market share it currently enjoys. This paper will undertake an analysis of Apple Inc. strategy in terms of marketing and how these strategies have contributed in making the organization a global brand.

Targeting

Targeting mainly entails the selection of potential customers with whom an entity wants to sell its product and services. This is attained through the segmentation of the market and each segment analyzed in terms of which products and services are appropriate. Apple Inc. target market is a people who are interested in computers and premium users. This has been achievable through the production of relatively easy to use, extra functional and attractive products. Therefore, Apple has attained its target market through learning from those who are interested and the creation of a product that fits with their interest. (Forbes.com, 2016) states that Apple Inc. is one of the unique corporations and it as invested a lot in studying the end user in order to develop products that suit their needs (Quora.com, 2016).

Which markets have Apple targeted?

In the further assessment of Apple’s target demographics, research evidence suggests that the primary targets are teens. This is because of the premium price tag that the Apple products come with and the fact that teens will understand and iPods value and the attraction for it will later translate to wanting Macs, iPhones, and other products in the future. Because of the unique feature of the Apple products, they are seen to be premium thus translating to a high price tag. However, not everyone who wants Apple product can have them because of the affordability issue. That’s why the company targets the young and wealthy segments that are more willing to spend on classy and flashy products. (Forbes.com, 2016) highlighted that this market segment of teens is the best performing in regards to Apple Inc. products.

The next Apples Inc. target markets are the millennial. This is because of the high extent in which the Millennial have been exposed to technology thus, allowing Apple to take this advantage and target them in their product segmentation. Therefore, the most common markets that Apple as targeted are the millennial and teens (Bloomberg.com, 2007).

How have Apple targeted their specific audiences?

One of the ways that Apple has used in creating product awareness of this target group through the years is through education. Apple has managed to capture the target market’s attention through differentiating its products from its competitors. This has ensured that the target market tend to prefer to own and purchase Apple’s products. The company also proceeded in creating a unique culture cachet that as proved to be essential to teens. For instance, Apple was brilliant in meeting the teens need from the iPod 2001 debut. The love teens have for music is in another level and Apple was able to meet their needs through the introduction of the iPod. A survey undertaken by (University of San Francisco Online, 2016) showed that 78% of teens in high school own a portable media player and from this number, 82% own iPods. Also, Apple has been successful in making its brand seem to be in a league of its own. Also, through the new and unique features in their products, they are able to tap into the millennial market since majorities of this group are educated and urbanized (BrandonGaille.com, 2015).

Why Apple Outsources

The common belief as to the reason why Apple Inc. outsources its manufacturing bulk is due to cheap labor received by China’s factories. The main reason is to ensure minimization of cost of production, additionally the speed in production that the China factories add to the equation. Research indicates that Apple outsourcing reduces production from 9 months to 15 days. Therefore, outsourcing for Apple is very advantageous and key to the organization’s success (Forbes.com, 2016).

The Workings of Apples Supply Chain

Apples Inc. supply chain management has contributed a lot to the organization’s success. In fact, the company’s supply chain was classified to be the finest in the globe from 2010 to 2013 by Gartner research firm. Apple's CEO Tim Cook states that inventory of laptops; tablets and smartphones are very sensitive due to the high depreciation they have. It’s estimated that these products lose their value at a range of 1- 2 % every week. Therefore, proper inventory management is fundamental in order to attain company success (University of San Francisco Online, 2016).

Supply Chain Power and Control Issues

Apple's approach in supply chain management is done through the purchase of materials and components from various suppliers which are shipped to the China assembling plant. After the assembling process, the products are shipped using FedEx or UPS directly to the consumers who use the Apple’s online stores to purchase (Lu, 2016). In respect to other distribution channels, like retail stores, and Apple stores, its items are shipped from Elk Grove, California which is where the call center and central warehouse of Apple are to the stores.

Additionally, Apple has a very effective recycling facility since customers are encouraged to send back products to the nearest Apple Stores at the end of the products life cycle. The effective and well operating supply chain management has been achievable through the reduction of inventory, reduction of warehouses and creating an environment where suppliers have to compete among themselves. For instance, after taking over as the CEO, Tim Cook cut down on the component suppliers from 100 to 24 and shut down ten warehouses out of the total nineteen.

Owing to the unprecedented changes that take place in the technological industry as a result of innovation, Apple has been able to beat its competitors through storage of very minimal inventory. Compared to its competitors Samsung and Dell, Apple is considered to have the best supply chain management especially since it turns its inventory in 5 days thus, able to keep the cost of the warehouse down and minimize the adverse impact of competitors coming up with new innovations. In an industry where the old products are quickly cannibalized by the new, not having excess inventory and the sales level forecasted accurately is crucial, and that’s exactly what Apple Inc. as been doing (MANGAN et al, 2008).

One other factor that has contributed to the success of Apple supply chain is having a longer product life cycle. Apple’s key products have a life cycle of 12 months. They have also mastered the forecasting of customer demands. In fact, Apple not only focuses on the product forecast but also the future technologies that will be in demand. Through this, they end up minimizing cost since they place long-term orders with suppliers which in turn reduce the possibility of the emergence of imitation from competitors since suppliers have enough demand for components.

A change of policy in 2011 to stop the push for fast inventory turnover has also helped in making the supply chain management better. This is because the initiative to sell the long-awaited products the second day helps in ensuring smooth inventory tracking thus avoids inaccuracies from happening. Therefore, the good working relation that Apple has formed with supply chain has helped in developing better processes of manufacturing, and keeping them a step ahead of their competitors due to the easy and fast access to components (BLANCHARD, 2010). The figure below paints a clear picture of Apple’s supply chain

Source: (Hessman, 2016).

Apples Market Entry Strategies

Market entry strategy basically entails the activities a company undertakes during the process of introducing its products and services to a particular target market. This process involves deep planning where issues like entry barriers, resources needed for marketing, the supply chain management, and the forecasted revenue after entry will be assessed critically. Apple has recognized the fact that for successful supply of its products within the globe, it’s vital to first detect the most lucrative foreign markets. Apple identifies the markets that are most receptive to their products and services and assesses its penetrability.

How Does Apple Enter and Retail in International Markets?

The most effective strategy that Apple Inc. has used in the market entry is by finding already established markets and totally revolutionizing them through innovation. For instance, Apple after its entry to the already existing smartphone market totally changed the game through the introduction of its premium products.

Apple re-invented the market through leveraging its iPod user base. Therefore, what influenced mobile operators to be eager to shift to the newly launched iPhone were not its unique features but the assured support by iPod users who couldn’t wait to advance to the new generation device. Also, Apple has effectively been able to set up retail stores in all of the markets that it enters. For instance, as at March 2016, Apple had set up 475 retail stores in 17 countries and maintains a very effective online iTunes Store and Apple store (Harvard Business Review, 2015).

Apples Focus on Emerging Markets

Apple Inc. focus is in emerging markets in order to attain its objective of growth. According to the company, China and India present the biggest opportunity for growth. In China, there are currently 28 Apple stores and the company expects to open another 12 in 2016. Also, Apple has remained ignorant to the critics and remains bullish to attaining these markets. India, on the other hand, is ranked third with respect to the smartphone market with the majority of the population below 25 thus, subscribing to Apple market target of the young and its objective to create a market in India (Leverage Equity Research, 2016).

Ethical Issues for Apples Supply Chain

The most fundamental ethical issues that arise from the Apple supply chain management is the human cost. The Apple outsourcing has been seen as a loophole for workers’ rights being violated due to the lack of appropriate labor laws. Young people aged 16 to 18 undergo the risk of ending up being drafted by suppliers in factory positions under the disguise of work experience placement in order for the suppliers to meet their production schedules. Therefore, with Apple having over 1.6 million employees in 20 countries, the issue of workers rights is vital to its supply chain management sustainability. This has influenced Apple Inc. to come up with the Supplier Responsibility Progress Report that is intended to fix some of the issues that arise in the Supply chain management. This includes ways to monitor working hours to ensure laborers are not overworked and the introduction of education programs (Jefferies, 2014).

Brand Differentiation

Apple Inc. has been able to differentiate its brand from the rest of the competitors in the electronic industry. This has been through the production of products that are attractive and unique to the consumers. Steve jobs in an interview stated that Apple does not only build a product that the consumers’ needs but attempts to be innovative enough to offer consumer products that sort the needs that they were not aware they had (LÜSTED,2012).

Apple uses innovative advertising, in new product launches that enable them to achieve brand loyalty. In addition to that, they have also placed certain barriers for market entry that halts competitors from imitating their products. Also, the fact that Apple products have attached to them a premium price has helped in differentiating them from the other brands thus, seen as a product for the wealthy, classy and flashy market (Aaker, 2009).

Conclusion

In conclusion, it’s evident that the strategies that Apple has taken are the sole reason for the company’s success and growth to being a global brand. The mastermind approaches the company adopted of studying their markets, consumer needs and being able to manufacture quality products that cater for this needs have enabled the company to having a competitive advantage over their competitors. Also, ensuring that the supply chain management is effective and efficient as enabled the company to be more effective in manufacturing and management of markets thus, making the company more profitable and successful.

Reference

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