Business Strategy Please Read Attached Picture Answer Apple Vertically Integrated Many Com Q35399375

Business StrategyPlease read attached picture and answer Why is Apple morevertically integrated than many other computer makers? Whatbenefits does this bring? Why do other companies in the industrynot follow similar strategies? (1-2 pages)

Outsourcing and Vertical Integration at Apple At a dinner for Silicon Valley luminaries to make iPhones in the United States?” Jobs re- in February 2011, U.S. President Barack Obama plied, “Those jobs aren’t coming back.” Apple sked Steve Jobs of Apple, “What would it take management had concluded that overseas factorie provided superior scale, Bexibility, diigence, and in its home country, Apple executives responded, access to industrial skills-“Made in the U.SA. “We sell iPhones in over a hundred countries. just did not make sense for Apple anymore. Our only obligation is making the best product s an example of the superior responsiveness of Chinese factories to Apple’s needs, an executive described a recent event when Apple wanted to re- amp its iPhone manufacturing just weeks before perhaps-more vertically integrated than most it was scheduled for delivery to stores. At the last computer or smartphone firms. Apple’s decision minute, Apple had redesigned the screen, and new to produce its own hardware and software-and screens arrived at the Chinese factory at midnight. tie them tightly together and sell them its own Fortunately, the 8,000 workers slept in dormitories retail stores-was widely known and hotly debat- at the factory-they were woken, given a cookie ed. However, the vertical integration did not end and a cup of tea, and were at work fitting glass screens into their beveied frames within 30 minutes. production equipment that is used to outfit new Soon the plant was producing 10,000 iPhones per and existing Asian factories that will be run by day. The executive commented, “The speed and others (an example of quasi vertical integration) fiexibility is breathtaking.. . There’s no American and then requires those factories to commit to plant that can match that. possible. Although Apple epitomizes the opportunities for strategic outsourcing, it is also-paradoxically there. Apple also spends billions of dollars buying producing for Apple exclusively. By providing Foxconn City,” a complex where the iPhone is the upfront investment, Apple removes most of assembled, has 230,000 employees, many of whom the risk for its suppliers in investing in superior work 6 days a week and up to 12 hours a day. It is technology or scale. For decades, the computer owned by Foxconn Technology, which has dozens and mobile phone industries have been character- of factories in Asia, Eastern Europe, Mexico, and ized by commoditization and rapid cost reduc- Brazil. It is estimated that Foxconn assembles 40% tion. Suppliers had to work hard to reduce costs of the worid’s consumer electronics. It boasts a to win competitive bids, and standardized pro- customer list that includes Amazon, Dell, Hewlett duction facilities trumped specialized facilities as Packard, Motorola, Nintendo, Nokia, Samsung, they enabled suppliers to smooth out volatility in and Sony, in addition to Apple. Foxconn can hire scale by working with multiple buyers. This meant thousands of engineers overnight and house them that most suppliers to the computer and phone in- in dorms-something no American firm could do. dustry could produce cost-efficient hardware, but Nearly 8,700 industrial engineers were needed to not “insanely great” hardware. Apple’s strategy of oversee the 200,000 assembly-line workers required paying upfront for both the technology and capac to manufacture iPhones. Apple’s analysts estimat ity enabled it to induce its suppliers to make spe- ed that it could take 9 months to find that many cialized investments in technologies that were well qualified engineers in the United States. It only beyond the industry standard, and to hold excess took 15 days in China. Moreover, China’s advan- capacity that would enable rapid scaling-The net tage was not only in assembly, it offered advan- result is that Apple develops superior flexibility tages across the entire supply chain. As noted by and technological sophistication that its competi- an Apple executive, “The entire supply chain is in tors cannot match. China now. You need a thousand rubber gaskets? Seeming to acknowledge the advantages of That’s the factory next door. You need a million Apple’s strategy of controlling device design and screws? That factory is a block away. You nced that production, Microsoft announced on June 18, 2012, screw made a little bit different? It will take three that it too would design and produce its own tablet, hours” of Apple’s 64,000 employees, nearly one- the Surface. It also launched its own chain of dedi- third are outside of the United States. In response cated Microsoft retail stores that looked remarkably to criticisms about failing to support employment similar to Apple stores. The success of this strategy (continued) 306 Part 3 Stolegers is far from assured, however. Although Microsoft Sources C Duhlg and K. Bradsher,.”How the U.S. Lost Out can imitate some of the individual integration on iPhone Work: New York Times, January 21, 2012, p. I: C strategies of Apple, it lacks both the tightly woven ecosystem that Apple has developed around those strategies, and its decades of experience in imple- menting them. Guglielmo, “Apple’s Secret Plan for Its Cash Stash, Forbes, May 7 CASE DISCUSSION QUESTIONS 1. What are the advantages and disadvantages 4. Why is Apple more vertically integrated thar 2. What factors influence the choice of countries 3. Is there anything that might cause Apple to to Apple of outsourcing its production to foc many other computer makers? tories in China? to which a firm might outsource its production? eventually shift production back to the United 5. What factors will help or impede Microsoft i matching the advantages Apple gains from its vertical integration strategies? States? Show transcribed image text