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Outsourcing and Vertical Integration at Apple PDF

Added on - 16 Nov 2021

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OUTSOURCING AND VERTICAL INTEGRATION AT APPLE1
Outsourcing and Vertical Integration at Apple
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OUTSOURCING AND VERTICAL INTEGRATION AT APPLE2
Outsourcing and Vertical Integration at Apple
After a thorough exploration of the assigned reading, immense knowledge has been garnered
with respect to Apple Inc.’s utilization of the outsourcing (offshoring to be precise) strategy to
enhance its global positioning in the electronics sector. This paper presents a brief discussion of
the apparent concepts in the case study.
Apple Inc. SWOT Analysis
Strengths. The company controls the lion share of the electronics industry. Apple’s
vertical integration and outsourcing strategies are instrumental in its cost-effective global
expansion (Anonymous 2017). Not to mention the fact that China is best placed to meet the
company’s demands with regards to economies of scale and cutting-edge tech.
Weakness. Overreliance on the aforementioned business approaches – in the Chinese
market – places the company at a vulnerable position in the wake of intrinsic market challenges
such as poor intellectual property (IP) policies, and quality uncertainties (Wu 2017). Note that
the lack of investment in the American workforce threatens its brand superiority in the United
States.
Opportunities. Inasmuch as offshoring in the Chinese market threatens Apple’s brand
image in the United States, the option ushers the company into the highly impenetrable market.
This sentiment follows the conventional fact that expansion into China is an inherent challenge
in international business (Anonymous 2017). Furthermore, the vertical integration approach
allows the company to control a major section of the Chinese electronics market.
Threat.China’s poor intellectual property laws challenges Apple’s innovative model.
Perhaps, such a factor explains the emergence of its ever-expanding Chinese rival – in
smartphone manufacturing – Xiaomi (Kotabe, Mol, & Murray 2008).
OUTSOURCING AND VERTICAL INTEGRATION AT APPLE3
The Problems Noted in the Case Study
When going through the assigned reading, one cannot help but notice the problems faced
by the American workforce as well as Apple’s competitors, especially Microsoft. As far as the
US labor force is concerned, outsourcing from China creates an income gap especially since
technology sectors offer opportunities to the larger section of the country’s middle-class citizenry
(Anonymous 2017). On the other hand, Microsoft is left on a tight-rope as its dominant
counterpart possesses immense contractual connections and experience in the Chinese electronic
market. This sentiment explains why Microsoft’s outsourcing and vertical integration efforts in
the Chinese sphere have proved futile.
Case Discussion Responses
Advantages and Disadvantages. Apple’s offshore operations with Chinese manufactures
have both merits and demerits. The advantages include increased operational capitals, low-cost
production, high-end tech, and increased productivity (Anonymous 2017). These factors are in
line with the company’s primary goal: to deliver high-quality Apple products without
compromising profitability.
Interestingly, outsourcing does not often pop up as an effective strategy in a process-
oriented sector such as electronics. Such a bold declaration is supported by the belief that
inconsistency is an inevitable challenge when outsourcing products overseas (Pai & Basu 2007).
Apart from that, China’s tainted reputation – in quality matters – jeopardizes Apple’s brand
value. Fortunately, the company has addressed this issue through vertical integration: emphasis
on Apple Inc.’s backward integration approach aimed at enhancing its control of the production
process.
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