OUTSOURCING AND VERTICAL INTEGRATION AT APPLE 1 Outsourcing and Vertical Integration at Apple By Student’s Name Course + Code Professor University City, State Date
OUTSOURCING AND VERTICAL INTEGRATION AT APPLE 2 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 APPLE 3 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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