The Complexity of Apple's Supply Chain

While Apple may claim to be an environmentally friendly company, this is no more than a clever tactic to manipulate reality. The truth remains that Apple, in it’s essence, is an environmentally friendly company. Their numerous suppliers located overseas, however, are not.

Apple has been able to cut costs by outsourcing to small factories largely located in China where labour costs are lower, and social and environmental responsibilities are more lax than in the Western world. Statistics given by Johnathan Watts in The Guardian indicate poor environmental and labour conditions both in factories and their surrounding areas.

The above faults in Apple’s complex supply chain give rise to the benefits of Dell’s Direct Business Model. This model of direct supplier-customer interaction allows Dell to develop personal relationships with customers and in turn receive feedback on what consumers want. These translate into increased demand and revenue for the company. Apple, on the other hand, is using their supply chain as a facade to cover up cost cutting behaviour and in turn damaging their reputation.

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Picture 1- Apple’s Supply Chain

Apple Supply Chain Article- The Guardian 

Consumers walk by Gap's flagship store in San Francisco, California.

In Johnson Kim’s Blog, he explores the general trend of American companies to rely on international markets. He discusses the interplay between the Chinese and American economies and states that, “America has slowly been suffocating financially under the stress of the doggie collar the Chinese have placed around its neck”. I agree with this statement, and think that American companies must be careful not to rely too much on the Chinese market. This makes the company vulnerable to both domestic and international economic turbulence, thus increasing overall financial risk for the company.

Gap is one example of an American company turning to international markets. The retailer plans to close several American stores to allow for expansion into China. By the end of 2013, they plan to decrease overall American square footage by 10% while doubling revenue from outside of the US to 30%.

Gap’s recent revamp, however, is not purely a result of the shortcomings in the American economy. Since the addition of competitors such as H&M  and Abercrombie&Fitch into the market, Gap has noted a considerable decrease in sales and overall American Revenue.

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Globe and Mail Article

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In Harpal Kandola’s Blog, he discusses the marketing crossroad that Blackberry encountered as Apple approached the launch of the iPhone 4S. While I agree that Blackberry is disadvantaged by Apple’s innovation, the recent disappointment in Apple’s latest iPhone may turn out to be an opportunity for Blackberry to reposition themselves in the market as an innovative smartphone and shake the stereotype of being “corporate and stuffy” (Globe and Mail).

After months of anticipation, many are disappointed in today’s release of the new iPhone 4S. Many see the product as a let down because it does not live up to Apple’s claim of it being “the most amazing iPhone yet” (Globe and Mail, 2011).

The iPhone 4S letdown is not a result of poor quality, but rather poor marketing. Apple marketed the iPhone 4S excessively and built consumer expectancy to an unrealistic level. This is an example of where poorly executed marketing can actually harm a company. This case also highlights the turbulence of IT intensive industries through the rapid jumps in company success. It would be advisable for Apple to revisit their BTM and experiment and measure innovative methods to regain their status as a smartphone superpower.

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Globe and Mail Article

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Germany’s parliament has announced this week that they plan to endorse an enhanced bailout package aimed to finally pull the EU out of a downward spinning economic catastrophe. Sounds ideal, right? Unfortunately, the European Financial Stability Facility (EFSF) plans to achieve this by providing troubled countries with liquidity loans and the reassurance that they will buy their bonds when no one else wants to.

The question remains: where is this money coming from? Although it is nice to hope for economic renaissance for Europe, they cannot simply solve debt with more debt. This plan is no more than a band-aid aimed at covering up their underlying issues of poor governmental leadership and lack of initiative. The only thing it will buy for Europe is more time. It is up to them whether to use this time to drive forward positive change or keep waiting for a simple solution.

The Euro Zone Crisis article we discussed in class addresses these same issues, and highlights the important fact that leaders need to commit to either: ending the common currency or adopting fiscal integration. While some may view it as “too little, too late” for Europe, any action is better than apathy.

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Globe and Mail Article

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