Question

On the Value Chain – Apple Inc.

a. Identify and discuss the business model that best describes Apple's company. b. Provide a descriptive overview of the various components of Porter’s value chain model – include the firm’s current and target profit margin. c. Identify the areas within the value chain needing to be strengthened for Apple to strengthen the profit margin of the firm. - Pull from Zenger’s Corporate Theory to help support your discussion.

Answer 1

Answer a) Apple generates revenue of over $250 billion. Let's drill down to a brief study of their business model :

Apple sells three types of products :

• Apple Software Products
• Apple Hardware Products
• Apple Online Products

Apple strategically uses these three business entities in the below ways to generate revenue :

• Physical and Online sell of products: Apple products, owing to their brand quality and equity, occupy the cream layer of the market thereby forming the biggest source of cash flow through the selling of their products.
• Subscription fee of using Apple apps: Not only the sale of products but for using the Apple apps, Apple charges a subscription fee which is also a steady flow of money into their business.
• Extended Warranty and Value-add services - Since Apple products are premium high priced products, most customers prefer having an extended warranty to protect their products. This too contributes to Apple's cash flow.

Answer b) Application of Porters Value Chain to Apple company

Primary Activities:

• Inbound Logistics - Apple has a strong network of suppliers to ensure the smooth flow of goods into Apple's inventory.
• Operations - Apple is equipped with necessary raw materials to manufacture their products and launch them in the market place on time.
• Outbound Logistics - Apple has a well-established distribution network to deliver products on time through different intermediaries to the customer.
• Marketing and Sales - Besides production, Apple always comes up with innovative advertisements to attract customers' attention and drive sales.
• Services - Apple also takes into account a good after-sales service to keep the customer's faith in the product even post-purchase.

Secondary Activities: Firm Infrastructure, Human Resource, Procurement, and Technology development are secondary activities that drive Apple through its efficient operations and strategies is contributing to its brand equity.

Answer c) According to Zenger's Corporate Theory an organization should seek beyond just attaining competitive advantage but should aim to create sustained value creation through all business cycles. Apple's biggest strength is the premium product range so Apple should never compromise on its quality and serviceability. Innovation should drive the business along with proper strategies for distribution and marketing.

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