Business Model Canvas of Apple Inc

Business Model Canvass for Apple Inc. Business model canvas is a lean startup and strategic management template which is used for documenting and developing new business models. Business model canvas contains elements which describe the company’s key partners, activities, resources, value proposition, customer relationships, customer segments, channels, revenue stream, and cost structure. To the organization, business model canvass helps in developing a portfolio of ideas. (Dudin, Kucuri, Fedorova, Dzusova, & Namitulina, 2015). Managers who want to improve the effectiveness of their business model and organization, as well as to increase their own ability to manage, use diagnostics/assessments to determine the reality of business effectiveness in comparison to what they originally envisioned. Good feedback contributes to the development of plans to improve business/organizational effectiveness and management performance. in this paper, I am going to conduct an assessment of business model of Apple Inc. using business model canvas. The objective of this report is to explain the business model canvass of Apple Inc. Apple Inc. is one of the global leading manufacturer of telecommunication and electronic devices. In this paper, key business partners together with suppliers will be discussed. Major services offered by such business suppliers and other partners include assembly, distribution, and manufacturing of the corporation’s products. The giant distributor is creating value through the provision of modern technology products. Apart from modern technology, Apple Inc. is creating value by handling consumers’ complaints and needs with the help of Genius Bars. Apple Inc. distributes its products with the help of various retail outlets, retail stores, and online stores. The company operates with many resources amongst them being the people who are the employees, intellectual properties and physical assets. Additionally, the largest source of revenue for the organization is the sale of iPhones followed by the Macs and iPads. 1. Key Partners Apple’s key partners include Apple store Developers, manufactures, Publishers and Music, Cellular services, movie, and Television show industries. Each of the key partners play a specific role to the organization. Apple Store Developers. Apple store Developers provides an avenue through which the users can access and download mobile applications on their iPhone smartphone, iPod Touch, Apple watch, and iPad tablet computer. The users are allowed to browse and download applications developed with the company’s iPhone operating software development kit. Music Industry. Apart from partnering with Apple store Developers, the company is also working with music industry to provide entertainment to the users of its products. Over the past years, Apple has succeeded in reinventing and redefining certain elements of the music industry. The introduction of iTunes 14 years ago has helped to revolutionize the music industry. In the year 2003, the company launched iTunes, a platform which enabled the organization to sell MP3s. Single MP3 was sold for $0.99 each. From that point, the company grew the platform into a widely spread and profitable investment. iTunes eventually became the leading music retailer in the United States. (Arditi, 2014). Television and Movie Industry. Besides investing in technology, Apple has also invested in television industry through its Apple TV app. This application enables users to watch shows and movies in 4K HDR quality. It allows users to stream live news, sports and other entertainment contents from apps such as Hulu, Netflix, and ESPN. The company has also partnered with Hollywood producers to air some of its contents through Apple TV. This is meant to boost the views on the TV from which it will open avenues for advertising and other businesses. In general, these key partners play various roles to the company including software development, selling of the company’s products, provision of raw materials, assembly services, and manufacturing facilities. The following is the list of the top ten partners of the organization along with main activities carried out by each of them. 1. Verizon (among the biggest seller of iPhones) 2. AT & T (among the biggest seller of iPhones) 3. Foxconn Technology Group (largest electronic manufacturer globally) 4. Intel (microprocessors manufacturer) 5. TPK Holdings (the largest touch panel supplier globally) 6. Samsung Electronics (largest memory chip maker worldwide) 7. Quanta Computers (MacBook and iMac computer manufacturer) 8. Toshiba (flash drivers and LCD panel supplier) 9. Wintek (touch screen supplier) 10. Catcher Technology (leading maker of aluminum and magnesium casings) Key Suppliers Apple Company has various suppliers but top 200 suppliers provide 97% of the corporation’s needs which include manufacturing, supply of material, and assembling. Majority of the suppliers come from the Asian countries. They operate under strict regulations and rules to meet and if possible exceed the expected quality and demand of the customers. The organization has established a strong and close relationship with its suppliers by providing them with the required support so that they can operate well. (Christopher, 2016). Examples of Apple’s main suppliers include the following: i. Analog Devices Inc. which provides capacitive touch screen controllers for the Apple watch and iPhones. The company is based in China. Analog Devices Inc. supplies these products from the Philippines, Ireland, and U.S.-based stores. ii. 3M Co. This is a U.S.-based company which manufactures genuine screen protectors for iPhone. iii. Samsung. The company has three different subsidiaries including Samsung Electronics Co., Samsung Electro-Mechanics Co. Ltd, and Samsung SDI. Co. Ltd. These subsidiaries are situated in four different economies (China, South Korea, the Philippines, and the United States). It’s among the biggest supplier of Apple. It supplies various components such as flash memory used for storing contents of data, the mobile DRAM used for multitasking different apps in devices, and application processors which controls and keeps the entire device running. iv. Micron Technology Inc. This company together with its subsidiaries operates within the U.S. Singapore, Taiwan, Japan, and China. They supply different memory modules such as LPDDR3, LPDDR2, LPDDR4, and DRAM for Apple devices. These modules enable electronic devices and smartphones to effectively multitask and run different applications. The latest iPhone X uses LPDDR4 which makes it 60% faster compared to the previous model. v. Glue Mobile Inc. This is the largest supplier of iOS games and apps. Reports have indicated that the firm generates 64% of its revenue from the Apple Company. vi. Jabil Circuit Inc. which supplies casings for iPhones. Apart from producing casings, the organization also produces various components such as medical device miniaturization and computer numerical control tools. It also offers services such as product design, ideation, creation, and development. Reports indicates that 20% of its revenues come from the sale of casings to the Apple Company meaning it is a large supplier to the organization. vii. Nidec Corp. This is the leading supplier of taptic engine, a technology recently incorporated in the Apple watch. This technology produces the sensation of being tapped on the wrist. 2. Key Activities Apple Inc. engages in various activities ranging from software development, manufacturing, design, quality control, and distribution. These activities have resulted in creation of value proposition for the organization. The company has invested a lot in marketing of its products. Apart from marketing, Apple has been investing a lot in research and development. "The Company keeps on growing new advances to upgrade existing items and to extend the scope of its item offerings through innovative work, authorizing of protected innovation and obtaining of outsider organizations and innovation. Total research and development expense was $4.5 billion, $3.4 billion and $2.4 billion in 2013, 2012 and 2011, respectively”[ CITATION App12 \l 1033 ]. It has adopted a unique marketing strategy which has made the company’s products to stand out in the market. In most cases, Apple has always been focusing customer needs, a strategy which has enabled it to design products which meets the needs and demands of its consumers. 3. Key Resources Apple has expanded to become among the most valuable and profitable organizations in the globe. The company serves millions of clients around the globe through its retails retail outlets located in different parts of the world. Since its establishment, the company has managed to establish 497 stores in 17 countries. 269 retail stores have established in the United States and 228 combined in Canada, Belgium, Australia, China, France, Brazil, Hong Kong, Italy, Germany, Macao, Mexico, Japan, Singapore, the Netherlands, Sweden, Spain, Taiwan, Switzerland, Taiwan, United Arab Emirates, United Kingdom, and Turkey. In addition to the distribution networks, the company has got also other physical resources such as vehicles, buildings, and systems. Currently, the company has employed 116,000 full-time employees operating in various countries. As at 2012, Apple has employed 47,000 employees in the United States. In addition to human and physical resources, Apple is richly endowed with intellectual resources. Intellectual resources refer to the company’s employee skills, business training, and proprietary information which may provide the organization with a competitive advantage. (Dzenopoljac, Dzenopoljac, Yaacoub, Yaacoub, Elkanj, Elkanj, & Bontis, 2017). It is the collection of overall informational assets which an organization has at its disposal which can be used to drive revenues, create new customers, gain new clients, or improve the business. In the Apple Company, some of the intellectual resources include Copyrights, Trademarks, and Patents. 4. Value Propositions Key value propositions of the Apple Company include: i. Performance ii. Design iii. Usability/Convenience iv. Brand/status The company provides value to the consumer through the following: i. Convenience. All the products produced by Apple including phones, tablets, PCs are user friendly. ii. Improving the value by expanding the storage capacity and increasing speed in their subsequent new models. iii. Coming up with a design which is simple and unique from other brands preferred by the clients. iv. Reducing the risk through guarantees and warrants. This is meant to save clients from risk. Apple’s value proposition extends to provision of solution to various problems faced by customers. The solution entails provision of various products and continuous improvement of products through launch of new models for every product. For instance, recently, the company has launched iPhone X. These continuous improvements have not only helped to provide solutions to hardware and software-related issues, but has helped to meet the ever growing consumer demand for Apple’s products. Nowadays, every new feature that the customer wants but it’s in their mind, Apple turns it into reality. 5. Revenue Streams The main source of revenue for the company is the sale of iPhones. In the unaudited financial statement released by the company in early November this year, the sold 46,667 iPhones which yielded $28,846. The second largest source of revenue came from the sale of iPads which yielded $4,831 after selling 10,326 units. Other revenues come from sale of Macs and other products such as Apple Watch, Apple TV, Beats products, Apple-branded and thirdparty accessories, and Apple touch. Additionally, Apple also obtains revenues through its services such as Apple Pay, Digital Content and Services, licensing among other services. Based on the same unaudited report released on early November this year, the company generated $8,501 from sale of services and $3,231 from sale of other products like Beats products. 6. Customer Relationships Customer handling at the company has proved to be a significant source for the success of the company. Indeed, customer relationship has emerged as a secret weapon for the success of the company. The organization carries various activities for maintaining better customer relationships. Main activities conducted by the company with the aim of improving customer relations include the development of Genius Bar. Genius Bar is a tech support platform located inside Apple’s retail store. The system provides concierge style support for clients of Apple products. (Blenko, Waldron, Cornelius, Nespoli, & Lee, 2016). The establishment of Genius Bars has enabled the company to provide solutions to various software and hardware-related issues. Consumers bring their devices at these platforms and the experts present at these areas work to fix the problems raised by the clients. This is carried out because Apple knows how to deal with clients. The company has invested heavily in advertisements to offer information to both potential and existing customers. According to the Business Insider, Apple Company spent $97 million on advertisement in 2016. Apart from using advertisements to create customer awareness and relationship, Apple also provides guarantees and warranties to its customers. Provision of warranties and guarantees are meant to create customer confidence with the company products. Currently, Apple is providing 1-year warranty to all of its products. 7. Customer Segments The targeted consumers for the products and services offered by Apple Inc. include teenagers, business people, university and college students, adults, and young children. Teenagers use the iPods to socialize with friends, go on Facebook, twitter, MSN, among others. They also use it to listen to music. The iPods have gaming apps which provide more appeal to the users. University and college students Apple products such as MacBook, iPhone, and iPad to record notes. What makes these products more appealing to the students is the idea that they are light hence easily carried anywhere. Apart from being used by students, Apple products are also used in the business industry. The devices provide an avenue through which business people can easily communicate with the customers by either sending or receiving documents. (Bonk, 2015). Apple devices are used by young children for learning purposes. Parents or guardians can easily download learning and gaming applications. Adults use Apple’s devices such as iPhone to make calls, get map directions, view documents, access the internet, and use the camera to take photos. 8. Distribution Channels The company distributes its products through various channels including retail outlets, online stores among others. Currently, Apple has 463 retail outlets in 17 countries worldwide. Besides retail outlets, the organization has established thousands of online stores in about 37 countries which sell software and hardware. Customer can access Apple products through Apple.com, Apple retail stores (iStores), App Store. And other retailers. The distribution channels act as an avenue through which the company can store and sell its products. (Boone & Kurtz, 2013). It also provides safety services to the products. Apple’s Distribution Channel Structure 9. Cost Structure Apple Inc. is the price maker meaning that the market prices for all of its products is determined by the organization. Sometimes the company is forced to adjust prices due to shortage of most components and stiff competition in the industry. Over the recent past, price fluctuations due to external forces such as competition from other mobile phone manufacturers such as Samsung and Sony have directly affected its cost structure. The cost structure adopted by Apple Company varies according to the product portfolio. The prices charged by the company on its products depends on premium value proposition it gains from its key products. Key products produced by the organization include iPhone, iPad, Mac, iPod among others. The company pursues mass production to take advantage of economies of scale. This strategy of producing products in large volume enables the company to charge reasonable prices for its products. (Apple, 2012). Recommendation The key challenge faced by the company is cost reduction and means of increasing revenues in the uncertain business environment. There is need to optimize resources in order to compete favorably. The company should adopt finance-driven strategy which will enable it to focus more on new revenue streams hence reducing the cost of operations. The company is facing stiff competition from other companies such as Samsung. Apple should focus more on maintaining the quality of its products.