Apple Inc. Vertical Integration Strategy

QUESTION

Your initial paper is an introduction to your topic that provides a general overview of the technology/firm/agency/innovation environment you have selected. Your goal is to survey the technology/firm/agency in question and to provide an initial overview of key issues. The paper would typically include:

a) A concise introduction to your focal point: concisely summarize the history and central issues, developmental obstacles, and/or debates that have surrounded your case. How did the technology develop, or how did the firm/agency start? What part of the firm/agency/technology’s trajectory are you going to focus upon, if your topic has an extended history? Are there controversies, divisions, or disputes that have characterized your firm’s/the technology’s/the agency’s development? Are there any debates concerning social or economic effects?

b) Initial analysis of critical individuals: You should provide an initial overview of key individuals or groups involved in your case. If you are studying an innovative firm: who are the key actors? What are their backgrounds? Where did they come from (other firms, universities, government labs, etc.)? How is the firm organized? Does it do most/all of its R&D internally? Or does it collaborate with other ventures? If a government agency, how do their operations generally proceed? Who do they typically work with, if relevant? How big is their budget? What is the agency monitoring and oversight process? How do they deal with risk? If you are focused on a technology, you should do your best to characterize what the literature says about its emergence. Did it come from one innovator, or a firm? From a “network” of related parties? From a series of unrelated breakthroughs that came together? Did it involve a radical breakthrough, or a series of incremental innovations? If you are reviewing a policy or larger set of institutions, you should provide an overview of your focal point, key actors or events, and an initial assessment of what you believe to be relevant aspects of the policy environment.

Your paper should be approximately 3 pages in length, not including bibliography, with standard 1 inch margins and 11-ish point font.

Please use APA format for your bibliography

Steve Jobs and apple. This case isn’t really about the technology advancement rather than the vertical integration method that Apple implemented. My current knowledge on this topic is that Steve Jobs wanted a company that wasn’t compatible with any other products than his own. I could go along the path about the first touchscreen phone, or the ipod which directed people away from “walkmans”. With Apple it may be easier to just analyze the organization or firm as a whole. It would be easy to see the obstacles and summarize the history behind their innovations. Also Steve jobs being a prominent individual he had his hands in almost everything when it came to research and development.

ANSWER

Analysis of Apple Inc.’s Vertical Integration Strategy and Technology Growth

Apple Inc. sought to be unique in its products by implementing the vertical integration method. This way, they could stand out and stay incompatible with products offered by other firms other than their own. With this strategy, it is easy to place Apple Inc. as an easier-to-analyze organization. Given the organization’s history and observable obstacles, this analysis will give the background to the virtual integration method and explain the players responsible for the strategy’s success to this day.

History of Apple Inc.

Steve Jobs and Steve Wozniak started Apple Inc. by building and selling Apple 1 from Jobs’s garage without a monitor, keyboard, or casing. They later added these components in 1977, the year they incorporated vertical integration. This strategy would then earn Apple Inc. the economic benefits of two business models. After Wozniak left Apple Inc., Jobs encountered obstacles that saw him also leave the company they founded. Apple would then face competition from Microsoft after the president failed to have parts of their software licensed. However, Apple managed to stay in the competition as they sought to implement various strategies unique from the competitors.

Wozniak and Job were college dropouts when they brought a new view on computers. After the company continued to grow and go public, Wozniak developed a diminishing interest in the company and left (Stanko 2015). Jobs then hired John Sculley, who he worked with for a short time, and left the company due to controversy with the new president Sculley. Sculley led Apple to a new collaboration with Adobe- a then-tiny company- to create desktop publishing. After a challenging business period from the 1980s to 1999, Scully bought out NeXT Software and sought Steve Jobs’s help, and made him CEO in 2000. After his comeback, Jobs allied with Microsoft, which led to the creation of the first Mac software. Strategic alliances like these ones lead to success in businesses as they help revive some aspects of business considered declining (Parise and Henderson 2001). Jobs then led the company to revamp the computers to form the iBook, iPod, and the mp3 player which led in the market.

In 2007, the iPhone touchscreen cellular phone was introduced and became a successful product and several series followed as Apple upheld the virtual integration strategy to dominate the market. Apple is also said to have formed an alliance to reduce its products’ size and extend its market. For instance, Apple’s Powerbook notebook computer was developed after collaborating with Sony. In 1991, Apple collaborated with IBM and Motorola to develop RISC Macintosh products.

Controversies

Although Apple Inc.’s success has been great throughout the years, there are controversies surrounding its technology that are often unsubstantiated. For instance, Apple Inc. faces accusations related to insufficient data security and misleading warranties in their products (Otte 2017). At the same time, most businesses now regard Apple’s virtual integration strategy as unethical as the performance of older devices is apparently getting throttled to keep their new line of products in demand. Despite these controversies, it seems that Apple Inc.’s investors are not spooked, and development continues as the company announced new developer tools and technologies meant to create better apps (Apple 2021).

Developmental Obstacles

Vertical integration has developmental obstacles related to the less flexibility characterizing the strategy. However, Apple Inc. took the strategy during its initial development to continue its product line for decades. For instance, Apple Inc. software products do not require external electronic devices and computer systems but the company’s own hardware and components; i.e., the company uses materials manufactured within the organization and not from external suppliers. The challenge of high costs could have been a point, but Apple Inc. is known for its significant investment in its products, considering their final pricing. Nonetheless, the main idea for Apple Inc’s founders was to make a computer small enough and user-friendly to be used in homes and offices.

Internal Research and Development

Apple does its most R&D internally as compared to its struggling years. According to business news flooding several media houses, Apple Inc. is now directing most of its total revenue towards R&D, which is shaking other tech businesses. For instance, macro trends (2022) report that Apple’s research and development expenses were $ 6.797B on June 30, 2022, an 18.89% increase from the last year’s R&D costs. Given the nature and size of the organization, Apple Inc. is monitored by the audit and finance committee, which also oversees processes in the company. However, the management, especially the R&D department, is keen to handle risks like employee loss, which form an integral part of R&D. risks related to copying and exposing business secrets are handled through extra measures, including copyrights and legal contracts with the employees.

Considering Apple Inc.’s unique Vertical Integration Strategy, it has stayed on top of the competition because of the notion that VI does not work for all organizations. This strategy gives the organization the advantage of less exposure to risks, which primarily arise from their relationship with the suppliers. For instance, if Apple only had their software devices placed into electronic devices and computer systems, they would likely counter software and hardware counterfeits from the black market and have a business disagreement with some suppliers. At the same time, vertical integration has enabled Apple Inc. to advance its products, existing and new, and its overall technology.

References

Apple. 2021. Apple Introduces New Developer Tools And Technologies To Create Even Better Apps. Apple.Com. Retrieved 13.10.2022. https://www.apple.com/ke/newsroom/2021/06/apple-introduces-new-developer-tools-and-technologies-to-create-even-better-apps/

Macrotrends. 2022. Apple Research and Development Expenses 2010-2022 | AAPL. Macrotrends. Retrieved 13.10.2022. https://www.macrotrends.net/stocks/charts/AAPL/apple/research-development-expenses#:~:text=Apple%20research%20and%20development%20expenses%20for%20the%20quarter%20ending%20June,increase%20year%2Dover%2Dyear.

Otte, Stephen J. 2017. “Whether The Department Of Justice Should Have The Authority To Compel Apple Inc. To Breach Its iPhone Security Measures.” U. Cin. L. Rev. #85 (2017): 877.

Parise, Salvatore, and John C. Henderson. 2001. “Knowledge Resource Exchange In Strategic Alliances.” IBM Systems Journal #40. 908-924.

Stanko A. 2015. The History Of Apple Company. Збірник тез Ⅷ всеукраїнської студентської науково-технічної конференції „Природничі та гуманітарні науки. Актуальні питання #1. 97-98.