STRATEGIC MANAGEMENT FOR MARKETING

3V FRAMEWORK

TITLE – APPLE INC.

By

AASHNA SOOD – 1827228

ANUSHCA AGGARWAL – 1827131

POULOMI DATTA – 1827243

UMANG NAWANI – 1827126

RAJNISH KUMAR – 1827218

Institute of Management

CHRIST (DEEMED TO BE UNIVERSITY), Bengaluru

AUGUST 2019

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 TABLE OF CONTENTS
SR. NO. TOPIC PAGE NO.

1. INTRODUCTION 1

2. VALUED CUSTOMER 7
-Who are the valued customers?
-Are there customers who are unhappy with Apple products?
-Are there customers who have a need and are not being served
by the company?
- Should the marketing team try to reach customers who are
unaware that they need this product? If so, how could this need
be created?

- Who is the user? The buyer? The influencer? The payer?

What are the preferred criteria of each and their power in
the buying decision?
- Is the target segment large enough to meet our sales
objectives?
- What is the growth rate of this target segment?

3. VALUE PROPOSITION 13

- What is the core needs we are trying to address with our

value proposition?

- Does the value proposition fit the needs of our valued

customers?

- What benefits are we actually delivering to the

customers?

- Are our value proposition claims reinforced by

underlying product and service features?

- Is our value proposition differentiated from the

competitors or are we positioning in a crowded space?
- Are we positioning on attributed that we can
defend against competitive attacks?

- Are we positioning on too many benefits to be

credible?

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 4. VALUED NETWORK 19
- Can we serve the valued customers with the value proposition
at a profit?
- Do we have the necessary capabilities to deliver the value
proposition if not; could we acquire or partner with them?
-Would serving the valued customer have negative
consequences on our existing customers or businesses? If so,
how are we going to control this?
-Which high cost or low value-added activity could be
eliminated, reduced? Or outsourced in our value network?
-Where are the advantages of scale in our value network? Can
we maintain scale while not losing flexibility?
-How different is our value network from the rest of the
industry?
-What is our break-even point? Could we lower it by slightly
varying our value network?

5. REFERENCES 24

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INTRODUCTION

The 3V marketing mix is a method which aids in determining a company´s product strategy
as well as product portfolio. It represents an alternative approach to the marketing mix concept
and was created by Nirmalya Kumar. In contrast to the traditional 4P mix, Kumar defined his
marketing mix with the help of 3 Vs:

Valued Value
Customer Proposition
(Who to (What to
serve) offer)

Value Network
(How to offer)

Differences between strategic and tactical marketing:

From Marketing Segments to Strategic Segments: Strategic segments are those segments
that require distinct value networks, rather than just changes in the marketing mix. The
identification of strategic segments helps the business unit manager determine which value
network to deploy. If a company wishes to serve two different strategic segments, then it must
develop two unique value networks. Instead of simply aligning the four Ps, as is the case with
market segments, serving different strategic segments requires the alignment of other functions

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such as R&D or operations. As a result, instead of the four Ps, it is more appropriate to think
in terms of the three Vs—valued customer, value proposition, and value network.

APPLE INC.

We have chosen the company Apple Inc., which ranks 3rd in Fortune 500 companies list to
understand it’s 3Vs. Apple Inc. is an American multinational technology company
headquartered in Cupertino, California, that designs, develops, and sells consumer electronics,
computer software, and online services. It is considered one of the Big Four tech companies,
along with Amazon, Google, and Facebook. Apple is well known for its size and revenues. Its
worldwide annual revenue totalled $265 billion for the 2018 fiscal year. Apple is the world's
largest technology company by revenue and one of the world's most valuable companies due
to the high level of brand loyalty from its customers. It is also the world's third-largest mobile
phone manufacturer after Samsung and Huawei. It operates the iTunes Store, which is the
world's largest music retailer. As of January 2018, more than 1.3 billion Apple products are
actively in use worldwide. The story that they convey throughout their marketing is a powerful
one. It oozes lifestyle, innovation, passion and style – and why wouldn’t you want to be part
of that? It’s like an exclusive club that has millions of members.

A set of questions to determine the individual Vs are answered below with regard to Apple
Inc.

External Environment Analysis – Porters five Forces

Consumer electronics industry is a fast-growing industry. Technological changes in the

industry are very fast. Consumers are very demanding and it makes it necessary for the firms
to compete with each other and become the first mover or the best as a second mover in
bringing out a new innovation. The young generation in particular is very trendy and new
products are a fashion statement and so, and they are in a constant need of something new
and innovative. There are many players present in the market, and hence the competitive
rivalry is very high. The major players of the industry and the Competitors of Apple are Dell,
HP, Apple, Acer and Lenovo.

Although the demand in the market is high, there is a high entry barrier due to the
standardization of the components. Also, a high learning curve exists which means the

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customers take time to get accustomed with the new product. The existing brand names make
the entry barriers high and Exit barriers high.

Suppliers for this industry are powerful, their bargaining power is high. The suppliers are
hard to switch due to dominant production of such components. There is always a threat of
forward integration by the suppliers since the products manufactured by these suppliers are
highly sophisticated and the other components needed for the production are not so difficult
¬to imitate.

There are a number of substitutes available which makes buyers powerful to choose from the
available options and also because they are very price sensitive. The customers always have
an advantage of choosing the electronic good according to the need and taste. Therefore the
threat of Substitutes is very high and the bargaining power of buyers is also very high.

This industry has a vast customer base and companies have to be customer oriented and
should innovate according to their demand. Apple targets customers who are “techno savvy”,
who look for something unique. They have a wide range of products like computers (Mac
book), iPod and iPhone which are highly differentiated. Customers desire to buy its products
as they are “icons of the digital industry”.

Value Proposition

Value proposition is a company’s strategy that attracts customers to purchase its products.
The value proposition convinces customers that company’s products and service are the best
among all the rivals so that they will buy the products. Apple is a tech giant, and as such, it
encompasses a set of value propositions that make Apple’s brand recognized among the
consumers. It has a multi sided value proposition.

The three fundamental value propositions of Apple’s brand leverages on the Think Different
moto, reliable tech drivers for the mass markets and in 2019, Apple also started to emphasize
more about the privacy to differentiate from the other tech giants.

Values

Apple Values are the qualities, customs, standards, and principles that the company believes
will help it and its employees succeed. The values that govern Apple business conduct are:

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 • Empathy for Customers/Users

• Aggressiveness/Achievement

• Positive Social Contribution

• Innovation/Vision

• Individual Performance

• Team Spirit

• Quality/Excellence

• Individual Reward

• Good Management

VALUED CUSTOMER
1. Who are the valued customers?

Apple is a premium brand that is associated with a premium income level. It’s a brand that
everyone may want, but not everyone can afford. For this reason, the best customers for Apple
tend to be younger and wealthier, so millennials tend to be the next preferred targeted
demography after teenagers. Millennials are hooked into technology like no other generation,
exploit the benefits Apple can provide, and this leads to more wealth for them and more sales
for Apple.

Basis Target Customers

Geography US and International

Demography  Age: 17-45

 Gender: Male & Female

Socioeconomic  Income: High earners

 Social Class: Middle and Upper Class

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 Benefits sought  Sense of achievement and belonging
 Self-expression
 Speed of service
 Advanced features and capabilities

2. Are there customers who are unhappy with all the current offerings of the industry?

Apple customers huddle together in many places to whisper about their enthusiasms and woes.
Few offerings the customers are unhappy with are:

 USB-C cable provided with the new iPad Pros, that only supports USB 2 capabilities
 The lack of extension cable for the Macbook Pro charger
 Lack of storage on a 15-inch Pro
 USBC cable included in MacBook, MacBook Pro and MacBook Air models is only capable of
transferring data at 2.0 speeds
 Not enough battery backup for intense & hardcore users (only applies to the iPhone lineup).
 Apple TV remote design
 iPhone 11 rear camera design

However, whenever Apple does something new, people whine incessantly when they first see
it. Then they buy it and forget all about it because Apple sets the standard in consumer
electronics, so whatever Apple does becomes the new norm.

3. Are there customers who have a need but are not being currently served by the industry?

Apple is a company that is known to put ease-of-use as the main goal when designing a product.
Apple keeps evolving; thus, audience can always expect something new, fresh and exciting
from their latest product launch. They make the consumer feel like they are a better person for
having the product. The American Customer Satisfaction Index (ACSI) recently did an Apple
customer satisfaction survey in which the company scored 81 out of 100. Apple successfully
covers the safety, esteem, social and self-actualization needs.

However, there are certain needs of customers which Apple ignores:

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 When customers continued to complain about low capacity batteries, making it difficult to get
through the day on a single charge, Apple continued to make their phones thinner and more
powerful, but with no improvement to battery life. Apple offered to reduce the price of an out-
of-warranty iPhone battery replacement by $50 — from $79 to $29 — for anyone with an
iPhone 6 or later whose battery needs to be replaced.
 Apple just assumes users are savvy enough to learn new features on their own and do not
prepare customers for the transition. Example: Apple moved to facial recognition to replace
the fingerprint sign-on and verification, which required learning a new set of gestures and
replacing something that users liked and worked well.

4. Should the marketing team try to reach customers who are unaware that they need this
product? If so, how could this need be created?

Apple markets its products to cater to anyone and everyone who is looking for great value and
high quality – all over the world. Apple adopts a product-driven attitude. When it creates
products, it automatically assumes that there is a market for it; it’s just that the customers are
still unaware that they need the product Apple is developing. It is up to Apple, once the product
has finished development, to make the market realize that it wants and needs the product that
it has to offer. After all, according to Steve Jobs, the customer does not know what he wants.
The updates and upgraded versions of products that Apple has been doing in recent years is the
result of market surveys that it conducted, asking customers what products they liked, or what
specific features they thought were excellent or outstanding.

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 As almost all customers are unaware that they need Apple products, Apple markets its offerings
successfully by doing the following:

 Reach the early adopters: Apple has made it their mission to enchant the Technology
Enthusiasts and Visionaries, who can then act as banner-carriers to the rest of the market. They
do this on every possible front – from personalized engravings on your iPhone to equipping
elementary schools with iPads.
 Be Different and Simultaneously Understand the needs of customers: What really made
the iPod a hit seller weren’t its music-storage capabilities. It was the fact that (a couple releases
later), you could connect it to a PC. All you had to do was download iTunes. This meant
millions of PC users could now organize and listen to their music without the need for a Mac.
And for many of us, this was our first introduction to an Apple product in a long time. And we
loved it so much that we spread the word.
 Make it Easy for People to Change: Apple has a brand base with an unwavering belief in
their products. Once people are convinced that why you do what you do is worth it, making
believers out of them should be as quick, friendly and painless as possible.
 Build a Community of Customers: Over the years, Apple has built one of the most hardcore
fan bases for any brand, anywhere in the world. Apple has created a brand personality and
culture that’s cool, fun, and friendly — the opposite of some of its competitors.
 Design a Better Customer Experience: The “Apple experience” includes elements from
every aspect of the purchasing process – comparing different product versions, trying out
products in the retail store, actually buying the item, receiving it, unboxing it and setting it up.
The Apple retail store experience isn’t just a quick trip for most people. Most people who enter
an Apple store end up staying in the retail store, trying the products, asking questions of the
“geniuses” who work there – and many of them walk out with a new purchase. The Apple retail
store inspires purchases.
 Product placement and the buzz created by positive reviews in the media: 92% of
consumers trust recommendations they get from friends and family, while 70% of shoppers
trust opinions from other consumers that are published online, such as reviews.

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Like them or hate them, Apple’s marketing is a force to be reckoned with – and
something that has yet to be duplicated by other major technology companies.

5. Who is the user? The buyer? The influencer? The payer? What are the preferred
criteria of each and their power in the buying decision?

Preferred Selection Power in buying

Role Players
Criteria decision

User Students, Business professionals, Quality, Technology,

Moderate
adults, children Convenience

Buyer Quality, Price,

Technology,
Teenagers, Millennials, Adults Very high
Features, Design,

Privacy

Influencer Status, Quality,

Media, peer groups High
Experience

Payer High-income earner Quality, Cost Less

6. Is the target segment large enough to meet our sales objectives?

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 The financial results for the third calendar quarter and fourth fiscal quarter of 2018 is given
below:

For the full fiscal year, Apple generated $265.6 billion in sales with $59.5 billion in net
income, up from $229.2 billion in sales and $48.4 billion in net income for fiscal 2017.

Apple target segment is large enough to meet the sales objective.

 Apple focus on more than 25 countries in the world with total 507 apple exclusive store across
the world.
 Apple’s main target market is middle to upper class people because usually this demographic
has the means necessary to pay the higher premium price for Apple products. These people are
willing to pay a little extra for quality and have the income to do so.
 Although Apple is considered a premium brand and many products come with a premium price
tag, teens and millennials are considered one of the primary Apple target market demographics.
This is because they are attracted to the value of an I-Pod which was earlier very popular
product, Apple watch and this translates into wanting iPhones, Macs, and other products later
on in life.
 94% of Apple users are more affluent than those who purchase other brands of mobile devices.
 The average age of an Apple customer is 35 – 44 and 1 in 4 people in the 18 – 34 age
demographics say they plan to purchase an Apple product within the next six months.
 Apple also targets those who enjoy music. Apple’s products are all focused on the iTunes store
and the ease of music downloads. People who enjoy music and want an easy way to store, share
and purchase music are drawn to Apple products.
12 | A p p l e I n c .
 Also, professionals in the media and design fields also find Apple products to be preferable
because Apple products pride themselves on making creative functionality a key factor in all
of their devices.

7. What is the growth rate of this target segment?

Sales in billions
270
265.6
260 The sales growth rate of Apple:
250
240 = {(265.6-229.2)/229.2} *100
230 229.2
220 = (36.4/229.2) *100
210
2017 2018 = 15.88%
Sales

VALUE PROPOSITION

The three fundamental value propositions of Apple’s brand leverages on the “Think Different”
motto; reliable tech devices for mass markets; and privacy.

Business Canvas Model

13 | A p p l e I n c .
 1. What is the core needs we are trying to address with our value proposition?

Apple Inc’s addresses three core needs.

 Need for Innovation: Apple Inc launches a new generation of product every year. It improves
the performance and uses new technologies on the products to defeat the rivals in the mobile
phone, tablets, and computer market.
 Need for quality: In this era, customers are educated and have a strong need for quality
products. Quality is critical to satisfy customers and retain their loyalty so they continue to buy
in the future.
 Need for privacy: Privacy helps individuals maintain their autonomy and individuality. Apple
uses privacy protection to build customer trust and loyalty.

2. Does the value proposition fit the needs of our valued customers?

Yes, value proposition fits the needs of the customer because the customer considers apple
products as premium and Apple’s one of the value proposition is its brand and status. Another
need the customer looks for is good design which apple provides in each of its product. Quality
of the Apple product are superior than any of the products in premium range. Apple thinks
differently and launches a new product with some new technology or features which is then
copied by lower end phone. Therefore, we can say that Apple’s value proposition fit very well

14 | A p p l e I n c .
to the valued customers and so ones a customer purchases Apple product is always an Apple
customer.

3. What benefits are we actually delivering to the customers?

Value Proposition of Apple focuses on its customers for

1. Minimalist Design

2. Unique user Experience

3. Product Performance

4. Service at Apple Stores

The benefits provided by Apple to its customers are:

• User Focused – Apple calls itself successful in identifying user’s need - The MacBook Pro
power adapter with MagSafe Connector is just that: a magnetic connection instead of a physical
one. So, if the customer happens to slip over a power card, MacBook Pro won’t fall as; the cord
simply disconnects, without damage to either the cord or the system.

• Personalization - Apple personalizes its products according to the needs to the customers.
E.g.: iPad by laser engraving the text.

• Experience - Apple focuses on Memorable & Different, Fun experience provided to its
customers. Apple TV Ads emphasizes how much fun to be a Mac User.

• Personality and Coherency - Apple products & services are consistent through usability,
product design, communications. Take example of

• Simplicity and Ease of Use – Simplicity is the major strength of Apple. Apple positions itself
with Apple Mini as Simply Design. The Logical Navigational System & Well-designed of
menu elements makes the user experience better than competitors.

Innovation – Apple is known for its innovation; it uses inventors & artists in their
communication. For instance, in 1983 the Apple Lisa was the first home computer with a GUI
(graphic user interface). iPod connection with Nike shoes and live chat or schedule an
appointment at an Apple Store Genius Bar are other examples of Apple’s innovation.

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Customers are buying experiences. They are buying safety, comfort, convenience, simplicity,
productivity. Apple delivers hope, satisfaction, escape or vanity. In other words, customers
aren’t aware of their wants until they use Apple products. They trust products unseen which
have a reputation of delivering that which they think they might like, without knowing what
that is. By employing the product, and effort, time, mental energy and repetitive actions;
customers learn to exploit a product to achieve satisfaction.

4. Are our value proposition claims reinforced by underlying product and service
features?

Apple’s value proposition claims are reinforced by underlying product and service features as:

Performance - iPhone batteries use lithium-ion technology. Compared with older generations
of battery technology, lithium-ion batteries charge faster, last longer, and have a higher power
density for more battery life in a lighter package. Rechargeable lithium-ion technology
currently provides the best technology for your device.

Sustainability – Apple is environmentally focused and is continuously working to reduce its

environmental footprint and is focusing on climate change, resources, and safer materials. For
example, the latest generation MacBook Pros use 61% less energy than the previous generation.
The HomePod while playing music, consumes less power than the average LED lightbulb.

Privacy -Apple talks about its Privacy in its value proposition, as its products are designed to
protect the customer’s privacy. It doesn't gather the customers personal information to sell to
advertisers or other organizations. Apart from that, the data used to identify the customer for
Touch ID and Face ID is converted into mathematical representations that are encrypted and
protected by the Secure Enclave on the device, where they cannot be accessed by iOS or apps.
It isn’t stored on Apple servers or backed up to iCloud.

Safety - Apple has integrated theft prevention software into the operating system, which makes
it easy to track where your iPhone goes if it's stolen, and impossible to wipe it or turn off the
GPS tracker without entering your password.

5.Is our value proposition differentiated from the competitors or are we positioning in a
crowded space?

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According to Apple’s existing value proposition, it has positioned itself to a certain type of
customer, wealthy people, innovators, people with good jobs, good lifestyle, etc. Customers
have a great trust on company’s elegant products and they always look forward to be loyal to
the brand. It serves in a competitive market to a niche segment of customers.

Apple has a “Think Different” motivation and it believes in “Value Creation”. The success of
some products like iPod and iPhone cannot decide its sustainable competitive advantage
because the industry has intense rivalry and imitation is also a threat. Hence, Innovation plays
a key role to remain the leading company in the dynamics of fast-growing markets, and Apple
definitely can withstand the changes with its innovative skills. Apple has been able to command
a premium in market and gain above average returns owing to its innovation and differentiation
of technologically superior products.

• Apple keeps its “Price strategy” different from its competitors which give computers and
other entertainment devices at low cost. The high prices (especially Computer) keep it access
limited to only people with high income level. There are no substitute products, or similar
machines that customers can buy to have the same user experience.

• Unique Resources - The Core competencies responsible behind the success are mainly the
Unique resources and Differentiation strategy. It offers the best designed hardware and
incomparable software in its products. For example, Apple has been giving “Plug and Play”
solutions. The hard drive-based player called iPod has a stunning design which has become the
“icon of the digital age”.

• Customer Experience - Apple’s number one priority are their customers and its goal is
unsurpassed the user experience. Apple handpicks the tile for their retail stores. They hide the
wires, cash registers, and clutter so the audience can focus on their products. They offer free
Wi-Fi, they let the customers play with the computers are unlimited in number so nobody has
to wait. The staff performance is very high at the Apple stores.

• Design - Apple’s dedication to design is so strong that the design team has precedence over
the engineering team. In other words, the designers dictate the mold and user experience, and
the engineers have to match the hardware so it’ll fit inside.

6.Are we positioning on attributed that we can defend against competitive attacks?

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Apple Inc. makes a difference in the industry through its innovative product design and high
standard applications. Macintosh has been the powerful tool to build the success story of the
company. The “integrated system” of computer was its differentiated strategy which presented
the Macintosh along with its own Operating System (OS). Apples’ Iphone is designed to deliver
an experience that is simple and easy to use. All of this is only possible through a combination
of advanced technologies and sophisticated engineering.

Apple’s Reliability Testing Lab amplifies real world conditions to make sure the device can
last in the hard conditions of the surroundings.

• Advanced Products - Battery Service, Apple uses rechargeable lithium-ion technology as it

provides the best performance for their devices. Compared with older battery types used by the
competitors, lithium-ion batteries weigh less, last longer and charge more efficiently.

• Least Environmental Impact - Disposal of battery directly is harmful for the environment.
Apple ensures recycling of their batteries and protection of the environment, provided the
customers get their Apple batteries serviced only through Apple or an Apple Authorized
Service Provider.

• Innovation and standard of high performance - Apple innovation goes into the materials of
Apple’s products. For instance, the new MacBook Air and Mac mini, their enclosures are made
from 100 per cent recycled aluminum, without compromising strength or finish.

• Operating System Compatibility – Apple claims that IOS updates the older device with new
capabilities. While it's to be expected that older phones will eventually lose support for the
latest OS, Apple's support for older phones is generally better than Android's. For example:
IOS 12 was released in 2018 but is optimized for devices as far back as 2013. Thus, older
models can be updated with the latest features, functionality and security.

• Hardware - Only Apple’s iPhones, has extremely tight control over how the software and
hardware work together, therefore they are of a higher quality. Whereas; its competitors;
Google offers the Android software to many phone makers, including Samsung, HTC, LG, and
Motorola, which are more prone to problems.

• Integrated system - Most people use a tablet, computer, or wearable in addition to their
smartphone. For those people, Apple offers a more consistent and integrated experience.

18 | A p p l e I n c .
 • User Experience - iPhone is balanced out by quality and attention to detail, a device that just
looks and is well-integrated with other products, it delivers a high-quality experience, and is
easy to use.

With the above-mentioned attributes Apple can defend itself from the competitive attacks.

7. Are we positioning on too many benefits to be credible?

Apple is positioning many benefits, but not in excess, to be credible. It positions itself with it
great visibility in the marketplace and helps build consumer loyalty. The company’s strong
branding, and the interrelationships between its products, encourage customers who buy one
Apple product to try another. Products such as the iPhone, iPad and Mac share the same
software and applications, and operate in a similar way, making Apple a natural choice when
customers are considering another device. Apple company was the first producer who created
a powerful and convenient smart phone with touch screens.

Apple’s Apps were connected to a lot of businesses such as Air Canada, Nike, Facebook; these
relationships certainly render the Apple company a much stronger one in the world. Therefore,
more and more people became aware of the company and the strength of its products.

VALUE NETWORK

1. Can we serve the valued customers with the value proposition at a profit?

Yes, Apple can serve its valued customers with the value proposition at a profit. This is because
of unique marketing skills and the value network of Apple. They primarily target a niche
segment according to spending capacity. But, they do not forget about the other segments. A
lot of sales for apple also happen because of the spillage.

A signal that if you were using Apple products, you were part of the cool kids. This is why
every advertising agency had to have an Apple computer. It was a signal they were sending to
their clients (we’re creatives and have cool ideas) as well as their employees (here’s a cool
place for work). In many cases, it’s also interesting to define your audience by who you aren’t
targeting. In the case of Apple, they weren’t interested in the laggards.

So, Apple earns profits by charging its customers for high quality product topped up with great
features and facilitated by efficient Marketing Efforts.

19 | A p p l e I n c .
2. Do we have the necessary capabilities to deliver the value proposition if not; could we
acquire or partner with them?

Yes, Apple does have the necessary capabilities to deliver the value proposition and even has
the capacity to partner with them or acquire them. Apple is full-fledged when it comes to
delivering the value proposition to its customers. It is also known that Apple can make or break
a supplier. Being known as a supplier to it has definite value. The value lies in the fact that
Apple is recognized as having a high-quality build spec, so a relationship reflects well on that
supplier’s products. And even if Apple doesn’t name a company as a supplier, its name will
still leak out. So, from the supplier’s side, there never arises any issues.

Value network of apple consists of all these suppliers and other alliances. Not to forget, Apple
is capable enough to go for acquisitions if required which was very well evident by some
of Apple's big acquisitions in the past which include its $400 million purchase of Shazam in 2017 and
its $3 billion acquisition of Beats in 2014. Hence, Apple would continue delivering value proposition
without any glitch and if any arise, they are good enough to trade off that glitch with acquisitions.

3. Would serving the valued customer have negative consequences on our existing
customers or businesses? If so, how are we going to control this?

No, serving valued customers do not have negative consequences on Apple’s existing
customers or businesses as the brand name has a great goodwill in the market which is very
tough to disturb. Even if Apple serves only one segment of customers, still a lot of spillage
leads to providing value proposition to customers who were not targeted which is evident from
the example in question one and also by how market for Apple developed in India. Value
delivers amazing value propositions to its customers due to which no negative consequences
can arise and even if they do, the value network of Apple is good enough to come up with a
solution for it in a jiffy.

4. Which high cost or low value-added activity could be eliminated, reduced? Or outsourced
in our value network?

Efficient Business analysis skills of Apple has helped it till date to optimize its activities. There
not has been a time where Apple suffered a high cost due to the activities. Optimal utilization
of available resources and great business intelligence has always kept Apple one step ahead of
time. Even before high cost or low value activities start bothering Apple, they outsource those
activities till now. The whole operations of Apple are very well planned from the scratch and

20 | A p p l e I n c .
 do not let the productivity decrease. The strong value network supports the company to
undertake its activities commendably. In future also, if any high cost or low value-added
activity is discovered by Apple, the Business analysis team would figure it out well ahead of
time and will fulfill the outsourcing requirements in a snap as evident by acquisition of 2014
& 2017 or by Foxconn and Apple relationship which transformed the whole Tech sector.

5. Where are the advantages of scale in our value network? Can we maintain scale while
not losing flexibility?

Apple follows demand economies of scale rather than supply. Demand economies of scale are
driven by efficiencies in social networks, demand aggregation, app development, and other
phenomena that make bigger networks more valuable to their users. In the case of apple, they
have their own operating system which is widely treasured for its technological feat. This has
given them a network effect advantage that is extremely difficult for competitors to overcome.
Demand economies of scale are the fundamental source of positive network effects, and thus
the chief drivers of economic value in today’s world. Apple follows growth via network
philosophy. Once someone who buys a single Apple product is introduced to their ecosystem,
evidently the customer comes back to Apple for other products as well. Apple has always
maintained a strong position in the market when it comes to the scale of their products, hence
they have always strived to design better products and have never lost the flexibility. But if you
assume that a person who uses will want to use an android smart watch, well then Apple might
not be flexible in this situation.

6. How different is our value network from the rest of the industry?

Apple has a very large supply chain and when it comes to obtaining raw material, it has several
options before it. A very large number of its major suppliers are located in Asia in China and
Japan. Some of its major raw material suppliers include 3M and Foxconn. Based on its financial
clout Apple enjoys high bargaining power with respect to its suppliers. It has set quality
standards for its suppliers so that they maintain the highest quality standards for their goods
and services. The manufacturing of the Apple products takes place in several nations. However,
it is mainly China where its products are assembled and that is why several of them bear the
tag of Made in China. Apple has also engaged the Indian government in talks and
manufacturing may soon start from there. While a large part of the assembly takes place in
China, a smaller part takes place in the other nations too. Labor costs have been lower in the
Asian nations which reduces the manufacturing costs for Apple. Apart from it, Apple has also

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 focused on reducing the use of toxic substances in the manufacturing and assembly of its
products. Recyclable material is now more in use at Apple. Apple has managed a very large
distribution channel consisting of both direct and indirect channels. From retail stores to online
retail and its sown branded stores, Apple has managed a very large channel for the distribution
of its products to the customers. Apple is a famous brand whose products are known for quality,
design and technological innovation. Any new product from Apple is like news that is
highlighted not just by media but several other sources including small and big websites. Apple
provides comprehensive after sales support to its customers. Most of the products from Apple
come with a 90 days complementary support and a one-year limited warranty. Apart from it,
there is online store help available for the Apple customers. They can check their order status
online. Customers can chat with experts or call Apple for help. Customers can get their phones
or other Apple products repaired at a local Apple authorized service provider or an Apple store
with genius bar. Apple spends heavily on research and development. Its brand is known for
technological innovation and for the great quality and unique designs of its products. In order
to maintain its competitive advantage, the brand has to invest a lot in R&D. The style of HRM
has changed a little in times of Tim Cook. Apart from inclusion and diversity, the new CEO
has brought several changes that are aimed at changing the reputation of Apple in terms of HR.
Procurement is also a key focus area at Apple. It has managed excellent relationships with its
suppliers. The suppliers are required to provide the workers with safe working conditions and
to provide products and services as per the standards. Any organization’s infrastructure has a
key role in the success of the organization. From management to financial and other resources
plus the culture and structure, all these things form the infrastructure of any firm. The better
the management of a firm’s infrastructure the higher the ability of creating profits for any firm.
In the case of Apple, it underwent a major cultural change recently.

7. What is our break-even point? Could we lower it by slightly varying our value network?

Apple attains its break-even point very early on when they introduce a new product. They have
always positioned themselves as high-end sophisticated brand which is priced higher than any
other product in the market. The overall actual expense of Apple products is around 20-25%,
and every other dollar above that is a profit for the company. For eg, last year Apple product’s
prices touched a new high with the release of Apple X, now this product saw one of the lowest
sales of an Apple product ever. To combat this, the company came up with a wider range of
products, which were priced much lesser than Apple X where they removed some of the
features to help gain more customers. So, they have already made necessary changes in their

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value network to lower the break-even point. Even in this case, Apple will yield huge profits
because of the positioning they enjoy in various industries they release their product in.

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 REFERENCES

1. Apple’s value proposition | Junyuan Deng's Blog. (2013, September 29). Retrieved from
https://blogs.ubc.ca/junyuandeng/2013/09/29/apples-value-proposition/
2. What is the Apple Business Model? (2018, September 13). Retrieved from https://www.denis-
oakley.com/2018/09/13/what-is-the-apple-business-model/
3. Customer perceived value for a apple inc customer. (n.d.). Retrieved from
https://www.ukessays.com/essays/marketing/customer-perceived-value-for-a-apple-inc-
customer-marketing-essay.php
4. Apple’s High Customer Value | HuanLing (Katherine) Cui. (2013, October 22). Retrieved from
https://blogs.ubc.ca/katherinecui/2013/10/22/apples-high-customer-value/
5. Bary, E. (2019, 14). Apple worth $1 trillion for first time in 2019 after detailing new iPhones,
streaming pricing. Retrieved from https://www.marketwatch.com/story/apple-crosses-trillion-
dollar-threshold-after-pricing-surprises-2019-09-11
6. The world's most valuable brand: Apple's secret to success. (n.d.). Retrieved from
https://blog.bynder.com/en/the-worlds-most-valuable-brand-apples-secret-to-success/
7. Marvin J. Strauss. (2018, March 9). Why Apple is Best When it Comes to Understanding
Customers. Retrieved from https://betterthansure.com/why-apple-is-best-when-it-comes-to-
understanding-customers-6913acbb19e4?gi=87bb4a6b6a01
8. Heisler, Y. (2015, May 26). Apple’s secret weapon: Incredible customer service. Retrieved
from https://bgr.com/2015/05/26/apple-customer-service-genius-bar/
9. Apple's Value Proposition to its Customers. (n.d.). Retrieved from
https://prezi.com/nqqdzi9ylqis/apples-value-proposition-to-its-customers/
10. How Apple Creates Value... By Creating Customers. (2016, September 20). Retrieved from
https://intrinsicinvesting.com/2016/09/20/how-apple-creates-value-by-creating-customers/

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