Blog Post #2- Apple and Making Supply Chain Decisions
“Why Are iPhone 8, 8 Plus Component Suppliers Halting Production Next Month?” (http://www.ibtimes.com/why-are-iphone-8-8-plus-component-suppliers-halting-production-next-month-2642269)
“Poor iPhone X Sales Are Good News for Apple” (https://www.forbes.com/sites/ewanspence/2017/12/18/apple-iphonex-sales-q4-supercycle-fail-good/#65249141386e)
In response to low order numbers in 2017, Apple iPhone component suppliers are halting production for 2018. Other component suppliers have started to prepare for the consequences of decreasing iPhone orders. Apple claims that the low orders are believed to be due to seasonal factors. But, these declining orders for the iPhone 8 and 8 Plus began in the fourth quarter of last year, causing this trend to continue in 2018. In further research, a Forbes article, “Poor iPhone X Sales Are Good News for Apple”, states that this decline resulted in the release of the iPhone 8, 8 Plus, and iPhone X all around the same time. This continued decline insinuates that there is something else, not just seasonal factors, that is responsible for causing the trend.
Apple’s decline in orders relates to our class topic of Making Supply Chain Decisions. It is apparent that Apple is failing to properly evaluate business opportunities through the value in use method. The value in use method for a product, such as the iPhone, is the value or worth of that product in its intended use. There is a disconnect between Apple’s value in use and Apple’s customer value in use of the iPhone.
From Apple’s customer standpoint, they are asking themselves: is this new iPhone worth purchasing? This question takes into account order winners and order qualifiers in making their purchase decision. When an Apple customer is determining their need for a new phone they will look at factors such as camera quality, screen size, or any new benefits the phone will offer. These are considered to be the consumer’s order qualifiers, as they are the minimal level required from a set of criteria for a firm to do business in a particular market segment. These consumers will then weigh these new benefits against what they currently have. When this is done, the consumer will determine just how badly their desire is for purchasing this new phone. As a result, the consumer then creates a perception of what they individually are willing to pay for the new iPhone.
The consumer then assesses their individual perception against the price Apple is currently offering. When Apple offers the newest iPhone at a price in which consumers are not willing to pay, they lose the opportunity to increase iPhone orders and make the sale. This is because the price of the new iPhone exceeds the consumer’s desire for the benefits offered. For Apple consumer’s the order “anti” winner here is price. This is because the high cost of these new iPhones is the determining factor for consumers not wanting to purchase the newest iPhones. For Apple, the high price is the serving as a deterrent of the purchase of their products.
This is happening because Apple is not accurately assessing what price the iPhones should be sold for. The inaccurate price assessment is resulting in supply and demand issues. Based on the article, there has been a discrepancy between the consumer demand and the supply. Because of this discrepancy, suppliers are reaping the consequences of Apple’s actions.
Lauren,
Your demonstration of supply chain decisions through Apple’s recent downfalls is very relevant, especially to the students at the University of Richmond and even in our class today. You pinpoint exactly how important order qualifiers and order winners are to the success of sales of a product. The demographics at Richmond include students who are typically able to afford numerous Apple products, and typically able to purchase the latest iPhone. But as I walk around campus, I see very few people who have the latest iPhone X, and I have heard no desire to purchase it. People have begun to take consider what increase in value—typically done through new improvement—the latest products provide for them. With applications and changes that people, specifically college students, do not need the Apple iPhone X has failed.
I decided to do some additional research on how the company has changed since the passing of Steve Jobs. This particular article acknowledges the change in culture at Apple, and how it has begun to lose its focus without its former CEO, (www.news.com.au/technology/gadgets/mobile-phones/the-steve-jobs-effect-former-apple-employees-say-culture-changed-for-the-worse-after-jobs/news-story/3b5cbf923f41940622049b6d6edc45ff). I would also like to address the statement in the article that mentions Apple has become much less innovative since Jobs’s death. Apple has veered away from introducing products that fix issues that many people face, and shifted more to producing goods that focus more on the aesthetic and enjoyment. All the new technology in the iPhone X does not make peoples’ lives any easier or different than it was with the iPhone 7 or 7 Plus. As Lauren hinted at, Apple needs to focus more on the value in-use for consumers, and maybe then they can make a comeback.
“This is because the price of the new iPhone exceeds the consumer’s desire for the benefits offered. For Apple consumer’s the order “anti” winner here is price.”
Without a doubt, I totally agree. Where order qualifiers should be price, design, functionality, and look, the IPhone X tries too hard to make order winners for the consumer. Where facial recognition and augmented reality should be Apple’s order winners, it instead created an order “anti” winner which was price. Many classmates that I am with have not bought the IPhone X because of its ridiculous price point. Apple believed that they could provide an operations strategy where they provided a partial “Hybrid Office” option. Here, they provided top quality, somewhat low volume, but did not provide a successful variety option (especially for price). The IPhone 8 and IPhone 8 Plus could definitely be provided at a lower cost, and Apple would still be able to maintain their profits. However, they thought they would be able to raise the prices and maintain their market share. Honestly, my opinion is that they should focus further on accommodating the consumer with lower costs, similar to how they were able to sell a product like the IPhone 5C. There, they put lower costs into production, did not have a high price point, and were able to create lots of sales because they could invest into an entirely new market.