Strategic outsourcing involves separating out some of a company’s value creation activities within a business and letting them be performed by an independent entity. Indeed, Apple has outsourced various functions in terms of manufacturing, assembly and logistics as its contract manufacturers and outsourcing companies can perform several value-creation functions at a lower cost due to low-cost location and other competitive advantages. We are living in a globalized economy in which overhead and production costs are the single most important financial factor that can determine a product’s success or failure. Apple produces most of its products such as iPods, iPod minis and iPhone in China, thus ensuring a very low production cost and an increased US market attractiveness (Scribd, 2011).The single most important reason for outsourcing iPod and iPhone production to China is that the manufacturing costs are significantly lower than what it would cost to assemble in the United States or Europe. As Apples’ focus lies in the design of its products and its strength can be seen in the fields of innovation, creativity, and marketing, it makes sense that the company focuses on these value creation functions and outsources its manufacturing activity to contract manufacturers that specialize in this function. Therefore, Apple can reap benefits in terms of a lower cost structure, opportunities to differentiate its products, and increased focus on its distinctive competencies. Nevertheless, it has to be stated that the company bears risks with regard to holdup due to the dependence on it outsourcing partners as well as loss of control and information. One of the success reasons of Apple products is the outsourcing of application development. As a result of outsourced application development, application developers, who build different apps for different platforms not only that there are plethora of applications available, but also the outsource application developers have...
References: Scribd. (2011). Why iPods Are Made In China. [Online]. Available from: http://www.scribd.com/doc/969788/Why-iPods-Are-Made-in-China [25th June 2011]
Apple Articles. (2011). Outsource iPhone Application Development. Available from: http://applications.articlesapple.com/outsource-iphone-application-development/ [25th June 2011]
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