Is Apple more like Zara ? How can the ipad be sold for $ 500 ?

A article in WIRED magazine (February 21, 2011, Brian X. Chen) asks the question – how can the ipad be sold for $ 500 when other manufacturers cannot attain that price ? The answer suggested is that Apple is, for most part, a vertically integrated company, except for outsourcing the guts of its manufacturing.  It controls the retail store, the iTunes software ecosystem (music, video, books and apps), the hardware and chip design as well as the operating system.   Controlling everything enables elimination of double marginalization and a more streamlined supply chain. The author claims that the sales at WalMart and Bestbuy only enable more buzz and do not contribute to a large volume.  However, owning the prime real estate for the stores is expensive, and vertical integration has its risks – all it needs is a sales stumble to reveal its frailties.  Could one argue that ,given its vertically integrated strategy, survival requires a continual series of exciting products that ramp up demand rapidly and a nimble supply chain ? In short, is Apple more like Zara (the Spanish apparel chain)  in its global supply chain execution ?

 

About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues and tagged , , , , , . Bookmark the permalink.

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