Introduction
Modern technological progress implies a high level of competition among the leading players in the market. Manufacturers of gadgets, smartphones, and laptops, such as Apple, Samsung, and Google, adopt each other’s technology and try to provide customers with a better product than the competitor. Each company chooses a specific business model that determines the way forward. However, the challenges posed by contemporary challenges require strategies to address them. The vertical integration method will solve one of the most pressing problems of Apple and give it an advantage over competitors.
Business models
To identify the business models of Apple, Google, and Samsung, it will be essential to highlight the features of it. According to Voigt and Muller (2021), the digital business model “aims at real-time capability, dynamics and self-control, focusses on customer needs and integrates all stages of the value chain” (p. 5). It is important to note that all three companies now focus on the Digital Ecosystem Model as the primary business model. This approach combines products and services into a single system that empowers users (Henry, 2021). The difference between the three companies may be the extent to which the ecosystem is integrated into the business model. Apple has done most of this because it provides a wide range of devices, such as iPhone, iPad, iMac, Apple Watch, AirPods, and others, and many services that combine all devices.
Problem
Although, as defined in the previous paragraph, Apple Inc. provides customers with a wide range of services and allows them to create an ecosystem from their products, it is also a manufacturer. Nevertheless, the company still depends on some manufacturers despite its size and financial viability. For example, to produce iPhones, companies need screens they cannot produce themselves. Consequently, Apple Inc. collaborates with other firms and companies, such as Samsung and LG, to provide screens as components for their devices. This approach may have both advantages and disadvantages. On the one hand, cooperation with other players in the market can increase the company’s ability to produce those devices that it cannot produce independently (Pijl et al., 2020). On the other hand, the company becomes dependent on these suppliers, and the success of some products depends directly on them. Because in today’s global market, there are often conflicts between countries, such as between China and the US, this business model becomes problematic.
Apple Inc. is no exception to these processes. In a recent conflict of economic interests between the two largest economies – the Chinese and the US economy, Apple Inc., led by Tim Cook, has been seriously concerned about the stability of the supply of specific components and the operation of its factories in China. Delays or the inability to supply some of the spare parts for iPhones, such as screens, put the company in a difficult position. Although, as a result, the countries had been able to agree among themselves, there was no guarantee that the situation would not recur. Consequently, the lack of control over some segments of the supply chain has been identified as a problem for Apple Inc. due to a certain level of dependency.
Problem Solving
The method of vertical integration was chosen to solve the problem and as an application of business and marketing strategy. This approach takes up a niche in the supply chain to increase independence from other suppliers. In addition, the benefits of vertical integration include improved product quality when production is established, and new technologies are adopted. It allows the company more flexibility in making decisions about the production of its products. The following reason why vertical integration was chosen is the special attention of Apple Inc. to the design of its devices. According to Kleineberg (2019), “vertical integration can facilitate coordination when it comes to product design” (p. 42). Since all significant components of the iPhone are produced and designed by one company, it will improve the overall look of the devices and increase the company’s visibility in the market. As Kleineberg (2019) states, “a coordinated product design would also lower production costs and might lead to a higher production quality as well as shorter lead times” (p. 42). Hence, vertical integration will help the company avoid situations where one supplier cannot meet its needs.
It is known that Apple Inc. pays considerable attention to the distribution of its products and retail segment. Apple Stores are located in the most famous cities in the world. Their design, which is designed by the well-known architectural firm Foster & Partners, is aesthetic and recognizable. These factors allow identifying Apple Inc. as a prominent retailer. Therefore, the backward method was chosen as the type of vertical integration. According to Hollensen and Opresnik (2019), “the retailer can make backward integration, seeking control of businesses at wholesale and manufacturer levels of the channel” (p. 288). It will allow the company to focus on its problems as a manufacturer and occupy appropriate niches in the supply chain. As a result, the company can produce components for its devices, particularly the iPhone, which will solve the problem mentioned above.
Conclusion
In conclusion, it will be essential to highlight that for every business model problem, there is a strategy to address it. This paper reviewed the digital business models of Apple Inc., Google, and Samsung, their features, and their differences. Particular attention was paid to identifying the problem in the Apple Inc business model, which was the lack of flexibility in the company’s supply chain. In addition, the advantages of backward vertical integration offered as a solution were highlighted. This approach allows Apple Inc. to improve in the role of manufacturer and take a more profitable position in the market.
References
Henry, A. (2021). Platform and collective intelligence: Digital ecosystem of organizations. John Wiley & Sons.
Hollensen, S., & Opresnik, M. O. (2019). Marketing: A relationship perspective (2nd ed.). World Scientific.
Kleineberg, C. (2019). Vertical integration and regulation: An analysis of vertical unbundling from a competition law and competition economics perspective. Springer.
Pijl, P., Lokitz, J., & Wijnen, R. (2020). Business model shifts: Six ways to create new value for customers. John Wiley & Sons.
Voigt, K. I., & Muller, J. M. (2021). Digital business models in industrial ecosystems: Lessons learned from industry 4.0 across Europe. Springer Nature.