Running head: BUSINESS MODEL CANVAS 1

Business Model Canvas of Apple Inc.

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Business Model Canvass for Apple Inc.

Business model canvas is a lean startup and strategic management template which is used

for documenting and developing new business models. Business model canvas contains elements

which describe the company’s key partners, activities, resources, value proposition, customer

relationships, customer segments, channels, revenue stream, and cost structure. To the

organization, business model canvass helps in developing a portfolio of ideas. (Dudin, Kucuri,

Fedorova, Dzusova, & Namitulina, 2015). Managers who want to improve the effectiveness of

their business model and organization, as well as to increase their own ability to manage, use

diagnostics/assessments to determine the reality of business effectiveness in comparison to what

they originally envisioned. Good feedback contributes to the development of plans to improve

business/organizational effectiveness and management performance. in this paper, I am going to

conduct an assessment of business model of Apple Inc. using business model canvas.

The objective of this report is to explain the business model canvass of Apple Inc. Apple

Inc. is one of the global leading manufacturer of telecommunication and electronic devices. In

this paper, key business partners together with suppliers will be discussed. Major services

offered by such business suppliers and other partners include assembly, distribution, and

manufacturing of the corporation’s products. The giant distributor is creating value through the

provision of modern technology products. Apart from modern technology, Apple Inc. is creating

value by handling consumers’ complaints and needs with the help of Genius Bars. Apple Inc.

distributes its products with the help of various retail outlets, retail stores, and online stores. The

company operates with many resources amongst them being the people who are the employees,

intellectual properties and physical assets. Additionally, the largest source of revenue for the

organization is the sale of iPhones followed by the Macs and iPads.

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1. Key Partners

Apple’s key partners include Apple store Developers, manufactures, Publishers and

Music, Cellular services, movie, and Television show industries. Each of the key partners play a

specific role to the organization.

Apple Store Developers. Apple store Developers provides an avenue through which the

users can access and download mobile applications on their iPhone smartphone, iPod Touch,

Apple watch, and iPad tablet computer. The users are allowed to browse and download

applications developed with the company’s iPhone operating software development kit.

Music Industry. Apart from partnering with Apple store Developers, the company is also

working with music industry to provide entertainment to the users of its products. Over the past

years, Apple has succeeded in reinventing and redefining certain elements of the music industry.

The introduction of iTunes 14 years ago has helped to revolutionize the music industry. In the

year 2003, the company launched iTunes, a platform which enabled the organization to sell

MP3s. Single MP3 was sold for $0.99 each. From that point, the company grew the platform into

a widely spread and profitable investment. iTunes eventually became the leading music retailer

in the United States. (Arditi, 2014).

Television and Movie Industry. Besides investing in technology, Apple has also invested

in television industry through its Apple TV app. This application enables users to watch shows

and movies in 4K HDR quality. It allows users to stream live news, sports and other

entertainment contents from apps such as Hulu, Netflix, and ESPN. The company has also

partnered with Hollywood producers to air some of its contents through Apple TV. This is meant

to boost the views on the TV from which it will open avenues for advertising and other

businesses.
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In general, these key partners play various roles to the company including software

development, selling of the company’s products, provision of raw materials, assembly services,

and manufacturing facilities. The following is the list of the top ten partners of the organization

along with main activities carried out by each of them.

1. Verizon (among the biggest seller of iPhones)

2. AT & T (among the biggest seller of iPhones)

3. Foxconn Technology Group (largest electronic manufacturer globally)

4. Intel (microprocessors manufacturer)

5. TPK Holdings (the largest touch panel supplier globally)

6. Samsung Electronics (largest memory chip maker worldwide)

7. Quanta Computers (MacBook and iMac computer manufacturer)

8. Toshiba (flash drivers and LCD panel supplier)

9. Wintek (touch screen supplier)

10. Catcher Technology (leading maker of aluminum and magnesium casings)

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Key Suppliers

Apple Company has various suppliers but top 200 suppliers provide 97% of the

corporation’s needs which include manufacturing, supply of material, and assembling. Majority

of the suppliers come from the Asian countries. They operate under strict regulations and rules to

meet and if possible exceed the expected quality and demand of the customers. The organization

has established a strong and close relationship with its suppliers by providing them with the

required support so that they can operate well. (Christopher, 2016). Examples of Apple’s main

suppliers include the following:

i. Analog Devices Inc. which provides capacitive touch screen controllers for the Apple watch

and iPhones. The company is based in China. Analog Devices Inc. supplies these products

from the Philippines, Ireland, and U.S.-based stores.

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ii. 3M Co. This is a U.S.-based company which manufactures genuine screen protectors for

iPhone.

iii. Samsung. The company has three different subsidiaries including Samsung Electronics Co.,

Samsung Electro-Mechanics Co. Ltd, and Samsung SDI. Co. Ltd. These subsidiaries are

situated in four different economies (China, South Korea, the Philippines, and the United

States). It’s among the biggest supplier of Apple. It supplies various components such as

flash memory used for storing contents of data, the mobile DRAM used for multitasking

different apps in devices, and application processors which controls and keeps the entire

device running.

iv. Micron Technology Inc. This company together with its subsidiaries operates within the U.S.

Singapore, Taiwan, Japan, and China. They supply different memory modules such as

LPDDR3, LPDDR2, LPDDR4, and DRAM for Apple devices. These modules enable

electronic devices and smartphones to effectively multitask and run different applications.

The latest iPhone X uses LPDDR4 which makes it 60% faster compared to the previous

model.

v. Glue Mobile Inc. This is the largest supplier of iOS games and apps. Reports have indicated

that the firm generates 64% of its revenue from the Apple Company.

vi. Jabil Circuit Inc. which supplies casings for iPhones. Apart from producing casings, the

organization also produces various components such as medical device miniaturization and

computer numerical control tools. It also offers services such as product design, ideation,

creation, and development. Reports indicates that 20% of its revenues come from the sale of

casings to the Apple Company meaning it is a large supplier to the organization.

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vii. Nidec Corp. This is the leading supplier of taptic engine, a technology recently incorporated

in the Apple watch. This technology produces the sensation of being tapped on the wrist.

2. Key Activities

Apple Inc. engages in various activities ranging from software development,

manufacturing, design, quality control, and distribution. These activities have resulted in creation

of value proposition for the organization. The company has invested a lot in marketing of its

products. Apart from marketing, Apple has been investing a lot in research and development.

"The Company keeps on growing new advances to upgrade existing items and to extend the

scope of its item offerings through innovative work, authorizing of protected innovation and

obtaining of outsider organizations and innovation. Total research and development expense was

$4.5 billion, $3.4 billion and $2.4 billion in 2013, 2012 and 2011, respectively” (Apple Inc.,

2012). It has adopted a unique marketing strategy which has made the company’s products to

stand out in the market. In most cases, Apple has always been focusing customer needs, a

strategy which has enabled it to design products which meets the needs and demands of its

consumers.

3. Key Resources

Apple has expanded to become among the most valuable and profitable organizations in

the globe. The company serves millions of clients around the globe through its retails retail

outlets located in different parts of the world. Since its establishment, the company has managed

to establish 497 stores in 17 countries. 269 retail stores have established in the United States and

228 combined in Canada, Belgium, Australia, China, France, Brazil, Hong Kong, Italy,

Germany, Macao, Mexico, Japan, Singapore, the Netherlands, Sweden, Spain, Taiwan,

Switzerland, Taiwan, United Arab Emirates, United Kingdom, and Turkey. In addition to the
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distribution networks, the company has got also other physical resources such as vehicles,

buildings, and systems. Currently, the company has employed 116,000 full-time employees

operating in various countries. As at 2012, Apple has employed 47,000 employees in the United

States. In addition to human and physical resources, Apple is richly endowed with intellectual

resources. Intellectual resources refer to the company’s employee skills, business training, and

proprietary information which may provide the organization with a competitive advantage.

(Dzenopoljac, Dzenopoljac, Yaacoub, Yaacoub, Elkanj, Elkanj, & Bontis, 2017). It is the

collection of overall informational assets which an organization has at its disposal which can be

used to drive revenues, create new customers, gain new clients, or improve the business. In the

Apple Company, some of the intellectual resources include Copyrights, Trademarks, and Patents.

4. Value Propositions

Key value propositions of the Apple Company include:

i. Performance

ii. Design

iii. Usability/Convenience

iv. Brand/status

The company provides value to the consumer through the following:

i. Convenience. All the products produced by Apple including phones, tablets, PCs are user

friendly.

ii. Improving the value by expanding the storage capacity and increasing speed in their

subsequent new models.

iii. Coming up with a design which is simple and unique from other brands preferred by the

clients.
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iv. Reducing the risk through guarantees and warrants. This is meant to save clients from

risk.

Apple’s value proposition extends to provision of solution to various problems faced by

customers. The solution entails provision of various products and continuous improvement of

products through launch of new models for every product. For instance, recently, the company

has launched iPhone X. These continuous improvements have not only helped to provide

solutions to hardware and software-related issues, but has helped to meet the ever growing

consumer demand for Apple’s products. Nowadays, every new feature that the customer wants

but it’s in their mind, Apple turns it into reality.

5. Revenue Streams

The main source of revenue for the company is the sale of iPhones. In the unaudited

financial statement released by the company in early November this year, the sold 46,667

iPhones which yielded $28,846. The second largest source of revenue came from the sale of
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iPads which yielded $4,831 after selling 10,326 units. Other revenues come from sale of Macs

and other products such as Apple Watch, Apple TV, Beats products, Apple-branded and third-

party accessories, and Apple touch. Additionally, Apple also obtains revenues through its

services such as Apple Pay, Digital Content and Services, licensing among other services. Based

on the same unaudited report released on early November this year, the company generated

$8,501 from sale of services and $3,231 from sale of other products like Beats products.

6. Customer Relationships

Customer handling at the company has proved to be a significant source for the success

of the company. Indeed, customer relationship has emerged as a secret weapon for the success of

the company. The organization carries various activities for maintaining better customer

relationships. Main activities conducted by the company with the aim of improving customer

relations include the development of Genius Bar. Genius Bar is a tech support platform located

inside Apple’s retail store. The system provides concierge style support for clients of Apple

products. (Blenko, Waldron, Cornelius, Nespoli, & Lee, 2016). The establishment of Genius

Bars has enabled the company to provide solutions to various software and hardware-related

issues. Consumers bring their devices at these platforms and the experts present at these areas

work to fix the problems raised by the clients. This is carried out because Apple knows how to

deal with clients.

The company has invested heavily in advertisements to offer information to both

potential and existing customers. According to the Business Insider, Apple Company spent $97

million on advertisement in 2016. Apart from using advertisements to create customer awareness

and relationship, Apple also provides guarantees and warranties to its customers. Provision of
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warranties and guarantees are meant to create customer confidence with the company products.

Currently, Apple is providing 1-year warranty to all of its products.

7. Customer Segments

The targeted consumers for the products and services offered by Apple Inc. include

teenagers, business people, university and college students, adults, and young children.

Teenagers use the iPods to socialize with friends, go on Facebook, twitter, MSN, among others.

They also use it to listen to music. The iPods have gaming apps which provide more appeal to

the users. University and college students Apple products such as MacBook, iPhone, and iPad to

record notes. What makes these products more appealing to the students is the idea that they are

light hence easily carried anywhere. Apart from being used by students, Apple products are also

used in the business industry. The devices provide an avenue through which business people can

easily communicate with the customers by either sending or receiving documents. (Bonk, 2015).

Apple devices are used by young children for learning purposes. Parents or guardians can easily

download learning and gaming applications. Adults use Apple’s devices such as iPhone to make

calls, get map directions, view documents, access the internet, and use the camera to take photos.

8. Distribution Channels

The company distributes its products through various channels including retail outlets,

online stores among others. Currently, Apple has 463 retail outlets in 17 countries worldwide.

Besides retail outlets, the organization has established thousands of online stores in about 37

countries which sell software and hardware. Customer can access Apple products through

Apple.com, Apple retail stores (iStores), App Store. And other retailers. The distribution

channels act as an avenue through which the company can store and sell its products. (Boone &

Kurtz, 2013). It also provides safety services to the products.

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Apple’s Distribution Channel Structure

9. Cost Structure

Apple Inc. is the price maker meaning that the market prices for all of its products is

determined by the organization. Sometimes the company is forced to adjust prices due to

shortage of most components and stiff competition in the industry. Over the recent past, price

fluctuations due to external forces such as competition from other mobile phone manufacturers

such as Samsung and Sony have directly affected its cost structure. The cost structure adopted by

Apple Company varies according to the product portfolio. The prices charged by the company on
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its products depends on premium value proposition it gains from its key products. Key products

produced by the organization include iPhone, iPad, Mac, iPod among others. The company

pursues mass production to take advantage of economies of scale. This strategy of producing

products in large volume enables the company to charge reasonable prices for its products.

(Apple, 2012).

Recommendation

The key challenge faced by the company is cost reduction and means of increasing

revenues in the uncertain business environment. There is need to optimize resources in order to

compete favorably. The company should adopt finance-driven strategy which will enable it to

focus more on new revenue streams hence reducing the cost of operations. The company is

facing stiff competition from other companies such as Samsung. Apple should focus more on

maintaining the quality of its products.

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References

Apple Inc. (2012). Corporate Governance Guidelines. Retrieved from

http://investor.apple.com/governance

Arditi, D. (2014). iTunes: Breaking barriers and building walls. Popular Music and

Society, 37(4), 408-424.

Blenko, D., Waldron, K., Cornelius, J., Nespoli, G., & Lee, D. (2016). ORGANIZATIONAL

ANALYSIS: APPLE RETAIL STORES.

Bonk, C. (2015). The impact of Apple's communication and French and Finnish consumers'

product perceptions: case of the iPhone product.

Boone, L. E., & Kurtz, D. L. (2013). Contemporary marketing. Cengage learning.

Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

Dudin, M. N., Kucuri, G. N., Fedorova, I. J. E., Dzusova, S. S., & Namitulina, A. Z. (2015). The

innovative business model canvas in the system of effective budgeting.

Dzenopoljac, V., Dzenopoljac, V., Yaacoub, C., Yaacoub, C., Elkanj, N., Elkanj, N., ... &

Bontis, N. (2017). Impact of intellectual capital on corporate performance: evidence from

the Arab region. Journal of Intellectual Capital, 18(4), 884-903.