Supply Chain Frontiers issue #22. Read all articles in this issue
Memo to Tim Cook, Chief Operating Officer of consumer electronics company Apple: if you are looking for an additional sales channel for your notebook products, put specialty electronics retailers at the top of your list. That is the main conclusion of a product analysis carried out by MIT-CTL’s Masters of Engineering in Logistics (MLOG) students. Cook may or may not heed the advice, but the work shows how two key parameters – profitability and strategic alignment – can have a profound impact on channel choice and supply chain management.
The research was framed as an MLOG Class of 2008 orientation exercise. Teams of students were asked to consider four questions pertaining to Apple’s MacBook and MacBookPro notebook products. First, should the company sell these items through specialty electronics or general discounter channels, and if so, which outlets/channels and product configurations are recommended? Second, should the strategy be applied uniformly across the world or differ by region? Thirdly, what supply chain implications are there? And finally, what are the ramifications for Apple’s operations generally?
The analysis looked at the strengths and weaknesses of Apple’s current market position, and how various retailers are positioned in terms of the types of customers they serve. The students also looked at sales and geographic spread for relevant retailers, and the competitive power of customer experience factors, such as a perception that firms are “cool” and innovative.
The winning team, called Team Australia, observed that Apple’s products have a reputation for high quality and also appeal to the lifestyle aspirations of buyers. However, the company needs to venture beyond Apple-owned retail outlets if it wants to reach a broader market. The challenge is how to migrate to new channels without devaluing the products that have helped Apple to become a market leader. The recommendation: expand existing relationships with electronic specialty chains such as Best Buy and Circuit City, because they offer the closest match to Apple’s strategic positioning as well as the highest potential for overall profitability.
The strategy is recommended for markets in North America and Europe but not in India, China or South Korea, where there are no equivalent retailers that give the national coverage provided by Best Buy and Circuit City. In these latter countries, the company should launch a series of Apple branded stores to create demand.
Regarding supply chain opportunities and challenges, the team advised Apple to take advantage of the distribution channels it has established for its extremely successful iPod product and to fully exploit the potential for converting LTL shipments to full truckloads. One of the challenges Apple would need to address is how to ensure that the retailers’ staff would provide the same level of service and customer support available at Apple’s own outlets.
If implemented successfully, the strategy should create a wider customer base for the company’s world-class products. “Apple should recognize the opportunity that is being presented to capture a much larger share of the market and take bold steps to play a larger role,” advised the winning team.
The team of MLOG students that developed the winning Apple strategy includes: Nelly Andrieu, Nan (Benson) Li, Guruprakash Rangavittal, Tae Hee Sohn, Erik Caldwell and Nicholas Macan. For more information on the project and the MLOG program, contact Chris Caplice.