Apple's financial success: The precariousness of power exercised in global value chains

The topic of this paper is the Apple Inc business model and how, in a financialized world, the success of this business model is represented by what we term financial ‘point values’. Our argument is that there is a tendency to promote specific point valuation multiples as measures of success, but these values, by their nature, do not reveal the contingent and variable nature of the power relations exercised in and along global supply chains. Firms such as Apple exploit their resources and capabilities to ‘create value’ but also exercise power to recalibrate relationships with suppliers in the value chain to secure ‘value capture’ for financial transformation. Value capture is an active ingredient that can help inform our understanding of the fragility of the Apple business model value proposition and frame a critical argument regarding the precarious nature and sustainability of Apple's substantial profit margins.     

Owning the consumer—Getting to the core of the Apple business model

This paper uses a business model framework to analyze the main limitations of Apple Inc. post-2003, a significant turning point in the company's history. As such, we move beyond an exclusive focus on what makes Apple unique or different by evaluating the mundane and out-dated elements of its business model. To do so, we examine the end-to-end supply chain, from source to store, to present a more holistic evaluation of the Apple business model. Drawing on the existing literature, we argue that the quintessential element of the Apple business model is its ability to ‘own the consumer’. In short, the Apple business model is designed to drive consumers into its ecosystem and then hold them there, which has been hugely successful to date and has allowed Apple to wield enormous power in the end-to-end supply chain. We demonstrate this through a detailed evaluation of Apple's physical and content supply chains and its retailing strategy. Moreover, we find that the very business processes that enable unparalleled corporate control bring with them new problems that Apple has thus far been unable, or unwilling, to adequately address.     

财务战略驱动企业盈利模式——美国苹果公司轻资产模式案例研究

本文首先明确了企业现金流结构是连接企业价值与盈利模式的关键变量,架构了"企业价值→财务战略(现金流结构主导)→盈利模式(轻资产模式)→商业活动与资本行为→财务业绩"的财务战略驱动盈利模式的理论框架。文章以美国苹果公司为分析对象,选取该公司自2001年至2011年间的主要业务经营资料与关键财务数据,从财务战略驱动视角,透视苹果公司持续轻资产模式运营的基本要点,包括实施简化生产和标准化零配件、快速供应链、极短的存货周转期、高额现金储备和营运资本、小额固定资产投资、巨额研发与销售终端投资、并购技术性优势企业、内源融资主导等等,这些轻资产战略的基本特征的概括既丰富了财务战略的理论主张,也给企业战略管理实践提供了许多实操性的启示。     

Apple's changing business model: What should the world's richest company do with all those profits?

Apple Inc. stands out as the world's most famous, and currently richest, company. To the general public, Apple is known for three things: its intriguing CEO Steve Jobs, who has achieved iconic status in death as in life; its amazing iOS products, especially the iPhone and the iPad, and their predecessor the iPod, which have literally placed sophisticated technology in the hands of the masses; and its stratospheric stock price, which even when in March 2013 it had dropped to 63 percent of its September 2012 peak, gave Apple the highest market capitalization of any company in the world. As a result of its phenomenal success, at the end of fiscal 2012 Apple had $121 billion in liquid assets. In April 2013 the company committed to distributing as much as $100 billion to shareholders in stock buybacks and cash dividends by the end of calendar 2015. By employing the theory of innovative enterprise to analyze how over the course of its 37-year history Apple became so profitable, we argue that there is no economic justification from a risk-reward perspective for this distribution to Apple's shareholders. Taxpayers and workers have superior claims on these profits. In analyzing by whom value is created as a basis for considering for whom value should be extracted, we raise the implications of Apple's changing business model for the future of innovation at this heretofore exceptional American company and even in the U.S. economy as a whole.     

The Apple business model: Crowdsourcing mobile applications

Much to Apple's chagrin, the ‘suicide express’ at the Foxconn manufacturing complex in China has been widely reported. While outsourcing the manufacture of technology components is neither new nor unique, the external sourcing of digital content is integral to the success of Apple's business model. In 2008, Apple opened up their platform to third-party IT developers, leveraging their expertise for the supply of applications. Apple's rapid dominance of the mobile market led to the emergence of a business model that weaves together Internet-enabled mobile devices with digital content, brought together within a closed proprietary platform or ecosystem. Applying a Global Production Network analysis, this paper reports on fieldwork among Apple mobile application developers in Sweden, the UK, and the US. The analysis shows that although some developers experience success, financial returns remain elusive and many encounter intense pressure to generate and market new products in a competitive and saturated market. Crowdsourcing allows Apple to effectively source development to a global base of software developers, capitalizing on the mass production of digital products while simultaneously managing to sidestep the incurred costs and responsibilities associated with directly employing a high-tech workforce.     

Financialization across the Pacific: Manufacturing cost ratios,supply chains and power

This article argues that thirty years ago favourable cost conditions helped build productive power in Asia, whereas now US financial power drives and benefits from low labour costs in China, using the very different supply chain positions of Apple Inc. and Foxconn International Holdings (FIH) as examples. In the first section, the authors bring together the literatures on financialization and global supply chains to contextualise the pressures and outcomes discussed. A temporal dimension is added in section 2, using macro evidence on labour costs to compare new entrants into the industrial world order since the 1970s. The article then presents company illustrations in sections 3 and 4, deconstructing Apple's financial success and its trans-Pacific relations with its handset supplier FIH. The article concludes by observing that the rise of the post-national corporate player changes the alignment between large corporate interests and the US economy where Apple hoards its cash surplus and the success for the stockholders does not align with the broader needs of the US economy and society.     

Predators and prey: a new ecology of competition

Much has been written about networks, strategic alliances, and virtual organizations. Yet these currently popular frameworks provide little systematic assistance when it comes to out-innovating the competition. That's because most managers still view the problem in the old way: companies go head-to-head in an industry, battling for market share. James Moore sets up a new metaphor for competition drawn from the study of biology and social systems. He suggests that a company be viewed not as a member of a single industry but as a part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies "co-evolve" around a new innovation, working cooperatively and competitively to support new products and satisfy customer needs. Apple Computer, for example, leads an ecosystem that covers personal computers, consumer electronics, information, and communications. In any larger business environment, several ecosystems may vie for survival and dominance, such as the IBM and Apple ecosystems in personal computers or Wal-Mart and K mart in discount retailing. In fact, it's largely competition among business ecosystems, not individual companies, that's fueling today's industrial transformation. Managers can't afford to ignore the birth of new ecosystems or the competition among those that already exist. Whether that means investing in the right new technology, signing on suppliers to expand a growing business, developing crucial elements of value to maintain leadership, or incorporating new innovations to fend off obsolescence, executives must understand the evolutionary stages all business ecosystems go through and, more important, how to direct those changes.     

A pattern‐based approach to extract REA value models from business process models

Business models are economic models that describe the rationale of why organizations create and deliver value. These models focus on what organizations offer and why. Business process models capture business activities and the ways in which they are accomplished (i.e. their coordination). They explain who is involved in the activities, and how and when these activities should be performed. This paper discusses the alignment between business models and business process models. It proposes a novel systematic method for extracting a value chain (i.e. business model) expressed in the Resources, Events, Agents (REA) ontology from a business process model expressed in Business Process Model and Notation?. Our contribution is twofold: (1) from a theoretical standpoint we identified a set of structural and behavioural patterns that enable us to infer the corresponding REA value chain; (2) from a pragmatic perspective, our approach can be used to derive useful knowledge about the business process and serve as a starting point for business analysis.     

Community and international business futures: Insights from software production

This article explores the role of community in the field of international business. In particular, the turn towards community in the general business environment is considered before the scope for international production and innovation to occur in global communities is investigated through the example of international software production. The global production of software is examined through a comparison of the commercial software organization of the Microsoft Corporation and the non-commercial Mozilla Open Source Software (OSS) community. Insights gained from this comparison together with findings from extant research are employed to construct a range of scenarios that capture potential roles for community in the prospective futures of international business.     

A novel equity valuation and capital allocation model for use by long-term value-investors

We present a novel asset pricing model that captures the investment wisdom and stock-selection approach of the long-term value-investors Benjamin Graham and Warren Buffett. Taking a longer term view of business prospects and business risks, we explicitly consider the time period in which a business enjoys a competitive advantage over its peers as the central tenet of our model and capture the eventual demise of this competitive advantage in a probabilistic manner. Assuming that our investor has log utility, our model answers the question of capital allocation in a two-asset scenario. The model does not enforce the Efficient Market Hypothesis and is shown to explain some well-known empirical studies on stock returns.