Apple’s E-Commerce

Abstract

The electronic commerce or e-commerce emergence has formed fresh business standards, one that awards marketers noteworthy opportunities. The greatest impact of e-commerce is improving and ensuring an effectual supply and marketing channel management. The major issue in numerous business-to-business or B2B activities presently is channel conflict. Therefore this document will investigate the impacts of utilizing the internet channel within an already intricate multichannel distribution structure from the supplier firm viewpoint. The document will illustrate strategies for practically managing conflict externally and internally (externally meaning with channel partners as well as internally within subunits that manage channels). The company of focus is Apple Inc. which has overtime been faced with distribution channel conflicts upon its B2B supply chain. Apple seeks to reduce its involvement with channel partners by establishing its own distribution stores. Thus, this document will bring out ways in which Apple Inc. can adopt e-commerce within its B2B distribution channel and successfully abolish conflict within its supply and marketing channels.  

Company background

Apple Inc. is a multinational firm based within US. Apple Inc. production activities involve designing, manufacturing as well as selling personal computers in addition to software’s and electronic devices. Additionally Apple manufactures and supplies computer related peripherals along with networking solutions (Apple Inc., 2013). This company was founded in 1976 by Steve Jobs Steve Wozniak as well as Ron Wayne in Beatty California.  In 2004 Apple had a market capitalization of about $8 billion. Between the start of 2009 and the end of 2013 the firm’s market capitalization increased from $75 billion to beyond $600 billion turning out to be the mainly profitable public company in the US. In 2012, Apple’s mobile operating system (iOS) was rated as the highly used to access the mobile Web within the US. The company sells its products worldwide via its self-owned retail stores, direct sales force, and the internet and third party resellers. Presently, the company operates greater than three hundred and sixty retail stores globally (Apple Inc., 2013). As a result of enormous popularity of Apple’s products, the company possesses a distinct channel advantage to the dealers and wholesalers. Apple retail stores attract clients via own brand equity as well as its innovative products

Business problem

An article in 2007 by a popular newspaper in the US stated that “Apple Grows, But So Does Channel Conflict”, this clearly demonstrates an excellent illustration of marketing as well as supply channel conflicts. Resulting for the broad success concerning Apple’s comeback via iPods and iPhones sales, Apple aggressively established of their self-owned retail stores to approximately 33 percent annually (push strategy) (Apple Inc., 2010). Previously, the company similar to other firms majorly used a distribution channel which utilized third parties’ stores. Before Apple’s dominance, the company owned very few self operated stores. Opening more stores Apple is basically attempting to sell to every client themselves. This strategy eliminates the requirement of having to distribute through other companies thus cannibalizing sales away from them. This is a strategy that many have seen as unusual and ill advised: this is because Apple will never be able virtually erect self-owned stores at every point on the globe, it is through intermediaries that companies are able to distribute to all the markets worldwide.

The company resolved to restrict iPhone sales via solely AT & T contracts. Nevertheless since AT&T normally sells its phones via self-owned AT&T stores as well as other retailers like Best buy, iPhone was broadly accessible albeit still limited within the AT&T network.   The AT&T exclusive later ended due to arising conflicts and Apple decided to supply their iPhones via cell providers such as Verizon, therefore heightening distribution significantly however also leading to channel conflicts (Apple Inc., 2013). Apple is clearly facing tough decisions of marketing and supply channels: the company is unsure whether to use it own retail stores to sell directly to their clients or via third party retailers. Both approaches possess benefits and limitations leading to inevitable conflict.

High level solution

In order for avoiding channel conflicts Apple requires to develop new strategies of incorporating e-commerce within their existing distribution systems. The core element in implementing the internet within its B2B channel mix is to understand what clients in every channel value as well as whether the prevailing channels are satisfying the demands and expectations (Eservglobal, 2012). Apple’s B2B marketers ought to start precise market segmentation as well as providing distribution channels, which satisfy their target segments by the mainly convenient manner. Offering multiple channels forms the best way for Apple to effectually serve the diversified client base, and the company needs to utilize the multichannel distribution power to ensure its products spread everywhere. Apple should utilize e-commerce to support its distribution network, instead of displacing the prevailing retail stores and other intermediaries. Once the company segments its clients grounded on preferences as well as readiness to pay, it can determine what channels are suited to serve every segment traditional or lower cost e-commerce (Gillin & Schwartzman, 2011). Coordinating a company’s channel resources with client needs being the center piece is known as integrated marketing.  Below are a number of strategies that the company’s B2B marketers could use to eliminate channel conflict.

1. Pricing

Manufacturers fail to come to a realization that the channel partners strictly monitor everything that is done on their website. Certainly, intermediaries show concern over nearly everything they see within a producer’s site, understanding it as way to decrease their role and contact with the client (INTERSHOP, 2013). Thus Apple requires being aware that everything they place on the internet will cause a reaction by their channel partners. Evidence shows that price is normally the single most contentious issue that generates conflict within the distribution channel. Consequently Apple’s B2B marketers should be extremely cautious with regard to their pricing strategies whilst placing electronic ads (Muneesh & Sareen, 2012). Apple should realize that undercutting channel partners regarding prices is the lowest blow with regard to online channel etiquette, this means that they should avoid awarding discounts online: Apple will experience reduced channel conflicts by avoiding to price products online below the channel partners’ resale price thus reducing conflict.

1. Distribution

Among the mostly essential limitations of the internet channel regards its incapacity to offer essential distribution functions i.e. physical tangible goods delivery. Apple should use its channel partners to extend its fulfillment task regarding orders placed online. An early realization of this limitation to Apple will make it actively involved with its intermediaries in the e-commerce business (Oracle, 2012). Thus for the company, involving channel partners is the logistical engine behind all online sales and meeting the evolving responsibility of distributors within the latest sales models. Apple should redirect its online orders to the nearest intermediary store: the client may opt to pick the product themselves or it may be mailed to them. Certainly, involving the channel partners within the sales serves to evade cannibalization, generate trust as well as cooperation amongst companies whilst preventing unwarranted channel conflict (Sonntag, 2009).Thus Apple should sell its products via distributors who should also manage the product inventory then sell or supply to value-added resellers. This strategy will complement the traditional channels. In the end Apple will experience reduced channel conflict levels through diverting order fulfillment placed on their website online via the channel partners.

1. Promotion

Basic marketing states that promotion is the relaying of product or service information in a persuasive manner. Whilst the online channel offers manufacturers with excellent techniques of promoting directly to the final customer: there exists no restriction towards promoting their channel partners within the manufacturer’s website, which would encourage consumers, utilize those channels (Standifer & Jr., 2010). Apple could utilize this strategy in addition to permitting them place their own ads on the website. This could be done by establishing a partners’ page which provides detailed information regarding its partner programs as well as acting as a gateway towards private access to partners’ websites (Turban, King, & Lang, 2009). This could reduce channel conflict through: firstly, Apple without taking orders it could provide product information within the website: secondly, it could promote the channel partners on the website: thirdly, by encouraging channel partners to place ads on Apple’s website.  

1. Product

Apple’s B2B marketers may additionally reduce channel conflict by restricting the online product offering to products that are not accessible on the traditional channel platform. Apple may also place emphasis on the consumer segment needs, which prefer purchasing via electronic channel, by offering only the products they desire (Xu & Quaddus, 2010). Apple could adopt an exclusive brand name or reference to the online products from those offered by the channel partners, even if they are similar to those offered via the other available channels, this decreases the probability of clients’ direct product comparisons. Another aspect that Apple should realize is that when a product’s demand is rising rapidly, offering a product within the website poses minimal threat to channel partners’ sales, however, during the decline stages the company should refrain from offering the product online since its likely to cause cannibalization of the channel partners sales  (Zhao, 2010).

• Communication and coordination

Apple through communication and coordination could significantly decrease the channel conflict levels, both externally (amongst distribution partners) and internally (with subunits that manage the channels). Proper coordination of distribution activities within the channels as well as within the company is the way to reducing channel conflict (Zhao, 2010). Distribution activities can never be organized in absence of effectual internal as well as exterior channel communication strategies.  How well the company’s personnel communicate effectively with intermediaries has a crucial role towards channel management process. Moreover, channel coordination refers to the synchronization of activities as well as flows by channel partners.

Apple in requires doing a better job in communicating the online plans to channel members rather than establishing the new online channel under the disguise of privacy, Apple must take the time  to precisely explain their e-commerce plan (Eservglobal, 2012). Resellers require to be made aware regarding what the targeted segments in addition to knowing ways in which Apple’s efforts will assist them rather than harm them.  Internal communication concerning the firm’s e-commerce strategies carries equal weight. Apple Staffs must comprehend the mechanisms as well as value regarding varying channel strategies failure to which they may feel disregarded by the management. Additionally Apple should educate staffs through holding training sessions to enlighten them regarding the internet or the online strategies. Alternatively Apple could introduce channel management groups within the organization whose core duties are to supervising the indirect channels and handling internal communication between the channels and for creating Apple’s strategic direction regarding the channels (Xu & Quaddus, 2010). Ultimately, Apple will be differentiated from other companies since it will be addressing the needs of customers from all available angles: this will in turn boost customer loyalty and amplify sales significantly.

 Benefits of solving the problem

Apple will benefit from adopting e-commerce whilst reducing conflict amongst its B2B channels in a number of ways. To start with, the multinational will no longer experience conflict with its channel partners since there will be a complete demarcation of responsibilities (Gillin & Schwartzman, 2011). Secondly, e-commerce will permit the company to better adapt to the evolving clients’ needs as well as shopping patterns. Thirdly, since Apple has a broad range of products e-commerce is beneficial for the reason that the products will be offered more than one channel of marketing and delivery. Fourthly, Apple will have an opportunity to focus on more precise markets of its products (Sonntag, 2009). To Apple e-commerce will provide new approaches of doing business as compared to mere extensions of prevailing practices in reducing aimed at reducing conflict. Apple will be able to perform the tasks of a complete marketing and delivery channel online or such products as software’s.

Technology or business practices to augment the solution

E-commerce is described as the strategic implementation of computer-based instruments as well as information technologies to meet business objectives. Certainly the “market-space” (a virtual universe of information parallel to real marketplace of services and products) emergence will allow the company’s marketers to manage content, infrastructure and content in a new unique way (Standifer & Jr., 2010).  Electronic marketing channels utilize the internet to avail products and services to the target market whilst reducing conflict with the channel partners. Apple being a computers manufacturer has the advantage of not having to purchase computers to initiate the project. Additionally already the company’s systems are already connected to the internet. The electronic marketing channel or the internet has the capacity of substituting possess the customary communication as well as conducting transactions.  Apple in addition requires training its staff with regard to the adoption and functioning e-commerce within their B2B marketing and delivery channels. Informing and also educating the channel partners with regard to the e-commerce adoption is an additional prerequisite of its successful implementation (Turban, King, & Lang, 2009). A document detailing all the proposed measures concerning roles and responsibilities and the way forward after the implementation of e-commerce should be availed to both staffs and channel partners.

Business process changes

The e-commerce implementation by Apple will create a structure for doing business thereby influencing all parts of the marketing mix. A particularly essential aspect of the new business paradigm regards its effect towards the marketing channels (Sonntag, 2009). The company will be presented with profound opportunities, such as accessibility to new market segments in addition to the capability to disseminate information globally on a continuous basis. However as earlier stated channel conflict will be a thing of the past between Apple and its channel partners. In the process of reforming the supply chain challenges will definitely arise but in the long run it will be more efficient and conflict free.

High-level implementation plan

All the preceding statements point to the managerial implications arena. The internet has been known to ravage the traditional distribution channels prospectively rendering them obsolete. Apple is remiss in underestimating the significance of traditional distribution channels as they implement the e-commerce B2B supply chain (Eservglobal, 2012). The management requires formulating realistic policies going forward regarding the successful adoption of e-commerce whilst embarking on building positive relationships with the distributors. Companies like General Motors and Ford have at some point have attempted to reduce the participation of distributors by incorporating the e-commerce platform but this in turn doubled the conflict between them. Apple’s executive must ensure that products sold online are priced higher than the distributors’ prices to reduce channel conflict and increase the relationship between them boosting sales. This can be learnt from Mattel, the globes largest toys producer that has placed its online product sales 15 percent higher than those of its distributors (Xu & Quaddus, 2010). This has amounted to very minimal conflict between the company and its intermediaries. Adopting these marketing strategies, Apple will place itself in a good position of utilizing the opportunities linked with e-commerce harmonization with traditional channels.

Conclusion

E-commerce when adopted in an appropriate manner will completely eradicate channel conflict in any company. Though its implementation is demanding in terms of the requirements it’s the way to go for company that wants to strengthen their supply chain. Emotions are elevated when conflict is generated between a company and its channel partners damaging their relations. Apple through the stated strategies will reduce conflict between the firm and its subsidiaries after it successfully implements e-commerce in its B2B supply chain. Apple should be aware of the capacity of e-commerce since it might further alienate distributors leading to additional loss of distribution points so as to ensure a successful eradication of conflict. This paper has given evidence with regard to benefits of preventing unwanted conflicts from coming up at all within the supply chain. Further this document has advised against the actions of Apple in establishing self-owned outlets whilst attempting to reduce its distributors: it is not possible for Apple to build outlets all over the world, the best method remains to be adopting e-commerce which will assist in reducing channel conflict. The actuality that Apple manufactures all the required equipment and has the infrastructure to adopt e-commerce in a bigger way more than any other company, it is imperative that the company adopts the e-commerce in a new way that incorporates the channel partners. 

Summary of the Project

This project addresses Apple Inc.’s necessity to adopt e-commerce in its B2B supply channel whilst simultaneously reducing conflict between the company and its intermediaries. Apple has over time attempted to aggressively increase its self-owned retail stores: building more and more annually, however this documents has analyzed this strategy and found to be unsatisfactory. This is for the reason that Apple will never be able to establish retail stores everywhere. A number of companies have tried the same strategy but they have miserably failed to attain their previous sales targets due to inefficient distribution. This document has presented recommendations and detailed e-commerce implementation strategy in areas of pricing, product, distribution and so on, which would enable Apple successfully harmonize e-commerce with conventional marketing and supply channels in its B2b activities.

References

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Apple Inc. (2013). Annual Report Pursuant To Section 13 15(D) of the Securities Exchange Act of 1934.  Retrieved from http://files.shareholder.com/downloads/AAPL/2949262207x0x S1193 125-13-416534/320193/filing.pdf

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