Apple’s E-Commerce
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Provide an opportunity for students to apply a technology solution to a business problem in a specific
company or organization that adds value to the organization.
Guidelines
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Week 1: Begin thinking of a business problem that could be solved with a technology solution for a
company or organization you are familiar with. Use the Q&A Forum to ask questions and discuss your
ideas about the project. See the Course Project Technical Areas for ideas.
Week 2: Complete the Course Project Proposal using this format:
Course Project Proposal (1-2 pages, 75 points, due week 2, properly cite any external sources used)
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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.
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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
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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
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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.
i) 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
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experience reduced channel conflicts by avoiding to price products online below the channel
partners’ resale price thus reducing conflict.
ii) 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.
iii) 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
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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.
iv) 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).
v) Communication and coordination
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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.
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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
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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-
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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 is 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
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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.
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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.
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References
Apple Inc. (2010). Annual Report Pursuant To Section 13 15(D) of the Securities Exchange Act
of 1934.
