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Ken Mark wrote this case under the supervision of Professor P. Fraser Johnson solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e);
Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-06-12
Jessica Grant was an analyst with BXE Capital (BXE), a money management firm based in Toronto.2 It
was February 28, 2014, and Grant was discussing her U.S. equity mandate with BXE’s vice president,
Phillip Duchene. Both Grant and Duchene were trying to identify what changes, if any, they should make
to BXE’s portfolio. “Apple is investing in its next generation of products, potentially the first new major
product lines since Tim Cook took over from Steve Jobs,” she said. Apple Inc., the world’s largest
company by market capitalization, had introduced a series of consumer products during the past dozen
years that had transformed it into the industry leader in consumer devices.
Apple managed a global supply chain with creative development in the United States, outsourced
manufacturing in Asia and components sourced from suppliers around the world. Apple was in the centre
of a complex ecosystem that produced market-leading consumer devices. With $160 billion3 in cash in
February 2014, the company was well-capitalized. Despite its commercial success, Apple’s stock was at
$524.47 on February 28, 2014, 25 per cent below the $700 level it had reached in 2012. Cook reassured
investors that the firm was focused on the future, and it had a solid pipeline of new products. This was his
way of signalling to stakeholders that he would be able to run the firm following the death of Steve Jobs,
one of Apple’s co-founders and the man responsible for rebuilding the firm. “We’re working on some
things that are extensions of things you can see and some that you can’t see,” Cook said at Apple’s annual
shareholders’ meeting on February 28, 2014.4
Industry observers were skeptical that the company could deliver new product successes:
It is unclear whether the spread-sheeting-loving, consensus-oriented, even-keeled Cook can
successfully reshape the cult-like culture that Jobs built. Though Cook has deftly managed the
iPhone and iPad product lines, which continue to deliver enormous profits, Apple has yet to
launch a major new product under Cook; talk of watches and televisions remains just that . . . in
the day-to-day at Apple, Cook has established a methodical, no-nonsense style, one that’s as
different as could be from that of his predecessor. Job’s bi-monthly iPhone software meeting, in
which he would go through every planned feature of the company’s flagship product, is gone.
“That’s not Tim’s style at all,” said one person familiar with those meetings. ‘He delegates.’5
This document is authorized for use by Troy Montgomery, from 7/8/2023 to 12/31/2023, in the course:
EMBA 7310: Operations Management – Montgomery (Summer 2023), University of Georgia.
Any unauthorized use or reproduction of this document is strictly prohibited*.
Page 2 9B14D005
Nevertheless, it was clear to Jessica that Apple’s product range would get more complex in the next few
years. As part of her analysis of Apple’s stock, she wanted to take a look at the company’s supply chain to
see if she could gain some insight into whether to continue with Apple as a key holding in BXE’s fund.
Apple Computer was founded on April 1, 1976, by Steve Jobs, Steve Wozniak and Mike Markkula to
manufacture and distribute desktop computers. Both Jobs and Wozniak started tinkering with computing
devices in a time when enthusiasts who wanted a fully functioning computer had to assemble the parts by
themselves from individual components. They struck a deal to sell an initial order of 50 units of their
“Apple I” computer to a local computer shop, and negotiated a 30-day credit term to pay for the parts,
effectively using their suppliers to fund the startup. After selling 200 units of the Apple I, Wozniak
improved the design and showcased the Apple II in April 1977. Needing capital for the next phase of their
company, they brought on Markkula, a marketing manager at Intel who had retired after making millions
on his stock options. The company became the largest private manufacturer of personal computers in the
United States and held its initial public offering in December 1980, thereby creating 300 millionaires.
Although it had a great product, the team at Apple soon found that IBM’s entry into the market in 1981
would change the industry. By 1983, IBM’s personal computer (PC) became the best-selling computer in
the United States, heralding the beginning of its domination of the PC market. Even Apple’s popular 1984
Superbowl commercial,6 combined with a heavy marketing campaign, was not enough to stop IBM’s
growth. Jobs left Apple in 1985. The company stumbled along for the next decade, and even though it
launched a line of Macintosh computers such as Quadra, Centris and Performa, it failed to gain traction in
the marketplace. Worse, its retail partners such as CompUSA and Sears did not devote resources to
displaying its products properly. Apple also suffered from a perception that its machines were more
expensive than comparable Windows PCs. The company had poor operating controls and inventory
management, failing to properly estimate demand for its products and leading to both stock-outs and
excess inventory.7
Apple squandered its goodwill from the 1980s Macintosh era. In 1996, Microsoft was one year into the
launch of Windows 95, which was turning out to be a very popular operating system. Apple’s sales of
Macintosh computers fell dramatically and Apple, in an attempt to reverse the trend, began licensing the
Mac operating systems to third-party manufacturers. From 1993 to 1996, Apple went through three
CEOs: John Sculley, Michael Spindler and Gil Amelio.8
In 1996, Jobs returned to the company as CEO at a time when Apple’s future was in question. Apple’s
market capitalization had fallen from $11.6 billion in 1987 to $3.1 billion at the end of 1996. In 1996,
sales were $9.8 billion. In the early 1990s, Apple had begun licensing its Mac operating system to thirdparty manufacturers who would produce their own lines of devices powered by Mac’s operating system.
Its licensing model was similar to that employed by Microsoft, allowing the operating system producer to
earn additional revenues by selling copies to generic computer manufacturers. With the objective of
reasserting control over its product, one of Jobs’ first decisions was to stop licensing Apple’s Mac
operating system. This resulted in a fall in computer unit market share from 10 per cent to 3 per cent.
Throughout this time, Apple continued to manufacture its own devices. In 1997, Jobs announced a
partnership with Microsoft that would see the latter invest $150 million in Apple and release the dominant
office software — Microsoft Office — for Macintosh. At the time of the announcement, Apple’s market
capitalization had continued to fall to $2.5 billion.
This document is authorized for use by Troy Montgomery, from 7/8/2023 to 12/31/2023, in the course:
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Any unauthorized use or reproduction of this document is strictly prohibited*.
Page 3 9B14D005
Between 1998 and 2001, Apple launched iMac computers as a line of revamped PCs that focused on
design. The computer body was made from bright colours such as green, blue and purple. The line sold
well and provided the spark for Apple’s return to prominence. In May 2001, Apple announced that it
would be opening its own retail stores to enable it to educate consumers and to grow its market share. In
October 2001, it introduced the iPod portable digital audio player. Supporting the iPod was the iTunes
music store, which was stocked with downloadable songs. At a time when the biggest record labels were
worried about pirated songs being downloaded to MP3 players, Apple negotiated a deal with the five
largest labels to be part of iTunes. The success of the iPod helped to revitalize Apple’s prospects, building
a strong financial base from which the firm could grow.
By 2004, Apple was able to gain better control over its supply chain by working with new suppliers on
proprietary parts for which Apple would provide upfront capital in return for volume commitments and a
lower overall price per unit. Apple’s growing clout allowed it to work with its suppliers to launch a series
of new products containing significant technological advancements, such as iPod Video, iPod Touch and,
by 2007, the iPhone. Concurrently, Apple expanded its retail store base beyond the United States, opening
its first Japanese store in 2003.
From 2007 to 2013, Apple’s success with its music players allowed it to upgrade its iPhone and iPod lineup, introduce new Mac computers and other products such as Apple TV, and develop its application (app)
store, where third party developers listed their apps for consumers to download. In April 2010, Apple
reinvented the tablet computer market by launching its iPad. With its slim design, multi-touch screen and
touch-sensitive keyboard, the iPad was an instant commercial success. For consumers, the iPad was a
portable computer and entertainment device, allowing them to respond to emails, watch videos, play
games, and browse the Internet, among other things. While Apple still used retail partners to distribute its
products, it sold 70 per cent of its products and services directly to consumers and businesses (see Exhibit
Jessica had seen many reviews stating that Apple’s success was due to a combination of design,
functionality, marketing and an ability to modify production to meet spikes in demand. She read an article
about Apple’s launch of its iPhone 5 in September of 2012, including a demonstration of the new phone
by the vice president of marketing for Apple, Phil Shiller. Nine days away from that product’s official
launch, Apple was confident enough in its just-in-time supply chain that it had not yet begun to ramp up
production. The company had an aggressive schedule to meet as the iPhone 5 eventually sold at a rate of
3.7 million units per week for the first three months. In addition, it was available in 100 countries from
240 mobile phone carriers. 9
Intrigued by Apple’s ability to coordinate its supply chain on a real-time basis, Jessica started to dig
further for details of the firm’s operations. She decided to focus on one product, the iPhone, and
understand how Apple managed to bring that product to market.
The iPhone’s Supply Chain
Apple’s iPhone supply chain was global, tying together a research and development base in the United
States, 156 suppliers, assembly operations in China and retail stores, some of which were its own Applebranded stores. Jessica began to trace the path of Apple’s iPhone from inception to delivery to customer.
This document is authorized for use by Troy Montgomery, from 7/8/2023 to 12/31/2023, in the course:
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Page 4 9B14D005
New Product Development
Apple’s management team kept a short new product development cycle. Whereas a traditional product
lifecycle – for a new car model, for example – might span four to five years, Apple’s iPhone lifecycle was
closer to one year. Exhibit 2 provides a list of iPhone models since the first version was launched in June
2007, and Exhibit 3 shows iPhone unit sales by the quarter.
The new product development department coordinated a wide variety of stakeholders, including internal
groups such as hardware, software and production. For example, the industrial design team headed by
senior vice president, Jony Ive, worked with the production team to ensure that products could be built in
large volumes. Instead of outsourcing its manufacturing to third-party service providers — as in the case
of Samsung10 — Apple preferred to control the entire supply chain internally. 11
Unlike other electronics manufacturers that might outsource the entire production — and management —
of their supply chain to a third-party service provider such as Solectron or Flextronics, Apple designers
worked in close proximity with suppliers. Quite literally, the designers would often spend “months living
out of hotel rooms in order to be close to suppliers and manufacturers, helping to tweak the industrial
processes that translate prototypes into mass-produced devices.”12
Creative design and engineering was managed in California, where Apple developed new technologies,
acquired licenses for intellectual property and made bolt-on acquisitions of technology firms whose
products could be used in Apple’s ecosystem of products and services. Concurrently, Apple conducted
market research and product-testing to refine the upgrade being considered. Cost data were put together,
including a list of parts and suppliers, and an estimate of what it would cost to assemble the iPhone.
Potential quality defects were identified and plans were drawn up to mitigate risk. In 2013, Apple
continued to invest heavily in research and development (R&D) to ensure that it would have innovative
products in its pipeline. R&D spending was $4.5 billion in 2013, up from $3.4 billion in 2012 and $2.4
billion in 2011.
Apple’s devices — unlike Dell’s — were available in a limited number of configurations, a deliberate
product strategy that allowed its supply chain processes to be streamlined. Apple’s technology
competitors typically had separate R&D departments and separate profit and loss accountability for each
product segment. In contrast, Apple was highly integrated, with centralized R&D and accounting for the
entire company.13
Apple products contained key components that were often sourced from a single manufacturer. Because
the different mobile phone firms often used the same components, key parts from a single, popular
supplier were regularly out of stock due to overwhelming demand. To counteract this supply issue, part of
Apple’s procurement strategy was to purchase suppliers’ production capacity in advance in order to
ensure the steady supply of key parts (see Exhibits 4 and 5). In addition, Apple had a program that
allowed it to buy capital equipment for suppliers in exchange for both supply assurance and achieving
cost targets.14
As a percentage of the selling price of an iPhone, Apple captured approximately 60 per cent as gross
margin, and suppliers such as LG and Samsung captured another 5 per cent to 7 per cent as revenues (see
Exhibit 6 for a breakdown of the distribution of value from the sale of an iPhone). Product demand was
forecast 150 days in advance and updates were continually sent to suppliers to allow adjustments in
This document is authorized for use by Troy Montgomery, from 7/8/2023 to 12/31/2023, in the course:
EMBA 7310: Operations Management – Montgomery (Summer 2023), University of Georgia.
Any unauthorized use or reproduction of this document is strictly prohibited*.
Page 5 9B14D005
production schedules. Apple’s procurement team used sales targets to manage production ramp-up issues
and place material purchase commitments, making pre-payments if necessary.15 It reacted to changes in
sales forecasts by altering the orders, often at a moment’s notice. Depending on forecast demand,
Foxconn was known to wake up its workers – even at midnight – to meet sudden spikes in orders from
One former executive described how the company relied upon a Chinese factory to revamp
iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the
iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving
at the plant near midnight. A foreman immediately roused 8,000 workers inside the company’s
dormitories, according to the executive. Each employee was given a biscuit and a cup of tea,
guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into
beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day. “The speed
and flexibility is breathtaking,” the executive said. “There’s no American plant that can match
These alterations had an impact on both components and assembly labour requirements. Every quarter,
for its current slate of products, Apple reviewed its inventory levels, adjusted its demand forecast, and
monitored its cost of components. New products in the development pipeline were added to the review as
An analyst estimated that the bill of materials for the iPhone 5 ranged from $199 to $230 for sub-models
that retailed for $649 to $849 (see Exhibit 7). The production of the iPhone began with orders placed to
156 component suppliers around the world. It was normal for Apple to sign exclusivity agreements with
key suppliers. For example, when Ive found a U.S. laser equipment supplier that made $250,000
machines to cut precision holes, an agreement was signed to secure hundreds of the machines for
manufacturing Apple’s products. According to observers, maintaining control over suppliers was
important. Apple’s decision to manage a “closed ecosystem” enabled it to negotiate large discounts on
components. This gave the company access to flexible manufacturing volume in the event demand was
high, and savings on other supply chain costs such as air-freight.17
Apple engineers worked closely with suppliers to update manufacturing processes and technology. For
example, new tooling equipment was designed to cut the MacBook’s unibody shell. Apple’s insistence on
exclusivity and its high volume of purchases meant that competitors often had to wait for key
components, such as screens. “To manufacture the iPad 2,” for example, “Apple bought so many highend drills to make the device’s internal casing that other companies’ wait time for the machines stretched
from six weeks to six months, according to a manager at the drillmaker.”18 These delays had a material
impact on competitors. In May 2005, news about Apple ordering DRAM chips sent Samsung’s stock
price tumbling in one day, erasing a staggering $10 billion of the electronics giant’s market cap.19
For suppliers, Apple’s high-volume orders and offers to invest in capital equipment had both benefits and
drawbacks. While suppliers enjoyed profits due to the high volumes ordered by Apple, the latter expected
detailed breakdowns of suppliers’ costs for manufacturing labour, materials and even projected profit.
Suppliers were also expected to keep two weeks of parts inventory in close proximity to assembly plants.
In addition, the cost to carry parts was borne by suppliers as Apple stretched out its payables to as long as
90 days after the parts were used. 20
Apple’s offer to pay for machinery and its firm commitments to future supplier volume were not typical
for the electronics industry, which traditionally preferred to negotiate the lowest possible combination of
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Page 6 9B14D005
price and volume commitments per order. The following is an example of a deal negotiated by Apple with
a key supplier:
Apple struck a deal with GT Advanced Technologies Inc., a maker of furnace equipment that is
used to produce sapphire materials that cover smartphone lenses and home buttons. Apple
received an exclusivity agreement from GT Advanced for the furnaces in exchange for making a
prepayment of $578 million. GT Advanced said it would pay Apple back over five years starting
in 2015. The deal has “limited our ability to take additional” business, Thomas Gutierrez, GT
Advanced’s CEO, said in a conference call with analysts. GT Advanced said in its announcement
that revenue from the division that includes the kinds of machines Apple is buying will increase
to 80 per cent of the company’s total business, predicted to be $600 million to $800 million, up
from 31 per cent previously.21
To maintain their independence, some suppliers chose to decline Apple’s orders and capital, realizing that
Apple’s negotiating tactics would leave them with slim profits. A major parts manufacturer declined to
commit its manufacturing capacity to Apple’s products, even refusing a $1 billion upfront payment from
Apple. The manufacturer was worried that Apple’s insistence on committed capacity and low prices
would have an impact on sales to its other customers. 22
Product Assembly
Final assembly of the iPhone 5 occurred in China, at Apple subcontractor Hon Hai Precision Industry Co.,
better known as Foxconn, at a cost to Apple of $8 per unit. Foxconn, founded in 1974, was an original
design manufacturer for clients such as Apple, Sony, Nintendo, and BlackBerry. Based in Taiwan, it was
the world’s largest electronics manufacturer with 1.23 million workers in 2012. In 2012, Foxconn
generated $2.7 billion in net income from $4.2 billion in revenues. Foxconn had factories in Asia, Europe,
Mexico and South America. Apple’s competitors, in contrast, tended to outsource production of their
• In June 2011, it was reported that Nokia outsourced its Windows Phone handset production to
Compal Electronics.1
• In December 2013, BlackBerry, in an attempt to turn around its business, outsourced its hardware
production to Foxconn,2
• Even Samsung, a large conglomerate, announced in December 2013 that it would be outsourcing the
production of its low-end smartphones.3
Several iPhone components required labour-intensive assembly operations with complex quality control
processes. For example, Apple had run each iPhone camera module through a battery of tests before it
could be inserted into an iPhone. One of the key tasks for subcontractors was coordinating the sourcing
and hiring of the temporary labour used in testing and assembling individual components. For example,
for a group of 24 companies with 28 plants in Malaysia that were supplying assembly services to Apple’s
component suppliers, receiving assembly orders meant that they had to focus efforts on hiring thousands
1; accessed June 4,
2 Will Connors, “At BlackBerry, Stock Jumps Despite Big Loss”, The Wall Street Journal Online, December 20, 2013,; accessed June 4, 2014.
3; accessed June 4, 2014.
This document is authorized for use by Troy Montgomery, from 7/8/2023 to 12/31/2023, in the course:
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Page 7 9B14D005
of temporary workers. These firms looked to draw workers from developing Southeast Asian countries
such as Indonesia, Cambodia, Mynamar, Vietnam and Nepal.
When the iPhone 5 forecasts were developed, one of Apple’s top component manufacturers, Flextronics,
put out a call for 1,500 additional temporary workers to assemble a camera component. Labour was hired
via a network of recruiters and subagents, all of which were tasked with finding people on short notice.
For a job that paid approximately $178 per month, temporary workers paid as much as $1,000 in fees —
to recruiters. Flextronics arranged for workers to board scheduled flights from their home countries to
Malaysia, where they were transported to the company compound. Housing was provided, and workers
were expected to work 12-hour shifts per day. Flextronics accounted for the fluctuations in orders by
hiring or terminating temporary workers as needed. In the example cited above, 4,500 temporary workers
began assembling iPhone 5 camera components in October 2012.
But the workers were laid off in mid-January 2013, eliciting comments from the public that they had been
unfairly treated. In response, Apple pointed to its supplier code of conduct, which had clear policies
governing abusive practices such as harassment, involuntary labour and human trafficking.23 Due to
Apple’s just-in-time supply chain, which placed significant responsibility on the shoulders of suppliers,
component delays had an impact on Apple’s inventory projections. Sharp Corp, a supplier of iPhone
displays, notified Apple that its output had fallen behind schedule as it struggled with high costs and debt
servicing obligations.24 Finished components were consolidated at Foxconn’s China factories, where
thousands of workers assembled the components into iPhones.
Aside from the general labour required to test components and assemble devices, another critical
advantage for Apple was that global suppliers provided engineers at a scale that its U.S. suppliers could
not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee
and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The
company’s analysts forecasted that it would take as long as nine months to find that many qualified
engineers in the United States. In China, it took 15 days.
On the assembly side, managing a huge workforce and keeping to tight schedules was difficult. A
Foxconn factory was closed in Taiyuan, China in September 2012, following a riot among its 2,000
employees. In the summer of 2013, Foxconn began restricting workers to nine hours of overtime per
week.25 To ensure that secrecy was maintained throughout the assembly process, Apple placed electronic
monitors in select boxes of parts and followed the components remotely — from Cupertino — in case
there were leaks.
In 1997, Jobs’ return brought Apple a renewed focus on revamping its supply chain management
capabilities. That year, Apple was facing a $1 billion backlog of orders that frustrated the management
team. The firm looked at innovative ways to speed up the supply chain, even using expensive air-freight
when most computer firms were relying exclusively on shipments by sea. In 1998, Jobs even prepurchased all available holiday air-freight, paying $50 million to ensure that Apple’s new iMacs could be
delivered to stores for the holiday sales rush. The move had the added benefit of shutting out rivals —
such as Compaq Computer — from using air-freight as a transportation option. In fact, when it came time
to ship its new iPod products in 2001, Apple discovered it was cheaper to ship them directly to consumers
from its suppliers’ assembly plants in China. 26
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EMBA 7310: Operations Management – Montgomery (Summer 2023), University of Georgia.
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Page 8 9B14D005
Apple relied on intermediate warehouses at UPS and Fedex and had its own warehouses in Elk Grove,
California. It had to ensure that its many sales outlets — online stores, retail stores, direct sales force,
wholesalers and retail network — had the product stock they needed according to the demand forecast.
In addition, the company had a reverse logistics system as well, encompassing the management of
warranty claims, trade-ins and Apple’s recycle and reuse program. Managing reverse logistics effectively
contributed to Apple’s success, both on a cost level and on a customer service experience level.
Traditionally, when a customer sought to return an electronic product, he or she would have to bring it
back to the store with a receipt, and the store would take the item back, issue a refund, then hold the
presumably defective item until it could be delivered back to the manufacturer. In contrast, Apple allowed
consumers to enter data about the defect on the Apple website, adding the unit’s serial number to identify
purchase details (including date of purchase, location and information about the customer).
Within half a day, Apple would send the customer an email indicating if the product was still under
warranty and providing details about how it would be returned. Within 48 hours, a pre-addressed, prestamped box would arrive at the customer’s door-step, sent by express parcel service. A shipping label
and a receipt for the return were both included in the box, along with secure foam packaging and even
packaging tape. By calling a central dispatch number, Apple’s assigned courier — UPS, FedEx or DHL
— would come and pick up the item directly from the customer’s house or office.27
By providing rapid service through its reverse logistics function, Apple improved customer satisfaction,
lowered the number of calls to its technical support services and eliminated the likelihood of customer
error when processing a return (by using an incorrect address, for example). Getting the electronic
product back into Apple’s service depots allowed them to diagnose and return the item to the customer
rapidly, or fix the issue and sell the refurbished product as an “Apple Certified. Good as New” product in
its Apple Store.28
Apple’s close management of its logistics system extended to packaging devices in plain boxes to “avoid
detection,” and monitoring “every handoff point — loading dock, airport, truck depot and distribution
center — to make sure each unit was accounted for.”29
Retail Experience
Apple had 424 retail stores in 16 countries around the world. In addition, its online Apple Store was
available in 39 countries. The company’s retail stores were typically located at high-traffic locations in
quality shopping malls and urban shopping districts. By operating its own stores in desirable high-traffic
locations, Apple was positioned to ensure a high-quality buying experience and attract new customers.
The stores were designed to simplify and enhance the presentation and marketing of the company’s
products and related solutions. The retail stores employed experienced and knowledgeable personnel who
provided product advice, service and training and offered a wide selection of third-party hardware,
software, other accessories and peripherals that complemented Apple’s products.
Apple could monitor product sales by store by the hour and it relied on this information to tweak its
production forecasts on a daily basis. According to one article: “If it becomes clear a given part will run
out, teams are deployed and given approval to spend millions of dollars on extra equipment to get around
the bottleneck.”30
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EMBA 7310: Operations Management – Montgomery (Summer 2023), University of Georgia.
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Page 9 9B14D005
The company also invested in programs to enhance reseller sales by placing high-quality Apple fixtures,
merchandising materials and other resources within selected third-party reseller locations. Through the
Apple Premium Reseller Program, certain third-party resellers focused on the Apple platform by
providing a high level of product expertise, integration and support services. A side-by-side comparison
of Apple’s iPhone 5 with devices from key competitors can be found in Exhibit 8.
Looking Forward
At the end of fiscal year 2013, Apple had $171 billion in sales, with market capitalization of $457
billion.31 There were rumours that Apple was going to announce a stock split, something it had only done
three times in its history: on June 15, 1987, on June 21, 2000 and on February 28, 2005.32
Jessica noticed that Apple continued to invest in its supply chain. At the end of 2013, Apple was investing
$10.5 billion in new technology — including assembly robots and milling machines — to ensure that its
products could be made more quickly and more cost effectively. In fact, Apple’s supply chain was ranked
number one in a list prepared by Gartner Group, an analytics firm (see Exhibit 9). Selected financial
information from three competitors – Samsung, BlackBerry and Nokia – is shown in Exhibit 10. One
observer noted that:
Apple is increasingly striking exclusive machinery deals . . . outspending peers on the tools that it
then places in the factories of its suppliers, many of which are in Asia. ‘Their designs are so
unique that you have to have a very unique manufacturing process to make it,’ said Muthuraman
Ramasamy, an analyst with consulting firm Frost & Sullivan, who has studied the use of the
machinery. ‘Apple has so much cash that they can invest in cutting-edge, world-class machinery
that is typically used for aerospace and defense.’33
Finally, Jessica pored over financial information from 1996 to 2013, as well as important segment
information (see Exhibits 11 and 12), before summarizing her notes on Apple’s supply chain. Then she
started to prepare a one-page outline of the pros and cons for her presentation to Phillip Duchene.
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The iPhone, with the iPhone 5s and 5c as the latest versions, combined a phone, photo and video camera,
music player and Internet-accessible device. Apple’s iPhone segment generated $91.3 billion in sales in
2013, up 16 per cent from 2012. The iPhone had been launched as a high-end product and was available
at a premium price. Apple’s iPhone 5c, however, was the first version of the iPhone targeted at the entrylevel market. In 2013, Apple sold 150.3 million iPhones, up from 125 million units in 2012.
The iPad was Apple’s tablet computer, with the fifth generation iPad Air launched in October 2013.
While many competitors had launched tablet computers in the past decade, Apple’s iPad, featuring a
touch-screen interface, was the first tablet computer to gain traction in the market. Apple’s iPad segment
generated $32 billion in sales in 2013, up 3 per cent from 2012. The number of iPad units sold rose 22 per
cent from 58.3 million to 71 million, yet this segment’s revenues were stagnating due to Apple’s launch
of smaller, less expensive iPad models over the years.
Apple’s Mac computers had Intel microprocessors and their own OS X operating system. Apple produced
both desktop and laptop computers. Mac revenues fell 7 per cent to $21.5 billion in 2013. Unit sales fell
10 per cent to 16.3 million in 2013 from 18.2 million in 2012.
The firm’s portable digital music players combined a flash-memory player with features such as a photo
and video camera, and allowed consumers to purchase content from its iTunes store. Sales of the iPod had
been declining for the past few years, with segment revenues down 21 per cent in 2013 to $4.4 billion,
and unit sales down 25 per cent to 26.4 million devices.
iTunes and the iTunes Store
Consumers could purchase and download apps, music and TV shows from the iTunes store. The iTunes
store was integrated with Apple’s App Store and iBooks Store, which featured eBook downloads. The
iTunes software and services segment generated revenues of $16.1 billion in 2013, up 25 per cent from
2012. By January 2013, Apple customers had downloaded 40 billion apps and Apple had made $7 billion
in payments to third-party developers.34
Mac App Store and iCloud
Computer users could download Mac apps from the Mac App store and iCloud was Apple’s cloud
service, where users could keep their personal information online.
Source: Apple annual reports and SEC filings.
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Page 11 9B14D005
Source: Apple annual reports and SEC filings.

iPhone (1st
iPhone 3GiPhone 3GSiPhone 4iPhone 4SiPhone 5iPhone 5CiPhone 5SModel
In addition to prior,
features a fingerprint
resistant oleophobic
coating,[242] and
262,144-color (18-bit)
TN LCD with hardware
spatial dithering[9]
3.5 in (89 mm), 3:2 aspect ratio,
scratch-resistant[7] glossy glass
covered screen, 262,144-color (18-
bit) TN LCD, 480 × 320 px (HVGA) at
163 ppi, 200:1 contrast ratio
3.5 in (89 mm), 3:2 aspect ratio,
aluminosilicate glass covered
16,777,216-color (24-bit) IPS LCD
screen, 960 × 640 px at 326 ppi,
800:1 contrast ratio, 500 cd⁄m² max
4 in (100 mm), 71:40 aspect ratio, 1136 x 640 px screen resolution at 326 ppi
4, 8 or 16 GB
8 or 16 GB
8, 16 or 32 GB
8, 16, 32 or
64 GB 16, 32 or 64 GB
16 or 32 GB16, 32 or 64 GB
833 MHz (underclocked
to 600 MHz) ARM
S5PC100[11][246] (64 KB
L1 + 256 KB L2)
620 MHz (underclocked to 412 MHz)
Samsung 32-bit RISC ARM (32 KB
L1) 1176JZ(F)-S v1.0[243][244]
1 GHz
(underclocked to
800 MHz) ARM
Cortex-A8 Apple A4
1 GHz
(underclocked to
800 MHz) dual
core ARM Cortex
A9 Apple A5
1.3 GHz dual-core Apple-designed ARMv7s
Apple A6[249]
1.3 GHz dual-core Apple-designed
ARMv8-A 64-bit Apple A7 with M7
motion coprocessor[250]
DRAM[11][245] (200 MHz)
Memory 128 MB LPDDR DRAM[252] (137 MHz)
DRAM[253][254][255][256][257] (200 MHz) 1 GB LPDDR2 DRAM[258][259]
3 MP photos, VGA
(480p) video at 30 fps,
macro focus
2 MP f/2.8
5 MP photos, f/2.8,
720p HD video (30
fps), Back
illuminated sensor,
LED flash
8 MP photos,
f/2.4, 1080p HD
video (30 fps),
sensor, face
detection, video
8 MP photos with 1.4µ pixels, f/2.4, 1080p HD
video (30 fps), Infrared cut-off filter, Back
illuminated sensor, face detection, video
stabilization, panorama and ability to take
photos while shooting videos
8 MP photos with 1.5µ pixels, f/2.2
aperture, 1080p HD video (30 fps) or
720 HD video slo-mo video at 120 fps,
improved video stabilization, True
Tone flash, Infrared cut-off filter, Back
illuminated sensor, face detection,
panorama, ability to take photos while
shooting videos and Burst mode
1.2 MP photos with
1.75µ pixels, 720p HD
video (30 fps), Back
illuminated sensor
VGA (0.3 MP) photos and videos (30
1.2 MP photos with 1.9µ pixels, 720p HD video (30 fps), Back
illuminated sensor
4, 8 GB: June 29,
16 GB: February 5,
16, 32 GB: June 19,
16, 32 GB: June
24, 2010
16, 32, 64 GB:
October 14, 2011
8 GB: September
20, 2013
All models:
September 21, 2012
All models: September 20, 2013All models: July
11, 2008
8 GB black: June 24,
CDMA: February
10, 2011
White: April 28,
8 GB: October 14,
4 GB: September
5, 2007
8, 16 GB: July 11,
16 GB: June 8,
16, 32 GB: June 24,
16, 32 GB: October
4, 2011
32, 64 GB:
September 12,
16 GB:
September 10,
8 GB: In
All models:
September 10, 2013
In Production
8 GB black: June
7, 2010
8 GB black: September
12, 2012
8 GB: September
10, 2013
Initial operating
iPhone OS 1.0 iPhone OS 2.0 iPhone OS 3.0
iOS 6.0 iOS 7.0
Aluminum, glass,
steel, and black
Glass, plastic, and steel; black or whiteBlack or white aluminosilicate glass
and stainless steel
Black with anodized
aluminium “Slate”
metal or white with
White, pink, yellow,
blue or green
Silver (white front with “Silver”
aluminium metal back), Space Gray
(Black front with anodized aluminium
(white not available for 8 GB models)

iOS 4.0 (GSM)
iOS 4.2.5 (CDMA)
iOS 5.0
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Page 12 9B14D005
Source: Apple annual reports and SEC filings.

Global iPhone Sales by FY Quarter (in MMs)
Q3 2007 0.270
Q4 2007 1.190
Q1 2008 2.315
Q2 2008 1.703
Q3 2008 0.717
Q4 2008 6.890
Q1 2009 4.363
Q2 2009 3.793
Q3 2009 5.208
Q4 2009 7.367
Q1 2010 8.737
Q2 2010 8.752
Q3 2010 8.398
Q4 2010 14.102
Q1 2011 16.240
Q2 2011 18.650
Q3 2011 20.340
Q4 2011 17.070
Q1 2012 37.040
Q2 2012 35.100
Q3 2012 26.000
Q4 2012 26.900
Q1 2013 47.800
Q2 2013 37.400
Q3 2013 31.200
Q4 2013 33.800
Q1 2014 51.000

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Page 13 9B14D005
Source: Apple Inc.,, accessed October 4, 2013.

Apple Suppliers 2011
1AACTechnologies Holdings Inc.53Daishinku Corporation (KDS)105Interflex Co.,Ltd.
2AcBel Polytech Inc. 54 Darfon Electronics Corporation 106 International Rectifier Corporation
3Acument GlobalTechnologies 55 Delta Electronics Inc. 107 Intersil Corporation
4Advanced Micro Devices,Inc. 56 Diodes Inc. 108 Inventec Appliances Corporation
5AmperexTechnology Ltd. 57 Dynapack InternationalTechnology 109 Jabil Circuit,Inc.
6Amphenol Corporation 58 Elpida Memory,Inc. 110 Japan Aviation Electronics Industry,Ltd.
7Analog Devices,Inc. 59 Emerson Electric Co. 111 Jin Li Mould Manufacturing Pte Ltd.
8Anjie Insulating Material Co.,Ltd. 60 ES Power Co.,Ltd. 112 Kaily Packaging Pte Ltd.
9Asahi Kasei Corporation 61 Fairchild Semiconductor International 113 Kenseisha Sdn.Bhd.
10AU Optronics Corporation 62 FasteningTechnology Pte Ltd. 114 Knowles Electronics
11AustriaTechnologie & Systemtechnik AG 63 FLEXium Interconnect,Inc. 115 Kunshan Changyun Electronic Industry
12austriamicrosystems 64 Flextronics International Ltd. 116 LairdTechnologies
13AvagoTechnologies Ltd. 65 Fortune Grand Enterprise Co.,Ltd. 117 Lateral Solutions Pte Ltd.
14Brady Corporation 66 Foster Electric Co.,Ltd. 118 Lens OneTechnology (Shenzhen) Co.,Ltd.
15Brilliant International Group Ltd. 67 Fuji Crystal Manufactory Ltd. 119 Lg Chem,Ltd.
16Broadcom Corporation 68 Fujikura Ltd. 120 Lg Display Co.,Ltd.
17Broadway Industrial Group Ltd. 69 Grand UprightTechnology Ltd. 121 Lg Innotek Co.,Ltd.
18Byd Company Ltd. 70 Gruppo Dani S.p.A. 122 LinearTechnology Corporation
19CareerTechnology (MFG.) Co.,Ltd. 71 Gruppo Peretti 123 Lite-OnTechnology Corporation
20CatcherTechnology Co.,Ltd. 72 Hama Naka Shoukin Industry Co.,Ltd. 124 Longwell Company
21Cheng Loong Corporation 73 Hanson Metal Factory Ltd. 125 LSI Corporation
22Cheng Uei Precision Industry Co.,Ltd.(Foxlink) 74 Heptagon Advanced Micro-Optics Pte Ltd. 126 Luen Fung Commercial Holdings Ltd.
23Chimei Innolux Corporation 75 Hi-P International Ltd. 127 Macronix International Co.,Ltd.
24Coilcraft,Inc. 76 Hitachi-LG Data Storage 128 Marian,Inc.
25Compeq Manufacturing Co.,Ltd. 77 Hon Hai Precision Industry Co.,Ltd.(Foxconn) 129 MarvellTechnology Group Ltd.
26Cosmosupplylab Ltd. 78 Hynix Semiconductor Inc. 130 Maxim Integrated Products,Inc.
27CymMetrik (Shenzhen) Printing Co. 79 Ibiden Co.,Ltd. 131 Meiko Electronics Co.,Ltd.
28Cyntec Co.,Ltd. 80 InfineonTechnologies AG 132 MicrochipTechnology Inc.
29Cypress Semiconductor Corporation 81 Intel Corporation 133 MicronTechnology,Inc.
30Mitsumi Electric Co.,Ltd. 82 Ri-Teng Computer Accessory Co.,Ltd. 134 Suzhou Panel Electronic Co.,Ltd.
31Molex Inc. 83 ROHM Co.,Ltd. 135 Taiyi PrecisionTech Corporation
32Multek Corporation 84 Rubycon Corporation 136 TaiyoYuden Co.,Ltd.
33Multi-Fineline Electronix,Inc. 85 Samsung Electro-Mechanics Co.,Ltd. 137 TDK Corporation
34Murata Manufacturing Co.,Ltd. 86 Samsung Electronics Co.,Ltd. 138 Texas Instruments Inc.
35NanYa Printed Circuit Board Corporation 87 SanDisk Corporation 139 Tianjin Lishen Battery Joint-Stock Co.,Ltd.
36NEC Corporation 88 SANYO Electric Co.,Ltd. 140 Toshiba Corporation
37Nippon Mektron,Ltd. 89 SDI Corporation 141 Toshiba Mobile Display Co.,Ltd.
38NishokuTechnology Inc. 90 SeagateTechnologies 142 Toyo Rikagaku Kenkyusho Co.,Ltd.
39NVIDIA Corporation 91 Seiko Epson Corporation 143 TPK Holding Co.,Ltd.
40NXP Semiconductor N.V. 92 Seiko Group 144 TripodTechnology Corporation
41ON Semiconductor Corporation 93 Sharp Corporation 145 TriQuint Semiconductor
42Optrex Corporation 94 Shimano Inc. 146 Triumph Lead ElectronicTech Co.
43Oriental Printed Circuits Ltd. 95 Shin Zu Shing Co.,Ltd. 147 TXC Corporation
44Panasonic Corporation 96 SilegoTechnology Inc. 148 Unimicron Corporation
45PCH International 97 SimploTechnology Co.,Ltd. 149 UnisteelTechnology Ltd.
46Pegatron Corporation 98 Skyworks Solutions Inc. 150 Universal Scientific Industrial Co.,Ltd.
47Pioneer Material PrecisionTech 99 Sony Corporation 151 Vishay Intertechnology
48Prent Corporation 100 Standard Microsystems Corporation 152 Volex plc
49Primax Electronics Ltd. 101 STMicroelectronics 153 Western Digital Corporation
50Qualcomm Incorporated 102 Sumida Corporation 154 Wintek Corporation
51Quanta Computer Inc. 103 Sumitomo Electric Industries,Ltd. 155 Yageo Corporation
52Renesas Electronics Corporation 104 SunrexTechnology Corporation 156 Zeniya Aluminum Engineering,Ltd.

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Page 14 9B14D005

FirmLocationPart or service supplied
SamsungSingaporeCPU and Video Chips
InfineonSingaporeBaseband Communications
Primax ElectronicsTaiwanDigital Camera Modules
Foxconn InternationalTaiwanInternal Circuitry
Entery IndustrialTaiwanConnectors
Cambridge SiliconTaiwanBluetooth
Umicron TechnologyTaiwanCircuit Board
Catcher TechnologyTaiwanCasings
BroadcommU.S.Touch Screen Controls
MarvellU.S.802.11 Specific Parts
FoxconnChinaAssembly and Inventory

Source: Kenneth L. Kraemer, Greg Linden and Jason Dedrick, “Capturing Value in Global Networks: Apple’s iPad and
iPhone”, July 2011, page 5. From “” Note that “Apple Profits” are
gross margins to Apple and suppliers’ “profits” are revenues to that supplier. Amounts do not add up to 100 per cent due to

Cost of inputs: China labor1.8%
Cost of inputs: Non-China labor3.5%
Cost of inputs: materials21.9%
Unidentified profits:5.3%
South Korea profits4.7%
Japan profits0.5%
Taiwan profits0.5%
E.U. profits1.1%
Non-Apple U.S. profits2.4%
Apple profits58.5%

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Page 15 9B14D005
Source: HIS iSuppli Research, September 2012., accessed January 3, 2014.

Components/Hardware Elements16 GB32 GB64 GB
Pricing without Contract$ 649$ 749$ 849
Total Bill of Materials Cost $ 199 $ 209 $ 230
Manufacturing Cost $ 8.00 $ 8.00 $ 8.00
Bill of Materials and Manufacturing $ 207 $ 217 $ 238
iPhone 5 Model

Major Cost Drivers

NAND Flash$ 10.40$ 20.80$ 41.60
DRAM $ 10.45 $ 10.45 $ 10.45
Display and Touchscreen $ 44.00 $ 44.00 $ 44.00
Processor $ 17.50 $ 17.50 $ 17.50
Camera(s) $ 18.00 $ 18.00 $ 18.00
Wireless Section – BB/RF/PA $ 34.00 $ 34.00 $ 34.00
User Interface and sensors $ 6.50 $ 6.50 $ 6.50
Bluetooth/WLAN $ 5.00 $ 5.00 $ 5.00
Power Management $ 8.50 $ 8.50 $ 8.50
Battery $ 4.50 $ 4.50 $ 4.50
Mechanical/Electro-Mechanical $ 33.00 $ 33.00 $ 33.00
Box Contents $ 7.00 $ 7.00 $ 7.00

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Page 16 9B14D005
Source:, accessed April 3, 2014.

iPhone 5Samsung
Galaxiy S III
Droid RAZR
Nokia Lumia
Screen Size4 inches4.8 inches4.7 inches4.5 inches
Resolution 1,136 x 640 1,280 x 720 1,280 x 720 1,280 x 768
Weight 3.9 oz 4.7 oz 5.1 oz 6.5 oz
CPU Dual-core
Apple A6
Snapdragon S4
(in the U.S.)
Snapdragon S4
Dual-core 1.5
Snapdragon S4
16GB, 32GB
or 64GB, no
card slot
16GB, 32GB or
64GB +microSD
32GB, no card
Connectors Apple
Lightning microUSB microUSB microUSB
Operating System iOS 6
Android 4.0.4
(Ice Cream
Android 4.0.4
(Ice Cream
Windows Phone
225 hours
standby, 8
hours talk
time (3G)
790 hours
standby, 11:40
hours talk time
300 hours
standby, 10
hours talk time
LED flash
8MP, 3264×2448
autofocus, LED
autofocus, LED
8MP, 3264×2448
pixels, optical
autofocus, dual
LED flash
Networking Wi-Fi, 2G, 3G,
Wi-Fi, 2G, 3G,
Wi-Fi, 2G, 3G,
Wi-Fi, 2G, 3G,
$199 for
16GB, $299
for 32GB,
$399 for
64GB; avail.
Sept. 21
$199.99 + $35
carrier fee
launch end of
TBA, launch Q4

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Page 17 9B14D005
1. Gartner Opinion and Peer Opinion: Based on each panel’s forced-rank ordering against the definition of “DDVN
2. ROA: ((2012 net income / 2012 total assets) × 50%) + ((2011 net income / 2011 total assets) × 30%) + ((2010 net income
/ 2010 total assets) × 20%)
3. Inventory Turns: 2012 cost of goods sold / 2012 quarterly average inventory
4. Revenue Growth: ((change in revenue 2012-2011) * 50%) + ((change in revenue 2011-2010) * 30%) + ((change in
revenue 2010-2009) × 20%)
5. Composite Score: (Peer Opinion * 25%) + (Gartner Research Opinion * 25%) + (ROA * 25%) + (Inventory Turns × 15%) +
(Revenue Growth × 10%)
6. 2012 data used where available. Where unavailable, latest available full-year data used. All raw data normalized to a 10-
point scale prior to composite calculation. “Ranks” for tied composite scores are determined using next decimal point
Source: Debra Hofman, Stan Aronow, Kimberly Niles, “The Gartner Supply Chain Top 25 for 2013”, The Gartner Group, 22
May 2013, pages 5-6.

(172 voters)
(33 voters)
ROA2 (25%)
Growth4 (10%)
2 McDonald’s 1,197 353 15.8% 147.5 5.9% 5.87
3 3,115 475 1.9% 9.3 33.6% 5.86
4 Unilever 1,469 522 10.5% 6.5 9.0% 5.04
5 Intel 756 515 15.6% 4.2 11.4% 4.97
6 P&G 1,901 493 8.6% 5.8 3.6% 4.91
7 Cisco Systems 1,167 517 8.5% 11.2 7.8% 4.67
8 Samsung Electronics 1,264 298 11.6% 18.5 15.7% 4.35
9 The Coca-Cola Co. 1,779 278 11.7% 5.5 14.0% 4.33
10 Colgate-Palmolive 794 324 18.9% 5.2 3.6% 4.27
11 Dell 1,409 342 6.2% 30.7 -0.6% 4.05
12 Inditex 745 221 18.0% 4.2 13.4% 3.85
13 Wal-Mart Stores 1,629 282 8.8% 8.1 4.9% 3.79
14 Nike 955 236 14.1% 4.2 10.6% 3.62
15 Starbucks 808 159 16.5% 4.8 11.5% 3.41
16 PepsiCo 810 314 8.6% 7.8 10.5% 3.41
17 H&M 399 41 28.2% 3.7 6.7% 3.22
18 Caterpillar 714 247 5.8% 2.8 23.4% 2.91
19 3M 999 105 13.3% 4.2 6.9% 2.87
20 Lenovo Group 397 211 2.5% 22.2 29.8% 2.75
21 Nestlé 679 112 13.3% 5.1 -0.6% 2.51
22 Ford Motor 552 231 5.7% 15.1 3.1% 2.51
23 Cummins 74 139 13.3% 5.3 13.5% 2.48
24 Qualcomm 122 45 12.7% 8.5 25.9% 2.37
25 Johnson & Johnson 730 144 9.6% 2.9 3.3% 2.35

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Page 18 9B14D005
Source: Mergent Database; accessed April 3, 2014.

In U.S. dollarsFY 2009FY 2010FY 2011FY 2012FY 2013
Net sales117,821137,905142,403188,351217,462
Cost of sales81,75691,56296,785118,621130,934
Gross margin36,06546,34345,61869,73086,528
Research & development expense6,3848,1158,613NANA
Net income (loss)8,43614,40011,85322,33328,978
Total shareholders’ equity63,13179,68587,896113,777142,649
Accounts receivable, net15,40017,08118,88522,34823,761
Accounts payable7,1179578841,0921,002
Land & buildings37,64847,23653,54664,14271,789
Cash equivalents19,33622,75925,97939,97257,751
Total assets96,954119,764134,315169,589203,562
In U.S. dollarsFY 2009FY 2010FY 2011FY 2012FY 2013
Net sales14,95319,90718,43511,0736,813
Cost of sales8,36911,08211,8567,6396,856
Gross margin6,5848,8256,5793,434(43)
Research & development expense9651,3511,5591,5091,286
Net income (loss)2,4573,4111,164(646)(5,873)
Total shareholders’ equity7,6038,93810,1009,4603,625
Accounts receivable, net2,5943,9553,0622,353972
Accounts payable6168327441,064474
Land & buildings1,9572,5042,7482,395942
Cash equivalents1,9112,1211,7742,6542,529
Total assets10,20412,87513,73113,1657,552
In U.S. dollarsFY 2009FY 2010FY 2011FY 2012FY 2013
Net sales5904056809500043977317497
Cost of sales3993339655353632871510138
Gross margin191071715414641110587359
Research & development expense85127847725963033606
Net income (loss)3751797-1925-4994-1017
Total shareholders’ equity212472172318000124529169
Accounts receivable, net1149710131928873163994
Accounts payable71318165715557922536
Land & buildings2690261523831886779
Cash equivalents16452611253146185061
Total assets5148352361468293947434681

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Page 19 9B14D005
Source: Mergent Database; accessed April 3, 2014.

FY 2013FY 2012FY 2011FY 2010FY 2009FY 2008FY 2007FY 2006FY 2005
Net sales170,910,000156,508,000108,249,00065,225,00036,537,00032,479,00024,006,00019,315,00013,931,000
Cost of sales 106,606,000 87,846,000 64,431,000 39,541,000 23,397,000 21,334,000 15,852,000 13,717,000 9,888,000
Gross margin 64,304,000 68,662,000 43,818,000 25,684,000 13,140,000 11,145,000 8,154,000 5,598,000 4,043,000
Research & development expense 4,475,000 3,381,000 2,429,000 1,782,000 1,333,000 1,109,000 782,000 712,000 534,000
Net income (loss) 37,037,000 41,733,000 25,922,000 14,013,000 5,704,000 4,834,000 3,496,000 1,989,000 1,335,000
Total shareholders’ equity 123,549,000 118,210,000 76,615,000 47,791,000 27,832,000 21,030,000 14,532,000 9,984,000 7,466,000
Accounts receivable, net 13,102,000 10,930,000 5,369,000 5,510,000 3,361,000 2,422,000 1,637,000 1,252,000 895,000
Accounts payable 22,367,000 21,175,000 14,632,000 12,015,000 5,601,000 5,520,000 4,970,000 3,390,000 1,779,000
Inventories 1,764,000 791,000 776,000 1,051,000 455,000 509,000 346,000 270,000 165,000
Land & buildings 3,309,000 2,439,000 2,059,000 1,471,000 955,000 810,000 762,000 626,000 361,000
Cash equivalents 146,761,000 121,251,000 81,570,000 51,011,000 33,992,000 24,490,000 15,386,000 10,110,000 8,261,000
Total assets 207,000,000 176,064,000 116,371,000 75,183,000 53,851,000 39,572,000 25,347,000 17,205,000 11,551,000
Full-time employees 80,300 72,800 60,400 46,600 34,300 32,000 21,600 17,787 14,800
FY 2004FY 2003FY 2002FY 2001FY 2000FY 1999FY 1998FY 1997FY 1996
Net sales8,279,0006,207,0005,742,0005,363,0007,983,0006,134,0005,941,0007,081,0009,833,000
Cost of sales 6,020,000 4,499,000 4,139,000 4,128,000 5,817,000 4,438,000 4,462,000 5,713,000 8,865,000
Gross margin 2,259,000 1,708,000 1,603,000 1,235,000 2,166,000 1,696,000 1,479,000 1,368,000 968,000
Research & development expense 489,000 471,000 446,000 430,000 380,000 314,000 303,000 485,000 604,000
Net income (loss) 276,000 69,000 65,000 -25,000 786,000 601,000 309,000 -1,045,000 -816,000
Total shareholders’ equity 5,076,000 4,223,000 4,095,000 3,920,000 4,107,000 3,104,000 1,642,000 1,200,000 2,058,000
Accounts receivable, net 774,000 766,000 565,000 466,000 953,000 681,000 955,000 1,035,000 1,496,000
Accounts payable 1,451,000 1,154,000 911,000 801,000 1,157,000 812,000 719,000 685,000 791,000
Inventories 101,000 56,000 45,000 11,000 33,000 20,000 78,000 437,000 662,000
Land & buildings 351,000 350,000 342,000 337,000 324,000 323,000 338,000 453,000 480,000
Cash equivalents 5,464,000 4,566,000 4,337,000 4,336,000 4,027,000 3,226,000 2,300,000 1,459,000 1,745,000
Total assets 8,050,000 6,815,000 6,298,000 6,021,000 6,803,000 5,161,000 4,289,000 4,233,000 5,364,000
Full-time employees 11,695 10,912 10,211 9,603 8,568 6,960 6,658 8,437 NA

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Page 20 9B14D005
Source: Apple 2013 10-K filing, page 27.

Net Sales by Operating Segment:
Europe 37,883 4% 36,323 31% 27,778
Greater China (a) 25,417 13% 22,533 78% 12,690
Japan 13,462 27% 10,571 94% 5,437
Rest of Asia Pacific 11,181 4% 10,741 8% 9,902
Retail 20,228 7% 18,828 33% 14,127
Total net sales $170,910 9% $156,508 45% $108,249
Net Sales by Product:
iPhone (b) $91,279 16% $78,692 71% $45,998
iPad (b) 31,980 3% 30,945 61% 19,168
Mac (b) 21,483 -7% 23,221 7% 21,783
iPod (b) 4,411 -21% 5,615 -25% 7,453
iTunes, software and services (c) 16,051 25% 12,890 38% 9,373
Accessories (d) 5,706 11% 5,145 15% 4,474
Total net sales $170,910 9% $156,508 45% $108,249
Unit Sales by Product:
iPhone 150,257 20% 125,046 73% 72,293
iPad 71,033 22% 58,310 80% 32,394
Mac 16,341 -10% 18,158 9% 16,735
iPod 26,379 -25% 35,165 -17% 42,620

This document is authorized for use by Troy Montgomery, from 7/8/2023 to 12/31/2023, in the course:
EMBA 7310: Operations Management – Montgomery (Summer 2023), University of Georgia.
Any unauthorized use or reproduction of this document is strictly prohibited*.
Page 21 9B14D005
1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Apple Inc. or any of its employees.
accessed April 3, 2014.
3 All currencies are in US$ unless otherwise stated.
4, accessed April 3, 2014.
5 Poornima Gupta, Peter Henderson, “Apple CEO Tim Cook is slowly, quietly, burying Steve Jobs,” Reuters, August 22,
2013, accessed April 3, 2014.
6, accessed May 16, 2014.
7 Stewart Alsop, “Apple of Sun’s Eve,” Time, February 5, 1996.
8, accessed April 3, 2014.
9 Cam Simpson, “An iPhone Tester Caught in Apple’s Supply Chain,” Bloomberg Businessweek, November 7, 2013,
accessed April 3, 2014.
10; accessed January 3, 2014. Samsung had its own factories in China, Vietnam and India but
was accelerating the outsourcing of the production of its smartphone devices.
11 Adam Satariano, “Apple’s $10.5 B on Robots to Lasers Shores up Supply Chain,” Bloomberg, November 13, 2013,
accessed April 3, 2014.
12 Cam Simpson, op.cit.
14; accessed April 3, 2014.
15 Apple 10-K report 2013, page 7.,
accessed April 3, 2014.
16 “How the U.S. Lost Out on iPhone Work,”, accessed April 3, 2014.
17 Adam Satariano and Peter Burrows, “Apple’s Supply-Chain Secret? Hoard Lasers,” Businessweek, November 3, 2011.
18 Cam Simpson, op. cit.
19, accessed April 3, 2014.
20 Cam Simpson, op. cit.
21 Adam Satariano, op. cit.
22 Cam Simpson, op. cit.
23 Poornima Gupta and Jennifer Saba, “Apple sells over 5 million iPhone 5, supply constraints loom,” Reuters, September
24, 2012, accessed April 3, 2014.
24 Ibid.
25 Paul Mozur, “Life Inside Foxconn’s Facility in Shenzhen,” China Realtime Report, The Wall Street Journal, December 19,
2012, accessed April 3, 2014.
26 Cam Simpson, op. cit.
27, accessed April 3, 2014.
28, accessed April 3, 2014.
29 Cam Simpson, op. cit.
30 Ibid.
accessed April 3, 2014.
32, accessed April 3, 2014.
33 Adam Satariano, op. cit.
34 Matthew Lynley, “Apple has paid out more than $7 billion to developers,” The Wall Street Journal, January 7, 2013,
accessed April 3, 2014.
This document is authorized for use by Troy Montgomery, from 7/8/2023 to 12/31/2023, in the course:
EMBA 7310: Operations Management – Montgomery (Summer 2023), University of Georgia.
Any unauthorized use or reproduction of this document is strictly prohibited*.

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