Who Makes the Apple Iphone?

Ch. 1: Who Makes the Apple Iphone?

  1. What are the benefits to Apple of outsourcing the assembly of the iPhone to foreign countries, and particularly China? What are the potential costs and risks to Apple?

Some of the main benefits to Apple of outsourcing to particularly China are the following;
-Cost advantages: this is the most obvious benefit of outsourcing. Apple can get their assembly in China done at a much lower cost compared to the US.
Moreover, the low wages won’t hurt the quality of the products since the quality of the services are just as high as in the US.  
However, the case states that this is not the main driver of location decisions.
-The ability of the Chinese subcontractors to respond quickly to requests from Apple to scale production up and down.
-Efficiency: the outsourcing company in China will already have years of experience. This means they can do the job better and faster, and therefor increase the efficiency of the assembly.
-Access to skilled resources: when Apple outsources to China there is no need to invest in recruiting resources for their business. The resources hired by the outsourcing company are well educated and experienced in catering to Apple’s needs.

Outsourcing is usually really cost-effective, but hidden cost are one of the biggest risks.   Hidden costs are the costs that can’t be predicted, and are not included in the purchase price. A few examples of these hidden costs are;
-costs of unexpected logistic activities
-cost of poor quality
-cost of supplier management
-cost of unforeseen risks
-cost of managing outsourcing relationships

Other risks of outsourcing could be;
-Loss of managerial control: when a firm outsources a tasks to another company, they are turning the management and control over to the other company. The outsource company won’t have the same mission and values that your firm has, their mission will be making a profit on the outsource services that they’re providing to...