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Essay title: Development of Business Relationships in the Technology

Industry: An Apple Inc. Case Study

Word count: 2,967

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Degree: MSc Business Economics

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Introduction
The development of business relationships has been a critical topic in business management,

strategy and economics particularly since the rise of globalisation over the last few years.

Building and managing effective business relationships with suppliers, customers, and other

stakeholders can help provide firms with access to important resources, expertise, and networks,

which can contribute to their competitive advantage and growth which is also highlighted in the

study conducted by (Baraldi & Håkansson, 2015; Li & Li, 2018).

The purpose of the following report, is to examine the development of business relationships in

the technology industry, using a case study approach. The case study will focus on how

technology companies have developed and managed its business relationships with suppliers,

customers, and strategic partners, and how these relationships have contributed to their

subsequent growth and success over the last two decades. The particular case study that will be

reviewed as part of the study regarding business relationships and growth will be the Apple

Incorporation which is a major multinational technology company specializing in designing and

manufacturing smartphones, laptops, computers and other technological accessories.

Literature Review
Business relationships are critical for firms to achieve growth and success in their respective

industries. A business relationship can be defined as a long-term, mutually beneficial

arrangement between two or more organizations that involves the exchange of goods or services

according to (Coviello et al., 2017). The objective of a business relationship is to create value for

both parties being involved in a certain business or operational activity, which can subsequently

go on to increase efficiency, reduce costs, or generate revenue for all the parties involved.
Apple is a multinational technology company that has developed several business relationships

over the years, including supplier relationships, customer relationships, and strategic alliances.

These relationships have enabled the company to capture the economies connected to

specialization and process integration, as well as add to resource development or be a stimulus

for innovation. According to (O'Reilly III & Tushman, 2020), Apple has gone on to utilise its

business relationships significantly in order to exponentially grow and some of its notable

relationships are with content creators such as the New York Times and advertisers.

Economies of specialization and process integration

In the case of Apple Inc., the company has formed several business relationships that have

enabled it to capture the economies connected to specialization and process integration.

According to (Al-Mudimigh, 1998), economies of specialization and process integration refer to

the efficiencies gained through a company's ability to focus on and improve specific tasks or

processes. Specialization refers to the ability of a company to concentrate on a particular product,

service, or process, and to develop the necessary expertise to become highly proficient in that

area (Coviello et al., 2017). By specializing, a company can achieve economies of scale, which

can subsequently reduce costs and increase efficiency.

Process integration on the other hand refers to the ability of a company to link various processes

within the value chain to create a more efficient system. According to (Coviello et al., 2017),

process integration can result in cost savings, improved quality, and faster response times. For
example, companies can integrate their production and distribution processes to reduce the time

and costs involved in delivering products to customers.

Apple has been able to establish strong business relationships with suppliers that specialize in

providing high-quality components and raw materials for its products. These relationships have

enabled Apple to achieve economies of scale and develop more efficient production processes,

which has contributed to its competitive advantage over the past decade and more which is

highlighted in the study conducted by (Yu, 2020). Moreover, according to (Yu, 2020), Apple's

supplier strategy has also enabled the company to manage risks associated with supply chain

disruptions, such as natural disasters or political unrest. By developing long-term relationships

with its suppliers, Apple has been able to build a more reliable and resilient supply chain that can

respond to unexpected events such as the Covid-19 pandemic which had a significantly negative

impact on supply chain operations of many companies (Kumar, 2020).

Apple's success can be significantly attributed to its effective process integration strategy. The

company's business relationships with suppliers and manufacturers have been a key component

of this strategy. Apple's manufacturing process is highly integrated, with suppliers working

closely with the company to produce the components that go into Apple's products (Haberberg &

Rieple, 2008). This tight integration ensures that the products are of high quality and delivered

on time. Moreover, Apple has also integrated its sales and distribution processes.
Resource development and innovation

Apple's resource development and innovation strategies have been instrumental in the company's

growth and success. According to (Lashinsky, 2012), the company has a culture of innovation,

and its product development process is designed to encourage creativity and risk-taking. Apple's

innovation is not limited to product development, but extends to all aspects of the business,

including marketing, sales, and customer service.

One of the key components of Apple's resource development and innovation strategy is its

relationship with suppliers which is also highlighted in the study conducted by (Yu, 2020). Apple

develops and manages relationships with its suppliers through long-term contracts, networking

and collaboration to develop new technologies and improve existing ones according to a study

conducted by (Linzmayer, 2004). For instance, Apple worked with its suppliers to develop the

Retina display, which is now a standard feature on many of its products. This close collaboration

has helped Apple to stay ahead of its competitors and maintain its position as a leader in

innovation.

Another aspect of Apple's resource development and innovation strategy as part of its business

relationship management is its investment in research and development (R&D). Apple invests

heavily in R&D to develop new technologies and improve existing ones (Lashinsky, 2012).

These investments have helped the company to develop innovative products such as the iPhone,

iPad, and Apple Watch, which have been hugely successful. Apple has partnered with companies

such as Intel and IBM to develop new processors and chips for its products as part of its

innovation strategy according to (Lashinsky, 2012). This collaboration is a pristine example of

how business relationships can help organizations grow as the collaboration have enabled Apple

to access the expertise and resources of these companies and develop new technologies faster

and more efficiently.

In addition to that, Apple has also developed business relationships with startups and smaller

companies that specialize in emerging technologies as part of its larger resource development

and innovation strategy. An example of this is Apple’s acquisition of Siri, a virtual assistant

technology in 2010 (Business Insider, 2010). This acquisition allowed Apple to integrate Siri

into its products and develop new features based on the technology which also subsequently

went on to become a prime feature of the Apple products.

The benefits of resource development and innovation at Apple are numerous with one of the key

benefits being improved competitiveness. By developing new technologies and products, Apple

has been able to maintain its competitive advantage and stay ahead of its competitors which has

consequently helped the company to increase its market share and profitability significantly (Lee

et al., 2018, p. 3686). Moreover, as business relationships has enabled Apple to enhance its

resource development, it has led to the creation of new business opportunities and multiple

revenue streams for the company. An example of this is the development of the iPhone, which

subsequently led to the creation of the App Store, which has become a significant source of

revenue for the company (Lashinsky, 2012). Similarly, the development of the Apple Watch is

also projected to create new opportunities in the health and fitness industry according to

(McGinley, 2014), which further reiterates the fact that effective business relationships can

significantly act as a stimulus for innovation.

Key Business Relationships

Apple has a strong business relationship with Foxconn, a Taiwanese manufacturer that produces

a range of Apple products, including the iPhone and iPad (Hill, 2019). The partnership has

allowed Apple to access Foxconn's expertise and support in the manufacturing process, enabling

the company to produce high-quality products at scale. However, the relationship has not been

without controversy, with reports of labor violations and worker mistreatment in Foxconn's

factories (Kim, 2019). Despite this, Apple has continued to work with Foxconn, highlighting the

importance of the partnership to its production and supply chain strategy.

In addition to that, Apple also has a significant supplier relationship with Samsung, particularly

for the production of key components like displays and memory chips (Kim, 2019). This

relationship has been strained at times due to legal disputes over patents and intellectual

property, with both companies suing each other in various jurisdictions (Borland, 2011).

However, the partnership has also been mutually beneficial, with Samsung benefiting from the

high-volume orders from Apple and Apple being able to access Samsung's expertise and

technology in the production of key components.

Another example of Apple’s key business relationship is of Marcus by Goldman Sachs, a digital

banking platform, which has partnered with Apple and Amazon to provide credit cards and loans

to their customers (McKinsey & Company, 2020). The partnership between Marcus, Apple, and

Amazon has benefitted all three companies in different ways. For Marcus, the partnership has

helped it gain popularity and credibility among consumers, as well as access to millions of
potential customers who are loyal to Apple and Amazon (PYMNTS.com, 2020). For Apple, the

partnership has helped them to enhance their ecosystem and offer a seamless payment experience

to its users. In addition to that, it has also helped Apple diversify its revenue streams and reduce

its dependence on hardware sales (ZDNet, 2020).

SWOT Analysis

The following SWOT analysis if carried out to analyse the strengths, weaknesses, opportunities

and threats of the business relationships of Apple.

Strengths

 Strong partnerships with suppliers such as Goldman Sachs, IBM, Foxconn and Samsung

that provide access to valuable resources and expertise (Hill, 2019; Kim, 2019)

 Investment in research and development to develop innovative products like the iPhone,

iPad, and Apple Watch (Lashinsky, 2012)

 Strong brand reputation and customer loyalty, which help to attract and retain high-

quality suppliers (Duhigg & Barboza, 2012)

 Effective negotiation skills that enable Apple to secure favorable terms and pricing from

suppliers (Nisen, 2012)

Weaknesses

 Dependence on a few key suppliers, which can lead to supply chain disruptions and

impact product availability (Rao, 2020)

  Limited control over suppliers' ethical and environmental practices, which can impact

Apple's sustainability and CSR practices (Garriga & Melé, 2013)

 High production costs due to Apple's stringent quality standards and demands (Friedman,

2012)

 Limited control over suppliers' manufacturing processes, which can impact the quality

and consistency of Apple's products (Satariano & Chen, 2012)

 Limited control over suppliers' manufacturing processes, which can impact the quality

and consistency of Apple's products (Satariano & Chen, 2012).

Opportunities
 Expansion into new markets and industries, such as healthcare with the Apple Watch

(Ahmed, 2019)

 Collaboration with suppliers to develop innovative new technologies, such as OLED

displays and voice recognition software (Cheng & Chiu, 2014; Linzmayer, 2004)

 Increasing demand for sustainability and ethical practices, which can drive Apple to

partner with suppliers that share its values (Garriga & Melé, 2013)

Threats

 Increasing competition in the technology industry, which can lead to a decrease in

supplier bargaining power (Saporito, 2018)

 Economic and political instability in supplier countries, which can impact production and

supply chain costs (Rao, 2020)

  Increasing labor and environmental regulations that can impact supplier costs and

increase production costs for Apple (Rao, 2020)

Findings & Discussion

The case study analysis of Apple Incorporation, one of the biggest firms in the technology

industry substantially highlights how important business relationships are for growth. One of the

major finding from the case study of Apple is the importance of collaborating with suppliers,

manufacturers, and other stakeholders which are crucial towards enabling a company towards

developing new products, improving existing ones, and also expand their reach to new markets

which has become key in the current age of increased competitiveness.

One of the most crucial stakeholders with whom business relationships are very important for

long-term growth are suppliers who are essential in facilitating growth and innovation for

businesses according to a study conducted by (Henderson & Reilly, 2011). By establishing long-

term relationships with suppliers, businesses can improve their efficiency, reduce costs, and gain

a competitive advantage. Rising supply chain costs have become a growing concern for

businesses, particularly in the wake of the Covid-19 pandemic. The pandemic has disrupted

global supply chains, causing shortages of raw materials, components, and finished goods, as

well as transportation and logistics delays (KPMG, 2020). This has led to increased costs for

businesses, as they are forced to pay higher prices for materials and transportation, as well as

incur additional costs associated with supply chain disruptions and delays (KPMG, 2020).
As a result of these challenges, strong business relationships with suppliers have become even

more important for organizations. By establishing long-term relationships with reliable suppliers,

businesses can reduce the risk of disruptions and ensure a stable supply chain (Henderson &

Reilly, 2011). Moreover, by working closely with suppliers, businesses can also improve their

efficiency, reduce costs, and gain a competitive advantage. This has particularly important in

times of crisis, such as the Covid-19 pandemic, when businesses need to be able to adapt quickly

to changing market conditions and customer needs and this was also one of the major reasons for

Apple’s resilience despite the Covid-19 pandemic. Therefore, it can be highlighted that business

relationships act as a stimulus for growth through establishing processes for supply chain

efficiencies and reducing the risk of disruptions which is also highlighted in the study conducted

by (Chong et al., 2019, p. 197)

In addition to that, business relationships can also enable companies to get access to more

valuable expertise, support and resources which are required to produce high-quality products

and services. For instance, major technological companies such as Apple, Amazon and

Microsoft, all have strong business relationships which significantly enable them to enhance

their offerings. This can also be seen from the example of Apple’s relationship with Foxconn,

Samsung, IBM and Goldman Sachs which was discussed earlier in the analysis.

The findings from the case study analysis highlight that business relationships can play a

significant role in enabling companies to capture the economies connected to specialization and

process integration, as well as in enhancing their resource development and innovation.

specialization allows a company to focus on its core competencies and outsource other functions

to external partners who have more expertise or lower costs (Prencipe et al., 2003). Apple is an

example of a company that has successfully leveraged specialization and process integration in
its business model. Apple designs its products in-house but relies on a global network of

suppliers and manufacturers for production. Apple also integrates its processes with those of its

collaborators through various mechanisms, such as long-term contracts, quality standards,

information sharing systems, joint problem-solving teams, and performance incentives

(McKinsey.com). By doing so, Apple reduces its operational costs, ensures high-quality

standards, speeds up product development cycles, and also successfully delivers innovative

products to the market.

However, it should also be taken into consideration that a major challenge associated with the

development of business relationships is to balance the benefits of collaboration with the costs of

dependence. For example, Apple has established a strong ecosystem of products and services

that create value for its customers and partners, but also impose constraints on their choices and

behaviors (The New York Times, 2021). Apple's strategy relies on maintaining control over its

hardware, software, and distribution channels, which enables it to offer a seamless and

differentiated user experience. However, this also means that Apple has to manage potential

conflicts with its suppliers, developers, regulators, and competitors who may have different

interests or goals (CNBC, 2021). Moreover, Apple faces the risk of losing its competitive edge if

it fails to innovate or adapt to changing customer preferences and market conditions. As a result,

Apple has to constantly invest in research and development, marketing, and customer service to

sustain its loyal fan base and attract new customers (Seeking Alpha, 2021). Therefore,

developing a business relationship is not a one-time event but an ongoing process that requires

strategic alignment, mutual trust, effective communication, and conflict resolution among the

parties involved.
Conclusion

The findings of the report have critically evaluated the development of a business relationship

and how it can be a stimulus for growth, using Apple as a case study of a technological company.

The report has primarily concluded that business relationships can indeed enable a firm to

stimulate innovation and capture the economies connected to specialization and process

integration. The report highlights the various types of business relationships of Apple with its

suppliers, customers, competitors, complementors, and intermediaries and how these

relationships have helped Apple to achieve cost efficiency, quality improvement, customer

satisfaction, competitive advantage, product differentiation, and market expansion. Apple has

notably had business relationships with IBM, Intel and Goldman Sachs which have all enabled

the firm to diversify their revenue streams and launch more innovative products and services into

the consumer market.

On the other hand, the report has also discussed how a firm such as Apple has managed its

business relationships by taking into consideration several factors such as dependency,

opportunism, coordination costs, and ethical issues. To put it in a nutshell, it can be concluded

that business relationships are essential for any company that wants to grow and succeed in

today's dynamic and complex environment. Business relationships can provide access to valuable

resources, capabilities, knowledge, and markets that would otherwise be difficult or impossible

to obtain. However, business relationships also require careful planning, negotiation, adaptation,

and evaluation to ensure that they are mutually beneficial and sustainable. Therefore, firms

should adopt a strategic approach to developing and managing their business relationships for

different purposes.
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