Forecasting
Forecasting is the ability of a firm to plan for its future. The future of firms has different parameters such as costs, inventory, interest rate charges, and capacities. The constant changes in the business environment demand that organizations must prepare to adapt to the environment in order to continue realizing continuous growth.
The forecasting process enables organizations to predict the future behavior of their internal activities like financial flow (“Industry Forecasting Methods” par. 1). They can also evaluate the external activities like the customers’ tastes and preference. This approach enables firms to satisfy their customers’ needs. Therefore, the forecast helps firms to come up with strategies that they can employ to go through the future challenges. This gives organizations competitive advantage over other competitors.
Methods and Techniques of forecasting
Firms employ various forecasting techniques in order to understand the nature of their customers’ demands. Forecasting entails research and development with the purpose of replacing old trends with new trends. The various types of forecasting are in two broad categories that are qualitative and quantitative approaches.
Under qualitative approach, there are Delphi method, market research, product life-cycle analogy and expert judgement (“Forecasting” par. 6). In this method experts are presented with a scenario and are tasked to make initial predictions based on a questionnaire to write opinions. Afterwards, response analysis is carried out, and another summary is given to the experts for further predictions. This process undergoes several repetitions until a consensus is reached.
Market research involves the use of questionnaires and surveys in testing the market trends and customers’ behaviors. There is also the product life-cycle analogy which analyzes the performance of a given product in the market. This method studies the general life-cycle of all products that firms produce. Lastly, expert judgement is carried out by the entire management and other technocrats.
On quantitative methods, there are the time series forecasting methods; it is analyzes historical information over consecutive periods (“Forecasting” par. 8). In this method, analysts assume that they can use varied precedent data patterns to foresee future data points. In time series, there are moving averages, Box-Jenkins methods of autocorrelation, exponential smoothing and mathematical models.
In this broad base quantitative forecasting method, firms plot to determine the characteristics of the plotted data. The components are trend, cyclical, irregular and seasonal component. Smoothing methods is an example of forecasting approaches, which show a fairly stable time series of no notable cyclical, seasonal effects, and trends.
Apple’s Forecasting Technique
The Apple Company uses time series analysis. The use of historical data has helped the company to redesign new products to constantly changing market, for example, the iPod (“Industry Forecasting Methods” par. 5). Apple has overtime altered their product models and sizes. The company forecasts on music portability in light gadgets. This strategy made the company gain competitive advantage over their competitors like Microsoft.
Through continuous research and development, Apple which for a long time had been under the Windows operating system, became a leader in mp3 player, in the global market. Apple is continuously using trend forecasting to study the market nature 10 years ago and 10 years to come.
The old trend system has made Apple remain at the top as they can predict the future tastes of their customers. With the current technological developments like large gigabytes of storage in computers and ability of customers to stream live and download videos, the Apple Company has inculcated these features in their iPod in order to remain in the forefront in the near future.
Process Design
Apple’s Process Design
Process design is the means by which organizations construct and reorganize their products to be above par in the competitive market. Apple has truly succeeded where others failed in the design process of their products. The firm uses the experimental object design process of design, that is, their design process aims at removing ambiguity in operation of products by the consumers.
Even though the process takes a lot of time and involves a large amount of work, it corrects past mistakes. In addition, the designers use the 10 to 3 to 1 mock up (Walters par. 3). This enables them to design without restrictions and choose the best standard out of the available designs. Clearly, the variety of products allows designers to make strong decisions on the best designs to meet the present and future market demands.
The device is redesigned to avert any situation of leaks that may arise from nations like China. Afterwards, there are paired design meetings where engineers and designers brainstorm on how their idea will solve a problem in the market. The meeting encourages openness in accepting new ideas in developing any app (Walters par. 5). Lastly, the management meets to decide on the best design that they believe can offer long-term solutions to the market demands.
This process helps to manage the entire design process. After product development, it is launched under a well coordinated action plan that is confidential. The landmarks of the product development are entrusted to a responsible individual who does not leak the information to wrong parties. An attempt to release this information before the product launch leads to dismissal right away.
Management of the Design
From the onset, Apple agrees that this process is time consuming and involves a large volume of work; however, they contend that the product will create a difference in the market. Apple produce products that are expensive, but they are more efficient than other cheap products in the market.
The company holds that even though their products are expensive, they fail to disappoint the customers. Clearly, Apple follows its devotion to ‘good products first’, and from their historical performance, they have succeeded massively in the past 10 years (Panzarino par. 7).
Additionally, the company ships 99% of the products that exceed a certain threshold. This is in comparison to other firms like Philips which kills 9 out of 10 projects that the institute. This approach of management by Apple encourages innovative ideas among the designers and engineers as compared to other competitive firms.
Moreover, the firm raises the employees’ morale hence creating a corporate culture where employees work together to achieve the objectives of the Apple Company. Therefore, Apple’s design process makes employees achieve personal goals of skill development and support.
The process enables employees to evoke their fresh knowledge in coming up with possible solutions to counter the problems. These behavior changes enable Apple to use their employees’ potential fully towards meeting their strategic objectives. The current Nest CEO Tony Fadell agrees that when he joined Apple in 2001, the entire original iPod design process was fascinating and even encouraging as they worked as a team.
The designers are highly valued as all the end products match their vision (Panzarino par. 5). Jonathan Ive heads the design department at Apple, who decides on the design process of any product.
The designers at the Industrial Design Studio do not engage the finance department at any time. Jonathan Ive is powerful as he has absolute control of the product designing process. This responsibility helps in focusing on delivering standard designs even if they are expensive. From this management style, the company is not following its strategy of low cost orientation.
Capacity
Apple’s Capacity Management
Capacity refers to the number of workforce, customers, suppliers and variety of products that a firm has. In the 21st century firms have been reducing their capacity through layoffs, salary cuts and foregoing recruitments. This can be attributed to some effects like the recession and mismanagement of companies.
The Apple Company, on the other hand, focuses on software, hardware and digital services provision. It is the best innovative product development company and the most profitable and fast growing firm. The design strategy that Apple uses has made its customers patient as the customers believe in getting value for their money.
At present Apple supports 307,250 US jobs with 50,250 jobs at Apple (“Apple – Job Creation” par. 1). Notably, the firm has supported other jobs in companies like those under healthcare, transportation, professional, scientific and technical services and consumer sales. For example, employees at Corning in New York create glasses for the iPhone and manufacturers of processors for their iOS products. Capacity management can also be seen from the economic perspectives, that is, Apple was able to supply over 800,000 apps.
The introduction of the iPhone in 2007 has added over 290,000 jobs in the US. They have managed to sell these gadgets to over tens of millions of their customers worldwide and receive $8 billion to developers. This firm has been able to develop strong trust among their customers with their quality and efficient products. The final users love the technological applications on Apple’s products.
Moreover, Apple recorded a profit of $20billion during its first quarter; this was far much ahead of firms like Intel, HP and IBM (“Apple’s amazing run” par. 1). Apple had higher market capitalization than the computer company giants, Microsoft. Apple has also put down vast emphasis on the consumer market; an initiative that aims at customer satisfaction at the expense of profit maximization and cost minimization.
A close study of the historical sales patterns for their various products shows an increasing trend. For example, the iPod sales history shows 2.5 times in sales during the fourth quarter in comparison to the third quarter. This translates to over 10 to 11 million iPads during the fourth quarter.
Surely, the company has a capacity that needs proper management. This is derived from the comparison with other firms in the same industry. This capacity is not enough given that the company has a strategy of producing costly products that are accessible to a certain group of customers.
Apple should continue with this strategy of ensuring quality products go into the market; however, they should cut some extra costs on these products like iPhones, Macs, iPads and iPods. Additionally, the selected strategy of differentiation, low cost and response do match the company managing capacity. For example, they outsource production to a firm in a country with low labor cost and flexible employees.
Apple’s concentration on meeting the customers’ needs makes it be above other competitors in capacity management. This process enables them to forecast on the expected trends hence remaining under high liquidity even during economic challenges like the 2008/2009 financial crisis. Therefore, capacity management remains a continuous process that organizations should institute all the time in order to remain viable in the market. This process assists them in understanding the forces of demand and supply in the market.
Works Cited
Apple – Job Creation. Apple. Apple Inc, n.d. Web.
Apple’s amazing run. Matching Supply with Demand | Current events and issues in Operations Management. WordPress.com, 19 Oct. 2010. Web.
Forecasting. Operation Management Page. N.p., n.d. Web.
Industry Forecasting Methods. HubPages. HubPages Inc., 9 July 2010. Web.
Panzarino, Matthew. “How Apple’s Top Secret Product Development Process Works.” The Next Web – International technology news, business & culture. The Next Web, Inc., 24 Jan. 2012. Web.
Walters, Hellen. “Apple’s design process.” Businessweek. Bloomberg L.P, 8 Mar. 2008. Web.