The world economic systems are driven by two main components namely production and consumption. These two components are interrelated through the dynamics of demand and supply relationship. The economic theory stipulates that a commodity once produced has to be consumed.
As such an equilibrium between production and consumption has to be established if the product is to survive the in the market. If there is any disequilibrium between demand and supply, then the commodity will have experienced market failure, as too much production will lead to wastages, increased storages prices and complicated warehousing logistics while underproduction of the commodity will lead to shortages and as possible price hike of the commodity.
Production and consumption are linked by the distribution chain that ensures that a commodity reaches the intended market. Production of a commodity involves several variables such as land labor capital and raw material. Firms have to reduce the cost involved in these variable especially labor and land.
Raw materials have to be sourced and prepared well so as to make sure that they meet best quality standards. The distribution of a commodity is facilitated by the extensive and complex transport and communication network, information technologies and the increased liberalization of world markets. As such, between production and consumption, there exists a chain of interrelated activities.
Commodity chain analysis is the inter related series of activities that involve production, trading and marketing and it also covers all activities from the processing of raw materials, the intermediate activities involved in valued addition of the semi finished good to the transportation of the final product to the market (Rodrigue 2011b).
These activities are interdependent and also sequential. Commodity chain analysis also involves other variables such as the pricing of the products, the laws regulating the ownership of the products, and also value addition to the product at every stage of production (Rodrigue 2011a). Commodity chain thus ensures an efficient production and supply of a commodity such as the Apple iPhone to the market with minimum hindrance for maximum returns.
Apple Inc. is an American multinational corporation that is involved in the designing, production distribution and selling of consumer electronics such as mobile phones, software’s, laptops, desk tops, and accessories. Some of the products include the the Apple brand of electronics such computer, the apple laptop, the iPod, the iPad, iMac ,soft wares such as the Mac OS Xoperating system, the Macintosh computer and the Apple iPhone (Apple 2011a).
The apple iPhone is one of its most popular commodities and offers some of the most advanced features in the iPhone market such as WiFi internet connection, inbuilt 2MB camera, touch screen technology, 2.5g edge network as well as a host of other functions (Apple 2011; Reading et al n.d.).
Designing the Apple iPhone is not a very complicated procedure. Apple designs the commodity and holds the exclusive rights for the designs. Apple designers take s great care examining the raw materials that goes into making its parts.
A lot of attention goes to understanding the properties of material so as to understand the best procedure to use in processing those materials before the final product is made (Abilla 2010). Most of the iPhone’s raw materials are environmental friendly and reduce environmental impacts such as the emission of green house gases. Such parts as the LCD screen is mercury free, the glass is Arsenic free while most of the packaging f materials are from recyclable sources (Aplle 2009).
The main raw material that goes into making the commodity are plastic, metals such as aluminum and silver, foam rubber and glass. Much attention is taken to reduce the levels of harmful chemicals in these materials such as lead, mercury, polyvinyl chloride, brominated flame retardants and phthalates (Davies 2011). Apple has gathered experienced designers for its iPhone. Designing is also a learning process where designers learn from previous designs and make necessary improvements.
The new iPhone 4 is thus the result of the learning experience from the previous design as it has a variety of new features that makes it stand out amongst its peers in the market. Some of the new values added features at the designing level are: the 9.3 mm enclosure making it the thinnest iPhone, the 326 pixels/ inch LCD screen making it the highest resolution screen in the market, a more powerful A4 chip that also guarantees longer battery life and better multi tasking efficiency for the new iPhone among others (Apple 2011b).
Apple does not design all the parts for the commodity and therefore has to source some of the parts from established manufacturers. The company sources almost all its material from Taiwan as a cost effective measure. These are the main components that Apple sources from Taiwan for its iPhone. The iPhone connectors are manufactured by Entery Industrial, Taiwan.
The iPhones Bluetooth sets are sourced from Cambridge Silicon, Taiwan while circuit boards and stainless steel metal casings are imported from Umicron Technology and Catcher Technology respectively both from Taiwan. Primax Electronics Taiwan makes the commodities Digital Camera Modules while the internal circuitry is made by Foxconn International Taiwan. Other main parts that go into making the commodity include CPU as well as the Video processing chips which are made by Samsung Singapore.
Infineon Singapore makes the Baseband Communications hardware while Broadcomm U.S makes touch screen controllers. All these parts are then shipped into the company’s Shenzhen manufacturing facility in china. The company also pays other manufacturers to manufacture its own designed parts. Such manufacturers include Samsung Germany, which produces Apple deigned applications processor (Abilla 2007; Barboza 2010).
Foxconn International is the company that is most involved in the production process of this commodity. It has been reported that it is involved in sourcing and supply of most of the parts that go in the production of the commodity. It is also involved in supplying other part such as the products outer Case and other mechanical parts.
Other than sourcing parts for iPhone Foxconn is also involved in production some of the cheap parts with the intention of reducing the cost of production. As such Foxconn also sources for raw materials for this parts from local mines and suppliers of such raw materials (Barboza 2010).
All this parts are shipped to Foxconn assembly pant in Shenzhen, China. Foxconn Shenzhen is the main assembler of Apple iPhones as well as other world major brands such as Dell and HP. At Foxconn Shenzhen, the plant management uses a military like precision and efficiency in assembling of these commodities.
Foxconn Shenzhen employs the Henry Ford model of production where the plant establishes a production line for the commodity. The result is that Foxconn Shenzhen produces high quality Apple iPhones that meets market demand (Barboza 2010). From Foxconn Shenzhen, the commodity is shipped to the market.
The figure below summarizes the commodity’s chain map
Source: Abilla 2007
Apple has adopted series of distribution techniques for its iPhone. This is intended to reach a wide market with its products. The company has an online distribution store where clients order commodities online. Online sourced commodities are shipped to the client in record time. Apple also has signed deal with mobile service provider in different countries. These service providers act as distribution outlets and retail points for the gadget.
These mobile service providers get the commodity from regional logistic distributors. At the Apple online store, clients can create an online account and test the product before signing a contract to buy the phone (Slide Share 2011). The commodity has recorded increasing profits from the year 2008 and the company has even put higher limits on expected profits for the year 2011. The figure below shows the company’s’ profits analysis.
Source: Elmer-DeWitt 2010
Compared to other products of the same nature iPhone outsmarted them in the market in terms of revenues and percentage contribution to the makers overall turn over. The figure below reflects the commodities performance against other products of the same nature.
Source: Elmer-DeWitt 2010
Apple, in calculating is pricing factors in the cost of the parts sourced from suppliers before determining the final price of the commodity. The sourcing and manufacturing of the commodity is one of the less expensive aspects of production. Foxconn China therefore makes very little from the profits accrued from sales.
Most of the money goes to Samsung Germany and Broadcomm USA which makes and supplies the main parts such as the commodities internal processors. Apple Inc, being the patent owner of the iPhone also takes a considerable amount of profits while distributors and suppliers of the finished products also share in the profits (Barboza 2010).
In the process of manufacturing the commodity, there has emerged a number of ethical issue that may worry not only the consumer but also the parent company Apple Inc of America, foreign governments especially in china and human rights bodies.
Reports from its Chinese assembly plant in china indicate that there has been a number of bizarre suicides involving a number of Foxconn Shenzhen workers. These workers are under 26 years of age and are first time workers. The deaths have been connected to very poor working conditions and increased work place pressure to meet standards mostly associated with the scientific method of management employed at the plant. This, accompanied from pressure from family members has lead to the suicides.
It was reported that the assembly plant witnessed 9 suicides from workers who jumped from top floors of the assembly plant building in the year 2009. The highlight of the suicides has been the death of Sun Danyong, after being accused of loosing the iPhone 4 prototype and was also subjected to gross mistreatment by company security guards. Suffice to say that the workers earn the US $ 130 minimum wage per month payable in the state of Shenzhen, and as such they have to work overtime to increase their earnings.
The suicides have generated rebuke from various quarters including Apples CEO, who demanded a quick fix to the problem at Shenzhen. Foxconn Shenzhen responded by awarding an increase of 30% in wages to all workers, among other measures. It also promised to implement other measures and improve the working conditions at the assembly plant (Ramzy 2010).
Another of the ethical issue that would be of consumer concern especially in the UK is whether the commodity is envorormntaa friendly. It has been proved that electronic gadgets are some of the greatest contributor of increased level of carbon in the environment. The Apple iPhone is a considerable energy consumer because of its expanded consumption and as such emits greenhouse gasses into the environment.
The process of the production including the transport mechanism also produces carbon to the atmosphere. As a result the company has responded by incorporating various countermeasures to reduce the effects. The Apple iPhone is now being packaged in materials made by recycling wastes, while the material that make the products are free of harmful elements such as lead, mercury, PVC among others (Apple 2009).
Making the Apple iPhone begins in the parent company’s plant in America but it also involves several other companies which are involved in manufacturing various parts that are used to assemble the final products. Assembling of these parts involves and tens of thousand of workers. The Apple Inc. parent company only imports the designs to China’s Foxconn Shenzhen. Foxconn Shenzhen assembles the final product and ships it back to the US and other markets.
A lot of logistics goes into the whole commodity chain and sometimes delays have been experienced. However the Apple iPhone has not disappointed the user because of the care that goes into the whole [production chain from carefully examining the raw materials to sourcing parts from reputable makers such as Samsung. The assembly process is characterized by military like efficiency. The result is high quality product that has outperformed its peers in the market.
Reference List
Abilla, P. 2007. The apple iPhone supply chain. Shmula. Web.
Abilla, P. 2010. Material informs form: the apple, iPhone 4. shmula. Web.
Apple, 2009. Iphone 3gs environmental report. Web.
Apple, 2011. IPhone: the future is in the details. Web.
BARBOZA, D. 2010. Supply chain for iPhone highlights costs in china. New York Times. Web.
Davies, C. 2011. What is apple’s manufacturing footprint for the iPhone, iPad and IPod? Global warming and climate change are big issues for apple. Web.
Elmer-DeWitt, p. 2010. IPhone gross profit margin nears 60%. cnn money. Web.
Ramzy, A. 2010. Chinese factory under scrutiny as suicides mount. Time. Web.
Reading, S., et al n.d. Apple iPhone. Web.
Rodrigue, J. 2011a. Commodity chains and freight transportation. Web.
Rodrigue, J. 2011b. Commodity chain analysis. Web.
Slide Share, 2011. Apple’s iPhone launch marketing strategy analysis. Web.