■ Balanced scorecard dedicated to Apple's general and supply management strategy for the iPod presented at the ESSEC business school in march 2005. ■ If you are very attentive to details, you could also note that the device on the right on the cover slide is not an iPod (in 2005).

1.  Anissa OUTELDAIT  Thomas ROBILLARD  Shemsy SEBTI
Advanced Master in International Supply Management 2005
APPLE’S STRATEGY
A Purchasing Balanced Scorecard for the iPod

2. ESSEC Business School – Advanced Master in International Supply Management 2005 - 2 / 16 -
SYNOPSIS
 Apple : stakes & strategy
 Purchasing strategy
 Purchasing organization
 BSC
 Objectives, indicators & actions
 p. 3
 p. 8
 p. 9
 p. 11
 p. 12

3. ESSEC Business School – Advanced Master in International Supply Management 2005 - 3 / 16 -
STAKES
 Decline
 Return to balance
 Diversification

4. ESSEC Business School – Advanced Master in International Supply Management 2005 - 4 / 16-
STRATEGY
 Diversification : Music
New market
Complementary product
 Differentiation
Online
Dematerialization & desintermediation
Paying !
Material
Technological rupture
 Creation of barriers at the entry
Proprietary technology
Digital Right Management (DRM Fairplay)
Conquest of market share

5. ESSEC Business School – Advanced Master in International Supply Management 2005 - 5 / 16 -
Product lifecycle
Embryonic Time
Sales
Growth Maturity Decline
Primary source : Le marketing du produit nouveau, slide n°4 – Sylvie Mira Bonnardel, Ecole Centrale de Lyon – 13 décembre 2001

6. ESSEC Business School – Advanced Master in International Supply Management 2005 - 6 / 16 -
S-curve
Time or cumulated investissement
Saturation
of the potential
Embryonic Growth Maturity Decline
2001 2003 - 2004
iPod (Hard)
iTunes(Soft)
2005 - 2006
Internet Mobile Phones (Hard)
? (Soft)
 Motorola…
Primary source : Le marketing du produit nouveau, slide n°5 – Sylvie Mira Bonnardel, Ecole Centrale de Lyon – 13 décembre 2001

7. ESSEC Business School – Advanced Master in International Supply Management 2005 - 7 / 16 -
Value creation
Optimizing
processes
Increasing the
value perceived
by customers
Increasing
the value creation
Rationalizing and
cutting costs
Marketing, Sales
Research & Design
Methods,
IT
Purchasing
Primary source : Le pilotage de la performance, Tixis System, slide n°8 – Laurent Vilain, Mastère Spécialisé HEC-Ecole des Mines de Paris – November 27th, 2003

8. ESSEC Business School – Advanced Master in International Supply Management 2005 - 8 / 16 -
PURCHASING STRATEGY
 Securing procurements to follow the growth of
demand
 Limiting the use of LCC supplier
 Developping supplier partnerships
 Training buyers to project and innovation
management

9. ESSEC Business School – Advanced Master in International Supply Management 2005 - 9 / 16 -
PURCHASING ORGANISATION
 Centralizing procurements (CA, Cupertino)
 Producing in China (Shenzhen)
 Using a taiwanese subcontractor (Hon Hai)

10. ESSEC Business School – Advanced Master in International Supply Management 2005 - 10 / 16 -
Alliances and partnerships
iTunes.com
Customer
Container & content
Bank
payment
delivering
paying
benchmarking
ordering
donwloading
Credit cardAuthorization
Majors
content
Subcontractor
container
iPod
Independents
content
AppleStore
Primary source : Stratégie d’e-business, Amazon’s alliances & Partnerships, slide n°35 – Yves Pigneur, HEC Lauzanne – Mai 2001

11. ESSEC Business School – Advanced Master in International Supply Management 2005 - 11 / 16 -
BSC
COSTS
INNOVATION
PARTNERS PROCESS
VISION AND
STRATEGY
Primary source : Gouvernance des Systèmes d’Information d’un laboratoire pharmaceutique – Laboratoires Etypharm, p. 108 – JM Largouët, ESSEC MSIR – 2003

12. ESSEC Business School – Advanced Master in International Supply Management 2005 - 12 / 16 -
Cost perspective
Targets Indicators (KPI) Actions
Cut administrative costs Cost of the sourcing function
Cost of the procurement function
Centralization of purchasing.
Using an Internet configurator.
Purchasing cost reduction Ratio (purchasing / sales) turnover
Statistical Process Control (SPC)
defects
Average payment term
LCC Sourcing and purchasing cost
controlling.
Developing SPC at plants
(subcontractors and group).
Payment term summary.
Fostering sourcing efficiency Reverse auctions orders per buyer
% of contracts / purchasing value
Cost reductions per buyer
Setting up reverse auctions.
Raise up the contractualisation and
the % of negociated purchasing
Increase or create a bonus on the
purchasing / sales ratio accordingly to
the products’ life cycle (see slide n°5)
Stocks reduction Stock value / sales turnover Adjust stock to the products’ life cycle.
Made to order production with JIT.
One product, one plant.

13. ESSEC Business School – Advanced Master in International Supply Management 2005 - 13 / 16 -
Process perspective
Targets Indicators (KPI) Actions
Raise up contracts’ volumes
Foster procurement efficiency
Improve purchasing processes
Contracts / Total purchasing %
Number of orders below 1000 €
Order average value
Purchasing request (PR) processing
average time
Vendor base rationalization.
Contrats review and renegociation.
e –procurement catalogs creation.
Approval worklow automatization.
PR gathering PR volume
Purchasing orders number
IT PR gathering centralization to
reduce the volume of orders per
vendor and buyer.
Needs rationalization Specifications number
References number
Specifications’ downsizing
e –procurement catalogs creation.

14. ESSEC Business School – Advanced Master in International Supply Management 2005 - 14 / 16 -
Partners perspective
Targets Indicators (KPI) Actions
Vendor
Vendor rationalization
Raise up LCC purchasing
* High risk vendor number
* Contract vendor %
* Dependency rate
* Active vendor number
* LCC purchasing %
Vendor rationalization based on
value and volume of orders
Choose a subcontractor with a
production based in China
Internal client
Mastering quality
Mastering delays
* Nonconform deliveries %
* Quality satisfaction grade
* Average PR process delay
* Late deliveries %
* Delay satisfaction grade
Forecast contractual charges for
nonconform and late deliveries
Create an Intranet client satisfaction
questionnaire for each delivery.
Give phone calls to the departments
with a level D and below satisfaction
grade
Annual vendor and PR process
auditing

15. ESSEC Business School – Advanced Master in International Supply Management 2005 - 15 / 16 -
Innovation perspective
Targets Indicators (KPI) Actions
Skills development Training days / Buyers number * Personnalized, modular and
progressive training to complete
purchasing, project management
and innovation management skills
Coordination and centralization Training number per year
Connections to the collorative
base per month
Name a project leader in charge of
purchasing best practices
capitalization.
Create a worldwide collaborative
purchasing community in the
Intranet with dedicated access and
applications.

16. ESSEC Business School – Advanced Master in International Supply Management 2005 - 16 / 16 -
LAST BUT NOT LEAST
 That’s Apple!