Short Essay 1_Chau Yee Ki, Joyce (1155206824)

The launch event of Apple's new products, which was held last week, reminds me of the concept of vertical integration. 

Apple is undoubtedly one of the most successful corporations that applies vertical integration strategy. It controls the designs of hardware, software, and services to create its own ecosystem which brings the Company success. For example, the Company has already launched 12 models for iPhone and different models for other products such as iPhone, iPad, Macbook, Apple Watch, AirPods, and so forth. 

With the vertical integration, it allows Apple to maintain high standards of quality and innovation in the products, ensuring the customers to have a consistent experience across the product range. Also, the ecosystem of Apple is known as "Walled Garden" the products of the Company and it does not function well with Android or other competitive devices, considering as one of the advantages of maintaining high standards of privacy so that the users will not be easier to leave and enhance the customer loyalty, which in turn increases the profit. 

However, the vertical integration brings various drawbacks and potential challenges to Apple. First of all, the “updated” models of iPhone in recent years brought no surprises to the users. To give an example, there are many opinions from analysts and market commenting that the new features of iPhone 16 are limited and people are no longer impressed by the new model. It is obvious that the quality of goods appears to show a downward trend which may affect the sales and profits of the Company.   

Also, by employing vertical integration strategy, the flexibility and innovation of the company might be limited. Artificial Intelligence (AI) has undergone significant advancements in recent years and various corporations strive to develop the related field to stay ahead of market trends. Unfortunately, Apple has been focused on its own activities and expects to create its own products by itself, resulting in the capabilities of AI lagging behind those of the competitors. Despite different rumours about Apple planning to cooperate with several industry leaders, the Company seems to have failed to introduce the AI features in the latest model as the users still need to wait for the update of iOS. 

Last but not least, a company might face higher capital and operational costs for expanding into new areas since it has been focused on its product range. Regarding Apple, it introduced Vision Pro, a mixed-reality headset, in 2023 and became available for purchase early this year. However, there were some comments critizing about poor wearing comfortability and limited usage scenarios which were not enough to boost the sales of the product. According to the report of the International Data Corporation (IDC), the Vision Pro has yet to sell 100,000 units in a quarter since its launch in the US in February, and it faces a 75% drop in domestic sales in the current quarter. 

Apart from the Vision Pro, the project of Apple car which was launched in 2014 and has been invested more than USD$10 billion in research and development. Nevertheless, the Company has decided to shut down the plan due to its narrow estimated profit and challenges posed by strong competitors such as Tesla. From the mentioned examples, it is obvious that Apple would face a lot of barriers to step out of its comfort zone and broaden the product range to increase profit which would be one of the drawbacks of vertical integration.