The purpose of this report was to explore, investigate and apply knowledge to three forms of operations within two global businesses, Apple and Kathmandu. Research was conducted through case studies and other reliable sources to receive information on; quality management, outsourcing, material management. It was found that the businesses applied multiple operational strategies to overcome issues and gain competitive advantages. It is recommended that Apple and Kathmandu continue to improve their services to improve and understand the needs of internal and external operations by accommodating communicative strategies to overcome management issues to continue to improve efficiency.
Table of Contents
This report explores the operations within two global businesses Kathmandu and Apple, to provide a further analyse and understanding of the strategies utilised by both businesses to maximise operations. Three strategies were selected and applied to the research of the two businesses. These are; quality management, outsourcing, materials management. These three strategies were selected due to their close correspondence within the operating functions. Each operating system focused on the efficiency of management procedures. How Apple and Kathmandu apply these strategies to transform operation processes will be analysed to justify its role in the global business market.
Quality management processes are viewed in multiple ways to suit the expectations of the company. These outcomes are then defined by the customers. Chapman et al., (2014) defined the term as, ‘those processes that a business undertakes to ensure consistency, reliability, safety and fitness of the purpose of a product’. Management systems are used in both Apple and Kathmandu to ensure integral operations run efficiently to produce the best outcome.
Apple is driven by the quality of its products to differentiate itself from competing smartphones. Though for Apple to maintain superiority and customer loyalty the company must apply quality management procedures to attain this brand image. Steve Job’s substructural focus was placing customer experience and quality first. ‘Total quality management (TQM) has emerged as a business management strategy which aims to create awareness of quality through all organisational processes’ (Hashmi, 2019). It is used by Apple to continuously improve quality control and emphasise employee involvement creating an efficient business environment that reflects onto the innovative structure of the product, gaining customer satisfaction. One facet that Apple seems to be lacking is its ability to manage the quality control of its external operations at Foxconn. It is important to not only focus on the internal quality management procedures of a business but to investigate the possible risks of external operations. Apple’s dependability on their single production supplier, Foxconn puts the company at risk of things they cannot control. Larkin, (2020) discusses a press release, ‘Foxconn suffers unrest at iPhone factory’ this challenges the quality management of the company. Apple was receiving complaints from consumers about the scratches on the back of the new production line of the iPhone 5. The production line workers at Foxconn were to blame and, ‘resisted strict quality requirements introduced in connection with the production of the iPhone 5’ (The Financial Times, 2012). A widespread work stoppage at Foxconn occurred which then impacted ‘Foxconn to take a hit of up to $1.6bn to cover the cost … a major blow to the world’s leading smartphone manufacturer’ (Larkin, 2020).
Kathmandu’s quality management operations commit to continually improving growth strategies to elevate brand awareness through design and innovation in their adventure and clothing equipment. Chapman et al., (2014) signifies that continuous improvement will be successful and effective overtime and ‘the basis of successful improvements in quality is the inclusion of staff into improvement processes’. Kathmandu achieves this through their 6 business values (See Appendix A) which motivate and encourage workers of Kathmandu to strive to continue efficient management strategies. To control the external elements of their business, i.e. the customers, Kathmandu emphasises ‘As a product and brand-led business, we are focused on engaging our customers by creating distinctive and quality products and by promoting our brand authenticity continuous commitment to seek new ways’. (Chapman et al., 2014). Retail workers also assist in personifying the company’s ethos to every customer they serve to back the foundations of the company and improve sale processes. Quality management is consistently be evaluated and improved at Kathmandu to ensure all who operate and experience the adventures of their brand; product team, retail workers, producers, consumers are receiving optimum management within their operating systems.
Apple and Kathmandu both use external businesses to gain advantages in operating systems to increase sales growth. ‘Outsourcing involves the use of outside specialists to undertake one or more key business functions’ (Chapman et al., 2014). Apple and Kathmandu outsource offshore to other countries due to their low costs, specialised support and simplification in operating procedures. However, outsourcing comes with its down faults that each company must evaluate and control to avoid significant challenges and problems.
Apple sources from a global web of suppliers reducing the cost of production and potentially achieving cost leadership. ‘Cost leadership involves aiming to have the lowest costs or to be the most price competitive in the market’ (Chapman et al., 2014). Apple uses this strategy to gain a competitive advantage over other companies. Apple’s major outsourcing partner is Foxconn as they can employ up to 200,000 factory workers at a cheaper labour rate, the production of materials is lower in China than the USA and there is a larger range of technical expertise. Though these advantages come with speculative disadvantages that reflects the outcome of quality management reducing control over quality, quantity, speed and flexibility in operations. Some other disadvantages include: ‘communication challenges and cultural barriers, the importance of meeting deadlines, the reputation of Apple that is affected by the actions of outsourcing partners’. (Larkin, 2020). Apple has received a lot of negative media coverage surrounding the treatment of Foxconn workers. The Guardian (2019) reveals Foxconn has turned into an environment of a ‘high-pressure working where exploitation is routine and where depression and suicide have become normalised’. This article supports the argument surrounding the disadvantages of outsourcing as Apple’s restricted ability to control the operations and environment of Foxconn has led to numerous deaths and extremely poor working conditions. Apple must do more to create stronger relationships with outsourcing partners to implement more strategies to overcome these oppressive and harsh working conditions.
Kathmandu highlights that its global brand awareness is driven by the company’s ability to utilise offshore outsourcing and/or global sourcing. ‘In the supply chain management activity, global sourcing means buying or sourcing from wherever the suppliers are that best meet the sourcing requirements’ (Chapman et al., 2014). Kathmandu is very open about where it sources its materials from providing a published list of factories displayed on it’s web page. Quite similarly to Apple, Kathmandu sources the majority of its products from China due to its low cost and high-quality product. The disadvantages of outsourcing include the lack of control Kathmandu has over its partners and the unreasonable timeframes asked of workers to produce goods. How Kathmandu has applied growth strategies to ensure ethical treatment of workers has influenced its brand image. Chapman (2018) pinpoints Kathmandu’s inevitable actions towards protecting ‘human rights and improved working conditions for its contract workers’. Kathmandu’s audits did not work for some global supply chains, so they further accredited Fair Labour Association. The company also operates a confidential contact line for workers to use. No negative media coverage has been seen to surround the unethical management procedures of Kathmandu which support the company’s goals towards continuing brand authenticity.
Kathmandu and Apple are both multinational businesses that require sourcing material from multiple suppliers. For efficient production, both companies must manage product operations surrounding material management to make sure it is meeting the level of demand in the current market. VCEBizMan, (2019) emphasises that to assist efficient material management a business must ensure materials; arrive at the right place, arrive on time, arrive in the right quantities, arrive with desired quality.* However, ‘The operations management is significantly affected by the rise in climate change awareness and the need to integrate a long-term sustainable view of resource management’. (Chapman et al., 2014) Apple and Kathmandu have both stepped up to help tackle the intensifying global climate action concerns by better managing material operations.
*To further understand the process, a simple cycle representing material management is presented in Appendix B.
The quality of the materials greatly influences the outcome of the product. Apple instils efficiency in all operational processes to produce a quality product. Larkin, (2020) states that ‘Due to the rapidly challenging nature of the smartphone industry, … New models require new components, … and suppliers’. Apples’ CEO, Tim Cook is quite advanced in selecting quality materials to ensure the fastest and cheapest intermediate goods are selected to transform the newest product. Due to their globally spread list of 785 suppliers in 31 countries (349 based in China), with most managing the same product; Apple is able to gain a competitive advantage over its competitors by ‘securing the exclusive supply of certain components, reducing costs by increasing that competition between suppliers and preventing delays in production’ Chapman et al., (2014). How these materials are sourced, produced and disposed of is finally being revaluated and improved ‘to make things better for people and the planet’ say’s Apples 2019 Environmental Responsibility Report. Though the quality of where these materials come from has not been a focus for Apple unlike the sustainable brand authenticity of Kathmandu. Apple is only just starting to pick up its environmental strategies by introducing the recycling robot that dissembles and reuses materials and ‘covering 100 percent of our operations with 100 percent renewable electricity’ (Jackson, 2019). This innovation used to install material recovery and sustainable energy sources seem like a big step for the company but its 2019 Environmental Report does not state when or how these changes are going to occur instead, Jackson (2019) encourages, ‘we’re pioneering a future where we no longer need to mine precious materials from the Earth to make our products’. But when is this future going to come about? And how will this affect the operations of suppliers to ensure all operations processes produce a quality product.
Kathmandu’s recognises the importance of quality and innovative products and how the company maintains its brand authenticity. Kathmandu’s Sustainability Report addresses multiple ways its company sustainably operates to make a difference to our planet, collaborating – even with their competitors – to drive industry wide change. The inputting of materials that are required to produce Kathmandu’s apparel work to minimise waste to lower its environmental impact. They are prioritised in this order:
1. Responsible down
2. Recycled polyester
3. Sustainable cotton
4. Approved fabrics and trims (minimal chemicals)
5. Responsible wool
6. Materials that minimise water use
7. Preferred man-made cellulosics
8. Materials that seek to reduce ocean plastics’ (Chapman, 2018)
Similar to Apple, Kathmandu supplies 85% of its materials from China due to its low cost and high quality. Though Kathmandu has chosen to prioritise environmental and social impacts and abides by the strategies of the United Nations Sustainable Apparel Coalitions (SAC) Higg Index framework and aligns with the United Nations Sustainable Development Goals to provide a future path way of sustainable improvement. Kathmandu’s Sustainability Report (2018) states it uses this database to measure the ‘material impacts on things like climate change, water scarcity and pollution’. It identified how they reduced source impacts to almost zero by swapping to recycled cotton. These changes require suppliers to adapt and coincide. Kathmandu maintains material management by, ‘engaging the supplier, educating them about why it is important to us and discussing quality and cost that goes along with changes’ (Chapman, 2018).
In analysing the information dissected from multiple reliable sources, it was clear Apple and Kathmandu are aware of all forms of operations, more specifically; quality management, outsourcing, material management. The businesses are always aiming to improve and understand the needs of internal and external operations by accommodating communicative strategies to overcome management issues to continue to improve efficiency.
It is recommended Apple and Kathmandu apply the Six Sigma quality management approach instead of focusing on their operations holistically. ‘Six Sigma is used to remove the causes of problems in the operations process’ (Chapman et al., 2014). This allows the businesses to step back look for sources of variation and identify ways to eliminate them. When exploring the outsourcing operations of both business, Kathmandu and Apple were disadvantaged when it came to the lack of control, they had over their supply partners. Chapman et al., (2014) suggests co-sourcing as a positive alternative where ‘the work is not done by an external party but rather by an external expert who works within the business as a contractor. It helps the business take better control over what is given to a specialist third party’. Kathmandu surrounds its platform around minimises waste and its environmental footprint. It has been constantly been working to a sustainable future for not only itself but partnering with other company’s too. Apple has only just starting to pick up its environmental strategies and needs to continually improve minimising waste and allowing products to last longer.
- Hashmi, K. (2019). Introduction and Implementation of Total Quality Management (TQM). Retrieved from, https://www.isixsigma.com/methodology/total-quality-management-tqm/introduction-and-implementation-total-quality-management-tqm/
- Chapman, S., Dhall, M., Gallina, R., Devenish, N., Doherty, M., & Norris, C. (2014). Business Studies in Action (5th ed., pp. 5- 478). 42 McDougall Street, Milton, Qld 4064: Jacaranda, John Wiley &Sons Australia.
- Larkin, A. (2020). Chapter 1.1 – Operations. Apple & the iPhone (pp. 2- 89). Seaforth NSW 2092: Evolve Education Australia.
- The Financial Times. (2012). Foxconn suffers unrest at iPhone factory. Retrieved from https://www.ft.com/content/116dc2e8-105a-11e2-a5f7-00144feabdc0
- Chapman. (2018). Jacaranda Business Studies in Action HSC Course, 6th Edition eGuidePLUS (6th ed., p. CASE STUDY Kathmandu: Introduction and operations). Jacaranda, John Wiley & Sons Australia.
- VCEBizMan. (2019). VCE Business Management - Materials Management [Video]. Retrieved from https://www.youtube.com/watch?time_continue=6&v=fN2DtWoAKdw&feature=emb_title
- Apple. (2019). Environmental Responsibility Report (pg. 3). – Letter, Lisa Jackson. Apple. Retrieved from https://www.apple.com/au/environment/pdf/Apple_Environmental_Responsibility_Report_2019.pdf
- Kathmandu. (2017). Sustainability Report (pp. 1- 45). Retrieved from https://www.kathmanduholdings.com/wp-content/uploads/2012/08/Kathmandu-Sustainability-Report-2017.pdf
- Kathmandu. (2018). Sustainability Report (pp. 1- 92). Retrieved from https://issuu.com/kathmandulimited/docs/kathmandu_susreport_18_hi_res_singl
- The Guardian. (2019). Life and death in Apple’s forbidden city. Retrieved from https://www.theguardian.com/technology/2017/jun/18/foxconn-life-death-forbidden-city-longhua-suicide-apple-iphone-brian-merchant-one-device-extract
Integrity- We conduct our business in an ethical and honest manner, and always strive to do the right thing
Openness & Directness- We act with transparency to create a productive environment that eliminates bureaucracy and encourages efficiency.
Passion & Determination- We love what we do, we believe in what we create, we go the extra mile and we get the job done.
Resourcefulness- We celebrate ingenuity and inventiveness. We encourage a ‘can-do’ attitude and a ‘hands-on’ approach.
Love of Travel & Adventure- This forms the heart and soul of Kathmandu. All our daily business revolves around travel and adventure.
Environmental Action- We believe in protecting the outdoors and are committed to minimising our environmental footprint.
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