Apple's predatory supply chain

Summary:AMR Research’s Bruce Richardson writes about what he calls "predatory supply chains," situations where manufacturers through exclusive contracts monopolize key inputs leaving competitors high and dry, especially in new growth markets. Richardson introduces the idea with Apple's iPod.

AMR Research’s Bruce Richardson writes about what he calls "predatory supply chains," situations where manufacturers through exclusive contracts monopolize key inputs leaving competitors high and dry, especially in new growth markets.

Richardson introduces the idea with Apple's iPod. He points out the recent wave of reports about Samsung's local competitors alleging that the chip maker was supplying flash memory chips to Apple at half the market price. While the scandal ultimately derailed a proposed $3.8 Billion join-venture between Apple and Samsung, it doesn't look like much of a set-back:

Of all the strategic moves, I like the flash memory story the best. Apple sold one million iPod nanos in the first 17 days after release. Create incredible demand for a new product while blocking competitor access to critical components.

If the flash memory story is true, Apple has built the Predatory Supply Chain. While that advantage won't last forever, it has allowed Apple to build a strong lead over all of the MP3 vendors. 

The predatory supply chain can also be found elsewhere and in other industries, according to Richardson. He points to Dell (predator behavior hastens price war on PCs), Wal-Mart (a predator via information systems and penny-pinching sourcing and logistics strategies), and Toyota (a predator in hybrid-engine cars) as examples.

Richardson asks: "Are the flash memory and hybrid transmission stories once-in-a-lifetime opportunities, or do companies have more frequent market windows where they could produce the next iPod or Prius?"  I'd reason that companies like Apple and Toyota are among the very few with the right mix of design, innovation, timing to seize the many opportunities that are floating out there.

Topics: Apple

About

Natalie Gagliordi is a staff writer for CBS Interactive based in Louisville, Kentucky, covering business technology for ZDNet. She previously worked as the editor of Kiosk Marketplace, an online B2B trade publication that focused on interactive self-service technology, while also contributing to additional websites that covered retail tec... Full Bio

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