Purchase and manufacturing decisions are often made by global businesses regarding whether outsourcing must be preferred or a specific activity must be carried out by them. To enhance scheduling, accrue dynamic capabilities and protect proprietary product technology, core competence activities are mostly internalized by the organizations. On the other hand, with of objective of accomplishment of strategic flexibility and eliminating cost, the activities perceived as secondary to core competencies are mostly externalized.
The core competencies of Apple are development and designing of its products, therefore, in order to avoid opportunism from competitive organizations, these activities are internalized by Apple. Core competencies of the organization can also be expanded and protected through the acquisition of businesses. To acquire intellectual property and skills in order to work on new projects, smaller businesses have been acquired by Apple. For example, Siri which is a voice-recognition system has been acquired by Apple in recent years. Along with this the basis of Apple Maps was shaped up as a series of mapping start-ups was acquired by Apple. In contrast to this, it has been pointed out by critics that since Apple is moving to mobile computing and smart phones from conventional personal computers, therefore, it must become more acquisitive, as the competition is quite tough.
In addition to this, transaction cost analysis of boundary decisions, involving the most effective way of governing it should also be considering by the companies when balancing between externalization and internalization. The hierarchical approach of Apple to transaction cost analysis of boundary decisions is demonstrated by its internalized development and design. Since activities are carried out in-house, therefore, there is minimum threat of opportunism but high costs.
On the other hand, manufacturing activities are externalized by Apple and are carried out by other organizations like Foxconn Technology Group in China. Since significant advantages from the manufacturing agreement are availed by both of the companies, therefore, this can also be considered as an example of intermediate governance. For manufacturing of product of Apple, one of the ideal locations is China as it offers a stable economy, a good business infrastructure, and low-priced and high-skilled labor force.