Answered: A manufacturer of microwaves has…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 65P

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When Apple introduced its mobile payment system in 2014, the company was looking to leverage the popularity of its iPhone by adding more functionality and convenience for millions of customers. With Apple Pay, iPhone owners and Apple Watch wearers first enter their credit- or debit-card information, which Apple confirms with the banks. Once this information is on file, Apple creates a digital “token” that will be electronically transmitted to the retailer when an iPhone owner pays for something. To complete a purchase, the customer simply waves the phone or taps it at the checkout, uses the iPhone’s Touch or Face ID security to activate Apple Pay, and the phone instantly transfers the token as payment. Even though Apple Pay offers consumers the benefits of convenience and security, Apple knew it wouldn’t succeed without a large network of retailers, restaurants, and other businesses agreeing to accept its mobile payments. Among the earliest businesses to sign up with Apple was McDonald’s, which agreed to honor Apple Pay in its 14,000 U.S. restaurants and drive-through locations. “We serve 27 million customers every day. This is a clear and compelling business opportunity for us,” explained McDonald’s chief information officer. Compared with cash transactions, Apple Pay transactions cost McDonald’s a few pennies more to process because of bank fees. Yet the fast-food giant was willing to sign on because it saw competitive advantage and profit potential in wooing iPhone users interested in speedy checkout. Another early business supporter was Walgreens, the nationwide drug-store chain with 85 million customers enrolled in its frequent-buyer rewards program. Walgreens sells snacks, household products, and health and beauty items in addition to health-care products. Not only did Walgreens agree to accept Apple Pay at its checkout counters, but it was also the first U.S. retailer to add its rewards program to Apple Pay’s easy sign-on system. As a result, Walgreens’ customers tap twice at the checkout, once to activate the rewards account and display their savings, the second time to process the actual payment. By deciding to honor Apple Pay, Walgreens said it was “enabling a simple and convenient customer experience.” Several hundred thousand businesses had signed on to participate by the time Apple Pay launched in October 2014. Apple’s ongoing efforts to increase business participation paid off: Eighteen months later, the network of participating businesses topped 2 million, and major companies like Starbucks, Domino’s, and Crate & Barrel were preparing to participate. Eyeing international expansion, Apple also initiated talks with banks in China to bring Apple Pay to millions of iPhone users there. Today, Apple Pay is accepted at more than 50 percent of all U.S. retail locations and in many retail stores in twenty countries. Even though more consumers are making more mobile payments year after year, not every U.S. retailer is willing or able to work with Apple Pay. Some aren’t satisfied with the amount of consumer information that Apple Pay shares with participating merchants. Others would have to upgrade to new checkout technology for Apple Pay. Still others are locked into exclusive mobile payment deals with competing services. Today, mobile payments represent a small fraction of all purchase transactions, dwarfed by cash as well as by credit and debit payments. And Apple Pay faces strong competition from Google, Samsung, and others operating in the mobile-payment market. To remain a leader, Apple will have to keep signing more participating businesses and showing consumers the benefits of paying by iPhone or Apple Watch whenever they make a purchase. Which environmental influences on the decision process seem to have been most important to McDonald’s when it decided to honor Apple Pay?
When Apple introduced its mobile payment system in 2014, the company was looking to leverage the popularity of its iPhone by adding more functionality and convenience for millions of customers. With Apple Pay, iPhone owners and Apple Watch wearers first enter their credit- or debit-card information, which Apple confirms with the banks. Once this information is on file, Apple creates a digital token that will be electronically transmitted to the retailer when an iPhone owner pays for something. To complete a purchase, the customer simply waves the phone or taps it at the checkout, uses the iPhones Touch or Face ID security to activate Apple Pay, and the phone instantly transfers the token as payment. Even though Apple Pay offers consumers the benefits of convenience and security, Apple knew it wouldnt succeed without a large network of retailers, restaurants, and other businesses agreeing to accept its mobile payments. Among the earliest businesses to sign up with Apple was McDonalds, which agreed to honor Apple Pay in its 14,000 U.S. restaurants and drive-through locations. We serve 27 million customers every day. This is a clear and compelling business opportunity for us, explained McDonalds chief information officer. Compared with cash transactions, Apple Pay transactions cost McDonalds a few pennies more to process because of bank fees. Yet the fast-food giant was willing to sign on because it saw competitive advantage and profit potential in wooing iPhone users interested in speedy checkout. Another early business supporter was Walgreens, the nationwide drug-store chain with 85 million customers enrolled in its frequent-buyer rewards program. Walgreens sells snacks, household products, and health and beauty items in addition to health-care products. Not only did Walgreens agree to accept Apple Pay at its checkout counters, but it was also the first U.S. retailer to add its rewards program to Apple Pays easy sign-on system. As a result, Walgreens customers tap twice at the checkout, once to activate the rewards account and display their savings, the second time to process the actual payment. By deciding to honor Apple Pay, Walgreens said it was enabling a simple and convenient customer experience. Several hundred thousand businesses had signed on to participate by the time Apple Pay launched in October 2014. Apples ongoing efforts to increase business participation paid off: Eighteen months later, the network of participating businesses topped 2 million, and major companies like Starbucks, Dominos, and Crate Barrel were preparing to participate. Eyeing international expansion, Apple also initiated talks with banks in China to bring Apple Pay to millions of iPhone users there. Today, Apple Pay is accepted at more than 50 percent of all U.S. retail locations and in many retail stores in twenty countries. Even though more consumers are making more mobile payments year after year, not every U.S. retailer is willing or able to work with Apple Pay. Some arent satisfied with the amount of consumer information that Apple Pay shares with participating merchants. Others would have to upgrade to new checkout technology for Apple Pay. Still others are locked into exclusive mobile payment deals with competing services. Today, mobile payments represent a small fraction of all purchase transactions, dwarfed by cash as well as by credit and debit payments. And Apple Pay faces strong competition from Google, Samsung, and others operating in the mobile-payment market. To remain a leader, Apple will have to keep signing more participating businesses and showing consumers the benefits of paying by iPhone or Apple Watch whenever they make a purchase. Which of the four categories of business markets is Apple Pay best suited for, and why?

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