
Apple Chiefs Discuss Strategy, Market Share, and the New iPhones - lazydon
http://www.businessweek.com/articles/2013-09-19/cook-ive-and-federighi-on-the-new-iphone-and-apples-once-and-future-strategy#p1
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cageface
There's a lot of middle ground between Apple's current exceptional margins and
the bottom feeders. I'm not sure why this is always cast in such black & white
terms. Apple has a lot of pricing options open here that would enlarge their
market share without sacrificing anything essential in performance or build
quality.

And please let's not have any Mercedes analogies. It doesn't matter to me what
car my friends drive but the network effects of mobile ecosystems are very
real.

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simonh
Except that Apple really honestly don't care about market share. They want to
capture the high margins and profits in the premium end of the market, and
that's it. Going too far down market would threaten to undercut the value
proposition of their premium products too much.

The corollary of this is that Apple knows there is a large 'junk' end of the
market, and they don't care who captures it. Android, Windows Phone,
Blackberry, Symbian? It doesn't matter. There's not enough profit there to be
worth it. It happens to be that Android has captured the lion's share of that
end of the market, and therefore dominates sales numbers. Doesn't matter.
Whether one OS dominates the low end, or a dozen OSes split it between them
makes no difference to Apple as long as they keep producing consistently high
quality products that sell well.

Just look at the PC industry. Apple makes as much or more profit than all the
Windows licensees put together. Windows market share domination has actually
played into Apple's hands by forcing Windows Licensees in a race to the bottom
against each other, leaving Apple the only high quality premium PC hardware
vendor outside the server market. Selling lower priced Macs would just
undercut their own high end sales and margins, and the same goes for phones.

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cageface
These are the same black & white terms people usually use to frame this debate
but the iPad mini has already demonstrated that there's room under the premium
tier for quality products and healthy margins. Apple's dwindling market share
undermines their efforts to establish Facetime, iMessage, iCloud etc as
popular services.

The problem with dismissing the low end of the market as "junk" is that this
segment of the market is increasingly made up of reasonably capable phones
with Android 4.x, which is good enough to serve most people's needs. We've
already hit the point of diminishing returns on increasingly powerful mobile
chips.

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gwright
I tend to agree with you that partitioning the market into two tiers ("junk"
and "premium" in particular) is an artificial distinction but I disagree with
your characterization of the iPad mini as something from the bottom tier. It
is a different form factor, but that isn't the same thing as lower quality or
less featureful.

Apple isn't afraid to use form factors, feature sets, and multiple SKUs to
partition the market it is just that they focus on partitioning the upper-end
of the market and not the entire market.

I wonder if Apple could ever manage multiple brands to partition the market
even further in the way that Gap Inc, partitions the clothing retail market
via its Banana Republic, Gap, and Old Navy brands.

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cageface
_I disagree with your characterization of the iPad mini as something from the
bottom tier._

My point is that the iPad mini is neither premium nor junk, but somewhere in
the middle. It expands Apple's user base and makes them a tidy per-unit
profit. Like a lot of people, I was hoping the iPhone 5C would be a similarly
mid-tier priced device that would open up new markets for them but
unfortunately (IMO) a premium-priced phone.

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outside1234
I get what he's saying but it rubs me the wrong way.

What he is saying is that he only wants to serve the richest 10% of the
market. That's his choice. But I think it will ultimately be their demise.

The rest of the world needs phones too. Is an iPhone 4 class phone really so
out of date that someone in India can't use it?

I think they could. I think it'd be orders of magnitude better than what they
currently use.

What I think is this: He is worried that nobody would buy the 5S if there was
a cheap 4 because the 4 is what 90% of us need (not want) and is at the price
point that the 90% of us need it to be at.

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nonchalance
90% of the economic profits are to be found in the top 10% of the market.
Simple as that. By going after the low-end, they are chasing after a market
which is arguably smaller in profits than the market they have yet to capture
(namely the high end -- they are strong but haven't expanded to everyone yet)
and risk losing customers (that would get the low-end device rather than the
high-end)

The flaw in your logic manifests itself in many places, including app store
revenues (comparing iOS to Android)

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owenmarshall
> The flaw in your logic manifests itself in many places, including app store
> revenues (comparing iOS to Android)

I think this is what so many people ignore when trying to compare ecosystems.
People who have a major focus on what they spend on their phone are also going
to have a major focus on what they spend on phones.

The last figures I heard: Android lead iOS by 10% on app downloads, but the
iOS App Store generated over 2x revenue.

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dannyr
Not sure about the context but Tim Cook's statement sounds arrogant.

People in 3rd-world countries use these "junk" phones to improve their lives.

Even here in the US, some of the poor doesn't own a PC but own a cheap Android
phone.

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grecy
> _Apple’s market share is bigger than BMW’s or Mercedes’s or Porsche’s in the
> automotive market. What’s wrong with being BMW or Mercedes?_

That's the money quote to me.

For some reason everyone continues to think Apple should try to be the Toyota
or Kia of the computer world, but in reality, it's perfectly acceptable to be
BMW or Mercedes.

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devx
You make it sound as if that's some original thought from Apple headquarters.
I've seen that comparison for _years_ in blog comments. I swear sometimes it
felt that even Steve Jobs got his talking points from blog comments.

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grecy
Oh no, not at all. I realize this has been around for a long, long time (in
fact the quote is attributed to Jobs).

I personally think it's as important today as it was back then, and people
need to be reminded of it.

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001sky
Title: _Apple 's Cook: "We' re not in junk business"_

Actual Title: Apple Chiefs Discuss Strategy, Market Share—and the New iPhones

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ahnda
So their answer to Android eating their lunch in market share is, "we weren't
hungry anyway"?

