

Drucker on Apple - krmmalik
http://krmmalik.posterous.com/drucker-on-apple

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Tichy
I don't understand it. I only know companies that started small and eventually
bought their suppliers. For example I read about Matsushita who started with
bicycle lights and eventually bought the battery manufacturer.

How does this even apply to Google? They didn't own the internet
infrastructure (still don't).

Apple is hardly a newcomer, and only now have they bought a chip manufacturer.

~~~
unwind
I think it applies to Apple as a way to model their advantages when entering a
new market; they tightly control the hardware, and run their own OS and
applications.

They where newcomers to MP3 players, to cell phones, and now (I guess) to
tablet computers.

EDIT: That's "I think" as in "I think that is the perceived relevance of this
quote", not as endorsement.

~~~
Tichy
But they never controlled the whole economic chain? Also, doesn't every
hardware manufacturer control their hardware? I just don't see what I am
supposed to learn from that snippet.

~~~
access_denied
Not controlled the whole economic chain, but knows and manages the costs of
said chain. Switching over to Intel after Motorola proved itself unmanageable.
Keeping OS development inhouse instead of buying from MS. These are managed
costs.

Dell gets basically blackmailed by Wintel, Apple has an alternative for
everything they buy.

~~~
Tichy
I have troubles understanding that. What does know and manage the costs mean?
Surely every manufacturer knows how much their supplies cost? Of course if you
have more options (inhouse dev, other suppliers), you have more leverage and
control. But there is a limit. I still don't see what is to learn from the
snippet - that if you control the whole production chain, you can make it big?
Hardly?

Switching to Intel was a huge success for Apple, if I remember correctly.

Also, for the iPad it is only the chip that Apple creates themselves. Or are
they also creating their own IPS panels and SSD disks now? I wouldn't be
surprised if the panel cost more than the chip.

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reggieband
> Surely every manufacturer knows how much their supplies cost?

They know the price today, but not the price next year. Think about Apples
predicament with PowerPC not that long ago. It probably cost them quite a lot
to make the change to Intel. I think A4 is a hedge against that same situation
happening again - where they face a technical challenge altering their
platform to avoid a critical performance disadvantage.

> Also, for the iPad it is only the chip that Apple creates themselves.

From a performance (battery and speed) standpoint the chip is probably more
important than the display panels. Disks and RAM are debatable. AFAIK they
manufacture the controllers for those though. That allows them tight
integration with their OS. That is definitely an advantage since they can
write their code with a much more limited architecture in mind.

All this being said, I doubt this is an advantage that will last. Companies
that specialize generally outpace companies that generalize. I wouldn't be
surprised if in 5 years, once Intel or whoever catches up with a chip
specialized for this type of hardware, then Apple switches back.

This is really more a first mover advantage. They get to come out of the gate
with a better overall package because they rolled their own practically
everything (and can you think of anyone else who could ... from chip to OS and
most of the inbetween). Remember this is a new category of product - the types
of internal components well-suited to this type of technology are not in wide
spread production at the moment. By the time they are turned into commodities
Apple hopes to have a market lead.

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Gupie
"But in every single case, the newcomer also enjoys a tremendous cost
advantage, usually about 30 percent."

This doesn't seem to fit Apple. Their products are more expensive than the
competitors, e.g. iPlayer vs Zen, Mac vs PC. They market their products as
being more stylist, easier to use, trendy...

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krmmalik
I wouldn't be surprised if Apple in fact _is_ enjoying these cost savings.
They just don't happen to be passing them onto the consumer, rightly or
wrongly.

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elblanco
It's well known that Apple regularly tries to corner manufacturing on key
components for a spell. If I recall Samsung had an agreement with Apple for a
number of years for nearly all of their flash memory of a certain type.

[http://www.engadget.com/2009/02/20/apple-once-again-
squeezin...](http://www.engadget.com/2009/02/20/apple-once-again-squeezing-
samsungs-flash-memory-supplies/)

