Jaime Creixems

The wars on the mobile space

This post is inspired by a recent twitter discussion by @ald and @luisjoset about Apple losing the marketshare war against Android.

On our argument we discussed all the angles on how Apple has lost the market share war against Android on the mobile space but then again how this is not the war Apple is fighting.

To understand this idea you need to know how Apple works. It is the simplest business model of all: they sell products for a profit. that’s it, no big deal.

When companies go after massive markets they look to reduce prices in order to increase market share, that reduces profit, reduces costs at max level and usually ends up creating cheap, crappy products for the masses. We’ve seen this in computers, retail and almost every massive market.

However that’s not how Apple works. Apple works much more like a premium product company. They make a more expensive product that adds a lot more value than the average market by providing an integrated infrastructure, a flawless taste for design and ¬†an amazing User experience. Their products are then sold for a profit, usually a large one.

Apple is a lot closer to the wood-carver that hand-made a chair than to IKEA.

That’s why profitability for Apple is achieved at very low “units sold” numbers. That means Apple is not playing for market share. Apple is playing for profit.

When you look at the profit of the mobile industry, Apple takes it almost all. The thing that changed over the years is… Apple became popular. So this niche company selling products with a high margin is now very demanded. The espectacular control over their manufacturing process and logistics has allowed Apple to grow incredibly while lowering their prices but keeping almost the same profit structure.The quality of their products have not been damaged by this.

So when you see Apple you’re not supposed to see a “go take it all” kind of company but rather a small company selling premium products for profit, turned extremely popular. Apple doesn’t do market research, I recall Steve Jobs saying in AllThingsD: “if they like they’ll buy it, if they don’t they won’t”. I believe that’s how far the market research goes. They’re not lookin got become the phone maker of everybody, they’re focused on making the best phone they can build. It’s not about market share, it isn’t about profit either I dare to think. Profit is what allows Apple to keep rolling the best products they can make.

But let’s not be so idealistic, Apple is a for-profit company and they rule on that area. So as long as they remain there, market share won’t be a concern for Apple, they’ve always been a niche company, they’re just the popular kid right now.

If this vision stays true the reign of Apple might come and go, but their model will remain. However if they turn to become a take-all-marketshare kind of company I will fear for Apple’s future. Their focus needs to remain in their products, not the market.

So the market share war might be lost. But that’s not the battle they’re fighting. Apple fights the battle for profit, and boy do they lead that one!



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