Apple’s Irrational Success

Posted by on November 24, 2018 in computer and software | 0 comments

In a way, Apple’s crazy success embodies the aberrations of global capitalism. Here’s a company that sells much less than its competitors: Chinese Huawei has just overtaken the US behemoth to become the second largest mobile phone manufacturer, behind the number one, the Korean Samsung. Apple, the former champion of innovation (remember the frenzy created by the iMac or the iPod?) didn‘t make a breakthrough since its first iPhone in the last eleven years.

The computers and smart-phones of its fearsome Asian rivals, which cost two to three times less than Apple’s products, are even, in some respects, superior to its own, especially since, unlike Apple, that designs both hardware and software, its Asian counterparts do not lock their users into their ecosystem.

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Again, Apple’s actions as a group are far from exemplary in terms of environmental or social responsibility. Although it has significantly improved its carbon footprint, it persists in continuing with the planned obsolescence of its products which can not be repaired. On the production side, Apple is still tying hands with its subcontractors and industrial partners, who in their turn exploit their workforce.

So why, despite its unflattering pedigree, does the Cupertino company continue to fly from success to success? Why the hell are we still buying its products like hotcakes?  It has crossed the figure of $ 1,000 billion in capitalization. Sitting at the top of the digital titans, it now alone accounts for half of the cumulative value of the CAC 40! But, contrary to the assertions of its boss, Tim Cook, Apple’s position of dominance is not because the group is innovative and respects its values. It is rather because it pursued the strategy of its late founder, Steve Jobs, who had positioned Apple as a luxury brand, the Rolls-Royce of the world of technology.

A visionary, Jobs understood that, at all costs, Apple needs to maintain the people’s eagerness and desire of buying its products. His business strategy involved organized scarcity.  It is this ‘stroke of genius’ that immediately allowed him to impose selling prices completely out of sync with its costs: the iPhone X, priced at $999, had components worth $370. In buying an iPhone or iPad, you buy a prestige and a status just as with a Gucci bag or a Rolex watch. This allows the group to post a net profit margin of 21.6%!

As a result, with only 15% share of the global smart-phone market, Apple earns more than half of that market’s revenues and 87% of its profits. But even if the company begins to sale services (iCloud, iTunes, Apple Music), it remains dependent on the iPhone, which makes up 61% of its turnover. So, to continue its dream run, Apple will have to invent a new product that is ‘awesome’. It will have to continue to feed the desire of its users and nourish their dreams.

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