Why Apple doesn’t care about its competition

http://blogs.reuters.com/felix-salmon/2012/10/24/why-apple-doesnt-care-about-its-competition/

by alwillis • 14 years ago

48 43 14 years ago

blogs.reuters.com

bryanlarsen3• 14 years ago

By my back of the envelope calculation, Apple's profit margin is better for the mini than it is for the larger models. This seems silly because the mini is in a much more price sensitive market. But from Apple's perspective, a mini sale quite likely cannibalized a full size sale, so profit per device matters as much as margin.

jc4p• 14 years ago

I would argue that the fact that Apple spent the vast majority of the iPad Mini announcement with a giant picture of the Nexus 7 behind them and comparing/contrasting features would make this article incorrect.

ajross2• 14 years ago

Exactly. Their last two big product reveals have been almost entirely defined by reference to Google/Android products: A 16:9 screen on the iPhone. A 7" tablet. Changing maps providers. And they're not even trying to hide this. (And, I should note, all of this is quite objectively a good thing for the market).

The premise of the article is ridiculous. Sure, Apple has built a great brand that they can leverage into huge sales for the iPad Mini. I have no doubt it will be the most successful tablet in its size class within a few months. But to pretend that this means the Mini's development wasn't driven by the existing competitors is just silly. Apple jumped into this market because everyone else proved it out first.

siglesias• 14 years ago

Proved it out? Do you have any data to back that up? Everything I've read says that the sales of 7" tablets by Apple's standards have been negligible.

Edit: And this is to say nothing of profits.

fusiongyro3• 14 years ago

The announcement is for people in the press who want to hear how the product compares (and will complain if it's not brought up), and secondarily people who love Apple enough to take the time to watch the announcement. You will not see a single mention of the competition on Apple's site or in any of their promotional materials, because of exactly what this article explains: aspirational brands do not compare themselves to those brands beneath them, because it would tarnish the brand.

dannyr• 14 years ago

So are you saying despite that, Apple doesn't care about its competition?

anonymfus• 14 years ago

Most of international companies don't have mentions of competition on website and in optional materials. It's illegal to directly compare with competitors or ever call best without mention of specific set of characteristics in many countries.

TLDR: There in Russia we don't have "I am Mac vs I am PC" advertisements.

panacea2• 14 years ago

>You will not see a single mention of the competition on Apple's site

It's not explicitly mentioning the Nexus 7, but this is at the top of the iPad Mini's 'design' page on Apple.com: http://i.imgur.com/7Mg92.png

coloneltcb• 14 years ago

I agree. That part of the announcement was very defensive. Haven't seen them talk about the competition that much since the AntennaGate presser, when they compared other phones' attenuation issues. And that's when they were in damage control.

Disclosure: Apple fanboy with enough AAPL shares to count on one hand

peloton• 14 years ago

I believe that Apple spent more time thinking about how not to compete with themselves (i.e. segment the product and price it just right to cause the least amount of ripples for the rest of the product portfolio) than thinking about the tablet competition. In terms of short term downside risk, there's more money at stake with the former than the latter.

mladenkovacevic• 14 years ago

I would agree and disagree. I don't think they want to compete with the Nexus 7. I think they are afraid that the cheap tablets will eat away at their existing customers so the Mini is their way of saying "look we have that too".

I wrote this in a previous post: The iPad Mini is different than anything Apple has done before. For the first time Apple is NOT building a product to enchant brand new customers and grow their brand. Instead they are filling a hole that they feel was threatening to pull their customers into other ecosystems. "Don't mind those other, more affordable playgrounds. Pay attention to how we mill the shit out of this block of aluminum just for you."

tobyjsullivan• 14 years ago

I don't think this necessary means the article is wrong but that really depends on whether or not Apple has identified this exact issue.

What I mean is that most of Apple's actions seem to fall in line with what the article is suggesting. The one exception to this is, as you stated, the press conference. The press conference was designed around and addressed the exact questions that the press asks.

Now, what we don't see is Apple's website or TV spots filled with comparisons to the Nexus 7.

Why? Different target audiences.

phaus• 14 years ago

I would argue that the existence of the iPad mini itself proves the article false. Until the public proved that there was a widespread demand for a smaller, less expensive tablet, Apple ridiculed them.

panacea2• 14 years ago

Apple consistently ridicules form factors and products it doesn't have an offering for.

Steve Jobs famously ridiculed the idea of smartphones before they released the iPhone.

feint• 14 years ago

Looking back through Apple keynotes and product launches, they have often compare their products to an incumbent. They did it with the iPhone, Macbook Air and now the iPad mini.

programminggeek• 14 years ago

Well, Apple cares about its competition, but I think it cares more about making a profit and they do that by build great products that they can charge a lot for.

Selling a product with a high margin is actually easier in some ways than with a low margin because with a high margin you can afford to advertise, market, and push harder to sell a product.

Amazon can sell the Kindle Fire at break even because it owns its own sales and marketing channel at Amazon.com. Google sells the Nexus 7 with no margin because that is the only way for them to gain a foothold against the Kindle Fire.

A $329 iPad Mini with say a $129 margin means Apple can spend $129 per sale in advertising and marketing and still be as profitable as the Kindle Fire or Nexus 7. We all know it doesn't cost Apple $129 to make a sale, so there's a nice profit left over.

Ultimately, Apple's goal is to be a profitable, sustainable company and they do that by turning a profit on hardware sales. That's their model. Amazon and Google have a different business model.

bryanlarsen3• 14 years ago

The iPad mini margin is definitely more than $129.

tomkinstinch2• 14 years ago

Based on what information?

Spooky23• 14 years ago

iSupply data estimated the low-end retina iPad margin at 37%, which is consistent with a $129 profit. Apple is of course a master at extracting more profit by market segmentation.

Apple is basically the BMW of technology. The difference between a run of the mill 3-series BMW and a Honda to the average commuter is image + $10,000. The iPad yields a premium because its an iPad.

diego_moita• 14 years ago

Even the title of this post smells like "another one of those HN Apple fanboys declaring his adoration". The article itself is even worse:

"The world divides into people who think of Apple as a company, and people who think of Apple as a brand..."

joe_the_user• 14 years ago

Yes, just "fanboy" stuff...

The power of the Apple brand is an important factor for Apple, sure. But the article provides almost no analysis of the distinction between company and brand and how they play out. It merely touted the brand part.

yalogin• 14 years ago

Apple fanboy is an insult only in the tech world. Apple has cultivated a certain image among regular people and that is what he was talking about. Also not everything is about the Google-Apple war. Both of them can exist and be discussed by themselves :)

cryptoz• 14 years ago

Their former CEO's thermonuclear war is solid evidence that they do indeed care about their competition. You generally care about something before you drop nuclear weapons on it.

jivatmanx• 14 years ago

Actually, he pushed the red button accidentally while cooking souffle.

Yhippa• 14 years ago

I would say this might be true when it comes to creating the initial version of their products. I feel that the way you make an iPhone is not by saying "let's see what our competitors are doing and do the opposite of what they're doing bad". If you do that you ground yourself to at the time what was pretty terrible HCI.

By separating the design of the iPhone from what your conventional competitors are doing and re-imagining things they were able to create something that was very usable. I felt that they did this again with the MacBook Air.

Like others have pointed out I feel that Apple definitely cares about it's competition. That's why you're seeing aggressive lawsuits against it's competitors, swapping out Google Maps, and restrictive App Store policies.

spinchange• 14 years ago

A more apt headline assertion would be, "Why Apple doesn't care about price competition."

mickgardner• 14 years ago

So thats why they spend their time suing the shit out of every company that competes with them.

gm• 14 years ago

Exactly. That's what makes this article DOA and not worth a read. Of course Apple cares about their competition.

dmansen• 14 years ago

I think this article is spot-on. You can call people who buy Apple products "fanboys", you can insult them for buying a product you find inferior. However, they're still buying the products. Why is that? Because they like them. That's all.

jarjoura• 14 years ago

I dunno, the iPad Mini seems like more a reaction to the 7" tablet market than Apple's commitment to remain laser focused on a few products. It's even a very conservative product launch that stinks of wanting to check off a bullet point for reasons why people weren't buying iPads.

It will do fine and definitely continue to increase iOS market share, but it's not very interesting as a product. I personally would have liked them to make something with a unique screen dimensions that apps could target. 4" apps, 7" apps, and 10" apps :-).

mcantelon• 14 years ago

Sure, people have been convinced not to look at alternatives because it's convenient not to look at alternatives, but it seems that press on tech would be pretty boring if the press didn't bother looking at alternatives (especially when Apple products are created in response to these alternatives).

omnisci• 14 years ago

It is pretty clear that they care about their competitors, but they also don't have to at the same time. People are so locked into the apple marketing that they don't even want to know what else is out there. Uhh, I got to hear this firsthand when looking at a Galaxy Note a few weeks ago. I was looking at the Note to see if I can fit the damn thing in my pocket and two BestBuy employees were BSing about "android people". "Yo, I don't even care what other features android has, I'm apple fo life!" to which the other guy agreed.

This is sad for society and wonderful for Apple. Apple's marketing is so strong/effective that at some level, they don't even have to pay attention to the competition, particularly when their customers think that every smart phone is an iPhone.

However, as said above, it is clear that they do care about their competition and if aggressive marketing from other companies (Re: Samsung's commercials), they may have a bigger battle to fight.

seacond• 14 years ago

"... it sells premium products at premium prices, and it never discounts."

Yeah, but the prices of those "products" (=Asian factory-made electronics, smaller form factor and reduced functionality) keep dropping. That is the nature of the computer business. And there's nothing Apple can do to stop it. Eventually we will reach "zero", or very close to it.

Maybe what this journalist is realising is that Apple the company may finally be seeing real competition in the "sexy hardware" space. They have historically been the only company to mass produce computers that "look cool" sitting on a desktop, even when they're turned off. They have never had any real competition in that space (=opinion). But now, as the price point and form factor have been significantly reduced (the price to own an Apple computer used to be a lot higher, I can recall it being over $1000 in the not-so-distant past), other companies might finally also be able to mass produce sexy-looking hardware that can compete.

Assuming that's true, and we're headed for "disposable" computers (i.e. ridiculously cheap), then what's left of Apple's reality distortion field? Maybe it's "Apple, the brand" that the journalist observes.

And what is that brand? Maybe it's partly "easy to use", as he suggests is a known characteristic of Apple products.

So, who can possibly compete with Apple on ease-of-use in a handheld computer? No one?

Hmmm, we'll see about that. Imagine a company that can offer the same simplicity, without greedy control freak attitude and imposing incessant hoop-jumping on its customers. And their computers look cool.

RShiki• 14 years ago

> it sells premium products at premium prices, and it never discounts.

I fail to see what's premium in a tablet that has an inferior screen compared to the cheaper alternatives.

Apple won the 10" market by virtue of literally doing everything better than the competition. Better screen, better battery life and so on. The iPad mini isn't like that. The $200 Nexus 7 has a much higher pixel density which used to be Apple's own obsession until the mini (retina iPad, iPod Touch, Macbook Pro, iPhone) and they completely ignored the whole pixel density and screen quality angle when comparing the mini to the N7, just stating the obvious "ours is bigger!!!".

When you ask for premium prices, you should deliver premium quality. The iPad mini is not premium enough to warrant premium prices. I would have seriously considered buying one even at a higher price IF it was actually a premium device, but it's not. The N7 is just the better device here, and if there was no software issue with their shoddy fork of android, the Kindle Fire HD 8.9 would've also been interesting with its full hd screen. 1920x1200 8.9 display for... $299, less than the crappy iPad Mini.

I've never felt so underwhelmed by an Apple product since a long time. The iPad Mini feels Meh rather than making me drool at the thought of getting one.

ari_elle• 14 years ago

The title of course is not really true. As a company of enormous proportions you always care about your competition.

But i actually agree with some statements that are made in the article itself.

Though It actually doesn't explain reasonably why Apple doesn't care about competition, it explains more how many (especially die-hard apple fans) view Apple and what their relationship toward the company actually is (and why therefore this relationship is hard to break).

Why Apple doesn’t care about its competition

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