Soon after the new iPhones were unveiled, I published an article citing a conversation with a friend, who staunchly protested Apple and its products. Though it did not make sense to me, I did my best to convince him to let people make their own choices and tried to dissuade him from judging people. For instance, he read on social media that Apple fans are dumb and believed it because it seemed to be everywhere. I am still wondering how dumbness is decided by a purchase.
His statements troubled me though, not because they made sense and I was changing my mind (no, they didn’t; and no, I wasn’t), but because I failed to understand the rationale behind his comments. I could not sleep well that night and felt uneasy thinking about why someone would chastise a company for its business practices, when so many others seem to be working in the exact same way. Just because their products are pricey and portray an aura of exclusivity?
I thought about it and read up on a lot of stuff, including my favourite newspaper, The Economist, which promptly had an article up about the unveiling event and the analysis of Apple’s business strategy. The Economist cites two shifts of focus at Apple which a prejudiced Apple-hater would refuse to acknowledge.
Their first point is the formation of the ecosystem at Apple, moving away from the conventional business of manufacturing hardware to the creation of the ecosystem, accommodating a payment system, health tracking and monitoring, the Smart Watch and the ease of transacting using the Touch ID sensor. This is in addition to the existing well-performing iTunes music service, which generated around $16billion in revenue last year, almost as large as Starbucks.
The Economist’s second point, which is more internal to Apple than external, is about Apple opening up their high walls to allow more interaction and collaboration with the external world. Right from allowing outside developers to design apps for their operating system, to hiring executives from other niche firms, Apple has begun to shift its focus to the widespread acceptance and use of its ecosystem, which increases the likelihood of a customer lock-in.
The underlying strategy of business seems to be moving towards the ecosystem approach, already put to phenomenally good use by Google, with its own assortment of products and services to gather data from its users, and Amazon, which also brought out its phone and tablet to promote integration with its e-commerce platform.
These strategic shifts at Apple are also getting reflected in the sales of their newest phones – the iPhone 6 and the iPhone 6 Plus. Reuters reported that the two new iPhones registered 4million first-day pre-orders, breaking all records of its iPhones released so far. To better understand the demand for these phones, consider the following:
When the iPhone 5 went on sale in September 2012, 2million pre-orders were received in the first 24 hours and 5million units were sold in the first weekend. When the iPhone 5s and iPhone 5c were launched last year, 9million units were sold in the first three days in retail stores. Analysts expect the new iPhone 6 phones to cross the 9million mark in the first weekend. The demand for the new iPhones surged enough to crash the Apple website, leaving Apple loyalists disappointed due to the bugs in the system.
The Economist’s analysis, coupled with hard data from Reuters, presents a very clear picture to me. No matter how expensive its phones are or how obnoxiously pricey it may seem to be, Apple is here to stay, at least in the smartphone market. The sluggish sales of Macbooks and iPads may be a cause of worry, but the iPhones don’t seem to contain the potential to disappoint. A lot of people, including me, like the iOS operating system, a lot of people (excluding me) have increasingly higher disposable income and a lot of people are more than willing to shell out a significant portion of their wallet to grab the latest Apple gadget.
Everyone agrees that the target segment for Apple is the wealthier community. With the rising middle class in India and China and the willingness of people to move to the Apple ecosystem, one thing seems to be certain – the number of “dumb” people who buy Apple products is bound to increase. If social media is to be believed that is…