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Sunday, September 14, 2014

It's All Business

With this week's Apple announcement, I finally figured out the business behind the marketing and it kind of makes me sad that I didn't see it sooner. This realization is that there are three business explanations for what Apple does to have the backbone behind their marketing. These explanations are SWOT, diminishing returns and opportunity cost. While the second and third explanations are subsequent iterations in business, in the case of Apple, I am think they go hand in hand based on SWOT analysis.

Prior to the launch of the iPhone, Apple had a competitive advantage with their other products of exclusivity and providing a user experience other operating systems had trouble providing and users paid a premium for. This strategy translated well into the strength behind the iPhone along with taking advantage of the opportunity in the market of providing a UI that allowed the growth of consumer electronics in this decade. Unfortunately, the market position was short lived in that competitors were able to take advantage of a weakness Apple couldn't overcome in that there are users who preferred a less closed system of using technology along with lower price points and more choices in their device needs. This translated later into operating systems that were more mobile friendly than iOS could provide. While, they were not presented well in early iterations, Apple's minimal lack of change in backend updates allowed for competitors to catch up and overtake Apple's dominance in the market. While Apple still commands a fair amount of the market, much of it is due to a lack of desire to change to another system which now provides a threat to Apple.

Diminishing Returns
At some point in a business’s product life cycle, they have to consider how much investment in a product is enough. With a product like the iPhone, while the initial iterations provided steady income and change, competitors have expanded and eaten away at Apple’s revenue stream. This eating away at the pot probably relates to the concessions made by introducing larger iPhone models. This tied with Tim Cook’s announcement they Apple is working on non-teased products is nothing surprising as less guaranteed income means that the iPhone market penetration is nearing its desired limits and it is time to look for something new, different, and/or innovative.

Opportunity Cost
Fortunately for Apple, their diminishing returns for the iPhone along with the rewards for legacy users providing income, they are able to look for new methods of income that they can hope is their "new iPhone." I don’t mean new iPhone in the sense of a new model of the phone but as in a brand new device or service that is market changing. It could be a service that uses iOS as the backbone or a device that merges it all. If they see their opportunity cost of replacing the iPhone or making a new product that is the focus of their efforts, then they have a substantial step ahead in terms of business cycles all set. But on the flip side, if the Apple Watch is any indicator, they may be stuck as far as not being able to engage the consumer as the new and exciting company because they are stuck being a reactive rather than innovative

To round out this post, I figure that Apple can go in one of two directions. Granted that the Apple Watch may be a me-too device and the larger IPhones is a reactive update, it keeps them in the gave and semi-relevant as far as allowing iPhone users to have comparable devices but also lends credence to other smartphones having larger sizes and other smartwatches being devices that people want to buy. In my opinion, it should cause users to second guess Apple’s marketing plan in that they are not innovative devices but should be marketed as the baseline for what consumer products should be and let other companies be the future facing, advanced feature providing companies who can provide that kind of service.

The other direction that would keep Apple relevant would be the new groundbreaking service and/or device(s) that ties everything together but cannot limit users who cannot afford the products and lets tech saavy individuals do what they want to do without bringing down or otherwise impairing whatever ecosystem is presented.