IPhone share of phone market: 5% volumes, 20% revenues, 55% profit
asymco.com
asymco.com
Moreover, you create real value by innovating and pushing the future forward, reaping the reward from that. Nintendo has similar strategies.
More insanely, Apple has a 90% share of the revenue for PCs costing more than $1,000. Although smaller than the market for PCs costing less than $1,000, that's still a huge market and Apple has cornered nearly all of the money in it.
And Apple can do it precisely because it's hard. If it was simply a matter of targeting the high end, everyone would be doing it.
Fighting for market share and making infinitesimal margins across a large market share is the relatively easy and obvious way to do things, and it involves relatively easy and obvious processes of copying/iteration.
Everybody is doing it, but their execution is abysmal. They're trying to go toe-to-toe with the leader in those segments without the business and development processes to support it. Apple has singularly focused their entire company on this problem and have the execution nailed. Motorola, Dell, etc. are distracted by the low-margin high volume part of their business and can't focus enough to get it right.
In the PC market Dell would love to go high-end, but they can't because Acer will ship the same machine, with plastic rather than carbon fibre, and sell it at 1/3 the price. Apple doesn't have that worry.
Technology is an echo-chamber. Step outside it and look at what other people have done, then learn from their success.
JCrew is clearly in a commodity market, but they're not exactly upscale. I'd consider them the $800 laptop. Not Walmart/Netbook, but certainly not expensive. And there are expensive clothing manufacturers, but there's a reason why Gap sells hundreds of millions in jeans, while $500 designer jean brands come and go like the wind.
Dell probably would love to have Apple's revenue share, but they don't have Apple's requirements for style so would make a hash of it. Theirs would also end up being plastic instead of carbon fibre.
You would think so, but while WalMart has proven that WalMart can do it in retailing, many other businesses have proven that they can't.
So in the end I agree that simply proving such-and-such is possible is not a recipe for any old company doing it.
Another interesting point about the Nintendo model, their approach is not only more innovative, but it's not cutting edge, and it's cheaper than the competition.
Four years later and Nintendo's been first to mass market with a 3D device and the central innovation for the wii 2/HD appears to be advanced haptics, something we've seen a number of Apple patent applications for. It will be interesting to see if Apple again catches the rest of the phone industry napping with their implementations of these technologies.
Apple even pointed this strategy out in the original 2007 MWSF keynote where the iPhone was announced. They showed their math, pointed out the global annual sales volume of phones was almost 1 billion devices. They then said 1% of that would be a great starting point because that's still ten million phones out the door and it's a good place to carve out a high value niche.
The only innovation I can really find where they were truly leaders is the concept of the app store - which admittedly has been huge - but outside of that they sell an extremely well executed smart phone and tablet.
Aside from that, Nintendo's strategy is miles away from Apple's.
I am not trying to 'troll' anyone here, but I think if you look at the truly innovative business processes, technologies, and sheer inventions, Nokia as a company has Apple beat hands down over the last few years.
Yes, in some sense, building a better mouse trap is innovation, and no one can deny Apple's success as a company especially over Nokia's, but I would still strongly contend it has more to do with sheer execution and market positioning over sheer innovation.
What parts does one have to look at to see the innovation? I feel like I'm missing something obvious...
And that was just version 1.0 in 2007, which is still better than most Nokia phones today. Then they launched the App Store and the iPad.
I'm sure someone had a touch screen phone, somewhere, before the iPhone. But no one nailed all those little features of user experience. I'm sure the software/hardware for a consistent multitouch screen capable of being manufactured at scale was alone a very big deal.
Lots of Apple bashers love screaming about how Apple has huge margins because the cult will buy any old iPoo, yada yada reality distortion field.
But on the Apple financials call they pretty consistently come in just under 30% on their product margins, and these guys (asymco) have them peaking at almost 50%.
Is this based on some backyard analyst's estimated component cost breakdown? In which case it is a worthless guesstimate, or is it based on official numbers?
Internally, they're essentially the same phone. The iPhone is a better built phone to be sure, but I find it hard to believe that it costs that kind of difference. But hey, people still buy them so I can't see the pricing structure changing for the moment.
Charts and graphs aren't writing.
Writing: Meaningful letters or characters that constitute readable matter: http://www.thefreedictionary.com/writing
You sir, in the kindest way possible, are 100% wrong. You're entitled to your opinion, but not your own facts.
Language is a convention, not a fact. You are entitled to your own conventions (but I'm going to use the ones others accept for the sake of this post), but not your own facts.
The fact is that if you have more relative profit margins than revenues, that more of the money people are paying you are not going to the costs used to produce the product. Thus, you are paying a smaller % of your money toward the product itself, no matter what value you place in having that product.
You fanboys are seriously rabid, and for the sake of this community, please learn how to defend things you like in a civilized manner (http://paulgraham.com/disagree.html) as opposed to the emotional knee-jerk reactions you have. Or leave.
What took you so long to presenting an actual argument? The reason I replied to your dubious claim at best, "In other words, you are paying for the brand, not the product" is because you offered no proof or evidence, you just made some random accusation.
How do you separate what profits are due to the successful product and those which are due to the brand? AdAge did say Apple is the most valuable consumer brand, but I'm pretty sure you weren't referring to that. You're saying any % more that Apple makes over x, x being the industry standard is due to Apple's brand, but Apple's products are commodities so it's not a fair comparison. Apple's OS/UI is usually where the added value comes from. It's a virtuous cycle, Apple makes good products, people trust them, so they can charge more than say Acer who doesn't have the same track record.
I'm not a fanboy, I use a Dell and a Blackberry, maybe you should stop making assumptions. I just prefer to have discussions, not flame wars, which is what you tried to instigate in your initial comment.
"The fact is that if you have more relative profit margins than revenues, that more of the money people are paying you are not going to the costs used to produce the product. Thus, you are paying a smaller % of your money toward the product itself, no matter what value you place in having that product."
Newsflash: none of this leads to your conclusion that people are paying for the "brand" as opposed to the product itself.
People pay more for good products and service and experiences and they also pay more for brands and some other things. Companies can also increase profits by cutting down on component costs, leveraging scale, with good recruiting, and good management in a hundred other ways. The fact that one product is more profitable then another doesn't imply any of these in particular. The fact that Apple is so much more profitable generally is taken of evidence that many of them are in play. Dismissing all of this as "paying for the brand" is just ignorant.