Jun
With the kind of cult following that Macs have amongst their users, one would believe that Apple’s market share in the PC + Notebook category would be steadily on its way up, since their resurgence as a formidable player in the computer market in the early 2000s. Almost anybody who has made the move to a Mac (yours truly included!) swears by the fragile beasts, and wonders why they didn’t move earlier.
While Apple’s share has indeed gone up, it is still small in terms of volumes. Most of this is probably due to two strong factors – the premium pricing of all of their models – their range starts from $1000 – and the reluctance of the average consumer to shift to a completely new operating system. Apple sees the second one as more of a strength rather than a liability, as most of its users would agree, and would almost never tinker with what is essentially its USP – a robust OS which just sits there and lets you do what you want to without bothering you with random error messages and crashed programs.
What it can do, however, and no doubt would have been tempted to do, is tinker with its price range. It has already done that to an extent, in its June WorldWide Developers Conference, slashing prices of its high and mid-range MacBook Pro models. What is notable is that they have maintained the entry level pricing of $1000 for the white polycarbonate Mac constant. This seems like an attempt to lure current Mac users to trade up, rather than get new ones into the fold, which means that there is little change in market share. Apple has resisted temptations to enter the lower end of the market, steadfastly maintaining that it has no intentions of bringing out a netbook or a cheap laptop, saying that the lesser-than-optimal user experience with cramped keyboards and slower processors is not something they want to get into. This sounds like more of an excuse, though, for their current entry-level Macbook keyboard, although comfortable, definitely isn’t anything exceptional.
All of which makes one wonder – Does Apple have a self-imposed maximum market share limit? As scandalous as this may sound, can we put this kind of unconventional thinking beyond a company which has continued to surprise and wow gadget freaks for close to a decade? This seems to make perfect sense for several reasons. One of the reasons the Mac OS has been so successful is that it makes up too small numbers to attract the attention of evil coders with too much time on their hands, who’d rather play with Windows and watch as the world cringes. Change that, and you have a whole new headache to deal with, fixing each and every loophole in your OS, something which will undoubtedly come at the cost of further innovation, which Apple would rather like to spend its energy on. Macs work fine without any anti-virus software, and there seem to no known viruses in the wild which can create havoc with Macs so far. Try to cater to the lower end of the market, and you suddenly have a host of new problems, with only a marginal rise in profitability, due to the fiercely competitive and price sensitive nature of this market. Secondly, it’s rather tough to have a cult following and a fierce sense of ownership amongst your users if half the world also uses the same product, although the trade-off can be well worth it, as Apple saw with iPods. Third, Apple might be taking a conscious decision to maintain or improve profitability over topline growth, something which gives it a remarkable amount of breathing space in case things start going awry. Fourth, Apple would be wary of anti-trust litigation, after the hammering Microsoft got over crimes far less serious than what Apple pulls off with its OS. While there is no doubt that the Apple OS is a superlative piece of software engineering, it is as monopolistic as things could get.
Would it really be unthinkable to do this way? Would everybody, by default, prefer a larger, heavier, more cumbersome organization which has to put up wall after wall of defenses to stave off threats, whether it’s evil coders or government watchdogs, living off small margins and having to deal with a billion different suppliers and dealers and what-not? Maybe Apple does not limit its innovation to merely the design of its products, but extends it, or rather, lives by it in all facets of business. Maybe the real innovation is here, in their business model, rather than in their superlative products.
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12 Responses to “Does Apple have a self-imposed maximum market share limit?”
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Very interesting read.
Interesting read, but the point is why do they need to come up with a product which is opposite to their current positioning (the want-factor associated with Apple products)? Wouldn’t a low-priced product disrupt the current users’ exclusivity?
at the same time, it may pose a threat of downward movement along the value-chain (for its existing customers) an unwanted aspect.
Apple need not become a yet another company in electronics goods manufacturing. That too when it commands such an interesting and lucrative niche 9a big one too). Something that every other organization crave for.
First the disclosures: I am not an Apple user \ fan. I admire ‘design’ aspects of the products.
Apple’s success is product design led (with spend in tech to back that).
Coming to its strategy I see following factors
1. Limited market share (premium – exclusive positioning) is great for branding and can be a valid strategy if you have ability unleash product after product that users love.
2. This ability is by no means a given thing even if Steve Jobs is around.
3. Windows or MS is not a great factor -they might sink under the weight of their success.
4. Google docs \ Android or Linux may change landscape once again.
5. If your product creation waves peter out, you are in a dangerous game of having to fund your ‘attitude’
6. Who knows tide may turn against the current absurd patent regime (read a fortnightly in BS) due to shift of center of Gravity from western civilizations.
7.In any case today there are many non-Apple touch screen based devices and Apple’s uniqueness go off unless they come up with something new.
8. It may be the sign of times that Apple had to open of API for Iphone to encourage third party applications. But it is a pain to deal with Apple.
Phew! That’s almost an essay. But that’s that.
Hemant
Interesting argument. A couple of thoughts:
1. Is this analogous to saying that LVMH or Prada has low market share in leather bags? Maybe the Apple market is high-end laptops. What would be its share in the market for laptops above $1000?
2. Of the four points you make to support your argument, (1) and (4) seem implausible. In (1) for one, is is counter intuitive that a company that prides itself for product design will knowingly release an OS with obvious holes. Secondly, Antivirus is a business in itself. Apple need not get into creating Antivirus software for the Mac – Symantec and the likes would be happy to pitch in. Point (4) again seems to say that Apple chooses to be small and hence ‘ignored’ from possible legal proceedings. But what is the additional legal bill per dollar earned for MS? How much does that eat into the profitability number?
I like your premise though, that a company should ‘choose to remain small’. I tend to feel that this is likely to be more existential philosophy than a deliberate strategy.
Comments/reactions?
@vivek : for the simple temptation of dramatic increase in topline. But yes, as you agree, they have several stronger reasons not to do that.
@Hemant : Agree with most points, except number 7. Apple’s uniqueness lies with their OS in the computer market; an advantage which they would actually have to work hard to negate. Yes, Apple does behave in a very monopolistic and high handed manner with several of its associated companies – which is exactly what I was trying to say – but they can afford this attitude simply because they have the rebel, I-don’t-care way of looking at things.
@Ashwin : You’ve raised excellent points. Agree with 1, I don’t have figures for what their share is for the plus $1000 market, but I doubt it’s anything substantially higher than its overall share.
In point 2, in response to my first point, I didn’t mean to say that Apple will knowingly release an OS with obvious holes. The point is that they don’t have to worry half as much MS does. The anti-virus line was a bit of a mistake, I actually meant that they don’t even have to think about all these things. But in the context of the article, yes, maybe that would have been better left out. About the additional legal bills per dollar earned – it is indeed worth studying that, though I wonder with what accuracy one could arrive at a figure.
interesting read …
interesting read indeed, but i have to say i dont quite agree. Apple has always been more a technology driven company. And i believe this has more to do with mass appeal. After all the Iphone is also an Apple product and yet is one of the most popular one in the market.
There are many other examples in the market that are free and yet never took off. In languages Python is one heck of a scripting language and yet it works in corner of the development world.
hey good one harshad! pretty interesting read!
Nice analysis … interestingly put