High Margins are the Apple Corporate Culture

Matthew Yglesias suggests that Apple shouldn’t use its enormous cash stockpile to do a WhatsApp-style acquisition, but rather to compete on price for its non-flagship products.  I think Yglesias is entirely correct that that’s what Apple should do, but he positions it as “It would be hard to acquire and maintain Apple’s corporate culture.”

But it’s hard to think of anything more core to Apple’s corporate culture than a complete refusal to compete on price.  High margins drive everything which defines Apple.  Their 21st Century resurgence as a great technology company has been driven by saying, “Rather than compete on price, we will cede market-share and concentrate on building new, yet more high-end products.”  Check out, say, the move to retina displays.  As the iPhone finally started to have meaningful competition in the smartphone market (after several years of simply not having any peers), Apple’s response was not, “Okay, let’s broker our head-start to crush Android before it finds it’s feet,” it was, “Let’s double-down on our premium brand.”

For better or for worse, Apple has defined itself as a high-end brand in every device it has, and lives in paranoid fear that any lower-end offering will cannibalize its high-margin sales.  I’d argue that there have been times when it has been for worse (I think that Apple missed a chance to utterly dominate mobile devices by, in 2009 or so, sticking with AT&T when it needed to diversify carriers, and allowing a low-end market for Android devices that were not yet able to compete head-to-head with iOS), and there have been times when it has been for better (I think that the iPhone and the iPad were created because Apple refused to let itself focus its attention on iPods and Macs), but that’s absolutely core to what the company is.

Advertisements

One thought on “High Margins are the Apple Corporate Culture

  1. Pingback: Apple Margins Redux | Sandor at the Zoo

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s