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Apple's Secret Weapon To Influence Industry Pricing
Hugh Pickens writes "Nick Wingfield writes in the NY Times that Apple's present pricing strategy is a big change from the 1990s, when consumers regarded Apple as a producer of overpriced tech baubles, unable to compete effectively with its Macintosh family of computers against the far cheaper Windows PCs. Now within the premium product categories where Apple is most at home, comparable devices often do no better than match or slightly undercut Apple's prices. 'They're not cheap, but I don't think they're viewed as high-priced anymore,' says Stewart Alsop. Winfield writes that Apple uses its growing manufacturing scale and logistics prowess to deliver Apple products at far more aggressive prices, which in turn gives it more power to influence pricing industrywide, and one of Apple's pricing secrets has been it's willingness to tap into its huge war chest — $82 billion in cash and marketable securities last quarter — to take big gambles by locking up supplies of parts for years."
I've heard that the reason you see so few 9.5" "ipad size" tablet displays is that Apple bought up the entire stock. This is also why the iPad 2 had the same resolution as the ipad 1, and why the Android tablets are mostly stuck at 7". Can anyone confirm/deny this? Or explain that better. My knowledge of LCD manufacturing plants and capability is minimal, to say the least.
moox. for a new generation.
as a non-native speaker, I find it painful to read "it's" instead of "its" in almost every /. post ...
"I love my job, but I hate talking to people like you" (Freddie Mercury)
People who view Apple's decisions as "big gambles" simply are not giving Apple the credit they deserve. Quite frankly, Apple hasn't gambled in quite a while - they are making very smart, very well thought out decisions and they are executing those decisions with skill and refinement. That isn't a gamble.
Regardless of what you think of Apple - love 'em or hate 'em - it's simply inaccurate to describe their moves as "big gambles". They are making bold business decisions.
Now, admittedly, that doesn't sound impressive but it actually is - too few companies are able to come up with a well thought out plan and to boldly follow it, sadly...
Yes having little variation in the range results in economies for the manufacturer, but the "one size fits all" approach combined with Apple's resistance to letting the people who buy their stuff do any changes to it means that very few people are perfectly served by the model range . The more choices you have in choosing a device and what you run on it the more like is the result you end up with something that severs your needs, rather that the needs the manufacturer feels you should have.
N.B. this user is far too lazy to write a witty and intelligent sig.
Not sure that is a fair comparison given that Dell laptop is reported to have poor build quality, poor battery life (some people report 2 hours), a poor quality screen, and I'm not even sure Dell sell it anymore. Also, the Apple laptop in question has Thunderbolt, backlit keyboard, firewire 800, 7 hour battery, solid aluminium (not plastic) and magsafe power connector. Not to mention a better operating system. It is clearly a better designed and engineered machine than the Dell.
You'll always find laptops that are cheaper than Apple. But you get what you pay for.
Really? The iMac is reaching end of release cycle, so isn't at its peak of value, but...
27" iMac built from scratch (prices from newegg):
27" 2560x1440 S-IPS monitor including camera: $999 (from apple, 1099 if you buy it from dell)
i5 2300: $179.99
DH67GD: $102.99
2x2GB DDR3 1333: $22.99
1TB 7200rpm HDD: $139.99
Radeon 6670 (aproximating the speed of the 6770m here): $79.99
Corsair CX430 PSU: $44.99
Antec 300: $69.99
Total: $1639.93
Apple's price: $1699
That really doesn't look like too bad to me. Were you by any chance ignoring the price of a 2560x1440 S-IPS monitor when you were finding they cost twice the price?
Aside –the system built here will be significantly louder than an iMac too, and significantly bulkier. Factoring that in, I'm sure we can forgive apple $60 at the end of their release cycle ;)
Look at the report to the President on Ensuring American Leadership in Advanced Manufacturing. (http://www.whitehouse.gov/sites/default/files/microsites/ostp/pcast-advanced-manufacturing-june2011.pdf)
Laptops, semiconductor memory device, flat panel displays, and lithium-ion batteries are all technologies that America has lost the capability to manufacture. Apple could not manufacture their products in the US anymore.
Reposted to help get this AC's point out where people who ignore ACs will see it, and also to add an anchor tag to the "linked" document, so those of us who hate seeing URLs without links can just click the darn thing.
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For casual computing, and I mean real casual computing (check your e-mail, browse and maybe reading a book/watching movies), tablets are ideal. Even if you coach something, imagine instead of taking all your student files, the planning and even having the ability to take notes on a single device (instead of a file that weights 3x more).
There is a market for tablets, some might even say it is the real personal computer for people that don't like computers (I don't agree with them, but I see the point).
It's not a choose one situation. With one night stand I probably wouldn't take my tablet in bed (because I'd be quite drunk too), but after sex I'm just not that tired usually. To be honest, sometimes it gets really irritating when my girlfriend tries to jerk me off while I just want to play one more turn of Civilization.
If I read your point further, you are saying that Apple should be forced to build their phones in the US.
I never said they should be forced to do anything. I said they probably could make them in the US. What gets me is that most consumers think they are "buying American" when they buy Apple, when in actual fact there is not much here in America apart from some offices in Cupertino and pimply teenagers at Apple stores. What I don't get is that Japan - with incredibly high labor costs and costs of living - manages to continue to be a manufacturer. As does Germany. Yet the US seems to be completely incapable of doing this. At one point buy the damned robots and upgrade your plants, you know?
Seven puppies were harmed during the making of this post.
Wow, rarely has there been a post that I disagree with more.
Right now, the tablet market is iPad and people who have them, mostly love them. The iPad is wreaking havoc on the low end PC market and they are still selling more iPads quarter after quarter. Apple is rumored to be dumping part of their desktop line up. There's no indication that the tablet line up is going anywhere.
If this were true, I think you would be seeing a resurgence in netbook sales. The reality is that sales are way down and are stagnant. I think a lot of Slashdotters are really out of touch with how normal people use computers.
Technically equivalent or superior? You must be measuring by clock cycle or memory size. I don't know of any tablet that even comes close to the iPad in areas that matter like build quality, battery life, and software. Apple has figured out that saying no to a feature is a bolder move than adding yet another switch or option and their product is subjectively better for it.
How's that PDA working for you? Netbook sales are way down from their peak and not recovering. And who wants to use their PC? That's their work machine. The iPad is their play machine.
Talk to people who compete in the low end PC market. The iPad has them terrified. It's a huge part of what spurred Apotheker to conclude that the PC business is dead. And have you seen Windows 8? That has me thinking that Microsoft is also turning away from the desktop market. It almost seems like they are splitting Windows into server and tablet versions.
Here's a leaked excerpt from the next edition of Walt Mossberg's Wall Street Journal column, where he reports on a recent interview with Tim Cook, Apple's newly ascended CEO:
I asked Cook what he thought his biggest challenges were. "Clearly," he replied, "China is our next big challenge. After the U.S. it's our second-largest market. But we're doing well there. We have 6 Apple Stores in China now."
And after China? "Our biggest challenge in the U.S. is the Slashdot market," he said without hesitation. "We haven't executed successfully in that market. But it's a big market, vital to our success, and we're going to aggressively pursue it. I've asked Phil (Phil Schiller, Apples Senior VP of Worldwide Product Marketing) to sit down with John Frazier and figure out a way to get our products onto the ThinkGeek web site."
Cook can't explain why the Slashdot crowd won't buy Apple products. "I don't understand it. OS X is based on Unix. We've been big contributors to the open source movement. But they persist in calling our customers 'Appletards' and 'fanbois.'"
Cook is normally a low-key guy, but the more he thought about all the lost Slashdot sales the more agitated he got. "I want the Slashdot market. I will have it. Once I have the Slashdotters, the world will be mine! MINE I TELL YOU!"
At this point I had to terminate the interview.
"some offices in Cupertino and pimply teenagers at Apple stores", huh?
Apple employ ~60,000 people now, with very very few (if any) of those being in China...
It's not Apple's job to make your country a better place or more biased towards manufacture than design, that's your governments job. Unfortunately your government prefers to play with its dangerous toys, declare war left, right, and centre, try to make its rich richer at the expense of everyone else, ignore the healthcare requirements of its populace (seriously? No single-payer system in this day and age?), destroy human rights in the name of 'the war on terror', and generally have its two parties more involved with acting like dicks to each other than actually, you know, running the country.
When you can vote the government in and out of office, you get the government you deserve. I can only assume a majority of Americans are seriously screwed up. Or masochists. Or something!
Simon
Physicists get Hadrons!
Also there is no need to follow the specs exactly.
Sure there is, if you're saying that buying a computer from Apple is more expensive than buying the equivalent computer from someone else or building it yourself. Nobody disputes that you can buy a computer with worse parts than a Mac for much cheaper than a Mac. Similarly, nobody disputes that the high quality parts are superfluous for some (possibly large) segment of the population, so you can make some substitutions of worse parts without affecting the value to that consumer. The question is whether a computer with the same specs built by Apple is more expensive than one obtained some other way.
So their 'secret weapon' is that they think ahead, price aggressively in shrewdly chosen market segments, and take carefully measured strategic risks with their resources?
Does it strike anyone as ironic that it's so unusual for a company to act the way a capitalist company is *supposed* to act that it's called a 'secret weapon'?
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
Wow, that comment took me by surprise, but I can't think of a more true statement. I suspect that's why they just don't understand Apple's success. The goto Geek was THE person to talk to about any PC purchase, and now they are the ones out of touch with the mainstream. That's not to say they don't know what's what in the tech world, but they simply don't seem to understand what drives today's computing generation. Even 10 years ago there was still an element of garage tech to PC's. They were mysterious to the general population, hard to learn to the laymen, and generally frightened the old folk.
Now the Geek factor isn't relevant, no one cares about Ghz, spindle speed, bus speed, etc. Unless somehow has a specific niche they need to fill, they typically can just buy what they want without the need to consult with their friendly PC geek. I have to wonder if the advent of these closed boxes (read: not upgradable) like laptop's, Mini's, smart phones, etc, have removed the need to know a geek to get your video card upgraded. No one does that anymore except for those that insist on using a desktop, and lets face it. Desktop's just aren't that mobile.
I also find the comments about 'seeing them everywhere' and arguments to the contrary a bit humorous. 100+ million sold. They are now impacting the netbook, Laptop, Low end Desktop PC, and gaming market and people are still calling them a fad. They have been selling like gang busters for 2 years straight, with no slowdown in sight and they are still a 'fad'. The disconnect here would be scary if it wasn't so funny.
I concur with what you're saying, and I have a couple of points to add:
I feel like I've made my point, though I could go on. In the interest of full disclosure, I don't own a tablet (by any definition, or a Netbook). I have used them, I have talked to people who live with them every day. They don't work for me and what I do.
The strategy is pretty sound if you make a few assumptions:
- Most manufacturers of components want Apple's business because they know it's *safe* and reasonably profitable
- Most manufacturers of these kinds of components are willing to share with Apple (and their other big customers) what kinds of things are coming down the pipeline in the next 1-2-3 years
- There won't be something that appears out of nowhere that's mindbogglingly amazing and ready to be manufactured without at least some advance notice.
- Apple has enough cash on hand, brand cachet, and momentum that if they were to release something that was "good but not insanely great" they could survive it relatively unscathed (as long as they didn't keep doing that) because people would still buy it.
These assumptions seem pretty reasonable to me. The Apple strategy also protects them against things like the quake + tsunami in Japan, the flooding of Thailand, and other issues that will come up and force competitors to raise prices.
Since I can't tell them apart, I treat all ACs as the same person.
"Seriously, the reason those things won't replace desktops is the same reason laptops haven't, except much much more so."
You realize, of course, that laptops have in fact replaced desktops for the majority of people?
Any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so.
I thought this too, until I spent some time in the airport people watching. I was flying to Ukraine and I sat next to a gaggle of older women (late 40's, early 50's) and two of them had ipads. The other four women could not stop commenting on how they had to have one because these other two where able to show their photos and emails from their beaus, and maps and information relating to the company this woman's son was considering an offer from. And then photos of him and his awards and newspaper articles about how well his school was doing in football.
Watching that interaction completely changed my mind about the lifespan and usefulness of tablets. I still don't own one, but now I understand their market.
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