Apple’s Journey from Revolutionary to Price Cutting Firm

In an article entitled, “The end of Apple as we know it?” BBC columnist Sydney Finkelstein describes the transformation of Apple from a revolutionary firm to a price cutting and competitive one. Initially, Apple products were revolutionary. In reality, the iPod was a technically inferior product to many other MP3 players of the day. In particular, the sound quality was poorer. What Apple sold and won with was not a better product, but instead a better experience. Apple was cool, and this combined with the iTunes program and the new product design captivated consumers.

In a similar fashion, though the iPhone offered nothing noticeably different from say, a Samsung phone, customers were drawn in by the revolutionary newness of “an Apple phone.” The iPad, a tablet, also continued this tradition. What drew consumers to Apple, according to Finkelstein, was not the quality of the products, but rather brand name coupled with a penchant and reputation for innovation that drove the firm forward.

In contrast, Apple today is entering into a competitive stage, where rather than pushing for new ideas, the firm is striving to compete on a technical, rather than innovation level. Finkelstein argues that while this method can work, it was not the model that drove Apple’s success, and in fact the strategy of short run profit maximization necessitated the reinstatement of Steve Jobs, just to recover the culture of innovation.

This contrast, between using innovation or quality as the driving force of a firm, cuts to the question of what is the best way for firms to compete. Should firms seek to compete with quasi-identical goods, and use cost cutting as the primary method of differentiation? Or should they instead seek to innovate, inventing wholly new products that they can dominate for a time while other firms play catch up? In investigating this question, it seems that the latter, which is not based on driving down costs (and realistically price), is preferable for the long term maximization of firm profits.

http://www.bbc.com/capital/story/20130904-the-end-of-apple-as-we-know-it

3 thoughts on “Apple’s Journey from Revolutionary to Price Cutting Firm

  1. It seems to me that Apple is currently attempting to do both price cutting and innovation. For example, the last iphone release consisted of a newer, more advanced model of the Apple iphone, along with a cheaper version of the phone. I am curious to see if this method of operation is going to be sustainable in the long run, or if Apple is going to have to either switch to price cutting completely to compete with “copy-cat” products, or if they will revert back to their previous model of innovation and the creation of inspirational goods. Could Apple be the pioneer company of a luxury technology market?

  2. It’s interesting because so much of Apple’s “innovation” has come from product cannibalization. People debate whether this actually constitutes innovation, because merely improving on your current product is not necessarily innovative. A Samsung commercial tries to highlight Apple’s lack of innovation by suggesting that consumers who bought the iPhone 5 had “deja deja deja deja deja vu”. Another person in the commercial asserted that the iPhone 5 was a completely different product because the headphone jack was on the bottom on the phone, as opposed to being on the top of the iPhone 4.

  3. It makes sense for Apple to make only small, incremental changes to its products. As long as competition does not create products that utilize fundamental innovation, Apple doesn’t have much incentive to invest a lot of R&D into its products. Maintaining the status quo ensures profits. The company’s move to sell very similar products at two different prices seems like another profit-maximizing action. Apple will now be able to profit from consumers with high reservation prices.

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