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.