Prognosticating is a spectator sport. Anyone with a soapbox to stand on can deliver an opinion (or, conflicting opinions) on what a company should do and why, but not take the time to figure out how. Take Henry Blodget. Please.
The same Henry Blodget who was charged with civil securities fraud and banned from the industry runs The Business Insider, his personal soapbox. His latest rant says Apple needs to look at the long term picture, produce lower priced products, stop going after the premium piece of the industry.
You see, Apple competes with cheap products at every turn, in every category. The Mac competes against cheap, plastic, limited, and crippled Windows PCs. The iPhone competes with giveaway smart phones running Android (and everything in between). The iPad competes with cheap tablets as well as Microsoft’s hot selling Surface tablet (Sorry… I jest).
Simply put, Blodget thinks Apple’s profit margins are too high. And, for some reason, lower must be better.
Here’s the problem I have with that thinking. Which company in which industry is eating Apple’s lunch? Where is the outside, competitive pressure for Apple to lower prices, reduce margins, and be competitive with cheap?
Blodget doesn’t really say, only touting Android devices as the real growth engine. Growing what? Unit market share. Blodget also loves Amazon because it’s willing to lose money to gain market share. He must love Google, too, and for the same reasons.
As an example, Blodget touts Apple’s iPad mini as willingness that the company can move down-market. Yet, Apple kept the iPod price competitive with cheaper media players and sucked out all the profits from that industry segment.
The Mac mini is an example of Apple being Apple. It’s a low priced alternative to cheap Windows PCs but does not skimp on quality, power, or usability. That positioning allows Apple to maintain higher margins and profit, maintain a premium product role in the market place, and yet put enormous pressure on competitors who can only compete in a race to the bottom.
It’s important to note that Apple doesn’t have a reputation regarding the need to gain market share. Just as Microsoft’s Windows topped the Mac in market share, Apple has already ceded market share superiority to Android devices. To what end? Apple’s smaller percentage of market share drives the largest share of revenue and profits. Only Samsung, which prefers to copy Apple products at the atomic level, is profitable in smart phones.
People will always be attracted to the cheaper price of competing products. Among those minions, many will also aspire to something better, a premium product with more functionality, greater value, perhaps a higher status, and a willingness to pay more for more. If Apple goes into the dirt cheap arena with all the plastic hogs some of that brand and status is lost and cannot easily be reclaimed.
As it is, regardless of Apple’s riches, the company struggles to meet demand for all products, while competitors struggle simply to stay in business. It’s easy to say what Apple should do, and that’s Blodget’s forte. It’s more difficult to describe the why and the how. That’s a detail that Blodget doesn’t bother to address.