Can Apple afford to stay high-end only?

Laura Knotek

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Makers of World of Warcraft (and other console MMO games).

As far as the original question...why wouldn't Apple be able to "stay high end only" (as you put it)? People aren't buying Apple products because they feel it's the top dog of the market, people are buying them because of preference, quality and service standards...truthfully, I don't even consider Apple's products to be "high end only". Do they command a premium? Sure! Just like a BMW or Mercedes would...and I guess in the comparative way you'd look at a BMW vs. a Kia, you could make the "high end" generalization...but the reality is, it's simply a preference, and these days, it's really not that much more than a comparable product from another manufacturer (a couple hundred bucks is really nothing).




Thanks! I'm not a gamer, so I don't know anything about game companies.





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Trees

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I think market share matters. If a company has a diminishing pool into which a product can be sold, then to sustain revenue needed to fuel R&D and other operating and capital expenses; an increase in price is likely required to bring the next product iteration to market. In parallel, diminishing market share can morph into decreasing consumer awareness and interest; which in turn could be a catalyst for decreasing revenue and more difficult business decisions.

I realize this is a simplified scenario, however, something to consider.
 

Fit24

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I love Apple but I find that defending them by saying their stuff isn't more costly is just not reality. You can go to most places and buy a Windows laptop for anywhere from $400 - 900 and I'm not talking netbook. So when I'm giving friends and family advice I don't try to sell them on Apple. I give them an honest answer. Yes it is more expensive the cheapest laptop is going to start at around $1,000 for very basic specs. However there is so much that goes along with owning an Apple that make the purchase of more value than the laptop you get at BestBuy. The ability to call or go to an Apple store for a problem whether you bought it there or not, try that with a Toshiba or whatever you buy. The resale value holds up so much better because after paying $800 for a Windows laptop how much would you really expect to sell it for in a year or two? Now the same goes for the phones, they are expensive. Talking about the subsidized price means nothinig when you talk emerging markets because most people in that marking at looking at the cost unsubsidized. The problem is that the people on Wall St. or wherever pressuring Apple to make a cheap iPhone while thinking about money are not thinking long term. There could actually be a potentially earning less money even with gaining more market share, where have I heard that before? There is no way Apple could make a cheap iPhone and only sell it in other countries people in NA would cry bloody murder and sue if they can. Now if that cheap iPhone is sold in North America sure some parents will buy it for their kids, some feature phone users will upgrade to it. The problem is people who would have upgraded to a 6 or 6s will also just get the cheaper one. Cheap also means cheap internals so then you're looking at increased returns, warranty swaps, genius bar appointments. It is just not needed in North America, what the people mean when they are saying cheap iPhone is actually an iPhone just at a cheaper price. Why would Apple lower the price on the iPhones when they have always sold more than the previous model? Obviously people are buying them so what happens when they sell it for cheaper and it does nothinig to the stock price? Really what do the analysts know about running a tech company? It's like a food critic telling a chef how to make the dishes on the menu.

I will always maintain Google can afford to give Android away for free because what they really care about is more people using it. The more people use the services and search and the other stuff they make the real money from is their real concern. Other than Samsung are the other manufacturers making profit? So why would anyone look at this as what Apple needs to do? Sure I admit as an iPhone user I have noticed a shift and an increase in the number of people I notice with Android devices. What I also know is that The PC industry is really in trouble right now and Apple still doesn't have huge problems with Macs. So decades from now when the market is completely full of Android devices of all types and they are dirt cheap and the manufacturers can barely make any profit from it and Apple is still selling their devices at a profite I'm not so sure people will look at it as a lost oppurtunity.

Well said Ipheuria! IMO a cheaper device is not always cost effective and it doesn't always make good business sense.
 

jmr1015

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I think market share matters. If a company has a diminishing pool into which a product can be sold, then to sustain revenue needed to fuel R&D and other operating and capital expenses; an increase in price is likely required to bring the next product iteration to market. In parallel, diminishing market share can morph into decreasing consumer awareness and interest; which in turn could be a catalyst for decreasing revenue and more difficult business decisions.

I realize this is a simplified scenario, however, something to consider.

But this hardly applies to Apple. Apple's "loss" of market share has nothing to do with decreasing sales. It is simply the bottom end of the market ballooning. Apple's sales continue to increase year over year... The overall market is just getting larger and larger, which makes the segment Apple sells to, appear to be smaller and smaller, when in reality, it too, is growing.
 

Fit24

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high-end:

Free Online Dictionary ... "Appealing to sophisticated and discerning customers."

Merriam-Webster Online ... "higher in price and of better quality than most others."

IMO Apple tends to focus on making great products of high quality and great value. They should continue to make "high-end" products. Why mess with success?
 

Ujjwal Agarwal

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whatever apple do they will always stay in the limelight
the fantastic combination of software and hardware is what keeps apple out of the league!
 

abazigal

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To me, the issue is that Apple is currently using hardware pricing to subsidise software.

For example, Apple Maps doesn't earn them a cent in revenue, unlike Google Maps. So the costs of maintaining it is indirectly factored into the initial asking price of any IOS device you pay. IOS updates (and possibly future OSX updates as well), but a lot of time and money has clearly been spent on improving them every year. Same goes for other services like Siri and iCloud.

Selling more devices at cheaper prices would defeat the purpose if it not only earns them less revenue, but also cannibalises sales of more expensive alternatives. I think for the moment at least, Apple can only remain profitable by catering to the higher-end section of the market.
 

jsarino

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Can Apple afford to stay high-end only?
Yup ... that business model has severed Mercedes Benz well for how many years?

Mercedes Benz has low-end cars in their lineup... the CLA is $30k for instance. Same with BMW and Audi. :) A Ferrari would've been a better analogy. ;)

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Speedygi

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Although I do agree that Apple should stay at the high end, I think eventually they are going to cede so much of the lower end market share that they will eventually be known as that high end luxury brand and nothing else. This could be a good thing for Apple but it could also be a bad thing because they are one dimensional. Being one dimensional creates alot of disadvantage for a company in general..

It is and only because it's Apple that it's doing as well as it is now... Just look at HTC. They focus on getting top end devices out and look how they are losing out drastically to Samsung in terms of Marketing.

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jmr1015

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Although I do agree that Apple should stay at the high end, I think eventually they are going to cede so much of the lower end market share that they will eventually be known as that high end luxury brand and nothing else. This could be a good thing for Apple but it could also be a bad thing because they are one dimensional. Being one dimensional creates alot of disadvantage for a company in general..

It is and only because it's Apple that it's doing as well as it is now... Just look at HTC. They focus on getting top end devices out and look how they are losing out drastically to Samsung in terms of Marketing.

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Apple has never really offered a low end computer. They've continued to offer $1000+ notebooks, $1000+ all-in-one desktops, and $3000 work stations... The most affordable entry in to the Mac world is the Mac Mini, and it's still priced high, considering you must buy a monitor, keyboard, and mouse, separate.

People constantly said, if Apple wants to compete with PC/Windows, they have to make cheap computers. They're losing market share. They're doomed. Blah blah blah...

And here we are today. Apple is still going strong. The Mac is still known to be a fantastic high end machine, at a slightly "high end" price. Windows is still dominant in market share.

And again, I hate to have to keep bringing it up, but Apple is only losing market share because the lower end of the market is increasing. A market Apple doesn't sell to. Just like their loss of market share to the PC. It had nothing to do with Apple's Mac sales decreasing, it was just cheap PC sales increasing,

The iPhone's apparent loss in overall mobile market share is not because Apple's sales are decreasing. They are continually increasing, year over year. It's really hard to take talk of Apples downfall seriously when they haven't even shown signs of hitting a plateau. Let alone a decline, or a decline serious enough to worry about their future in the industry.
 

Speedygi

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Apple has never really offered a low end computer. They've continued to offer $1000+ notebooks, $1000+ all-in-one desktops, and $3000 work stations... The most affordable entry in to the Mac world is the Mac Mini, and it's still priced high, considering you must buy a monitor, keyboard, and mouse, separate.

People constantly said, if Apple wants to compete with PC/Windows, they have to make cheap computers. They're losing market share. They're doomed. Blah blah blah...

And here we are today. Apple is still going strong. The Mac is still known to be a fantastic high end machine, at a slightly "high end" price. Windows is still dominant in market share.

And again, I hate to have to keep bringing it up, but Apple is only losing market share because the lower end of the market is increasing. A market Apple doesn't sell to. Just like their loss of market share to the PC. It had nothing to do with Apple's Mac sales decreasing, it was just cheap PC sales increasing,

The iPhone's apparent loss in overall mobile market share is not because Apple's sales are decreasing. They are continually increasing, year over year. It's really hard to take talk of Apples downfall seriously when they haven't even shown signs of hitting a plateau. Let alone a decline, or a decline serious enough to worry about their future in the industry.

But that's because Apple has gained so much popularity that people aren't only overlooking the flaws of the devices but they are in fact simply willing to pay the high prices to get them as well. It's how powerful the brand name has become.
 

Fausty82

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But that's because Apple has gained so much popularity that people aren't only overlooking the flaws of the devices but they are in fact simply willing to pay the high prices to get them as well. It's how powerful the brand name has become.

I do agree that the Apple brand is valuable, and represents quality in the minds of many (most?) consumers. Or, it it (as I think it is) that Apple addresses the shortcomings that are discovered... and people are willing to pay for quality hardware and accept quality (free) operating system software.
 

Speedygi

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I do agree that the Apple brand is valuable, and represents quality in the minds of many (most?) consumers. Or, it it (as I think it is) that Apple addresses the shortcomings that are discovered... and people are willing to pay for quality hardware and accept quality (free) operating system software.

Nah, I still am of the opinion that, yes, although Apple do make very good quality products, but they have been riding the tides of their brand equity more than innovate with their devices to win over new customers.
 

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