The Apple business model….a lot has been written already (I did myself – Flat Education – Case: Apple Inc), but then again you wonder: Is my business model Apple proof?
With the launch of the iPad 2, last week, Apple had a major advantage: they were first to give an updated version on a tablet at a ‘cheap’ price. How is it possible for a Market introduction to put these ‘low’ price for such a ‘high’ tech product. In normal marketing pricing terms, we would use a market skimming pricing strategy, coming in high and then lowering the price (a classical marketing theory….I love it – in the off-line world, or the web 1.00 world), but in the online web world of 2011 traditional marketing isn’t always the right way. So way is Apple able to introduce the new iPad 2 at a competitive price? Easy….it’s the business model!
Let me explain it you!
“Apple is the only company in the IT industry that sells the whole widget” – Steve Jobs!
Apple has used this business model since it introduction mid 70-ies. Apple wants to produce integrated software and hardware-solutions, look at Macintosh, Apple 1, ….even the iPhone and iPod use the same strategy. Apple makes everything in-house, even adding the iTunes store as the third-party intermediary between the Apple user and the commercial world. (See my case: Apple Inc.)
If we look at the iPad (2) strategy we see the same strategy:
- hardware: Apple’s patented R&D design, with A4 Chips, …. (and not Intel, AMD, ….)
- software: a closed ecosystem (where you can run third-party Apps, but can’t change the operating system, or else….)
- sold through the Apple retail network: off-line and online Apple stores….and third party stores to get word out! Works especially well in the US, outside the US we see more traditional retail sales.
- iTunes store which is one of the most succesful online stores around…and fully integrated on the iPad, with the iBook and App Store.
These key elements make sure Apple can sell it’s iPad at a reasonable 500$ price….Maybe the overall value of the iPad is over 500$, but to be the first in the market you can set the price (especially when you have a good product – and the iPad is more than ok! I’m not saying it’s the best!). This means you can make it hard on competitors, which don’t have this vertical integration, and are teaming up with each other….but since everyone wants a piece op the pie, the price is higher. ( Motorola’s Xoom tablet is introduced at 800$ and the Samsung Galaxy Tab is 600$).
In addition I’m adding an interesting presentation of the Apple Business model, in comparison to the Amazon business model (see my Amazon.com case for more information Amazon). Although the outcome of this comparison is correct, I still feel that the Amazon business model is sufficient enough to survive the second Bubble…because of other key elements of a succesful flat business (see my page on creating a flat business).
Is your business Apple proof and ready to survive the second bubble?
Maybe you want to rethink your business model?