Apple’s Core

What’s at the heart of Apple’s success?

Many look at Apple and see a business that makes appealing, convenient consumer electronics. (Others see an information Hegemon bent on destroying individual liberty, but that’s another story.) But consumers are notoriously fickle and faddish about their gadgets. How does a gizmo company become the one of the largest corporations in the world in less than a decade, eclipsing oil giants and industrial powerhouses that took centuries to achieve their status?

Part of Apple’s success comes from unbundling prices. For years record companies included lousy songs along with hits on an album, forcing you to pay higher prices overall. By selling you single songs for a reasonable price Apple broke the pricing model that the recording industry had been using for 30 years, unleashing consumers from a practice that kept prices too high and encouraged piracy. In doing so, they profited as they unleashed a torrent of consumer demand.

Are there other services that bundle prices? Cable comes to mind. The cable companies charge $100 / month for 250 channels, when most people really only want a dozen or so. But like the old record companies, the cable companies seek to maintain their pricing model because it allows them to retain their profitability. But the times, they are a-changin’.

Video can be streamed quite easily via current technology, and if people can untether themselves from lousy cable-TV packages that tie them to 200 or so channels they never watch, watch them run. Apple TV through the iTunes Store has the potential to tap into another well of consumer frustration. My only question is what will Apple do with all the money they might make?

By | 2012-05-16T06:29:46+00:00 May 16th, 2012|Global Market Update, New Markets|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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