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Businesses Apple

Apple's Secret Weapon To Influence Industry Pricing 407

Posted by timothy
from the but-that's-no-fair dept.
Hugh Pickens writes "Nick Wingfield writes in the NY Times that Apple's present pricing strategy is a big change from the 1990s, when consumers regarded Apple as a producer of overpriced tech baubles, unable to compete effectively with its Macintosh family of computers against the far cheaper Windows PCs. Now within the premium product categories where Apple is most at home, comparable devices often do no better than match or slightly undercut Apple's prices. 'They're not cheap, but I don't think they're viewed as high-priced anymore,' says Stewart Alsop. Winfield writes that Apple uses its growing manufacturing scale and logistics prowess to deliver Apple products at far more aggressive prices, which in turn gives it more power to influence pricing industrywide, and one of Apple's pricing secrets has been it's willingness to tap into its huge war chest — $82 billion in cash and marketable securities last quarter — to take big gambles by locking up supplies of parts for years."
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Apple's Secret Weapon To Influence Industry Pricing

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  • by Rockoon (1252108) on Saturday November 05, 2011 @07:37AM (#37957018)
    There is also the theory that 7" is a better size than 9.5" for this market. Beyond a certain size bigger is certainly better, but I dont think this market is in that zone. People want something that they can hold comfortably in one hand for a long period of time.
  • Gambling (Score:5, Insightful)

    by whisper_jeff (680366) on Saturday November 05, 2011 @07:50AM (#37957076)
    People who view Apple's decisions as "big gambles" simply are not giving Apple the credit they deserve. Quite frankly, Apple hasn't gambled in quite a while - they are making very smart, very well thought out decisions and they are executing those decisions with skill and refinement. That isn't a gamble.

    Regardless of what you think of Apple - love 'em or hate 'em - it's simply inaccurate to describe their moves as "big gambles". They are making bold business decisions.

    Now, admittedly, that doesn't sound impressive but it actually is - too few companies are able to come up with a well thought out plan and to boldly follow it, sadly...
  • by jimicus (737525) on Saturday November 05, 2011 @07:55AM (#37957106)

    There is also the theory that 7" is a better size than 9.5" for this market.

    Call me cynical but that sounds like a theory borne out of sour grapes to me.

  • by Joe Jay Bee (1151309) <jbsouthsea.gmail@com> on Saturday November 05, 2011 @07:59AM (#37957132)

    I'd say that there are good reasons for the iMac to be a bit more expensive. You pay a premium on the iMac for the all-in-one enclosure, the form factor, the custom parts, the proprietary OS... if you were to try and custom-build a PC with the same form factor as an iMac, as well as various things like having an HD webcam built into the monitor, the touch-sensitive mouse, the aluminium keyboard etc it would most likely cost you more. My home-build PC cost me about a third less than the equivalent/worse-specced iMac (including an OEM copy of Windows 7, admittedly, which put the price up a little) but I'm not stupid enough to pretend it's entirely equivalent. Certainly it's bigger, looked a lot less polished and of course I had to build it, whereas the Mac comes as a complete package. That's another thing - you also tend to pay for convenience. Dell charge more for a PC than you would sourcing the components too. But at the same time, they build and support it for you. If my homebuild explodes one day I don't have someone I can shout at down the phone to fix it. Dell and Apple do that.

    Of course there's no denying that at least some of the price is due to Apple wishing to position themselves as a "luxury" brand. I'm not going to defend that but I can understand that. They want to be a premium product so they charge a premium price. Personally, although I'm not a Mac user (but have been in the past, and would be again... if I could afford an iMac ;)) I'd feel the price is worth it, but that's just me.

  • by tebee (1280900) on Saturday November 05, 2011 @08:04AM (#37957162)

    Yes having little variation in the range results in economies for the manufacturer, but the "one size fits all" approach combined with Apple's resistance to letting the people who buy their stuff do any changes to it means that very few people are perfectly served by the model range . The more choices you have in choosing a device and what you run on it the more like is the result you end up with something that severs your needs, rather that the needs the manufacturer feels you should have.

  • by sqldr (838964) on Saturday November 05, 2011 @08:27AM (#37957304)

    It scares me. One thing going through my head is if the microsoft secureboot lookout thing happens, rather than paying the microsoft tax to get a linux laptop, I fear I may one day have to pay the apple tax, which is a lot more and I've been saying apple are worse than microsoft since itunes.

  • by errandum (2014454) on Saturday November 05, 2011 @08:40AM (#37957388)

    For casual computing, and I mean real casual computing (check your e-mail, browse and maybe reading a book/watching movies), tablets are ideal. Even if you coach something, imagine instead of taking all your student files, the planning and even having the ability to take notes on a single device (instead of a file that weights 3x more).

    There is a market for tablets, some might even say it is the real personal computer for people that don't like computers (I don't agree with them, but I see the point).

  • by Eponymous Coward (6097) on Saturday November 05, 2011 @09:01AM (#37957518)

    Wow, rarely has there been a post that I disagree with more.

    Right now, the tablet market is iPad and people who have them, mostly love them. The iPad is wreaking havoc on the low end PC market and they are still selling more iPads quarter after quarter. Apple is rumored to be dumping part of their desktop line up. There's no indication that the tablet line up is going anywhere.

    after you buy one and try to use it you find that you're better off using your smart phone or your netbook

    If this were true, I think you would be seeing a resurgence in netbook sales. The reality is that sales are way down and are stagnant. I think a lot of Slashdotters are really out of touch with how normal people use computers.

    There are many other tablets out there that are technically equivalent or superior to Apple's tablets, but nobody wants to use them

    Technically equivalent or superior? You must be measuring by clock cycle or memory size. I don't know of any tablet that even comes close to the iPad in areas that matter like build quality, battery life, and software. Apple has figured out that saying no to a feature is a bolder move than adding yet another switch or option and their product is subjectively better for it.

    Contrast this to the uptake of useful devices like PCs, laptops, netbooks, PDAs and smart phones. People actually wanted to use these ... these devices have had staying power

    How's that PDA working for you? Netbook sales are way down from their peak and not recovering. And who wants to use their PC? That's their work machine. The iPad is their play machine.

    Talk to people who compete in the low end PC market. The iPad has them terrified. It's a huge part of what spurred Apotheker to conclude that the PC business is dead. And have you seen Windows 8? That has me thinking that Microsoft is also turning away from the desktop market. It almost seems like they are splitting Windows into server and tablet versions.

  • by Arlet (29997) on Saturday November 05, 2011 @09:11AM (#37957588)

    They only off-shored because it was cheaper, and it was cheaper because American workers were not competitive enough.

  • by BasilBrush (643681) on Saturday November 05, 2011 @09:36AM (#37957744)

    There is also the theory that 7" is a better size than 9.5" for this market. Beyond a certain size bigger is certainly better, but I dont think this market is in that zone. People want something that they can hold comfortably in one hand for a long period of time.

    Smartphones already fill the "comfortable to hold in one hand for a long period of time" market. Tablets are a different market. A 7" is a compromise between tablet and phone, not being ideal for either.

  • by Space cowboy (13680) on Saturday November 05, 2011 @09:51AM (#37957868) Journal

    "some offices in Cupertino and pimply teenagers at Apple stores", huh?

    Apple employ ~60,000 people now [cnn.com], with very very few (if any) of those being in China...

    It's not Apple's job to make your country a better place or more biased towards manufacture than design, that's your governments job. Unfortunately your government prefers to play with its dangerous toys, declare war left, right, and centre, try to make its rich richer at the expense of everyone else, ignore the healthcare requirements of its populace (seriously? No single-payer system in this day and age?), destroy human rights in the name of 'the war on terror', and generally have its two parties more involved with acting like dicks to each other than actually, you know, running the country.

    When you can vote the government in and out of office, you get the government you deserve. I can only assume a majority of Americans are seriously screwed up. Or masochists. Or something!

    Simon

  • by flooey (695860) on Saturday November 05, 2011 @10:05AM (#37957994)

    Also there is no need to follow the specs exactly.

    Sure there is, if you're saying that buying a computer from Apple is more expensive than buying the equivalent computer from someone else or building it yourself. Nobody disputes that you can buy a computer with worse parts than a Mac for much cheaper than a Mac. Similarly, nobody disputes that the high quality parts are superfluous for some (possibly large) segment of the population, so you can make some substitutions of worse parts without affecting the value to that consumer. The question is whether a computer with the same specs built by Apple is more expensive than one obtained some other way.

  • by BasilBrush (643681) on Saturday November 05, 2011 @10:10AM (#37958036)

    Yet you don't find the lack of capital letters at the beginning of sentences to be a problem. If you're going to be a grammar nazi, it's probably a good idea to use correct grammar yourself.

  • Secret weapon? (Score:5, Insightful)

    by hey! (33014) on Saturday November 05, 2011 @10:11AM (#37958048) Homepage Journal

    So their 'secret weapon' is that they think ahead, price aggressively in shrewdly chosen market segments, and take carefully measured strategic risks with their resources?

    Does it strike anyone as ironic that it's so unusual for a company to act the way a capitalist company is *supposed* to act that it's called a 'secret weapon'?

  • by DJRumpy (1345787) on Saturday November 05, 2011 @11:02AM (#37958384)

    Wow, that comment took me by surprise, but I can't think of a more true statement. I suspect that's why they just don't understand Apple's success. The goto Geek was THE person to talk to about any PC purchase, and now they are the ones out of touch with the mainstream. That's not to say they don't know what's what in the tech world, but they simply don't seem to understand what drives today's computing generation. Even 10 years ago there was still an element of garage tech to PC's. They were mysterious to the general population, hard to learn to the laymen, and generally frightened the old folk.

    Now the Geek factor isn't relevant, no one cares about Ghz, spindle speed, bus speed, etc. Unless somehow has a specific niche they need to fill, they typically can just buy what they want without the need to consult with their friendly PC geek. I have to wonder if the advent of these closed boxes (read: not upgradable) like laptop's, Mini's, smart phones, etc, have removed the need to know a geek to get your video card upgraded. No one does that anymore except for those that insist on using a desktop, and lets face it. Desktop's just aren't that mobile.

    I also find the comments about 'seeing them everywhere' and arguments to the contrary a bit humorous. 100+ million sold. They are now impacting the netbook, Laptop, Low end Desktop PC, and gaming market and people are still calling them a fad. They have been selling like gang busters for 2 years straight, with no slowdown in sight and they are still a 'fad'. The disconnect here would be scary if it wasn't so funny.

  • by thesandtiger (819476) on Saturday November 05, 2011 @12:00PM (#37958906)

    The strategy is pretty sound if you make a few assumptions:

    - Most manufacturers of components want Apple's business because they know it's *safe* and reasonably profitable

    - Most manufacturers of these kinds of components are willing to share with Apple (and their other big customers) what kinds of things are coming down the pipeline in the next 1-2-3 years

    - There won't be something that appears out of nowhere that's mindbogglingly amazing and ready to be manufactured without at least some advance notice.

    - Apple has enough cash on hand, brand cachet, and momentum that if they were to release something that was "good but not insanely great" they could survive it relatively unscathed (as long as they didn't keep doing that) because people would still buy it.

    These assumptions seem pretty reasonable to me. The Apple strategy also protects them against things like the quake + tsunami in Japan, the flooding of Thailand, and other issues that will come up and force competitors to raise prices.

  • by jedidiah (1196) on Saturday November 05, 2011 @01:26PM (#37959582) Homepage

    That's just someone's dressed up attempts at advocating Marxist wealth redistribution.

    "Too much choice" happens. It happens naturally because people are free to do what they want.

    They are free to enter the market and make what they want and sell it to whomever is willing to buy.

    On a level playing field, even niche players can continue to thrive despite the likes of Kraft and Apple dominating the market.

"Lead us in a few words of silent prayer." -- Bill Peterson, former Houston Oiler football coach

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