Just on September 10th (Apple, 2019), an Apple special event took place. From what they announced, Apple users probably wouldn’t be too surprised: It’s yet another sleek and fancy tech gadget. But, is that really what it is?
Actually, no, it does have a more serious underlying strategic decision. Let us rewind back to March 25th (Apple, 2019), when Tim cook unprecedentedly did not announce any new physical products; instead, he unveiled a suite of services, including video streaming (Apple TV+), news (Apple News+), games (Apple Arcade), and even a credit card (Apple Card). So, what is Apple trying to accomplish? Or, put it another way, what problem does Apple currently face? A simple situation assessment is as follows,
- Sales Bottleneck: Apple’s first earnings report of 2019 doesn’t look so good, with iPhone revenue dropping 15% year-over-year, from Q1 2018 $61.1 billion to Q1 2019 $52 billion (Matney, 2019). Hence, the outlook isn’t too rosy as the gadget maker sees a major year-over-year decline in its cash cow iPhone business.
- Competitive advantage: Every cloud has, at least, one silver lining. One is that the company saw the gross margins of its “Services” business, operating at 62.8 percent. The other one is that the global install base of iPhone continues to grow and has reached an all-time-high at the end of December, 2018, surpassing 900 million devices, according to CFO Luca Maestri.
The potential solution might be that, combining Apple’s 900m+ iPhones worldwide with Apple’s integrated service platform, Apple’s logical next step is to create an even stronger network, luring the already massive user base into its ever more appealing universe of services customized to every user need (The Economist, 2019). As the article “Thriving in an increasingly digital ecosystem (Weill and Woerner, 2015)” suggests, an ecosystem driver (Apple Inc.) aspires to own the customer relationships, while at the same time, standing not on the single spot of the value chain, but across the whole value chain.
Bibliography
Apple. (2019). Apple Events – Keynote September 2019. [online] Available at: https://www.apple.com/apple-events/september-2019/ [Accessed 15 Sep. 2019].
Apple. (2019). Watch the Apple Special Event. [online] Available at: https://www.apple.com/apple-events/march-2019/ [Accessed 15 Sep. 2019].
Matney, L. (2019). Apple’s Q1 revenue declines with iPhone sales down 15% – TechCrunch. [online] TechCrunch. Available at: https://techcrunch.com/2019/01/29/apple-posts-q1-revenue-decline-with-iphone-sales-down-15-percent/ [Accessed 15 Sep. 2019].
The Economist. (2019). With iPhone sales slowing, Apple bets on video, gaming, news and a credit card. [online] Available at: https://www.economist.com/business/2019/03/26/with-iphone-sales-slowing-apple-bets-on-video-gaming-news-and-a-credit-card [Accessed 15 Sep. 2019].
Weill, P. and Woerner, S. (2015). Thriving in an Increasingly Digital Ecosystem. MIT Sloan Management Review, p.2.
