How Apple disrupted the Mobile-Phone Industry

28

September

2017

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In 2015, iPhone generated 92% of the profits made by mobile-phone manufacturers in the world (Alstyne, Parker & Choudary, 2016). Since 2007, the year that Apple’s iPhone came out, the company has been able to dominate the industry. At that time, other mobile-phone manufacturers, like Nokia, Samsung and LG, did have strategic advantages, customer loyalty and economies of scale (Alstyne, Parker & Choudary, 2016). So what enabled Apple to gain such a vast amount of market share?

According to Rogowsky (A decade of iPhone, 2017) Apple did something critical. They were able to disrupt the market by differentiating their product by creating a small computer. Since components got massively cheaper, specs of the iPhone became better and better. And even now, with every iPhone update, new and innovative technologies are implemented, usually not used before by Apple’s competitors (A decade of iPhone, 2017). Through differentiation, making the product unique and attractive to consumers, Apple has generated brand loyalty which enables them to ask a premium price for their product (Nielson, 2014).

Another way that Apple was able to gain market share when they brought the iPhone to the market was the way that they leveraged the power of platforms. Instead of a pipeline business model, Apple made use of the platform strategy. It saw the iPhone as a way to connect participants in two-sided markets in order to serve both ends of the spectrum. With more participants on each side of the platform, the value grows. The App Store is a prime example, since developers want to develop their apps for the iPhone because of the large amount of users and iPhone users appreciate the large amount of different apps that the App Store offers (Alstyne, Parker & Choudary, 2016).

By understanding the value of the network effect in their platform strategy and keeping their products differentiated and innovative, Apple has been able to keep their market share above 80% of all industry’s smartphone profits in the last three years (Jones, 2017).  But these are just two factors that could have played a role. What other factors do you think have helped create Apple’s success?

 

References:

Nielson, S. (2014). Apple’s premium pricing strategy and product differentiation. Market Realist. Retrieved from: http://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/

Jones, C. (2017). How Important Is Apple’s iPhone Market Share? Forbes. Retrieved from: https://www.forbes.com/sites/chuckjones/2017/05/29/how-important-is-apples-iphone-market-share/#2448c7719ca4

Rogowsky, M. (2017). A decade of iPhone: The Smartphone Disrupted Everything But Still Has Work To Do. Retrieved from: https://www.forbes.com/sites/markrogowsky/2017/01/09/iphone-at-10-the-smartphone-disrupted-everything-but-still-some-has-jobs-to-be-done/#5541d863ed59

Van Alstyne, M. W., Parker, G. G., & Choudary, S. P. (2016). Pipelines, platforms, and the new rules of strategy. Harvard Business Review 94(4) 54-62

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Technology of the Week – How Blockchain is Disrupting Finance

22

September

2017

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Link to the YouTube video

Blockchain is an increasingly popular topic of financial disruption. This is all for a good reason, as blockchain technology is able to significantly improve financial processes. One of the areas where blockchain already has a disrupting role is in the remittance industry, which focuses on peer to peer cross-border payments. But first, what actually is this phenomenon called blockchain?

A blockchain is a distributed ledger of transactions. The ledger is distributed decentrally across a network of thousands of independent computers, which means that anyone with internet access can view transaction history, creating safety, and ensuring that no one hacker can edit the ledger. As transactions can be processed digitally instead of having to go through banks and other institutions, transaction costs can be significantly decreased.

So, how is this technology applicable to the area of remittance payments?

The remittance industry is the industry where companies facilitate cross-border payments and it has gone largely unchanged for the past two decades. Whenever a person wants make an international money transfer to another person, the money passes through a bank. This bank, acting as a middle-man, needs to verify, record and send the payment to the next institution, which drives up the cost of the transaction. Public blockchain, in the form of Bitcoin or Ethereum, removes this middle-man and allows safe, transparent, rapid and significantly cheaper direct peer-to-peer transactions.

And how exactly is this disrupting the remittance industry, you ask? Let us explain.

Blockchain is disrupting the remittance industry, because the remittance industry is a newly vulnerable market in finance as it is (1) easy to enter, (2) attractive to attack and (3) difficult to defend:

(1) The market is easy to enter because blockchain networks only require an internet connection and thus are easily accessible. In addition, the trends of global digitalization, improved internet penetration have made it easier for individuals to connect with others all over the world. And last but not least the changes in regulations are favourably, since countries as Japan, Australia and the Philippines already legalized Bitcoin for remittance payments and more countries will likely follow soon (Business Insider, 2015).

(2) The remittance market is driven by volume of remittances and fee per transaction, naturally making some countries more profitable than others. The market is attractive to attack because incoming players can choose in which countries they want to operate, while traditional players are active in all high-profit and low-profit countries.

(3) The market is difficult to defend because it is price sensitive, so the companies with the lowest prices are well positioned. Blockchain start-ups can offer lower prices compared to traditional players as they have asset-heavy operating models with high costs due to having to cover costs of physical stores and employees.

This is just a small part of the possibilities that blockchain offers. So, how do you think blockchain will contribute to the future of financial world even more?

 

References:

Buenaventura, L. 2016. There’s a $500 billion remittance market, and Bitcoin startups want in on it. [online]. Available at: https://qz.com/775159/theres-a-500-billion-remittance-market-and-bitcoin-startups-want-in-on-it/

Business Insider (2015). The global remittance industry is huge, and digital-first startups are taking advantage. [online]. Available at: http://www.businessinsider.com/the-top-global-markets-for-sending-and-receiving-remittances-2015-7?international=true&r=US&IR=T

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Artificial Intelligence in Online Marketing: Are algorithms deciding what you are going to buy?

15

September

2017

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Artificial intelligence is changing a lot of industries, including online marketing. Companies are continuously using algorithms to tailor the online experience of customers to make more people buy more. The more you know about who your potential customers are and what makes them buy your product, the more you can adjust your advertising and online presence to make customers buy your products.

Google AdWords is an online bidding platform where you put up a bid for your ads to show up on the google search results pages when people are searching the search engine for specific queries. You can adjust your bid to make your ads show up for people of a specific age, from a specific city or you can make your ads appear higher up in the results, for example, in the morning or late at night. With artificial intelligence, the algorithm can adjust these bids for you. By testing different adjustments and analyzing which groups of people click on your ads, the algorithm learns who, where, and when your ads should pop up on the google search results to increase conversion.

These techniques are not just being done in Google’s search results. Websites are also continuously testing their pages to see which changes lead to a higher revenue. Artificial intelligence can be used to test which headlines or header images on the homepages should be shown to what target audience to get the best results (Schober, 2017) .

But what are the consequences of this for the consumer? We should be aware that our data is being captured continuously while you are shopping online and that companies are constantly adjusting their website or advertising to increase the chances of you buying their products. So next time you are online shipping, ask yourself if you really need that pair of shoes or is the algorithm forcing you to add them to your shopping cart?

Sources:
The Impact of Artificial Intelligence on Online Marketing – AI marketing will open doors which seem closed today. Schober, M. (2017). Retrieved from: https://medium.com/@mariusschober/the-impact-of-artificial-intelligence-on-online-marketing-8f2ba4fcf0bb
Adspert is an example of an online automated bidding tool: https://www.adspert.net/en/search/
Adobe Target is an example of a platform for personalized A/B testing: http://www.adobe.com/marketing-cloud/target/ab-testing.html

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