“The list of once-great consumer electronics companies is long,” Michael Holt writes for Morningstar. “Brand loyalty is largely dead, forcing hardware manufacturers to compete on features and price each product cycle. This makes it difficult to sustain a leadership position. Temporary advantages are easy to identify–namely the number of available applications and first-mover advantage on tablets. More relevant and meaningful to a sustainable competitive edge is how a firm applies software to establish user switching costs that will pull customers from one generation of devices to the next. The heart of Apple’s (AAPL) strategy is to create a bond with the user that transcends device cycles.”
“The heart of Apple’s strategy is to create a bond with the user that is more powerful than any given device cycle. Current momentum and execution should deliver many years of customer acquisition, but Apple is building a moat around software that locks in customers. Given the loss of visionary leader Steve Jobs and growing competition from Google, Facebook, and Microsoft, we believe Apple will not be able to sustain its leadership by delivering great design,” Holt writes. “Great design and execution enable Apple to build its customer base, but it is the firm’s software that makes it difficult for consumers to switch to another device.”
MacDailyNews Take: That an insult to Jony Ive and his team who are going to shock Holt back to reality in short order.
Holt writes, “The switching costs Apple has established to date are tied to content and not yet strong enough to ensure long-term lock-in to the Apple ecosystem. Movies, video, and books are often consumed only once. Multiuse content, such as music, is much less convenient to have split across ecosystems. Ultimately, Apple must establish stronger ties to the customer than just music. Momentum is strong, and we believe the firm is on track with iCloud and SIRI [sic] to materially raise switching costs, but a lack of progress with these initiatives would be detrimental to Apple’s long-term success.”
Full article, with bull and bear speculations and more, here.
I am not surprise by this article. Holt and all those financial analysts treat us like we are stupid or don’t have a clue. One does not have to read about the Apple bashing to see what the true agenda is, because it is everywhere. We are expected to follow and believe that buying cheaper and poorly designed copies of products is the way of life. We are supposed to buy furniture made of cheap crumbling compressed particle boards; buy cheap cars stamped with Made in America but designed poorly with cheap parts; eat fast food where calories are meaningless; sodas and snacks with no good nutritional value; and PCs with technology designed to nickel and dime us. Ever noticed the advertisements saying how new and great they are, but they don’t explain why? Ever noticed Microsoft’s and Android’s advertisements target which audience? Businesses like them are expecting the clueless to believe and follow. By the numbers, there are way more of the clueless in the world to profit from. The hard reality is, we have been exploited for generations.
Absolutely! The corporate world is so disconnected from real people that they don’t even know who we are anymore. They think we are all Homer Simpson and his family.
What a bunch of hockey puck B.S.!
What a friggin’ nitwit!!!
yes because that’s how they did it with the iPod wasn’t it.
I need to revise or at least add to my previous post.
Although I don’t see any of the competition (ie Google, MS) attract away any huge numbers of Apple users over the next 18-24mo. But I do see that it can be progressivly harder for Apple to lure away future users of Android,MS simply because these platforms will develop and be percieved “good enough” and have their own lock-in features, ie the actual and percieved cost of switching to Apple is bigger than the percieved gains from doing so.
Fortunately both Android and MS8 have a couple of thing to fix, OS continuity&truly delivered upgradeability, holistic view of user experience, hw/sw marching in sync, on-line & retail experience etc etc.
So my personal view is that this would require a mindset change before they occur.
That is unlikely to happen if you think of their current focus and modus operandi.
If your mind is focused on selling ad and help your advertisers monetize these then you will give a different user experience, much similar to attempts by cable providers attempt to force viewers to watch crap just so they can shoot ad’s at you.
If your focus is a split and clearly separated vision of “Office everywhere” and “Xbox360” and nothing in between them you will have a hard time grasping concepts such as “playfully productive” although I would truly love to see mr Balmer demo Excel from a comfy chair using a combined gesture and voice interface.
taken in proper context, Holt is correct.
No company has been able to sustain market leadership for more than a few generations — far less if a company’s innovation is easily copied. And as we all know, practically all western companies (Apple included) have been giving away technological property to pirates in China and 2nd-world manufacturing sites for a generation or more. Western car companies sat on their fat asses while Japan stole the majority market share right from under their noses, and Japan is a tiny island with resource limits. Today the aspiring Chinese and Indonesian entrepreneurs will take no prisoners. With offshoring has come western unemployment and a glut of copycat Asian products that look, but don’t function or last, like the real thing. Walmart has convinced stupid Americans that this is healthy. Got no full-time job? No matter, buy your disposable plastic junk here and save!
And of course Microsoft, the biggest tech copycat on the planet, is ready and willing to destroy perceived competition, if only they could figure out what it is. Android is already a dead technology walking, with the MS hounds close on Google’s trail. Only a matter of time before Apple, too, makes a misstep and loses a market or two.
There you go. Macroeconomically, the West has chosen to slit its own throat to save a manufacturing dollar. The buzzards are always around to pick off cheap sales. And successful companies, even Apple, trip up after complacency sets in. Let’s just hope it’s not in our lifetimes.
For the analyst to make such a stupid comment, would be equivalent to saying Apple is ditching its core concept of trying to make great products for people. If design changes are required from time to time to give the best experience to customers, then they will change designs — but not at the expense of trying to make great products of people. People have been speculating about Apple’s future for the past 30 years. Further, Apple will not pay dividends for the same reason Berkshire Hathaway does not pay dividends. If the company can create more value to shareholders by re-investing their money into building products and increase share price (hopefully), then it would be stupid to pay dividends.
This writing is an ill-informed crock of shit.
If you compare the comments on MDN to, say, those at MacRumors, I don’t know why the comments here seem more one-eyed and Mac-fan-rabid. Whilst I’ve been an Apple fan for a couple of decades, I keep my data in a format that is cross-platform. All my email is in IMAP, and all my files are cross-platform. I avoid putting photos in iPhoto format. So, in an instant, I can switch to, say, Windows 8. Not that I am, but I am not stuck with Apple.
Let’s say – and I can’t see any right now – but imagine another manufacturer suddenly came up with a string of drop-dead-gorgeous designs for their laptops and desktops. As said, I don’t know why all the other manufacturers designs look pathetic- but imagine if they did get their act together, I’d be ok with switching, if Apple continued their 4 year stunt of refusing to offer matte screens on all desktop gear and the smallest notebooks.
What I observe is another shot in an ongoing war waged against excellence by closet Luddites who crave a return to the business-as-usual market landscape of a generation ago, when market leaders were perennial, market dynamics were comprehensible, upstarts were quickly put in their place, and the past largely defined the future for lazy, puffed-up technology analysts to easily make their consensus forecasts, collect their bribe money, and go home to watch their Laverne and Shirley collection.
The guy is FOS. ITunes music is open IF the record company says it is. That is the same for all stores. Apple locks people in through amazing ease-of-use and quality. My brother just switched to Samsung. Hooked his phone up to his Windows computer and it wasn’t recognizable. Hours of finding software, downloading, finding an iTunes sync program. But he complained about MobileMe not consolidating his Outlook 2007 duplicate contacts and his gmail contacts! Plus he hates AT&T. He’s not a results-oriented individual, he is a compulsive “punisher.” He already returned one Samsung phone for another and found the whole change process Apple’s fault. These are American consumers: scatty, compulsive. You can only wish them luck.
The best, most sustainable way to “lock in” customers is to build the best products. Everything else is a gimmick.
I stick with Apple products BECAUSE THEY LACK FEATURES!!!!
What do I need with this setting and that setting and those settings and that configuration. Do you, as I still do, spend 20% to 50% of my time configuring, reconfiguring my Windows computer?
Apple gives me the features I need. No more. And configures the system for me so I can be productive.
I am always amazed when I get on my MacBook and begin “producing” things immediately instead if spending an hour updating/configuring before I start.
My 2 cents…
As long as you know your limits you will do fine. Having the luxury of being able to configure and reconfigure your computer gives you more power over your environment. I see one iPhone user, I have seen them all. No one have anything more than the next, they are all clones of one another. iPhone just got the ability to multitask, albeit Steve Jobs iteration of multitasking, where as every other device out there has been multitasking the accepted way since the beginning. Tabbed browsing has just been invented in Apple world for the iPad. How long have we all been using tabbed browsing while surfing the web?
With article’s like this one I predict the rapid decline of Morningstar. It won’t be able to sustain it’s minimal following as its readers catch on and seek better advice. Morningstar soon to be a hasbeen.