Has Apple Bitten Off More Than It Can Chew?

Has Apple Bitten Off More Than It Can Chew?

The 10th September 2019 Apple Conference in California marked the launch of the much-anticipated iPhone 11 range, which included the iPhone 11 Pro and the unimaginatively named iPhone 11 Pro Max. Despite other products also being unveiled at the event, including the Apple Watch Series 5 and the new iteration of the iPad, the brand-new iPhone was most definitely the main attraction.

The smartphone market has been volatile during the last ten years, characterised by the ‘Patent Wars’ which were at their height towards the beginning of the decade. Just ten years ago, Nokia had a market share of 38% – more than the combined share of the three next-largest companies. Fast-forward to 2019, and Nokia has a 1% global market share, which demonstrates that you must continue to innovate whilst at the top of the tree. After recently being overtaken by Huawei as the second-largest smartphone maker by market share and quarterly shipments (both Huawei and Apple lag behind Samsung in this regard), the pressure was on Apple to deliver a “show-stopping” product that would blow its rivals’ offerings out of the water. The result was something different altogether – a sleek range of phones, but ultimately limited improvement upon the iPhone XS and the flagship smartphones of competitors, such as Huawei’s P30 Pro and Samsung’s Note 10+.

Over the last 15 years in particular, Apple have treated us to a plethora of products that have completely redefined the technological landscape we are living in – in particular, the first editions of the iPhone, iPad, and Apple Watch, along with the virtual assistant, Siri. Since then, some feel that the company has regressed, going from trailblazers to followers – an example people have pointed out is Samsung and Huawei’s plan to release a foldable smartphone before the end of 2019, whereas Apple has no plans to release such a device until 2021.

However, although Apple is a tech company, it is also a lifestyle brand. It has done a marvellous job of ensuring continued brand loyalty by elevating its user experience to new heights. The integration between the iPhone, Mac and Apple Watch has been a stroke of genius, as there are a multitude of features that having multiple Apple products can unlock – an example is unlocking your Mac through the Apple Watch – perhaps not a mind-blowing feature, but Apple products have so many of these. The creation of real-time connectivity and synchronicity between products including hardware devices and software (iOS and iCloud) cultivates brand loyalty, intertwining the Company’s products to such a degree that each becomes indispensable, and allowing Apple to focus its marketing on attracting new customers as opposed to keeping current ones.

Another unique facet of Apple’s brand approach is the exclusivity it seeks to maintain. Whilst Samsung and Huawei do battle in the budget smartphone market (which goes some way to explaining why they are the two largest smartphone makers), Apple prefers to operate in the upper echelons of the market – its partnership with luxury fashion company Hermès only seeks to reinforce this point. Other than a brief foray into the ‘budget’ smartphone market with the release of the iPhone 5c in 2013 (which retailed at £469), Apple prefers to reduce the price of its older models, allowing it to get rid of stock, but also maintain a ‘premium’ brand feel which so many companies seek but very few ever attain.

One thing is clear: Apple has set such high standards over the past 15 years that it has become a victim of its own success. Whilst it may be true that it has been a few years since Apple has released a product that has revolutionised the world of technology, it has expertly used marketing and brand techniques to ensure that this lull has not had an impact upon its profit margins (Apple made a profit of $59.5 billion in 2018). Given its track record, we should be confident that the technology behemoth will release yet another ground-breaking product in the near-future. Although Huawei is growing rapidly, with revenue growth of 39% in Q1 of 2019 compared to the same period the previous year, predictions of a ‘changing of the guard’ are somewhat premature. In 2018, Apple achieved revenues of $256.6 billion, comfortably more than Samsung and over double that of Huawei. Although its rivals are in hot pursuit, Apple remains the top dog – for now at least.

 

Author: Emre Turan, Analyst

Email: Emre@metispartners.com

Tel: +44 (0)141 353 3011

 

Image credit: Reuters

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