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Apple’s Strategy

January 23rd, 2005 · No Comments

The Economist writes on Apple’s mass-market strategy with its iPod Shuffle and Mac mini:

It also makes perfect sense, says Steven Milunovich at Merrill Lynch, an investment bank, as long as one realises that the iPod is the tail wagging the dog, the dog being Apples computer business. Even though the iPod now outsells Apples computers by volume, most of the firm’s revenues still come from the computersthe iMac desktop, the iBook laptop and the high-end Power Mac and PowerBook. So Mr Jobs still needs to fix Apples longstanding problem in its core business, which is that its global market share in computers seems stuck at about 3%. Using the iPods halo effect to convert mainstream (ie, Microsoft Windows) computer users, thinks Mr Milunovich, is the way to do it.

Which is why Mr Jobs, to gasps in the audience (even though the news had already leaked out), also announced his most radical product, the Mac mini. Named to remind people of the iPod mini, this is a fully-fledged but tiny computerit almost fit into Mr Jobss palm. The twist, in Mr Jobss words, is that it is BYODKM, or bring your own display, keyboard and mouse: buyers are expected to plug in whatever monitors and peripherals they have already. Leaving out these bits reduces the price to $499, or $599 for a more powerful model. This is about $800 less than the flagship iMac, making the Mac mini Apples first truly low-cost computer, so that people who are thinking of switching [from a Windows machine] will have no excuse, says Mr Jobs.

Cutting the price tag of the new box by leaving out the peripherals rather than by stripping down its functionality is a shrewd way of minimising two risks. It is unlikely to cannibalise sales and profit margins of Apples more expensive models; and it is likely to snap many Windows users out of their inertia and into making the switch. As more of them do, Mr Jobs reckons, the converts will tell other Windows users how safe Macs are (compared to Microsofts buggy, virus-prone software) and how user-friendly (just try networking several Macs together, compared to several Windows machines).

Thus, Mr Jobs hopes, Apples growing but seamlessly integrated range of products, from entry-level stuff for kids to pricey boxes for professional designers or musicians, should make Apple the most revered brand in the digital home and in consumer electronics.

Tags: Management

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