Apple’s competition is really Apple
IT may have passed you by but the best economist you’ve never heard of, Ronald Coase, passed away last week. One of the reasons he was so highly regarded within the profession was that he brought out into the open things that no one had seen before: but which once they were out in the open became immediately obvious. And it’s this that leads to the observation that Apple’s biggest competitor is really Apple itself.
Had I had room, I would have quoted a question that my former University of Rochester colleague, Ron Schmidt, a master teacher, posed in about 1976 and that I got the wrong answer to. The question: “What is General Motors’s biggest competitor?” [Remember that this was before the Japanese producers were a large part of the market.] My (wrong) answer: “Ford.” Ron Schmidt’s answer: “The used car market.”
We tend to think 0f Apple’s competitors being Samsung, Nokia, HTC and so on. But that’s not really true in the smartphone market at present. Smartphones have only been around for 6 or so years and they have developed a bit. Better cameras, faster processors, more memory, that sort of thing. But a 5 year old smartphone still works, still does most of the things that anyone wants one to do. As such, the real competitor to Apple is not all of those other companies: it’s all those phones already out there in the second hand market.
And it’s most definitely that which drives them forward in introducing new technology into the phones they’re making now. Sure, there’s a hefty number of people who will buy an Apple no matter what. But in order to get them buying the new ones rather than second hand ones you’ve got to keep driving up the standards and specs of the new ones.