Wednesday, 21 October 2009

Apple, Nokia and CNN

No, they have nothing in common.

Apple announced its sterling results recently. And Richard Quest on CNN was analysing last evening the same with the help of some tech correspondent in the US and UK.

Apple makes cool products.
Nokia stumbled in looking for volume market share- and has so badly lost its 'cool factor'.
And CNN, business report on these two companies was so pathetic, it made me angry.

Our strategy thumb rule states that no company has cconsistently gained volume market share and maintained premium pricing (high margins) at the same time. Period. It has never happened.

Mass markets and premium products require very very different execution skills. They cannot remain in the same company.

Lexus and Toyota is a striking example of how to make it work.

In 2007, we mentioned that Nokia was possibly making a very big mistake is running after market share numbers. Sure, in the short run "analysts" reward companies for their sales. More sales means more revenues. But that is short term.

A technology company with high margins needs high innovation and investment in technology. When it gets distracted with mass market products, its capacity to dedicate resources (money and people) to technological advances reduces.

Sony Ericsson, in the meanwhile has simply gone the other way and now focuses on VALUE market share. We believe they will benefit in terms of bottom line as well as strengthening of the brand.

Apple keeps making sexy products and charging sexy money. What i find interesting about Apple is that they don't produce anything for the mass market. As the technology becomes out-dated, they simply drop the price to allow more people to enter their product categories. This is interesting. Designing and selling "cheap products" is a costly proposition. Selling cheap older technology is a great way to bring in new consumers.

And CNN got all of this wrong. The tech correspondent from California says " Apple is able to read the consumers needs of tomorrow and make products around that". !!!! What????

Their UK correspondent says " Apple makes great products, but i don't expect them to challenge Nokia's market share for a long time." Wow! He still does not get it. The day Apple starts to chase global market share folks, sell its stock.

All Apple does is use technology to create easy user interfaces. Lets not make soothsayers out of them. They simply listen to their consumers and enhance user experience.

Strategy is about choices. The first one to make is, who is my consumer?

If we start out to satisfy everyone, sooner or later we will satisfy no-one.

Venkat, Ritu