Imagine sitting on your own private jet – you’re high up in the clear sky, no clouds, things are clam and you’ve been given a flute of champagne to sip on. Then you look out the window, towards the land – and you see flames. Other planes burning up and some colliding in to each other. The land filled with chaos and you can only imagine people screaming their heads off.
But you don’t care – you’re mile above that problem and enjoying life.
The the above scenario is where Apple is at given the current worldwide economic crisis
You see, despite the thinking of cheap US$800 laptops that companies like DELL, Toshiba, Acer, Asus and others are churning out – that’s just not Apple’s style.
Sure we would all love cheap laptops, but we would look just like anyone else. Apple have a premium brand, with premium products and therefore premium prices to match. During their recent launch of new laptops, Apple announced prices from US$999 up to US$2499. So the question is – if you like a good premium product – would you pay an extra $199? (Agree that some specs may differ)
People are willing to pay extra for that premium feel and ‘oh-so-awesome-one-click-mouse’. No doubt Apple has grown tremendously and maintained that reputation over the past few years – and Steve Jobs has done a hell of a job to keep his plane cruising at that altitude.
So why isn’t Apple down with the mess that the others guys are in?
You have companies below competing, trying to save costs, laying off staff, whipping sales people to make more cash and that just isn’t how Apple sees it. Yes, no doubt Apple’s margins will be a little lower and growth won’t be as before – but Apple’s sells to a market that is not a price-sensitive one and will not compromise on premium quality goods. Hence Apple doesn’t bring its price down nor sacrifices it’s brand.
You take the same case for car manufacturers – just because the current crisis affects people’s spending, we don’t see BMW or Mercedes bring down their sedan prices to match Toyota’s Camry?
It’s an economic dip that will affect BMW’s margins, but that’s reality. Like every other car manufacturer, they will take a hit. But when we all do recover from the economic issues, BMW will still maintain it’s reputation for a company producing quality cars.
Here is a quick Apple health check – the company has $20 billion in cash, no debts and the highest margin and growth rate it in the industry. If you see Apple’s stock price going down, it’s not because the company is in trouble – it’s because everyone else in the same industry will dip, and Apple economically follows suit.
Sources:
http://www.alleyinsider.com/2008/10/apple-won-t-get-crushed-by-the-recession
http://www.nytimes.com/2008/10/19/business/19digi.html
I recently read an article on ZDNet’s blog – http://blogs.zdnet.com/BTL/?p=10403
It talks about Gartner’s worst case for 2009 IT Budget and why it isn’t so bad given the current financial issues worldwide.
Towards the end of the article, there are 10 points about managing through an economic crisis… hmm somehow, I feel those points are all related to layoffs. Here goes:
1] Reduce headcount or freeze hiring
Freeze hiring, means anyone who leaves does not get replaced, and therefore more stress for other staff who eventually leave. And Reduce headcount, well that just means layoffs.
2] Renegotiate with technology and service providers
This would force your vendors to execute layoff to reduce their costs and still make profits from you.
3] Curtail data center expansion, virtualize assets and lease them back
i.e. consolidate your data center and layoff of your extra data center employees!
4] Consolidate systems
Now you can layoff of non-data centre employees!
5] Outsource commodity
Take it to India and get rid of your office staff.
6] Offshore outsource
Take everything overseas including your receptionist.
7] Investment shutdown
Can’t afford to pay your staff or support new projects? Layoff!
8] Prioritize projects
Do only the ones that make the most profit – cut the rest, including innovation!
9] Mothball businesses and projects
I guess, this is the MBA terminology to the above point
10] Change leadership and restructure IT teams
Take them all for a trip to the Hunter Valley, have a secret meeting with 2 cases of wine and who ever wasn’t invited to that “secret” meeting gets laid off.