Quoting from an article in Wired: “Apple is the most vertically integrated company in the world. In addition to operating its own retail chains, all Apple hardware and software are designed in-house, and Apple also runs its own digital content store, iTunes.”
Reading this got me thinking how Apple transformed from an also-ran to becoming the most valuable tech company in the world. After thinking it through, I believe the genius of Apple as a company lies in this: it is extremely adept at creating virtuous cycles. Take the Ipad for example. With the Apple Store retail system in place (meaning no cuts from 3rd party retailers), pricing the Ipad at 500 USD becomes feasible for Apple. Because the price is low given the quality of the product, consumer acceptance is very high. With this in place, software developers see a huge market for their applications. Hence, the Ipad app market grows. It becomes even more attractive to get an Ipad because of the growing number of apps. Apple takes a cut for every app sold. With greater economies of scale, Apple can hence optimize Ipad production. Profits increase. They invest in the improvement of the consumer experience. Consumers take to Apple products even more. Their products edge closer to ubiquity. And the virtuous cycle goes on.
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