It Might Be The Right Time For Apple To Change Its Business Model

Karamchand Rameshwar - Mar 21, 2019

At some point, Apple won't have room to grow.

Back in the booming period of the iPhone era, Apple has always applied the business strategy of its co-founder and former CEO Steve Jobs. It is always keeping the hardware price high, but keeping service and software prices as low as possible.

That strategy helped boost Apple's revenue and profit to a record. However, the market for its devices is already saturated, causing iPhone sales to stall and make Apple's revenue decline.

According to Ewan Spence, a Forbes’ expert on the field, Steve Jobs' divine business strategy has a flaw as at some point, Apple business won't have room to grow. So it's time for CEO Tim Cook to correct the mistake and find a new business model for Apple.

Ewan Spence believes that Steve Jobs' business strategy cannot be applied at the moment. The evidence is that Apple has no consistency in keeping the price of its products at the same level.

Apple had to reduce the price of iPhone XR in China (not just once) to attract consumers. Meanwhile, Apple raised the average selling price of the iPhone in India, by eliminating low-cost iPhones from the market.

In Europe and the US, Apple also cut the price of its 2018 iPhones, by adding value to old devices in the trade-in program and extending the duration of the program.

Keeping the selling price of equipment higher than the market average is an increasingly tricky strategy. Because the market will not have room for you to grow anymore, and maintaining high prices seems to narrow your chances to sell more devices.

It's time for Apple to change, not to follow Steve Jobs's business strategy. And last year, CEO Tim Cook confirmed that Apple's future would be a service company. The goal that he set is that the service business will double, from $41 billion in 2016 to $82 billion in 2020.

But the problem of software and service business is that you need to have a large user base. That's why Google offers its Android operating system for free as they want to have a huge Android smartphone user base to develop services like Gmail or Google Maps.

“Cook’s Apple wants to have a profitable software and services arm. It also wants to keep the prices high on the hardware that are needed to access these services. I don’t believe that it can manage both. So which will it be? ”, said Ewan Spence.