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Apple and the three bears; or, why great can beat cheap or free

Apple, in the minds of some media outlets and market makers, is perpetually failing. The latest big thing is always the last, the newest competitor is always the killer, and no matter what Apple does, they won’t be able to sustain their current advantages. They’re predestined to doom. Yet, to date, since the turn-around begun by Steve Jobs’ return, Apple has vexingly failed to fail. John Gruber deftly points out the reason for this, one the three different types of Apple bears he defines keep missing: Design quality and customer delight are sustainable advantages. From Daring Fireball:

So the irony here is that iOS vs. Android (or, if you prefer, iPhone and iPad vs. commodity smartphones and tablets) is in fact a replay Mac vs. Windows — but not in the way that most who make the comparison would have you believe. Judging by its actions, Apple is keenly aware of the lessons to be learned from 20 years ago. To wit, this has nothing to do with focusing on raw market share, and everything to do with keeping the pedal to the metal on design and quality. If Apple maintains a lead over its rivals in those regards, the Mac suggests that Apple can occupy a dominant, stable, long-term position as the profit leader in the mobile market as well — a market that is already bigger than the PC market ever was, and unlike the PC market, is still growing.

How many commodity electronics vendors, the ones who dumped VHS players in the 80s, are still vibrant today? How many computer makers, the ones who dumped netbooks in the 00s, are still growing right now? If you compete on price, your customer’s loyalty is to price, and they’ll go wherever the lowest price goes. If you compete on quality – real quality – your customer’s loyalty is to quality, and they’ll likewise go wherever the best experience takes them.

The big difference is that it’s a hell of a lot easier to slash prices and undercut competitors than it is to make the best products in the business and outclass competitors. That’s why it’s also easier to lose customers for whom low price is the most important feature, than it is to win customers for whom quality is the most important feature.

Any company in consumer electronics can quickly make the next cheapest phone. No other company on earth right now could make an iPhone without tremendous time and effort. That’s a pretty great competitive position for Apple to be in.

(I kinda went off the rails here; read Gruber’s piece for some terrific analysis of the three main bear positions on Apple.)

Source: Daring Fireball