Wednesday, July 06, 2011
How Apple Computer uses its massive cash hoard to strategic advantage. If the words "supply chain" don't cause your eyes to roll back in to your skull, well worth reading.
"What Apple does is use its cash hoard to pay for the construction cost (or a significant fraction of it) of the factory in exchange for exclusive rights to the output production of the factory for a set period of time (maybe 6 - 36 months), and then for a discounted rate afterwards. [snip] Apple has access to new component technology months or years before its rivals. This allows it to release groundbreaking products that are actually impossible to duplicate."
It's trite, but Apple must guess right about its new products. There's no escaping that "investments" carry the risk of loss. If Apple had paid for a factory to build the Newton PDA, we would be reminiscing about Apple the way we do about Pan Am or Nehi soda.
This strategy will be difficult to replicate in its new initiatives. Apple's billion-dollar server farm (http://tech.fortune.cnn.com/2010/02/22/video-flyover-apples-new-cloud-computing-center/) is unlikely to have cloud technology unavailable to Google or Amazon. And no one outside Apple can figure out how Apple TV will be unique and the next big thing, much less how Apple can wall off competition like it does in other areas.
But give Apple credit for marching to its own beat. Retail is dead everywhere but in Apple stores.