4 ms·

This is a pretty incoherent rant. Sample: > The death spiral begins for the global brands who are forced to give up the low end of the market and focus on the

This is a pretty incoherent rant. Sample: > The death spiral begins for the global brands who are forced to give up the low end of the market and focus on the high end, resulting in loss of both economies of scale and profit margins for the global companies. Except that profit margins are much fatter at the high end of the market, and successfully positioning yourself as a luxury mass-market good is a license to print money. (Exhibit A: Apple.)

Arainach 5y ago
This is a real documented phenomenon. An example from the metalworking industry: the big steel companies could produce a variety of products with their process, but smaller cheaper forges appeared that could produce certain kinds of material. These kinds of material had lower profit margins, so the big companies gave up that share of the market. The big companies profit margins got even better, the smaller mills were making money, everything looks better to the investors. Then the cheaper mills get better and can now do medium-grade work. That's still less profitable than the biggest work, so once again the big companies withdraw from that market when they can't compete on price and their profit margins get even better. You can see where this is going. There's nothing stopping the upstart that you're ceding some of your markets to from entering into your market and taking it over, and at that point you have no moat and no differentiation, while those companies have a full range of other products to fall back on and earn revenue. https://hbr.org/2015/12/what-is-disruptive-innovation https://hbr.org/2015/12/what-is-disruptive-innovation
- xyzzy123 5y ago
  This happened very much with printing / copiers.
  - mc32 5y ago
    And MRI machines… and a whole bunch of other tunings big conglomerates like GE were involved in.
- sjtindell 5y ago
  Thanks for the breakdown.
thathndude 5y ago
But as smartphones continue commoditization, the non-luxury brands will become “good enough.” The differences compress. Suddenly the luxury maker is cut off at the knees. We’re already seeing this play out with really compelling non-Apple devices. However, it’s worth noting that Apple isn’t a great/perfect example for the phenomenon because it has the confluence of both software and hardware plus ecosystem lockin.
- tomrod 5y ago
  This is already there with BLU phones, where you might forgo some recent hardware features to get a current flagship Android phone.
- sjtindell 5y ago
  Plus if Apple actually needed to, there’s probably very little stopping them just getting into the lower margin markets. They have an infinite bank, ridiculous brand strength, etc.

Arainach 5y ago

This is a real documented phenomenon. An example from the metalworking industry: the big steel companies could produce a variety of products with their process, but smaller cheaper forges appeared that could produce certain kinds of material. These kinds of material had lower profit margins, so the big companies gave up that share of the market. The big companies profit margins got even better, the smaller mills were making money, everything looks better to the investors. Then the cheaper mills get better and can now do medium-grade work. That's still less profitable than the biggest work, so once again the big companies withdraw from that market when they can't compete on price and their profit margins get even better. You can see where this is going. There's nothing stopping the upstart that you're ceding some of your markets to from entering into your market and taking it over, and at that point you have no moat and no differentiation, while those companies have a full range of other products to fall back on and earn revenue. https://hbr.org/2015/12/what-is-disruptive-innovation https://hbr.org/2015/12/what-is-disruptive-innovation

xyzzy123 5y ago
This happened very much with printing / copiers.
- mc32 5y ago
  And MRI machines… and a whole bunch of other tunings big conglomerates like GE were involved in.
sjtindell 5y ago
Thanks for the breakdown.

thathndude 5y ago

But as smartphones continue commoditization, the non-luxury brands will become “good enough.” The differences compress. Suddenly the luxury maker is cut off at the knees. We’re already seeing this play out with really compelling non-Apple devices. However, it’s worth noting that Apple isn’t a great/perfect example for the phenomenon because it has the confluence of both software and hardware plus ecosystem lockin.

tomrod 5y ago
This is already there with BLU phones, where you might forgo some recent hardware features to get a current flagship Android phone.
sjtindell 5y ago
Plus if Apple actually needed to, there’s probably very little stopping them just getting into the lower margin markets. They have an infinite bank, ridiculous brand strength, etc.