A look at Apple

If you haven’t stuck your head into financial news lately, I’ll note a figure so big it eclipsed everything else: By the end of last month the value of Apple Inc. went over the $500 billion mark. And March has also been kind to Apple, as its stock price keeps climbing, resulting in a value (known as “market capitalization”) of $550 billion as of yesterday.

Meanwhile, Apple has amassed more cash than any other U.S. corporation. It’s sitting on a tidy stash of $97.6 billion. Dang, if I had coin like that, maybe I could fill up my SUV with gas.

Saipan’s consumers have helped fuel the Apple success story, but I guess we can say that about consumers everywhere in the world. And, naturally, there won’t be a corner of the planet where MBAs aren’t churning out waves of case studies fishing for insights on Apple’s big success.

Lots of people will be plumbing different parts of the action. Marketing types will study Apple’s marketing, computer wonks will ponder Apple’s technology, retail experts will analyze Apple’s stores, and so on. That’s on the clean side of the street. Meanwhile, on the seedy underbelly, boiler room hustlers will be pitching penny stocks to widows and orphans, assuring them they’re getting a ground-floor opportunity in the “next Apple.”

Apple is such a big phenomenon that even people who don’t think about such things can’t help thinking about it.

As big as this gig is, small fry vendors aren’t left out of it. According to a March 12 editorial in Barron’s financial weekly, Apple’s App Store has shelled out more than $4 billion in payments to independent app writers since the introduction of the iPhone in 2007. I don’t know if anyone on Saipan has been part of this action, but it would be feasible for those with the right skills.

You may know that Apple products are typically made in China by various manufactures (though other places and arrangements might be involved as well, I don’t really know). So the big profits for Apple don’t come from actually making what they design and sell, since the making part is handed to someone else. There’s food for thought in this, and it came to my attention via yet another computer company, Acer, of Taiwan.

It was Acer’s founder, Stan Shih, who is credited with conceiving of a simple little curve known as the “smiling curve.” This reflects the value added by different stages of an IT product’s life cycle, going from concept to consumer. It’s a U-shaped curve, with the ends (high parts) of the “U” being the most valuable points, and the bottom (center) of the “U” being the least valuable point.

By “valuable,” I mean value added, which should be a reflection of how much profit juice it has.

Anyway, the left part of the “U” represents the concept, design, and branding phases, so that’s one realm of the greatest value added, the middle point of the “U” represents the manufacturing phase, so there’s your lowest area of value added; and then the right side of the “U” represents the marketing and sales phase, yet another realm that adds the most value added.

I’ve seen this graph presented various ways over the years, so I’m just picking a few highlights.

But it sure makes sense when we think about what Apple has done so well over the years. The powerful concepts of its products, the popularity of its designs, and the strength of its brand are famous attributes that even non-Apple customers like me are aware of.

Something else that strikes me is how effectively Apple has broadened its offerings over the years, going from computers to music players to smart phones to tablets to, well, to stuff that I’m surely not aware of yet. And, indeed, I know people, and you probably do too, who own a Mac computer, and an iPod, and an iPhone, and an iPad.

This brings to mind a Saipan hotel manager who told me that the goal of his hotel was to keep the guests “on the property” as much as possible, by offering a lot of services (dining, drinking, dancing, recreation, sports, shopping, etc.) so the guest expenditures would also stay on the property. That’s not a cynical gig, it’s perfectly sensible, since nobody will go there, or stay there, unless they want to be there to begin with.

So it seems that Apple is good at keeping folks on the property. Whether we’re in the computer industry, hotel business, tourism field, or, well, anything else, Apple probably has some business lessons to heed.

After all, you can argue about who makes the best computers, but you can’t argue with success.

Visit Ed Stephens Jr. at EdStephensJr.com. His column runs every Friday.