Apple Inc. (NASDAQ:AAPL) has clearly defined its strategy with the “not so cheap” pricing of the iPhone 5C, the company is prioritizing brand image and profit margins over market share. That’s not necessarily a bad thing for the company in the long term, but it will have negative implications in terms of growth rates, at least until Apple brings a new product to the market.
In case you’re feeling disappointed by Apple Inc. (NASDAQ:AAPL)’s strategy, these three tech companies are going on the opposite direction and aggressively betting on growth versus profit margins.
The iPhone is too expensive for many consumers, especially in Emerging Markets, and Apple Inc. (NASDAQ:AAPL) has been losing market share to Samsung and other competitors over the previous quarters.
Investors have been eagerly waiting for the new lower-priced iPhone 5C to see if the company was finally going to start playing the pricing war, but judging by the falling stock price after the announcement, it seems many were disappointed by the “not so cheap” price starting at $549 without a contract or $99 with a two-year deal.
Apple Inc. (NASDAQ:AAPL) is staying in the high end of the pricing spectrum, and customers looking for cheaper smartphones will find many attractive Android alternatives to choose over the iPhone. This most likely means that competitors will continue outgrowing Apple in emerging markets, where most of the industry growth is coming from.
Apple Inc. (NASDAQ:AAPL) will continue building high-end products for customers who are willing to pay extra for the differentiated brand image and user experience. Profit margins will remain high for industry standards and the company is protecting its brand power in the long term.
On the other hand, investors looking for accelerating growth rates from Apple will need to wait for new product categories, because the iPhone 5C is no game changer.
Amazon the disruptor
When it comes to the margins vs. market share debate, Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) could hardly be more different. The online retailer strives to keep prices as low as possible in order to grow sales and gain market share versus the competition, Amazon.com, Inc. (NASDAQ:AMZN) is disrupting multiple retail segments at the same time, even if that means operating with ultra-thin profit margins.
The company is investing heavily in areas like building its warehouses, digital content, and cloud computing services; this is another factor weighing on short term profitability, but provides huge long-term opportunities for the company.
Jeff Bezos wrote in his first letter to shareholders in 1997:
We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.
And he has been clearly living up to that promise through the years.
Google is building the future
Google Inc (NASDAQ:GOOG) is not facing the same kind of margin pressure as Amazon.com, Inc. (NASDAQ:AMZN), the online search giant has operating margins in the area of 23% thanks to its leadership position in online advertising. But Google Inc (NASDAQ:GOOG) is still one of the most innovative companies in the world, and its management team is not afraid of making long-term investments with a strategic focus even if they don’t have economic feasibility in the short term.
