apple Business Model – How does apple make money

How many songs can you store on your mobile phone or music player? How many apps do you have on your mobile phone? A lot right? But did you ever think all of this was possible when you were a kid? Because a lot of people in the current generation have seen technology evolve rapidly in the past two decades. People can do things with their mobile phones that they wouldn’t have dreamt of in the past decade. If you go further back no one thought that computers would be useful for common people. Looking at the early computers people thought that they would only be useful for companies and scientists. But look at now almost everyone who is working for a company has a computer. Not only that but most of the students have computers. More and more people are buying computers in the current age as it is one of the requirements. 

But how did all of these changes take place? They took place because some companies had a vision for the future like no one else did. Those companies didn’t just want to create products but they wanted to change the world. One of the companies that did succeed in doing so is Apple. Apple, this is the one brand whose products are something that people want to own really badly. This is one of the companies in the world that does not need any introduction. You can go to almost any country and ask about Apple. They will not only think about the fruit but also the company. That’s how much of an impact they have on this current world. Apple is the richest company in the world which is not surprising at all. In the past few decades, the company has created some revolutionary products which made it the richest. However, many people don’t know the business model of Apple. This article is completely about that. But let’s know a little bit about the company before knowing its business model.

What is Apple?

Apple as you already know is a multi-national technology company. Another name that comes to the minds of Apple fans is Steve Jobs. He is one of the co-founders of the company. Steve Jobs worked as the CEO of the company until he died of cancer. But the other important name that often goes unnoticed is Steve Wozniak. He is one of the most important persons in the company from the beginning. Steve Wozniak is the one who built the company’s first computer. The story goes as this Steve Jobs returned from India after seeking enlightenment. He knew Steve Wozniak from the beginning. When Jobs found out that Atari was hiring he took a board designed by Wozniak for pong. Atari hired him thinking that he himself built it. Later Atari asked people to build a circuit board eliminating the maximum number of TTL chips offering $100 for each chip that was removed. Wozniak built a board eliminating 46 chips, a design that could not be produced on an assembly line which showed the genius of Wozniak.

By the year 1976 Wozniak had built the first version of Apple and showed it to Jobs. Jobs told him that he should sell it. Wozniak was hesitant at first but after some time he agreed. On the 1st of April 1976 Steve Jobs, Ronald Wayne, and Steve Wozniak founded Apple in the garage of Steve Jobs. They were able to sell the Apple I successfully and after they never looked back. In 1977 the company was incorporated into Apple computer Inc. Ronald Wayne was not a part of this company as he sold his shares for $800 to Steve. After that, Mike Markkula who is an American businessman and investor invested $250,000 and offered his business expertise to the company. This gave the company the boost it needed. Wozniak built Apple II which was also successful. 

In 1984 Apple created Macintosh which was the first computer that was sold to the public that didn’t have a programming language. They have started the personal computer revolution in the world. The product looked promising in the beginning as the sales were great. But after a while, the sales were declining. In 1985 John Sculley who was made CEO of the company removed Jobs as the general manager of the Macintosh with the support of all board of directors. After a while Jobs was stripped off of all his duties when Sculley found out that Jobs was trying to get him out of power. Steve Jobs resigned and left the company he founded. Apple continued to make products but they were not successful. On the other hand, Steve founded NeXT and also became the majority shareholder of Pixar. 

When Gil Amelio became the CEO of the company Apple acquired NeXT bringing back Steve Jobs to the company. Steve Jobs identified the talent of Jonathan Ive as a designer and they started to work together. Jonathan Ive designed iMac which was a design that was never seen before. It is a product that brought back the status of Apple. The company started to see the rise after this. Apple acquired SoundJam and renamed it iTunes. After that, the company only saw growth. It was successful in designing one of the best music players of all time, the iPod. The company later developed the iPad and iPhone. All of these were designed by Jonathan Ive. There is no need to tell how successful the company is today. 

Business model of Apple

Now that you have learned the brief history of the company let’s look at the things it follows that made it successful. 

Quality of the products

This is one of the biggest reasons that the company is as successful as it is today. When you think about Apple products you always think about the quality of them. From the beginning, the company focused on quality over quantity. This ensured that they built products that stand out. You can look at both the hardware and software aspects of their products. Both of them are unlike the products that are offered by any other company in the world. They decided to make software and hardware products that are exclusive to the company and its users. You can just hold their products to realize how good they are.

Innovation

Apple is known for innovation right from the beginning. Innovation is what made the company famous and rich. Starting from their first product Apple wanted to offer something new. They wanted to sell computers to common people. Apple released the iPod which is a lot portable compared to the Walkman. What is better, carrying a music player that is as big as a diary or a music player that is the size of later that can hold upto 2000 songs? It released the iPad which showed the people what applications are, how to download them, and use them. The iPhone is still one of the safest devices to store your information. It stores all of its users information in iCloud. The user can sync all his Apple devices through iCloud. These are some of the things that only Apple did and does. Apple is constantly observing the changes in the public interest and tries to create products that people like.

Customer support

Apple offers customer support, unlike any other company. If your device has some issues then you must take them to the nearest Apple store if you want to get it fixed without damaging it. The company sells its products exclusively through its stores. It has stores all over the world that offer services to customers.

How does Apple make money?

Though the company manufactures hardware products it is not the only way in which the company makes money. It has more than one way of generating revenue. So let’s look at the ways in which the company makes money.

Selling products

This is the most obvious way in which the company makes money and you already know this. Apple manufactures a variety of products that it sells in various parts of the world. The products have different prices depending on which part of the world you are living in. But no matter which country they are being sold they are always costlier than the other products of that category because of Apple’s brand value. Apple manufacturers different types of products like iPods, iPads, MacBooks, iPhones, Apple Watches, and Apple TV. The majority of its revenue comes from selling iPhones which is about 61% followed by MacBooks and iPads. These hardware products that are of excellent quality manage to bring the majority of the company’s revenue.

Subscription fees

Many people who do not use Apple products do not know that Apple charges a subscription fee from its customers to use some of its services. Apple users have to pay a subscription fee to use it services like iCloud, Apple Music, and iTunes. Without iTunes, you cannot download music into your device. iTunes is one of the most important services because it saved the music industry. When people found that they could download music from the internet the record sales went down. When Jimmy Iovine met Steve Jobs to deal with this issue Steve came with this idea. 

The plan is to allow people to download music through iTunes for a small price. Apple would receive a small commission fee and the remaining would be paid to the artist or the label. So these services are very important and the company has every right to charge the customers. Similarly the iCloud stores all the information in the devices of the customers in case they want a backup. The company needs money to do this so they charge a subscription fee. 

Demanding more money for extended warranty

Not many people know this but the company makes its customers pay more if they want an extended warranty on the products they buy. Apple also sells a few third-party products that are compatible with their devices.

Conclusion

This is the business model of Apple. It is currently the richest company in the world and has more liquid cash than many countries. The products of the company speak for themselves. There is no doubt that the company is going to create more products that are going to be successful. To know more about other business models you can look at other articles that cover the business model of other companies. If you want to know who currently owns Apple click here.

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