How, and Why, Apple Overtook Microsoft

Description: When Microsoft stock was at a record high in 1999, and its market capitalization was nearly $620 billion, the notion that Apple Computer would ever be bigger — let alone twice as big — was laughable.

Source: NYTimes.com

Date: Jan 29, 2015

apple-vs-microsoft-2

Mr. Gates “couldn’t imagine a situation in which Apple would ever be bigger and more profitable than Microsoft.”
“He knows he can’t win,” Mr. Gates said then of the Apple co-founder Steve Jobs.
But less than two decades later, Apple has won. How this happened contains some important lessons — including for Apple itself, if it wants to avoid Microsoft’s fate. Apple, after all, is now as dependent on the success of one product line — the iPhone accounted for 69 percent of its revenue — as Microsoft once was with Windows. The most successful companies need a vision, and both Apple and Microsoft have one. But Apple’s was more radical and, as it turns out, more farsighted. Microsoft foresaw a computer on every person’s desk, a radical idea when IBM mainframes took up entire rooms. But Apple went a big step further: Its vision was a computer in every pocket. That computer also just happened to be a phone, the most ubiquitous consumer device in the world. Apple ended up disrupting two huge markets. Read the rest of the Story

Questions for discussion:
1. How did Apple overtake Microsoft in becoming more valuable?
2. How would you describe Apples strategy using one of Porter’s generic competitive strategies?

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74 thoughts on “How, and Why, Apple Overtook Microsoft

  1. Brady T

    Apple was able to overtake Microsoft as the industry leader in technology because they were able to use Porters competitive strategies more effectively than Microsoft. Apple uses a Differentiation focus, which is what set them apart from the rest of the market in terms of software and hardware. When Apple first debut the iPhone, it sparked a revolution in the phone industry, a revolution where smaller, more compact phones were shelved in favor for phones with larger, more modern touch screens and more powerful processors. It also started paving the way for phones to be more than phones, but a way for people to access their emails, calendars or games at any time they wanted, or needed too. By essentially putting a computer in everyone’s pockets, they have eliminated the way the world, especially the business world, operates and have transformed how people communicate and go about their day to day business.
    Apple is also responsible for the advance of mobile gaming. While Nintendo has had handheld gaming systems for years, Apple has transformed the industry by allowing almost anyone with the knowledge and skills to create a game and release it to people all over the world. This has led to the rise of multi million dollar companies such as King, the owner of Candy Crush and other popular games to dominate a market with free or $0.99 games, with an option to pay to play that earns them millions in revenue. Without Apple revolutionizing the market, such companies would not even exist today.

    Reply
  2. Shiqi Wang

    Nowadays, Apple products are becoming a symbol of fancy and high quality for the public. Apple’s worldwide annual revenue in 2014 totaled US$182 billion (FY end October 2014). Apple enjoys a high level of brand loyalty and, according to the 2014 edition of the Interbrain Best Global Brands report, is the world’s most valuable brand with a valuation of $118.9 billion. By the end of 2014, the corporation continued to manage significant criticism regarding the labor practices of its contractors, as well as for its environmental and business practices, including the origins of source materials.
    From all of these data, we can see it’s obviously strength than Microsoft. For most of teenagers, it would be the best moment when they get the latest iPhone or iPad as a birthday gift. At least, it is meaningful for me. To be honest, the specific system is more convenient for users when they are customized with the apple system. Almost everything in your life can be found in the apps, although sometimes you have to pay a little money to get them…All in all, there are few friends change back to use Microsoft system after using Apple system.

    Reply
  3. Jaime Zachery

    Apple has often been a visionary in the creation and expansion of new consumer electronics. While Microsoft’s vision was realistic and more near sighted, Apple’s vision was farsighted and seen as more radical. The unique and innovative quality of Apple’s products leads to Consumer Loyalty. As stated in the article, an android device can be purchased anywhere, where an iPhone has to be purchased through Apple. This also gives them a competitive edge because the threat of replicas and similar products are reduced. While Microsoft was concerned with maintaining its success, Apple was willing to make mistakes and lose a bit to gain a lot. Some products contradict another, such as a bigger iPhone with the iPad, but in the end it is worth it. Steve Jobs’s idea of “beauty matters” and “passion for perfection” also gave Apple a competitive edge.

    Reply
  4. Christy Weiss

    Apple overtook Microsoft in becoming more valuable by having a radical vision to put “a computer in every pocket” which consequently, was disruptive in two large markets. Apple is a innovator and entrepreneur in electronics, and it is this innovation in its products time and time again that has given Apple value superiority over Microsoft. Another item that supplements Apple’s superior value is the fact that Steve Jobs “believed that beauty matters.” It is because of the elegant, desirable design of Apple’s incredibly functional products that they have been so wildly successful. Value is also derived from Apple not being afraid to develop new products, even though it may hurt their other product lines. (Such as developing the iPhone, thus hurting its iPod sales) In this regard, Apple made a very definitive choice that Microsoft did not, and this has contributed substantially to Apple’s success. Apple is not only advancing their product lines themselves, but also the operating systems on which the products operate to always improve and stay ahead in the market. Also contributing to Apple’s superiority is the fact that it has always been a market trendsetter, and it is certainly far from a market follower, unlike Microsoft.
    It is evident that Apple uses a differentiation strategy.

    Reply
  5. Ayesha S

    Although Bill Gates had an amazing run with Microsoft, it couldn’t last for much longer after Apple came into the market. Apple’s biggest weapon was their courage and optimism. They were not afraid to take risks and make opportunities knock on doors. Microsoft got the world started but Apple has owned the world with so many devices on the market. They truly do deserve the spotlight. Apple has beaten the toughest of competitions. Going from computers to laptops, to iPod, to iPhone to Ipads and much more has not only created a sense of loyalty with the customers but has started a fan base as well. I, myself look forward to releasing of apple products. Many people camp outside days before the products from apple come out in front of stores instead of waiting to get it later. Why? Sense of loyalty and trust. Nothing so far has disappointed any apple fans in their range of products. Steve jobs created a perfect picture of apple in the world’s eyes. Bill Gates was definitely someone who started to help the society get familiar with computers and software’s, but apple has induced us into trying new things and create new hobbies with the apps and music stores online. The products apple has come out with have been so much more innovative than any other company in competition so far. It is very unique and ahead of the participants in the technology race. I will always be an apple supporter. They deserve the spotlight.

    Reply
  6. Ryan.kozole@uleth.ca

    One of the main reasons Apple overtook Microsoft is due to the continuous improved design and function of their product. Back when Microsoft owned basically all of the market share in this industry, Gates did a good job developing his product over the others and becoming a well known name. However, when Apple came in later on and Microsoft still at the top, Steve Jobs not only valued the importance of the design of his products but also the development and improvement in order to gain value and trust of people buying. Microsoft on the other hand was developing products at a much slower rate than their counterpart at Apple, which in the end led to an increased amount of hype over Apple products, and over time a market share that had exceeded that of Microsoft.

    One of the big reasons why Apple now has majority market share is due to the smartphone they came out with called the IPhone. When this technological age came about, Apple was all over it which caught many other companies such as Microsoft Samsung, Nokia and RIM (maker of the Blackberry) off guard. Due to this new technology that everyone was relishing in, the IPhone became insanely popular within the past decade and is the leader of the smartphone industry as well a leader in regards to laptops and desktop computers. Almost everywhere you go, people are pulling out their IPhone and due to the quality and quick product development of apple , it is probable many will be pulling out a new upgraded version of the phone years into the future.

    Reply
  7. Kristin Kobbert

    Apple has surpassed Microsoft in becoming more valuable by choosing a very different strategy and sticking with it through its ups and downs. Apple went after a market that didn’t really exist yet and innovatively created it. Apple has a unique business model, largely thanks to their co-founder Steve Jobs. He was kind of a perfectionist when it came down to his products and wanted to oversee every aspect. Apple now experiences higher profit margins, because the company is involved in every step of the production to selling process and so has the power to set their prices. Microsoft focused too much of their efforts on maintaining their Windows program and avoided making risky design decisions.
    In the article it really made sense to me that the iPhone has appealed to so many consumers and taken such a large market share, because of its physical design. I think we as consumers, are largely superficial when it comes to our products. Steve Jobs had the right idea when he put beauty into the design of mobile devices. Apple has become a brand that people recognize and hold in high value, because this awareness it is sought after.
    Out of Porter’s generic competitive advantage strategies, Apple goes after a differentiation focus strategy with their products. Apple products are the unique from competitors, because of their design and innovative offerings. Apple’s target segment is smart phone users and the company attempts to create phones that are different from their competitors. With the immense saturation of the smart phone industry, Apple may have to re-evaluate their strategy to maintain their competitive edge.

    Reply
  8. Ryan Ozar

    Apple overtook Microsoft because it wasn’t afraid to take a risk. Microsoft was large and in charge for a long time, but it was the same old song and dance each and every year. Which is fine if you have a good song that everyone loves and a dance that everyone needs. But they got complacent, and where they were unwilling to take a leap, Apple did. When the iPhone released, there were plenty of phones on the market that you could put music on, or access your email, or go on the internet; but when the iPhone came out it was sleek, it was sexy, it had an enormous screen (for the time), and it was touchscreen. All these factors put together something that was the complete package. Easy to use, easy to update, connecting to your home computer already through iTunes. It was an instant hit and got people thinking about Apple and Apple products and they wanted to see what else there was out there, and they saw that it wasn’t only the iPhone that was sexy. Macbooks, iMacs; pretty much everything in Apple’s line-up was appealing, easy to use, portable and best of all for Apple, expensive. But if Apple has shown us anything its that people will pay for brand and aesthetics. Microsoft was just too slow into that market, and that’s how they were caught. Differentiation is clearly the category for Porter’s strategies, they were simply different from everyone else out there. Instead of trying to figure out what the customer wanted, they gave the customer what they wanted and how they wanted it.

    Reply
  9. Jayden Faulds

    Apples history may not have been the greatest to look back on, but since then Apple has grew bigger then almost any other company. Products that are launched are always something new and so innovative from any other in the market. Apples iPhones are so beyond the technology I ever thought I would see especially at this age. Steve jobs put all his efforts into this company to make it the business it is today. Almost twice a year Apple updates all their products with new styles and continues to make them at a higher quality which is what keeps them at the top. There are so many competitors out their against Apple, mimicking the products they release but it is always easier to just go with Apple knowing that you are going to receive the top quality and best service.

    In my opinion, Apple is a company that is focused by differentiation. Like I mentioned above, Apple will compare themselves to the other products available to the market place but somehow convince consumers to stick with their product. They do this by stating how they are always so reliable with great customer service and will always help you if any issues arise with your electronic devices. Apple has always been a top selling item allowing them to slightly ignore the cost of production as they have trust that people will buy them anyways.

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  10. Natalie Schultz

    Back about 16 years ago Microsoft was at the top of headlines as there company was one of the highest valued companies. At the same time Apple was nearly bankrupt and going out of business. Steve jobs was persistent and didn’t let his dream company down. He thought of new and innovated ways to bring his company back into the market and even try to compete with Microsoft, one day. Not knowing he would have brought this company to be so successful now. Worth double the amount Microsoft is. Apple knew that consumers wanted an on the go device so they could use it anywhere anytime to access their personal needs. That’s when apple knew that they could make something like nothing before, taking the blackberry almost completely out of the market when the first iPhone came out. Ever since then, the iPhone has upgraded numerous times and gotten shockingly better then the last. I can’t even begin to think about what the next version of iPhone to come out will be like. Not to mention what it is going to be like in 10 years.

    The way that Apple structures their company is definitely differentiated focused. They have numerous products that the majority of companies don’t have. For instance, they have iPods, iPhones, computer desktops, laptops, tablets, etc. This really helps with sales considering each product has on average 5-7 generations. They clearly want their product to stand out against all other options consumers have, but they have something special about the company that draws customers in. This also keeps them coming back time after time.

    Reply
  11. Jayden Faulds

    Uber is a driving service much like regular taxi cabs that allow you to track a vehicle, choose which model of vehicle you would like and order it directly to your location. It is a safe and efficient way to get home after a night of drinking or a substitute if you do not have a vehicle. It is much like a taxi in the sense that it runs off a meter, keeping track of the money you owe and then automatically charges the amount to your personal account. It is even said to be cheaper then taking a regular taxi home. 20% of the earnings go to Uber itself, making 80% go to the driver. Giving Uber drivers more money then the average taxi driver.

    I would definitely take advantage of the Uber service if it was offered to me. I love the idea of being able to see how close the car you ordered is to your current location. Also if you don’t have the money the moment you get home, it is automatically sent to your personal account with Uber. I would definitely research more into the company before jumping on the opportunity to sign up, just to check the safety precautions and make sure everything was legit.

    I think they have been able to demonstrate dis-intermediation as they have allowed the costumer to order the car they would like and if the driver is available they can agree to come, taking away the middle man taking the phone call and then transferring it to the driver. The whole idea seems a lot more efficient then a traditional taxi service.

    Reply
  12. Natalie Schultz

    Uber is similar to a traditional taxi service with the main idea of getting people from location A to location B safely. Uber is different by having customers create accounts with them so they can digitally order the specific vehicle they please at the time they would like the service. They then wait for the confirmation that the driver sends out to show he had agreed to come and pick them up. Just like the common taxi service you are charged by the meter although the payment is not given by handing cash and a tip to the driver; it is done by being charged to your online account for you to pay for.

    After looking into the company a little further and exploring the website they have offered for you to sign up with I can currently say yes, I would like to use this service. By looking at where cars are around you and knowing instantly if a driver can come and get you or not, you eliminate the wait time you would have with a traditional cab service. Sometimes I see myself waiting half an hour or more to get picked up where Uber could eliminate this problem.

    This could be an example of both intermediation and dis-intermediation because it does take out the service man that you phone to book the cab making it dis-intermediate. But on the other hand you are still having to go on your phone, find the car you want and order it that way. Still waiting for the driver to confirm to you or turn you away.

    Reply
  13. Arty K

    Apple overtook Microsoft and became more valuable because it was able to relate to customers like Microsoft never has. For current generation, owning an Iphone isn’t just a phone. It’s almost a necessity to fit in. You look at all the teenagers and all they want is a new iphone for Christmas just because “Billy has the new one”. It became a huge part of everyday life for a lot of people. PC is good. It’s solid it’s reliable,, but it’s not easily accessible.
    Apple made owning their devices cool. It gave it style. In their commercials it always talks about lifestyle, innovation. Apple was able to relate to customers. To find out what they need. Playing games, or accessing twitter, or instagram is an intangible part of most of the young adults these days. People literally can’t spend a day without their phone, while most can spend weeks without a PC. Why? Because Apple made all the functions on the Iphone, all the apps, it’s all that’s needed for a user to feel up to date, and comfortable.
    Apple didn’t beat Microsoft. Microsoft defeated itself, when it stopped developing new product, when it didn’t relate to customers, when it just took it’s dominance for granted. Apple was risking, bold, innovating, and that was made them stand out, that what brought them millions of customers all over the world, and made them billions of dollars off those customers.
    Google though “if it isn’t broken, don’t fix it”; Apple though “if it’s working now, it won’t be working for long, we need something new”.

    Reply
  14. Brittanie Such

    Apple has been known to constantly innovate. What sets them apart from other competitors, such as Microsoft, is their willingness to move into new, unexplored areas of technology, even if it means abandoning old product lines that have been profitable to date. While Microsoft was a leader in technology for a very long time, in recent years Apple has swiftly overtaken the industry and has recently become the world’s largest company.

    Apple’s success largely stems from the company’s ability to be one step ahead of the opposition. By the time another company is able to create a product similar to Apple’s, Apple is already pursuing a new product line or enhancements to current products. The technology industry is very competitive and is constantly evolving; companies must constantly be adapting to keep up. This is something Apple has placed a large focus on. While many believed Microsoft to have the better business model, the success of Apple over Microsoft has called that into question.

    If I were to choose one of Porter’s competitive strategies that Apple aligns itself with, I would choose that of Differentiation. While majority of the company’s revenue comes from the sale of iPhones, the company also produces and sells a number of other products such as Mac’s and iPads. The main reason I believe that differentiation is the strategy of Apple is because they are constantly shifting the focus of the products they offer to suit the needs and wants of the population and stay ahead of competitors. For example, years ago, the iPod was apple’s main source of revenue, but as competitors were catching onto the idea, Apple quickly shifted its focus into the Smartphone industry. Today, the iPhone accounts for 69% of Apple’s total yearly revenue. This is just one example of Apple’s use of differentiation through innovation.

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  15. Ethan Yeomans

    Apple was able to overtake Microsoft in becoming more valuable because Apple continued to design and look ahead to the future unlike Microsoft. It took Apple decades, but they were able to surpass Microsoft and completely obliterate old records with their growth and revenue. Microsoft was the giant corporation at the time and may have seen themselves as too big and therefore would be difficult to overtake. Apple, on the other hand, continued to innovate and design newer and more radical products are what was able to launch them into a whole new level of corporation with how big they have become and how quickly they are making money.
    Apple used a strategy of differentiation and providing something completely new to the market. Microsoft was more focused on the desktop computer and continuing to expand on the idea that they already had and just continue to improve on the product that was dominating the market. Apple strived to make something new and exciting in the future and completely changing the marketplace. There is a reason that iphone sales are at ridiculous rates and never seem to slow down whenever there is a new one to come out. There is a reason that whenever someone considers making an app, they want it on the Apple app store before anywhere else. The reason they are so large and successful is because of their ability to innovate and differentiate from their competitors. They did not focus on the present and continue to look into the future as to what else that they can create and develop to remain different and successful.

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  16. Xuan Wen

    In my own opinion, the reason why Apple overtook Microsoft is the marketing strength made by Steve Jobs. He was tried made Apple as a need for everybody and understood what people want to have in the future. Apple focus on specific productions such as iphone, mac-top, and ipad. People will update their Apple products when new one is come out. Also, he made people feel to have a Apple product as high-end. And now, Apple’s market capitalization hit $683 billion, more than double Microsoft’s current value of $338 billion. Apple’s was more radical and, as it turns out, more farsighted. Microsoft foresaw a computer on every person’s desk, a radical idea when IBM mainframes took up entire rooms. But Apple went a big step further: Its vision was a computer in every pocket. That computer also just happened to be a phone, the most ubiquitous consumer device in the world. Although Microsoft also have expand products, the major sale of Microsoft is Windows operation system. But Apple create their own computer system to counter Microsoft, and the Apple’s computer system is even more simplify than Windows. Although Microsoft is still a successful company, it lost the competition with Apple. Microsoft nurtured its dominant position, but at the risk of missing potentially disruptive innovations. And now, Apple is keeping push out sundry products and Apple stores are always crowd. Can Apple continue to live by Mr. Jobs’s disruptive creed now that the company is as successful as Microsoft once was? We do not know, but Apple will answer us in the future.

    Reply
  17. Linden W

    Apples overtake of Microsoft as being more valuable has been progressive through the years. Apple decided to broaden themselves by coming up with new products and updating there products by making a new version of old products every year. The purpose is to fix old mistakes and develop the perfect product through creation and reviews of old products. Apple has been matching Microsoft with the products they create and creating something g that could be understood as better and more likeable by consumers. These are all examples of Porters Generic Strategies. Now Apple has been making themselves a consumers preference when purchasing products because of loyalty of the customers. It would take some great mistake by apple for people to quit supporting there products today.

    Reply

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