John Sculley, the former CEO of Apple who allegedly—and infamously—participated in the ousting of demi-god Steve Jobs (which I wrote about here) was recently in India promoting his new line of smartphones aimed at the developing world, specifically markets like India.
Sculley had one interesting comment (about Apple) and one revelation both in his interview with the Economic Times.
Ever wondered why Apple hasn’t been all over the Indian market like jam on toast when it comes to developing Apple phones with altered specs and (cheaper price points) for the Indian market?
This is after all both the fastest growing smartphone market in the world and the largest in terms of volume, with a 1.2 billion population and an 18 percent smartphone penetration rate.
Yet, Apple has a negligible market share compared to arch rival Samsung (35 to 40 percent) but doesn't seem interested in doing anything about it. The best they could come up with was to recently re-introduce a has-been—the iPhone 4—which they initially re-launched in Indonesia. Leftovers for the developing world, is one way to look at it.
Here's why Sculley thinks Apple is holding back: "You can repackage a phone into monthly installments but the reality is - it's still very expensive. Apple tried with the 5C, it failed because they compromised on product as they used an old processor and left out certain features.
Apple's expectation from product quality is so high but business model requires high gross margins. They generate incredible amounts of cash but if they compromise on that, their stock goes down. They have a dilemma - either miss the market where 70 percent of the industry is or risk falling of their stock price dramatically if they go after the market. One company's dilemma is another company's opportunity."
In other words, what I think Sculley is saying is that Apple cannot trot out a lower spec'd product for a mass market because its business model makes a fountain of cash selling a premium product that is flying off the shelves for a premium price in most parts of the world.
In India, telecom companies unlike the US haven't subsidized the cost of phones with locked in contracts so an iPhone is far beyond the reach of most Indians. And introducing a cheaper phone will suddenly confuse the hell out of the value proposition of the iPhone in western markets. Which is why Apple's strategy has been to introduce the way-inferior iPhone 4 here in India rather than a brand new product developed at this market.