The Fragility of the Software Industry

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This isn’t a discussion, per se, but I want to transcribe my thoughts about the software industry in general(and Apple in specific) while you criticize, comment, and discuss my thoughts.

Before you hit that caps lock button, please remember I’m just thirteen. Don’t rag on me too bad, okay? Well, no, I can’t ask for that in the internet, but just keep that in mind.

In my opinion, Apple is actually quite fragile. Why? The laws of supply and demand. If demand goes up, price goes up and vice versa. If supply goes up, price goes down and again vice versa.

Most of the time in economics, we only have to worry about demand. Supply is usually tightly regulated with things like patents, copyrights, etc. Demand is the key to success.

Ironically, in the case of Apple(a so-called “solid company”), the problem is the opposite way around. Imagine that Country X has decided to get into the touchscreen market(which makes up a significant portion of Apple’s profits). Now imagine that Country X has just been ravaged by a war and that jobs are scarce, therefore people are willing to work in factories that give them very low pay.

If Country X’s government simply built thousands of these factories, they would be able to flood the market with cheap iPhone copies that are just as usable as the actual thing. And because the factories are government-run, you can’t activate patent laws as you can’t sue a government for copyright infringement.

Before you ask why Country X would do such a thing, remember that money goes to the factories and from there to the government. A large intake of money(carefully controlled, of course) would stimulate the economy and help Country X on its way to rebuilding itself.

If the market is full of cheap iPhone copies, I see no reason why Apple would not lose a significant chunk of its profits, forcing it to stop expanding and maybe even close down some of its less useful factories. If other third-world, war-torn countries all do the same thing simultaneously, Apple will be forced into a deep hole, the other software companies will jump on the opportunity and Apple will collapse.

Discuss how such a seemingly long-lasting, never-to-fall company can crumble so easily.

 
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I really don’t want to discuss your scenario too much in detail, but you say you’re 13?
On your profile it says you are 21?

 
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who doesn’t lie on their profile.

i actually am 28 though. just as a warning.

And because the factories are government-run, you can’t activate patent laws as you can’t sue a government for copyright infringement

i think you can.

Apple will be forced into a deep hole, the other software companies will jump on the opportunity and Apple will collapse

that would take some time. they won’t plummet, they’ll just gradually fade into the back-ground (or keep pretences for some time while wobbling).
branches fall like that all the time. it doesn’t mean anything. a corporation is not an entity, it’s just a formalised imagination.

employers will go to other companies; share-holders transfer their profits and let the tax-payers pay for the deficits, while they still have all of their other investments; middle-man will move to affiliated branches.

it’s all fiction. and exploitative.

 
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If a war breaks out far less luxury products will be used. However it’s common for high tech companies to switch to producing war related objects during a war and survive that way. (Software companies can make all kinds of targeting or data searching software and hardware companies can make all kinds of military hardware apple can do both).

 
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Apple’s predominantly a hardware company… I’m not sure what this has to do with the software industry though…

Apple is no more vulnerable than Microsoft, Canonical, Valve, HP, IBM or any other company. Sure, Apple supposedly has more in liquid assets than any of the other companies I listed above, but they too are subject to their competitors and to their own products and consumers.

I highly doubt Apple will be the first to fall in this regard though; they always try to up-market their products as a bit more prestigious. More likely than not I’d see some of the other smartphone companies (in this scenario) suffering first, like HTC and Samsung maybe. Apple distinguishes itself by controlling how it sells its goods; HTC/Samsung sell to consumers either directly or via a third party; Apple only goes the third party route with vetted vendors.

In all honesty, I feel like Apple runs on a slightly different means of revenue-generation than other major company that is similar. I say this because Apple specifically controls how it sells its products, while Samsung or Acer or HP often lack such control. You can go to an Apple store to buy a Macbook Pro, and generally that’s where you get them (generally, I know you can get them elsewhere, but generally). The Apple store is absolutely iconic. For Samsung, or HP, I could just walk into any major electronics store and purchase one. I could even buy one at a Microsoft store. Once you lose control over how your product is sold, you need to constantly find ways to make as much revenue as possible if you are not selling directly to consumers. That’s my perspective, though.

 
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Maybe I chose the wrong example.

But the main point stands; everyday names like Samsung, Nokia, HP and so on can collapse at any moment.

 
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Originally posted by helltank:

And because the factories are government-run, you can’t activate patent laws as you can’t sue a government for copyright infringement.

Yes you can.

 
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Even if Country X mass produces an identical object, any company involved in the infringement can just declare an embargo on those items, or an injunction from any shop in Country Y selling Country X’s products.

 
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“Oh jeez, we are war ravaged and the people need jobs, wut do?”
MAKE TABLETS!”
I don’t think a government would ever take over creating luxury items for its citizens.

 
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First off, your iPad example is not software industry, it’s hardware.

Second (and more importantly) Apple doesn’t compete on price. Cheaper iPad copies will not sway Apple’s core market share which is based on brand loyalty, reliability, hype and customer retention. (That’s not to say some customers won’t switch – but price isn’t everything, especially when it comes to technology)

Have you ever seen an apple product on sale at a discount? Probably not. That’s because Apple knows their target customer, and doesn’t lower their price to get more customers (they don’t need to).

 
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Originally posted by ShivaFang:

First off, your iPad example is not software industry, it’s hardware.

Second (and more importantly) Apple doesn’t compete on price. Cheaper iPad copies will not sway Apple’s core market share which is based on brand loyalty, reliability, hype and customer retention. (That’s not to say some customers won’t switch – but price isn’t everything, especially when it comes to technology)

Have you ever seen an apple product on sale at a discount? Probably not. That’s because Apple knows their target customer, and doesn’t lower their price to get more customers (they don’t need to).

Good point.

 
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I am sure Apple will keep selling products as long as there are developers targeting Apple platform. (Devs need to own a mac to publish and they need to register the testing device too)

As for software industry, it is fragile but not as you thought it was. Brand recognition is a thing which will keep these companies alive even if third-world countries flood the markets with cheap copies of their product (by this I mean the services which the company offer, like stores where you can buy games/software according to your need, timely response to anything, places where you can get it repaired and other stuff). Society is another thing. A person using a cheap copy of a phone is looked down upon always even if the copy is exact same except for logo.

Software fragility arises because the hardware changes or new platforms emerge. Software then has to change to scale upto the new platform. But I dont think that will hamper already established companies like Apple, Microsoft, Samsung etc. They would infact benefit from this as they would probably build new software which the clients must buy in order to work on latest technologies/hardware. And they will stop supporting their old software which has been happening a lot recently. Now once they have the markets saturated with this new software some companies will come up with new hardware which is faster than previous and other stuff. Most of the times these established companies also bring up new hardware. This cycle will keep on repeating, something which the unoriginal cheap copies never would be able to compete. In the end the consumers are the ones paying up. And it is a pain in the ass for the developers to switch to another language/platform.