Business Strategy Monday–Apple Loses In Court

Watch

On YouTube

YouTubeLink

Today’s

Vocabulary

(1) Margin: Price minus cost

We have a $5 margin. It costs us $2 to make one and we sell them for $7.

(2) Sales volume: The number of items sold.

We have too many t-shirts in our inventory. How can we increase sales volume?

(3) Collusion or to collude: When companies work too closely together to hurt other companies.

The big airlines colluded to prevent smaller airlines from buying space at airports.

Today’s

Questions

1. What is Apple’s strategy?

a. Make the best products and charge a lot

b. Keep prices low and sales volume high

c. Work with publishers to set high prices

2. What is Amazon’s strategy?

a. Make the best products and charge a lot

b. Keep prices low and sales volume high

c. Work with publishers to set high prices

3. How did Apple collude?

a. They charged too much for eBooks.

b. They created the Kindle with Amazon.

c. They worked with publishers to set high prices.

7 ________________________

BUSINESS STRATEGY MONDAY

________________________

apple

By Jeremy Schaar

Did you hear that Apple lost a big court case? They worked with book companies to illegally fix prices and hurt Amazon. Today, we’ll compare the strategies of Apple and Amazon. Then we’ll look at Apple’s illegal tactic. You’ll learn how to talk about Apple and Amazon’s strategies. You’ll also learn some great legal and strategy vocabulary.

Apple’s strategy is to make technological products–like computers, iPods, and iPads–that are amazing. They’re so amazing that they (1) can charge more money than anyone else for the product and (2) force you to buy all your programs, music, movies, and books in iTunes. They have great margins on the initial products and then you keep buying apps, songs, movies, and books. In the end, 10% of Apple’s revenue comes from iTunes.

Amazon, on the other hand, wants you to buy everything from Amazon.com. They don’t really care about making money. (I know that seems incredible, but it’s true, and their stockholders, amazingly, don’t seem to care.) All they care about is volume of sales. They’ve had one technological product–the Kindle–that they created so that people would buy eBooks.

So we have two strategies: Apple is great products and high margins. Amazon is low margins and large sales volume.

With those two strategies in mind. Let’s check out this court case that Apple lost. Amazon was selling eBooks for $9.99. They lost money on each book, but they grew the eBook business. Publishers made money, but they worried that everyone would start buying on Amazon and eventually Amazon would renegotiate the deals. After that, the publishers would make less money. Apple wanted to sell eBooks for more money, but they worried about Amazon having lower prices. So, Apple got the five big publishers together to make Amazon set the price higher.

This was illegal. It’s called collusion. You can’t work that closely with competitors when negotiating contracts.

The judge said:

“Understanding that no one publisher could risk acting alone in an attempt to take pricing power away from Amazon, Apple created a mechanism and environment that enabled them to act together in a matter of weeks to eliminate all retail price competition for their e-books.”

Do you want to learn more about this issue? Click on this link. It’s a great article about this topic.

Got questions or comments? How about practicing some new vocabulary and posting your thoughts on the blog, Facebook, or Twitter?

CHECK YOUR ANSWERS!

Answers To Today’s Questions

B, C, A

——————————————

You Can Do It All Yourself But You Dont Have To

One Response to “ “Business Strategy Monday–Apple Loses In Court”

  1. Jan V. Day says:

    What can I say? As an ELT teacher, I always wanted to know about strategies to hep ELLs with their L2 acquisition process. This book makes it really easy to manage and use with students.

Leave a Reply