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April 9th, 2014

Apple’s Plan to Compete With Other Companies



Harry C. Alford

Apple’s success story is a familiar one: a group of misfits who grew an unlikely startup from the confines of a small garage into the world’s largest business. From the company’s iconic logo to the off-beat leadership of the late Steve Jobs, Apple’s public image has always invited the idea that it holds an equal bite at the apple for everyone. It seems quintessentially American – except it isn’t – and the tech giant’s efforts to eliminate its competition are perilous for the African American community.

In recent years, revelations about Apple’s business practices – from evasive tax schemes to protracted courtroom battles – have gradually pulled back the veneer on a company that leaders from Washington to Wall Street have begun to question. Digging in its heels against shifting market dynamics, Apple has shown a troubling side, one prepared to disrupt competition and trample consumer interests.

This month, a U.S. district judge rejected Apple’s request for a permanent injunction on Samsung smartphone sales on grounds of patent infringement. The ruling marks the latest chapter in a three year courtroom battle over features like autocomplete and slide-to-unlock technology. Juries have already awarded Apple nearly $1 billion in restitution.

Regardless, Apple is headed back to court again at the end of the month, this time to dispute the operating platforms of newer model Samsung phones. Its demand this go-around: a $40 royalty per phone or tablet sold, which some experts have called "objective insanity." nsumers in the form of higher device costs.

Unable, or unwilling, to compete in emerging markets, Apple appears resolved to instead play outside the lines and drive up the costs of more affordable devices, which have gained significant traction in recent years.

According to a Pew Research study, African American and Hispanic consumers are more likely to access the internet through their phone than others. Smartphone ownership is growing among this demographic as well, due largely to more affordable devices. Last year devices costing less than $200 made up 43 percent of all purchases, more than twice the level of 2011, according to the International Data Corporation (IDC).

Coupled with greater access to broadband and wireless, the drop in smartphone prices is helping close the digital divide along racial lines. Studies show African-Americans have about a 15 percent greater ownership of smartphones than the general public and spend more time online with them. More than 70 percent own an Android phone, compared with less than 60 percent of all consumers.

Increasing mobile usage rates alone has important implications for small businesses. A Neilson study last year found African Americans are more likely to make purchases using their phone and spend twice as much time at personal hosted websites than any other group. This has a very real impact on our small business members who have invested in websites that can handle online sales.

Apple finds itself falling behind in this digital revolution as rival phones running the Android operating system now dominate the market. One might assume Apple’s answer to its troubles would redouble focus on its product development.

Instead, the company has doubled down, mechanically rehashing and rolling out the same products. There is only a handful of Apple smartphone models on the market today, while there are several dozen smartphones that are equipped with the Android operating system. In fact, Apple hasn’t shipped a new format phone since 2012. The average price difference between an iPhone and an Android phone has grown to $374, and an Android now costs half as much as an iPhone.

So, if not through greater innovation or competitive pricing, how does Apple hope to hold its own in the marketplace? It appears by closing down its competitors’ markets through courtroom litigation. Simply put: if you can’t beat ‘em, ban ‘em.

Starting in 2010, Apple noticeably stepped up its litigation against others. The company recently appealed the court’s rejection of the ban Samsung phone sales (it was the second time the court dismissed the bid), likely as a grounds for further action against its competitor’s newer model phones.

Apple’s latest charge, that Samsung should pay a $40 fee per device, promises to drive up costs and leave consumers in the lurch if approved. The biggest impact of such a decision will fall on the shoulders of lower income consumers, who will effectively be priced out of the marketplace and then their Internet access could be limited.

Equal opportunity is tenet of the America promise. In today’s increasingly connected world, an individual’s location, race or income should not determine whether or not he or she has access to online information and resources. Let’s ask Apple to defend the same principles that fostered its success.

Harry C. Alford is the co-founder, President and CEO of the National Black Chamber of Commerce.


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