In the past few decades, the tech revolution has gained a momentum that we’ve never seen before. The world as we know it has changed fundamentally due to its innovations, and some of the biggest businesses in existence today belong to this industry.
It is a world of giants – of Apple and Sony, Microsoft and Samsung – so it’s interesting to note how exactly these companies have pushed themselves to the forefront and dominated their respective markets.
That’s why we’ve created this article, so let’s take a look at some of the business models at play.
Diversification across six key domains
When we’re examining what it is that makes these consumer technology companies so successful, there is one commonality among them all: they have a core business, but also manage to be competitive across six key domains.
These key domains are, notably, hardware, software, content, communications, connectivity, and the digital layer, and within these categories are everything from smartphones to music and payments. In the case of Apple, for example, we see this point illustrated perfectly, with the iPhone forming the core of their business, but many other technologies revolve around this.
This business model resembles a strategy long adopted by investors, whereby risk is balanced and reward is optimised through diversification. This means that while an investor’s portfolio might be heavily geared toward the stock market, for example, they may offset this with CFDs and other investment instruments (CFD meaning ‘contract for difference’ or a way to speculate) on rising and falling financial markets without owning the underlying asset. The result of this is that they cover all of their bases and safeguard their success.
Diversification into these six related sectors is only one of the methods tech leviathans use to stay on top. Innovation also lies at the core of their respective business models, with each vying to outdo their nearest competitors.
We can see this in the constant slew of products released, with companies like Apple and Samsung regularly unveiling their newest creations, and an increase in both sales and, often, company share prices that directly correlates to each new release.
In the case of the iPhone 7, for example, the first of Apple’s smartphones to do away with the standard headphone jack, sales soared to a phenomenal 21.5 million units in the first quarter after it hit shelves, as stated in the infographic above.
We talked earlier about the importance of diversification, and selling products on a global scale works in a similar way: it helps tech giants to offset risks. The simplest way to explain this is by considering this scenario.
Imagine that we have two successful tech companies: one whose sole focus is on the American market, and one who sells their smartphones, tablets, and consoles all around the world. If the United States delivers a poor economic performance, this could spell real trouble for the former company, whose sales would dip dramatically, compared to the latter, who would be better able to weather this volatility.
Microsoft provides us with an ideal real-world example of this. With 54 percent of its sales coming from outside of the US, it not only survived a weak dollar in 2017, but actually benefited from it, thanks to reduced production costs and higher profits overall.
As this brief exploration shows, big businesses have numerous strategies to help further their successes, and although much more limited resource-wise, there are certainly lessons that smaller companies can take away from this. How will you use this information to benefit your venture?