2 of Apple's Economic MOAT.
Updated: Apr 17, 2022
Table of contents
Apple’s MOATs
How to tell if a company’s Brand asset is as robust as we think they are
Apple products are targeted towards people who are “Different”
All of Apple products are voted to be the best in their respective product ranges every year
“Apple products are just better, don’t @ me" - Apple's consumers
An addressable market for Apple they can tap into: dissatisfied non-Apple users
Apple products provide better personal data & privacy protection
(Great business model): Customer lifespan is actually super long
Disclaimer: This communication is provided for information purposes only and is not intended as a recommendation or a solicitation to buy, sell or hold any investment product. Readers are solely responsible for their own investment decisions.
Apple’s MOATs
Warren Buffett, the Oracle of Omaha who had been long known to avoid tech stocks throughout his whole investing career, started buying Apple stocks in 2016 and subsequently made it their largest stock holding as of 2019.
The man who popularized the term Economics moat, understood the robust potential of Apple’s most important form of intangible asset, and that is their BRAND.
MOAT 1: Apple’s superpower- their BRAND
(Image above): Few of the plenty of hardcore Apple fans who tattooed the logo on their body to display their fondness towards the brand.
I guarantee you will not find as many or any other people tattooing logos of Samsung, Huawei on themselves.
Apples’ loyal following goes back to 1990s when Apple was in the verge of bankruptcy,
their devoted fans hung around the Mac section of computer stores to recommend their products to shoppers. [13]
a. How to tell if a company’s Brand asset is as robust as we think they are:
Here is one way we can identify if a company truly possess a strong and lasting Brand Moat power:
Think of it this way,
If the company’s competitors have as much money as them,
and they are able to replicate or take away the success of the company’s brand
(in other words, use money to buy their fans or build their brand power).
The company’s brand asset is probably not as strong as you think it is. (Note: this does not mean that the brand asset is not strong at all, just that it does not have as much of an edge that you may think it has).
An example would be Nike and its peers,
Nike is currently the leading athletic apparel seller in the world.
And also the most cash-rich amongst their peers in the industry.
However, if any of these companies have as much cash as Nike,
They will be able to sign more endorsement deals with superstar athletes.
And overtime when any of these companies have more superstar athletes that outperform the other companies’ athletes,
their brand will end up being the most popular one among the rest.
But up until now, it is very difficult for the other companies to entice athletes to join them over Nike because it is difficult for them to match Nike’s lucrative offers to the athletes.
Take the 3 most popular athletes below for example:
Had Michael Jordan, Cristiano Ronaldo and LeBron James signed with Adidas instead of Nike and proceeded to as successful of a career as they had today.
Adidas would have been a lot more popular than they are today,
possibly even more popular than Nike.
But this is not the case for Apple
and the industry they are operating in,
Although Samsung has almost twice as much short-term cash as Apple,
Enabling them to spend more money on activities like Marketing, Sales and Advertising.
Even with Samsung’s high amount of celebrity endorsements and other marketing efforts,
plus their high amount of cash holdings compared to Apple.
They do not have as large and as loyal of a group of followings from their fans compared to Apple.
This is a sign that Apple has created something very unique.
Apple created a culture and movement which is deeply adored by loyal fans around the world over a long period of time. And this is very difficult for their competitors to replicate even though they have access to more resources or cash.
The irony though is that a number of these celebrities sponsored by other brands,
ended up using iPhones anyway behind the curtains.
And these celebrities’ genuine preferred choice is the vote that truly counts. [15]
Social Media following, the new form of currency
The number of followers or subscribers an entity have on social platforms like Youtube, Instagram and Twitter is a form of new currency in today’s world,
Companies are willing to pay a lot of money to increase their number of followers because these group of people are highly influenced by any forms of communication they published on their accounts or channels.
When we compare Apple’s amount of followers with their peers,
we can see Apple is leading significantly.
“Never bet against a company that has raving fans”
It is very unlikely for the Samsung Brand to be as trendy & fashionable as Apple's.
Albeit Samsung internationally recognized,
it is very difficult for a brand like Samsung, to become as hip and as trendy as Apple.
When people think of Samsung, they may also think of home appliances goods like washing machine, fridge, air conditioning units etc.
which may not be the most fashionable items.
And worst yet, there will almost always be an association of exploding phones with their brand in the mind of consumers,
and that may deter them from purchasing their smartphones for some time to come.
b. Apple products are targeted towards people who are “Different”.
The competitive advantage that sets Apple apart from their peers goes back to their culture instilled in the organization since their founding days.
Their products were not meant to be targeted towards the ordinary people (nor the mass market).
Apple products were and are targeted towards:
· People who were against the status quo
· People who think different
· People who consider themselves rebels against the system
And this was a movement that is very appealing to many until today
Although the younger consumers may not be aware of the founding story,
Apple’s marketing messages up till today are still revolved around their main slogan of “Thinking different”.
This strategy works really well because everyone possesses a degree of innate human desire to be unique and different from the others,
be it the way we think, dress, act or what we choose to represent.
And Apple’s products are an opportunity for us to express the idiosyncrasy of our peculiar personalities.
Apple’s products were designed to be a symbol for their customers for combating conformity and asserting originality.
Which is why Apple products will most likely always remain in the premium range,
to maintain their uniqueness and the sense of exclusivity for the brand.
Because if the majority of their products are made affordable to the masses, it will no longer be “different”.
[How Apple will likely maintain their status as a more Fashionable and Stylish brand compared to their peers]:
i) Apple products are heavily endorsed by influential and popular figures
Celebrities, influential figures and themes use Apple products
and it became a pop culture icon.
along with Mega popstars like Taylor Swift
and Drake
And as mentioned above, even celebrities who are endorsed by other brands ended up using iPhones behind the curtains, betraying the sponsorship agreements.
When many popular figures and themes either endorse or take the risks of using Apple products even when they are not supposed to,
it becomes a social proof to the public that Apples’ products must be superior compared to the alternatives in the market.
Entrepreneurs and popular business leaders use them - creating an association of success & good performance with Apple products in the minds of consumers.)
Apple computers are the go-to-choice for developers around the world.
Not to mention that it is an impressive feat for Apple to develop their own operating system too
And their computers are generally a go-to-choice for developers and programmers around the world.
ii) Imitation is the best form of flattery:
Apple being the trendsetter in the industry, it is inevitable that some of the players will be imitating their products and feature designs.
Some of the players even copy Apple’s designs and concepts shamelessly to the exact.
iii) Apple products have become a symbol status
Because of Apple’s premium product price ranges,
along with their influence in pop culture
and endorsement by influential figures.
Apple products users are perceived to be in “higher status”
since their products signify wealth and status.
“Apple products make consumers feel good about themselves. it’s because they make the consumer feel like they are a better person for having the product”
-Wyzowl[28]
iv) Apple’s exquisite retail stores
Apple probably has some of the best-looking retail stores in the world.
Image sources: Apple
i. Apple store in Pudong District, Shanghai, China.
ii. Apple store in Marina Bay Sands, Singapore
iii. Apple Store in Downtown Brooklyn, New York
Did you know that Apple had the highest amount of Sales per Square foot ($5,546)
vs any other retailers in the world at 2017?
This was of course contributed by the premium prices Apple charge for their products,
It is also undeniable that that their retail stores designs are the most elegant when compared to their peers in the electronic devices segment.
It is obvious that Apple pays a lot of attention to details to their retail stores which gave them an edge over competitors.
They have design patents on nearly everything in its stores, even their shopping bags. [30]
v) Apple, a Marketing Behemoth
Apple is undeniably one of the best Marketing company out there today,
Their quality of their marketing contents (be it products presentation or advertisements) is top-notch and are unmatched by any of their peers in the industry,
which will continue to create a perception of superiority of their products for their audience.
One of the many great ads by Apple, which quality of production in terms of ad script and picture are unmatched by their peers’.
vi) Apple’s ginormous influence in the market maintains their position as the industry trend setter.
“Beauty is in the eye of the beholder” And in the case of Apple, they have enough influence power in the marketplace to decide for the crowd what is deemed to be beautiful and what is not.
I am sure there are many times when you see certain product designs from some expensive brands and you think to yourself
“Damn, that is really ugly” or “That is not a good-looking design at all!”
This was also my experience when I first saw the release of the iPhone 12,
I was disappointed because the design looked very similar to their older iPhone 4 & 5 model
But the iPhone 12 became one of the best-selling smartphones in the market the following quarter.
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