canvas business model apple

Profitable Business Models > Business models of large companies

Apple Business Model Canvas: How it became the King of Innovation

• by  Joanne Moyo
• September 23, 2021

Unless you’ve been living under a rock, you probably know just how big Apple, Inc. is. Over the last few decades, Apple has become one of the most recognized brands in the world. It’s been dominating the technology industry, becoming one of the most valued companies in the world.

As of August 2021, Apple had a market cap of around $2.43 trillion. With a business model based on innovation and consumer-centric devices, Apple can retain a loyal customer base through user-friendly designs, easy data migration to new product lines, and integration between Apple devices. Every time Apple drops a new iPhone, the long winding queues are proof of how successful its business model is.

But how did the company manage to create such a fierce love for the brand?

Apple created an entire technological ecosystem, often referred to as the Apple Ecosystem Lock. The company’s insistence on integrating its products makes it easier for customers to keep using new Apple products. Thus, it is more challenging to switch to a competitor’s product.

In terms of hardware and high-end gadget sales, Apple created brand loyalty in the early 2000s by radically aiming to put a computer in every pocket. Unlike the then-dominant Microsoft, whose focus was on putting a computer on every person’s desk. This nonconformist business model is what propelled Apple to the top of the technological food chain.

However, every success story also has a couple of failures along the way. Over the last 40 years, Apple has faced disappointing product releases, continued leadership, and legal issues. Nevertheless, its profitable business model has ensured Apple’s success.

Let’s take a look at how this giant was born.

1971-1989: The birth of Apple

1971: the beginning of personal computers.

In the 70s, computers were big and expensive machines, and the industry was dominated by IBM. Additionally, only a handful of enthusiasts knew how to manage and use these technologies aside from the big corporations.

The idea for microcomputers began to take root among computer enthusiasts in Silicon Valley. Several people were building personal computers using parts such as the first chips manufactured by Intel.

During this time, the founders of Apple, Steve Jobs, and Steve Wozniak, first met through a mutual friend, Bill Fernandez, in 1971. They began their first business partnership later that year when Wozniak, who had experience in electronics, started to build his original invention called the “blue boxes.”

These boxes made it possible for people to make free long-distance phone calls. Jobs convinced Wozniak to sell some two hundred blue boxes for $150 each, and they split the profits. Wozniak was also working on several other inventions, one of them being a video terminal that he could use to log on to minicomputers.

1975: The first commercial, personal computer

In 1975, the Altair 8800 became the first computer to achieve commercial success. It, however, required the user to assemble the different components, so it had no real appeal to the average person. It mostly captured the hearts of electronic hobbyists and computer geeks who would have the know-how. 

At the time, Wozniak could not afford to buy the microcomputer CPUs that were on the market. Instead, he decided to learn as much as he could, designing computers on paper. This paid off tremendously, and by 1975, Jobs and Wozniak had withdrawn from Reed College and UC Berkeley, respectively.

They started attending different meetings and conferences to gain more knowledge about the computer industry. One specific meeting they went to at the Homebrew Computer Club inspired Wozniak to build a microprocessor into his video terminal and have a complete computer.

1976: Apple Computer Inc. was born

In April, along with Ronald Wayne (who worked with Jobs at Atari), Jobs and Wozniak formed Apple Computer. Wayne designed the first company’s logo and prepared the first partnership agreement with a 10% stake. However, just twelve days later, he relinquished his stake to avoid any potential financial risk. 

Wozniak finished working on his hand-built personal computer kit that was named the Apple I.  It was a circuit board that lacked basic features like a keyboard, monitor, and case. Jobs had to sell his Volkswagen Type 2 minibus for a few hundred dollars. Wozniak sold his HP-65 programmable calculator for $500 to raise money to pay for the parts.

They used Job’s parent’s garage in Los Angeles, California, as their office and factory. The first public launch of the Apple I was at the Homebrew Computer Club. The computer received a warm reception convincing the pair to go commercial.

Wozniak offered the design to Hewlett-Packard (HP), where he worked at the time, but they turned him down. So he decided to sell the Apple I for a little more than the cost of the parts. All he wanted was to recover the money they had put into making the computer.

Partnership with Byte Shop

Jobs, on the other hand, had bigger plans. He approached a local computer store called The Byte Shop to sell them 50 units of the Apple I. It was a considerable risk for the shop for several reasons. First, there was not enough Apple I to fulfill the order, and Apple Computer Inc. didn’t have the money to produce them.

Atari, where Jobs worked, required cash for the components it sold him, and a bank he had approached for a loan had turned him down. While Job’s friend’s father had offered to loan him $5,000, it wasn’t going to be enough. 

Fortunately, Paul Terrell,  Byte Shop’s owner, decided to grant Apple the $500/unit purchase deal anyway. Jobs hoped that Wozniak could produce enough working computers to settle the bill from the proceeds (they were selling the Apple I for $666.66).

They roped in family and friends at a kitchen table to help solder parts they had bought from Cramer Electronics (a national electronic parts distributor). Once the computers had been tested, Jobs drove them over to Byte Shop. All in all, 200 Apple I units are sold.

1977-1978: Apple’s First Investor & the Apple II

On January 3, Apple Computer Inc. was incorporated. Wozniak designed the Apple II, an upgraded personal computer intended for mass-market production. Meanwhile, Jobs and Wozniak meet Mike Markkula, who invests $250,000 in the company.

Markkula was pivotal in securing credit and additional venture capital for Apple. He also recruits Michael Scott, who acted as Apple’s first CEO.

Wozniak and Jobs wanted to create a computer that would fit into the average person’s everyday life. Thus the Apple II was released in June of that year at a retail price of $1,298. The Apple II had a completely redesigned TV interface, with a simple text display and graphics.

Other competitors & Partnerships

However, it wasn’t the only personal computer of its kind on the market. Its rivals, the Commodore PET 2001 and the Tandy TRS-80 were launched at the same time. All three machines were designed to make personal computers as straightforward as possible.

Users didn’t need to have the computer skills required to start using one. However, the Apple II had something different; a color video connection and presentable packaging. The Apple II had no visible boards and wires. Additionally, Apple partnered with programmers Dan Bricklin and Bob Frankston, and the Apple II became the official carrier of the new VisiCalc spreadsheet program in 1978.

VisiCalc opened the way for Apple to enter the business market. Moreover, the fact that the Apple II was starting to have corporate clients attracted more software and hardware developers like Microsoft to the machine. In fact, Apple’s home user customer segment grew because of the Apple II’s compatibility with Microsoft Office’s basic program.

The value proposition of the Apple II was its flawless design and high performance. It’s no wonder that the product exploded in popularity. By the end of the year, Apple had made $750,000 in revenue.

1980: The Third Generation Computer & Going Public

After riding off the success of the Apple II for two years, Apple announced the arrival of the Apple III in May of 1980 during the National Computer Conference (NCC) in Anaheim, California.

Apple rented Disneyland for a day and commissioned bands to play in the Apple III’s honor. This third-generation PC was meant to solidify Apple’s hold in the business environment. Despite the success of the Apple II, IBM was still dominating the corporate computing market.

The Apple III was released in November at a retail price ranging from $4,340 to $7,800. While it was a relatively conservative design for computers of the era, it had some fantastic features that corporations enjoyed. For example, it had a typewriter-style upper and lower case keyboard and an 80 column display.

The following month in December, Apple went public. Selling 4.6 million shares at $22 per share.

Apple Business Model Canvas: The Early Days

At this point, Apple’s Business Model Canvas looked like this:

1981-1990: Product Failures & Fierce Competition

1981-1982: competition from the ibm pc & failure of the apple iii.

By August, Apple was among the largest microcomputer companies in the industry. It was slowly overtaking giants like IBM and revenue in the first half of the year had already exceeded 1980’s $118 million.

In fact, the lack of production capacity was constraining growth. The pairing of the Apple II and VisiCalc ensured that businesses kept purchasing Apple’s PCs. When IBM discovered that all its corporate customers wanted VisiCalc, the computer giant quickly launched its own personal computer in August 1981.

However, Apple had many advantages over IBM PC. Firstly, Apple established a strong network of dealers in the US who provided them with parts for their hardware. Apple also had partnerships with hundreds of independent software developers and had an established international distribution network. Additionally, the Apple II had more than 250,000 customers.

The IBM PC had none of that. Fortunately for IBM, the failure of the Apple III would prove to be its saving grace. The Apple III had significant flaws and was prone to overheat, glitches, and minimal software. By 1982 Apple had to recall 14,000 Apple III computers, and Apple’s reputation for producing flawless computers tanked. It was a significant blow.

1983: The Apple Lisa

By 1983, Apple was losing ground to IBM. Revenue from the Apple II was dwindling, and Apple hadn’t released a successful product since 1977. Jobs had to act fast if Apple was to compete with the expanding personal computer market.

To gain a competitive advantage, Apple decided to move away from the text-based format that PCs were coming in. Jobs discovered a new technology by a company called Xerox that developed a demo PC with a graphic user interface and a mouse. He convinced Xerox to grant Apple’s Engineer access to the technology. In exchange, Xerox bought 100,000 Apple shares at a discounted price of $10 each.

The Apple Lisa was launched in January 1983. It was a high-end business machine that was targeted at business users. It retailed for $10,000, but unfortunately, it was a commercial failure. It had a lackluster software library and an unreliable floppy disk.

There were simply better and cheaper computers on the market, and the Apple Lisa failed to sell.

Problems with Apple Leadership Begins

Jobs had gotten so involved in the development of the Lisa that he had started bypassing the management structure of the company. This caused significant problems for him when the Apple Lisa failed to take off.

Michael Scott, the then CEO, and president and Mark Markkula created a new corporate structure that sidelined Jobs and stripped him of any responsibility for research and development within Apple. Looking for a new project, Jobs turned his sites to the Apple Macintosh, which had been in development for a couple of years.    

1984: The Iconic Macintosh

Apple needed another hit to guarantee its future and target the lower end of the market as the Lisa. The Apple III had failed to make waves in the high-end market. This hit came in the form of the Macintosh. It combined the low production cost of the Apple II with the Apple Lisa’s features.

Before the launch of the Macintosh, Apple decided to increase its marketing budget. All the previous launches had been somewhat reserved. This time they wanted to create a buzz because they believed that much in their product.

Apple put a call to its ad agency and tasked them with securing sixty seconds during the third quarter break of Super Bowl XVIII. The production budget of this new campaign stood somewhere between $350,000 and $900,000. The commercial featured a sportswoman in red shorts in a sea of pale men, all dressed in grey clothing sitting down on benches in front of a big screen.

The woman is holding a sledgehammer and is being chased by police-like figures as she runs towards the screen. The commercial ends with the woman throwing the hammer at the screen and a voice-over announcing:

On January 24th, Apple Computer will introduce Macintosh.

And you’ll see why 1984 won’t be like “1984”.

It was an indirect reference to how IBM was dominating the PC industry and how Apple was trying to break the monopoly. The “1984” phrase was taken from a novel by George Orwell where the earth is controlled by “Big Brother”.

The ad was a hit and the Mac went on sale in January 1984 at a retail price of $2,495. While it wasn’t cheap, it was good value for money, and sales skyrocketed.

The Mac fails to make significant traction.

Although the Macintosh was received well, it still needed a killer application, as VisiCalc had been on the Apple II.

The PageMaker was a desktop publishing computer program that helped users create ads, brochures, newsletters, and books was Mac’s golden ticket. It was backed up by the revolutionary Apple LaserWriter printer. It would establish the Mac as a contender in the low-end market. The LaserWriter was the first mass-market laser printer, even though it wasn’t the first laser printer.

Unfortunately, the Mac was three times more expensive than the average PC. Moreover, the new graphic user interface required much more effort for existing software developers to make new programs compatible with the Mac. This resulted in very limited programs and applications for the Mac.

Apple was also against IBM in the home customer segment. IBM had a stronghold in the corporate world. Many customers who used IBM computers at work simply decided to go with what they knew when they bought their first home computers.

The IBM PC came with a range of software and included the hugely popular VisiCalc spreadsheet program and the EasyWriter word processor.  Within a few months, sales began to dwindle as consumers were not interested in an expensive PC that was not compatible with anything. This led to conflict within Apple’s leadership.

1985: Jobs is forced out of Apple

Although Steve Jobs was Apple’s most public face and the company’s co-founder, he wasn’t its CEO. Apple’s leadership has changed hands a few times since 1976. In the mid-80s, John Sculley was hired by Apple to run the company.

At first, Sculley and Jobs got along; however, Jobs had the vision to create a computer for the mass market. He wanted a computer that would cost $1000 or less; unfortunately, production costs had doubled the price.

Jobs and the development team had pegged the Mac at $1,995. Still, Sculley, who needed to ensure profitability, insisted on hiking the price by an additional $500. This caused a lot of friction between the two men.

The tanking sales of the Mac increased the tension, and the board urged Sculley to reign in Jobs. They felt that he was taking unnecessary risks, putting the company at risk financially.  Again Jobs was stripped of his duties with the Macintosh team and given a ceremonial role as Chairman. Jobs was not happy about this demotion at all and decided to launch a coup.

Unfortunately, Sculley got wind of it, and Jobs was forced to resign. He took with him a few Apple employees and went on to start a company called Next.

1986-1997: The decline of Apple

1986-1992: an identity crisis.

The departure of Steve Jobs signaled the beginning of an immense identity crisis for Apple. Up until now, Jobs had driven the company’s direction towards one single goal; making low and high-end PCs at a consumer-friendly price.

Sculley and the board wanted to go in a different direction. They wanted Apple to be a premium computer company that sold cutting-edge products. Since Apple already appealed to creative business users, they figured that the most logical step was to target the high-end market. They settled for more powerful and thus more expensive Macs.

Apple raised the price of the Mac at a time when competing PCs from Microsoft and IBM were becoming cheaper. The strategy was to create demand by selling fewer units at a higher price, resulting in higher profits. Boy, were they wrong! Despite the unique user interface that created brand loyalty, Apple’s stock prices and market share continued to decline.

They introduced several products such as the Centris PC line, a low-end Quadra offering, and the ill-fated Performa PC line. These products were sold with many configurations and software bundles to avoid competing with consumer outlets such as Sears, Price Club, and Wal-Mart. They were the primary dealers for these models.

1993-1997: The Dark Years

In 1993 Michael Spindler replaced Sculley as CEO. Spindler completely restructured Apple, laying off 15% of the workforce and splitting up the product development team according to the market. He wanted to focus on building as many cheap products as possible.

Not only did this weaken the product development team, but it also caused a lot of confusion. The product line was so complicated that no one could identify which product was best for which market.

Apple experimented with several failed consumer targeted products that included digital cameras, portable CD audio players, speakers, video consoles, and TV appliances. Unfortunately, none of these products helped, the company continued to experience challenges. None of its products were seeing the success that the Apple II had enjoyed. There were simply better alternatives on the market.

1994: Microsoft: The New Giant in Town

At this time, Microsoft began making significant strides in the market. Its Windows software was proving to be highly reliable, and it came at an affordable price. Microsoft continued to gain market share.

To address Microsoft’s growing dominance, Apple joined forces with IBM and Motorola in the AIM alliance. The aim was to create a new computing platform that would use IBM and Motorola’s hardware and Apple’s software. The AIM alliance hoped that the new platform would replace the PC and thus counter Microsoft.

The same year, Apple launched the Power Macintosh, the first of Apple’s computers to use Motorola’s PowerPC processor. The following year Apple decided to license the Mac Operating System and Macintosh ROMs to 3rd party manufacturers to produce Macintosh “clones.” They wanted to achieve deeper market penetration and earn extra revenue for the company. However, this backfired as the clones were competing with Apple’s Macs and reduced Apple’s own sales.

1996-1997: Steve Jobs Saves the Day

In 1996, Spindler was replaced by Gill Amelio. Amelio implemented more layoffs and cost-cutting measures to try and keep the company afloat. It was clear that Apple was dying a slow and painful death. They just could not keep up with how quickly the tech industry was changing.

While Apple had experienced initial success with the Apple II, once competitors developed similar and more stable technologies, Apple could do little to stop the inevitable. It had lost the element of surprise.

Realizing this, Amelio tried to improve Mac OS, but nothing was working. In a last-ditch effort, he chose to approach Steve Job’s NeXT and its operating system. He also decided to bring Steve Jobs back to Apple as an advisor.

In July 1997, Gil Amelio was fired, and Jobs became the interim CEO. He began restructuring the company’s product line, creating a dream team to drive up innovation. They decided to launch just four computers, the iMac, Power Mac, iBook, and the PowerBook.

Furthermore, he partnered with Microsoft agreeing to release new versions of Microsoft Office for the Macintosh. In exchange, Microsoft made a $150 million investment in non-voting Apple stock.

In November, Apple introduced the Apple Online Store launching a new build-to-order manufacturing strategy. They closed off the year, having sold 80,000 units of their four products, creating a constant income stream for the cash-strapped company.

Apple Business Model Canvas: The Dark Days

1998-Present: Return to Profitability

1998-2007: moving beyond the pc & key acquisitions.

In August 1998, Apple introduced a new all-in-one computer similar to the Macintosh 128K: the iMac. The iMac had modern technology and a unique design. Within 5 months, it had sold almost 800,000 units.

Apple made several vital acquisitions throughout this period:

• In 1998, Apple bought Macromedia’s Final Cut software. This was a move into the digital video editing market.
• In 2001 they bought Spruce Technologies, a DVD authoring company that had developed a software called DVDMaestro. This software was a direct competitor to Apple’s own newly released DVD Studio Pro 1.0. Apple wanted to incorporate the features of DVDMaestro into its new DVD Studio Pro 2.0 software.
• In 2002, Apple purchased Nothing Real’s Shake app. It was a high-end video compositing software application that enabled Apple to integrate it into their computers for better video quality.

2001-2003: First Official Store, iPod, and iTunes

In 2001 after years of development, Apple released the Mac OS X aimed at the average consumer and the professionals. In May that same year, Apple opened the first official Apple Retail Stores in Virginia and California.

A few months later, in October, Apple announced the iPod portable digital audio player and started selling it on November 10. The iPod was a phenomenal success. In 2003, Apple’s iTunes Store was launched, offering online music downloads for $0.99 a song. Users could integrate iTunes and the iPod.

Soon Apple became the market leader in online music services.

2007-2011: The iPhone, App Store, iPad & iCloud

In June, Apple introduced what was to be their best-selling product yet, the iPhone. During the Macworld Expo, Jobs announced that Apple Computer Inc. would now be called Apple Inc. The reason was that the company was now focusing on mobile electronic devices and not just PCs.

This led to the development of the iPhone, iPod Touch, and the iPad. Apple became the first to achieve a mass-market adoption of the touch screen user interface with pre-programmed gestures. Additionally, Apple expanded its business model and introduced its App Store to purchase third-party software applications.

The iCloud was launched in 2011. The online storage and syncing service for music, photos, files, and software solidified Apple’s Ecosystem. Users of Apple products could seamlessly move from one device to another and still have access to their data. This signaled the beginning of the Apple we know today.

Unfortunately that same year, Steve Jobs passed away and with his passing Apple began to lose some of its competitive edge and innovation.     

Apple Business Model Canvas: The Profitable Days

The Apple we see today is a far cry from the highly rebellious, non-conformists start-up it was under the guidance of Jobs. Jobs’ greatest skill was relentless internal competition. While Tim Cook (who now leads Apple) has focused on making the company profitable, it’s clear that he follows a more conservative approach.

The danger for Apple now is that 90% of its business is now centered on one product; the iPhone. Apple has fallen into the classic monopoly trap where because of its dominance they’ve stopped innovating and are now focusing instead on protecting their core business.

History is clear, monopoly is never a good place to get comfortable. Just look at Microsoft, it was late to the internet, late to the cloud, and late to portable music players, all because it was trying to protect its Windows software.

Time will tell whether Apple will survive a post-mobile phone era with this strategy.

• https://finance.yahoo.com/quote/AAPL/
• https://www.marketing91.com/business-model-of-apple/
• https://www.bailiwickexpress.com/jsy/life/technology/apple-timeline-key-milestones-companys-40-year-history/
• https://www.nydailynews.com/news/national/apple-turns-40-timeline-tech-giant-evolution-article-1.2581048
• https://www.macworld.co.uk/feature/history-of-apple-steve-jobs-mac-3606104/
• https://www.investopedia.com/articles/personal-finance/042815/story-behind-apples-success.asp
• https://www.nytimes.com/2015/01/30/business/how-and-why-apple-overtook-microsoft.html
• https://www.investopedia.com/articles/markets/111015/apple-vs-microsoft-vs-google-how-their-business-models-compare.asp
• https://medium.com/age-of-awareness/what-made-apples-1984-advert-so-successful-dc5af1b073f3
• Tags: apple , business model canvas , cloud services , ibm , itunes , microsoft , steve jobs , wal-mart

Most Popular

Netflix’s Business Model Canvas Evolution (2021)

McDonald’s: Business Model Canvas, its evolution and company’s history

18 Must-Read Business Books

Check how Amazon’s main focus allowed the company to thrive. Amazon’s Business Model Canvas and how it changed from the very beginning.

• Business books reviews (27)
• Business Ideas (8)
• Business Model Canvas (9)
• Business models of large companies (26)

Business Tools

Download Free Business Model Canvas Template in Word / docx / PDF / SVG format

Inspire yourself with Business Ideas Generator

Get INSPIRING stories and TIPS on making your business model PROFITABLE!

• Recently trending business ideas
• Inspiring business models
• Examples of profitable businesses from all over the world

Related Posts

Twitter: Becoming The World’s Fastest Information Hub

Today, Twitter is one of the most recognizable and influential social media platforms on the planet. As of February 2022, Twitter is valued at $27.48

The Business Model Canvas Explained: Cost Structure

The last (but not least) segment on the Business Model Canvas is the cost structures. In this segment, you must ask yourself, how much will

The Business Model Canvas Explained: Key Partners

No man is an island; the same goes for your business. They are other companies, 3rd parties, and people that you will need to achieve

The Business Model Canvas Explained: Key Resources

On the Business Model Canvas, the Key Resources segment refers to the supplies, assets, and materials required to deliver your value proposition to your customer

Privacy Overview

Apple iPhone

In 2007, apple launches the iPhone and combines an internet browser, a music player, and a mobile phone in one high-end, multitouch device without a keyboard. It ushers in the era of the smartphone.

In 2007, Apple founder Steve Jobs famously introduced the iPhone at the Macworld 2007 convention as a revolutionary device that “would change everything.” Its initial selling price was a hefty $499, but 270 thousand units sold its first weekend and 6 million units in its first year of production.

Apple’s iPhone ushered in the era of the smartphone, the world of mobile-first and constant connection, leading the way for mobile technology to dominate and reform day-to-day existence. Apple’s iPhone has consistently been more expensive than competing devices. However, Apple continually packs new features and technology into its iPhone in order to keep its products from seeming like a commodity.

Despite high prices, Apple maintains a high degree of control over production costs in its supply chain. This combination of controlled costs, high-end positioning, and continuous technology innovation have resulted in gross margins of 60 to 70% in the last 10 years.

1. Delight and surprise the high end of the market

Apple positions the iPhone at the high end of the spectrum, knowing that the price will put it out of reach for the majority of the market. The phone combines an aspiration feel with design, technology, and simplicity, and capitalizes on its love-mark brand.

2. Control costs

Apple does not manufacture the iPhone, but keeps its production costs low by controlling its supply chain. Due to the popularity of the device, Apple forces its suppliers to keep costs low as well as maintain privacy and secrecy over their devices.

3. Maximize margins and profits from high end market share

The iPhone’s profit margins have remained between 60 to 70% over the past 10 years. At its peak, Apple captured 94% of the smartphone industry’s profits, despite only accounting for 14.5% of sales.

4. Continuously reinvent and surprise the high end of the market

Since 2007, Apple has released 12 generations of iPhones. While Apple isn’t always the first to develop many of the iPhone’s technological innovations, it often delivers the best: multi-touch screen, dual cameras, Apple Pay, Siri, iMessage, FaceTime, facial recognition.

+ The App Store

The iPhone initially launched without the App Store, which was opened in 2008 with 500 applications. As of 2019, the store featured over 1.8 million apps. The available applications and number of developers provide Apple with an additional competitive advantage as described in the Resource Castle Platform.

About the speakers

Download your free copy of this whitepaper now, explore other examples, get strategyzer updates straight in your inbox.

• Skip to primary sidebar
• Skip to content
• Skip to footer

Denis Oakley & Co

I HELP BOLD LEADERS TRANSFORM THEIR BUSINESSES AND THE INDUSTRIES THEY COMPETE IN

September 13, 2018 By Denis Oakley

What is the Apple Business Model Canvas?

What is Apple’s business model? In this video, I describe how Apple makes money by working through all 9 components of Apple’s business model canvas.

Apple creates consumer electronic products that have amazing design and usability and bundles them with software products to lock consumers in. Because they are so attractive they deliver great status and productivity to users leading to a premium price.

Customer Segments in the Apple Business Model

Apple’s business model targets mass-market consumers. That is hundreds of millions of consumers. They may be middle class and fairly affluent. It may be marketed as a premium product but it is a mass-market electronic good.

There are smaller customer segments that it focuses on for non-handheld products. Designers and entrepreneurs both use and love Mac products but in 2019 this is a relatively small proportion of Apple’s revenue.

In the tables below Apple’s customer segments are broken down across a number of different measures, geographic, demographic, behavioural and psychographic

Apple’s Customer Segmentation – Geographic

Apple’s customer segmentation – demographic, apple’s customer segmentation – behavioural, apple’s customer segmentation – psychographic, value proposition.

The Apple Value Proposition revolves around three core concepts.

Think Different

• Tech That Works

Your Privacy is Safe with Us

“Think different” sets Apple apart. In the years since the original advert, shown below, it has developed into a philosophy that spawned the design style

The value proposition is that Apple is for the people who Think Differently , who see the world differently, who change it. Creatives, Entrepreneurs and Hipsters.

Their Apple devices are a way of letting them make their statement about who they are and what they are doing. The design, which many people say is important, is an outward and visible sign of the value proposition. Not the value proposition itself

Tech that Works

Living in a Microsoft environment before I got my first iPhone I remember how difficult it was to get things to work. It took me a day once to install a printer for an insurance company. I spent hours trying to get music onto my Creative music player. Technology promised lots of gains, but you had to put the hours in to get the technology to work to get those gains.

What Apple brought, brings, to the table, is technology that is seamless and integrated. Play around with Google for a while and you quickly discover that their products aren’t really integrated. Google Plus is dead but I still had to go somewhere that looked a lot like Google Plus to change my YouTube channel name today. Microsoft Windows has a UI that is half sleek and modern , and then suddenly jumps you back 20 years due to legacy coding issues.

The Apple business model is in large part the experience of using Apple products. Google’s is to consume advertising – which is why the experience isn’t nearly so good.

This is a major differentiation between it and it’s Android competitors. Apple controls the software, the hardware and the content. This means that it is able to finely tune the experience that users have.

In contrast, Samsung and other users of Android OS have to face the fact that they control the hardware, have some control over the version of Android that they use and have little control over the apps on the Play Store. This results in a far less joined up, or easy, experience for users.

Because Apple is the only company able to offer this it is major support for the premium that it is able to charge.

Apple sells Software and Hardware. It doesn’t sell advertising or make a market in data. It also builds all of its products into a single consistent eco-system or walled garden.

Once you are in you are safe. You stay safe. Apple doesn’t take your data. Apple makes sure that no one else takes your data unless you explicitly give them permission to do so.

This creates a core value proposition that separates them from Google. Google’s whole business model is based on taking your data and selling it to other people.

We can break these down into a number of smaller value propositions which Apple delivers to customers through its hardware and software products

Sense of Achievement

For many, there is a sense of achievement in getting an Apple Phone. When billions have a $50 smartphone being able to afford a phone that can cost over $1,000 is important. This is especially so for those who started off with an Android phone and were able to, through hard work or endeavour, to be able to achieve one. It’s a visible mark of success and is treated as such.

Self Expression

The self-expression component of Apple’s value proposition is an identification of the user with Apple’s brand values. Having an Apple product makes you hip, cool, an entrepreneur, creative, individual, someone who thinks different, successful. Any of the or all of these may apply to particular individuals. Invariably, individuals use Apple products to show to the world that these are important truths about them

Speed of Service

Speed of service is an important value proposition for Apple’s customers. This is not really about how fast your new Apple phone is delivered. It’s about how fast you can set it up and start using it. It’s about how quickly you can learn to use it. It’s about how smoothly the product has an impact on what is important in your life and how it makes you more efficient and effective.

“I waste less time trying to do stuff now that I have an Apple”

The efficiency component is deeply related to Apple’s speed of service value proposition. It’s not about the tech. Apple is notoriously behind many other hardware manufacturers in its tech.

It’s about how the tech interacts with your life. Is there friction between the tech and you? If there is then the technology is not really delivering the value that the hardware claims. This is a big part of ‘design’. It’s about ergonomics and usability. It’s stripping waste, or muda , out of every customer interaction. Those milliseconds and seconds stack up to a far more efficient customer experience

Advanced Features & Capabilities

This is all the cool tech stuff. Retina displays. Multiple Cameras. Fingerprint sensors. They are important but other manufacturers have them – and often better

So despite Apple entering the smartphone and tablet categories first, it is happier to be a fast second. The value proposition is a hygiene factor. Not a critical success factor.

Finally recreation. People play lots of games on Apple devices. They watch lots of videos. But the consumers who buy them are predominantly wealth successful business people.

Recreation on Apple devices is a much lower importance value proposition for many of them. For example, I have Netflix on my iPhone, no games and almost every app contributes to me doing my job better.

Apple Products

Apple has four groups of products

Operating Systems

Accessories.

• iPhone smartphone
• iPad tablet computer
• Mac personal computer
• iPod portable media player
• Apple Music
• Airpods – wireless headphones
• Apple Watch – Smartwatch
• AppleTV – digital Media player
• HomePod – smart speaker

Distribution Channels

Apple uses a number of powerful promotional channels in the Apple business model, several of which have now been copied so much that they no longer differentiate Apple. These include the packaging of Apple products and the genius bar layout of apple stores.

These include:

• Apple Stores
• Apple’s websites
• Third Party Stores
• Telecom Companies

Apple Stores make a statement in a way that their competitors do not

Apple also controls the distribution of its products through its own website

Third-party stores have their brand and image tightly controlled so that they support the Apple brand.

Finally, Apple phones and tablets are sold through telecoms companies – bundled with the SIM and data required to make the most out of the device.

Marketing Channels

Apple generates an immense amount of PR and this is supported by strong brand awareness campaigns ‘shot with iPhone’ is a classic and long-running campaign.

Just as importantly – more so even – is the word of mouth. Because of the importance of self-expression and achievement in Apple’s value proposition users need and want to talk about their ownership of an Apple product.

If no one knows that they own an Apple device then they don’t get as much benefit from it. So they talk and often evangelise.

The final component of Apple’s word of mouth is the importance of groups.

“People like us do things like this” Seth Godin – Marketing Guru

Creatives, entrepreneurs, hipsters and business people have all adopted Apple products as part of their definition of group membership.

You can’t really be a ‘proper’ designer unless you use an Apple product. This isn’t true, but to members of a group, and especially to aspiring members of a group it can seem so.

Customer Relationships

With over 1.6 billion devices sold Apple is a mass-market consumer company by any definition.

Apple has a number of channels where they manage customer relationships

Telephone Customer Support

Chat and Online Customer Support

These are all great and are typically much better than competitors. Staff are onshore, rather than offshore, and as can be seen often match the demographics of target customers. Compare this to a lowest cost outsourced customer service department at Verizon.

However what makes the biggest difference in Apple’s customer relationships are:

• Evangelists

The evangelists have been mentioned in the section on Marketing Channels. They provide a similar service in the customer relationships – advocating for Apple, as unpaid salespeople. They will often also provide a front line level of support for other users.

Design is critical. Because Apple is a product-led company – they focus on building great products and expect success and scale to be based on the product – a great deal of the need for customer support is designed out.

In many ways, customer support, an important part of customer relationships in the business model canvas, is a failure of product design. Consumers contact support when something goes wrong. If you can design out failures…. then you need far less customer support.

Revenue in Apple’s Business Model

Apple’s business model is hugely cash generative. It makes more profits and has a stronger cash flow than Amazon, Google and Facebook combined.

Apple’s $60B of TTM operating income was nearly 50% more than the combined operating income of Alphabet ($24B), Facebook ($15), and Amazon ($3B). Above Avalon

So what does Apple sell? How does Apple monetise its business model?

• Apple Watch
• iTunes Store,
• Garage Band

Almost all of those are large enough to be a large company in their own right.

Key Resources in the Apple Business Model

The most important key resources in the Apple Business model are:

• Product First Design Philosophy

Supply Chain

• Walled Garden

Apple’s Product First Design Philosophy

If you look at Apple’s products you will find that they are often not better, on a technical sense

If you look at Apple’s products you will find that they are often not better, on a technical sense than its competitors. They are also priced similarly to the competitors’ premium products.

Apple, despite this, manages to extract far more profit from its products and services than its competitors.

This is a key feature of the Apple business model. When you charge the same price for a similar service and make a lot more money from it something must be going on under the hood.

The difference is Apple’s Product First Design philosophy.

This starts from the premise that they are going to make the best possible product for their market segment. Unlike competitors, they don’t initially think about scale and volume.

The focus is on how to make a product that will delight and inspire its users.

Those are the design constraints. Most other companies use budget and manufacturability as design constraints.

For them, a functional product is good enough. Customers understand that it is a functional product and treat it as one. In contrast, Apple’s focus is on creating a product that excels.

This is captured in their core values

• We believe that we’re on the face of the Earth to make great products.
• We believe in the simple, not the complex.
• We believe that we need to own and control the primary technologies behind the products we make.
• We participate only in markets where we can make a significant contribution.
• We believe in saying no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us.
• We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.
• We don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change.

 The result of this is that Apple’s business model creates products that work well. I mean well on a very deep level. They are hard to design, easy to manufacture and easy to use.

There is a significant amount of risk in doing this. If their idea of a product is wrong, if it doesn’t gel with the times, then they could lose a lot of money.

It’s a philosophy of perfection and, after their market entries, means that they will rarely be at the forefront of technology.

Design perfection means that they take longer to bring products to market. If they didn’t then they would lose the ease of use and many of the subtle components of the value proposition that makes the Apple business model so successful.

This key resource is composed of hugely talented people and a number of research and development labs working to bring products and services to fruition.

The second key resource that Apple has is its supply chain. In some ways, this is a misnomer as Apple, as part of the design of its business model, has positioned itself as a designer of products

It has decided to buy the manufacturing of its products as a key resource delivered by key partners (ie Foxconn) rather than make them itself.

In contrast, many computer hardware manufacturers are, well, computer hardware manufacturers.

They have to spend a great deal of cash building and running factories, and then even more time focusing on the management of their supply chain to make sure that it works efficiently.

Imagine we have a management team that has a limited amount of time and attention.

It can decide to spend some of its time on manufacturing and some on design. That’s what most companies do. They produce good products as a result.

What Apple does in its business model is to focus ‘all’ its time on design. It then gets Foxconn to spend ‘all’ its time on manufacturing and supply chain.

As a result, it gets far better outcomes in both design and manufacturing than other computer hardware manufacturers do.

This also nicely ties in with the design focus of Apple’s business model.

Much of the visible design is focused on the consumer experience. A great deal of the invisible design is focused on the manufacturability of the product.

Because Apple gives another party critical control over a key part of its business model there is a huge risk of things going wrong.

The manufacturing design, done in Cupertino, work hard to design out as many faults as possible in the product. They are easier to manufacture as a result, and this, in turn, reduces the number of issues of product failure and reduces the need for customer support.

The Walled Garden

The final resource that the Apple Business Model has is the walled garden. This could also be called the Apple Ecosystem

Everything works smoothly together.

This delivers a key part of Apple’s value proposition. It’s easy, unlike Windows or Android

If we look back into history Microsoft Windows created a platform that worked with any piece of hardware and allowed almost any software to run on it.

The operating system was the middleware that allowed everything to happen. The problem was that hardware designers and software developers cared only about their own products and didn’t often follow standards.

That meant that Windows was often a frustrating product to use as software and devices didn’t work, couldn’t be installed easily or crashed with the famous blue screen of death

Apple in an attempt to differentiate itself from Microsoft kept tight control of the ecosystem – perhaps because early users were creatives and not good at IT (Slanderous assertion I know) – and ensured it was user-friendly in a way that Microsoft did not.

This was rolled over into the Apple Store when the first iPods and iPhones were released. It then became an increasing part of the Apple experience. Everything played nicely together.

That then provided additional benefits.

Because Apple made its money from hardware sales it has no need to mine customer data and sell it to other people.

Apple can give users privacy. It also provides them with safety and security from many of the threats on the internet.

Finally, the more Apple products you use the greater the synergy you have. With each product, you add you get fewer irritations and hitches in your electronic life.

Key Activities in the Apple Business Model

Apple has two key activities in its business model. The first is the design. The second is branding.

We’ve spoken a great deal about design already, so I won’t go into too much detail there.

Why did I talk about branding being a key activity rather than marketing?

Apple is fundamentally about associating their products and services with emotional feelings in its users.

Apple wants its users to feel successful. Apple wants them to feel that they have achieved. It wants them to feel different. It wants them to be special

This is not something that can be done with traditional feature-based product marketing.

Branding thus connects people who want to be a ‘Mac’ and creates the need to buy the product in them.

It is all about who they can be and the lifestyle that they will become part of if only they buy into the Apple lifestyle.

Branding also works well because Apple controls a big chunk of its direct distribution channels – the Apple Stores.

Key Partnerships in Apple’s Business Model

There are two groups of key partners in the Apple business model.

These are the:

• Contract manufacturers
• Telecoms companies

Telecoms Companies in the Apple Business Model

Whilst Apple does have 500 shops worldwide this is a small number compared to the shops of other mobile phone companies, telecoms companies and resellers.

Expanding this network to enable everyone who wants to buy a phone would be cost prohibitive.

Apple’s key sales channel is selling phones through telecoms companies. They bundle the Apple iPhone with a subscription and let consumers pay for the phone over a couple of years. They provide the consumer financing that lets many people afford an expensive phone.

Apple outsource sales to the phone companies and uses their distribution networks and million of direct customers to achieve scale far faster than it could through its own store and website distribution service.

Contract Manufactures

Apple made the decision to buy manufacturing services rather than making its own. It derisked this by focusing on its design and quality control. As a result it freed up a huge amount of cash on its balance sheet.

It thought, correctly, that by using a manufacturer that it had a deep long term relationship with that it could get lower prices, a lower cost per unit, than if it ran factories itself.

Costs in the Apple Business Model

Apple employs some of the most expensive designers in the world in one of the most expensive locations in the world.

Equally, it spends a great deal on branding and on sourcing high-quality components.

Does it make sense then to say that Apple is a cost-driven company?

I think it does.

The expensive designers mean that Apple’s products hit the value proposition sweet spot demanded by their customers. As a result, Apple makes more $ per designer’s time than competitors.

The expensive branding means that it has to spend far less on tactical marketing and sales.

The expensive components deliver a superior user experience that generates intense loyalty and significantly reduces the retention cost and churn of apple users.

As a result, this focus on spending a lot on very valuable activities means that the actual cost of making Apple products is remarkably low and this is the fundamental reason for Apple’s incredible profitability.

Cost is a strategic goal, not a tactical one in the Apple business model

That’s the secret of Apple’s business model!

• Marketing Experimentation
• What is the Tencent Business Model?
• Business Model Design & Customer Value
• Value Proposition Design Questionaire
• Should a Brand be Desirable?

About Denis Oakley

Explorer | Trail Runner | Mountain Lover

'Big' companies are civilisation. I stay in the wilderness guiding entrepreneurs and startups on their journey to becoming 'Big'.

Then I head back to the frontier

Strategy | Marketing | Operations

Ready to start?

I help entrepreneurs transform their industries through wiser choices

Outcome : More Traction, Bigger Rounds, Better Products

Method : Problems, Customers, Business Models, Strategy

Apple Business Model (2023) | How Does Apple Make Money

5 minutes read

How does the Apple business model canvas continue to find success in the market? One of the world’s most popular brands, Apple dominates the tech industry with its top-quality products and software. Users choose to upgrade their iOS-powered devices year after year thanks to the company’s effective marketing and production tactics. This article reviews the inner workings of the Apple business model.

A Brief History of Apple

Apple founders Steve Jobs and Steve Wozniak officially launched the brand on April 1, 1976. The partnership of the two college dropouts brought forth sweeping ideas to motion. Working from Job’s garage, the pair aimed to create computers that didn’t take up much space in homes and offices. They introduced the hand-built Apple I computer as their first product, featuring only hardware modules.

Jobs and Wozniak later presented the Apple II in 1977, shifting to a fully assembled personal computer. It retailed for $1,298 during release and featured a redesigned TV interface that displayed simple text and graphics. It bested some of that year’s competition and became a bestseller in the tech industry. They opened the product to the public and amassed a whopping $118 million in 1980.

Wozniak left the company in 1983, followed by Jobs in 1985 after an attempted coup against then-president John Sculley. However, Steve Jobs bought back Apple in 1997 to save the brand’s dropping market shares. His revolutionary tactics improved the numbers, eventually paving the way for the first iPhone to be introduced in 2007.

The Apple business model canvas stayed unbeatable through it all, allowing the company to reach the trillion-dollar mark in 2018. iOS devices and software became a household name, doubling its market cap in 2020. Today, aspiring businesses can take pointers from the highly successful Apple business model.

Apple Business Model Canvas

Apple Inc. is a world-renowned technology company that delivers creative and aptly differentiated products for a global audience. The business model utilizes an effective framework, ensuring that the brand maintains its reputation as an industry leader.

This section presents the canvas for Apple’s business model created using the Boardmix productivity platform.

Value Proposition of Apple

The brand's value proposition lies heavily in design, branding, and innovation. Banking on creativity, the brand sets its products and services apart using aesthetics, advanced technology, and user experience. The build quality and sleek appearance of the iPhone, for example, makes the device recognizable in an instant. Additionally, the superior interface makes the gadget suitable for people of all ages.

In terms of the hardware to software to services ecosystem, Apple manages to provide seamless integration across all these aspects. As a result, the user can switch between devices without losing their work or progress. Adding to its strengths is the user-friendly operating system, iOS. It’s intuitive and easy to navigate, which helps customers manage their usage effectively.

Customer Segments of Apple

The diverse clientele of the brand is a testament to the effectiveness of the Apple business model canvas. Its customer segment primarily consists of product buyers and service subscribers who utilize Apple TV, iCloud, and other products. There are also product developers looking to monetize their creations using the platform.

Key Partners of Apple

At the core of Apple's business model lie crucial partnerships that uphold the brand's impeccable standards and product quality. Key collaborators encompass suppliers and manufacturers who meticulously provide and assemble components. Additionally, strategic alliances with content providers are integral to ensuring users access the exceptional service and quality they expect. These symbiotic relationships underpin Apple's commitment to delivering top-tier products and experiences to its global customer base.

Key Activities of Apple

Apple focuses on several key activities that boost business performance, including design, development, and manufacturing. The company invests significantly in research and development (R&D) to leverage new and up-and-coming technologies. The engineering and production teams collaborate to create seamless products that meet customer expectations and needs.

In addition, Apple strengthens its marketing efforts by implementing strong branding tactics. The market is always abuzz with the company’s latest products. With a global network of distributors, the brand is a household name in all parts of the world.

Customer Relationships of Apple

The brand sells billions of devices, making it a mass-market provider in the tech industry. Its customer relations teams cater to consumers through various avenues like social media and the official website. It also maintains a loyal customer base by offering services via the Apple Store and a robust reward system.

Key Resources of Apple

Apple’s supply chain enables a more streamlined production scaling, with different teams working seamlessly to create high-standard products. Besides its strong brand image, Apple also banks on its pool of engineering and design talents. Additionally, the company has a healthy portfolio of trademarks and patents that boost the value of the brand.

Channels of Apple

Apple's business model encompasses a diverse array of distribution channels to cater to its extensive customer base. Boasting over 500 retail stores worldwide, customers have the opportunity to experience and test devices firsthand before making their purchase decisions. This brick-and-mortar presence complements its robust online presence, ensuring accessibility and convenience for consumers.

The company also has an excellent e-commerce platform that enables customers to select pick-up or home delivery for their purchases. Lastly, the brand enlists authorized carriers and sellers to make Apple products widely available for different types of customers.

Cost Structure of Apple

It’s a known fact that the Apple business model canvas relies heavily on R&D. As such, it incurs a huge expense in this aspect, including marketing and advertising. However, despite this heavy investment, the company has a commendable supply chain management. Its efficiency, strong branding, and product pricing allow Apple to offset costs effectively.

As of 2022, the company has over 160,000 employees, which means salaries take a significant cut of the expenditures. The company also pays for platform maintenance and payment processing fees, ensuring ease and convenience for customers.

Revenue Streams of Apple

Apple Inc.'s primary revenue stream predominantly derives from product sales, notably the iconic iPhone, iPad, Apple Watch, Mac, and an array of innovative devices. In tandem with its hardware offerings, the brand provides an array of complementary services, encompassing Apple Music and the seamless convenience of Apple Pay.

Beyond these core channels, Apple enjoys supplementary income from royalties stemming from its rich reservoir of intellectual properties. Additionally, the sale of accessories and peripherals, including chargers and cables, contributes significantly to the company's diverse revenue portfolio. This multifaceted approach underscores Apple's robust financial ecosystem.

How Does Apple Make Money?

The Apple business model reveals the brand's dedication to designing and innovating products and services for a diverse clientele. The company understands customer expectations and needs and answers every demand effectively. In return, Apple loyalists continue to patronize their devices, accessories, and software year after year.

Apple's strong value proposition paired with a deep understanding of its customer segments helps the company generate a sizable revenue. On top of the price tag on products and services, the company makes money off device care like warranties. Customers are willing to add a few more dollars to acquire brand-recommended apps and third-party accessories.

With respect to gross margin, subscription services take the highest revenue across all channels. However, the most profitable source is understandably the product sales.

Key Takeaways

The Apple business model canvas is highly successful, and it can be attributed to the company’s emphasis on design, innovation, and optimized user experience. The company leads the market with its strong branding, backed by the guaranteed quality of products and services.

Apple has a streamlined supply chain and a network of stakeholders that provide expertise and resources. As a result, the brand continues to dominate the tech industry in different parts of the world. Since its inception, the brand managed to stay on top and generate significant revenue by selling top-notch products and services. Overall, Apple has a framework worth emulating.

You can get an in-depth view of the Apple business model canvas when you use the Boardmix platform. The productivity app provides outstanding insight regarding the tech powerhouse, which you can take inspiration from for your project. Get the Boardmix application and find the canvas template without hassle!

References:

https://worktheater.com/explaining-the-apple-business-model/

https://businessmodelanalyst.com/apple-business-model/#Apple%E2%80%99s_Customer_Relationships

https://blog.gitnux.com/companies/apple/

Join Boardmix to collaborate with your team.

Walmart PESTLE Analysis: A Deep Dive into External Influences

Coca-Cola PESTLE Analysis Demystified: Unveiling Growth Strategies

Zara PESTLE Analysis: Unlocking Success

Presentations made painless

• Get Premium

Apple: Business Model, SWOT Analysis, and Competitors 2023

Inside This Article

In this blog article, we will delve into Apple's business model, conduct a SWOT analysis, and explore its competitors in the year 2023. Apple, a renowned multinational technology company, has established a unique business model that focuses on innovation and premium products. By analyzing its strengths, weaknesses, opportunities, and threats, we can gain valuable insights into Apple's current and future position in the market. Additionally, we will examine the competitive landscape to understand the challenges Apple faces from its rivals. Join us as we explore Apple's strategies and its outlook for the coming years.

What You Will Learn:

• Who owns Apple and the structure of the company's ownership.
• The mission statement of Apple and its guiding principles.
• How Apple generates revenue and the sources of its income.
• An explanation of the Apple Business Model Canvas and how it applies to the company.
• An overview of Apple's main competitors and the industry landscape.
• A comprehensive SWOT analysis of Apple, examining its strengths, weaknesses, opportunities, and threats.

Who owns Apple?

Major shareholders.

Apple is one of the most valuable companies in the world, but who exactly owns it? Let's take a closer look at the major shareholders of Apple.

At the top of the list is typically institutional investors, such as mutual funds, pension funds, and other large investment firms. These institutions own a significant portion of Apple's shares. Some of the major institutional shareholders include The Vanguard Group, BlackRock, and State Street Corporation. These organizations manage funds on behalf of millions of investors, including individuals and retirement accounts.

Another notable group of shareholders is Apple's executive team, including the CEO, CFO, and other key executives. These individuals often receive stock options and grants as part of their compensation package. As a result, they have a vested interest in the company's success and hold a considerable number of shares.

Additionally, individual investors also own a portion of Apple's stock. These investors can range from small retail investors to high-net-worth individuals. While their ownership may not be as significant as institutional investors, they collectively contribute to the overall ownership structure of the company.

Founders and Inheritance

Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1976. However, Ronald Wayne sold his shares back to Jobs and Wozniak just a few weeks after the company was formed, making Jobs and Wozniak the primary founders and shareholders.

Over the years, Steve Jobs became the face of Apple and played a pivotal role in its success. However, he sold all of his shares in the company in 1985 after being ousted from Apple. Jobs returned to the company in 1997 and was instrumental in its turnaround, but he did not initially own any shares. As part of his return, he negotiated a deal to buy back a significant number of shares, which eventually made him the largest individual shareholder of Apple.

Following Steve Jobs' passing in 2011, his shares were transferred to the Steve Jobs Trust, managed by his widow, Laurene Powell Jobs, and other family members. The Trust remains a major shareholder in Apple, representing the late co-founder's vision and legacy.

While Apple is a public company with shares traded on the stock market, its ownership is widely distributed among institutional investors, executive team members, individual investors, and the Steve Jobs Trust. This diverse ownership structure reflects the broad interest and confidence in Apple's future, as well as the company's commitment to delivering value to its shareholders.

What is the mission statement of Apple?

The mission statement of apple: innovate and inspire.

Apple's mission statement is concise, yet powerful: "To bring the best user experience to its customers through innovative hardware, software, and services." This statement encapsulates the essence of Apple's purpose and the driving force behind its success.

Apple's commitment to innovation is evident in every product they release. From the iconic iPhone to the sleek MacBook and the intuitive Apple Watch, Apple consistently pushes the boundaries of technology. Their innovative approach not only sets them apart from competitors but also shapes the industry as a whole.

However, Apple's mission goes beyond mere technological advancements. They strive to inspire their customers by creating products that seamlessly integrate into their lives. Apple products are designed to be intuitive and user-friendly, providing an unparalleled user experience. This dedication to simplicity and usability is a testament to Apple's mission of delivering the best experience to its customers.

Apple's mission statement also emphasizes the importance of hardware, software, and services working together harmoniously. This holistic approach is evident in their ecosystem of devices, operating systems, and services, which seamlessly integrate and enhance each other. By creating this ecosystem, Apple aims to provide a cohesive and seamless experience for its customers, regardless of the device they are using.

Moreover, Apple's mission statement highlights their commitment to service excellence. Beyond offering innovative products, Apple understands the importance of customer support and satisfaction. Their extensive network of Apple Stores, online resources, and customer service channels ensures that customers receive the assistance they need promptly and efficiently.

In conclusion, Apple's mission statement reflects their dedication to innovation, user experience, integration, and exceptional service. It serves as a guiding principle for the company, driving their continuous pursuit of excellence and inspiring their customers worldwide.

How does Apple make money?

Sales of iphones.

One of the primary ways Apple makes money is through the sales of its flagship product, the iPhone. With each new release, Apple generates significant revenue from the sale of these smartphones. The company's ability to consistently innovate and deliver cutting-edge technology has created a loyal customer base that eagerly awaits new iPhone models. Apple's iPhones are known for their premium quality, sleek design, and advanced features, which allows the company to command a premium price and generate substantial profits from each device sold.

App Store and Services

Another major source of revenue for Apple is its App Store and various services. The App Store offers a vast selection of applications and games, both free and paid, which users can download onto their iPhones, iPads, and Macs. Apple takes a 30% cut from the sales of paid apps, in-app purchases, and subscriptions, thereby generating significant revenue. Additionally, Apple's services such as Apple Music, iCloud storage, Apple Pay, and Apple TV+ also contribute to the company's revenue stream.

Mac Computers and iPads

While iPhones may be the most popular product, Apple also earns a substantial amount of money from the sale of Mac computers and iPads. Macs are renowned for their performance, user-friendly interface, and seamless integration with other Apple devices, making them a preferred choice among professionals, creatives, and students. Similarly, iPads have become increasingly popular due to their versatility, powerful features, and compatibility with a wide range of apps. The sales of these devices contribute significantly to Apple's overall revenue.

Wearables, Home, and Accessories

Apple's wearables, home, and accessories segment is another lucrative revenue stream for the company. This category includes products such as the Apple Watch, AirPods, HomePod, and various accessories like cases, chargers, and cables. The Apple Watch, in particular, has gained immense popularity as a leading smartwatch in the market. The seamless integration with other Apple devices, health tracking capabilities, and a vast array of apps make it a sought-after accessory. The sales of these products contribute to Apple's overall profitability.

Other Products and Services

In addition to the main revenue sources mentioned above, Apple also generates income from other products and services. This includes sales of iPods, Apple TV, iTunes content, licensing fees from third-party manufacturers, and more. While these may not be as significant as the primary revenue streams, they collectively contribute to Apple's overall financial success.

In conclusion, Apple's ability to generate substantial revenue stems from its diversified product and services portfolio. The sales of iPhones, along with the App Store and services, remain the primary sources of income. Additionally, Mac computers, iPads, wearables, home, and accessories, as well as other products and services, all contribute to Apple's overall financial performance.

Apple Business Model Canvas Explained

What is a business model canvas.

A Business Model Canvas is a strategic management tool that allows businesses to visually describe, analyze, and design their business models. It provides a comprehensive framework to understand the key components of a business and how they interact with each other to create value for the company.

Key Components of the Apple Business Model Canvas

Customer Segments : Apple primarily targets premium customers who value quality, design, and innovation. They focus on different customer segments such as individual consumers, businesses, educational institutions, and creative professionals.

Value Proposition : Apple's value proposition centers around creating user-friendly, innovative, and aesthetically pleasing products. They emphasize the seamless integration of hardware, software, and services to deliver a unique user experience. The company positions itself as a premium brand that offers superior quality and design.

Channels : Apple utilizes a multi-channel approach to reach its customers. They have a strong retail presence with Apple Stores worldwide, online sales through their website, and partnerships with authorized resellers. Additionally, Apple leverages advertising campaigns, product launches, and word-of-mouth to promote its products.

Customer Relationships : Apple focuses on building long-term relationships with its customers. They achieve this through excellent customer service, providing regular software updates, and offering warranty and repair services. Apple also encourages customer engagement through its Apple Support Communities and feedback channels.

Revenue Streams : Apple generates revenue through various sources, including the sale of hardware products such as iPhones, iPads, Macs, and wearables like Apple Watch. They also earn revenue from digital services like the App Store, Apple Music, iCloud, and Apple Pay. Additionally, Apple generates income from licensing agreements and partnerships.

Key Activities : Apple's key activities revolve around product design, development, and manufacturing. They invest heavily in research and development to create innovative products and maintain a competitive edge. Apple also focuses on marketing, supply chain management, and retail operations to ensure efficient delivery of their products.

Key Resources : Apple's key resources include its intellectual property, patents, trademarks, and brand reputation. They have a strong supply chain network that ensures a steady flow of high-quality components. Apple's human capital, including skilled designers, engineers, and marketing professionals, also contributes to its success.

Key Partnerships : Apple collaborates with a range of partners to enhance its business model. They work closely with suppliers to ensure the availability of quality components. Additionally, Apple has partnerships with software developers, content providers, and other technology companies to expand the ecosystem of its products and services.

Cost Structure : Apple's cost structure is mainly driven by research and development, manufacturing, marketing, and distribution expenses. They incur significant costs in designing and developing new products, as well as maintaining a global supply chain. Apple also invests in marketing campaigns to create brand awareness and promote its products.

The Apple Business Model Canvas provides a comprehensive overview of how Apple creates, delivers, and captures value in the market. By analyzing each component, it becomes clear that Apple's success stems from its focus on innovation, design, and delivering a superior user experience. Understanding the intricacies of the Apple Business Model Canvas can provide valuable insights for entrepreneurs and businesses looking to learn from Apple's success.

Which companies are the competitors of Apple?

Samsung is one of the biggest competitors of Apple in the global smartphone market. Known for its flagship Galaxy series, Samsung offers a wide range of smartphones that compete directly with Apple's iPhone. With a loyal customer base and innovative features, Samsung has managed to capture a significant market share, posing a tough challenge to Apple.

Google, with its Android operating system, is another major competitor of Apple. Android is the dominant mobile operating system worldwide, powering a multitude of smartphones from various manufacturers. Google's Pixel smartphones, in particular, directly compete with Apple's iPhone, offering similar features and capabilities. Additionally, Google's ecosystem of apps and services provides a compelling alternative to Apple's offerings.

While primarily known for its software and operating systems, Microsoft has been making inroads into the hardware market, directly competing with Apple. Microsoft's Surface lineup of devices, including the Surface Pro and Surface Laptop, offers a unique blend of tablet and laptop functionality, challenging Apple's iPad and MacBook range. With its focus on productivity and versatility, Microsoft aims to attract consumers looking for an alternative to Apple's products.

As a Chinese telecommunications giant, Huawei has emerged as a strong competitor to Apple, particularly in the global smartphone market. Known for its high-quality cameras and cutting-edge technology, Huawei's flagship smartphones, such as the P and Mate series, directly compete with Apple's iPhone. Despite facing some challenges in recent times, Huawei continues to innovate and expand its market presence, posing a significant threat to Apple's dominance.

While not traditionally seen as a direct competitor in terms of smartphones, Amazon competes with Apple in various other areas. With its Kindle e-readers and Fire tablets, Amazon offers affordable alternatives to Apple's iPad and other tablet devices. Additionally, Amazon's smart speakers, such as the Echo series with Alexa voice assistant, compete with Apple's HomePod. As Amazon continues to expand its product portfolio, its competition with Apple is likely to increase in the future.

Apple faces tough competition from various companies in different sectors of the technology industry. Samsung, Google, Microsoft, Huawei, and Amazon are just some of the major competitors vying for market share and consumer attention. As the competition intensifies, Apple will need to continue innovating and delivering exceptional products and services to maintain its position as a leading player in the highly competitive tech market.

Apple SWOT Analysis

Strong brand image: Apple has a powerful brand reputation that is associated with quality, innovation, and premium pricing. This allows the company to command a loyal customer base and maintain a competitive advantage in the market.

Robust ecosystem: Apple has successfully built an integrated ecosystem of hardware, software, and services. This seamless integration across its product lines, such as the iPhone, iPad, Mac, and Apple Watch, creates a superior user experience and encourages customer loyalty.

Innovation and design excellence: Apple is renowned for its commitment to innovation and groundbreaking product designs. The company consistently introduces new features and technologies that set industry standards and drive customer excitement.

Strong financial performance: Apple's financial performance has been consistently strong, with high revenue growth and profitability. This allows the company to invest heavily in research and development, marketing, and acquisitions, further strengthening its competitive position.

High price points: Apple's products are typically priced at a premium compared to its competitors. This can limit its customer base, especially in price-sensitive markets. Additionally, the high price points may deter some potential customers from purchasing Apple products.

Dependency on a few key products: Apple's success heavily relies on a few key products, particularly the iPhone. This dependence exposes the company to risks such as changing consumer preferences, market saturation, and increased competition.

Limited customization options: Apple's products are known for their sleek design and user-friendly interface, but they offer limited customization options compared to some of its competitors. This may deter customers who prefer more flexibility and customization in their devices.

Opportunities

Growing demand for wearable technology: The market for wearable devices, such as smartwatches and fitness trackers, is rapidly expanding. Apple's Apple Watch has gained significant market share and presents an opportunity for the company to further capitalize on this growing trend.

Expansion into emerging markets: Apple has the opportunity to tap into untapped markets, particularly in emerging economies where smartphone penetration is still low. By offering more affordable product options tailored to these markets, Apple can increase its market share and revenue.

Services revenue growth: Apple's services segment, including Apple Music, iCloud, Apple Pay, and the App Store, has been experiencing strong growth. The company can continue to leverage its robust ecosystem to further expand its services and generate additional revenue streams.

Intense competition: Apple operates in highly competitive markets, facing strong competition from companies like Samsung, Google, and Huawei. These competitors continuously introduce new products and technologies, which can erode Apple's market share and profitability.

Dependence on third-party suppliers: Apple relies on a global network of suppliers for the components and manufacturing of its products. Any disruption in the supply chain, such as natural disasters or political instability, can impact Apple's ability to deliver its products to the market.

Regulatory challenges and legal disputes: Apple operates in multiple countries and is subject to various regulations and legal disputes. These include issues related to privacy, antitrust, intellectual property, and taxation. Adhering to different regulations and resolving legal disputes can be time-consuming and costly for the company.

Key Takeaways

• Apple is owned by its shareholders, with the largest shareholders being institutional investors such as Vanguard Group and BlackRock.
• The mission statement of Apple is to design innovative products that enhance the lives of individuals, while also focusing on environmental sustainability and ethical practices.
• Apple primarily makes money through the sale of its hardware products, such as iPhones, iPads, and Macs, as well as through its services, such as the App Store, Apple Music, and iCloud subscriptions.
• The Apple Business Model Canvas consists of key elements such as customer segments, value proposition, channels, customer relationships, revenue streams, key activities, key resources, key partnerships, and cost structure, all of which contribute to Apple's success.
• Apple faces competition from companies such as Samsung, Google, Microsoft, and Amazon. While some competitors focus on hardware, others compete in the software and services space, challenging Apple's dominance in certain areas.
• Apple's SWOT analysis highlights its strengths in brand loyalty, innovation, and strong financial performance, along with weaknesses such as high prices and dependence on a limited product range. It also considers opportunities in emerging markets and new product categories, as well as threats from intense competition and changing consumer preferences.

In conclusion, Apple is owned by its shareholders, who invest in the company and have ownership rights. The mission statement of Apple is to design innovative products that enrich people's lives. Apple makes money primarily through the sale of its hardware devices, such as iPhones, iPads, and Mac computers, as well as software and services like the App Store and Apple Music.

The Apple Business Model Canvas provides a comprehensive overview of the key aspects of Apple's business model. It highlights the company's key activities, resources, and partnerships, as well as its customer segments and revenue streams.

As for competitors, Apple faces strong competition from companies such as Samsung, Google, and Microsoft. These companies offer similar products and services, and constantly strive to innovate and attract customers in the highly competitive tech industry.

In conducting a SWOT analysis of Apple, we can identify the company's strengths, weaknesses, opportunities, and threats. Apple's strengths include its strong brand image, loyal customer base, and innovative product design. However, weaknesses such as high product prices and dependence on a limited number of suppliers can pose challenges. Opportunities exist in emerging markets, expansion of services, and further technological advancements. On the other hand, threats such as intense competition, changing consumer preferences, and legal and regulatory challenges need to be carefully managed.

Overall, Apple has established itself as a leading technology company with a strong focus on innovation and customer experience. By continuously adapting to market trends and leveraging its strengths, Apple is well-positioned to maintain its success and drive future growth in the dynamic tech industry.

What is a SWOT analysis for Apple?

• Strong brand image and reputation globally.
• High-quality and innovative products.
• Strong financial position and high profitability.
• Diversified product portfolio including iPhones, iPads, Macs, Apple Watch, etc.
• Extensive and loyal customer base.
• Robust supply chain and efficient distribution network.
• Strong ecosystem of products and services including iTunes, App Store, iCloud, etc.
• Effective marketing and advertising strategies.
• Strong focus on research and development.
• Strong leadership under the guidance of CEO Tim Cook.

Weaknesses:

• High prices of products limiting market reach.
• Dependence on a few key products for revenue generation.
• Limited customization options for products.
• Limited compatibility with non-Apple devices.
• Reliance on third-party suppliers for critical components.
• Limited presence in emerging markets.
• Ongoing legal battles and patent disputes.
• Limited focus on entry-level and mid-range market segments.

Opportunities:

• Growing demand for wearable technology.
• Expansion into emerging markets like India and China.
• Increasing demand for services like Apple Music, Apple TV+, etc.
• Growing trend of remote work and online learning.
• Expansion of the Internet of Things (IoT) market.
• Acquisitions and strategic partnerships to enhance product offerings.
• Growing demand for electric vehicles and autonomous driving technology.
• Intense competition from other technology giants like Samsung, Google, etc.
• Rapid technological changes and short product life cycles.
• Economic downturns and fluctuations in global markets.
• Potential impact of trade wars and tariffs.
• Increasing concerns over data privacy and security.
• Counterfeit and imitation products affecting brand reputation.
• Negative impact of COVID-19 pandemic on global economy and consumer spending.

What are Apple's strengths and weaknesses?

• Strong brand image: Apple has a highly recognizable and respected brand worldwide.
• Innovation: Apple is known for its cutting-edge technology and innovative products.
• Design: Apple products are known for their sleek and aesthetic design.
• Integration: Apple offers a seamless integration between hardware, software, and services.
• Strong customer loyalty: Apple has a large and dedicated customer base that is loyal to the brand.
• High prices: Apple products tend to be more expensive than competitors, limiting their accessibility to some customers.
• Dependency on few product lines: Apple heavily relies on a limited number of products, with the iPhone being its most significant revenue driver.
• Reliance on suppliers: Apple depends on a global network of suppliers, making it vulnerable to supply chain disruptions.
• Limited customization: Apple's closed ecosystem limits customization options for users.
• Competition: Apple faces intense competition from other technology companies, especially in the smartphone and computer markets.

What are the strengths of Apple's SWOT analysis?

Some of the strengths of Apple's SWOT analysis are:

Strong brand image: Apple has a highly recognizable and trusted brand globally, known for its innovative and premium products.

Product differentiation: Apple's products are known for their unique design, quality, and user experience, setting them apart from competitors in the market.

Strong ecosystem: Apple has built a robust ecosystem of hardware, software, and services that seamlessly work together, enhancing customer loyalty and creating a barrier for competitors.

Innovation and R&D capabilities: Apple has a strong focus on research and development, consistently delivering innovative products and features that drive customer demand.

Strong financial position: Apple is one of the most valuable companies in the world, with a strong financial position and substantial cash reserves, enabling it to invest in new technologies and acquisitions.

Retail presence: Apple's physical retail stores provide a unique experience for customers to interact with products and receive expert advice, contributing to its strong sales and customer satisfaction.

Global presence: Apple has a strong global presence, with a vast distribution network and the ability to reach customers worldwide, enabling it to tap into various markets and drive sales.

What are Apple SWOT analysis weaknesses?

Some of Apple's weaknesses identified in a SWOT analysis include:

Dependence on a limited range of products: Apple heavily relies on a few key product lines, such as iPhones, iPads, and Macs. This dependence leaves the company vulnerable to market fluctuations and changes in consumer preferences.

High price points: Apple products are often priced at a premium compared to their competitors. This pricing strategy can limit the company's market share, particularly in price-sensitive markets.

Overdependence on China for manufacturing: Apple relies heavily on Chinese manufacturers for the production of its products. This concentration of manufacturing in a single country exposes the company to risks such as supply chain disruptions, regulatory changes, and rising labor costs.

Limited customization and compatibility: Apple products are known for their closed ecosystem, which limits customization options for users. Additionally, Apple's software and hardware are designed to work best within their own ecosystem, making it less compatible with non-Apple devices and software.

Reliance on third-party suppliers: Apple sources key components from various suppliers, which can lead to potential supply chain issues, quality control problems, and intellectual property disputes.

Weak market presence in emerging economies: While Apple has a strong presence in developed markets, it faces challenges in gaining significant market share in emerging economies due to affordability issues and intense competition from local brands.

It is important to note that weaknesses are relative to a company's overall strengths and should be analyzed in conjunction with its opportunities and threats to provide a comprehensive SWOT analysis.

Want to create a presentation now?

Instantly Create A Deck

Let PitchGrade do this for me

Hassle Free

We will create your text and designs for you. Sit back and relax while we do the work.

Explore More Content

• Privacy Policy
• Terms of Service

© 2023 Pitchgrade

• April 5, 2023

Explaining the Apple Business Model. How does Apple Make money?

Have you ever thought about how apple makes money in this article, we explain the depths of the apple business model to help you learn how the brand has built an massive business empire..

Apple Inc. is a multinational technology company based in Cupertino, California, that has revolutionized the world through its innovative and iconic products. Established in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple has since grown into one of the world’s most valuable and influential companies. Apple designs, manufactures, and markets a wide range of consumer electronics, software, and online services, with its flagship products being the iPhone, iPad, Mac, Apple Watch, and Apple TV.

In this blog post, we will explore the business model of Apple using Alexander Osterwalder’s Business Model Canvas. The canvas is a strategic management tool that presents a company’s business model in a visual and comprehensive manner, breaking it down into nine key components: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. By analyzing Apple’s business model through this lens, we will uncover the secrets behind its success and longevity in the competitive technology industry.

The Story of Apple

The story of Apple began in the 1970s when two young visionaries, Steve Jobs and Steve Wozniak, set out to change the world. Both had a passion for technology and a shared belief that personal computers could empower people to create, learn, and communicate in ways never before possible. They met in 1971 through a mutual friend and began working on various projects, including the infamous “blue box” that allowed users to make free long-distance phone calls.

The idea for Apple was born in 1976 when Wozniak designed the Apple I, a personal computer that was relatively affordable and easy to use. Jobs saw the potential in Wozniak’s invention and convinced him to start a company to sell the Apple I. They were joined by Ronald Wayne, who provided administrative support and helped draft the company’s first logo and legal documents. On April 1, 1976, Apple Computer, Inc. was officially founded.

The Apple I was initially sold as a kit that users had to assemble themselves. However, with the introduction of the Apple II in 1977, the company shifted its focus to producing fully assembled computers. The Apple II was a game-changer, featuring a color display, a user-friendly interface, and a sleek design. It quickly became a bestseller, establishing Apple as a major player in the burgeoning personal computer industry.

Over the years, Apple has faced numerous challenges, including competition from IBM and Microsoft, internal power struggles, and the temporary departure of Steve Jobs. However, the company has continuously reinvented itself and its products, driven by its founders’ unwavering commitment to innovation and design excellence. Today, Apple stands as a testament to the power of creativity, perseverance, and vision in business.

Now that we have a brief understanding of Apple’s history, let us delve into its business model using Alexander Osterwalder’s Business Model Canvas.

• Customer Segments

Apple targets a broad range of customer segments, including individual consumers, businesses, educational institutions, and governments. The company’s products and services cater to various needs, from communication and entertainment to productivity and creativity. Some of the main customer segments include:

• Tech-savvy individuals who value high-quality products and cutting-edge technology
• Creative professionals, such as graphic designers, musicians, and filmmakers
• Students and educators who use Apple devices for learning and teaching
• Businesses of all sizes that rely on Apple products for their daily operations
• Value Propositions

Apple’s value propositions revolve around design, innovation, and user experience. The company has consistently delivered products and services that are not only technologically advanced but also aesthetically pleasing and easy to use. Some of the key value propositions that differentiate Apple from its competitors include:

• Superior design and build quality: Apple products are known for their sleek and minimalist design, as well as their durability and premium materials. This attention to detail has made Apple devices highly desirable and instantly recognizable.
• Seamless integration and ecosystem: Apple’s ecosystem of hardware, software, and services is designed to work seamlessly together, providing a smooth and consistent user experience across all devices. This integration encourages customer loyalty and encourages users to purchase multiple Apple products.
• Innovation and technological advancements: Apple has a track record of introducing groundbreaking technologies and features, such as the first graphical user interface on the Macintosh, the iPod’s click wheel, and the iPhone’s multi-touch display. This commitment to innovation has kept Apple at the forefront of the industry.
• User-friendly software and interfaces: Apple’s operating systems, macOS and iOS, are renowned for their intuitive and user-friendly design, making it easy for users of all skill levels to navigate and use their devices effectively.
• Brand prestige and status: Apple has cultivated a strong and loyal brand following, with many customers seeing ownership of an Apple product as a status symbol. The company’s focus on design, innovation, and marketing has contributed to this perception.

Apple uses a combination of direct and indirect channels to distribute its products and services to customers. These channels include:

• Retail stores: Apple operates over 500 retail stores in more than 25 countries, providing customers with a unique shopping experience where they can test and purchase Apple products and receive expert assistance from knowledgeable staff.
• Online store: Apple’s e-commerce platform allows customers to purchase products and services directly from the company’s website, with the option for home delivery or in-store pickup.
• Authorized resellers and carriers: Apple partners with a network of authorized resellers and carriers to sell its products in various countries, ensuring broad availability and distribution.
• App Store and iTunes Store: Apple’s digital marketplaces allow customers to download and purchase apps, music, movies, TV shows, and other digital content directly onto their devices.
• Customer Relationships

Apple has built strong customer relationships through its emphasis on customer service, support, and user experience. Some of the ways the company fosters these relationships include:

• Retail store experience: Apple Stores are designed to be welcoming and interactive spaces, where customers can try out products, attend workshops and events, and receive personalized assistance from the company’s highly trained staff.
• Genius Bar: The Genius Bar is a dedicated support center located within Apple Stores, where customers can receive technical support and repair services for their devices.
• AppleCare: Apple offers extended warranty and support plans for its products, providing customers with peace of mind and additional protection for their devices.
• Online resources: Apple’s website features extensive resources, such as user guides, tutorials, and forums, to help customers get the most out of their devices and troubleshoot any issues.
• Revenue Streams

Apple generates revenue from several sources, including:

• Product sales: The company’s primary revenue stream comes from the sale of its hardware products, such as iPhones, iPads, Macs, Apple Watches, and Apple TVs.
• Services: Apple’s growing services segment includes revenue from the App Store, iTunes Store, Apple Music, Apple Pay, and iCloud.
• Accessories and peripherals: Apple also sells various accessories and peripherals for its devices, such as cases, cables, and adapters.
• Licensing and royalties: Apple earns royalties from licensing its technology and intellectual property to third parties.
• Key Resources

Some of Apple’s key resources include:

• Intellectual property: Apple’s extensive portfolio of patents, trademarks, and copyrights protect its innovations and give the company a competitive advantage.
• Supply chain and manufacturing: Apple’s sophisticated supply chain and relationships with manufacturers enable the company to source components, assemble products, and scale production efficiently.
• Design and engineering talent: Apple’s success relies heavily on its ability to innovate and create compelling products. The company employs a talented team of designers, engineers, and researchers who drive product development and technological advancements.
• Brand equity and reputation: Apple’s strong brand image, customer loyalty, and reputation for quality and innovation are key resources that contribute to its success in the marketplace.
• Key Activities

Apple’s key activities revolve around designing, developing, and manufacturing its products, as well as marketing and distributing them to customers. These activities include:

• Research and development: Apple invests heavily in R&D to explore new technologies, develop innovative features, and improve existing products.
• Product design and engineering: The company’s design and engineering teams work closely together to create user-friendly and aesthetically pleasing products that meet customer needs.
• Manufacturing and assembly: Apple partners with manufacturers to produce and assemble its products at scale, ensuring high-quality standards and efficient production.
• Marketing and advertising: Apple’s marketing efforts are focused on creating brand awareness, generating product interest, and driving sales. The company uses a mix of traditional and digital media, as well as high-profile product launches and events, to promote its products.
• Distribution and logistics: Apple manages a complex distribution and logistics network to deliver its products to customers globally through various channels, such as retail stores, online platforms, and authorized resellers.
• Key Partnerships

Apple has formed several key partnerships to support its business operations and enhance its product offerings. Some of these partnerships include:

• Manufacturing partners: Apple relies on a network of manufacturing partners, such as Foxconn and Pegatron, to produce and assemble its products. These partnerships enable Apple to scale production and maintain quality standards while focusing on its core competencies.
• Component suppliers: The company works with a variety of component suppliers, such as Samsung, LG, and Intel, to source the necessary parts for its devices. These partnerships help Apple secure access to cutting-edge technology and maintain a competitive edge.
• Content providers and developers: Apple collaborates with content providers, such as music labels, movie studios, and app developers, to offer a wide range of digital content and services through its platforms, like the App Store and iTunes Store.
• Authorized resellers and carriers: Apple partners with authorized resellers and carriers to distribute its products in different markets, expanding its global reach and customer base.
• Cost Structure

Apple’s cost structure is composed of various elements, including:

• Research and development: As a technology-driven company, Apple invests heavily in R&D to stay ahead of the competition and drive product innovation.
• Manufacturing and production: The company incurs costs related to manufacturing and assembling its products, such as labor, materials, and equipment.
• Marketing and advertising: Apple spends a significant amount on marketing and advertising to promote its products and maintain its brand image.
• Distribution and logistics: The company’s global distribution network and logistics operations generate costs related to transportation, warehousing, and inventory management.
• Employee salaries and benefits: Apple’s talented workforce is a significant expense, with the company offering competitive salaries and benefits to attract and retain top talent.

Apple’s business model, as analyzed through Alexander Osterwalder’s Business Model Canvas, reveals the company’s unwavering commitment to innovation, design, and customer experience. By understanding its target customer segments, delivering compelling value propositions, leveraging strategic partnerships, and managing its key resources and activities, Apple has managed to maintain its position as a leading technology company.

The company’s ongoing success is a testament to the vision and perseverance of its founders, as well as the dedication and talent of its employees. By continuously evolving and adapting to changing market conditions and customer needs, Apple has managed to stay ahead of its competitors and create a loyal customer base that spans across the globe.

As a result, Apple serves as an excellent example for entrepreneurs and business leaders seeking to build a successful and sustainable business in today’s fast-paced and competitive landscape. By focusing on delivering exceptional value to customers, fostering strong relationships, and constantly pushing the boundaries of innovation and design, companies can learn from Apple’s example and create their own unique and successful business models.

In summary, Apple’s business model, as analyzed through the Business Model Canvas, can be broken down into nine key components:

• Customer Segments: A broad range of consumers, businesses, and institutions
• Value Propositions: Superior design, seamless integration, innovation, user-friendly software, and brand prestige
• Channels: Retail stores, online store, authorized resellers, carriers, App Store, and iTunes Store
• Customer Relationships: Retail store experience, Genius Bar, AppleCare, and online resources
• Revenue Streams: Product sales, services, accessories, and licensing and royalties
• Key Resources: Intellectual property, supply chain and manufacturing, design and engineering talent, and brand equity
• Key Activities: Research and development, product design, manufacturing, marketing, and distribution
• Key Partnerships: Manufacturing partners, component suppliers, content providers, and authorized resellers
• Cost Structure: R&D, manufacturing and production, marketing and advertising, distribution and logistics, and employee salaries and benefits

By understanding and applying the lessons from Apple’s business model, entrepreneurs and business leaders can develop a clear roadmap for success and build companies that are not only profitable but also make a meaningful impact on the world.

Did you know? Creators like to use our  coworking space in Bangalore.

Learn more about our  coworking space  on  YouTube  where we talk about a variety of topics including personal finance, entrepreneurship, business and life.

Did you know? We also have a  private theater in Bangalore .

You'll also like this...

Everything about Nagarbhavi in Bangalore. Explored

Explore Nagarbhavi in Bangalore: Discover landmarks, educational hubs, car showrooms and Work Theater, the ultimate coworking space with virtual office

What is Coworking? The Rise of Coworking in India

Today let’s explore what is coworking in depth. Also, let’s look into the rise of virtual offices and coworking in

Differences between Ltd and Pvt Ltd Companies in India

Explore the key differences between Ltd and Pvt Ltd companies in India in this detailed article. Here’s a comprehensive guide

Why is MG Road the Commercial Hub of Bangalore?

If you’re wondering why is MG Road the commercial hub of Bangalore, you’ve come to the right place as we

Leave a Comment Cancel Reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Work Theater is a coworking space in Bangalore for startups, individuals, teams and creatives.

© 2023 Work Theater (A unit of Chaitra Ventures )

Terms of service

© 2022 Work Theater (A unit of Chaitra Ventures )

designed by KatMantra Webdesign

Hey there, We're open for bookings. Do fill in your details and we will get in touch with you soon.

About Supliful

Supliful is dropshipping platform that lets you launch an online consumer brand with no upfront cost or risks.

You can choose from 100+ white label products and launch your brand as soon as today

Search white-label product supliers

Discover 100s of white label products ready to be customised and sold in your online store

Understanding Apple's Business Model

Unlock the hidden strategies behind apple's business model and its unprecedented achievements..

In today's fast-paced and ever-evolving tech industry, one company has consistently stood out as a symbol of innovation and success:

Apple Inc. From its humble beginnings in a garage in California to becoming one of the world's most valuable companies, Apple's journey is nothing short of extraordinary.

To truly grasp the magnitude of Apple's success, we must delve into its business model, examining its history, product portfolio, revenue streams, and marketing strategy.

Unraveling Apple's Business Model: Key Insights

Before we can understand Apple's business model, we must first explore its fascinating history. Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1976. The trio turned a passion for technology into a business that would redefine the world of computing.

The Founding Years and Early Struggles

In its early years, Apple faced immense challenges. Despite releasing the Apple I and Apple II computers, the company struggled to find its footing in a market dominated by IBM and Microsoft. However, Apple's commitment to innovation and design would soon set it apart.

One of the defining moments for Apple during this time was the introduction of the Macintosh in 1984. With its revolutionary graphical user interface and mouse, the Macintosh became a symbol of Apple's dedication to user-friendly technology.

Despite initial skepticism, the Macintosh went on to become a cult favorite among creative professionals and laid the groundwork for Apple's future success.

Another significant development for Apple was the creation of the Apple Store in 2001. This retail concept allowed Apple to directly engage with customers and showcase its products in a unique and immersive environment.

The Apple Store quickly became a destination for tech enthusiasts and played a crucial role in building Apple's brand image.

The Steve Jobs Era

In 1997, Steve Jobs returned to Apple after a decade-long absence. His vision and relentless pursuit of perfection transformed the company into what it is today. Under Jobs' leadership, Apple launched iconic products like the iMac, iPod, iPhone, and iPad, forever changing the way we interact with technology.

The iMac, introduced in 1998, was a breakthrough in computer design. Its colorful, all-in-one design and emphasis on simplicity made it a hit with consumers and set the stage for Apple's future success. The iPod, released in 2001, revolutionized the way we listen to music, with its sleek design and the introduction of the iTunes Store.

Perhaps the most significant milestone of the Steve Jobs era was the launch of the iPhone in 2007. The iPhone not only redefined the smartphone industry but also paved the way for a mobile revolution.

With its intuitive touchscreen interface and access to the App Store, the iPhone became an indispensable tool for communication, entertainment, and productivity.

Entrepreneurship Lessons To Learn from Steve Jobs:

• Innovation is Key: Embrace innovation as the foundation of your entrepreneurial journey, seeking to create groundbreaking solutions.
• Customer-Centric Approach: Understand and prioritize your customers' needs to build a business that truly serves them.
• Design Matters: Focus on aesthetics and user-friendly design to make your products or services stand out.
• Keep It Simple: Embrace simplicity to enhance customer satisfaction and adoption rates.
• Perseverance through Challenges: Learn from failures and stay resilient when facing obstacles.
• Strong Branding and Marketing: Invest in branding and effective marketing strategies to build a loyal customer base.
• Pay Attention to Detail: Meticulously attend to the finer aspects of your products and business for greater success.
• Disrupt the Status Quo: Challenge norms and find disruptive solutions to address market gaps.
• Build a Talented Team: Surround yourself with passionate and skilled individuals who share your vision.
• Never Settle for Mediocrity: Pursue perfection and continuous improvement.
• Adapt to Market Changes: Stay flexible and adapt your business strategy to changing market conditions.
• Have a Long-Term Vision: Look beyond short-term gains and plan for sustainable growth.
• Ruthless Prioritization: Focus on the most critical tasks and initiatives for your business's success.
• Embrace Failure as Learning: View failures as opportunities to learn and grow.
• Fuel Your Passion: Be genuinely passionate about your entrepreneurial journey and believe in your ideas.

Remember, while these lessons from Steve Jobs are valuable, every entrepreneur's path is unique. Adapt and apply these insights in a way that aligns with your business goals and values for the best results.

Post-Jobs Apple: The Tim Cook Leadership

Following Steve Jobs' passing in 2011, Tim Cook took the reins as CEO. Cook faced the daunting task of sustaining Apple's remarkable success and living up to its legacy. With Cook at the helm, Apple continued to innovate and expand its product portfolio, solidifying its position as a global tech giant.

Under Cook's leadership, Apple introduced new product categories such as the Apple Watch and AirPods, further diversifying its offerings. The Apple Watch, launched in 2015, brought wearable technology into the mainstream and became the best-selling smartwatch in the world.

The AirPods, released in 2016, revolutionized wireless audio with their seamless connectivity and innovative design.

Furthermore, Apple's commitment to sustainability and environmental responsibility has been a key focus under Tim Cook's leadership. The company has made significant strides in reducing its carbon footprint, transitioning to renewable energy sources, and implementing recycling programs for its products.

In conclusion, Apple's history is a testament to the power of innovation, design, and visionary leadership. From its humble beginnings to its status as a global tech giant, Apple continues to shape the world of technology with its groundbreaking products and unwavering commitment to excellence.

Apple's Product Portfolio

Central to Apple's business model is its diversified product portfolio that caters to different consumer needs. Let's take a closer look at some of Apple's most iconic products:

Macintosh: The Computer Revolution

The Macintosh computer revolutionized the industry with its user-friendly interface and sleek design. From creative professionals to students, Apple's Mac lineup continues to dominate the market.

The Macintosh, with its innovative graphical user interface, changed the way people interacted with computers. It offered a more intuitive and visually appealing experience compared to the command-line interfaces of other computers at the time.

This breakthrough in user interface design made the Macintosh a favorite among creative professionals, who appreciated its ability to handle graphic-intensive tasks with ease.

Over the years, Apple has consistently pushed the boundaries of technology with its Mac lineup. From the compact and powerful Mac Mini to the high-performance iMac Pro, Apple offers a range of options to suit the needs of different users.

Whether you're a professional video editor or a casual web surfer, there's a Macintosh computer that's perfect for you.

iPod and iTunes: Changing the Music Industry

The introduction of the iPod and iTunes marked a turning point in the music industry. Apple's seamless integration of hardware, software, and services created a music ecosystem that empowered consumers and disrupted traditional distribution models.

Before the iPod, listening to music on the go meant carrying around a bulky CD player or cassette Walkman. The iPod changed that by introducing a sleek and portable device that could store thousands of songs in your pocket.

With its iconic click wheel and easy-to-use interface, the iPod became a cultural phenomenon and a must-have gadget for music lovers.

But it wasn't just the hardware that made the iPod a game-changer. Apple's iTunes software revolutionized the way people bought and listened to music. With the iTunes Store, users could legally purchase individual songs or albums and instantly download them to their iPods.

This shift from physical media to digital downloads disrupted the traditional music industry, paving the way for the streaming services we know today.

iPhone: The Smartphone Revolution

The iPhone's launch in 2007 ushered in a new era of smartphones. Combining cutting-edge technology, elegant design, and a user-friendly interface, the iPhone cemented Apple's position as an industry leader.

With its multi-touch display, the iPhone introduced a whole new way of interacting with a mobile device. Users could now pinch, swipe, and tap their way through apps and webpages, making the smartphone experience more intuitive and immersive.

The iPhone's sleek design and premium build quality set it apart from its competitors, making it a status symbol and a coveted device.

But the iPhone was more than just a phone. It was a portable computer, a music player, and a camera all rolled into one. With the App Store, users gained access to a vast ecosystem of apps that transformed the iPhone into a versatile tool for work, entertainment, and communication.

From social media apps to productivity tools, there's an app for almost everything you can imagine.

iPad and Apple Watch: Expanding the Ecosystem

With the introduction of the iPad and later, the Apple Watch, Apple expanded its ecosystem beyond computers and smartphones. These devices empower users with seamless connectivity and convenient access to a wide range of services and apps.

The iPad, with its large touch screen and powerful hardware, bridged the gap between a smartphone and a laptop. It became the go-to device for content consumption, allowing users to browse the web, watch movies, read books, and play games with ease.

The Apple Pencil further enhanced the iPad's capabilities, turning it into a versatile tool for digital artists, students, and professionals.

Meanwhile, the Apple Watch brought the power of technology to your wrist. With its fitness tracking features, customizable watch faces, and seamless integration with your iPhone, the Apple Watch became a popular choice for fitness enthusiasts, tech-savvy individuals, and fashion-forward consumers.

It not only tells the time but also keeps you connected and motivated throughout the day.

As Apple continues to innovate and expand its product portfolio, it remains at the forefront of technology and design. From computers to wearables, Apple's products have become an integral part of our daily lives, empowering us to work, create, and connect in ways we never thought possible.

Apple's Revenue Streams

Apple's diverse product portfolio is the backbone of its revenue streams. Let's explore the key sources of Apple's revenue:

Hardware Sales

Apple generates a substantial portion of its revenue from selling hardware, including Macs, iPhones, iPads, and wearables like the Apple Watch. Each product release creates a frenzy among consumers, propelling sales to new heights.

One of the most significant contributors to Apple's hardware sales is the iPhone. With each new iteration, Apple manages to captivate its loyal customer base and attract new users. The iPhone's sleek design, advanced features, and seamless integration with other Apple products make it a highly sought-after device.

Additionally, Apple's Mac lineup, including the MacBook Pro and iMac, appeals to professionals and creatives who rely on powerful computing capabilities. These devices are known for their exceptional performance, stunning displays, and user-friendly interfaces.

Apple's iPad, on the other hand, has become a popular choice for both personal and professional use. Its versatility, portability, and extensive app ecosystem make it an attractive option for tasks ranging from entertainment and gaming to productivity and creativity.

Wearables, such as the Apple Watch, have also become a significant revenue driver for Apple. With features like fitness tracking, heart rate monitoring, and seamless integration with other Apple devices, the Apple Watch has carved a niche for itself in the wearable technology market.

Software and Services

In addition to hardware, Apple's software and services play a significant role in its revenue generation. From the App Store and Apple Music to iCloud and AppleCare, these offerings provide both convenience and recurring income for the company.

The App Store, with its vast collection of apps, is a thriving marketplace for developers and a go-to destination for users seeking new and innovative software solutions. Apple takes a percentage of the revenue generated from app sales and in-app purchases, contributing to its overall revenue stream.

Apple Music, Apple's music streaming service, competes with other industry giants like Spotify. With its extensive music library, personalized playlists, and exclusive content, Apple Music has attracted a substantial user base, generating revenue through subscription fees.

iCloud, Apple's cloud storage and backup service, provides users with a seamless way to store and access their files across multiple devices. The convenience and peace of mind offered by iCloud subscriptions contribute to Apple's recurring revenue.

AppleCare, the company's support and repair service, offers extended warranty coverage and technical assistance for Apple products. Customers who opt for AppleCare contribute to Apple's revenue by paying for additional coverage and services.

Other Revenue Sources

Apple's revenue streams span beyond its core products. The company earns revenue from various sources, including licensing fees, Apple Pay transactions, and partnerships with third-party developers.

Through licensing agreements, Apple allows other companies to incorporate its technologies into their products, earning royalties in return. This revenue stream not only adds to Apple's bottom line but also helps establish its presence across a wide range of industries.

Apple Pay, Apple's mobile payment and digital wallet service, enables users to make secure transactions using their Apple devices. With a growing number of businesses accepting Apple Pay, the service generates revenue through transaction fees.

Partnerships with third-party developers also contribute to Apple's revenue. By collaborating with app developers, game studios, and content creators, Apple gains access to a diverse range of high-quality software and content for its devices, attracting more users and generating additional revenue.

Apple's Marketing and Branding Strategy

Apple's unparalleled success can be attributed not only to its exceptional products but also to its marketing and branding strategy. Let's examine some key elements of Apple's approach:

The Power of Simplicity

Apple's marketing revolves around simplicity. From sleek product design to minimalist advertisements, Apple captures the essence of its products with elegance and clarity. This focus on simplicity resonates with consumers and creates a sense of desirability.

Creating a Lifestyle Brand

Apple has successfully positioned itself as more than just a technology company; it's a lifestyle brand. By aligning its products with creativity, innovation, and individuality, Apple connects with its customers on a deep emotional level, fostering brand loyalty like no other.

Apple's Retail Strategy: The Apple Store Experience

One of Apple's most impactful branding strategies is its retail presence. The Apple Store experience is carefully curated to immerse customers in the Apple ecosystem and provide exceptional customer service. These stores have become iconic landmarks, attracting millions of visitors worldwide.

In conclusion, Apple's business model is a culmination of its rich history, diverse product portfolio, multi-faceted revenue streams, and strategic marketing approach. By consistently pushing the boundaries of technology and maintaining a strong brand identity, Apple continues to define the future of the industry. As the company evolves, one thing remains clear: understanding Apple's business model is essential to comprehending its remarkable success and its continued impact on our world.

Exploring More Business Models:

For those interested in understanding the business models of other industry giants, the following articles provide in-depth insights:

https://supliful.com/blog/how-does-herbalife-business-work

https://supliful.com/blog/what-is-a-business-model-canvas-of-amazon

https://supliful.com/blog/how-does-nike-business-model-look-like

These articles will give you a broader perspective on how different companies operate and succeed in their respective markets.

Suggested posts

How To Offer Free Shipping And Still Make Money

Offering free shipping can be a great way to increase customer loyalty and boost sales. However, as a business owner, you may wonder how you can offer free shipping and still make a profit.

A Comprehensive Review of Shopify POS Go

In today's competitive retail market, a versatile and efficient point-of-sale (POS) system is crucial for business success. The Shopify POS Go app is designed to fulfill this need, providing users with a comprehensive tool to manage their in-store and online transactions.

Best Crm And Marketing Automation For Small Business

In today's business world, it's more important than ever for small businesses to have effective customer relationship management (CRM) and marketing automation solutions. But with so many options available, how do you know which one is right for your business?

• How it works
• Help center
• Get label or store design Crash course
• Liability insurance
• Terms of Use
• Privacy Policy IP policy
• Affiliate program

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

How Apple Is Organized for Innovation

• Joel M. Podolny
• Morten T. Hansen

When Steve Jobs returned to Apple, in 1997, it had a conventional structure for a company of its size and scope. It was divided into business units, each with its own P&L responsibilities. Believing that conventional management had stifled innovation, Jobs laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization. Although such a structure is common for small entrepreneurial firms, Apple—remarkably—retains it today, even though the company is nearly 40 times as large in terms of revenue and far more complex than it was in 1997. In this article the authors discuss the innovation benefits and leadership challenges of Apple’s distinctive and ever-evolving organizational model in the belief that it may be useful for other companies competing in rapidly changing environments.

It’s about experts leading experts.

Idea in Brief

The challenge.

Major companies competing in many industries struggle to stay abreast of rapidly changing technologies.

One Major Cause

They are typically organized into business units, each with its own set of functions. Thus the key decision makers—the unit leaders—lack a deep understanding of all the domains that answer to them.

The Apple Model

The company is organized around functions, and expertise aligns with decision rights. Leaders are cross-functionally collaborative and deeply knowledgeable about details.

Apple is well-known for its innovations in hardware, software, and services. Thanks to them, it grew from some 8,000 employees and $7 billion in revenue in 1997, the year Steve Jobs returned, to 137,000 employees and $260 billion in revenue in 2019. Much less well-known are the organizational design and the associated leadership model that have played a crucial role in the company’s innovation success.

• Joel M. Podolny is the dean and vice president of Apple University in Cupertino, California. The former dean of the Yale School of Management, Podolny was a professor at Harvard Business School and the Stanford Graduate School of Business.
• MH Morten T. Hansen is a professor at the University of California, Berkeley, and a faculty member at Apple University, Apple. He is the author of Great at Work and Collaboration and coauthor of Great by Choice . He was named one of the top management thinkers in the world by the Thinkers50 in 2019. MortentHansen

Partner Center

• school Campus Bookshelves
• menu_book Bookshelves
• perm_media Learning Objects
• login Login
• how_to_reg Request Instructor Account
• hub Instructor Commons
• Download Page (PDF)
• Download Full Book (PDF)
• Periodic Table
• Physics Constants
• Scientific Calculator
• Reference & Cite
• Tools expand_more
• Readability

selected template will load here

This action is not available.

19.4: Business Model Canvas

• Last updated
• Save as PDF
• Page ID 27567

• How can the business model canvas help us to describe and assess a business model?

A business model describes the rationale of how an organization creates, delivers, and captures value. Entrepreneurs need to develop and refine a business model for themselves as they seek clarity about what they are doing, and also for discussing with colleagues, partners, and other stakeholders. Moreover, this business model will help them to identify opportunities in their internal and external environment. Originally developed by Alex Osterwalder and colleagues, the business model canvas covers the four main areas of any venture: customers, offering, infrastructure, and financial viability. There are nine building blocks that describe and assess a business model: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. Table \(\PageIndex{1}\). depicts the business model canvas.

Nine Building Blocks of the Business Model Canvas

Customer segments: Without customers, businesses cannot survive. Businesses must identify and understand their customers, and they can group these customers into segments with common characteristics.

Value propositions: A company creates value, or benefits, for customers by solving a problem or satisfying a need. The value proposition is the reason that customers choose one option over another when deciding what to buy. Although certainly not an exhaustive list, customers may value: newness, performance, customization, design, brand, price, cost reduction, risk reduction, accessibility, and convenience.

Channels: Channels bring the value proposition to the customers through communication, distribution, and sales. Companies can reach their customer segments through a mix of channels, both direct (e.g., through sales force and web sales) and indirect (e.g., through own stores, partner stores, and wholesalers), to raise awareness, allow for purchase and delivery, provide customer support, and support other important functions of the business.

Customer relationships: Companies need to maintain relationships with their customers to acquire and retain customers and boost sales. Strong customer relationships can significantly impact overall customer experience. There are many categories of customer relationships including personal assistance, self-service, automated service, user communities, and co-creation.

Revenue streams: There are two types of revenue stream: revenues from one-time customers and revenues from ongoing payments. Revenue pricing mechanisms vary from fixed (e.g., predefined prices based on static variables) to dynamic (e.g., price changes based on market conditions). Revenue streams can be generated through asset sales (e.g., selling a physical product), usage fees, subscription fees, licensing, brokerage fees, advertising, and temporarily selling the use of a particular asset (e.g., lending, renting, or leasing).

Key resources: Any business needs resources—physical, financial, intellectual, and/or human—to function. These resources enable the company to provide their products or services to their customers.

Key activities: Key activities are the critical tasks that a company does to succeed and operate successfully. Different companies focus on different activities in categories such as production, problem-solving, and platform/network.

Key partnerships: Companies build partnerships to optimize their business, reduce risk, or gain resources. There are four main types of partnerships: strategic alliances between noncompetitors, coopetition—strategic alliances between competitors, joint ventures, and buyer-supplier relationships.

Cost structure: All businesses incur costs through operation, whether fixed or variable. They may also face economies of scale and scope. Companies consider their cost structures in two strategies—cost-driven, where all costs are reduced wherever possible, and value-driven, where the focus is on greater value creation. Cost structures will often consider fixed costs, variable costs, economies of scale, and economies of scope.

Business Model Canvas Application: Apple

To best illustrate the business model canvas, we can take a look at Apple illustrated in Table \(\PageIndex{2}\).

Customer segments : Apple’s main consumer segment is the mass market, and Apple sells globally to customers all over the world. These customers tend to have similar needs and problems that can be addressed through globally standardized offerings such as the iPhone and iPad (hardware) as well as iTunes (software).

Value proposition : In a competitive marketplace, Apple must offer a bundle of products and services that cater to the customer segment. As one illustration, Apple iTunes offers a seamless music experience where customers can easily find, purchase, and download music all in one place.

Channels : Customers are able to interact with Apple in person through retail stores and Apple stores as well as online through the iTunes store and Apple’s company website.

Customer relationships : Apple’s customers are dedicated to the brand and often have many Apple products, such as iPhones, iPads, and MacBooks. The Apple lovemark has become a status symbol.

Revenue streams : Apple earns most of its revenues from selling products such as iPods, and the iTunes store protects them from competition with similar features.

Key resources : Apple’s key resources include its name brand, hardware and software, and content.

Key activities : Apple products have outstanding marketing and hardware design.

Key partnerships : Through negotiations and contracts, Apple’s iTunes store is one of the world’s largest online music libraries.

Cost structure : Most of Apple’s costs come through manufacturing and marketing, including employee salaries.

The business model canvas can be used to determine how to compete, as either an initial entrant or a fast follower. An entrepreneurial organization is often a first mover by introducing a new product or service category that can potentially define an innovation’s characteristics in the minds of buyers, gaining valuable name recognition and brand loyalty. First movers can also lock in key resources (such as certain distribution channels) and set a technology standard. Second movers have the potential advantage of learning from and improving on the first mover’s efforts. For example, second movers can take advantage of existing customers and optimize the first mover’s product to add new features, especially when customers are willing to switch. Research on the battle between first and second movers indicates that they are equally likely to win the market. One illustration of first and second movers is in China’s competitive mobile payment industry.

Expanding around the globe

The War of Two “Horses”: First and Second Movers in China’s Mobile Payment Industry

Over the last decade, Chinese people have been rapidly and systematically utilizing mobile payment—that is, payment services performed through a mobile device. This trend kicked off with China’s first e-commerce wholesale platform Alibaba, founded by Jack Ma from his humble apartment in Hangzhou, China, in 1999. Responding to eBay’s growing presence in China a few years later, Jack Ma launched taobao.com, a consumer-to-consumer (C2C) and business-to-consumer (B2C) online marketplace. To support taobao.com’s transactions, Jack Ma released Alipay later that year as a “third-party online payment platform.” Mobile payment became a reality in China when Alipay released its mobile app in 2008, which can be used to pay water, electricity, and gas bills as well as mobile phone fees. After 2011, when the first third-party payment license was issued to Alipay, more Chinese consumers replaced their credit cards and debit cards with Alipay. By 2013, Alipay overtook PayPal as the world's largest mobile payment platform. Alipay dominated 69.6 percent of China’s mobile payment market. Jack Ma was the “only horse” (the surname Ma means “horse” in Chinese) in the field and a clear first mover, but faced a solid rival in second mover IT giant Tencent.

Ma Huateng founded Tencent Inc. in 1998, and its early years focused on the iconic product of QQ, China’s first instant messaging software product. Tencent expanded into other Internet fields such as games, music, microblogging, and online shopping. By 2011, Tencent’s QQ was China’s most successful instant messaging software with over 700 million active users, and the company released WeChat, another instant messaging software product. Tencent’s two software products competed in the same space, with QQ primarily PC-based with “online” and “offline” status, and WeChat smartphone-based without “offline” status. WeChat soon acquired over 300 million users. Tencent is often described as a successful “second mover,” imitating a promising business model introduced by innovative first-mover firms and then surpassing these firms.

The two IT giants faced off in 2013 when each invested in a taxi booking app: Didi (by Tencent) and Kuaidi (by Alibaba). In an August 2013 5.0 version update of WeChat, users were surprised to find a “wallet” function added to the app, but most did not know how to use it. However, for Jack Ma and Ma Huateng, all had become clear: the two “horses” were going to war.

Tencent offered and then linked three seemingly unrelated apps: smartphone-based WeChat, taxi-booking app Didi, and a new wallet function. In January 2014, WeChat wallet was linked to Didi as the payment method. Passengers using WeChat to pay the taxi fare received a generous subsidy from Tencent, making taxi fare lower than bus fare. Alipay and the Kuaidi app responded in a similar way. While widely welcomed by white-collar workers, the money-burning campaign cost each side approximately 1.5 billion RMB (US$244 million). For Ma Huateng, the campaign is not just about occupying the newly born taxi-booking app market in China, but also about penetrating Jack Ma’s precious share of the mobile payment market by “teaching” WeChat users how to use make mobile payments. Weeks later, Ma Huateng continued his “teaching” in the virtual red envelope campaign during Chinese Spring Festival. The virtual red envelope is modeled after the Chinese tradition of exchanging packets of money among friends and family members during holidays. WeChat introduced the “red envelope shake” to the Chinese Spring Festival Gala, during which users were invited to shake their smartphones for a chance to win red envelopes, and eight million WeChat users participated in this promotion campaign. WeChat users can save the money won to their WeChat “wallet” and then send it to others with their own red envelope. WeChat sent 1.2 billion red envelopes worth over half a billion RMB (US$82 million) during the promotion. However, to use the money from the red envelope, WeChat users needed to add their bank card to their WeChat account and thus fully activate the WeChat payment function. Retrospectively, Jack Ma regarded the WeChat red envelope promotion as a “Pearl Harbor attack” on his territory.

After the Chinese Spring Festival, the money-burning war game between first mover Alipay and second mover WeChat continued. Both sides heavily subsidized taxi passengers on their taxi-booking apps through 2014. In the third quarter of 2014, Alipay’s market share reached a peak of 82.6 percent, but WeChat’s increasing presence the in mobile payment market was unstoppable. Both sides engaged in a new red envelope campaign during the next Spring Festival holiday. While Alipay fought hard to defend its market share, WeChat’s social nature smoothly transformed users into payers.

By the end of 2016, both sides saw continuous growth in user population; however, Alipay’s market share dropped to 54.10 percent, and Tencent and WeChat’s market share rose to 37.02 percent. In that year, consumers spent 157.55 trillion RMB (US$23.72 trillion) on mobile devices in China, and QR codes and POS machines supporting both Alipay and WeChat could be found at street food vendors, supermarkets, department stores, and online markets.

Discussion Questions:

• What tactics did Tencent use to encroach on Alibaba’s share of the mobile payment market?
• What key resources did WeChat use to compete with Alipay?
• Does WeChat’s presence in the mobile payment market always negatively affect Alipay?
• Would you rather be a first mover or a second mover in a new technology market?

Sophia Yan, “6 things you never knew about Alibaba”, CNN, May 12, 2015, http://money.cnn.com/2015/05/12/tech...cts/index.html ;

Paul Mozur, “In Urban China, Cash Is Rapidly Becoming Obsolete”, New York Times, July 16, 2017, https://www.nytimes.com/2017/07/16/b...-payments.html ;

Eva Xiao, “How WeChat Pay became Alipay’s largest rival”, Tech in Asia, April 20, 2017, https://www.techinasia.com/wechat-pay-vs-alipay ;

Anonymous Author, “WeChat”, Wikipedia, October 2 2017, https://en.Wikipedia.org/wiki/WeChat...yment_services ;

Anonymous Author, “WeChat red envelope”, Wikipedia, September 19, 2017, https://en.Wikipedia.org/wiki/WeChat_red_envelope ;

Anonymous Author, “Alipay”, Wikipedia; September 8, 2017, https://en.Wikipedia.org/wiki/Alipay ;

Nie Chenjing, “Mobile Payment Report: Alipay Shares Occupy Half of the Country”, Xinhuanet, March 31, 2017; http://news.xinhuanet.com/fortune/20...1120732899.htm ;

Li Yanxia, “Central Bank Report: China Mobile’s payment amount increased by nearly 50% year-on-year in 2016, March 16, 2017, http://it.people.com.cn/n1/2017/0316...-29150183.html .

concept check

• What are the key components of the business model canvas?
• What are the advantages and disadvantages of being a first mover?

The Leading Source of Insights On Business Model Strategy & Tech Business Models

Apple Business Model Analysis

Apple has a business model that is divided into products and services. Apple generated over $383 billion in revenues in 2023, of which over $200 billion came from iPhone sales, $29.36 billion came from Mac sales, $39.84 billion came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $28.3 billion came from iPad sales, and $85.2 billion came from services.

Table of Contents

History of Apple in the early days

When Steve Jobs and Steve Wozniak launched Apple Inc. back in 1976, the match turned out to be one of the most successful.

In the early days, the man acted as a bridge between the two strong personalities, Ronald Wayne.

However, he got out very early from the partnership.

Wozniak and Jobs had known each other a few years earlier, and they had both love for technology and computing, but two very different personalities.

On the one hand, Wozniak was highly technical, an engineer by core, and only interested in the technology.

But, instead, Jobs was a business person by nature, trying to figure out how technology could be commercialized and marketed to the masses, with his obsession with aesthetics.

Indeed, one of its greatest achievements of Apple has been the ability to make technology adopted at scale, as its devices, once a symbol of “Think Different,” turned into status quo objects and then into a must-have.

In that sense, the story of how Steve Jobs turned Apple upside down is all but linear.

In fact, while the first computer Apple launched was successful, the company’s revenues stalled later on, and that is when Steve Jobs was ousted from the company he had founded.

To give a bit of context, in the years before he got ousted, Apple had brought in adult supervision in the hands of John Sculley.

John Sculley was first fascinated by Jobs and joined the company; then he became one of the people that wanted him out as Apple revenues started to slow down significantly.

When Steve Jobs had to leave a company that wasn’t on good terms, jobs sold his stocks, and went on to find NeXT computers and later also invested in Pixar.

How did he get back and turn Apple upside down?

It was the year 1997,  Apple  was experiencing a sharp sales decline:

Compared to 1996, the company’s net sales decreased by 28% and even more compared to just a couple of years before.

To understand the severity of the crisis, an  article from NY Times dated March 28th, 1996 , said:

Apple Computer said today that it expected to report a $700 million after-tax loss for its fiscal second quarter, a sign that the nation’s third-largest personal computer maker is in even deeper financial trouble than had previously been recognized. The company said that more than half of the loss it was projecting for the quarter, which ends March 31, would come from write-downs against more than $1 billion in unsold products. An additional 25 percent would be related to restructuring costs, the company said, indicating that another wave of layoffs is imminent.

In its annual report, Apple stated:

Macintosh computer unit sales and peripheral unit sales decreased 27% and 33%, respectively, during 1997, compared with 1996, as a result of a decline in worldwide demand for most of the Company’s product families, which the Company believes was due principally to continued customer concerns regarding the Company’s strategic direction, financial condition and future prospects, and the viability of the Macintosh platform, and to competitive pressures in the marketplace

Apple had lowered the prices of many of its products.

So even though the aggregate average revenue didn’t change much, it still contributed to the sales decline.

Amelio, which was supposed to be a turnaround master, was eventually replaced.

Indeed, Apple swiftly moved and removed Amelio as CEO, and that is when Steve Jobs joined the company again after being ousted in 1985.

Steve Jobs and Bill Gates recounted the transition from Amelio back to Jobs:

Jobs was going back to Apple, which wasn’t cheap for the company. As reported in the 1997 Annual Report:

In February 1997, the Company acquired NeXT. NeXT developed, marketed and supported software that enables customers to implement business applications on the Internet/World Wide Web, intranets and enterprise-wide client/server networks. The acquisition was accounted for as a purchase and, accordingly, the operating results pertaining to NeXT subsequent to the date of acquisition have been included in the Company’s consolidated operating results. The total purchase price, including the fair value of the net liabilities assumed, was $427 million of which $375 million was allocated to purchased in-process research and development and $52 million was allocated to goodwill and other intangible assets. The purchased in-process research and development was charged to operations upon acquisition, and the goodwill and other tangible assets are being amortized on a straight-line basis over two years.

Looking back at the Apple investment in NeXT and given its financial distress, it’s easy to understand that it wasn’t an easy choice. What made Apple go for it?

When Steve Jobs left Apple in 1985, it wasn’t on good terms. As soon as Steve Jobs left the company, he also announced he was going to start a new company, which would become NeXT.

As soon as Jobs announced,  Apple  followed up with a suit!

To understand the strategic importance of NeXT for Apple, as  appleinsider.com  pointed out

At the time, Apple was experiencing a substantial flaw in its software. Many fail to understand that the business success of Apple wasn’t just its hardware and aesthetics, but the software side played a key role.

When Steve Jobs pitched to Apple its NeXTSTEP (the software that powered NeXT computers); he won his way back to Apple.

As pointed out on  macworld.com :

Jump back to 1996, when Apple was looking for a replacement OS. Steve Jobs heard of this search and pitched NeXTSTEP to Apple executives. They liked what they saw, and in December of 1996, Apple announced it was purchasing NeXT with the goal of using NeXTSTEP as the foundation of a new Macintosh OS. Along with the announcement came news that Steve Jobs would be taking an advisory role in the company. In a stunning turn of events, the founder was back.

The team from NeXT that Jobs brought to  Apple  right away tried to adapt the software side from NeXT to the Apple OS. The project took the name of Rhapsody.

Long story short, Adobe (at the time a critical third-party developer for Apple at the time) didn’t support this project until Apple changed its plans. In 1998, Apple started to develop a new graphical interface for Rhapsody, called “Aqua,” which as pointed out by macworld.com  during that project “ the philosophical shift from Rhapsody to OS X took place.”

The shift to Aqua was critical to winning over the consensus of developers, that were and are a key ingredient to Apple’s success.

When Steve Jobs presented Aqua, the audience was stunned as it showed many new elements of the graphical interface. Apple understood it needed to release it and put it in the hands of as many people as possible.

What did Apple do? As  macworld.com  pointed out:

Apple set the price of “Mac OS X Public Beta,” as it was called, at $29.95—low enough for anyone could get it if they wanted, but high enough to exclude folks who might not be constructive to the beta testing process. The beta sold through Apple’s online store; the company later offered a $30 discount on the first full release of OS X (v10.0) when it shipped in 2001.

The way the company launched its beta is quite impressive. Rather than release a free version, Apple released its beta with a low price point, yet high enough to exclude those that would not be constructive and sufficient for future development.

However, what mattered was that finally, Apple had won over the consensus of developers, which started to test and report bugs, which made the software grow and improve quickly.

To understand the importance of that development, Apple’s entire software ecosystem has been built on top of that.

Not only desktops devices but also iPhone and iPods devices.

Therefore, Steve Jobs entered again in Apple as Interim CEO never left the company again.

To have a bit of context of the impact that Jobs brought to  Apple . In 1998 the company was profitable again.

However, Apple gained momentum in sales again in the 2000s when Apple laid out a strategy that saw the launch of new products that hooked the consumers.

By 2004 the iPod would be a hit that fueled and got fueled by other music products consisting of iTunes Music Store sales, iPod-related services, and Apple-branded and third-party iPod-related accessories.

It was the fall of 2006 when Apple had been working on the launch of a product that would revolutionize the smartphone market.

Steve Jobs had remarked several times there was nothing “smart” to that market. True, these phones had improved a lot compared to previous phones. However, they were still hard to use, not practical and used primarily for business .

Not a consumer device.

Steve Jobs would put an end to all that with the launch of the iPhone, which would become a massive commercial success. Still, in 2017 iPhone sales accounted for most of Apple’s revenues.

The story of the iPhone and how it got to be – from the technological standpoint – has been told many times.

Thus, this time I want to focus on the business story. How Steve Jobs, rather than the greatest visionary we all think, might have been a great deal maker instead.

He was able to squeeze any industry he set up to disrupt with deals that took advantage of already-established oligopolies, cartels, and centers of power.

How he managed to do that is still a mystery to me. This time I want to focus on the deal that made the iPhone a wild success: the AT&T deal.

The iPhone’s success isn’t just about a technological device that innovated and was years ahead of its competitors.

This is the story of a tool, primarily subsidized by the carriers industry, which without it would have probably never taken off as he did, and it all starts with one of the most inaccurate predictions of our time, from Steve Ballmer, former Microsoft’s CEO.

Before Steve Jobs the iPhone changed the rules of the game, the mobile phone industry represented a multi-billion dollar industry where the mobile carriers saw the handset business as a commodity they could use.

While that strategy had paid back in the past to bring in new subscribers, the whole industry needed a shake.

And Apple was ready to give that. One of the first players that understood that the iPhone could be a potential hit – or at least could revitalize their brand was Cingular (later AT&T).

In an attempt to be branded as an “innovative company” and steal subscribers from its rivals, the time seemed right for Apple ‘s deal. Before we get to that point, there is another step of the story to understand here.

As the story goes, Steve Jobs understood he had to bet on the mobile market by producing its handset, which would be something in the middle between a phone and an iPod.

That phone was Rokr, and it was in partnership with Motorola.

When the Rokr came out – noted  cultofmac  – “ In the end, the Rokr E1 proved disastrous. With its cheap plastic design , poor camera, and a 100-song limit, it fell far short of the iPod’s promise of 1,000 songs in your pocket. Designed to make listening to your music easy, and pitched as the “iTunes phone,” it also failed on that front. The Rokr E1 required that users buy songs via iTunes, then transfer them to the device using a cable. “

The demo of Steve Jobs on the “iTunes phone” might well be considered the least successful one. Yet those mistakes would set the stage for the iPhone.

The Cingular team was the first to understand a change in the carriers’  business model .

Where before handsets providers were a mere commodity used to lock as many new subscribers with cheap phones. There was a chance now to be perceived as an innovator in the space.

And what partner would best fit this role than the company that had first disrupted the computer industry and then moved to the music industry?

Steve Jobs made a deal with AT&T, as reported by  Wired  “ i n return for five years of exclusivity, roughly 10 percent of iPhone sales in AT&T stores, and a thin slice of Apple’s iTunes revenue, AT&T had granted Jobs unprecedented power. “

However,  Apple  in return got a revenue-share model where it received $10 for every iPhone customer subscribing to an AT&T plan, plus total control over the design , manufacturing, and marketing of the iPhone.

That was an unprecedented deal! That was the beginning of the end for the mobile carrier’s dominance over the smartphone companies – or at least Apple.

As of December 31, 2009, AT&T served 85.1 million wireless customers, compared to 77.0 million on December 31, 2008. Part of this staggering growth was also due to iPhone’s success.

As Apple introduced its App Store in 2008, this finally enabled the sales of iPhones, thus creating Apple’s unique feature of hardware, combined with a powerful operating system and a marketplace, to enable third-party to build their apps on top of the iPhone. 

This business model , which we give for granted today, was the real revolution of Apple. 

The Trillion-dollar empire

In August 2018, Apple was the first American company ever to be worth $1 trillion. 

By the end of October 2022, in the midst of the greatest financial crisis of the last decade, Apple is one of the last standing big tech fortresses. 

In fact, whereas most tech companies lost half their capitalization, Apple is a company worth over $2.5 trillion dollars!

Source: CompaniesMarketCap  

To gain a bit of context of how big Apple has become, i f we take the US GDP figure for 2021 at 23 trillion, this means Apple’s market cap represents over 10% of the total economic output of the wealthiest country on earth.

The Apple business model explained

Apple’s business model is mainly based on the sales of tech products. However, it cannot be understood from that standpoint alone.

Apple is both software and hardware, which also made it successful. No doubt, the iPhone is an icon of our days. Yet, the iPhone is also a device that works pretty well, thanks to its software.

If we look at Apple’s growth for 2023, it was still primarily driven by iPhone sales, together with service revenues. 

The interesting part? Within the service business , advertising revenues were the fastest-growing sub-segment. 

Followed by Mac, Accessories & Wearables, and the iPad. 

Therefore, as of 2023, while Apple has a diversified business model , the iPhone does represent the most important piece of the puzzle. 

In fact, the iPhone is the physical platform, on top of which Apple has built its operating mobile system (iOS) and its marketplace (App Store). 

Hardware, operating systems, and the marketplace together make up an incredible business ecosystem, which fifteen years after the iPhone’s launch still makes Apple the most valuable company in the world. 

Apple’s products

Apple sells three main products and a set of accessories and wearables (which are developing into a whole new set of products):

• Wearables, Home, Accessories Devices.

Apple’s operating systems

Those products are run by Apple Operating systems:

Apple-related services

And supported by a set of related services:

• Digital Content and Services.
• Advertising .

Services revenues also have grown fast in the last few years, and they represented almost 20% of the overall revenues in 2022.

The most interesting part is that those revenues carry high profitability for the company, even more than its core products, as they follow a platform business model. 

In addition, within the services business , Apple has the advertising service sold via its store; this tells us that the advertising business (for which we don’t have a breakdown) is growing very rapidly, and it might be already now a multi-billion dollar segment. 

It’s very critical to highlight that for the sake of this analysis , I divide products and services into two separate business units. 

In reality, they are highly interconnected.

Indeed, there is no service business without the successful hardware products Apple has built over the years. And there is no service business without the iPhone. 

In fact, on top of the iPhone Apple also offers Apple Care, cloud storage, advertising (through the App Store), and more. 

In addition to that, the iPhone also spurs the whole accessory business for Apple. Products like the AirPods are great companions to the iPhone. 

It’s critical to keep that in mind.

Apple as a chip maker!

In November 2020, Apple launched the M1 chip, which would become the main component of its computers. This changed the whole supply chain of the chip industry.

Indeed, the M1 changed the whole architecture of Apple’s computers, making it possible for the company to create a whole line up of products based on these chips.

This move was critical for apple to complete a process of vertical integration further, controlling a key component of its hardware.

Indeed, design has been, for years, the key element of Apple’s competitive advantage.

As the smartphone industry saturated, Apple moved further up the supply chain by internalizing the production of chips. This changed the whole industry!

The introduction of Apple’s chips is also critical for the development of the business platform of the future: AR. Indeed, a powerful chip developed in-house will be a critical component to enable powerful AR devices. 

Apple’s Distribution strategy 

The Company sells its products and resells third-party products in most of its major markets directly to consumers and small and mid-sized businesses through its retail and online stores and its direct sales force.

The Company also employs a variety of indirect distribution channels, such as third-party cellular network carriers, wholesalers, retailers, and value -added resellers.

In 2023, the Company’s net sales through its direct and indirect distribution channels accounted for 37% and 63% of total net sales.

Where the indirect channel is critical for amplification and scale.

The direct channel is critical for the development of the service business, and as a branding tool at scale, it also plays a key role in the B2B sales side of the company.

It’s much easier for Apple to sell to other businesses through its owned stores, as it can provide the necessary support to them before and after the products’ purchases. 

Inside Apple’s iPhone Economics

To understand the economics of Apple, it’s worth looking at the economics of the iPhone.

For instance, based on the iPhone 14 Max Pro, Apple might spend about $501 to make it and sell it at a base price of $1099. 

This is a huge markup and premium for a tech product, and Apple is the only company on earth that can do it at such a scale. 

In short, the iPhone generated over $205 billion in revenues for the company in 2022 and has done it at wide margins.

And on top of the iPhone, Apple has built various business segments: 

• App Store: apps enhance the iPhone’s capability, and the reason Apple can charge a wide premium on the physical product is also thanks to the apps available on the iPhone (see reverse razor and blade strategy ).
• Service business:  on top of the iPhone and the other products’ lineup, Apple has built a set of services offered in its stores (insurance, assistance, education, and more). 
• Advertising : within the service business, the marketplace that Apple has created also enables Apple to sell mobile advertising at wide margins. 
• Marketplace revenue cut : within the App Store, the apps featured share a cut of the revenues with Apple. Also, the marketplace has become an incredible source of revenue at high margins. 
• Accessories and Wearables : new products like ups, like AirPods and Apple Watch, have become extremely successful. And lately, the AirTags as well. Those devices pair seamlessly with the iPhone, thus enabling a smooth experience if you stay within Apple’s ecosystem!

In short, the iPhone isn’t just a hardware product; it served as the basis for developing what I like to call a business platform .

On top of this business platform, comprising hardware, an operating system, and a marketplace, Apple has built its success.

Apple’s business model recap:

• Products : the products lines comprise things like iPhone, iPad, Mac, and wearable, home, and accessories devices (Apple Watch, AirPods, and more)
• Services: the services business comprises   primarily: 1.   Digital Content Stores and Streaming Services,   comprising purchases on the App Store and subscription services like Apple Music and Apple TV. 2.   Other services comprise AppleCare+   (“AC+”) and the   AppleCare Protection Plan,   which are fee-based services that extend the coverage of phone support eligibility and hardware repairs. 3.   Apple’s Cloud Services   (iCloud), 4.   Licensing is  where Apple licenses the use of certain of its intellectual property and provides other related services. And 5.   Other services   include Apple Arcade™, a game subscription service; Apple Card™, a co-branded credit card; Apple News+, a subscription news and magazine service; and Apple Pay, a cashless payment service.
• Apple has a diversified business model broken down into products and services.
• Even though iPhone sales still represented over 52% of the overall sales for 2022, the company also offers services and subscriptions, which are growing substantially.
• The services business has a high marginality, even higher than the products business of Apple. This makes it interesting for Apple to keep pushing its growth in the coming years, considering this part comprises the advertising business. 

Apple’s quest for the next business platform

Apple is among the tech companies that can build incredible hardware while leveraging its software.

Apple is secretly working on its AR headset (we don’t know the specs), which might be launched next year.

Apple controls the pipeline of the mobile Internet. And the next ten-trillion dollars business platform will be AR.

Thus, for Apple to be the company that we know today, it needs to be on top of it in ten years. 

Related to Apple

Who Owns Apple

• Apple Business Model

Apple Business Growth

Apple Distribution

Apple Value Proposition

How Much Is Apple Worth?

Apple Cash On Hand

Apple Employees

Apple Revenue Per Employee

Apple iPhone Sales

Apple Profits

Revenue Per Employee

Apple Mission Statement

The Economics of The iPhone

Tim Cook’s Salary

Tim Cook’s Net Worth

• Apple Distribution Strategy
• The Apple-NeXT Deal
• A Decade-Long Evolution Of Apple Sales By Products
• Who Owns Apple?
• Apple vs. Google Business Models

More Resources

About The Author

Gennaro Cuofano

Leave a reply cancel reply, discover more from fourweekmba.

Subscribe now to keep reading and get access to the full archive.

Type your email…

Continue reading

• 70+ Business Models
• Airbnb Business Model
• Amazon Business Model
• Google Business Model
• Facebook [Meta] Business Model
• Microsoft Business Model
• Netflix Business Model
• Uber Business Model

This web app uses cookies to compile statistic information of our users visits. By continuing to browse the site you are agreeing to our use of cookies. If you wish you may change your preference or read about cookies

APPLE BUSINESS MODEL | HOW DOES APPLE MAKE MONEY | STRATEGY AND INSIGHTS

Apple has always been a major favorite of customers from all around the world. The sleek designs of their products and their uniqueness have always attracted people. This attraction is seen by the $229 billion generated by Apple in the 2017 fiscal year. Apple was founded on April 1, 1976 by tech-entrepreneurs Steve Jobs, Steve Wozniak and Ronald Wayne. The first product of the company was the Apple I personal computer which was single-handedly designed and hand-built by Wozniak.

By going public in 1980, Apple started its journey towards success. Thought initially the high prices of the products as well as the internal power struggles caused issues for the company, they were resolved later on. By revenue, Apple is the world’s largest information technology company and the world’s third-largest mobile phone manufacturer after Samsung and Huawei. Apple has always been ranked as the world’s most valuable brand repeatedly.

Products launched by Apple

Each and every product launched by Apple has been well received by the customers. There have been good as well as challenging reviews for all the products. Here are some of the most popular products launched by Apple.

Launched on 24 January 1984, Mac or Macintosh is a group of personal computers designed by Apple Inc. They used to sell Macintosh along with Apple II group of computers for almost ten years before Apple II was taken from production in 1993.  While the varieties of Macintosh are different now, the original Macintosh was in fact the company’s first mass-market personal computer which had a graphical user interface, built-in screen and mouse.

There are a series of operating systems developed on the line of Macintosh by Apple. As of 2016, the operating system was called macOS. The current version is macOS High Sierra. Non-Apple operating systems like Linux, Microsoft Windows and can function in Intel-based Macs with the aid of Boot Camp or third-party software. The present varieties of Mac which can be seen in the stores now are iMac, Mac Mini, MacBook, MacBook Pro, Mac Pro and MacBook Air.

Smart phones running on iOS, iPhones are the most favorite product of Apple Inc. Released on June 29, 2007, there have been eleven generations of iPhones till date with each phone accompanied by one of the eleven major releases of the iOS operating system.

Including a virtual keyboard and a multi-touch screen, the user interface is complete in iPhone. iPhones can be used to take pictures, videos, send messages, browse the web, navigate with GPS etc. The latest variant of Apple in the market is iPhone X. iPhones are credited with making Apple one of the world’s most valuable brands.

One of the most popular portable media players as well as multi-purpose pocket computers designed by Apple Inc is iPod. Released on October 23, 2001, iPods also serve as external data storage devices. Though iPod was one of the best selling cakes of Apple, by the middle of 2010, iPhone overtook iPod on the number of sales made. The only version of iPod on sale is iPod Touch.

Business Model Canvas of iPod

Click the image to enlarge.

Released on April 3, 2010, iPads are tablet computers developed by Apple. Including a virtual keyboard and a multi-touch screen, the user interface is complete in iPhone. Some models have cellular connectivity while every model has Wi-Fi features. After Android-based tablets, iPads are the second most popular tablets in the market.

The latest released models of iPads are iPad 2017 and iPad Pro.

Apple Watch

Released originally in April 2015, Apple Watch is a series of smart watches developed by Apple. Other than just viewing time, it can also be used to track fitness regimes and other services.  The latest model released is the Series 3, which was released on September 22, 2017.

Apple Music Store

The online music service offered by Apple pionered the on-demand service approach, where you can listen to music at anytime, anywhere, by using anydevice.

Business Model Canvas of Apple Music Store.

Released on January 9, 2017, Apple TV is a digital media player and micro console developed by Apple Inc. It can be used to stream content into compatible televisions.  Apple TV works on only HDMI devices. It can be synced with other Apple devices such as iPhones or iPads and can be controlled by Apple Remote.

Business Model Canvas of Apple TV

This service opened a new way of possibilities to the Apple company, mobile payment more than a cool software feature can be considered as a basic necessity, we live in a world where you’re continuosly conected to your digital life, cash should dissapear as long as the digital wallets will be spreaded.

Business Model Canvas of Apple Pay

Click the image to enlarge

Major money-making acquisitions by Apple

Shazam .

Acquired by Apple for $400 million in December 2017, Shazam is a music identifying app developed by Shazam Entertainment Ltd, a British-based app making company. It was founded in 1999 by Chris Barton, Philip Inghelbrecht, Avery Wang and Dhiraj Mukherjee. Comparitable in iOS, Android and Windows OS devices, it used the built-in microphone to amass a short sample of the music being played. Then it generates an acoustic fingerprint formed on the sample and compares it with the central database for a match in the records. Once the match is found, it sends information such as the artist, song title, and album back to the user. Shazam is said to have much better features than Siri’s inbuilt music identifying system.

Siri, developed by Siri Inc and sold to 2010, is an intelligent personal assistant which is a part of iOS, macOS as well as watchOS and tvOS. It was first developed as an individual app to help book reservations at restaurants and cafes.

Siri was first released as an app for iOS in February 2010 and then later released with the fourth generation of iPhone, iPhone 4S. It uses the in-built microphone to listen to the queries and a natural language user interface to answer questions and perform actions as directed by the users. With continuous usage, it adapts itself to the priorities and preferences of the users. It has also been integrated to other Apple products such as iPad, Mac, Apple TV etc.

Acquired by Apple on July 1, 2002 for $30 million, Emagic, popular for its music sequencer, Logic Pro, is based in Germany. Apple acquired Emagic to develop its digital audio workstation software GarageBand which is known for its looping melodies and wide levels of customization. After acquisition, Emagic is known as Logic Pro.

Beats Electronics

Beats Electronics, having headquarters in California, was acquired by Apple on 2014 for a whopping $3 billion which made it the largest acquisition made by Apple. Beats Electronics was founded by music producer and rapper Dr. Dre and former Interscope Geffen A&M Records chairman Jimmy Iovine. While the initial focus was on headphones and speakers, it soon expanded its horizon by launching the subscription-based streaming service, Beats Music.

The formation of NeXT Inc is just like a movie plot. Steve Jobs was once forced out of Apple, the company he helped launch in 1976. He then started NeXT along with few people from Apple. 1988 saw the release of the first NeXT computer.

Apple acquired NeXT for $400 million which made it possible for Steve Jobs to return to Apple. This merger of Apple and NeXT made it possible for the union of NeXT software and Apple’s hardware to form OS X and iOS.

Acquired by Apple on November 2013 for $345 million, PrimeSense is a 3D motion sensor company based in Tel Aviv. Xbox 360 game system contains the motion tracking software developed by the company. This 3D technology was found in itSeez 3D, an iPad app which allows users to capture 3D models.

Exploring the Business Model Canvas of Apple

Before getting into the detailed structure of the business model of Apple and analyzing the important segments, let us look into how Apple earns revenue.

How does Apple earn revenue?

The majority of the revenue is earned through the products developed and sold by Apple . Out of these, the major share is coming from the sales of iPhones. The revenue is also generated through the sale of paid apps in iOS store, Mac store etc. Another way of earning revenue is through Apple search ads . Developers can pay Apple to have their product displayed first in the search list of the stores.

Business Model Canvas of Apple

The business model canvas of Apple explains the different aspects of a business model like customer segments, value propositions, channels, customer relations, revenue stream, key activities, key resources, key partners and cost structure.

Customer Segments: This denotes the people for whom Apple is useful.

• The large market
• Availability of products in various platforms.
• Various enterprises
• Professional and educational users

Value Propositions: What all problems can Apple solve and what all do they have to offer.

• To transform personal technology
• The brand being the most valuable in the world
• Unique value proposition when compared to other brands
• Experiencing itself is the products
• Unique products which stand out in the crowd
• Hardware and software are excellent qualities
• Things are kept simple
• Products are user-friendly
• Excellent customer service as well as in-store experiences
• Offers complete privacy to user data
• Becoming the largest retailer of music in the world
• The virtual services offered are excellent
• Near-field communications possible
• Data transfer, as well as payments to apps, are secure
• Plans to produce electric car with automatic driving by 2020

Channels: What all are the platforms used by Apple to reach the customers/users.

• Stores selling Apple products
• The official website
• Online stores like iOS App Store or Mac App store
• Apple Camp and Program
• Events and TV
• Promotional offers through Email or Gift Cards

Customer Relationships: Features offered by Apple to connect with the customers.

• The products are unique and the way of marketing is also unique
• The relationship between Apple products and people are very good
• The products are user-friendly
• Loyalty programs and bonuses

Revenue Stream: What are the main income sources? Where do all the users have to pay?

• Sale of products
• Online and Media sales
• Online subscriptions and services
• Apple for Business
• Apple search ads

Key Activities: What are the activities undertaken by Apple.

• Research and development of Hardware and Software
• Customer support and consulting
• Logistics and networking
• Training and sales
• Charitable activities

Key Resources: What all resources do Apple need to be successful?

• Excellent working environment and culture
• Putting benchmarks in all aspects of the market
• Staying ahead of its competitors always
• Different products launched by Apple

Key Partners: Who all help Apple? What all do they do?

• Joint-stock company
• It’s subsidiaries
• Suppliers and manufacturers
• Sellers and resellers
• World Wide Fund for Nature (WWF)

Cost Structures: What are the types and relative proportions of fixed and variable costs that Apple incurs?

• Advertising and designs
• Research and development
• Manufacturing and outsourcing costs
• Stores and centers
• Employees and operations

With each product, Apple is showing how unique and innovative they are. It is no doubt that they would rule the smartphone market for a long time. While the future of iPhone is a debate due to the changes in the latest iPhone X, the other products show promise.

Vizologi is a revolutionary AI-generated business strategy tool that offers its users access to advanced features to create and refine start-up ideas quickly. It generates limitless business ideas, gains insights on markets and competitors, and automates business plan creation.

+100 Business Book Summaries

We've distilled the wisdom of influential business books for you.

Zero to One by Peter Thiel. The Infinite Game by Simon Sinek. Blue Ocean Strategy by W. Chan. …

WECHAT BUSINESS MODEL | STRATEGY AND INSIGHTS

Youtube business model | how does youtube make money | strategy and insights.

Generate limitless business ideas, gain insights on markets and competitors, and automate business plan creation

Try it Free

Before downloading the canvas, we would like to invite you to our newsletter, from time-to-time we will send you curated content about business strategy

How Apple Changed its Business explained with Business Model Canvas Estimated Reading Time: just 3 min

The Business Model Canvas (BMC) is the structure of a business plan on one single page.

The Canvas is popular with entrepreneurs and intrapreneurs for business model innovation.

Fundamentally it delivers three things:

• Focus: since it is more concise than a traditional business plan
• Flexibility: sitting on a single page itis a lot easier to tweak than a business plan
• Transparency: it makes a much easier to understand a business model

This business model design template is based on:

• Customer Segments
• Value Propositions
• Customer Relationships
• Key Activities
• Key Resources
• Key Partners
• Revenue Streams
• Cost Structure
• Social & Environmental Benefits/Costs

An interesting case study of a successful Business Model Canvas application is Apple.

Apple is a company based in Cupertino, CA and it is one of the most famous technology companies in the world scoring in 2017:

• 229 billion $ Revenues
• 61 billion $ Operating income
• 48 billion $ Net income

The initial concept of the company was created by Steve Jobs, Steve Wozniak, and Ronald Wayne in April 1976 to develop and sell Wozniak’s Apple I personal computer.

The company encountered a great success during its first 15 years of life and then a decline that lasted until the late 90s.

This“dark age” was caused by some issues with creating products that were able to meet the needs of the market.

The situation changed with the return of Steve Jobs who was able to lead the company to create products that changed the world by exploiting the potentialities of the internet and, at the same time, changed the business model of Apple making it one of the most profitable companies in the world.

The business model of Apple until 2000 is described by the Business Model Canvas in the image below.

As reported in Customer Segments  block, Apple targeted a vast market that was segmented based on the use made of the company’s devices.

This was the cause of the decline period Apple experienced between 1991 and 1997.

In fact, the segmentation and the building of Buyer Personas was very expensive and time-consuming in an age when data wasn’t easy to get since the internet wasn’t what it is today.

Therefore, it was easy to fail in meeting consumers’ needs.

In this situation, Apple introduced iPod in 2001 and iPhone in 2007.

The most important idea was to shorten the distance with the Customer Segments by introducing two additional Channels.

This was made in 2003 with the creation of the iTunes Store to:

• Deliver a new Value Proposition : Music Experience
• Increase Revenues  by selling Music
• Move to Customer Segments that configured in a Mass Market

The last point was reached by leaving the customization of the iPod to the Customers exploiting internet potential that allows everyone to download each song on its computer and then to upload it in its iPod.

Before iPod, physical supports for music required a segmentation of the market to forecast the demand while with iTunes Store this was handed to the Record Companies.

A step further was made with App Store that exploited the same principles of iTunes and perfectioned them. In fact, Apple handed the Customer Segmentations risks to the App Developers.

This huge change in the Commercial Strategy had, of course, an impact on the Operational and Financial Strategies and Content Agreements with Key Partners such as Record Companies and App Developers became a central matter for Apple.

Last but not least, every single decision has an impact on the environment in which a company operates.

In this case, Music Digitalization brought a massive improvement related to the CO2 impact of the Music Industry caused by a drop in physical supports production such as MCs, CDs and LPs. This has been a great Environmental Benefit related to the new Business Strategy.

Digitalization is a trendy topic nowadays but, for a bright side, there is always a dark one.

In fact, in terms of Social Cost, digitalizing implies a downsize in the Industry Employment that needs to be analyzed very carefully to understand:

• What will happen to people with skills related to the old Physical Industry
• If it is possible to compensate for Digitalization with other jobs

For what concerns Apple, the switch has been from jobs related to the production and distribution of physical supports to ones mostly focused on legal agreements and software developments that are probably better rewarded but involves overall fewer people.

• Author Details

Business Strategy | Product Marketing | Executive Master eCommerce Management | Business Innovation Master | MSc

I am driven by my personal growth and of people/contexts that surround me. I followed a professional path in Valentino Fashion Group and Luxottica during which, thanks to the ability to understand different businesses and interests, I was able to succeed in Operations, Merchandising and Retail. These organizations have exploited my ability to mediate and translate needs/constraints into practice, assigning me to Project Management roles. Luxottica relied on my ability to analyze, to anticipate things and to imagine/implement solutions by appointing me in Supply Chain Management department and assigning me to the Product Management of IoT solutions for Anti-counterfeiting and Retail digitalization. During this professional path, I also developed my leadership by managing teams to build Processes, Organizations, Systems and Governance Tools.

Privacy Overview

You must be logged in to post a comment.

View in English

Choosing a business model

The App Store empowers you to scale your app distribution worldwide using a variety of business models. The right business model for your app balances your goals with your target market’s expectations. Choosing your business model before developing your app can inform your app design decisions for a cohesive user experience.

With free models, users don’t pay to download or use your app. Removing the barrier of price increases the likelihood that users in your target market will download and try your app, which can help increase awareness and expand your user base. If you’re looking to grow your brand or attract a large user base, consider offering your app for free.

Free without monetization. Your app doesn’t offer in-app purchases or the ability to buy physical goods or services within the app, and doesn’t display advertisements. You don’t earn any revenue from your app.

Free with physical goods and services. Users can purchase physical goods and services — such as clothing or food — within your app or order rides from transportation services. You earn revenue from these sales.

Free with display advertising. Display advertisements are part of the app experience and you earn revenue when presenting them. Make sure that all display advertisements in your app are appropriate and relevant to your target market, as low-quality, obtrusive, or inappropriate advertising reduces engagement and retention.

Your app and any third-party SDKs you use to help target display advertising or measure advertising efficacy need to follow the Data Use and Sharing and the Advertising sections of the App Store Review Guidelines.

Reader. Users purchase or subscribe to content — such as magazines, newspapers, books, audio, music, or video — outside of your app and enjoy access to that content within your app. You generate revenue outside of the app. For more information, see the “Reader” Apps section of the App Store Review Guidelines.

With freemium models, users pay nothing to download your app and are offered optional in-app purchases for premium features, additional content, subscriptions, or digital goods. Freemium apps are accessible to all users, regardless of whether or not they choose to spend, and offer the option to pay to enhance or customize the experience. You earn revenue from the sales of in-app purchases within your app. Successful freemium apps operate as services that are continually updated to attract and retain users. You can offer multiple types of in-app purchases, including subscriptions.

In-app purchase types

Consumable. Users can purchase different types of consumables, such as lives or gems in a game, to further their progress through an app. Consumable in-app purchases are depleted as they’re used, and can be purchased again.

Non-consumable. Users can purchase non-consumable, premium features within an app. Non-consumables are purchased once and do not expire, such as additional filters in a photo app. Apple can host content associated with your non-consumable in-app purchases.

Auto-renewable subscriptions. Users can purchase access to services or periodically updated content, such as monthly access to cloud storage or a weekly subscription to a magazine. Users are charged on a recurring basis until they decide to cancel. Learn more about subscriptions.

Non-renewing subscriptions. Users can purchase access to services or content for a limited duration, such as a season pass to streaming content. This type of subscription does not renew automatically, so users need to renew each time.

If you wish, you can allow users to access content or services across multiple Apple devices, as well as other platforms. If you offer any multiplatform functionality, be sure any purchasable items or services outside of the app are also available as in-app purchases within your app. For more information, see the Multiplatform Services section of the App Store Review Guidelines.

Learn about different freemium experiences

In the paid model, users pay once to download your app and use all of its functionality. There are no additional charges or in-app purchases. You earn revenue from the sales of your app. This model resonates with users who prefer to pay once to get the full experience. Because the cost to download might make users consider the app’s value more carefully, successful paid apps are often positioned as premium experiences through outstanding design, functionality, and marketing.

In this combination of the paid and freemium models, users pay to download your app and have the option to buy additional features, content, or services through in-app purchases if they want to engage more deeply. It offers the possibility of lowering the app’s download price while using in-app purchases for ongoing monetization. Successful paymium apps offer premium design, functionality, and content, as well as advanced features intended to complement the experience.

As with paid apps, the cost to download might make users consider the app’s value more carefully. Set expectations about what users get when they pay up front and what they’ll get if they purchase optional enhancements. Keep in mind that creating in-app purchases for features that are required to use the app can cause a negative experience and may affect your sales and retention.

App Store Small Business Program

The App Store Small Business Program is designed to accelerate innovation and help propel your small business forward with the next generation of groundbreaking apps on the App Store. It features a reduced commission rate of 15% on paid apps and in-app purchases, so you can invest more resources into your business to continue building quality apps that customers love.

Learn about the program

Business Model Canvas: Explained with Examples

Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

• The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
• The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
• The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
• The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
• The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
• It’s easier to edit and can be easily shared with employees and stakeholders.
• The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
• The business model canvas can be used by large corporations and startups with just a few employees.
• The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
• You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
• The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
• A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

• Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

There are different customer segments a business model can target and they are;

• Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
• Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
• Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
• Diversified: A diversified market segment includes customers with very different needs.
• Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

• Personal assistance: you interact with the customer in person or by email, through phone call or other means.
• Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
• Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
• Automated services: this includes automated processes or machinery that helps customers perform services themselves.
• Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
• Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

• Owned channels: company website, social media sites, in-house sales, etc.
• Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

• Transaction-based revenue: made from customers who make a one-time payment
• Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

• Asset sales: by selling the rights of ownership for a product to a buyer
• Usage fee: by charging the customer for the use of its product or service
• Subscription fee: by charging the customer for using its product regularly and consistently
• Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
• Licensing: customer pays to get permission to use the company’s intellectual property
• Brokerage fees: revenue generated by acting as an intermediary between two or more parties
• Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

• Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
• Problem-solving: finding new solutions to individual problems faced by customers.
• Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

• Human (employees)
• Financial (cash, lines of credit, etc.)
• Intellectual (brand, patents, IP, copyright)
• Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

• Strategic alliance: partnership between non-competitors
• Coopetition: strategic partnership between partners
• Joint ventures: partners developing a new business
• Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

• Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
• Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
• Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
• Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
• Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
• Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

• Use clear and concise language
• Use visual-aids
• Customize for your audience
• Highlight key insights
• Be open to feedback and discussion

More Related Articles

Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

Business Model Canvas

Using clil method.

• 3.0 • 1 Rating

Publisher Description

Alexander Osterwalder’s Business Model Canvas explained to students using CLIL (contents and language integrated learning) method. Schoolbook for Project Management and Enterprise Organization students attending the fifth class of ITIS Jannuzzi, Andria, sections AI, BI, and CI. This book is intended to help comprehension of the main topics of the Business Model Canvas, understanding the nine building blocks and the main patterns used in business design.

More Books Like This

More books by cosimo giovine, customers also bought.

Analyst Thinks the DOJ can force Apple to change its Business Model

S o, the Department of Justice is suing Apple . What does the DOJ actually think this lawsuit will do for or against Apple? Well, according to one analyst , the lawsuit will force “Apple to change its business model,” and it’s likely that Apple will have to pay a hefty fine.

Wedbush analyst Daniel Ives told clients in a note that “we do not expect any business model changes for now, but Apple clearly is going to have to find a way to eventually settle this case, pay a hefty fine, and ultimately find some compromise with developers on the App Store structure down the road.”

The DOJ alleges that Apple makes its products better by making competitors’ products worse

In the lawsuit, not only does the Department of Justice claim that Apple is a monopoly. However, they also claim that instead of making their products better, they work to make competitors’ products worse. Take, for instance, the Green Bubbles versus Blue Bubbles issue we have right now. Android users do not see green bubbles; in fact, Android users can customize those bubble colors to any color they want. It’s Apple making this decision to show non-iphones as green, and also their decision to stick to SMS for non-iphones at least until the EU forced it to change and add RCS later this year.

Apple has also been accused of causing the failure of the Amazon Fire Phone back in 2014 , as well as making it difficult for manufacturers like HTC and LG to compete in the market. In 2008, about six months after the iPhone went on sale, Apple had about 1.1% market share. LG had 8.3% and Nokia was the big winner at 38.6%. So, is Apple really to blame for those manufacturers dipping out on making phones?

There are quite a few wild claims in the lawsuit from the DOJ, and some of which are going to be very difficult to prove in court. But the outcome of this lawsuit will definitely be a pretty significant fine. Now, whether Apple is forced to change its behavior is a whole other story.

The post Analyst Thinks the DOJ can force Apple to change its Business Model appeared first on Android Headlines .