Apple's Competitive Advantage

 

Apple's current market capitalisation is 2.45 trillion USD which makes it the most valuable company on the planet.

How has this remarkable feat been achieved? Many analysts will point to Steven Jobs's genius. I agree that Steve Jobs marketing and product prowess was basically the main reason for Apple's amazing success. That said, Steve Jobs was able to perform his magic only because Apple Inc. had a loyal user base, which exhibited almost cult like behaviour in devouring fervently all products the Cupertino, California based company came up with.

Much like a religious organisation Apple built up through the years a loyal following which accepted no other companies's products as the universal truth. By being able to sell high-priced products with significant profit margins to its loyal customers Apple was able to muster financial resources which brought it safety to dive deeper to develop iPad  about which Steve Jobs said: "This would make a great phone" and iPhone came about and the rest is extraordinarily successful history.

Yes, Apple's hardware was almost always of exceptional quality and design. Here Jony Ive must be mentioned as much of the design of Apple's consumer electronics products is of his making. Ive was an industrial design genius, but also because of Apple's cult like status he was drafted in Apple's ranks in the first place. Apple has an aura of magic around it. Much if it is due, of course, to Steve Jobs' personality. However, Apple's auto could also be traced back to the company's primary decision to be exclusive, to offer high-priced high quality products not to everybody. This was, of course, Steve Jobs and Stephen Wozniak's decision. This very exclusivity brought about Apple's magnificent influence.

Yes, people like Jobs and Wozniak are who create companies, but inertia and momentum also matter greatly. Especially when the right, long-term, strategic decisions are taken at the right time.

All in all, I believe Apple is overvalued by 30 % based on its Price/Sales ratio. On Price/Earnings ratio, however, the company is only 10-15 % overvalued. In times of crisis, though, it is likely that people will try to save money and stop buying expensive products like Apple's hardware. In the coronavirus pandemic, the opposite proved through, actually. The world is moving to digital first. That said, Apple's current market capitalisation is around three years early.