On August 24, 2011, overcome by illness, Steve Jobs delivered a Tim Cook and to a handful of managers, who had nurtured for years, the keys to Apple, which was already the company with the largest capitalization in the world.
Few would have bet 1 euro on what Tim Cook and his team would actually have done in the next 10 years. Many assumed that Jobs' construction would spell the end for Alexander the Great's empire after the demise of its principal architect.
Instead, it happened that Apple, somehow, is better today than the one left by Jobs, simply because the successors have been able to administer and manage the heritage of ideas, innovations, knowledge and mentality matured in the Jobs era with wisdom and measure.
A heritage that already in 2011 made Apple 10 years ahead of any other possible competitor. Competition could erode Apple's advantage only in sectoral areas, but not as a global company.
The new evidence
Today Tim Cook and his group are faced with enormous challenges also determined by the different geopolitical and institutional environment in which they will have to operate: politics and the institutions want to regain the leading role of the world which they had abdicated in favor of the leading organizations of the technological revolution.
It will be a challenge as big as that of running an Apple without Jobs. The magazine "The Economist" traces well the trends with which Cook's second term will have to deal. Good luck Tim!
An astounding success
When it comes to Apple, it's hard to avoid superlatives. It is the most valuable company in the world, with a market capitalization of $2,5 trillion.
Over 80% of this immense valuation was amassed during Tim Cook's management. No other CEO has created more absolute value for shareholders (see Figure 1).
As he celebrates his XNUMXth anniversary at the helm of Apple, Cook can look back with satisfaction.
Instead of trying to imitate the co-founder of Apple, Cook took Steve Jobs' creation and made it bigger and better.
Much of this success has come from maintaining Apple's innovation and brand reputation. But Cook has also been able to make the most of an era of open and globalized capitalism. This era is fading.
The uniqueness of Apple
Because he plans to remain in office for another five years or more, how he deals with new market and world conditions will determine the next chapter in Apple's story.
By the standards of the other tech giants, Apple stands apart.
— It is older: it was founded in 1977.
— Mainly sells hardware.
— It is controlled by the investors and not by the founders.
— It is more global, with a higher share of international sales than Alphabet, Amazon, Facebook, Microsoft, Alibaba or Tencent.
Under the supervision of Tim Cook, he was able to get the most out of five trends, all of which were favorable.
The five favorable winds
1. The supply chain
The first is the global supply chain. Cook has built an immense manufacturing network with China at its core and components from all over the world. This machine, for example, is in full swing ahead of the launch of the new iPhone 13 next month, with sales forecast of around 90 million units.
2. The conquest of the Chinese consumer
In addition to employing Chinese labor, Apple has also won over Chinese consumers. Annual sales in China have increased fivefold from a decade ago, reaching $60 billion in revenues, more than any other non-Chinese company.
3. The benevolence of the institutions
Tim Cook's Apple benefited from a period in which governments were lenient on companies with high market shares.
4. Cartel agreements
While the brutal mobile industry (think of the rise and fall of BlackBerry) is still very competitive for low-end devices, in the high-end, where it operates, Apple manages to hold up well and even grow: it has in fact with a revenue market share of over 60% in America and a dominant position in operating systems. Also, rather than compete with rival tech giants, Apple has benefited from cartel deals, such as the one with Google which invested heavily in having its own search engine as the default on the iPhone.
5. Taxation
Finally, there has been much recourse to tax relief. Thanks in part to legal structures that allowed it to operate in low-tax countries, Apple has paid just 17% of pre-tax profits to the tax authorities over the past decade.
Change the wind
These five trends are fading.
Geopolitical tensions threaten global supply chains.
President Xi Jinping's authoritarian policies have reduced the ability to keep 18% of global sales in China. In his new slogan "shared prosperity" there is the idea of also cutting the profits of foreign companies.
Western regulators are targeting the tech sector, including the business model of Google Play and Apple's App Store. A model that Epic Games, the creator of Fortnite, accuses of imposing predatory commissions.
Finally, an international agreement brokered by the OECD could gradually force multinationals to pay more taxes.
Cook needs a plan
So what exactly is Cook's plan to deal with these new conditions? One of his successes has been maintaining Apple's cult of secrecy. Wall Street has been fed a diet of generous stock buybacks and scant information about company strategy. Still, some things are clear.
Apple will find ways to continue with tax breaks, but taxes will likely rise.
It will continue to move towards a subscription-based business model with over a billion users already consuming a variety of services (which now generate 21% of sales).
Apple will also continue to be the emblem of beautiful design and a flawless product, but it will also aspire to become a trusted intermediary, in a currently toxic and unruly sphere of the digital economy, in the world of subscription services. Here he has the strength to charge good rates.
He will also continue to invent a new generation of products — Apple Glasses or Apple Cars, for example — that can join the iPhone as a gateway to the Apple world.
Some thorny points
However, on some issues that are thornier than others, Cook still doesn't have a plan.
As for supply chains, even as Apple is shifting the mix of its long-term businesses to America — the share has risen from 38% in 2012 to 70% now — key suppliers including TSMC, a microchip company , are hesitant to set up production in America.
If the Sino-US rift deepens or Apple's relationship with Beijing sours, Cook will have to leave China, with momentous consequences for its margins and for world trade.
Meanwhile, the ardor of regulators and Apple's entry into the services world may sharpen competition with other tech firms.
Apple clashed with Facebook over privacy this year; it could go as far as developing its own search engine, going into e-commerce or entertainment, breaking away from the other members of the snug tech club.
Another 10 years of Cook's management are unlikely to be as successful as the first decade, but the challenge is just as daring.
From: The Economist, Apple exemplified an era of global capitalism that has passed, August 20, 2021
