Alphabet (the parent company of Google), Apple, and Microsoft as of 2017 were the three top companies in the world by market value. All three are technology companies with a strong focus on innovative software, but otherwise Google is quite different from the other two in its business model and the era in which it was founded. In some ways, though, all three companies are converging.
The oldest of the three companies is Microsoft, officially founded in 1975, which started by offering a programming language (Basic) and then an operating system (MS DOS, which later evolved into Windows) and eventually business and productivity software, with well-known products such as Word and Excel. Although Microsoft has made limited forays into hardware, its greatest success has been in dominating a software market for open architecture hardware. In other words, Windows runs on computers of similar architecture from multiple manufacturers. It only gradually moved into the hardware market with products such as the Xbox gaming system, Microsoft phones, and the Surface computer. Microsoft also is active in the server business and attempts to diversify by buying promising technology start-ups as well as innovating internally.
In contrast to Microsoft's reliance on open architecture, Apple remains a tightly closed shop, selling premium-priced computers, music players, and smartphones that consistently integrate an Apple user interface across multiple product lines. The closed nature of the Apple ecosystem has made Apple enormously profitable, as once one has invested in an Apple device, one is committed to making additional Apple purchases. Like Microsoft, Apple started early in the personal computer era, but it began with a greater focus on hardware, graphical interfaces, and upscale design rather than systems emphasizing functionality and raw computing power at a given price point. Apple's greatest financial success came with its early entry into the mobile market, with the iPod, iPad, and iPhone each dominating their initial markets and remaining premium products locking users into Apple ecosystems.
Google was founded in 1998 and began as a search engine company in the era of the internet. Thus, it differs from the other two in having started as an internet company. The bulk of its search revenue comes from advertising, and it pioneered the concept of enticing users to give away free information about themselves (which Google could then repackage and sell to advertisers). Its business model in a sense is one which trades use of a search engine for data about the people searching, and its most profitable product is the data it holds on users. Google, like the other two firms, has gradually been diversifying, offering tablets, small portable computers, smartphones, a popular smartphone operating system (Android), a search engine (Chrome), mapping software, email (Gmail), and other software. It is also competing in new areas such as self-driving cars and augmented reality, which merge hardware and software.
Tuesday, August 22, 2017
Compare the business models and areas of strength of Apple, Google, and Microsoft.
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