Industrial parties are not long lasting, but AAPL will – WSJ

The break-up of a group of old-school industry groups has led some to question the long-term prospects of “new groups” – tech companies such as Apple, Amazon, Facebook and Google.

But I have a piece WSJ They argue that companies like General Electric have two advantages over them that can last longer.

Traditional parties – large companies whose business activities cover a wide variety of business types – were based on two ideologies. First of all, good management is good management, so if they can succeed in one area, they can succeed in another. Second, the financial power to build large businesses means that they benefit large-scale economies when it comes to both raw material purchases and the production process.

But WSJ It is said that it seems so Industrial groups have spent their days, raising the question of whether tech companies will explode in the same way over time.

In recent years, the demise of General Electric, Toshiba, Johnson & Johnson, Siemens, Dow Dupont, United Technologies and other large business empires has been hailed as the demise of the party and the demise of the notion that excellent management teams work together. Can succeed Different industries. But as these giants of traditional industry are being dismantled, today’s tech giants have emerged as postmodern groups – some even call them “no-conglomerates”. They boast greater values ​​than any other company in history, and diversify their business through acquisitions and new startups like the old companies. […]

Smartphones, laptops, wearables, advertising and self-driving cars are now in the works or in the market from both Google’s parent alphabet and Apple.

However, while some suggest that they have the same fate, others say the tech giants have two advantages – Apple in particular.

First, while the company can now operate in a variety of areas, such as smartphones and streaming video, the ecosystem is what sticks everything together.

“For Apple, all of its products are plugged into this one platform,” says Kim Wang, an assistant professor of strategy and international business at Suffolk University’s Sawyer Business School.

Second, while Industrial parties rely on production economies, and tech companies take advantage of what one investment expert calls a “demand-side economy of scale.” In other words, the more customers you have, and the more integrated services you sell to each one, the more valuable each customer will be to you.

Kai Woo, founder and chief investment officer of investment firm Sparkline Capital, says one of the characteristics of platform companies is that they take advantage of the “network effects” that every additional user they add adds to. Brings more value than before. […]

In that sense, it is possible Apple could go into automobiles. Autos, and especially self-driving companies, have the potential to be the next most popular place for companies to bring services and apps to the screen, after phones, personal computers, TVs and wearables, where Apple already has. Is performing quite well.

(I like “pretty good”.)

Wu says this refers to tech giants that are growing dramatically.

All the evidence from the study of platform economies suggests that they will only grow. In other words, Amazon, Microsoft, Apple, and Alphabet are probably where GE was in the mid-20th century, a time when it dominated its industries but in terms of revenue and market value, was just beginning. ۔

Wu, however, acknowledges that while net economic models point to a brighter future, mistrust measures are a potential obstacle.

He says the only real obstacle to their progress will be a no-confidence motion by governments – a threat that is growing in China, Europe and the United States.

It’s a small thing, like “OK, enough.”

Photo: Brian Lowe / Insplash

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