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Morici: What Ails Apple? The Simple March of History

Stocks in this article: AAPL GOOG MSFT DELL IBM HON

In a nutshell, Apple offered refined, consumer-friendly products, while those run on the Microsoft platform were often clumsy and mediocre. That worked until the plane of competition shifted to handheld devices and Google (GOOG) entered the scene with Android.

I don't want to get into the debate over whether Android or Apple smartphones offer the better experience. Having tested both, I admit both have their points. However, Droids offer at least a comparable customer experience, are made by several firms, and one among them, Samsung designs its own components and manufactures phones.

In the automobile and other rapidly advancing industries, the most able competitors keep the manufacture of critical components, or at least systems comprised by those components, close and accessible to their product designers -- Samsung does, Apple does not.

Consequently, Apple produces a high-priced, high-cost-to-make product -- Samsung does not. The latter puts enormous pricing pressure on Google's Motorola, which markets devices as good as those made by anyone.

The late Steve Jobs was able to circumvent this kind of competitive disadvantage by coming up with whole new products. But Apple's competitive space is maturing, and the real work will be in refining handhelds, tablets and the like -- merging uses and speeding and enhancing the customer experience -- not coming up with whole new products.

In that environment, Apple must bring home manufacturing and acknowledge the requirement of competing for the masses. Being a step ahead for the elite, and those who wish to look elite, by whipping out their iPhone, doesn't cut it anymore.



At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.
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