Apple vs Microsoft: a new battle begins – a pricing battle.

There has been a long lasting war in the post world war II era, between two tech giants, that is Microsoft and Apple. They have been fighting with each other since the advent of personal computer. Last week, we went through some of the “Mac vs PC”campaigns from both side of the companies, and I believe that everybody in class enjoyed what they have been doing to each other.

So yes, they are still fighting in 2013. However, this year, Apple adds a new weapon. As we all know, every year, there is always some news coming from Apple, either from the WWDC (Worldwide Developer Conference ), or from its new product release event. As the world most valuable company, Apple acts as an industry leader, riding on the technology innovation trend and gradually eating the market share from other companies. Last week, it released the latest operation system for Mac products, which is the OS X Mavericks, and the latest version of iWork and iLife. Along with the software updates, Apple also announced its latest products, the new iPad Air and iPad Mini 2, and new Macbook Pro and Mac Pro. Besides the higher resolution, bigger screen, lighter weight and other “foreseeable” updates, the most significant change for us as consumers would be the price. When Microsoft makes its PC software suits from $139 to $399, Apple announced them free. As Tim Cook, the CEO of Apple teased about Microsoft in his keynote presentation, yes, it is quite amazing that not only the operation system, but also the iWork and iLife are free now. Compared to the price of Microsoft Windows 8 and the Microsoft Office, Apple now plays a new card that it has never used before to the market, that is the free card.

This move is very unordinary. After years of battle between the two, the pricing has been steady for a long time for both Microsoft and Apple until Tim Cook said the word “Free”.  This makes me wonder, are those two “tired” of doing sophisticated marketing strategies? Is Apple switching to a new pricing strategy?

The reasons behind this, from a personal point of view, may lie in several perspectives. First of all, as Apple is growing and reaching to a wider range of consumers than it used to be before 2007, there is still a part of its target consumers who are blocked away from Apple products by the higher price compared to other PCs. By lowing the price of its softwares, Apple may be able to reach to those people by cheaper softwares instead of hardwares. This can also be seen from the fact that the softwares are free along with any purchase of Apple products. Notably, Apple used to believe that great hardwares are their biggest selling point. But now, they are focusing on the power of softwares, which is, or used to be, Microsoft’s key strength. As the CEO said in the keynote presentation, he wants to make sure that “our customers have access to our greatest and latest new features”. Second，there has been a lot of intellectual property protection issues for Apple’s software in some countries, especially those developing markets in Asia. This move will directly challenge the illegal use of Apple Apps.

However, the real impact of giving away free softwares is no clear enough. On one hand, the market analysts predict that this move will push the use of Apple App Store and hardware. On the other hand, this is also causing tension for other software and app designers. Should they follow this path? If yes, then what about their costs? And most importantly, as Apple is stepping into Microsoft’s comfort zone, what are they going to react?

So, welcome to a new battle. Actually, the fights between two companies is a good thing in the market. Ultimately, it is the consumers who benefits the most from it, with more choices and better prices. Let us wait and see.

Sources:

http://techcrunch.com/2013/10/24/apple-microsoft-and-free-software/

http://www.usatoday.com/story/tech/2013/10/22/apple-mavericks-free/3151093/

http://www.businessweek.com/articles/2013-10-22/why-apple-wants-its-software-to-be-free