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As the smartphone industry matures and approaches the natural limit of technology, it will only become more difficult for Apple to convince its customers to shell out top dollar for a product with very little to offer in terms of improvement over the previous model (figure 4). As competition increases and the smartphone industry becomes saturated, Apple must look for other areas in which to innovate in order to maintain their current position. Enter wearable technology. As seen in the case, Tim Cook has fully committed to the Apple Watch, Apple Pay and Apple TV. We see this as a fantastic course of action for Apple. Not only does the Apple Watch add a great addition to the long line of products, but Apple Pay also adds another element of integration to the mix in a way that adds both values and prioritizes security and consumer trust. Although Apple wasn’t able to capture the first-mover advantage in the extremely competitive smartwatch industry, they are able to do what they usually cannot: observe the mistakes of the first movers and use their experiences to design a watch that truly adds value to its target consumers. Similarly, Apple is in a position to learn from its own mistakes and fix the issues that caused a lackluster debut of the Apple TV platform. By adding these three products, Apple is building its network of complementary technology, which adds value for existing users as well as further increasing the switching costs for customers. We believe that by building on this product integration strategy that prioritizes a network of compliments, Apple will be able to mitigate the effects of the smartphone industry approaching the natural limit of technology. This network of complementary products incentivizes customers to continue purchasing smartphones despite smaller year over year improvements. This gives Apple time to come up with its next game-changing innovation.
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ITunes Store, IPod Touch, mission of the Apple Company