Big Tech’s Path to $4 Trillion

Apple, Amazon, Google and Microsoft


Big Tech’s Path to $4 Trillion: Apple, Amazon, Google and Microsoft
Big Tech’s Path to $4 Trillion
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I. Big Tech Corporations on the Rise with Worth Over 1 Trillion Dollars

In September 2018, Amazon followed Apple into the $1 Trillion Club in market capitalization.

  • On 4 September 2018, the price of an Amazon share rose to $2,050.50, making Amazon the second publicly traded American company after Apple to be worth over $1 trillion.
  • Amazon began in 1994 when it was founded by Jeff Bezos as an online bookstore. In 1997, Amazon went public with a market value of approximately $500 million. For the next 20 years, the company grew 200-fold. In 2018 alone, Amazon recorded an impressive 75% growth.

Amazon fuels its consistent and rapid growth through a perfect business model and its focus on execution.

  • Clear Value Proposition: For 20 years, Amazon has [1] adhered to the most basic principle of commerce – selling quality products and services at the lowest price.
  • Combining B2B and B2C: Amazon generates tremendous traffic through its ecommerce B2C business, while recording significant profits through cloud services (AWS) for B2B customers.
  • Mixing Online with Offline: Although Amazon began as an online retailer, now that its domination of the ecommerce market is complete, Amazon is expanding into offline business by acquiring offline retailers such as organic supermarkets and bookstores. Amazon is building the perfect service system by connecting its online and offline businesses.
  • Corporate Focus on Efficiency and Execution: Unlike Google and Facebook, which provide their employees with excellent employee benefits and foster a corporate culture of creativity and autonomy, Amazon’s corporate culture focuses on executing the decisions of its management in a swift and efficient manner. The common view is that Amazon is rapid and relentless in running its services.

In addition to Amazon, Google Alphabet and Microsoft are on the verge of joining the $1 Trillion Club.

  • Google Alphabet is leveraging its overwhelming strength in the internet search (Google search), video platform (Youtube), and mobile OS (Android) markets to aggressively expand its big-data-based AI and cloud services.
  • Microsoft: Having dominated the B2B market with Windows and MS Office, Microsoft is growing rapidly through aggressive expansion into core service areas related to B2B (e.g. storage and software).

However, as many tech companies are now grappling with challenges that limit their growth, the US tech industry is being oriented around four big players.

  • With its recent data leak, violation of EU regulations, and a growing exodus of young users, Facebook’s market worth collapsed by 20 – 30% in one day, signaling the company has run into a roadblock.
  • Sharing economy platforms, including Uber and Airbnb, have not dominated the global market due to competition from local companies, which present a limit to their market value growth.
  • Dropbox, formerly a significant presence in the B2C data storage market, has faced challenges expanding into the B2B market and failed to build its cloud services up to the level of Amazon. Similarly, Salesforce, which boasts overwhelming dominance in SAAS, will find it difficult to secure B2B clients and service coverage to rival Microsoft.
  • The potential for tech startups in AI and machine learning to overtake the Big Four players is inherently limited, as the Big Four have already acquired immense data, intellectual property rights, and the best engineers.

For the last 20 years, Silicon Valley saw countless startups in diverse industries and technical areas, akin to a historical time in ancient China known as the Spring and Autumn period. Today, the Valley is being reorganized around the Big Four, as they [2] cement their hold on core businesses and continue to acquire unicorn startups that [3] pioneer new businesses, technologies, and services.

II. Different Ideas on the $1 Trillion Club

Experts around the globe have differing views on the $1 Trillion Club.

Some believe that the $1 Trillion Club is a temporary phenomenon headed for an inevitable collapse.

  • Tech industry bubble theory: One such view is that the PC/mobile-based tech industries, compared to manufacturing companies such as semiconductor makers, have been significantly overvalued in terms of the benefit they deliver to the customer.
  • Slowdown due to oligopoly in tech industry: Another view is that, if the tech industry reorganizes around the oligopoly of the Big 4, these companies may follow in the footsteps of other companies which, although dominant at one time as part of oligopolies, are currently on a downward slope (e.g. GE, GM, IBM).
  • Risk of regulations: Big Tech companies face the risk of their business operations shrinking if strong anti-trust regulations are enacted The Trump administration and the EU are strengthening regulations to create checks on the oligopolistic Big Tech.

Yet, others believe that the Big Tech companies are highly likely to hit the $2 trillion mark.

  • Potential expansion into related industries: Big Tech companies can grow their market value to over $2 trillion, as they are leveraging their advanced technology to penetrate other major markets, including automobile, home appliances, retail, and medicine, in which they have generated such meaningful outcomes such as electric/self-driving cars, smart homes, and drone deliveries.
  • High customer loyalty: Billions of people around the world spend a considerable number of hours every day using services offered by Big Tech companies, which generates valuable data for these companies, fueling their growth.
  • Leveraging financial strength to respond to regulations: Big tech companies may [4] leverage their immense financial strength to assemble expert groups to respond to government regulations, which will enable Big Tech to be proactive in their response.

III. Lessons for South Korea

For the past 10 years, South Korea has also seen the rise of many tech companies which continue to improve people’s lives.

  • Text/voice messages are now free thanks to KakaoTalk and LINE.
  • BDMJ, Yanolja and SoCar have brought innovation to the food delivery, accommodation and car rental businesses.

However, the local tech industry has not had companies that can rival Big Tech corporations in Silicon Valley and faces the danger of potentially being outmatched by startups in China and Southeast Asia.

  • Presently, the only South Korean company that can compete against Silicon Valley Big Tech is Samsung Electronics.
  • Unfortunately, among the South Korean companies established around the same time as Google and Amazon, none can claim rival status against Big Tech in Silicon Valley. The gap continues to grow.
  • In emerging tech sectors, such as mobility and block chain, South Korean startups have hit a wall in terms of their growth due to government regulations. Meanwhile, Chinese and Singaporean startups are growing rapidly and are starting to dominate Asia.

South Korea is in danger of losing its industrial competitiveness within 10 to 20 years.

Is the market value of big tech just a bubble? Or, can big tech continue to grow in the future? Are there South Korean companies that can compete against big tech? In which direction should the South Korean industry grow?

Talk with your Ringle tutor about these questions as you improve your English skills.

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