Professional Documents
Culture Documents
MEANING:
Price is an important element of marketing mix. Price is the exchange value.
Developing a right international pricing strategy is critical to an organizations
success. Price is a significant variable, as in many cases; it is the main factor
affecting consumer choice. Its significance is further emphasized as its the
only element of marketing mix that generates revenues and the others
produce costs.
OBJECTIVES
The first step in developing a pricing strategy is to develop pricing
objectives what the pricing decisions must accomplish. Pricing objectives
must support the broader objectives of the marketing department (such as
increasing market share) and that of the organizations overall objectives
(such as enhancing shareholders wealth or enhancing corporate image).
1. SURVIVALIt is the most important objective of pricing; especially when
companies are faced with the problem of over capacity, intense
competition, or changing consumer wants. Most firms adopt survival
objective during recession, when customers on an average have less
money to spend.
Prices are reduced in order to maintain sufficient flows of cash for
working capital. Profits are less important than survival. As long as
prices cover variable However, survival is a short-term objective, as
price-cutting is not always the answer. Marketers need to be careful
with the pricing strategy that brings short term benefits at the expense
of long-term goals.
Reducing prices in order to increase sales can cause customers to be
price sensitive.
2. PROFIT OBJECTIVE:One of the main objectives of pricing is to earn profit. The profit
objective of pricing can be expressed in two ways:
Return on investment:
a good number of firms fix their prices to stimulate consumer interest
in their brand over other competing brands. Attractive prices result in
higher sales ,which in turn helps to achieve a certain level of return on
investment or return on capital employed. This in turn helps a firm to
1
Profit maximization:
A profit maximization objective seeks to get as much profit as possible.
Profit maximization does not necessarily involve fixing high prices. Low
prices may bring in higher sales and profits.
3. SALES OBJECTIVES
Firms also fix prices in order to attain sales objectives. The sales
objectives can be expressed in two ways:
Market share growth: A firm may fix the price of its products at a
certain level so as to defend its current market share, and if possible to
increase the market share. for this purpose a firm may adopt
penetration pricing for its existing prices.
4. COMPETITIVE-EFFECT OBJECTIVES:
at times, a firm may deliberately seek to reduce the effectiveness of
one or more competitors. It may fix its prices in such a way that it
would enable it to win over competitors customers. For instance, a
departmental store can offer a heavy discount in early November on
garments, footwear, etc.
5. IMAGE DIFFERENTIATION:
Some firms may create image differentiation through pricing. They
may change a premium price for their products to create a distinct
image vis-a- vis the competitors, in the minds of their target audience.
Firms like Mercedes Benz, Rolex watches, and others have adopted this
strategy. Some other firms may charge a moderate price for high
quality products. For instance, a firm may position its product on the
moderate price vis--vis high quality.
Market skimming objectives: the firms that launch a new product in a
market may adopt the market skimming strategy. in this case, the
product is launched at a high price, and then gradually it is reduced
2
over a period of time. Skimming, apart from other benefits, helps a firm
to recover high development costs associated with new products.
To
To
To
To
margin. For example, your widgets cost $20 in raw materials and production
costs, and at current sales volume (or anticipated initial sales volume), your
fixed costs come to $30 per unit. Your total cost is $50 per unit. You decide
that you want to operate at a 20% mark-up, so you add $10 (20% x $50) to
the cost and come up with a price of $60 per unit. So long as you have your
costs calculated correctly and have accurately predicted your sales volume,
you
will
always
be
operating
at
a
profit.
investment (ROI). For example, let's use the same situation as above, and
assume that you have $10,000 invested in the company. Your expected sales
volume is 1,000 units in the first year. You want to recoup all your investment
in the first year, so you need to make $10,000 profit on 1,000 units, or $10
profit per unit, giving you again a price of$60 per unit.
VALUE-BASED PRICING - Price your product based on the value it creates for
the customer. This is usually the most profitable form of pricing, if you can
achieve it. The most extreme variation on this is "pay for performance"
pricing for services, in which you charge on a variable scale according to the
results you achieve. Let's say that your widget above saves the typical
customer $1,000 a year in, say, energy costs. In that case, $60 seems like a
bargain - maybe even too cheap. If your product reliably produced that kind
of cost savings, you could easily charge $200, $300 or more for it, and
customers would gladly pay it, since they would get their money back in a
matter of months. However, there is one more major factor that must be
considered.
PSYCHOLOGICAL PRICING - Ultimately, you must take into consideration the
lower than your competition. If you want to signal high quality, you should
probably be priced higher than most of your competition.
POPULAR PRICE POINTS - There are certain "price points" (specific prices) at
which people become much more willing to buy a certain type of product. For
example, "under $100" is a popular price point. "Enough under $20 to be
under $20 with sales tax" is another popular price point, because it's "one
bill" that people commonly carry. Meals under $5 are still a popular price
point, as are entree or snack items under $1 (notice how many fast-food
places have a $0.99 "value menu"). Dropping your price to a popular price
point might mean a lower margin, but more than enough increase in sales to
8
offset
it.
FAIR PRICING - Sometimes it simply doesn't matter what the value of the
product is, even if you don't have any direct competition. There is simply a
limit to what consumers perceive as "fair". If it's obvious that your product
only cost $20 to manufacture, even if it delivered $10,000 in value, you'd
have a hard time charging two or three thousand dollars for it -- people
would just feel like they were being gouged. A little market testing will help
you determine the maximum price consumers will perceive as fair.
Now, how do you combine all of these calculations to come up with a price?
Here are some basic guidelines:
Your price must be enough higher than costs to cover reasonable variations
in sales volume. If your sales forecast is inaccurate, how far off can you be
and still be profitable? Ideally, you want to be able to be off by a factor of two
or
more
(your
sales
are
half
of
your
forecast)
and
still
be
profitable.
Your price should almost never be lower than your costs or higher than what
most consumers consider "fair". This may seem obvious, but many
entrepreneurs seem to miss this simple concept, either by miscalculating
costs or by inadequate market research to determine fair pricing. Simply put,
if people won't readily pay enough more than your cost to make you a fair
profit, you need to reconsider your business model entirely. How can you cut
your costs substantially? Or change your product positioning to justify higher
pricing?
Pricing is a tricky business. You're certainly entitled to make a fair profit on
your product, and even a substantial one if you create value for your
customers. But remember, something is ultimately worth only what someone
is willing to pay for it.
A product pricing strategy by which a firm charges the highest initial price
that customers will pay. As the demand of the first customers is satisfied, the
firm lowers the price to attract another, more price-sensitive segment.
Therefore, the skimming strategy gets its name from skimming successive
layers of "cream," or customer segments, as prices are lowered over time.
Firms often use this technique to recover the cost of development.
Skimming is a useful strategy when:
-There are enough prospective customers willing to buy the product at the
high price.
-The high price does not attract competitors.
-Lowering the price would have only a minor effect on increasing sales
volume and reducing unit costs.
-The high price is interpreted as a sign of high quality.
Types of skimming pricing:
Rapid skimming pricingWhere high prices are charged,and the product is promoted with heavy
promotional expenditure.
Slow skimming pricingWhere high prices are charged, and there is limited promotional effort
to promote the product.
suitability: this strategy is suitable to those products that offer important
benefits to the target audience, and that the target audience doesnt mind
paying higher price. Secondly, for skimming pricing to be successful, there
10
should be little chance for competitors to enter the market in a short period
of time. This is possible in the case of highly technical and complex products.
Slow penetration pricing strategy- where low price charged, and there
is limited promotional expenditure to promote the product.
*suitabilityThis strategy is suitable to those newly introduced products, which can
generate a large volume of business.
ADVANTAGE
It helps to capture a large share of the market.
It discourages potential competitors to enter the market due to low
profit margin.
It brings in quick sales, and as such a firm can make good amount of
profits.
A firm can enjoy economies of large-scale production and distribution.
A firm introducing a new product at low prices can enjoy brand
leadership in the market.
II.
PROBE PRICING STRATEGY:
A marketer may adopt probe pricing, when a new product is introduced in
the market. In this case, a higher price is fixed to find out the reaction of the
buyers towards the price. If the firm gets enough business at high prices,
then high prices would be continued, otherwise, the price might be reduced.
III.
TRIAL PRICING: in this case, a firm may launch a new product with
low pricing for a limited period of time. The purpose is to win customer
acceptance first and make profits later. Often, trial pricing is seen as an
alternative to giving away samples of a product in order to make
people to have a trial of the product.
IV.
V.
buy frequently from that store. The special price is a reward for
customers loyalty.
VI.
VII.
VIII.
IX.
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APPLE INC.
INTRODUCTION:
Apple Inc., formerly Apple Computer, Inc., is an American multinational
corporation headquartered in Cupertino, California that designs, develops,
and sells consumer electronics, computer software and personal computers.
Its best-known hardware products are the Mac line of computers,
the iPod music player, the iphone Smartphone, and the iPad tablet computer.
Its consumer software includes the OS X and iOS operating systems,
the iTunes media
browser,
the Safari web
browser,
and
the iLife and iWork creativity and productivity suites.
The company was founded on April 1, 1976, and incorporated as Apple
Computer, Inc. on January 3, 1977. The word "Computer" was removed from
its name on January 9, 2007, the same day Steve Jobs introduced the iPhone,
reflecting its shifted focus towards consumer electronics.
Apple is the world's second-largest information technology company by
revenue after Samsung Electronics and the world's third-largest mobile
phone maker after Samsung and Nokia. Fortune magazine named Apple the
most admired company in the United States in 2008, and in the world from
2008 to 2012. However, the company has received criticism for its
contractors' labor practices, and for Apple's own environmental and business
practices.
As of May 2013, Apple maintains 408 retail stores in fourteen countries as
well as the online Apple Store and iTunes Store, the latter of which is the
world's largest music retailer. Apple is the largest publicly traded corporation
in the world by market capitalization, with an estimated value of US$415
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Mission Statement
"To make a contribution to the world by making tools for the mind that
advance humankind."
Apple Computer is committed to protecting the environment, health and
safety of our employees, customers and the global communities where we
operate. We recognize that by integrating sound environmental, health and
safety management practices into all aspects of our business, we can offer
technologically innovative products and services while conserving and
enhancing recourses for future generations. Apple strives for continuous
improvement in our environmental, health and safety management systems
and in the environmental quality of our products, processes and services.
Vision and values
Apple is committed to bringing the best personal computing experience to
students, educators, creative professionals and consumers around the world
through its innovative hardware, software and Internet offerings.
15
graphical user interface (GUI), and development of a GUI began for the Apple
Lisa.
On December 12, 1980, Apple went public at $22 per share, generating more
capital than any IPO since Ford Motor Company in 1956 and instantly
creating more millionaires (about 300) than any company in history.
PRESENCE IN INDIA
Apple has seen increased success in India and is looking to significantly
expand its presence in the country. The Economic Times, a daily Indian
newspaper, is reporting that Apple plans to triple its exclusive stores (Apple
Premium Resellers) from over 65 to about 200 by 2015 and expand the use
of multi-brand stores vs. previously being focused on selling through carriers
and premium resellers.
Key Takeaway: India is such a large market with a growing middle class that
Apple can grow significantly. It has recently ramped its efforts and is seeing
success. However it is late to focus on this country so Samsung (market
share of about 38%) and others have established themselves.
While the Smartphone market share is about 10% in India due to their costs,
given the potential growth and size of the Indian Smartphone market (IDC
estimates it could grow from 19 million units in 2012 to 108 million in 2016)
all the major players will be very focused on this opportunity.
Apple has increased its share significantly over the past nine months. It is
estimated that the companys revenue market share was 3.9% in the July to
September quarter and grew to 15.6% in the October to December quarter.
Apple started an advertising campaign that promotes an upfront payment of
5,056 rupees ($93) for an iPhone 5 vs. the total cost of about $840. The
Mobile Store, an Indian retail chain which says it sells 15% of iPhones in the
country, tripled its iPhones sales from December to January which it
attributed to the payment plan.
Another indication of Apples recent gains is an Apple premium reseller
saying that its sales have gone from Rs 35,000 lakh ($65,000) a month to Rs
2 crore ($370,000) a month per store.
Due to Indias requirement that 30% of a product be sourced in India it will
be difficult if not impossible for Apple to open any of its own stores in the
country.
17
APPLE PRODUCTS
Apple designs, manufactures and markets personal computers and related
solutions
for sale primarily to education, creative, business, and consumer customers.
The
companys key products and services include the following:
Mac:
18
iPad:
19
On October 23, 2001, Apple introduced the iPod digital music player. Several
updated models have since been introduced, and the iPod brand is now the
market leader in portable music players by a significant margin, with more
than 350 million units shipped as of September 2012. Apple has partnered
with Nike to offer the Nike iPod Sports Kit, enabling runners to synchronize
and monitor their runs with iTunes and the Nike+ website.
iPod Shuffle: Ultra-portable digital audio player, currently available in a 2 GB
model, introduced in 2005.
iPod Nano: Portable media player, currently available in a 16 GB model,
introduced in 2005. An earlier model featured the traditional iPod click wheel,
though the current generation features a multi-touch interface and includes
an FM radio and a pedometer.
iPod Touch: Portable media player than runs iOS, currently available in 32
and 64 GB models, introduced in 2007. The current generation features
the Apple A5 processor, a Retina display, and dual cameras on the front (1.2
megapixel sensor) and back (5 megapixel iSight), the latter of which
supports HD video recording at 1080p.
iPod Classic: Portable media player, currently available in a 160 GB model,
first introduced in 2001.
iPhone:
20
At the Macworld Conference & Expo in January 2007, Steve Jobs introduced
the
long-anticipated iPhone,
a
convergence
of
an
Internetenabled Smartphone and iPod. The original iPhone was released on June 29,
2007 for $499 (4 GB) and $599 (8 GB) with an AT&Tcontract On February 5,
2008, it was updated to have 16 GB of memory, in addition to the 8 GB and
4 GB models. It combined a 2.5Gquad band GSM and EDGE cellular phone
with features found in handheld devices, running scaled-down versions of
Apple's Mac OS X (dubbed iPhone OS, later renamed iOS), with various Mac
OS X applications such as Safari and Mail. It also includes web-based and
Dashboard apps such as Google Maps and Weather. The iPhone features a
3.5-inch (89 mm) touchscreen display, Bluetooth, and Wi-Fi (both "b" and
"g").
Apple announced on September 1, 2013 that its iPhone trade-on program
would be implemented at all of its 250 specialty stored in the US. For the
program to become available, customers must have a valid contract, and
must purchase a new phone, rather than simply receive credit to be used at
a later date. A significant part of the program's goal is to increase the
number of customers who purchase iPhones at Apple stores rather than
carrier stores.
Upon the launch of the iPhone 5S and iPhone 5C, Apple sold over nine million
devices in the first three days of its launch, which sets a new record for first
weekend smartphone sales.This was the first time that Apple has
simultaneously launched two models and the inclusion of China in the list of
markets contributed to the record sales result.
Apple Tv:
21
PRICING
STRATEGY:
23
tablets out there, such as Google's Nexus 7, which costs $229 with a highresolution display.
Apple shares slipped 0.3% to close at $519.87 following the new product
announcements.
"These new devices are not cheap," said Brian Marshall, an analyst at ISI
Group. "They are not going after the low end of the tablet market, which
means good margins for the company."
Still, Marshall said buyers may gravitate to the lower end of Apple's new iPad
range, going for 16GB Wi-Fi models rather than 64GB cellular versions.
Apple's share of the tablet market has been sliding as cheaper tablets
running Google's Android operating system become more popular.
IPAD AIR STEALS SHOW WITH FAMILIAR FEEL:
Android will have 49.6% of the worldwide tablet sector this year, while Apple
will have 48.6% making 2013 the first year Android will lead, according to
Gartner estimates. In 2011, Apple's share was almost two-thirds, and Android
was below 30%.
Still, there's a lot to fight for. Tablet shipments are expected to surge 43% to
more than 263 million units in 2014, making it almost as big a market as PCs,
Gartner estimates.
A revived iPad line is crucial for Apple, because Wall Street has begun to
think of the company as a "one-product" story again,Barclays analyst Ben
Reitzes wrote in a recent note to investors.
Apple unveiled new iPhones in September, and the smartphones account for
the largest part of the company's profit.
Third quarter global Smartphone sales came out earlier this week.
The message was clear:
Apple is getting its clock cleaned by Samsung, which is now by far the
dominant smartphone maker in the world. (Samsung had 32% of the global
market in Q3, the same share as a year ago. Apple, meanwhile, had only
12% of the market, down from 14% a year ago.)
Yes, both companies sold more Smartphone this year than last year. But
Apple's sales badly lagged both Samsung and, importantly, the broader
smartphone market.
Apple's sales increased 23%. Samsung's increased 46%. The smartphone
market as a whole, meanwhile, grew 46%.
There are two big problems with this analogy. First, unlike cars, Smartphone
are a "platform market" - third parties build products and services that run
on top of Smartphone - and in platform markets, market share is a huge
competitive advantage. Second, in emerging markets, which is where most
of the growth in Smartphone and tablets now is, there just aren't that many
people who want to buy BMWs when many very high-quality gadgets are
available for much lower prices.
25
Apple fans can keep telling themselves that this is just fine, that Apple
doesn't want or need to sell gadgets to earthlings of more average wealth,
but what these fans need to recognize is that this is effectively a major
change in Apple's pricing strategy.
In the first few years after the iPhone and iPad launched, Apple led the
market not just in product quality but in product price. The iPhone and iPad
were not just way better than the competition; they also cost the same or
less.
Now, Apple may still have an edge in product quality (this is debatable and a
matter of personal preference), but in most countries, its gadgets are
considerably more expensive than the alternatives. And those alternatives from Samsung, Google, Amazon, and many other vendors - are getting better
and better.
Now that Apple has "forked" its iPhone product line into the 5S and 5C, for
example, it could sell the 5C at a sharply lower price point. Instead, Apple is
still charging almost as much for the 5C as the 5S. (Yes, Apple is selling the
iPhone 4 at a significantly lower price than the 5s, but this phone is now old,
weak, and small.)
Similarly, in iPads, Apple is selling its "Mini" at prices that are radically higher
than high-quality alternatives. Instead, it could sell the latest, greatest
version of the Mini at a high price and other recent models at a very
competitive price.
Importantly, this would cost Apple nothing more than some near-term profits.
And Apple has plenty of profit to spare. (In fact, it has so much profit to spare
that it has no idea what to do with the cash piling up on its balance sheet.)
Significantly increasing its market share in key markets around the world
would make Apple's long-term competitive position much stronger. It would
help Apple increase the value of its content and app "ecosystem" in these
countries and, thereby, strengthen the "lock-in" of its products and services.
APPLE'S TABLET SALES, MEANWHILE, HAVE HIT A WALL.
When confronted with these statistics, Apple fans generally point out that
Apple still has a very strong position in the U.S. market and that Americans
keep scarfing up Apple's top-of-the-line iPhones.
Apple's market share in the United States is indeed strong,
But the U.S. is an anomaly. In most other countries, Apple is losing share fast.
And that means that, at best, Apple is missing a massive opportunity.
The bottom line is that, by trying to maintain its price points and super-high
profit margin, Apple has radically underperformed the market for the past
couple of years, especially in tablets. Because of the importance of the
platform and ecosystem for long-term value, this is a shortsighted decision.
Meanwhile, Google's Android has become the world's dominant smartphone
and tablet platform.
26
As Patrick McKenzie points out in this excellent post for the blog SaaS Pricing,
very few SaaS businesses can scale (let alone survive) by selling their
products for slightly above zero. While there are a few exceptions to that
rule, of course (e.g., Netflix, Dropbox, and others), it is not a prescribed
course of action.
Competing on price alone is problematic for growing companies for three big
reasons:
Someone will always be able to do what you do cheaper(namely, bigger
competitors with bigger budgets).
Lower prices are an unsustainable competitive advantage, particularly for
smaller businesses without the benefit of economies of scale.
Lower prices attract lower-value customers that still cost your business the
same amount to acquire and support.
Traditional PC makers such as Dell, Gateway, and IBM have learned those
lessons the hard way. The fierce competition between the PC makers pushed
prices down and resulted in razor thin margins. In the end, both Gateway and
IBM ended up exiting the PC business and Dell continues to struggle.
LESSON 2: COMPETING ON PRICE CAN ACTUALLY WORK (UNDER THE
RIGHT CONDITIONS).
Businesses can and have succeeded by being the low-cost option in their
market, and price is often a quicker route to capturing market share in
emerging markets like the ones that Apple is currently competing for.
In fact, as serial entrepreneur and investor David Skok writes in this post,
setting low prices in the early days of a companys development can actually
prove to be a smart strategy. Doing so ensures that a business doesnt scare
away price sensitive users, while also giving the company a way to compete
for more customers in a crowded marketplace. Good examples of that
approach include tech businesses like 37Signals and Ever note, which
essentially gave away their products early in their development in an
attempt to quickly acquire users.
The iPhone 5C, while not the lowest cost product, is Apples first attempt at
catering to the mainstream price sensitive market.
As Chen points out in the aforementioned New York Times post, the
companys profit growth has been slowing for some time, as competitors like
Samsung have made significant headway by offering Smartphone in both the
high-end and low-end markets. This has enabled Samsung to gain traction in
emerging markets such as China and India where smartphone sales are
surging. Lower-cost options are popular in these markets as they appeal to
what analysts call inspirational consumers buyers who will only splurge
on a fancy brand if the price is right.
28
If Apple is able to cater to that market and continue to sell its higher-end
products to higher-end consumers then the companys decision to cater to
price sensitive markets with lower cost iPhones could pay off in a big way.
LESSON 3: TIERED PRICING CAN BE INCREDIBLY EFFECTIVE.
The chief problem with Apples iPhone 5C strategy is that the companys
newest product offering might not be cheap enough to appeal to a broader
market.
The primary goal of this move was to broaden the iPhones potential market
in emerging markets where Smartphones are not subsidized by the cell
provider. Despite offering a lower cost phone, the iPhone 5C is still an
astounding $549. According to this Venture Beat post, that translates to one
months salary for average Chinese and Indian workers. That is compared to
an average smartphone sales price of around $300. As a result, some have
wondered whether Apple was better off offering a iPhone 4C. It would have
offered a more significant reduction in price while preserving the attractive
packaging.
Its surprising because for years, Apple has successfully offered an array of
products in their other product lines.
With several different models of laptops, desktops, iPods, and iPads, the
company has successfully tiered its products to appeal to a variety of buyer
types, without sacrificing its high-end brand reputation. And as Apple CEO
Tim Cook recently told the New York Times, each of those models had a
reason to exist. For instance, the classic iPod appealed to hard-core music
fans that needed more storage, while the iPod Mini targeted exercise fanatics
who wanted something that wasnt cumbersome to carry. The key to their
success was each product maintaining the look, feel, and quality that the
consumer expects out of an Apple product.
Tiered pricing can be effective for SaaS businesses that offer different levels
of products or services, because it gives them the ability to accommodate
different customer segments, market to low-entry buyers, and up sell
existing customers on feature upgrades.
Skok refers to that strategy as multi-axis pricing in this post, arguing that its
actually one of the best tools for growing SaaS revenue, while KISS metrics
Lars Lofgren points out that the ultimate key to tiered pricing is to focus on
value, not arbitrary dollar amounts.
29
reports.
"Regardless, we believe it would be more prudent for Apple to manage the
channel (despite potential holiday demand) as the risk of excess inventory is
much higher than ramping unit orders later," he said.
As for a series of discounts offered by retailers for the iPhone 5c, Um noted
that this is a typical strategy for third-party resellers. He doesn't see
discounts on the newly released model as concrete evidence of soft demand
for the iPhone 5c.
"As has been the case in the industry for years, third-party resellers derive
profits from carrier 'finder's fees,' which can amount to $250 depending on a
number of factors, including whether it's a new contract or an upgrade," he
said. "Thus, a price 'drop' is not necessarily a reflection of materially weak
demand, but, rather, a business model strategy to drive volumes."
Wells Fargo Securities has maintained its "outperform" rating for AAPL stock
with a share valuation range of between $525 and $575.
31
Cooks thoughts echoed those of his predecessor, Steve Jobs, whose strategy
for Apple had four pillars:
1.
2.
3.
4.
Create a halo effect that makes people starve for new Apple
products
DIFFERENTIATION
Apple attempts to increase market demand for its products through
differentiation, which entails making its products unique and attractive to
consumers. The companys products have always been designed to be ahead
of the curve compared to its peers. Despite high competition, Apple has
succeeded in creating demand for its products, giving the company power
over prices through product differentiation, innovative advertising, ensured
brand loyalty, and hype around the launch of new products. By focusing on
customers willing to pay more and maintaining a premium price at the cost
of unit volume, Apple also set up an artificial entry barrier to competitors.
This price strategy is effective in so far as it prevents retailers from
competing directly with Apples own stores, and it also ensures that no one
reseller has an advantage over another. So Apple is able to keep its
distribution channels clean as well as make more money on its direct sales.
The Macworld article noted that iPhones werent under a strict pricing model,
as they sold at a lower price with wireless contract deals, as retailers gain a
commission from carriers.
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PREMIUM PRICES
Jobs vision for Apple was always to create a premier product and charge a
premium price. Apples cheapest products are usually priced in the mid
range, but they ensure a high-quality user experience with their features.
The hardware and user interface are designed to provide a lot of value for
the price, which keeps profits high. However, a company can charge a
premium price as long as it has a competitive advantage, and analysts
believe the brand is on the way to losing its aspirational status.
With increasing competition from Android and low-cost smartphones, as well
as saturation in the developed markets, analysts feel that the company could
risk becoming a high-end niche name.
According to IDCs mobile phone forecast in 3Q 2013, a number of trends coexist in the global smartphone marketbut none have more of an effect on
driving market growth than the steady decline in average selling prices (or
ASPs). Android has enabled a number of new manufacturers to enter the
smartphone market, supported by a variety of turnkey processing solutions.
Many of these handset vendors have focused on low-cost devices as a way to
build brand awareness. In 2013, IDC expects smartphone ASPs to hit $337,
down 12.8% from the $387 recorded in 2012. This trend will continue in the
years to come, and IDC expects smartphone ASPs to gradually drop to $265
by 2017.
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CONCLUSION
Over the past 30 years Apple Inc has amplified from computer design to
developing consumer electronics. The company was started by Steve Jobs,
Steve Wozniak, and Ronald Wayne in the 1970s. Tim Cook is the current CEO
of the company. It uses different international business strategy. This means
that all employees & departments work together in the creation of their
product. What we found to be the most interesting about Apple is how they
are very innovative and early adapters. Apple is usually 1 st company to come
with a new product before anyone else. This is very risky but it seems to be
working to apples advantage. This shows that taking risks can sometimes
make or break you.
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BIBLIOGRAPHY
Search engines:
www.wikipedia.com
www.google.com
www.seanet.com
www.strategicmanagementsight.com
www.srceendigest.com
www.studymode.com
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