Economics of Apple, Inc.'s iPhone
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Case Code: ECON069 Case Length: 14 Pages Period: 2007 - 2019 Pub Date: 2019 Teaching Note: Available |
Price: Rs.400 Organization : Apple, Inc. Industry : Smartphone Countries : US; Global Themes: Pricing |
Abstract Case Intro 1 Excerpts
"$$$$ = Desire"
– Christopher Mims, Technology columnist, The Wall Street Journal
"...a company can sell a high-margin product at high volumes so long as it's an aspirational brand in a must-have product category, with high-value complements that support and strengthen its position."
– Matt Asay, Contributor, InfoWorld
Introduction
The iPhone, a product of Apple Inc. (Apple), made its debut in 2007 and proved to be a trailblazer in the smartphone industry. The phone, several versions of which were launched over the years, was looked upon as a status symbol by many smartphone owners. It also commanded intense loyalty among its users as was evident from the way consumers queued up before stores at the time of the launch of a new version. This also allowed Apple to price its iPhones higher than other smartphones. The iPhone’s appeal was enhanced by its ecosystem comprising the iOS operating system, applications, services such as iCloud and Apple Pay, and products such as the iPad and Apple Watch. According to industry observers, the iPhone brand’s appeal was further enhanced with the launch of the iPhone X in September 2017.
Eyebrows were raised when the iPhone X, which featured an organic light-emitting diode (OLED) screen and a facial recognition system, was priced at US$999 and above. Despite its high price, the iPhone X was the largest-selling smartphone across the world in the first calendar quarter of 2018. However, on the basis of reduced revenue forecasts from some of Apple's component suppliers (for iPhone X), some analysts expected the iPhone X's sales to fall in the second calendar quarter of 2018. According to them, the iPhone’s steep price was the reason for the projected softening of demand for the iPhone X. The question was, could Apple sustain its perceived steep pricing strategy for the iPhone X?
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