An

Economical
Analysis
 Apple Inc.
AMERICAN MULTINATIONAL CORPORATION THAT
DESIGNS THE MARKET CONSUMER ELECTRONICS,
COMPUTER SOFTWARE, AND PERSONAL COMPUTER

REVENUE OF $42.91 BILLION

PROFIT OF $8.24 BILLION

STEVE JOBS SPEARHEADING THE APPLE SUCCESS

Value Chain
TYPES OF MARKETS APPLE
OPERATES IN
 I-POD
MONOPOLY

MARKET SHARE OFMORE THAN 80%

CREATED A NEW MARKET

INNOVATE AND PROVIDE NEW

PRODUCTS

APPEAL TO NEW CONSUMERS

VERTICAL MONOPOLY
 I-Phone
OLIGOPOLY

MARKET SHARE OF 28%

MOBILE PHONE MARKET- A

MARKET WHICH IS MATURE, AND
SATURATED.

THIRD LARGEST MOBILE

SUPPLIER IN THE WORLD.

REVOLUTIONARY PRODUCT
Mac Book
OLIGOPOLY

MARKET SHARE OF 8%

APPLE CHOSE NOT TO COMPETE AT

LOWER PRICE

MARKET SHARE IN THE PREMIUM

PRICE SEGMENT WAS 91%

LIFESTYLE MARKETING

SALES HALO EFFECT FROM

SATISFIED I-POD AND I-PHONE
CUSTOMERS HELP MAC SALES
Market Share
Buying Pattern of
Consumers
 Buying Pattern of consumer
SOCIAL CULTURAL AND OTHER FACTORS INFLUENCE
CONSUMER PURCHASE BEHAVIOR

CONSUMER REQUIRE NEW FEATURES IN ELECTRONICS

GOODS

THEY ALSO PREFER TO USE USER FRIENDLY PRODUCTS

PRODUCT SHOULD ALSO BE RELIABLE AND PRICE ALSO

AFFECTS THE BUYING PATTERN
 Appeal offerings
APPLE OFFERS VARIETY OF PRODUCTS

PRODUCT ARE INNOVATIVE AND ATTRACTIVE

APPLE PRODUCTS ARE ECO FRIENDLY

PRODUCT COMPLETE AND COMPLIMENT EACH OTHER

 Apple Consumers
APPLE TARGETS MIDDLE
LEVEL AND ABOVE
CONSUMERS

THIS CONSUMER EXPECT

CLASSY PRODUCTS WITH
MORE FEATURES

CONSUMERS PAY FOR EXTRA

QUALITY AND EXPERIENCE
PROVIDED BY APPLE
 Brand Loyalty
APPLE HAS A VERY STRONG BRAND LOYALTY

APPLE IDENTIFIES WITH EVERYTHING YOUNG,

PERFECT AND SMART

CONSUMER VALUE APPLE AS A BRAND

 Pricing Strategy
PRICING STRATEGY OF I-PHONE

INITIAL PRICE OF THE I PHONE

Model Price
4GB $499
8GB $599

2 MONTHS LATER APPLE DISCONTINUED THE LESS

EXPENSIVE $499 MODEL AND CUT THE PRICE OF THE
PREMIUM VERSION FROM $599 TO $399
Riding Down Demand Curve
ALSO KNOWN AS PRICE SKIMMING

RELATIVELY HIGH PRICE FOR A PRODUCT IS SET AT

FIRST, LATER THE PRICE IS LOWERED

CAPTURING THE CONSUMER SURPLUS AND RECOVERING

ITS SUNK COST BEFORE COMPETITION STEPS IN

TEMPORAL VERSION OF PRICE DISCRIMINATION/YIELD

MANAGEMENT
 Versioning (Pricing Discrimination)
PRICING STRATEGY THAT CHANGES CUSTOMERS
DIFFERENT PRICES FOR SAME PRODUCT OR SERVICE

PROPOSES MAY VERSIONS OF PRODUCTS ACCORDING TO

NEEDS AND PRICES OF THEIR CUSTOMERS

WEALTHY CLIENTS GO FOR LATEST VERSION WHILE

OTHERS GO FOR PREVIOUS VERSION
Skimming Pricing
Consequences of Price Skimming
 Factors Influencing Buyers Price
Sensitivity
DIFFICULT COMPARISON EFFECT

BUYERS ARE LESS SENSITIVE TO PRICE OF KNOWN/MORE

REPUTABLE PRODUCT THEY HAVE DIFFICULTY COMPARING
IT TO POTENTIAL ALTERNATIVE

PRICE QUALITY EFFECT

BUYERS ARE LESS SENSITIVE TO PRICE

HIGHER PRICE SIGNALS HIGHER QUALITY

Other Factors
APPLE I-POD AND I-PHONE PRICE CHANGES ACCORDINGLY
TO ITS CUSTOMERS AND GEOGRAPHICAL LOCATION

APPLE ALSO USE OF AN I-POD TO THE USE I-TUNES

STORES

CONTROLS A LARGE PART OF DIGITAL MEDIA PLAYER

MARKET, ONLINE MUSIC MARKET, ONLINE VIDEO MARKET
EXTERNALITIES
 Externalities
THE EFFECT OF A DECISION BY CONSUMER AND
PRODUCERS THAT HAS AN EFFECT ON THIRD PARTY

POSITIVE

BENEFICIAL EFFECT ON THIRD PARTY

NEGATIVE

COST INCURRED BY THIRD PARTY

Externalities of Apple Inc
Innovations Environment Friendly

Macintosh Energy efficiency

I-phone Recyclability

I-pad Green Product

COST- R&D COST, SUPPLY CHAIN COST

Marginal social cost

AS THE AMT OF SCRAP DISPOSAL INCREASES, THE

MARGINAL PRIVATE COST, MC INCREASES, BUT INCREASE
AT MUCH LOWER RATE THAN MARGINAL SOCIAL COST

THE MARGINAL COST RECYCLING CURVE MCR, SHOWS THAT

AS THE AMOUNT OF DISPOSAL DECREASES THE AMT OF
RECYCLING INCREASES
Marginal
Social Cost
Curve
Network Externalities
WHEN A PERSONS DEMAND MAY BE EFFECT BY THE NO OF
OTHER PEOPLE WHO HAVE PURCHASE THE GOODS.

POSITIVE NETWORK EXTERNALITIES

EXIST IF THE QUALITY OF GOODS DEMANDED BY A

CONSUMER INCREASES RESPONSE TO A INCREASE IN
OTHER CONSUMER

NEGATIVE NETWORK EXTERNALITIES

ARE EXACTLY THE OPPOSITE

Conclusion
Externalities and Pricing
COMPANIES HAVE TO INCORPORATE THOSE COST
IN THEIR PRICING STRATEGY

WITH NETWORKING OFTEN HAVING A NEGATIVE

IMPACT ON CONSUMER BEHAVIOR, APPLE INC HAS
TO RESORT TO PREMIUM PRICES IN ITS
SOFTWARE AS IT DOES NOT ENJOY SAME
ECONOMIES OF SCALE

UNIQUE SOFTWARE CREATION CHARGES AND R&D

 Pricing and Consumer Behavior
ALSO, WITH THESE PREMIUM PRICES , IT ALSO OFTEN
AFFECTS CONSUMER BEHAVIOR

NOT ONLY IN NEGATIVE MANNERS – BUT SOMETIMES-

ALSO IN POSITIVE EFFECT-AS SHOWN AS BANDWAGON
EFFECT AND ALSO AS PRESTIGE GOODS

BUT WITH INCREASED TECHNOLOGY FASTER EACH TIME

AND COMPETITOR-IT ALSO HAS STARTING TO RESORT TO
DECOY PRICES AND REDUCING PRICES TO MAINTAIN ITS
POSITION
 Externalities and Market Structure
WITH CONTINUES INNOVATIONS NEEDED FOR THE
CONSUMER ELECTRONIC SECTOR, MARKET STRUCTURE
OFTEN IS OLIGOPOLY

BUT IN SOME WAY, APPLE ENJOYS CLEAR MONOPOLY

POSITION IN ITS I-POD SEGMENT - WITH COMPETITORS
TRY TO CATCH UP
Strategies for Competing in Rapidly
Growing Markets
DRIVING DOWN COST PER UNIT SO HAS TO ENABLE PRICE
REDUCTIONS THAT ATTRACT DROVES A NEW CUSTOMERS

PERUSING RAPID PRODUCT INNOVATION, BOTH SEA A

COMPANIES PRODUCT OFFERING A PART FROM RIVAL AND
INCORPORATE ATTRIBUTES THAT APPEAL TO GROWING NO
OF CUSTOMERS

GAINING ACCESS ADDITIONAL DISTRIBUTION CHANNEL

AND SALES OUTLETS

EXPANDING THE COMPANIES GEOGRAPHIC COVERAGE

 Contd…
EXPANDING THE PRODUCT LINE TO ADD MODELS OR
STYLES AND APPEAL TO A WIDE RANGE OF BUYERS

ONLINE SALES AND CUSTOMIZATION

Thank u…….
 Group Members
NAMES ROLL NO

BALKRISHNA AMBATI 01
ANAND CHIPPA 06
CHETAN MAPUSKAR 17
ATUL MANE 18
MONISH ROY 29
ABHIJIT RAUT 55