Transcript Econs Webquest

Econs WebQuest
Presentation
Done by: Serene, Nikki, Xin Rong,
Samuel, Wei Long
Project A
a) When did the ipad
first originated?
a) The iPad was announced on
January 27, 2010 and first arrived
in US stores on April 3, 2010.
b) How is the price of the
ipad determined?
b) Pricing is the process of
determining what a company will
receive in exchange for its products.
The needs of the consumer can be
converted into demand only if the
consumer has the willingness and
ability to buy the ipad. Thus pricing
is very important in marketing of
the ipad.
Determining of pricing of
ipad involves asking
questions like
1. How much to charge for an ipad?
market analysis
positioning
targeting
2.What are the pricing objectives?
Pricing objectives:
-Profit maximization
-Maximize quantity
(Profit maximization is
the (short run) process by which a
firm determines the price and output level that returns the
greatest profit.)
(Maximize quantity means to maximize the number of ipads
sold in order to decrease long term costs)
3. What is the cost of production of
the ipad?
The iPad Costs Only $229 to Produce
4. Have you considered external
factors?
• legal constraints
• competitor’s actions
5. As there is a relationship
between price and quantity
demanded, what is the demand
curve of the ipad?
6. What is the chance of getting
into a price war?
When another competitor lower its price, the price of
the ipad may be lowered to match. If one of them
reduces their price again, a new round of reductions
starts. The lower prices of ipad wil reduce profit
margins and can threaten their survival.
Price war is a term used in economic sector to indicate a
state of intense competitive rivalry accompanied by a
multi-lateral series of price reduction.
c) Related Associated
Products
• Substitutes
• Complements
Substitutes
Goods that are substitutes of the
ipad may replace the ipad in use. An
increase in the price of ipad, will lead
to an increase in demand of these
goods, and a decrease in the price of
the ipad, will lead to a decrease in
the demand of these goods.
Substitute 1
ARCHOS 9
The good: Thin design; solid construction;
plenty of storage space.
The bad: Terribly slow CPU; no way to easily
rotate orientation; frustrating touch controls.
Substitute 2
QUALCOMM
Snapdragon
Substitute 3
Laptops
Complement Goods
An increase in the price of ipad, will
lead to a decrease in demand of these
goods, and an increase in the price of
the ipad, will lead to a increase in the
demand of these goods.
Complement 1
iPad Keyboard
Complement 2
SD card
Complement 3
wireless headphones
iphone vs ipad
Substitute or Complement?
Ipad screens are larger, more easily touched, and
applications have the space to become more complex,
introducing a whole different dynamic to usage. On
the other end of the spectrum, the iPhone and its
smaller screen leaves it well suited to perform other
tasks. Sure you can watch video on it, send e-mails on
it, and run apps on it just like the iPad.
However, Could you imagine holding an iPad to your
ear to make a phone call though? Or trying to tuck an
iPad into your pants pocket?
Despite the overlap in certain
functional areas, the iPad and
iPhone are really more
complementary devices than
substitution devices .
End of Project A
Project B
Customer Point of View
Price of Substitutes
• Recent developments in the state of
technology
• Lead to rise of substitutes for the iPad.
• Such as rapid rise in Android tablets.
- eg. Samsung Galaxy Tab, Blackberry
Playbook, Acer Smartphone
Price Comparison:
• Apple iPad: $499 (cheapest version)
• Samsung Galaxy Tab: $890
• Blackberry Playbook: $399
• Acer Android Smartphone: $397 – $435
• Android Tablets: $299 to $699
How consumers react to prices of subs
• Price of substitute is lower than that of the iPad,
 Quantity demanded of the good will rise, while that
of the iPad will fall.
 Consumers will cast lower dollar votes for the iPad,
 Prices of iPad fall
• Price of substitute is higher than that of the iPad
 Quantity demanded of that good will fall, while that
of the iPad will rise.
 Consumers will cast higher dollar votes for the iPad,
 Prices of iPad rise
Income of consumers
• Recent tsunami in Japan
• Country needs to borrow money
• With the world just recovering from the
recent recession, this might mean that there
might be a relapse.
• The world is floating on borrowings that might
never be repaid.
• A recession may soon be arriving and thus
consumer’s real income would be lower.
Consumer’s reaction and what we
should do
• Less willing to spend on luxury goods
• The iPad, and sales of the iPad will dip.
Therefore, I would suggest lowering the
price of the iPad
• Delay the release of the iPad2 as it would
not sell well
Producer Point of View
Price of the Product
• Recent developments will have a direct
and indirect impact on marketing and
pricing decisions of the iPad.
• Maximizing profits would be the priority
• With the rise of substitutes and
complements, in the three months to 31
December 2010,
the shipment of iPad decreased from
95% to 75%
while Android devices increased from
2.3% to a stunning 22%.
How producers react to prices of subs
• Price of iPad is set too high,
the quantity demanded for it and applications
decreases.
Those unwilling / unable to pay for it would
be rationed out of the market.
Some consumers would choose to switch to
cheaper substitutes.
E.g. Android powered tablet by Acer at
US$299.
Producers’ reaction and what we
should do
• However, the high price will motivate producers to
produce more to reap more profit.
• Cause a surplus in the market, exerting a downward
pressure on the price of iPad.
• Expected rise of iPad 2 will result in fall in demand
for iPad, and a rise in the demand for iPad 2.
• Therefore, as a producer, I would lessen my supply
of iPad so as to save and transfer my resources to
producing iPad 2.
Changes in Number of
Sellers
• Due to recent developments,
• More companies like Samsung are able
to produce goods similar to iPad
• Sales of iPad will inevitably be affected
Producers’ reaction and what we
should do
• To increase the sales of iPad, both pricing and
non-pricing strategies can be used.
• Lower the price of the iPad
Consumers will be more willing and able to
buy the iPad.
• Advertisements
Promote that iPad is better than the similar
goods in the market and is worth it’s value.
The End