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Supply & Demand of Apple iPhone
Before the introduction of the iPhone, smartphones were typically limited to business users. At that time RIM’s (Research In Motion) device, BlackBerry, dominated the smartphone market. The introduction of the iPhone for the average consumer generated a spike in phone sales. Market demand over time for Apple’s flagship product, sales in 2007 Q4 alone were over a million, rising to 14 million by 2010. In 2010, the combined smartphone market had over 60 million (MarketWatch, September 2014).
As of 2015, there was an average of 190.5 million smartphone users in the U.S. alone (Statistic. (n.d.)). Today, smartphones outsell computers 4 to 1(Economist, Feb 2015).However,according to IDC (International Data Corporation),there may be an increase in tablets, such as Apple’s iPador convertibles vs. traditional PCs. This indicates the number of related goods may increase through 2019.
The following graph shows the demand over time for Apple’s iPhone.
Data compiled from http://apple.com/pr
Much like announcements of other new Apple products, there was a significantglobal spike in iPhone sales in 2014 with the introduction of iPhone 6 and iPhone 6 Plus (Apple, September 2014) due to the form factor size. The new form factor made it comparable in [physical] size to it’s competitors.
There are external factors that can affect not only sales but the supply chain as well. Broadcom, who makes the majority of chips within most smartphones, could be affected by flatted sales in China (Forbes, September 2015). Focus for a product cannot be isolated to just the US. Apple needs to watch globally. If Broadcom is unable to produce enough chips to build Apple’s product, it would negatively affect the supply line. China had a devaluation in its currency in 2015, but remains the largest market outside of the US despite it’s slowing growth.
If the income rises in the market segment for the iPhone, they will have more readily available money to purchase luxury items like the iPhone. Even if the iPhone price were to change, the consumer with the higher income could still afford it.
To keep interest in products, Apple dropped the prices on older models and introduced a trade-up program to entice customers to upgrade to the current model (iPhone 6s, as of this writing, Engadget, September 2015). There was continued interest due to competition from Samsung with their release of their high-end Galaxy 6 and Galaxy 6S Edge (AndroidPit, n.d.).
Traditionally, Android devices are lower in cost depending on product line. Manufacturers such as LG and Samsung have both higher and lower end models, such as the Samsung Galaxy S7 vs. the Galaxy Tab (Samsung, n.d.). The lower cost leads Android to have a larger market share than Apple due to the variation in entry prices.
Cellphone owners have a broad range of educational and income backgrounds for alternative options, such as an Android phone. Those on the upper end of the spectrum are more likely to have an iPhone as of 2013.
Expected Future Prices will change, due to the lack of subsidies from cellphone carriers (CSmonitor, n.d.). However, these changes will be positive for consumers. Manufacturing and component costs continue to drop. Manufacturers, including Apple, are predicted to drop even through 2018 according to research by IDC (ComputerWorld, May 2015). Analysis of information
The iPhone is inelastic because it is a luxury items, not a necessity. Consumers continue to want the item despite higher prices vs. comparable smartphone models (BGR, 2016).
If we focuson the 2011 iPhone Q2 sales of 18,500,000 vs Q3 sales of 20,340,00, the iPhone will have a brand elasticity of 4.3 meaning Apple would lose 4.3% of its sales for each 1% increase in price.iPhone handset prices maintained consistent between models year over year unless a user upgraded to a larger capacity (AAPLinvstor, n.d.)
Smartphone users in the US 2010-2019 | Statistic. (n.d.). Retrieved March 02, 2016, from http://www.statista.com/statistics/201182/forecast-of-smartphone-users-in-the-us/
Planet of the phones | The Economist (2015, February 28). Retrieved March 04, 2016, from http://www.economist.com/news/leaders/21645180-smartphone-ubiquitous-addictive-and-transformative-planet-phones
As Tablets Slow and PCs Face Ongoing Challenges, Smartphones Grab an Ever-Larger Share of the Smart Connected Device Market Through 2019, According to IDC. (2015, March 20). Retrieved March 03, 2016, from http://www.idc.com/getdoc.jsp?containerId=prUS25500515
How Apple’s iPhone first-day sales have fared since 2007. (2014, September 22). Retrieved March 04, 2016, from http://www.marketwatch.com/story/how-apples-iphone-first-day-sales-have-fared-since-2007-2014-09-22
Apple drops prices on the iPhone 5s, 6 and 6 Plus. (2015, September 9). Retrieved March 06, 2016, from http://www.engadget.com/2015/09/09/apple-iphone-5s-6-pricing/
Apple Announces Record Pre-orders for iPhone 6 & iPhone 6 Plus Top Four Million in First 24 Hours. (2014, September 15). Retrieved March 03, 2016, from http://www.apple.com/pr/library/2014/09/15Apple-Announces-Record-Pre-orders-for-iPhone-6-iPhone-6-Plus-Top-Four-Million-in-First-24-Hours.html
Is the Slowing Smartphone Demand in China a concern for Broadcom? (2015, September 11). Retrieved March 06, 2016, from http://www.forbes.com/sites/greatspeculations/2015/09/11/is-the-slowing-smartphone-demand-in-china-a-concern-for-broadcom/#5ab99c9d4a60
Samsung Product Line. (n.d.). Retrieved March 05, 2016, from http://www.samsung.com/us/mobile/cell-phones
Samsung Galaxy S6 review. (n.d.). Retrieved March 04, 2016, from https://www.androidpit.com/galaxy-s6-review
What the first iPhone 6s deal means for future iPhone prices. (n.d.). Retrieved March 06, 2016, from http://www.csmonitor.com/Business/Saving-Money/2015/0920/What-the-first-iPhone-6s-deal-means-for-future-iPhone-prices
Smartphone prices are dropping, and will continue to dip through ’18. (2015, May 29). Retrieved March 06, 2016, from http://www.computerworld.com/article/2489944/smartphones/smartphone-prices-are-dropping–and-will-continue-to-dip-through–18.html
Smith, C. (2016, February 12). New report says Galaxy S7 will cost less than Apple’s iPhone 6s. Retrieved March 03, 2016, from http://bgr.com/2016/02/12/galaxy-s7-iphone-7-prices/
IPhone US Pricing History. (n.d.). Retrieved March 06, 2016, from http://aaplinvestors.net/stats/iphone/pricing/
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