𝐓𝐡𝐞 𝐈𝐧𝐯𝐢𝐬𝐢𝐛𝐥𝐞 𝐇𝐚𝐧𝐝

Apple products are some of the most sought-after computing devices these days. How has the tech giant perfected the art of pushing up the price points of its latest phones?

Apple’s success comes from its understanding that smartphones are the most essential commodity for a plethora of its users. Consumers are willing to purchase it at a higher price as they are sure of the value it brings to them. People are willing to use their disposable incomes for owning the best product. Moreover, Apple has a knack for creating unique mobile and computing devices that are arduous to replicate, owing to their proprietary technology and closed-source orientation. Hence the question arises: are Apple products sensitive to price changes? I would say no, because the demand for Apple products is quite strong, making them more price inelastic than elastic, since there are no close substitutes. Secondly, Apple has been able to create high brand loyalty, because it’s ahead of its competitors by miles, in terms of hardware and software, and it perpetually delivers the best quality products and services.

Apple also enjoys economies of scale that only a small proportion of its Android rivals can match. Because Apple sells tens of millions of iPhones every quarter, and also due to the fact that most of Apple products for e.g. iPhone, and iPad, share the same components, it can commit to purchasing components at a large scale, enabling it to negotiate high volume discounts, thereby benefiting from bulk buying economies of scale. Secondly, due to its large size and reputation, it also gets to enjoy financial economies of scale, i.e lower interest rates on loans, and even technical and marketing economies of scale.

Furthermore, Apple is an oligopoly, which is a state of limited competition wherein a market is shared by a small number of producers or sellers. The characteristics of an oligopolistic market structure are high barriers to entry, interdependence, price-setting ability, maximized revenues, and product differentiation. No one else does exactly what Apple does, and this means that they are able to set higher prices for their products, and there is no competitive pressure to lower them, leading to them making higher profit margins.

The tech-giant saw nearly $3tn in profits despite challenges created by the Russia-Ukraine war and the global supply chain. In addition, Apple is one of the largest taxpayers in the US, and has paid almost $45bn in domestic corporate income taxes over the past five years alone. Since 2010, Apple has been one of the most valuable companies in the world, and it stayed at or near the top for many years after that.

In addition, in 2017, consumers were surprised with a collaboration between Apple and Reliance Jio. The deal included that customers who buy Apple’s iPhone 8, iPhone 8 Plus or iPhone X models and recharge their iPhone with Jio for a plan worth ₹799 every month will be eligible for Reliance to buy back their phones after 12 month in return of a whooping 70 per cent of the price of their iPhone. News agency Thomas Reutgers reported that this was a smart and well-planned tie-up since it drew high-paying customers to the Jio network and lifted Apple sales in the country. Also, for Apple, growth in India was crucial as growth slowed at home and in China. Lastly, the deal placed Apple’s iPhones in Reliance and Jio retail stores in 900 cities across the country, giving the company a chance to boost its meagre 3 per cent market share and close the gap with market leader Samsung Electronics.

-By Sarah Pershan