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Demand Supply WebQuest 2011 Market for iPads Gulliver’s Economics Team Oscar, Vanessa, Xue Ting and Gabriel Producer: Oscar Lee Outline (Part A) • Introduction to iPad • • • When did the iPad first originate? How is the price of the iPad determined? What are some of the related/associated products for the iPad? How are these products related to the iPad? *All prices stated in the following presentation are in United States Dollars (USD) unless otherwise stated. Apple iPad The iPad Story Pub Trivia Announced on January 27, 2010 Launched on April 3 16GB, 32GB or 64GB Wi-Fi only or with 3G 9.7” 1024x768 screen A4 Processor @ 1GHz 256MB RAM 400,000 Apps on the App Store Starting from $499 300,000 sold on launch date 12,000,000+ sold to date The iPad Story How was pricing determined? Production Cost per Unit $229.35* to $346.15** *For Non-3G iPad 16GB **For 3G iPad 64GB Profit per iPad $269.65* to $482.85** *For Non-3G iPad 16GB **For 3G iPad 64GB iPad 16GB Wi-Fi iPad 64GB Wi-Fi+3G Equilibrium Price What potential customers were willing to pay for such a new pioneer in the market? A sub-$1000 price was rumoured for a long time by consumers The iPad Story Competition Launched with no competitors Competitors finally emerge... Quite a long time later Samsung Toshiba Research in Motion HTC Hewlett-Packard LG Asus Acer Dell ... They tried to replicate the success of the iPad Samsung launched the Galaxy Tab The iPad Story Comparison Samsung Galaxy Tab vs Apple iPad Touch-screen Tablets: Processor Cortex A8 @ 1.0GHz vs Apple A4 @ 1.0 GHz RAM 512MB vs 256MB Flash Memory 16GB Built-in + MicroSD Expansion (up to 32GB) vs 16GB/32GB/64GB Battery Capacity 4000mAh vs 6600mAh Battery Life 7 hours vs 10 hours Network Connectivity Wi-Fi+3G vs Wi-Fi only/Wi-Fi+3G Cameras Front & Back vs None Touchscreen 7” (1024x600) vs 9.7” (1024x768) Video-conferencing Yes vs No Phone Calls Yes vs No Operating System Google Android vs Apple iOS Applications 200,000 apps on the Android Market vs 400,000 apps on the App Store Pricing $799 vs $499 to $829 Developing Freedom Open-source vs Closed UI Customizability Very customizable vs Non-customizable (unless Jailbroken) Outline (Part B) • Discuss recent developments and how these affect marketing and pricing decisions for the iPad Substitutes Competing brands have recently launched their own tablets, which are substitutes for the iPad This leads to a decrease in demand for the iPad Some substitutes... Samsung Galaxy Tab Blackberry Playbook HP Slate Consumers will go for such devices because they are more unique Some are cheaper too Blackberry Playbook: $499 HP Slate: $549 XED: positive; consumers would not be willing to buy more expensive goods in the presence of cheaper and closer substitutes Pricing of iPads will have to be lowered to maintain a competitive edge and maintain revenue Increase in income Due to the announcement of the Budget 2011, Singaporeans are given many benefits, including a rise in disposable incomes due to tax refunds Increase in (disposable) income→Greater purchasing power→Greater demand for iPad (normal good)→Elastic +ve YED News Report on iPad as textbooks Use of iPads as educational tools E-Textbooks increasingly used in schools to allow ease of doing homework and more interactive learning Apple should cut prices for iPad for educational institutes as the demand for iPad is Price Elastic Any fall in price of iPad will thus lead to a more than proportionate increase in quantity demanded Resource deficiency Sendai Earthquake 9.0 on the Richter scale Largest earthquake ever recorded in Japan Earthquake disrupted factory operations Production of key components of the iPad was slowed down Supply of Lithium Ion batteries reduced Cost of each lithium-ion battery increases as there is a decrease in quantity supplied Production cost of iPad increased Profit per unit of iPad decreases Since iPads are price elastic, Apple will reduce the quantity supplied to maximize profits Any hike in cost of production would lead to a more than proportionate fall in supply Earthquake will hence lead to a fall in supply of iPads There are many other factors which could affect supply and demand But that’s all we can show you, due to time constraints Fin. The End “Merci beaucoup, “Thank you very much, comme toujours” just as always.”