After a recent slash in Iphone prices in various countries , Some desperate users in India were

also excepting a price cut. Iphone currently costs whooping 6 times more in India as
compared to US. In India 8Gb Iphone costs Rs 31000 while after recent price cut it only costs
$99(Rs 5000) in US, A 16 Gb version costs Rs 37000 in India as compared to $299(Rs 15000) in
US. In India Airtel and Vodaphone are sole distributors of the Iphone and both have declined
any communication with Apple regarding price cuts in India.
Apple is not learning from it mistakes as it was not able to make its mark when it first launched
Iphone in India and were not able to sell even a fraction of the shipments.
There were a huge number of factors due to which Apple Iphone sales never picked up in
India:
• Huge price difference ,It costs 6 times in India than in US.
• Bad marketing strategy - Only sold through Airtel and Vodaphone and almost no retail
outlets.
• No awareness among people - Almost nothing spent in Advertising.
Now the real Question Why Apple is not slashing prices in India?
Why Apple is not slashing prices in India ,Doesn’t it want to make its mark in India which is one
of the largest growing market. Does it want to give up easily when companies like HTC which
are trying to make India their niche market.
Its not Apple who is slashing prices mostly, Its primarily At&t(service provider ) who is slashing
the prices of Iphone in US . At&T is bearing some of the initial cost of Iphone and are forcing
users to take a 2 year At&T subscription plan breaking which users have to pay a penalty. So its
like decreasing the upfront cost and distributing the costs into regular payment cycles.
This model cant be adopted easily in India due to lack of law enforcements policies and the time
it takes to track and fine a consumer who have breached a contract in between.
Apple may not be the only culprit for the huge upfront cost of Iphone in India but it atleast need
to have a look at marketing, advertisements policies, if it wants to make its mark in India
specially when it is planning to launch Iphone 3Gs in India.

Strategic Fit of Customer Service in the Supply Chain

In a supply chain network, the Strategic Fit of Customer Service is often the voice-of-the-
customer post-release of the service or product. The phrase “start with the customer and work
backwards” is really a misnomer. Why? Well, in most products or services, it really starts with
the customer and ends with the customer — that is, the customer’s voice is heard at the level of
product design and then the voice-of-the-customer is heard at the market monitoring level, post-
release of the product or service.
We know — through pretty accurate anecdotal evidence — that the supply chain of the iPhone
looks like the following:

From a high-level, we speculate that the following are the material suppliers of the Apple iPhone:
1. Samsung: The Singapore facility manufactures CPU and Video processing chips.
2. Infineon: The Singapore facility manufactures Baseband Communications hardware.
3. Primax Electronics: The Taiwan facility manufactures Digital Camera Modules.
4. Foxconn International: The Taiwan facility manufactures internal circuitry.
5. Entery Industrial: The Taiwan facility manufactures connectors.
6. Cambridge Silicon: The Taiwan facility manufactures bluetooth chipsets.
7. Umicron Technology: The Taiwan facility manufactures printed circuit boards.
8. Catcher Technology: The Taiwan facility manufactures stainless metal casings.
9. Broadcomm: The U.S. based facility builds touch screen controllers.
10. Marvell: The U.S. based facility builds 802.11 specific parts.
11. The Apple Shenzhen, China facility assembles the hardware, holds inventory, and handles
the pick, pack, and ship steps of the fulfillment process.
If I am correct in any of my research and assertions above, it’s easy to see that if there is any
disruption in material flow of any supplier into the Apple Shenzhen, China facility, then
production either slows or halts altogether.
We also know that the Austin, Texas Apple Operation is largely where Apple Care physically sits,
with another office just outside of Sacramento, California. So, for any contacts into their Call
Center, then that is most likely where the contacts will enter (they also have, we understand,
outsourcing partners, but Texas Apple Care is the headquarters).
So, more completely, then, the high-level iphone supply chain may represented like this:

Apple, iPhones, and Demand Curves, and “Price

Discrimination”
September 9th, 2007
by Steve Brady
· 1 Comment · Business, Commentary, Economics, Education, Technology, airlines
After some thought, I have decided to write about what Apple did right, and wrong, in their
decision to lower the prices on the iPhone. Essentially, I believe they recognized the opportunity
to generate more revenue from a lower price point, and chose to practice price discrimination to
achieve that. Alas, they made a couple significant mistakes. If you read to the end, you will see
what those mistakes were.
I think it is time for another look at that old friend of Economists and students in Econ 101, the
“Demand Curve” and the slightly more complex notion of “Price Discrimination.”
To catch up, you undoubtedly recall that the demand curve essentially shows that, as prices
decrease, demand will increase for a product. This is shown in the following graph:

Thus we can expect Steve Jobs is correct in saying that they did this to increase sales before the
Christmas season. In fact, lowering the price should increase the sales, assuming that there is
elasticity in the pricing and demand curve. Remember, elasticity is the degree to which quantity
changes with a change in price. The more elastic, the greater the change (steeper the slope of the
curve.)
Now, there is this other notion of “price discrimination.” Price discrimination, or “Yield
Management,” is the practice of charging different customers a different price for the same
product. The notion is really quite simple. As we saw in the Demand Curve, a few people are
willing to pay a high price for a product. A few more would be willing to be a lower price, and so
on. In the charts that follow, one can see how, by targeting different customers at different prices
points, one can increase total revenue.
The first chart shows the revenue generated if one were to charge a single price. You can see that
above the “box” is the revenue that is essentially lost due to customers getting a “good deal.”
They would have paid more, but are most likely happy that they were able to pay less. Of course,
to the right of the “box” is revenue lost because customers felt the price was not at a point where
they could make a purchase.
This next chart shows, notionally, what would happen to revenue if a business were able to
successfully segment the market, and provide 6 different price-points. As you can see a far
greater area under the curve is colored in, showing a significantly greater amount of revenue.

By identifying these customers, and finding ways to segment the market, a business can capture
more revenue by charging higher prices to those willing to pay those prices. Ideally, businesses
would like to charge a different price for every customer, targeting the maximum price they are
willing to pay. That level of price discrimination would ensure that every customer felt they were
receiving a “fair” deal, while removing even the smallest gaps between revenue and the demand
curve. This is rare, although an argument could be made that we see this in online auctions and in
car sales with negotiations.
Realistically, we do see price discrimination in our daily lives. Customers can find the “same”
available for different prices, simply by shopping at different stores. What makes people pay
more? A sense that they are receiving something additional for the increased costs. We are
perhaps most familiar with this practice in the airline industry, where yield management has gone
from art to science. We pay more for a first class ticket (obvious difference in treatment, although
you still arrive at the same destination.) But customers also pay a higher price for the privilege of
changing travel arrangements, or for the ability to purchase tickets at the last minute.
Alternatively, the airlines are able to ensure full planes by offering a select (and scientifically
computed) number of seats at lower prices. Travelers must purchase these tickets within certain
guidelines, but more tickets are sold (and seats filled), because they are able to capture those
people who could otherwise (perhaps) not afford to travel.
If you look around, you can find other instances as well. Coffee is more expensive depending on
whether a coffee shop has the right “feel.” Clothing is more expensive when purchased at
“higher end” stores.
What is critical here is the ability to segment your customers, and by doing so, create barriers to
transfer. This can be accomplished in many ways to include rules ( in the airline and cellphone
industries), controlling information (automobile industry), perception of enhanced service (coffee
shops and boutiques) and through geography (different shopping “districts.”)
So what does all this have to do with Apple?
I am glad you asked. I believe Apple made a “good call.” They sought to capture as many people
in the high end of the Demand Curve as possible. The problem (if you believe that sales may
have been trailing off in August) is that the demographic may have been smaller than they
anticipated, or they all reacted more quickly purchasing en masse early on. This then left a
potentially large amount of sales untapped. This is essentially what Steve Jobs was talking about
when he kept referring to capturing the holiday sales. They want to increase sales and to do that,
they must change the price point. This slides them down and to the right along the demand curve.
I suggest that Apple was trying to practice what I will call “temporal price discrimination.” They
were hoping to capture the “big spenders” early, and then move down the curve, capturing sales
from those who could not, or would not, spend at the higher price points. Unfortunately Steve
Jobs misjudged the timing. The group that purchased the iPhones at the higher prices were not
satisfied to say that 30 to 60 days of use of an iPhone was sufficient differentiation in their minds
to have paid a higher price. For many, one could argue it wasn’t worth $100 to $200 per month
to have a cool phone.
So, Apple failed to take the necessary steps to successfully practice price discrimination. They
failed to differentiate and segment their customers in a significant and substantial way. They did
try to create barriers. They were going to limit the number of people that could “switch”1 to the
lower price by putting a time window on when you could get your money back. But customers,
apparently in droves, pressured Apple early and often. Jobs responded within 36 hours, offering
in store credit (among other reported compensations.)
All in all, I think this has been an interesting time. I have only given a cursory look at the
economics involved, and there are far more details I left out (did I forget to mention marginal
costs?) Also, I am sure there are many other factors and pressures that influenced Apple’s initial
decision, and some may even include a pending shift in the demand curve itself. (If new
technology makes customers feel this iPhone Gen 1 is “obsolete” then the whole demand curve
might shift to the left…) Perhaps we shall revisit this topic…
iPhone Sales Figures
(Updated February 2009)It’s true that since the announcement of the fourth quarter 2008 sales
figures, iPhone is looking pretty healthy. Indeed Apple got off to a great start with sales of 1.38
million in the few short months of 2007. iPhone launched 29th June ‘07 giving it till end of
September to reach that figure. (Apple’s financialyear runs from the end of September). The
sales figures are identified below - and you might notice some anomalies; growth, then a dip,
then a bigger dip, then ‘insanely great
24
’ figures in Q4 08. It is also true that the iPhone 3G has already outsold the original iPhone
(unofficially now referred to as iPhone 2G); and that latest sales figures represent a much larger
global market than in the iPhone’s first year in just a handful of territories. We’ve untangled the
reports, predictions and analysis to bring you hard facts - checked against Apple’s own quarterly
reports.
Quarter 4 2008: Headline Snapshot
•
Total iPhones sold to date: 17 million•
Total 3G iPhones sold (Q4 08 - Q1 09) across 80 countries: 11.25 million •
Total iPhones (2G and 3G) sold in 2008: 13 million•
3G iPhones: 1 million sold in 1st weekend•
Apple’s sold more 3G iPhones than original iPhones
25
•
Techcrunch estimates Apple is on target to sell 40 million iPhones in 2009 •
iPhone now outsells Blackberry
26
•
In revenue terms Apple is the No3 handset manufacturer worldwideThe following figures are for
iPhone (2G and 3G versions). For 3G figures only, take figures from Q4 08 and Q1 09.

iphonesupply and demand data

fabricated by Brian, cs112 April 2009
Supply and Demand Quantities in Thousands (x10^3)
Price Supply Demand(USA) Demand(Europe) Demand(Asia)
Demand(Canada)
$1,500.00 800 2.980 5.808 3.864 3.765
$900.00 650 5.767 8.649 9.986 6.755
$500.00 500 35.876 24.855 29.544 28.087
$400.00 225 45.645 30.786 67.211 45.775
$350.00 100 90.656 55.551 106.656 80.099
$250.00 50 120.771 126.191 232.799 129.632
$100.00 20 223.721 246.687 356.053 145.997
$55.00 1 523.875 364.866 467.524 272.075

An Inside LOOK How Does the iPhone Help Apple and

AT&T?

Apple Coup: How Steve Jobs Played Hardball in iPhone Birth

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© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e. 37 of 42