Apple has let go of its premium pricing strategy. A strategic move made by the company, the consequences of which are still unknown. Learn more about Apple Inc. case study and Apple’s business model.
New CEO; new decisions:
Steve Jobs has definitely been handling a company with a different approach. All the products from Apple Inc. were portrayed as high-end products. They were specifically intended for the high-end users who were brand conscious. And considered the phones from Apple as a symbol for sophistication and class.
This image about the company and the products of the company has been maintained for quite some time by Tim Cook, as well. But the recent release of the iPhone and its pricing has been a real shock for most people.
If you haven’t been a close follower of the prices of iPhone or Apple’s business model, then you might be thinking that we are talking about the massive increase in the prices of the new model. But in reality, you’ll be astonished to hear that iphone price has decreased drastically. Yes, this is no joke. You can check it for yourself.
The experts have been wondering about Apple’s business model and the way it has been modifying the price of its major product line. Whether successful or not, it is definitely going to turn into an Apple Inc. case study. From where other businesses would learn and decide to follow or avoid drastic changes in their pricing approaches.
Reasons for high pricing of the iPhone:
In the business and marketing terms, we usually consider a high price or premium pricing strategy to be associated with the establishment of a premium brand image. It is right in most of the cases. But there can be some other reasons behind such a decision too.
Specifically, in the case of Apple Inc. case study, the high price of the phone was definitely intended to set up a brand image, which it successfully did. But apart from that, the cost of Apple’s phone is also higher as compared to the other brands. So it had to manage that additional cost as well because of which the price was set higher in comparison to the other brands.
Additionally, the provision of specific features in the form of Apple’s specific operating system was another reason for the higher pricing of the iPhone series. It actually earned the brand.
IPhones form half of Apple’s business:
Although Apple’s business model revolves around the personal computers with which it started its business, over time, it has moved to manufacture and sales of the iPhone. These iPhones are nearly half of Apple’s business now.
2.2 billion phones of Apple have been sold since the introduction of the first smartphone it launched in the market. These sales have brought in trillions of dollars of revenues for the company.
Similarly, this flagship product of the company has been the reason for the 2037% increase in the stocks of the company. This makes it one of the highly priced ventures. All of these success statistics have been the reason for incorporating Apple Inc. case study in the syllabus. Even it will help in the course books, and even practical roadmaps for the other companies in the IT industry.
All these statistics also show that the iPhone is Apple’s most profitable product now, and it can’t just play games with its business model or invite some external factors to play with apple internal risk.
If you still need some other statistics to know the importance of iPhone for Apple and the reason we believe that Apple internal risk is dependent on iPhone, then this data is important. The data shared by Phone Arena highlights that iPhone brings in $0.60-$0.74 for every dollar spent by the company. In comparison, the most profitable notebook of the company earns $0.29 for each dollar. This means that the profit earned through the iPhone is at least double the of other profitable products.
Recent changes in Apple internal risk:
The launch of the iPhone 11 this September was shocking in terms of the price that the company has set. Since 2007, each of the new models have been priced much higher than the past release. But this year it has dropped from $1,149 for the iPhone X to $699 for its latest iPhone 11.
This isn’t something too sleek to ignore. But even if this could be referred to as a one-time price strategy, still the new Apple’s business model isn’t making any sense.
Last year, one of the budget phones was released by the company. Remember, budget phones are not in the scope of the company in any way. It is a premium company with high-priced good, so where comes in the space of the budget phone. Another important thing here was that Apple mentioned that budgeted phone had lesser features in comparison to the normal phone. But there were no prominent differences except the slashed pricing.
Do these changes in the pricing policy depict the change in Apple’s business model?
This move from Apple leads us to a question where we’ll have to analyze that it is really a one-time change in Apple’s business model or overall Apple Inc. case study.
Apple Inc. is not a small company. So any move made by such large conglomerates is actually made after analyzing its possible dimensions and consequences. The decrease in the new model’s price from Apple is, thus, a part of the strategic policy of the company and should depict Apple’s business model.
However, not all the factors regarding the pricing aspects could be handled by the company on its own. The reaction of the public and public sentiment is going to determine if this change has created the apple internal risk. Or would the customers believe it to be a good step. Overall, more customers would be able to buy the product.
Old business model:
The old business model of Apple was actually interesting. The company launched its first iPhone in 2007. The price was kept higher, but it was not only because of internal reasons. Smartphone technology was not prevalent in the market at that time. So, high pricing justified it.
As soon as the market penetration started in the form of smartphones from other companies, the chances of selling every new product became lesser. Similarly, most of the world’s population got the mobile phone, leaving a little market to capture. This is common in all technology-related products. So, in order to manage the decrease in the sales value, Apple increased its price with the release of the ever-new model. This actually justified the overall revenue.
But now, we’ll have to wait until the company releases its official numbers to know whether a decrease in price has increased the number of buyers. Or all of this was simply business risk with apple, and no positive result appeared.
Apple Inc. case study implies that Apple’s business model has been changed. With the release of a low price version of the last model of iPhone and the current pricing of the latest iPhone, this is what experts in the industry believe,
The result of this change is going to be clearer with the annual report that the company is going to release. This approach that Apple has used is quite risky. And can create a devastating impact on the company’s future sales and the stock.
Up till then, release of the annual report and knowing the business risk with apple, we’ll have to observe the sales trend.
What do you think about Apple’s business model? Do you think that they have done the right thing, considering the shrinkage of the iPhone market? Kindly share your opinion in the comments section.