Group2

Members: Dansen, Keith, YiRen, SynJae, Darren


 * ~  ||~ Student's Post ||~ Teacher's comments ||
 * ~ Project A || 1. The iPad was developed by Apple Inc, first announced on January 27, 2010,  releasing the first iPad on April 2010.

2. Apple first announced the price of the iPad to cost $499. Prior to the release, the price of the iPad could have been determind through conducting surveys, to examine how much consumers would pay for such a product. After it's release, the price of the iPad could then later on be determined by looking at demand and supply. Being incentive driven, Apple would aim to maximise it's profits in the sale of iPads. This market equilibrium occurs at a price where the quantity demanded is equal to the quantity supplied. Lastly, the price of the iPad could also be determined through the price of substitutes. For example, the Samsung Galaxy tab, being a close substitute to the iPad, would greatly affect the demand of the iPad and hence the price. If the price of the galaxy tab were to decrease, the quantity demanded of the galaxy tab would increase and hence mean that there would be a fall in demand for the iPad hence resulting in a decrease in the price. Furthermore, the price of the iPad could also have been determined by the release of its next generation, the iPad 2. With the iPad 2 having all the functions of the pre-decessor and in addition, a camera, it would greatly affect the price of the iPad.

3. Some of the related or associated products of the ipad are mainly the ipad’s unique applications. Some uses of these applications include allowing users to read news articles online, doing easy video editing, spreadsheets and organised file management. There are thousands of useful applications suited for almost every individual’s wants and needs. Hence these applications are complements to the ipad. They make the ipad more attractive to consumers and hence giving the ipad a competitive edge over other alternative products. As the applications are considered compliments to the ipad, the prices, variety and quality of the applications will affect the demand for the ipad. Moreover, the applications and the ipad are considered as close complements. Hence, the demand for the ipad is very responsive to the variety, quality and the price of the applications. || Good point about prices could have been determined through conducting survey. So what is the intent of the survey? What are they trying to gauge? Good point to elaborate here. ||
 * ~ ======Project B====== || From the consumer’s point of view, before purchasing the iPad, they would first look at the substitutes for the iPad and then make a choice between the iPad and the possible substitutes. In the tablet market, there are currently three different types of operating systems - Android, Apple and Windows 7. The Windows 7 operating system is used mainly for work while the Android and Apple operating systems are used mainly for entertainment. Hence this makes tablets with Android operating systems closer substitutes with the iPad. The Apple operating system is unique to the iPad while the android operating system can be used by any tablet manufacturer. Therefore, in order for it to gain the dollar votes from consumers, it needs to create a niche for itself by having a unique design and a better operating system for the iPad. Apple boasts of a greater number of applications in its application store and a futuristic design for its iPad compared to the android tablets.

Another factor is that people’s disposable income has risen due to the growth dividends and tax reduction. Hence this is a good time for Apple to capture the increase in demand, as the iPad is a normal good. By applying income elasticity demand theory, an increase in income will result in a more than proportionate increase of quantity demanded. Therefore, the demand of iPad will rise if Apple is able to capture the increase in market size before the android tablet producers does so. Hence it will need to market its product aggressively by telling consumers that an iPad is a need while an Android tablet is a want. In addition, the world is coming out if not out of the latest recession. Hence consumers would anticipate an increase in income, making them more willing to buy such products.

The recent catastrophe that struck Japan would greatly affect the production of iPad 2 in the short - or possibly long – run. Since iPad 2 has several components being manufactured, designed, and imported from Japan, such as HDI boards for the apple tablet (1), it would certainly affect the number of iPad 2 produced. Given Japan’s current circumstances, export of such iPad components would be greatly limited because of the reduced production of such components caused by destroyed factories, limited manpower, flooded lands, lesser amount of raw materials, which in turn would not be able to meet up to Apple’s rising demand for such spare parts. In addition, since Japan is the current country which Apple is dependent on for iPad 2’s components, Japanese companies supplying such components would have to increase prices to ensure that the demand of Apple is lowered. In response to the increased prices set by Japanese industries, Apple would face a lower profit per unit of iPad 2 if the price was to be kept constant, causing a lesser number of units supplied. The reduced supply of components from Japan also causes lesser iPad 2 being produced, hence an overall subsequent production of iPad 2. In response to such problems, Apple has to increase the price of the iPad 2, so that consumers who are more willing and able to pay for the iPad 2 would get them.

Another factor that would significantly affect the pricing or market decisions of Apple regarding the iPad would be the imminent launch of the Motorola Xoom tablet (2), which would increase the number of number of options available to consumers in the tablet market. This result in an increase in the price elasticity of demand of the iPad, which means that ceteris paribus, the iPad would have to decrease their price in order to continue making profits and appear attractive to consumers. In actual life, however, Apple tackled the problem of competition by launching an improved product at the same price, which also resulted in the continued popularity of the iPad among consumers in the tablet market. (3) Both the iPad and the Xoom can be considered to be high-end tablets, with the target audience being wealthy people. They both run on industry-leading specifications which rival those of full-on notebooks, and utilise extremely intuitive and fast operating systems (iOS 4.3 for iPad, Android 3.0 Honeycomb for Xoom). Hence, they can be considered to be very close substitutes. Cross elasticity of demand between the two products is consequently high, and an increase in the price of the iPad would lead to a more than proportionate increase in the demand of the Xoom, ceteris paribus. This would lead Apple (which is assumed to be a profit-driven company) to adopt a pricing strategy which is competitive to that of the Xoom, to ensure continued high total profit

References (1) [] (2) http://www.engadget.com/2011/01/05/motorola-xoom-becomes-official-on-motorola-site-joined-by-unann/ (3) http://www.engadget.com/2010/04/03/apple-ipad-review/ (4) http://www.engadget.com/2011/03/02/the-ipad-2/ || Not too sure this is what the question is asking about when they said from the consumer's point of view but you managed to link it to how the producer therefore use such knowledge which is valid. However, you need to develop further and let me know what happens to the market for iPad then? Impact on Dd/Ss of iPad?

In your second paragraph, you are looking at the market for iPads specifically in Singapore right? Would be good to explicitly mention this. Good that you apply YED concept but why is it that Dd will increase more than proportionately? Being a normal good will only show that DD will increase given an increase in income.

Wait. Are you analysing the market for iPad or iPad 2? Why are you suddenly looking at iPad 2 here?

So given that Apple will not be able to import iPad components from Japan, what will happen to the DD/SS of iPad? You need to be clear with your analysis and show how your prices increase due to DD/SS. Rmb not to jump the gun!

Motorola Xoom is a substitute for iPad. Increase in number of substitutes will lead to a more price elastic demand for iPad. But how do you actually make the link to profits here? I don't quite understand what you mean by this sentence, "This result in an increase in the price elasticity of demand of the iPad, which means that ceteris paribus, the iPad would have to decrease their price in order to continue making profits and appear attractive to consumers."

Good point about adopting strategies to ensure continued profits but do link to DD and SS again! ||
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