1)Info about the IPAD 2)How the price of the IPAD is determined 3)Associated products 4)How recent developments would affect marketing and pricing decisions for the IPAD.

U.S release: April 2010

MARCH

Income (Increase in income will lead to an increase in demand for the IPAD) Price of substitutes (Eg: Samsung's Galaxy Tablet) Preference of consumers Expectations of consumers

Changes in the cost of production Change in the state of technology Changes in the price of related goods Expectations of future prices

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 Taste › Apple Inc. › Tablet PC is new thing; Apple succeeded in setting new trend › Setting new taste favorable to iPad; Demand Increase  Insufficient Substitutes › Tablet PC is very new thing; iPad being only one available › Other substitutes only came later in the 2010; November › iPad became unique › Demand not very responsive to substitutes  Other Factors › It’s unique OS and Appstore - much bigger range of Apps; › Most usage of iPad – Entertainment; Appstore is strong support

 Using Price Mechanism and ceteris peribus assumption;  As more non-price factors are favorable in increasing demand, demand rises; hence demand curve shifts rightwards  Shortage occurs, and now more people are willing to pay more for iPad; price have upward pressure  Some who cannot cope with the price rationed out of the market, quantity demanded will fall  As Apple tries to maximize profit, it will sell more iPads; hence quantity supplied for iPad increases  In the end, equilibrium price and quantity rises.

 Being very unique product; and succeeding in setting favorable taste, iPad remains price inelastic for the moment  It will hence dominate Tablet PC market for at least near future › Even in 2011, with more substitutes coming like Playbook or Slate, iPad is expected to take up as much as 75% of tablet PC share  However, if with more substitutes, iPad may become more responsive to the changes in other substitutes’ price, hence demand might decrease  To stay relevant and strong in the market, it might need to come up with better hardware and/or lower price; › iPad 2 actually did both. Price remained, although major flaws found in iPad 1 was fixed and other features upgraded. This affected competitors, shocked many. › One example of its victim would be Motorola’s XOOM; which set its price around $800; and it is already selling at retail store around $500; even that is not selling

 Similar products such as the samsung galaxy tab are known as substitutes products; they satisfy the same needs or wants.  If both products are very close substitutes, there would be a high level of competition as one can easily replace the other. (Eg: galaxy tab replacing the IPAD). This is known as Cross elasticity of demand(XED)

 The Ipad and Galaxy tab can be considered very similar products as they satisfy the same needs or wants.  The developers of iPad would thus channel more funds into their marketing ventures in order to make the Ipad more unique and attractive.  The marketing campaigns would aim to retain the current group of consumers who are interested in the apple Ipad as well as attract new consumers who are in the market for a netbook.  The suppliers thus aim to increase the demand for the apple ipad in the face of growing competition.  Latest solution: iPad 2

 How would this affect pricing strategy.  Because there is a relationship between price and quantity demanded of a product, it is important to understand the impact of pricing on sales by estimating the demand curve for the product.  In this case, the suppliers at Apple Inc would reduce the price of the ipad to make it more attractive to consumers. This would ensure that there would be a high quantity demanded for the good. This would also, as the apple developers hope, lead to a fall in the demand for other similar products such as the samsung galaxy tab  However the developers would still need to set it at a price where they would be able to maximise their profits.