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BLAW1002 S1 2022 – EPA Brief
Part 1 – 20 Marks
1a. How blackberry was killed off
When blackberry was first released it was an evolution from the pager, blackberries allowed anyone who had one to receive emails wherever and have access to the internet on the go. Now they are for people who want to appear offline thanks to apple. When apple first released information about the original iPhone, every single other competitive company had to contend with
it. A phone with one large touchscreen, no physical keyboard and technology so much more advanced than the others, these company’s such as blackberry had to come up with new ideas fast.
The reason blackberry was killed off was through the forces of creative destruction. Large companies such as apple, Samsung and google have money from previous successful products to allow for them to compete in the phone market while blackberry couldn’t keep up with the evolving
market. These companies were able to come up with new products, new methods of production, such as cheaper or faster, or new markets pushing the competitive markets to new levels which lower companies such as blackberry could not continue with.
The larger companies were constantly upgrading their products with new software or new technology, consistently bringing out new updated versions. Because of this and with the demand of these new phones, the components to build these products with, demand went up. With this happening, the cost of components raised by which the old firms that could not adapt to these prices and keep up, resulted in being swept away and forgetting such as blackberry.
Through the force of competitive innovations blackberry was also pushed to the edge and forgotten
about in the phone market as they just couldn’t discover new or better ways like apple or Samsung to launch them higher in the market. To keep in the industry blackberry came up with the ‘blackberry storm’, which was code named the ‘Storm AK’ with AK meaning apple killer. This phone didn’t have WIFI and was basically a small brick. Compared to apples iPhone it was a big piece of garbage that had dozens of flaws. Their design teams hadn’t adopted the mindset of the new generations and what they need like apple had so blackberries stayed simple.
(richie 2022)
Blackberrys designs were flawed, and they didn’t want to adapt to the modern-day phones and technology which in turn saw them become a relic of the past due to the forces of competitive innovation and creative destruction.
1b. elasticity of apple
The price of elasticity is defined as the degree of responsiveness from customers to a price change. In our situation here as the strong customer base is faced with a 10% hike in the price of apples offerings there is a change between the price and quantity of offerings on the demand curve.
Having used hypothetical figures such as when the iPhone cost $1200 the demand for them was around 200000, after the 10% hike we saw the price rise to $1320 with the demand being 180000. From this we can calculate that we saw a change of 10% in both supply and demand categories. The
price elasticity of demand for A is 166.67, the price elasticity of demand for A1 after the 10% hike showed 136.36. As we know if the price elasticity of demand is greater than 1 it is elastic showing that even after this 10% rise the products will continue to be elastic. Since apple has such a large loyal customer base to begin with as well having added 10% to their products is something that only
affects the numbers slightly since these consumers are so loyal to apple, they would buy this product regardless of the increased price.
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BLAW1002 S1 2022 – EPA Brief
The reason apple can price their products at such a high price compared to their competitors and still be the leading brand for consumers is because of their loyal customer base.
To help with apples loyal customer base they have been able to bring out a variety of different products which all
have the ability to help these consumers in different ways. Each product is though about thoroughly
after customer research so the apple teams can think about innovative designs consumers need. Apples product mix enhances the experience of their consumers as each product is connected through apples software. Each product can be accessed through another one of their products allowing for easy transfer and access for what they need.
Another strategy that apple uses to keep their consumers buying their products even though they might rise by 10 percent in price is the decoy pricing strategy. Companies like apple, Samsung and google all produce the same product and because of that these companies usually have the same components with a twist of their own to make the product unique. The decoy pricing strategy is pricing products higher than usual, so people think they are paying for the premium compared to others like Samsung and keep these prices high until they release an updated version of the product
because people still pay for the ‘premium’ product.
One of the best strategies that apple uses to enchant their loyal customer base is through promotion. Through a whole year apple will slowly release new features and looks of a new product
of theirs through commercials and print ads focusing on the differences between their products and
their competitions. Then at Apples yearly keynote, one of their biggest events and large part of their
image, their loyal customer base is interested in the unveiling of new products to come and how Apple is becoming better than before. This keeps these consumers interested about these products for when they release it’s as if they need to buy it as they’ve been waiting so long.
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1c. the iPhone 13
In 2021 apple released its newest iPhone with all the best specs and technology possible. The iPhone 13. In just the holiday period apple sold 40 million iPhone 13s with around another 50 million still produced and ready for sale. The average iPhone 13 costs around $1275 with the cheapest being $1200 and the most expensive being $1350. There are different models such as the iPhone 13 pro max which retails for around $1700 as well. From these statistics we can calculate that apple in just the holiday period made around 51 billion dollars in sales with over half their stock
left. Now the cost of producing one said iPhone 13 is said to be around $570 which is why apple is such a large company and profitable company because their mark-up is so large. Apples total profit from these sales during the holiday period were roughly 28.2 billion dollars. (Hardwick 2022)
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BLAW1002 S1 2022 – EPA Brief
A consumer’s willingness to pay for a particular model phone will depend not only on its characteristics, but also on the characteristics and prices of similar types of phones sold by other firms. Only consumers with strong customer loyalty wont reconsider buying a different brand because of price, so for apple their markup is key, as when consumers can choose between several similar phones, the demand for each of these phones is likely to be quite responsive to prices. The reason why apple price their phone around $700 above their production price is that other brands such as Samsung have similarly priced phones, but people consider apple to be a better brand. The deadweight loss gives us a measure of the unexploited gains from trade. The deadweight loss is high when the gap between the price and the marginal cost, which we call the firm’s
profit margin
, is high. The isoprofit curve shows the price x quantity combinations that give the same profit, above
on diagram is rough estimate. Part 2 – 10 Marks
1.
Toyota Hilux
the shift from 2020 and 2021 quantities and prices for the Toyota hilux was mainly caused by the repercussions from covid-19. for most of these new vehciles they are equipped with some high tech
that most car companies dramatically reduced forward orders for. Since the global economy bounced back quicker than people realised these car companies resumed production but these parts from the suppliers were not ready for them so car manufacturing was delayed until production for these parts was back on track. After these companies have produced these cars they need to be shipped on large shipping boats which now have been under immense pressure to get millions of prodcuts all over the country since the covid-19 breakout. For these car companies to ship thousands of cars to each country takes a while which is another reason that helped ush the price of he Toyota higher. Whilst people weren’t allowed to travel with covid-19 around people started to treat themselves to a brand shiny new vehicle for all purposes whether it be off roading or just because they had the money, but the demand for cars surged with the supply still laying low. Because of this car retailers were able to price their cars so high that with such a low supply it was first come first serve and if you didn’t like the price you would be put and a near 12 month waiting list. (Dowling, 2022)
Once the vehicle shortage has been resolved 2023, there is likely to be a large drop in price for second hand cars as whoever is looking to buy a car could go the the retailer and buy a brand new vehicle for the price a second had one is right now. The average 2021 Toyota hilux with around 20000ks is selling for $70000 which is nearly as much as a brand new 2022 toyota hilux. If this car shortage was resolved the second hand car would see a near $10000 drop in its price as consumers are willing to fork out a little extra cash for a brand new vehicle.
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References
The CORE Team (2022): Economy, Society, and Public Policy, Oxford, UK (500 pages), Oxford University Press, softcover, ISBN 978-0-19884-984-1. https://www.core-econ.org/espp
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BLAW1002 S1 2022 – EPA Brief
Dowling, J., 2022.
Top 5 reasons for new-car delays and price rises
. Drive. https://www.drive.com.au/news/top-5-reasons-for-new-car-delays-and-price-rises
2022. https://www.carsales.com.au/cars/2020/toyota/hilux
Carey, A., 2022.
Why you should wait to buy a new car
. news. https://www.news.com.au/finance/money/costs/experts-reveal-why-you-should-wait-to-buy-a-
car-as-industry-faces-soaring-prices-and-supply-crisis/news-story/
fc408604ad02faacd120124b2ab28533
Hardwick, Tim. 2022. "Apple Sold Over 40 Million Iphone 13 Models During The Holiday Season, Says Wedbush Analyst".
Macrumors
. https://www.macrumors.com/2022/01/03/apple-sold-over-
40-million-iphones-holiday-season
stieg, corey. 2022. "HOOKED The Psychology Behind A New Iphone Release—And Why It’S So Hard To Resist".
Make It
. https://www.cnbc.com/2020/12/08/the-psychology-of-new-iphone-
releases-apple-marketing.html
richie, rene. 2022. "How Apple Killed Blackberry".
Imore
. https://www.imore.com/how-apple-
killed-blackberry
.
END OF
EPA - BLAW S1 2022
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