FORMATIVE ASSESSMENT 1 Read the article below and attempt ALL questions that follow. iPhone sales plunge amid growing competition from Huawei, Xiaomi [100 MARKS] iPhone 14. Image: Apple Apple's revenue has dipped for a fifth consecutive quarter, driven by the steepest decline in iPhone sales since the early days of the Covid-19 pandemic. The California-based tech giant on Thursday reported a profit of $23.6 billion (R440 billion) on $90.8 billion (R1.3 trillion) in revenue during the January-March period. Sales of the iPhone fell 10 percent, to $45.7 billion amid growing competition from Chinese rivals such as Huawei and Xiaomi. Sales in Greater China, one of Apple's most important markets, fell to $16.4bn from $17.8bn year-on-year, a nearly 8 percent decline. The sales drop marked the biggest slump since the third quarter of 2020 when factory closures due to COVID delayed the release of the iPhone 12. Still, the revenue drop came in ahead of investors' expectations, and the company's shares surged on news of a stock buyback and higher quarterly dividend. Apple shares rose nearly 6 percent in after-market trading as the firm announced it would buy back $110bn of its own stock and raise its quarterly dividend by 4 percent to $0.25 a share. "Thanks to very high levels of customer satisfaction and loyalty, our active installed base of devices has reached a new all- time high across all products and all geographic segments, and our business performance drove a new EPS record for the March quarter," Apple CFO Luca Maestri said in a statement. "Given our confidence in Apple's future and the value we see in our stock, our board has authorised an additional $110bn for share repurchases. We are also raising our quarterly dividend for the 12th year in a row." Apple's tepid results come after a rocky start to the year for the company. As well as coming under growing pressure from low-cost Chinese rivals, the company is facing scrutiny from antitrust regulators in the US and Europe and recently abandoned its decade-long project to build an electric car. Meanwhile, Apple's mixed-reality headset, the Vision Pro, the company's only new product since the release of the Apple Watch in 2015, has yet to significantly contribute to sales. The trend-setting company is also battling perceptions that it is falling behind rivals such as Microsoft and Google in the race to develop and roll out artificial intelligence (AI). During a conference call on Thursday, Apple CEO Tim Cook sought to assure analysts that the company has Al products in the works. "We believe in the transformative power and promise of Al, and we believe we have advantages that will differentiate us in this new era," Cook said. https://www.news24.com/fin24/companies/iphone-sales-plunge-amid-growing-competition-from-huawei-xiaomi- Source: 20240503 Question 3 (25 Marks) Evaluate Apple's pricing strategy for the iPhone. In your discussion, justify why Apple would choose to continue with a market skimming pricing strategy rather than adopting a market penetration pricing strategy like the one implemented by Chinese brands.