Originally Posted by Carniphage
No. Utterly wrong.
A CFO who sets a price too high for the market, will face diminished profits as sales diminish.
A CFO who sets the price too low, will secure more sales, but profits will diminish due to the lower profit per unit.
A CFO who sets the price too high will see the market share decline, or stagnate. Both are indications of what the market think. An early adopters market is less price sensitive than a mature market. Which is where we are.
He's therefore obliged to set a price which is fit for the market.
He is not obliged to anything. He could be milking margin at the expense of growth. Or lowering prices to grow market share
which is essential in a software platform ( analogies with cars are thus misleading). At the moment Apple are doing the former - hence their record profits - although I admit there are supply constraints.
Apple's volume is increasing. And it's profit is increasing. And its share of industry profits is increasing. Just look at the bottom graph showing phone profit share.
Nokia's volume is increasing. Here are the stats.For the year though, Nokia remains the world's largest smartphone maker by both volume and sales, having sold 100m, up 48% on 2009, for total sales of €14.7bn.
That's right. Up 48%. Freakin
' amazing, right?
Nevertheless Nokia's market share is declining. As for Apple Market share is declining in the US, and stagnant over the world.
There may be some gains from Verizon and China Mobile in 1H 2011, but that re-inforces my point that they need to grow market share. in any way possible.
Nobody is suggesting a race to the bottom, just covering most of the price points. Let ZTE sell what it sells at it's ( probably unsustainable) price point. Go above that. The iPod touch - with the same internals as the iPhone 4, and a retina type display - sells at about $200. An iPhone at that cost would be free on most contracts.
All Apple have to do is
1) Keep the 3GS ( adding CDMA) and lower the sticker price by $100 . Lower the iP4 by $100. Keep the iP5 as the high end device. That maintains the brand.
2) Keep the iPad 1 and lower it's sticker price by $100. iPad2 same price as last year, component supply willing.
I would actually be surprised if they didnt do this. Nevertheless there has never been such a change in any Market so fast. A seismic change. The Android increase last year to this. What is it? 650%.
If Apple were getting the same revenue growth and the same profits in any other era, it would be amazing. Last year, it wasn't so amazing. Same with Nokia. 48% YOY. Amazing! Just not in 2010.
So Apple need to up their game. AS a single company they are doing good - the best. Tributes all round. Handshakes. Big Hugs. Huggie wuggies.
As a platform, not so well.