I don't see how the existence of a "premium" can be assumed for Apple products outside of the US market, unless it can be shown that no such "premium" exists in the US market. This argument apparently assumes that Apple prices products outside of the US further above the market for competitive goods than they do in the US. Since this seems like an irrational pricing policy (not to mention, one doomed to fail), I question the argument that Apple deliberately prices its products higher than the competitive market everywhere but in the US. I think all of this talk of currency exchange rates clouds the fundamental issue, which is that companies have to price their products competitively within every market in which they hope to succeed.
I understand your point, but if pricing was competitive in every country Apple operates in, there must be cases where it is *cheaper* in USD equivalent to buy from that country. However, I don't think there are any cases of this, unless you can name some.
In many Latin American and Asian countries, you can get a vast amount of all kinds of cheap but "decently spec'ed" mp3 players and computers. You could say Apple is not at all competitive based on price (but offers a lot of value), particularly given the weakness of those countries' currencies w.r.t the US Dollar. In China the MacBook Air 11" entry level is the equivalent of USD $1,200. I'm sure there are boatloads of netbooks or subnotebooks that are far below that price.
I'm not saying Apple doesn't try to be competitive in the countries they operate in, but fundamentally they do not price it lower than the equivalent in USD at the time the product models are released.
That is, I think this "premium" is to cover the currency fluctuations to always ensure their return in USD for every product is at least what they would get should the product have been purchased in the US. This "premium" of course varies depending on how competitive Apple can be, there is a range they can operate in but they do not drop below the USD equivalent.
Australia and Malaysia are cases in Asia Pacific whereby Apple products have been notoriously way beyond the prices of other MP3 players, phones, tablets and computers. If you think the "Apple tax" was bad in the US, it has been real rough in Australia in the past 10 years or so.
Even recently it would be hard to argue that Mac prices are "competitive" in Australia compared to PCs. But Apple doesn't compete on price that much. I mean, it's not stratospheric but it's never been cheap. It has become *more affordable* because the Australian dollar has strengthened a lot and maybe the premium has been reduced over time as Apple becomes more confident in the market.
Has Apple been successful in the Australian market? One would say, yes, but of course its market share is still small. I think Apple's policy is that it will not cede USD equivalent profit margins for market share gains in the countries it operates in.
Maybe someone who has been in Australia more recently or is currently living there can comment.
I understand your point, but if pricing was competitive in every country Apple operates in, there must be cases where it is *cheaper* in USD equivalent to buy from that country. However, I don't think there are any cases of this, unless you can name some.
Well again, I think you need to get out of the currency exchange mindset. This is not the primary determinant of market pricing. Markets are.
An example: A luxury car maker will price their luxury cars to compete with other luxury cars, in every market in which they hope to compete. If the currency exchange rates become unfavorable, then they have the choice of passing along these costs in whole or in part to customers. Normally, they cannot do this and remain competitive, so they will eat at least some of the higher costs and accept lower margins. Conversely, if the exchange rates become favorable, they can either pocket the difference, or lower their prices. Normally they will at least attempt to do the former, for two reasons. First is the obvious one, which is increased profits. The second is that they don't want their luxury cars to begin competing on price with non-luxury cars, as this can devalue their brand or even shift them into a different car market. They may be forced to lower prices if their competitors are similarly favored by exchange rates, but nobody wants to be the first to price under the market for their goods -- maximizing profits being the name of the game, after all.
Apple's market position is similar. They sell premium products in every country, and this includes the US. This is deliberate positioning on their part. In every country Apple is constantly looking at the price for competitive products and making pricing decisions -- and like the luxury car maker, is trying to maintain their position in the market relative to other products and maximize profits. Making exchange rate comparisons substantially muddies an understanding of how prices are set within any given market. It adds a level of abstraction to what is actually a pretty simple calculus.
The bottom line is, exchange rates don't change how much you pay, at least not directly. The price of a product in your country hasn't gone up simply because your currency has become relatively stronger and you could buy that product for less in another country. If you want to get full value for your appreciated currency, you need to get on an airplane and spend that money in another country.
See, this reinforces my point. I still believe exchange rates are the primary consideration in pricing Macs, but of course prices will be adjusted to be competitive within the range afforded but only after taking exchange rates into account.
Apple's market position is similar. They sell premium products in every country, and this includes the US. This is deliberate positioning on their part. In every country Apple is constantly looking at the price for competitive products and making pricing decisions -- and like the luxury car maker, is trying to maintain their position in the market relative to other products and maximize profits. Making exchange rate comparisons substantially muddies an understanding of how prices are set within any given market. It adds a level of abstraction to what is actually a pretty simple calculus.
Apple sells premium products in every country, agreed. However this premium is of course adjustable as Apple sees fit to maintain their position in the market, maximise profits, etc, but it is almost never set to anything below the US equivalent price.
Quote:
Originally Posted by Dr Millmoss
The bottom line is, exchange rates don't change how much you pay, at least not directly. The price of a product in your country hasn't gone up simply because your currency has become relatively stronger and you could buy that product for less in another country. If you want to get full value for your appreciated currency, you need to get on an airplane and spend that money in another country.
The price of a product in a country might go up because the currency has become relatively *weaker*, not *stronger* at least in terms of Apple pricing considerations.
Yes, getting full value of the appreciated currency would involve purchasing the product in another country, but for example in the Australian drop in Mac prices, currency appreciation in a country can result in lower prices for Apple products in that country.
Note that the above article linked to also mentions that there is usually no repricing done mid-cycle in-between product refreshes, and that while it has become cheaper to purchase Macs in Australia, it has not come down below the pre-tax US price.
Repricing in Europe and Australia has been done because the US dollar has dropped markedly with risk appetite reduced due to quantitative easing in the US and the natural fall of the dollar due to the Fed essentially "printing money".
Apple sells premium products in every country, agreed. However this premium is of course adjustable as Apple sees fit to maintain their position in the market, maximise profits, etc, but it is almost never set to anything below the US equivalent price.
The price of a product in a country might go up because the currency has become relatively *weaker*, not *stronger* at least in terms of Apple pricing considerations.
Yes, getting full value of the appreciated currency would involve purchasing the product in another country, but for example in the Australian drop in Mac prices, currency appreciation in a country can result in lower prices for Apple products in that country.
Note that the above article linked to also mentions that there is usually no repricing done mid-cycle in-between product refreshes, and that while it has become cheaper to purchase Macs in Australia, it has not come down below the pre-tax US price.
Repricing in Europe and Australia has been done because the US dollar has dropped markedly with risk appetite reduced due to quantitative easing in the US and the natural fall of the dollar due to the Fed essentially "printing money".
The USD is relatively weak in historical terms, and for many years now, been on a trajectory for it to become steadily weaker, with no change in the longterm trend is sight. The recent Fed action only reinforces the trend somewhat in the short term, but it did not create the trend. The weak dollar provides US companies with a competitive advantage, which is why the EU nations are so annoyed with the Fed's recent moves. But the general historical trend is why you see the price of Apple products almost always being higher outside of the US, at least as expressed in USDs.
But again, this is an abstraction, because people earn and spend their own currencies in their own countries. They pay the prices that their markets support, not the prices some other market supports as expressed in their currencies. If I convert my USDs into Mexican pesos I can still buy a lot of products in Mexico for less than I can in the US, because the peso is still relatively weak against the USD. But if I convert my USDs to Canadian dollars and go shopping in Canada, those same products will cost me a lot more, at least in terms of my own spending power. But the point is, none of this affects the prices of these products to Mexicans or Canadians when they buy at home.
Comments
I don't see how the existence of a "premium" can be assumed for Apple products outside of the US market, unless it can be shown that no such "premium" exists in the US market. This argument apparently assumes that Apple prices products outside of the US further above the market for competitive goods than they do in the US. Since this seems like an irrational pricing policy (not to mention, one doomed to fail), I question the argument that Apple deliberately prices its products higher than the competitive market everywhere but in the US. I think all of this talk of currency exchange rates clouds the fundamental issue, which is that companies have to price their products competitively within every market in which they hope to succeed.
I understand your point, but if pricing was competitive in every country Apple operates in, there must be cases where it is *cheaper* in USD equivalent to buy from that country. However, I don't think there are any cases of this, unless you can name some.
In many Latin American and Asian countries, you can get a vast amount of all kinds of cheap but "decently spec'ed" mp3 players and computers. You could say Apple is not at all competitive based on price (but offers a lot of value), particularly given the weakness of those countries' currencies w.r.t the US Dollar. In China the MacBook Air 11" entry level is the equivalent of USD $1,200. I'm sure there are boatloads of netbooks or subnotebooks that are far below that price.
I'm not saying Apple doesn't try to be competitive in the countries they operate in, but fundamentally they do not price it lower than the equivalent in USD at the time the product models are released.
That is, I think this "premium" is to cover the currency fluctuations to always ensure their return in USD for every product is at least what they would get should the product have been purchased in the US. This "premium" of course varies depending on how competitive Apple can be, there is a range they can operate in but they do not drop below the USD equivalent.
Australia and Malaysia are cases in Asia Pacific whereby Apple products have been notoriously way beyond the prices of other MP3 players, phones, tablets and computers. If you think the "Apple tax" was bad in the US, it has been real rough in Australia in the past 10 years or so.
Even recently it would be hard to argue that Mac prices are "competitive" in Australia compared to PCs. But Apple doesn't compete on price that much. I mean, it's not stratospheric but it's never been cheap. It has become *more affordable* because the Australian dollar has strengthened a lot and maybe the premium has been reduced over time as Apple becomes more confident in the market.
Has Apple been successful in the Australian market? One would say, yes, but of course its market share is still small. I think Apple's policy is that it will not cede USD equivalent profit margins for market share gains in the countries it operates in.
Maybe someone who has been in Australia more recently or is currently living there can comment.
I understand your point, but if pricing was competitive in every country Apple operates in, there must be cases where it is *cheaper* in USD equivalent to buy from that country. However, I don't think there are any cases of this, unless you can name some.
Well again, I think you need to get out of the currency exchange mindset. This is not the primary determinant of market pricing. Markets are.
An example: A luxury car maker will price their luxury cars to compete with other luxury cars, in every market in which they hope to compete. If the currency exchange rates become unfavorable, then they have the choice of passing along these costs in whole or in part to customers. Normally, they cannot do this and remain competitive, so they will eat at least some of the higher costs and accept lower margins. Conversely, if the exchange rates become favorable, they can either pocket the difference, or lower their prices. Normally they will at least attempt to do the former, for two reasons. First is the obvious one, which is increased profits. The second is that they don't want their luxury cars to begin competing on price with non-luxury cars, as this can devalue their brand or even shift them into a different car market. They may be forced to lower prices if their competitors are similarly favored by exchange rates, but nobody wants to be the first to price under the market for their goods -- maximizing profits being the name of the game, after all.
Apple's market position is similar. They sell premium products in every country, and this includes the US. This is deliberate positioning on their part. In every country Apple is constantly looking at the price for competitive products and making pricing decisions -- and like the luxury car maker, is trying to maintain their position in the market relative to other products and maximize profits. Making exchange rate comparisons substantially muddies an understanding of how prices are set within any given market. It adds a level of abstraction to what is actually a pretty simple calculus.
The bottom line is, exchange rates don't change how much you pay, at least not directly. The price of a product in your country hasn't gone up simply because your currency has become relatively stronger and you could buy that product for less in another country. If you want to get full value for your appreciated currency, you need to get on an airplane and spend that money in another country.
http://www.itwire.com/your-it-news/h...prices?start=1
Well it appears Apple has dropped prices in Australia and this site at least thinks it is due to the strong AUD compared to the USD.
http://www.itwire.com/your-it-news/h...prices?start=1
See, this reinforces my point. I still believe exchange rates are the primary consideration in pricing Macs, but of course prices will be adjusted to be competitive within the range afforded but only after taking exchange rates into account.
Apple's market position is similar. They sell premium products in every country, and this includes the US. This is deliberate positioning on their part. In every country Apple is constantly looking at the price for competitive products and making pricing decisions -- and like the luxury car maker, is trying to maintain their position in the market relative to other products and maximize profits. Making exchange rate comparisons substantially muddies an understanding of how prices are set within any given market. It adds a level of abstraction to what is actually a pretty simple calculus.
Apple sells premium products in every country, agreed. However this premium is of course adjustable as Apple sees fit to maintain their position in the market, maximise profits, etc, but it is almost never set to anything below the US equivalent price.
The bottom line is, exchange rates don't change how much you pay, at least not directly. The price of a product in your country hasn't gone up simply because your currency has become relatively stronger and you could buy that product for less in another country. If you want to get full value for your appreciated currency, you need to get on an airplane and spend that money in another country.
The price of a product in a country might go up because the currency has become relatively *weaker*, not *stronger* at least in terms of Apple pricing considerations.
Yes, getting full value of the appreciated currency would involve purchasing the product in another country, but for example in the Australian drop in Mac prices, currency appreciation in a country can result in lower prices for Apple products in that country.
Note that the above article linked to also mentions that there is usually no repricing done mid-cycle in-between product refreshes, and that while it has become cheaper to purchase Macs in Australia, it has not come down below the pre-tax US price.
Repricing in Europe and Australia has been done because the US dollar has dropped markedly with risk appetite reduced due to quantitative easing in the US and the natural fall of the dollar due to the Fed essentially "printing money".
Apple sells premium products in every country, agreed. However this premium is of course adjustable as Apple sees fit to maintain their position in the market, maximise profits, etc, but it is almost never set to anything below the US equivalent price.
The price of a product in a country might go up because the currency has become relatively *weaker*, not *stronger* at least in terms of Apple pricing considerations.
Yes, getting full value of the appreciated currency would involve purchasing the product in another country, but for example in the Australian drop in Mac prices, currency appreciation in a country can result in lower prices for Apple products in that country.
Note that the above article linked to also mentions that there is usually no repricing done mid-cycle in-between product refreshes, and that while it has become cheaper to purchase Macs in Australia, it has not come down below the pre-tax US price.
Repricing in Europe and Australia has been done because the US dollar has dropped markedly with risk appetite reduced due to quantitative easing in the US and the natural fall of the dollar due to the Fed essentially "printing money".
The USD is relatively weak in historical terms, and for many years now, been on a trajectory for it to become steadily weaker, with no change in the longterm trend is sight. The recent Fed action only reinforces the trend somewhat in the short term, but it did not create the trend. The weak dollar provides US companies with a competitive advantage, which is why the EU nations are so annoyed with the Fed's recent moves. But the general historical trend is why you see the price of Apple products almost always being higher outside of the US, at least as expressed in USDs.
But again, this is an abstraction, because people earn and spend their own currencies in their own countries. They pay the prices that their markets support, not the prices some other market supports as expressed in their currencies. If I convert my USDs into Mexican pesos I can still buy a lot of products in Mexico for less than I can in the US, because the peso is still relatively weak against the USD. But if I convert my USDs to Canadian dollars and go shopping in Canada, those same products will cost me a lot more, at least in terms of my own spending power. But the point is, none of this affects the prices of these products to Mexicans or Canadians when they buy at home.