4 ms·

When I say Apple doesn't compete on price, I'm talking about pricing aggressively as the OP suggested: "they can do so with price cuts deep enough and long enou

by dean 15y ago

When I say Apple doesn't compete on price, I'm talking about pricing aggressively as the OP suggested: "they can do so with price cuts deep enough and long enough to drive most potential competitors out of business." When a company has profit margins of 24.27%, as Apple does for the last quarter, they are not competing on price. Companies that compete on price typically have profit margins down around 5% (see Dell, Walmart). Apple will not cut into those margins to make market share. They never have. That's not to say they won't do whatever they can to gain market share. But deep price cuts is not one of those things. BTW the iPhone is subsidized by the carrier, not by Apple. Also, this is the first time I've heard that the iPhone "didn't take off" until the price came down. I kind of remember people lining up overnight to buy it when it came out -- no price drop necessary.

lotusleaf1987 15y ago
|Apple will not cut into those margins to make market share. They never have. That's not to say they won't do whatever they can to gain market share. But deep price cuts is not one of those things. Then where are all the $200-$400 tablets that should be killing Apple like in your reference previously: A brief look back at the history of the PC clearly shows this. So why isn't this happening now then? Also yes, AT&T or whoever the carrier is subsidizes the price, I thought this was obvious and didn't need clarifying.
- dean 15y ago
  "Then where are all the $200-$400 tablets that should be killing Apple like in your reference previously: A brief look back at the history of the PC clearly shows this." My reference to the history of the PC was to point out that even when Apple had only 4% or 5% of the PC market, and was all but irrelevant, they still did not choose to compete on price. I never said anything about "$200-$400 tablets that should be killing Apple", but since you bring it up, I would be surprised if they don't come eventually. And when they do, you won't see Apple matching those prices, let alone beating them. "Also yes, AT&T or whoever the carrier is subsidizes the price, I thought this was obvious and didn't need clarifying." If you know this, then why do you bring it up as an example of how Apple has dropped their prices?
  - demallien 15y ago
    I think you are both talking past each other. If I understand dean correctly, he isn't saying that Apple can't price a device aggressively, but rather that when faced with a choice of cutting corners to make a cheap device, or adding value to the product whilst maintaining price, they opt for the second choice. To make things more concrete, where Dell might look at a Macbook Pro, and then figure that they can compete by using a plastic casing instead of unibody aluminium, thereby making their product $50 cheaper to make, so they can sell it for $50 less, Apple is more likely to try to compete by adding a thunderbolt interface, or introducing better screens that guarantee colour fidelity, or making a better OS, or whatever. That don't lower the price - have a look at the MacBook line, the prices have barely changed over 5 years, but the value of the models offered has increased massively.
r00fus 15y ago
> When a company has profit margins of 24.27%, as Apple does for the last quarter, they are not competing on price. Companies that compete on price typically have profit margins down around 5% (see Dell, Walmart). The iPad is seriously competing on price. This both elated and worried AAPL investors, who are worried about gross margin as well as sales. So, Apple can and will compete on price in one market (iPad) while being nosebleed premium in other markets (Mac Pro). Regarding iPhone, there are no BOGO (buy-one, get-one offers) while every other manufacturer offers those, and the Average Selling Price (ASP) is a nosebleed $600+ and hasn't come down over 3+ years... this is money that Apple makes per unit. Apple is both luxury AND competes on price - they're incredibly flexible for such a large company.
- dean 15y ago
  "Regarding iPhone, there are no BOGO (buy-one, get-one offers) while every other manufacturer offers those, and the Average Selling Price (ASP) is a nosebleed $600+ and hasn't come down over 3+ years... this is money that Apple makes per unit." You are making my case for me. :)

by dean 15y ago

lotusleaf1987 15y ago

|Apple will not cut into those margins to make market share. They never have. That's not to say they won't do whatever they can to gain market share. But deep price cuts is not one of those things. Then where are all the $200-$400 tablets that should be killing Apple like in your reference previously: A brief look back at the history of the PC clearly shows this. So why isn't this happening now then? Also yes, AT&T or whoever the carrier is subsidizes the price, I thought this was obvious and didn't need clarifying.

dean 15y ago
"Then where are all the $200-$400 tablets that should be killing Apple like in your reference previously: A brief look back at the history of the PC clearly shows this." My reference to the history of the PC was to point out that even when Apple had only 4% or 5% of the PC market, and was all but irrelevant, they still did not choose to compete on price. I never said anything about "$200-$400 tablets that should be killing Apple", but since you bring it up, I would be surprised if they don't come eventually. And when they do, you won't see Apple matching those prices, let alone beating them. "Also yes, AT&T or whoever the carrier is subsidizes the price, I thought this was obvious and didn't need clarifying." If you know this, then why do you bring it up as an example of how Apple has dropped their prices?
- demallien 15y ago
  I think you are both talking past each other. If I understand dean correctly, he isn't saying that Apple can't price a device aggressively, but rather that when faced with a choice of cutting corners to make a cheap device, or adding value to the product whilst maintaining price, they opt for the second choice. To make things more concrete, where Dell might look at a Macbook Pro, and then figure that they can compete by using a plastic casing instead of unibody aluminium, thereby making their product $50 cheaper to make, so they can sell it for $50 less, Apple is more likely to try to compete by adding a thunderbolt interface, or introducing better screens that guarantee colour fidelity, or making a better OS, or whatever. That don't lower the price - have a look at the MacBook line, the prices have barely changed over 5 years, but the value of the models offered has increased massively.

r00fus 15y ago

> When a company has profit margins of 24.27%, as Apple does for the last quarter, they are not competing on price. Companies that compete on price typically have profit margins down around 5% (see Dell, Walmart). The iPad is seriously competing on price. This both elated and worried AAPL investors, who are worried about gross margin as well as sales. So, Apple can and will compete on price in one market (iPad) while being nosebleed premium in other markets (Mac Pro). Regarding iPhone, there are no BOGO (buy-one, get-one offers) while every other manufacturer offers those, and the Average Selling Price (ASP) is a nosebleed $600+ and hasn't come down over 3+ years... this is money that Apple makes per unit. Apple is both luxury AND competes on price - they're incredibly flexible for such a large company.

dean 15y ago
"Regarding iPhone, there are no BOGO (buy-one, get-one offers) while every other manufacturer offers those, and the Average Selling Price (ASP) is a nosebleed $600+ and hasn't come down over 3+ years... this is money that Apple makes per unit." You are making my case for me. :)