Tuesday, February 22, 2011

The iPad price over its competitors

"500 U.S. dollars or euros is a lot of money for a tablet? Apple announced a little over a year since the price was the best feature of the iPad, but at that time and hardly any references to cost a little belief in the good intentions of Apple.

A year later, with the price of many of its competitors, or the intuition of others of them, it seems that the iPad really cheap or rather, has a lower price than its competitors.

But knowing that this figure "magic" of 500 euros / dollars is a good way to sell the team, how is it possible that none of its competitors have been close to that price?

The price of the iPad, part of Apple's strategy

From Wired we try to bring some light on this aspect, is that part of the strategy and the inner workings of Apple's why this is viable.

That is, for any company today is frankly difficult to get a device like the iPad with a similar price and in any case, any price will be slightly closer to be associated with a contract to mitigate the losses caused by the sale of team, the reason? Verticality.

Verticality in economic terms is one of the most important patterns and behaviors to easily cut costs while expanding the productive capacity of an enterprise. A company that controls the production process in full is much more powerful, economically speaking, than one that depends on others for its production process.

Apple is by far one of the companies in technology, which has more vertical. That is, Apple as a company just depends on outside companies to manufacture their equipment. Uses proprietary technology, patents of its own, proprietary systems, self-produced, self-distribution, its own stores ...

Full control of your production workflow, except for some points (screens, making chips ...) Apple is the lord and master of almost all the technologies they use their devices.

This causes you to lose money just paying third party companies for accessories that can not be manufactured under patent or other systems or companies.

Starting at the lowest in the iPad Apple uses proprietary technology in its chips so they should only pay a company that manufactures and no royalties to other companies. We continue with a proprietary operating system and developed by them to end their own distribution.

Another key point: the distribution of devices

And according to this analysis, in addition to the vertical, Apple is one of the few companies that own distribution has both physical and online, which is a superior source of income to sell their equipment to other shops.

Instead of relying on other stores and share profits, Apple is able to distribute their equipment in its stores (over 300 worldwide, which is now a strong point of revenue for the company) with margins well above achieved if resold the equipment.

But if that was not enough, Apple still has a third point of entry of money related to their teams, talk about the conglomerate formed by iTunes Store, App Store and iBooks Store. Another form of income also associated with the sale of devices.

In short, Apple can afford to sell the iPad for a lower price than other companies for one simple reason: Apple is able to enter and retrieve some of that "loss" (defined as missing the win less than their competitors) from other points relating directly to the computer.

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