Case Discussion on

Apple’s iPhone in India: Ringing in new fortunes

By

WG D1

ADARSH D MANJESHWAR - 21F103

DEBANJAN SARKAR - 21F120

MANI PAUL - 21F132

RIYA LAKHOTIA - 21F141

SAKSHI SHETTY - 21F147

Apple never had a monopolistic power in the global smartphone market as a whole but was able to
evolve as a monopoly in a few of the developed nations. It maintains an oligopoly market structure in
the competition of smartphone brands. Apple phones were considered premium phones with the
superior built quality and easy-to-use iOS systems. The targeted customers were the ones who
preferred security over a variety of applications and functions. It gave a premium status for the user
and become very popular in a developed country like the United States. 

There are several factors that determine the Monopoly power in the Smartphones market:

Number of Firms:
In developed countries like US and European nations, the number of players was less, and Apple was
able to create a significant impact in the smartphone market. The less penetration of Chinese phones
helped Apple to create a strong customer base in these nations. Strong opponents like Samsung gave
stiff competition but since the number of players was less, Apple was successful even when it was
costly. In developing nations like India, there was a huge number of competitors which made it
difficult for the iPhone to flourish. The competitors provided cheaper android phones which were
preferred by the common people. The high-priced iPhones could not create a huge market in one of
the biggest markets in the world which shows its less monopolistic power. Apple always had stiff
competitors who provided more value for money products.

Price elasticity of demand:

Apple phones were price inelastic in developed nations because of its customers’ high brand
loyalty. Even when the price increased their premium customers did not move to other brands. This
may look like a monopolistic power, but this was only true for the high-income class which
means demand was income elastic. But, if we look into markets like India and China, the situation
was entirely different. Price played a significant role and for the very reason, iPhones couldn’t
conquer the biggest markets in the world. OPPO, Vivo, Gionee etc. with android software took away
the major market share which shows Apples’ weakness.

Interaction Among Firms:

Apple was able to evolve as a Monopoly in developed nations to some extent. The major reason is
fewer firms in these nations. The cheap, more useful Chinese phones couldn’t step into these markets
which restricted the number of players. The key players maintained high pricing strategy which could
be considered as a Cartel strategy. This was evident from the pricing followed by Samsung, Apple's
biggest competitor. Samsung's premium phones followed high pricing whose features were
comparable to that of iPhones. The fewer new players in these markets gave additional strength for
Apple to evolve as a Monopoly.
 At the same time developing economies like India had around 100 small or big players giving stiff
competition to Apple. They provided cheaper phones with the latest technologies. Pricing played a
key role in conquering the market which was against Apple’s strategy.
 
Other factors which worked against Apple in India are:
 Lack of regional language support in iPhone, lower per capita income of Indians, lower brand
awareness and fewer features in Apple phones. 
 The successful refurbished market and tendency of customers to switch phones regularly. 
 Government policies in India and higher costs of production also created a tough situation for
Apple in India.  
Q2. How has Apple’s monopoly power changed between 2014 and 2016?
The strategy followed by Apple in 2014 was to increase the price considerably thinking consumers are
insensitive to pricing. It created a huge impact in the monopoly power of Apple. The gap between
Cost and price increased considerably (In 2016, Apple released its new phone at 3 times of its cost –
iPhone 7).
The margin increased drastically between 2014 and 2016. The gap being three times resulted created a
critical impact on the demand of iPhones. Net profit and Net margin came down. Such a pricing
stratergy resulted in the downfall of iPhone market.Price elasticity of Demand is an indicator of
impact of price on the sale. If price elasticity is greater than 1 means its elastic and customers are
sensitive to increased price.

Price/Unit in Total
Year Model $ Cost Market Power Elasticity Index
iPhone 6 649 200.6 0.69 1.45
2014
iPhone 6plus 749 220.1 0.71 1.42
iPhone 6s 650 216 0.67 1.5
2015
iPhone 6splus 749 236 0.68 1.46
iPhone SE- 16gb 399 160 0.6 1.67
2016 iPhone SE- 64gb 499 170 0.66 1.52
iPhone 7 - 32gb 649 224.8 0.65 1.53

With the given data we can easily find out the price elasticity of demand when Apple increased its
products price. It’s evident that when elasticity stood at around 1.6, Apple choose to increase its price.
This shows the faulty decision taken by the Company. With positive price elasticity, the customers
weren’t happy with the increased price. Even the elite customers weren’t ready to pay high price for
the iPhone.
Another reason which led to the downfall of Apple market is global decline in smartphone market due
to high penetration of around 90 percent and increased life cycle of phones. These developed nations
were the ones which played critical role in the sale of Apple phones.
Huge markets like India and China opted to go for better, cheaper android phones. The highly price
sensitive middle class couldn’t afford costly iPhones leading to reduced sales. Indian Government
policies created further set back for Apple. The Make in India campaign and heavy duty on imports
supported local manufacturing leading to greater competition in India.
Overhead costs of Apple were increasing exponentially. Major spending came from R&D and
advertising. The increased costs along with reduced sales in the market reduced the profit margin.

iPhone Revenue and Unit Sales

Revenues (In Billions) iPhone Revenues(% of total Apple Revenue)