ST XAVIER’S COLLEGE (AUTONOMOUS),

MUMBAI
FYBMS, 2020-2021

ECONOMICS PROJECT:
Research Paper on Electronic tablets

Name- Shubham Sikaria

UID- 204046
Roll no.- 35

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INTRODUCTION

A tablet is a wireless, portable personal computer with a touchscreen interface. The

tablet form factor is typically smaller than a notebook computer, but larger than
a smartphone. Tablets are growing in popularity because of their ease of use,
portability, and features. Tablets can be used to browse the Internet, check email,
download and read books, play games, watch videos, organize content, and much
more.

COMMODITY’S GENESIS

The history of tablet computers and the associated special operating software is an
example of pen computing technology, and thus the development of tablets has deep
historical roots. The first patent for a system that recognized handwritten characters
by analyzing the handwriting motion was granted in 1914. The first publicly
demonstrated system using a tablet and handwriting recognition instead of a keyboard
for working with a modern digital computer dates to 1956.

In addition to many academic and research systems, there were several companies
with commercial products in the 1980s: Pencept and Communications Intelligence
Corporation were among the best known of a crowded field.

The development of the tablet computer was enabled by several key technological
advances. The rapid scaling and miniaturization of MOSFET(Metal–Oxide–
Semiconductor) transistor technology (Moore's law), made it possible to build
portable smart devices such as tablet computers. Another important enabling factor
was the lithium-ion battery, an indispensable energy source for
tablets, commercialized by Sony and Asahi Kasei in 1991.

The tablet computer market was reinvigorated by Apple through the introduction of
the iPad device in 2010. The iPad’s sleek design, coupled with the thousands of
applications that could be run on it, made tablets the hot phenomenon they are today.
“The year of the tablet” was the buzz at the 2011 Consumer Electronics Show as
Toshiba, Samsung, HP, Motorola, Dell, Panasonic and many other companies began

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to unveil their own products to compete with Apple’s iPad. Companies since have
been working on making their products thinner and lighter, while steadily improving
the specifications.

COMMODITY’S BACKEND PATHWAY

A variety of metals, plastics, raw materials and chemicals are used to produce tablets.
Overall, there is an average of about 35 materials required like silicon, aluminum,
plastic, iron, copper, lead, and nickel. For example, microchips rely on silicon and
rare earths metals, batteries need lithium, as well as specialized ceramics and glass for
screens and other parts.

Out of various components, some of the key components of a tablet are touchscreen,
LCD – liquid crystal display, motherboard, rechargeable battery, and, tablet casing,
which, is usually composed of two parts – the rear panel, and the front panel, holding
the touchscreen. Manufacturing of these parts take place throughout the world and
most of the major brands, outsource parts from all over the world for central assembly
and production, following the post-Fordism concept which leads to greater
specialization, and increases affordability of the product.

Except from assemblers, almost 100 people take part in manufacturing and
assembling all the complex parts that go into creating an amazing user experience.
Individual workers are responsible for making parts, placing them, and gluing tablets
into the final position. The majority of tablet assembly takes place in Taiwan and
China.

The innovation of Hot melt adhesives is an essential part of making tablets. Rather
than screwing in or soldering parts into tablets, the tiny parts that make it function can
be carefully placed. Adhesives are essential to tablets, making them more watertight
and ensuring that delicate internal parts stay in place despite our enthusiastic use.

Usual Scale of Production

The usual scale of production ranges from 180 - 200 million units around the world.

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The worldwide tablet grew strongly with a 19.5% year-on-year growth in 4Q 2020
and shipments totalling 52.2 million units. The tablet market recovered from the
decline experienced in the first quarter of the year due to the coronavirus (COVID-19)
outbreak. Unprecedented demand in the consumer and education segments due to
work from home and online learning, and new products to the market have
undoubtedly led to the resurgence in tablet demand.

Figure: Graph showing shipments of tablet worldwide

Appendix 1: Analysing Elasticity of Demand for Tablets through survey

Infrastructure and Personnel

The basic infrastructure required for tablet manufacturing plants are land, highways,
interconnectivity between different transport modes, digital infrastructure, and
industrial zones. Along with them, the quality and cost of energy infrastructure and
environmental restrictions are equally important. A vast variety of skillful personnel
are required in different job fields, ranging from software developer, mechanical
engineer, application designer, Production managers, assembly line workers, and
many more.

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Evolution

The evolution of tablet over time has led to creative destruction of both hardware and
app-based services. It is a radical innovation, since it involves large changes in both
the concepts and architectures. The concept of tablet computers involves touch screen
browsing and apps, while previous phones involved voice and texting and previous
computers involved mouse-based browsing. Subsequent versions can be considered
architectural innovations, since, functions were combined into fewer chips, electronic
and mechanical parts were moved around to meet form factor goals, and software was
reorganized to enhance usability and performance. For the new features, the tablet
includes an accelerometer, light sensor, magnetometer, gyroscope, and barometer, all
made possible through new components. The importance of these components can
also be seen in their impact on product capability and cost.

Table: Cost breakdown of standard components and assembly line

Components Cost (%)

Memory 17

Microprocessor 6.6

Display 38

Camera 2.9

Connectivity and sensors 6.3

Battery 7.3

Final Assembly (% of total cost) 3.1

These data demonstrates that final assembly represents a small percentage of costs
and that standard components represent a much larger percentage of costs. Standard
components represent more than 55% of total cost and more than 80% of material
costs. This shows us that the evolution of the iPad’s performance is characterized by

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improvements in standard components as they greatly contribute to product
performance.

The tablet market is a mid-day sun as the demand from households is set to accelerate
given rising disposable incomes, changing lifestyles, and easier access to credit.
Government and corporate spending will also contribute to growth in demand. Along
with this, this sector has attracted strong investments in the form of Merger’s and
Acquisitions and other FDI inflows. Companies are set to augment investments in
production, distribution, and R&D in the next few years.

Appendix 2: Barriers to entry in Tablet Market

Major Producers

The major producers of tablets are the global companies – Samsung, Lenovo, and
Xiaomi, whereas some of the private Indian producers are - Micromax, Lava and
Intex. The tablet war has already begun with many companies lining up their forces
(tablets) in global markets. The preliminary court injunctions granted to Apple against
Samsung, stops the latter from selling its Galaxy Tab 10.1 in Australia and Germany.
Apple accuses Samsung not only of copying its technology, but also its look, feel and
intuitive interface. As the war continues, new Indian private entrants like iKall,
Sorotek, and IRA are also coming up with their own low priced, affordable tablets.

Appendix 3: Porters Five Forces Analysis

Government Policies

The government launched attractive initiatives such as the production-linked incentive

(PLI) scheme which offers to boost domestic manufacturing and attract large
investments in tablet manufacturing, including Assembly, Testing, Marking and
Packaging (ATMP) units. Samsung as well as Indian firms such as Dixon
Technologies, Lava Inc, and Optiemus Electronics are expanding their factories to
take advantage of the PLI scheme.
Reforms like simplified labor laws and Policies like National Electronics Mission,
encourages and drives capabilities in the country for developing core components,

6
including chipsets, and creates an enabling environment for the industry to compete
globally.

COMMODITY’S FRONTEND PATHWAY

Main Outlets

The tablets can be bought from various outlets throughout the country, ranging from
standalone shops, neighborhood shops, in bazaars, to authorized retailers, multi brand
retailers and even single brand retailer, in malls and emporiums. Most of these stores
have tablets from every company so that one can look at the various choices first.
Every city has some well-known tablet store chains. For instance, Khosla Electronics
and Digital Point are popular stores in Kolkata, Whereas Croma Electronics and
Reliance Digital have a chain of stores in India.

On the online platforms, companies have their own purchasing portal and tie ups with
electronics e-markets like Croma to ease the process of purchase for the consumer.
Along with that, they are listed in all the major ecommerce stores like amazon,
flipkart, snapdeal and shopify, helping businesses establish a wider market presence
by providing cheaper and more efficient distribution channels for their products or
services. Online channels accounted for 48 per cent share of the Indian tablet sales in
the September 2020 quarter.

Profit Margin

The average profit margin a retailer enjoys ranges from 6% - 18%. Apple allows its
retailers a margin of just 6-8%. Due to the strength of Apple's brand and the customer
demand for iPad, retailers are willing to take little profit on iPad sales in order to drive
store traffic and make money on add-on purchases like accessories and extended
warranties which typically have margins between 50%-70%.

Whereas brand like Samsung and Lenovo, offers retailers a margin of 12-18%.
Whereas the wholesalers generally extract a 25-30% markup, which Samsung cannot

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control because it does not control the retail channel. Apple on the other hand does
own the retail channel and thus has a wholesale markup of 0%. Hence, the tablets are
placed on display shelves in electronic stores, depending on the brands.

Appendix 4: Why are Tablet prices falling?

Promotional Efforts

The tablet companies use various promotional activities, they provide free gifts, price
deductions, bundles, and discounts. For e.g., With the purchase of Samsung tab s6 one
can get a Bluetooth speaker costing Rs 4999 for free. Similarly, apple provides air
pods costing Rs 15000 along with its iPad costing Rs 69,000 at just Rs. 6999.
Companies also offer one-year additional warranty on software and hardware.

Services

With the online market already stealing away the purchase part of customer
experience, tablet stores play a key part in the pre-purchase experience. Customers
pay more and remain much more loyal in exchange for great customer-experience. All
they are looking for are ways to feel valued and feel secure. tablet stores allow
customers to Pick up, feel and choose the product they are going to buy. It gives them
the multi-sensorial ability to feel products, unlike online platform. To enhance the on
sales, experience the tablet stores provide human touch. This involves lots of human
interaction, be it the employees or other customers, along with good hospitality and
free Wi-Fi.

Most of the tablet brands provide post sale services such as Return and exchange
handling, Repair and claim handling, and Professionally staffed call centres for
technical and warranty support. While the newcomers usually opt to outsource the
after-sale service to cut costs, companies like Apple and Samsung have their chain of
service centers which helps them allocate spare parts better and bring down the repair
turnover time.

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Government Policies

The rate of GST on tablet and accessories were increased to 18% from 12% with
effect from 1st April 2020 at the 39th GST Council meeting. Before GST, excise and
VAT were charged on tablet. The VAT rates varied from state to state, from a low of
5% in Karnataka and Tamil Nadu to a high of 14% in states of Delhi, Uttar Pradesh,
Rajasthan, and Gujarat.

The Union Budget 2020 has re-imposed social welfare surcharge of 10% on imported
tablets over and above existing 20% basic customs duty, making them costlier than
the locally made ones. The maximum retail price of many tablets from brands like
Apple, Huawei, and Samsung have been impacted between 1.5 to 3%. Along with
this, duty has been increased on chargers from 15% to 20%, motherboard from 10%
to 20% and in similar range for other components, to discourage imports.

100% FDI in single brand retail policy has been passed, allowing brands to sell their
products through their own retail stores internationally. Namo Tablet Yojana 2021
will be providing tablets to the students of colleges at a subsidized price of 1000
rupees as the Government wants to implement new avenues of modern education in
our country by providing good quality technical products to the students.

Sale Spaces and Counterfeits

The tablets are sold to consumers nationally, but the wholesale markets are regional
like the Ghaffar Market in Delhi and Chandni Market in Kolkata, West Bengal. The
tablets are also sold at online second-hand retailers, marketplace exchanges, and third-
party refurb shops. These channels provide an alternative for people foregoing a retail
shopping experience for a hefty discount. However, there is an additional option:
counterfeits of popular tablet models. These knockoffs have become a burgeoning
industry, transforming cheap hardware and free software into mass profits at almost
no cost to the manufacturers. These clones often sell at under 1/10th of the retail price
and are often very convincing replicas at first glance. A dedicated anti-counterfeit

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team at Apple has sought the removal of more than one million counterfeit products
from online marketplaces in 2020.

Consumer Analysis

A demographic analysis of tablet users found that the heaviest audience concentration
was between the ages of 25-44, accounting for 45.8 percent of users. Tablet users also
skewed towards upper income households, likely a function of the high price point of
these devices still considered a luxury good to many consumers. Nearly 3 in 5 tablet
users resided in households with annual income of 7,50,000 rupees or greater.

Professions and occupations where tablets are used are Medical industry, Retail
sector, Education sector, Publication, Design and Drafting Jobs, and Internet,
Technology-Based Roles, and households.

ANALYSING APPLE’S IPAD

The iPad is a tablet designed by Apple. It was made for the purpose of making a new
product that falls between the computers (laptops) and the smart phones. Its USP is
handheld portable size, light weight, thin, attractive and multi utility product. Initially
its purpose was for music, movies, internet, e- books and games but now it has really
grown into a complete product by itself.

Appendix 5: Ipad’s Journey, From the Factory Floor to the Retail Store

Evolution

In the year 1993, Apple launched its first tablet computer the Newton Message Pad
100 but was discontinued in 1998. Steve Jobs, ex- CEO of Apple released the first
iPad in April 2010. The iPad was followed by iPad 2 and iPad 3 in subsequent years
due to the great market demand and response. Fast forward to 2021, and with each
newer generation the iPad has got an upgrade and gained new features and
capabilities. There are four different models of iPad available to choose from and

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even more generations within each type. Consumers can choose from the iPad Pro,
iPad Mini, iPad Air, and iPad line, each crafted to be versatile, offering a multitude of
sizes, processors, displays, colors, and more.

Picture: Product Line and Price of Apple iPad

Apple is living the benefits of a premium market segment iPad pro and has revamped
iPad range which is resonating with middle class and wealthy consumers as its high
margin products are coming under pressure from low-cost competitors such as
Xiaomi in the biggest markets (China and Asian region). New entrants such as
Lenovo and Xiaomi in particular position themself in the same tablet market with
competitive products that are priced competitively and force price point decisions on
Apple.

Appendix 6: Significant Developments in iPad

Production Scale

As apple, no longer reveals the number of iPads produced or sold in its quarterly
earnings reports it is difficult to get the exact figure, however the sales are estimated
to be 45.5 million units in 2020.

Market Share

This statistic in the graph below shows the global market share held by the leading
media tablet vendors (based on global shipments) from the second quarter of 2011 to

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the most recent quarter. As of the fourth quarter of 2020, the Apple iPad held a 36.5
percent share of the global tablet market.

Figure: Graph showing Market Share of Tablet Brands

The company has nevertheless seen its market share in the tablet market decline in
recent years. This has coincided with the rise of Samsung, whose tablets run on
Android, and has seen its market share rise from 7.3 percent in the last quarter of 2012
to 16.7 percent in the first quarter of 2018.

Competitors of iPad

As the competition is beefing up, the market for Tablets is dominated by 4 players -
Apple, Samsung, Lenovo, and Huawei. iPad’s topmost competitor is Samsung Galaxy
Tab, iPad still manages to have a high market share due to the brand value of Apple
and its distinguished features.

Appendix 7: Group behavior in a Monopolistic Competition

Promotional activities and expenditures of iPad

Apple has been able to grasp the attention and the interest of the customers by its
approach to distribution of its products. It has literally changed the dynamics of a
“marketing place”. Being a premium company, Apple ensures that its

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distribution channel is “Premium”. The experience of buying anything with an Apple
logo comes with a visual and emotional response – a sensory experience. Every part
of iPads packaging is designed to be clean, simple, and direct. That experience is
reinforced by what’s inside the box: something elegantly presented, cleanly designed
and straightforward to use.

Apple stores and outlets are established at well-placed locations where the loyal
customers as well as the prospective customers can examine the iPads to their heart’s
content and satisfy their curiosity. The overall feeling is one of inclusiveness by a
community that really understands what good technology should look and feel like -
and how it should fit into people's lives. These stores are located in premium localities
only and have a fantastic interior and physical evidence qualities to attract customers.

Apple is known to be the smartest marketer around and it builds its promotions on the
foundation of innovation. All of its communication vehicles send a message to the
customers that the iPad is different and unique. The apple stores offer discounts and
special packages on online purchases exceeding a certain amount, along with free
shipping on orders. Overall, whenever a new variant is launched, or during the festival
period, the newspapers as well as television are filled up with ads of the latest version
of iPad. Apple has also developed a strong presence on the internet and relies heavily
on desktop display ads, and desktop video format. Most of Apple’s ads appear on
YouTube. Twitter and other entertainment-oriented websites complete the rest of the
company’s significant placements.

Apple has stopped sharing how much it spends on ads and marketing, after the
company's advertising expenses rose 50% to a record $1.8 billion in 2018. The
Company believes ongoing investment in research and development. marketing and
advertising is critical to the development and sale of innovative products, services, and
technologies.

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Finance

Apple reported record-breaking revenue of $111.4 billion, an increase of 21% from the
prior year. It also posted quarterly earnings per diluted share of $1.68, up 35%.
International sales accounted for 65% of the revenue during the quarter. Apple reported
quarterly iPad revenue of $8.43 billion. Moody's Investors Service assigned Aa1 ratings
to Apple Inc.'s with various maturities up to 2061. Aa1 rating reflects Apple's robust
profitability, large and growing installed base of products and services, loyal customers,
a strong track record of innovation, and exceptional liquidity with nearly $84 billion in
net cash balances.

Figure: Quarterly Revenue and Net profit Graph of Apple

Future of iPad

The company's latest earnings show schools, hospitals, and general consumers are all
reacting positively to the iPad, and more people are using one, than before. Apple is
rapidly deploying the iPad to school systems, including an order of 350,000 to New
York City that's the largest such order in history. The coronavirus pandemic has
further helped in the transformation. iPads are now used by Hospitals and consumers
to take online classes or to work remotely.

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The iPad, Apple's decade-old tablet, is transforming itself from not-quite-a-
smartphone into a key vision for the future of computing. But with Apple's latest
moves on hardware and software, the iPad can replace a computer in more situations
than before. When paired with the touchscreen, Apple Pencil stylus and the Magic
Keyboard, the iPad seems to offer a wealth of options for designers, artists, students,
and corporates. On the software side, Apple with the launch of iPadOS 14 in
September, is opening up the iPad to more possibilities and moving the iPad further
from the iOS software used on the iPhone. The future of iPad is bright, and it carries
tremendous opportunity to become the computer of the future.

Picture: iPad being used as a laptop with the help of Apple’s Magic Keyboard and Stylus
Government Policies

Apple is not the pinnacle of capitalism. It’s the pinnacle of the marriage of Silicon
Valley innovation with strategic Asian mercantilism. Apple has long made most of its
iPads in China. That reliance has made the company vulnerable to events like the
U.S.-China trade war and the more recent coronavirus outbreak.

The Indian government is planning to launch an incentive scheme designed to boost

India’s tablet exports. The initiative will have a budget of up to Rs. 70 billion ($964
million) over five years. Apple wants to manufacture iPads in the country for the first
time but is reportedly asking for the budget to be almost tripled to Rs. 200 billion. The
reason is said to be partly that India’s supply chain doesn’t yet have the scale to meet
Apple’s demands. Apart from that, the manufacturing industry in India is less
developed, and there's a shortage of highly skilled labour and manufacturers able to
produce tablets. It's also proven difficult for Apple to find local suppliers that can
comply with its stringent responsibility policies.

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However, it is likely that iPads will be assembled in India by one of its current
contractors as early as this year. Apple’s partners in India currently include Foxconn,
Pegatron, and Wistron. Foxconn, the Taiwanese contract manufacturer assembling
Apple’s iPad, has pledged to invest up to USD 1 billion to expand a factory in
southern India and are expected to create an additional 1,80,000 jobs in the process.

Policies Applicable

The 100 per cent FDI in single brand retail policy has allowed Apple to commence
online retail operations before they open physical stores in the country. The previous
condition was setting up a mandatory brick-and-mortar store. However, a physical
store will still need to be opened within two years. 18% of the iPad sales in India in
2020 were made through apple’s online store. Apple is also set to open its first
branded retail store in the Mumbai, India in 2021 which will be owned and
operated completely by them.

All iPads must comply with Reduction of Hazardous Substances (RoHS)

requirements specified in E-Waste (Management) Rules, 2016. Apple is working to
phase out the use of these exempted substances from use in Apple products,
packaging, and manufacturing.

Some of the other standard rules that affect Apple include product quality laws,
environmental laws, and data security and privacy laws. It is necessary to comply with
these laws to avoid incurring hefty fines inflicted by the government or regulatory
agencies. Apple faced an antitrust probe in a tax-related case in India and paid around
$15 million.

Impact of Globalization

Globalization has enabled apple to command a large market share in America,

Europe, and Asia. Its products are traded globally. It has affected apple’s business
strategy, with extended market and demands for apple products, it has customized in
the application of differentiation strategy. It has affected the operational and
employment practices of Apple. With the ability to access every part of the market,
Apple has managed to outsource production plants in various parts of the world.

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Manufacturing in USA costs very much due to the laws and taxes imposed on them,
which is why Apple chooses China, as Chinese costs are much lower than their
American counterparts. While they manufacture their products in China, it is designed
in California, USA, and the resources come from different parts of the world.

CONCLUSION

With changing trends and preferences, it becomes apparent how people are
increasingly preferring tablets over laptops. The demand for tablets as a commodity
does not seem to be dying down in the coming years. In summary by taking all these
economic factors associated with the product, Apple is able to maintain and develop
on its operations through investing in product innovation and carrying out market
analysis. This way, Apple is able to constantly upgrade their products so that with
each subsequent product launch, consumers consider the product as new and
improved over the predecessor. Thus, Apple is making use of differentiation to
generate consumer demand. Also, taking the elasticity and substitutability of tablets
into account, the iPads pricing strategy is determined accordingly, allowing for the
firm to recognize sufficient profits through subsequent sales.

LESSONS LEARNT

1. I have learnt now how to write a formal research paper unlike the earlier ones I
worked on for various school and college projects.
2. Made me better in my research skills, to prepare a proper questionnaire to
conduct survey.
3. I learnt how to use advance excel while working with massive amount of data
and it was fun exploring the data and coming up with relations.
4. I learnt how to relate economic theories taught in class to the market and
industry.
5. Thinking back to how I started the project to now, the time span in sense of
academics has taught me how versatile applicability of economics is possible

17
 6. My vocabulary has increased drastically.
7. Recognized and admired how environmental concerns are changing consumer
patterns.
8. Understood the various marketing strategies brands apply in different areas
and outlets.
9. Learnt how to properly run and read a regression.
10. I have learned to complete my work before my time, as I can never know
when an emergency would arise.

PERSONAL SWOC ANALYSIS

Strengths:

1) I have good critical and analytical skills.

2) I possess all the resources needed to complete this project.

Weakness:

1) I suffer from low attention span.

2) I lack stress management skills.

Opportunities:

1) I have learned to use Microsoft Excel better, with the help of this project.
2) I have learnt to make Google forms and take survey.
3) I have learnt to write to write a formal research paper.

Challenges:

1) I struggled due to my academic stamina, but eventually I built the energy to go

on academically.
2) I got infected with COVID-19, just days before the submission date, and I
learnt to complete my work before time.

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WEBOGRAPHY

https://www.livescience.com/6318-ipad-breakdown-costs.html
https://www.coherentmarketinsights.com/market-insight/tablet-market-1741
https://vested.co.in/blog/apple-earnings-and-services-strategy/
https://titanwebmarketingsolutions.com/4-powerful-ps-need-know-apples-
marketing-mix/
https://www.businesstopia.net/economics/micro/use-income-elasticity-demand-
business-decision-making
https://www.spireresearch.com/spire-journal/yr2012/q3/the-computer-tablet-
industry-overflowing-with-opportunities/
https://papersowl.com/examples/apple-in-microeconomics/
https://fourweekmba.com/apple-mission-statement-vision-statement/
https://slideplayer.com/slide/8674771/
https://macnomics.wordpress.com/2011/03/06/supply-and-demand-ipad-cuts-
dramatically-into-laptop-sales/
https://www.marketingapple.com/Apple_Retail_Success.pdf

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 APPENDIX

APPENDIX 1: Survey Questionnaire

Q1. Age Q6. How long do you end up using

• 10-17 your tablet? or plan to use your
• 18-25 tablet?
• 26-45 • 1 - 6 months
• 46 and above • 6 months - 1 year
• 1 year - 2 years
Q2. What do you account as your annual • 2 year - 3 years
family income? (in rupees) • 3 years and above
• 0 - 5 lakhs
• 5 - 10 lakhs
• 10 - 20 lakhs Q7. How much did you pay for the
tablet? (in rupees)
• 20 - 30 lakhs • 3000 - 10000
• 30 lakhs and above • 10000 - 20000
• 20000 - 40000
• 40000 - 60000
Q3. Do you own a tablet? • 60000 and above
• Yes
• No Q8. Do you own any accessory for
your tablet?
• Yes
Q4. What type of tablet do you possess?
• No
• Detachable
• Slatebook
Q9. If yes, then select the
accessories you own?
Q5. Which brand did you buy the tablet from? • Keyboard
• Stylus
• Apple
• Samsung
• Lenovo
• Huawei
• Xiaomi
• Others

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Hypothesis:

1) Price= f(Income)

H0: Income is not an impactor on the price a consumer is willing to pay.

H1: Income is an impactor on the price a consumer is willing to pay.

Price Income Regression

80000

70000
y = 0.0067x + 24779
60000 R² = 0.2296

50000
Price

40000

30000

20000

10000

0
0 1000000 2000000 3000000 4000000 5000000
Annual Income

𝒀 = 𝜷𝟏 + 𝜷𝟐 𝑿
𝒀 = 𝟐𝟒𝟕𝟕𝟗 + 𝟎. 𝟎𝟎𝟔𝟕𝑿

Elasticity:
(Where X and Y are averages of the data collected of the two variables)

Eyp = 0.0067 (2398809.5 / 40785.7) = 0.394

Since Eyp<1, there is a relatively inelastic relationship between the income of the
consumer and the price he pays to purchase a tablet. Hence, we accept H0 indicating
that income is not a big impactor on the price paid.

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Claim: Price= f+(Income)

Y = 0.0067x + 24779
Since, the slope is positive, it indicates that there is a direct relationship between the
income of a consumer and the price he is willing to pay to purchase a tablet. Hence,
validating our claim.

R2 (Coefficient of Determination of Goodness of Fit) = 0.2296

This shows that income can explain only 22.96% of price’s behavior, as R2 is less
than 50% it is a poor fit.

2) Lifespan= f(Price)

H0: Price is not an impactor on the lifespan of a tablet.

H1: Price is an impactor on the lifespan of a tablet.

Life Span & Price Regression

60

50
Life Span (Months)

40

30

20
y = 0.0546x + 8.3712
10 R² = 0.5592

0
0 100 200 300 400 500 600 700 800
Price (in hundreds)

𝒀 = 𝟖. 𝟑𝟕𝟏𝟐 + 𝟎. 𝟎𝟓𝟒𝟔𝑿
ELp = 0.0546 (407.9 / 30.6) = 0.727

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Since ELp<1, there is a relatively inelastic relationship between the price of the tablet
and the duration for which it lasts. Hence, we accept H0 indicating that price is not a
big impactor on the durability of tablets.

Claim: Lifespan = f+(Price)

Y= 8.3712 + 0.0546X
Since, the slope is positive, it indicates there is a direct relationship between the Price
and lifespan of tablets. Hence, validating our claim.

R2 (Coefficient of Determination of Goodness of Fit) = 0.2296

This shows that price can explain up to 55.92% of duration behavior, as R2 is more
than 50% it is a good fit.

3) Price= f(Age)

H0: Age is not an impactor on the price a consumer is willing to pay.

H1: Age is an impactor on the price a consumer is willing to pay.

Price Age Regression

800
y = 1.4241x + 370.49
700
R² = 0.0046
Price (in hundreds)

600
500
400
300
200
100
0
0 10 20 30 40 50 60
Age

𝒀 = 𝟑𝟕𝟎. 𝟒𝟗 + 𝟏. 𝟒𝟐𝟒𝟏𝑿
Epa = 1.4241 (26.2 / 407.9) = 0.091

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Since Epa<1, there is a relatively inelastic relationship between the price of the tablet
bought and the age of the consumer. Hence, we accept H0 indicating that age is not a
big impactor on the price a consumer is willing to pay.

Claim: Price= f+(Age)

Y= 370.49+1.4241X
Since, the slope is positive, it indicates that there is a positive relationship between the
age of a consumer and the price he is willing to pay to purchase a tablet. Hence,
validating our claim.

R2 (Coefficient of Determination of Goodness of Fit) = 0.0046

This shows that age cannot explain the price behavior, as R2 is just 0.46% it is a bad
fit.

Price Elasticity of iPad

Average Selling Price is not the actual price point. It is averaged over the price points
of different versions of iPads Apple sells – from $ 299 mini to $ 1099 pro version. In
any given quarter Apple sells different number of these iPad units based on customer
preferences. Sum of all the revenue from all the unit sales is reported by Apple is
revenue from iPad. If we divide that by the reported unit sales we get the Average
Selling Price.

Price elasticity represents change in quantity sold (volume) per unit change in price.
By using average price points and the corresponding volume numbers, we can plot a
demand curve. The slope of the curve is price elasticity (assuming linear relation).

While the ASP represents the change in product mix for the quarter the underlying
driver is customer mix change. Here ASP is a computed number, not the set price. It
is not like Apple set prices different at three different quarters and found these

24
volumes. But we are indeed using it as a proxy for actual price and build a demand
curve, plotted with price on x-axis and quantities on y-axis

An incredible almost linear left to right downward sloping kinked demand curve
showing that demand persists. This indeed can be used as a stand-in for customer’s
willingness to pay for iPads. - Click here to Go Back

Appendix 2: Barriers to Entry in Tablet Market

Barriers to entry are obstacles that make it difficult for new entrants to enter the
market. The higher the barriers to entry, the lower the threat of competition. The main
barriers for the tablet computers market would be the following:

1. Economies of Scale: Economies of scale could be a barrier to entry in the tablet

market. Large incumbent firms like Apple and Samsung have significant cost

25
advantages which allow them to produce their tablets at lower costs than small or new
entrant firms. Therefore, new entrants would have lower profit margins making it
difficult to survive in the market.

Figure: Long Run Average Cost Graph of Tablets

2. Customer Loyalty: Another advantage the incumbent firms would have in this
market would be having customer loyalty. Large firms like Apple and Samsung
already have existing customers in the market who are loyal to their brand. Especially
with the presence of Apple which has high customer loyalty. This would make it
extremely difficult for a new firm to enter the market as many consumers would still
rather stick with a trusted and more experienced brand.

3. Sunk Costs: One major barrier to entry would be the existence of ‘Sunk Costs’ in
this market. Sunk costs are the costs to a business which cannot be regained when
exiting a market. A new entrant to the tablet computers market will have to invest
heavily in Advertising and Promotion methods. In case the firm doesn’t succeed and
decides to exit the market, the cost of this investment cannot be retrieved. The sunk
costs involved in this market is high due to the presence of large firms

4. Patents: Patents are designed to protect the intellectual property of a business and
restrict the amount of competition. A patent technology or design gives the patent

26
holder exclusive rights for a certain period (usually a maximum of seven years) to
manufacture and use them in the market. Apple earns enough revenue to cover the
cost of researching and testing new technology as well as earning a supernormal
return for shareholders. - Click here to Go Back

Appendix 3: Porter’s Five Forces Analysis

Picture: Porter’s Five Forces Analysis

1. Competitive Rivalry
• Competitive rivalry is quite high in this sector, as players use innovation and
product differentiation to beat peers.
• Each player adopts different strategies to capture market share; for example,
one player innovates While another diversifies, thus intensifying the rivalry in
the sector.

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2. Threat of New Entrants
• Threat is low due to capital intensive nature of the industry.
• Evolving technology, brand loyalty block entry.

3. Bargaining Power of Suppliers

• LOW bargaining power Of suppliers, as product differentiation is less.
• LOW switching costs for customers.

4. Substitute Products
• Threat is low because there is no substitute for electronics
• Threat is present Within the industry due to product innovation by peers

5. Bargaining Power of Customers

• High as buyers possess considerable product information these days, which
helps in comparison
• Availability of similar options - Click here to Go Back

Appendix 4: Why are the tablet prices falling ?

2016 2017 2018 2019 2020

Figure: Global Average Selling Price of tablets

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The average price of a tablet has been falling quite significantly, and market forecast
suggests it will keep falling. Note, this fall in price has occurred despite the rising
demand. Several factors explain this fall in the price of tablets.

1. Price skimming is a product pricing strategy by which a firm charges the

highest initial price that customers will pay and then lowers it over time. As
the demand of the first customers is satisfied and competition enters the
market, the firm lowers the price to attract another, more price-sensitive
segment of the population. When Samsung launched a product at $700, there
was an element of price skimming. After 4 months the price has come down to
$440.

2. Economies of scale in production. The growth in the tablet market has

enabled firms to benefit from economies of scale, this helps them in reducing
costs.

3. Technological development. The tablet market is benefiting from the usual

technological developments which enables more powerful computers with
lower costs. We’ve come a long way since mainframe computers would take
up whole rooms.

4. Growth in budget models. Recently, India has seen tablets offered by many
companies like Lava, Alcatel and TCL. These ‘budget’ tablets are aiming for
the most price sensitive customers.

5. Very low profit margins. Many companies are selling tablets with a very low
profit margin. There will be high rewards for those companies who can gain a
strong market share in the tablet market. High sales of tablets enable the
possibility of selling more profitable secondary products.

A supply and demand diagram to show the impact of tablet computers in the
past few years

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 Figure: Supply and Demand Graph of Tablets

We see an increase in both demand and supply. However, the increase in supply is
greater than the demand. Therefore, the price has fallen, whilst the quantity sold
continues to increase. - Click here to Go Back

Appendix 5: Ipad’s Journey, From the Factory to the Retail Store

The iPad has to go through a long process to get constructed before it reaches to the
store. Parts of the iPad are made from different minerals from all over the world.
Almost all components of an iPad are extracted from the earth by mining.

After the raw materials are mined, they are transported to different semi-conductors
and chip manufacturers around the world such as, In Italy, Germany, United States,
Russia South Korea and Japan to assemble the parts of an iPad.

After all the natural resources have been turned into the necessary parts for the iPad,
all the parts are sent to a factory in Shenzhen, China. This factory is owned by

30
Foxconn. Apple has hired Foxconn to manufacture all apple products, including the
iPad.

When the iPad is fully assembled and ready to be sold, it is shipped to Apple
distribution centers all around the globe, in countries like Australia, China, the Czech
Republic, Japan, Singapore, the U.K. and the U.S using mostly FedEx Boeing 777's.
Apple has certified re-sellers in many countries but its official stores are only in 25
countries.

The average lifespan of iPads between 2013 and today is four years and three
months. After the typical lifespan of an iPad ends, it becomes e-waste. Consumers can
trade in their iPad for a better newer version. If recycled directly through Apple's
"Renew" program, the environmental impact is quite low. If improperly disposed, the
environmental impact can be quite high. Improperly disposed electronics are turned
into E-waste and transported to un-wealthy countries. About 85 percent of the e-waste
are dumped in Ghana and other parts of West Africa. The rest is dumped in un-
wealthy countries like Malaysia. - Click here to Go Back

Appendix 6: Significant Developments

▪ iPad comes with accessibility features that support vision, hearing, mobility
and cognitive needs. Including Voice Control, which lets you command your
iPad with just your voice, and Switch Control, which lets you interact with
iPad without touching it.
▪ iPad comes with advanced security features like Face ID or Touch ID for
secure authentication.
▪ It has the apps you expect on a computer, plus a million designed just for iPad.
▪ iPad works with a keyboard or trackpad when you need one and with
Apple Pencil, it’s also your notepad, canvas, scanner and more.
▪ It has the power of a computer and the portability of iPad.

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 ▪ Dual Camera system In addition to the new wide angle camera it now includes
a new LiDAR Scanner. The LiDAR (Light Detection and Ranging) Scanner
uses lasers to help measure distance via light reflectivity.
Click here to Go Back

Appendix 7: Group Behavior in a Monopolistic Competition

R1 R4 R3 R2

Figure: Monopolistic Competition - group

Here, behavior

D1 and D2 represent market demand curve.

d1 and d2 represent individual demand curve.
R is the real point of operation.
When a firm moves down from d1 curve to d2, the concerned firm is reducing the
price, of its product and vice versa. When the firm moves from D2 to D1 curve the
market demand of the firm is increasing, due to the exit of competitor firms and vice
versa.

With the launch of the first iPad in 2010, using the first mover advantage apple was
operating at point R1, lying on the D1 and d1 curve, enjoying a huge market demand.

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To compete with the other tablet brands like Microsoft and google apple reduced their
prices and moved from point R1 to R4. At point R4, iPads were making such large
super normal profit that the new companies got attracted to this market, and several
brands like Samsung and Lenovo launched their products in the market. Due to the
competitive nature of the market the market share of apple reduced significantly, and
it got pulled from point R4 to R3, shifting rightward from D1 curve to D2. Apple saw
the opportunity to increase the price of iPad by making people pay more for it and
moved from d2 curve to d1 to point R2. It did so by using Brand loyalty. People got
addicted to iPad and apple’s ecosystem. Currently, Apple is operating at point R2.
Click here to Go Back

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