Anvinraj Sivanandan (2016) has undertaken decomposition analysis elements by phone devices offered by Apple (iPhone) and Samsung. His results are controversial. According to him, differences in labor expenses, cost, and quality of physical components between iPhone and Samsung are approximately inexistent. Although this, iPhone imposes prices several times higher than Samsung. More importantly, given the above, it seems like a paradox that iPhone customer demand is much higher than any of its competitors. This raises a serious dilemma when addressing if iPhone prices are unethical and if customers are fairly treated. In this argumentative essay, the sustained statement is: It is fair that Apple applies much higher prices than those of its competitors, although it offers a similar product in terms of physical characteristics.
The strongest argument that favors Apple’s decision to imply high prices on iPhone is Brand Value. If we refer to economic laws, higher costs of most products will lead to a decreased demanded quantity. iPhone customers break this law. This is because when clients buy an Apple product, they don’t buy just a phone, but they purchase a worldwide known brand. This signifies that together with physical phones, their benefits and facilities, customers profit in terms of social status, economic power, full range of software services, etc. (Laugesen & Yuan, 2010). This explains iPhone customers’ purchase behavior. It is sufficient to mention that Apple accepted a number of preorders greater than four million for iPhone six, only on the first day of “coming soon lunch” (Spence, 2014).
Secondly, it is true that iPhone encompasses material inputs very similar to its biggest competitors, but its total cost is increased by a lot of hidden and indirect expenses, which are not present in other competitors. To explain this claim, several of these indirect, non-material costs should be briefly mentioned. Initially, iPhone has invested in a worldwide distribution network, which helps customer reach. Furthermore, Apple has managed to become a market leader in terms of technology as a consequence of intensive research and development (R&D) investments. Finally, iPhone is the subject of intensive brand marketing campaigns, which should be funded. To conclude, in order to be in concordance with accounting, a product price should be based on the total cost, where all direct and indirect expenses are included. iPhone has similar direct costs with its competitors but much higher indirect costs; therefore, a higher price.
Lastly, it can be evaluated that marketing strategies followed by Apple in selling its products, and especially iPhone, have influenced in enhancing its sales even with high prices. For example, one common marketing strategy used by Apple is setting an extremely high lunch price. After the initial phase of a new product entering in market, the company decreases its price. This forms the illusion of medium and affordable prices. This is because clients use as a referencing system iPhone prices in the past and not actual prices of similar products offered by its competitors. Furthermore, Apple completes the iPhone with a set of services, software updates, and mobile apps, which are marketed as unique features of the iPhone.
In concluding, it may be stated that high iPhone high price is neither a coincidence nor unethical market behavior. This essay has argued that iPhone high prices are justified mainly for three reasons, that is: by paying iPhone price, clients purchase not only a physical product but even its brand value; its price is a logical consequence of complicated high indirect costs; iPhone has the privilege to sustain high prices because its customers are not sensitive to it, partly because of innovative marketing strategies. iPhone is among the unique products that break economic laws, as this was a kind of tariff attributed to the world in exchange for the radical revolution it has offered.