Business Economics Assignment # 1 Apple Watch Case Study Submitted By: Muhammad Ahmed MS IBF
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Business Economics Assignment # 1 Apple Watch Case Study Submitted by: Muhammad Ahmed MS IBF ERP ID: 23212 Q1 The buyers of the smartwatches include young athletes and affluent people. Following are the three needs that are fulfilled by a smart watch: 1. Ability to monitor Health and fitness activities 2. Communication, such as sending and receiving notification and search/ social networking 3. Style and fashion b) Who are the sellers? Identify three sellers and highlight their differentiating features The sellers of smartwatches are Pebble, Samsung, Apple, Motorola, LG. following are the differentiating features of three sellers: 1. Pebble: Pebble smartwatches have long battery life as compared to other smartwatches, its agnostic approach to operating feature was its unique feature and it was able to connect to both Apple and android devices through Bluetooth. 2. Samsung: Samsung Gear S had was first to free itself from a phone with its own 3G and Wifi connectivity. 3. Apple: it was a great combination of technology and art, and was as per the need of what people wanted. Q2 a) Apple watch is a consumer good because it cannot be used to produce anther consumer good or service in future. B) Study of Apple watch is a microeconomic study as it is concerned about an individual industry and not taking about economy as a whole, it is focusing on supply and demand, and other forces that determine price levels, making it a bottom-up approach which makes it the study of microeconomics. Q3 Assumptions year tradaitional smartwatch watch 2014 10 4 2015 9 4.5 2016 8.5 5 2017 8.1 5.3 2018 6 14 2019 5.5 19 2020 4 22 tradaitional watch 12 10 8 6 Sales tradaitional watch 4 2 0 2012 2014 2016 2018 2020 2022 year Smartwatch 25 20 15 Sales 10 Smartwatch 5 0 2014 2015 2016 2017 2018 2019 2020 Year Q4 Increase in price of complimentary (leftward shift in demand curve) Decrease in price of complimentary Improvement in attributes Worsen attributes Q5 a) The Quantity demanded of Apple Watch per week is the Dependent variable b) Independent variable: i) (PAW)Price of Apple watch (dollars per unit) ii) (PGEAR s) Price of the Samsung Gear S Watch iii) (PPEBBLE) Price of the Pebble steel iv) (PIPHONE6) price of the mid-range iPhone 6 smartphone v) (A) Quarterly targeted advertising budget for the Apple watch c) I) PAW: the sign is negative and it indicates that there is a negative(inverse) relationship between price of Apple watch and quantity demanded of Apple watch, an increase in price of Apple watch will decrease the quantity demanded Apple watch per week and vice versa. II) PGEAR S: the positive sign indicates there is a positive(direct) relationship between price of Samsung GEAR S watch and Quantity demanded of Apple watch, an increase in price of GEAR S will increase the quantity demanded of Apple watch and vice versa. III)PPEBBLE: the positive sign indicates there is a positive(direct) relationship between price of Pebble watch and Quantity demanded of Apple watch, an increase in price of Pebble will increase the quantity demanded of Apple watch Apple watch per week and vice versa. IV)PiPhone6: the sign is negative and it indicates that there is a negative(inverse) relationship between price of iPhone 6 and quantity demanded of Apple watch, an increase in price of iPhone 6 will decrease the quantity demanded Apple watch per week and vice versa. V) A: the positive sign indicates positive(direct) relation between Advertisement budget and quantity demanded of Apple watch per week, as the budget increases so do the quantity demanded of Apple watch per week and vice versa. Q6 a Q6 a PAW 349 Pgears 380 Ppebble 220 Iphone 299 A 15,500 PAW 349 QAW 177,200 Q6 b Q6b PAW 300 310 320 349 350 360 380 390 400 Pgears 380 380 380 380 380 380 380 380 380 Ppebble 220 220 220 220 220 220 220 220 220 Iphone 299 299 299 299 299 299 299 299 299 A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 PAW 300 310 320 349 350 360 380 390 400 QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800 PAW 300 310 320 349 350 360 380 390 400 QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800 Q6 c Demand curve q6c QAw D PAw Q6 d Q6d PAW 400 349 349 349 349 Pgears 380 400 380 380 380 Ppebble 220 220 150 220 220 Iphone 299 299 299 250 299 A 15,500 15,500 15,500 15,500 17,000 NEW_QAW 54,800 207,600 93,200 236,000 243,200 QAW 177,200 177,200 177,200 177,200 177,200 Q6d Xxxx i) Increase in price of AW from $349 to $400 ( Movement along the curve) ii) Increase in price of Gear S from $380 to $400 ( A rightward shift) iii) Decrease in price of Pebble from $220 to $150 (A leftward shift) iv) Decrease in price of iPhone6 from $299 to $250 (A rightward shift) v) Increase in Advertising budget from $15,500 to $ 17,000 (A rightward shift) Q6 d Part ii Q6 d part(ii) PAW 300 310 320 349 350 360 380 390 400 Pgears 400 400 400 400 400 400 400 400 400 Ppebble 220 220 220 220 220 220 220 220 220 Iphone 299 299 299 299 299 299 299 299 299 A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 PAW 300 310 320 349 350 360 380 390 400 NEW_QAW 325,200 301,200 277,200 207,600 205,200 181,200 133,200 109,200 85,200 QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800 price of Gear S from $380 to $400 Price Do D1 QAW Q6 d Part iii Q6 d part(iii) PAW 300 310 320 349 350 360 380 390 400 Pgears 380 380 380 380 380 380 380 380 380 Ppebble 150 150 150 150 150 150 150 150 150 Iphone 299 299 299 299 299 299 299 299 299 A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 PAW 300 310 320 349 350 360 380 390 400 NEW_QAW 210,800 186,800 162,800 93,200 90,800 66,800 18,800 - 5,200 - 29,200 QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800 price of Pebble from $220 to $150 450 400 350 Price 300 Do D1 250 200 -100,000 - 100,000 200,000 300,000 400,000 QAW Q6d part iv Q6 d part(iv) PAW 300 310 320 349 350 360 380 390 400 Pgears 380 380 380 380 380 380 380 380 380 Ppebble 220 220 220 220 220 220 220 220 220 Iphone 250 250 250 250 250 250 250 250 250 A 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 PAW 300 310 320 349 350 360 380 390 400 NEW_QAW 353,600 329,600 305,600 236,000 233,600 209,600 161,600 137,600 113,600 QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800 iPhone6 from $299 to $250 410 390 370 350 330 Price Do 310 d1 290 270 250 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 QAW Q6 d part v Q6 d part(v) PAW 300 310 320 349 350 360 380 390 400 Pgears 380 380 380 380 380 380 380 380 380 Ppebble 220 220 220 220 220 220 220 220 220 Iphone 299 299 299 299 299 299 299 299 299 A 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000 PAW 300 310 320 349 350 360 380 390 400 NEW_QAW 360,800 336,800 312,800 243,200 240,800 216,800 168,800 144,800 120,800 QAW 294,800 270,800 246,800 177,200 174,800 150,800 102,800 78,800 54,800 Advertising budget from $15,500 to $ 17,000 410 390 370 350 330 Price Do 310 D1 290 270 250 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 QAW Q6 the opportunity cost is 83.70 Q7 Q7 Other supplier other priceAppletwatch suppiler(d) Apple watch (Qd) 20 10 3 16 20 13 12 30 23 8 40 33 4 50 43 Chart Title 60 40 20 0 0 5 10 15 20 25 other suppiler(d) Apple watch (Qd) a) Other Suppliers: other supplier will enjoy as the market share of the smart watch industry would increase, thus their share would also be increased. In addition to that, the components would be easily available bringing the cost down and profits would increase. They would also be benefited from increase in price of Apple watch as their demand would increase in response. b) Healthcare Industry: the demand for healthcare industry would decrease as Smart watches would help people to keep track of their health thus the amount spent on health care would be saved.