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Apple's Secret Weapon to Influence Industry Pricin

Hugh Pickens writes (1984118) writes | more than 2 years ago

Businesses 0

Hugh Pickens writes writes "Nick Wingfield writes in the NY Times that Apple’s present pricing strategy is a big change from the 1990s, when consumers regarded Apple as a producer of overpriced tech baubles, unable to compete effectively with its Macintosh family of computers against the far cheaper Windows PCs. Now within the premium product categories where Apple is most at home, comparable devices often do no better than match or slightly undercut Apple’s prices. “They’re not cheap, but I don’t think they’re viewed as high-priced anymore,” says Stewart Alsop. Winfield writes that Apple uses its growing manufacturing scale and logistics prowess to deliver Apple products at far more aggressive prices, which in turn gives it more power to influence pricing industrywide, and one of Apple's pricing secrets has been it's willingness to tap into its huge war chest — $82 billion in cash and marketable securities last quarter — to take big gambles by locking up supplies of parts for years. One example is when Apple struck a five-year, $1.25 billion deal in 2005 with manufacturers to secure flash memory chips for its iPods and other devices. By buying up manufacturing capacity ahead of time, Apple forces its competitors to scramble for the parts that are still available, raising costs for their products. “We’ve historically entered into certain agreements with different people to secure supply and other benefits,” says Apple CEO Tim Cook. "We think that was an absolutely fantastic use of Apple’s cash. ""

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