Apple's iPhone in India: Ringing in New Fortunes?

In September 2016, Apple prepared to launch a new version of its flagship product, the iPhone 7. The new product, termed “the best, most advanced iPhone ever,” was priced at three times its cost in the U.S. market. However, Apple had witnessed an 18 per cent year-on-year dip in iPhone revenues in the first calendar quarter of 2016, dragging down Apple’s revenues for the first time in 13 years. The leader in the smartphone market was ousted from its number one position in fiscal year 2016 by the Samsung Group, which had a 20.5 per cent market share. A multitude of factors had caused a dip in the sales of iPhones in the United States and China—Apple’s key markets. Apple was now eyeing India, the third-largest smartphone market in the world, to replicate its China growth story. The India launch of the iPhone 7 was planned for October 7, 2016. The base model was priced at the equivalent of over US$900, about 39 per cent higher than the U.S. phone price. Did Apple have the pricing power to charge more than three times the cost of the iPhone in the Indian market? What would be Apple’s best pricing strategy in a market like India? How could Apple grow its revenues and profits in one of the fastest-growing smartphone markets in the world?

This case can be taught in a pricing strategy or introductory microeconomics course in a post-graduate or executive MBA program. Students can use insights from the case to understand firm monopoly power and its impact on pricing strategies. The case will also give them insight into the relationship between monopoly power and profits. After completion of this case, students will be able to<ul><li>understand the concept of firm monopoly power;</li><li>analyze the sources of, and factors affecting, the degree of monopoly power;</li><li>calculate the degree of monopoly power; and</li><li>assess the relationship between a firm’s monopoly power and its profits.

• Monopoly Power, Pricing Strategy, Smartphone market, Lerner's Index