“iPhone Demand Outstrips Supply in China”

Yuko Ohmori

Problem

<iPhone

Situation

UNICOM vender like Softbank and AU

Sept. 2010: 200,000 demanded However, only 100,000 were supplied

2009: 40,000 units were sold 200,000 > 40,000

iPhone is a hit in China

Graph

1 2 3 4 5 6 7 8 9$0

$100

$200

$300

$400

$500

$600

Shift in the Supply and Demand curve for the sales of iPhones in 2009 and the future in China

Quantity Supplied and Demanded in 10,000s

Pri

ce o

f iP

hon

e (

$)

D1

D2

S1

S2

E1

E2

E3

Stakeholders

Apple

Other smartphone companies

UNICOM

Effects: UNICOM

Winner

Only Chinese iPhone vender Law of Demand Opportunity to increase price for more profit

Sold all of its inventory

Get more from Apple

Loser

100,000 potential customers Wait Transfer to another smartphone

Effects: Apple

Similar to UNICOM

Winner

iPhone was a hit in China Additional market

Excessive Inventory

Diversion of iPhone shipment from other nations

Diversion of Inventory

UNICOM

1,000,000

1,000,000

-50,000

-50,000

+50,000

+50,000

100,000200,000

Apple HQ Meats Demand

Effects: Other Smartphone Companies

Winner

Potential customers Buy other smartphones

Year Market Size

No. of iPhone sold

No. of Other smartphones sold

Wait/Buy other

2008 1 mil 0 1 mil 0

2009 1.1 mil 40,000 1.04 mil 0

2010 Sep.

1.2 mil 100,000 1 mil 100,000

2010 Nov.

1.2 mil 200,000

1 mil 0

16.6% 83.3%

Shipment diversion analysis (example)

If Apple takes action

Year Market Size

No. of iPhone sold

No. of Other smartphones sold

Wait/Buy other

2008 1 mil 0 1 mil 0

2009 1.1 mil 40,000 1.06 mil 0

2010 Sep.

1.2 mil 100,000 1 mil 100,000

2010 Nov.

1.2 mil 100,000

1.1 mil

0

8.3% 91.6%

If Apple does not take action

What other smartphone companies should do

Advertise product TV, newspaper, online

Create something new Catch customer’s attention

Loser: Effects on Customers

Have to wait

Substitution Effect

Either way, customers lose

Unknown

iPhone hardware

(Manufacturing companies

and employees)

Chinese Apps (company and

engineer)

Black market dealers

Chinese iPhone Apps

Winner

Chinese App producing companies

Customers buy Chinese apps Increase business

Chinese Computer Engineers

More demand for Chinese Computer Engineers More job opportunities

iPhone hardware Manufactures

Winner

Company

iPhone is popular Produce more

Employees

Demand for more employees

Winner: Black market dealers

$200

$2000China

Hong Kong