The iPhone manufacturing company seems to be raising the prices of its devices in certain parts of the world, including Russia and Europe. According to sources close to Apple Inc., this rise in prices is in direct correlation with the strengthening American Dollar. However, industry experts are of the opinion that the company may be monetizing its monopoly status in certain markets over the world in order to generate increased profits.
It is no secret that Apple Inc. (NASDAQ:AAPL) enjoys a monopoly status in certain parts of the world, including Russia, where the company also faces tough restrictions by the government. These monopolistic privileges are endowed to the company as a direct result of the demand the iPhone and iPad devices currently enjoy with a certain percentage of the market. Even when Apple increases the price of its products within these markets, demand for them remains the same, or only slightly falls, still substantially improving revenues.
So when Apple Inc. recently increased prices for its devices in such markets, including the European and Russian ones, certain analysts began to hold the opinion that the company is monetizing on its monopoly status that it enjoys within such markets.
But, the rising value of the dollar against the currencies of the world is also a point of concern for the company, and it does justify Apple Inc.’s decision to increase prices in all such markets that are affected by the strengthening dollar.
As the dollar increases in value, it decreases the revenue Apple Inc. generates from international markets. This happens because in the international market, sales for the company’s devices are conducted in the local currency of the market, and not in dollars, and when the dollar subsequently rises, conversion of the revenue into dollars (which is the currency Apple Inc. operates with as it is a US based company) results in a much lower revenue than the company enjoys before the rise in the value of the US dollar.
This rise in the value of the US dollar also explains why Apple Inc. also increased the prices of all its apps available on the Apple App Store in countries whose currencies have fallen in value against the dollar.
But is the rise in prices proportionate to the rise in the value of the dollar? According to some industry analysts, no. According to them, Apple Inc. has increased prices by more than was necessary to maintain revenues in the international markets. This disproportionate increase seems to be working towards an increase in the revenue figures generated in the international markets from the sale of Apple Inc. devices.
This comes in direct contradiction to the policies adopted by Cisco, another tech company operating in the international markets amidst increasing dollar prices. Cisco, unlike Apple Inc., has in fact decreased prices of its products and services in the international markets to become more competitive with local manufacturers. As Cisco enjoys a more elastic demand within international markets, this seems to be the best pricing strategy for the company.
Hence, the increase in Apple Inc. (NASDAQ:AAPL) products in international markets is not a result of the strengthening dollar, but in fact more so a change in the pricing strategy of the company which accommodates its monopolistic outlook within such markets.
