Report: Price Determination of Tablet Computers in the UK Market

This report provides a comprehensive analysis of the factors influencing the pricing of tablet computers in the UK market. It begins with an overview of technological advancements and their impact on the economy, particularly within the UK. The report identifies key factors that determine tablet prices, including industry standards, competitor pricing, consumer demand, and product positioning. It then examines the growth of the global tablet market, presenting data on market size and user numbers, and analyzes the reasons behind declining tablet prices, such as price skimming, economies of scale, technological developments, and low-profit margins. The report further explores the market share of leading tablet vendors like Apple and Samsung and discusses the factors contributing to the decline in demand for tablet computers, such as larger-screen smartphones and economic conditions. Finally, it delves into the role of the UK's free market economy and identifies factors that influence tablet prices within this context, including the price of substitutes, consumer income, and future price expectations. The report concludes by summarizing the key findings and implications for the tablet market in the UK.

Price of Tablet Computers in
UK

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Factors that help in determining price of tablet computers in UK..............................................1
Factors that determine price of tablet in free markets:................................................................7
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Technology is continuously developing in the economy. It has now become life blood in
the growth of economy. The Highest advancement of technology can be seen in the industry of
computers. From the past 10 years, every year the latest technology computers come in the
market and become obsolete after few years, therefore change and development has both positive
and negative impact on the economy. These impacts can be clearly seen in the economy of UK.
More than two third of the population of UK is using and has become dependent on computers.
The latest advancement in computer industry is tablets. These small tablet computers can
perform almost every task that a large computer can perform and also have an advantage of small
size that can be easily carried anywhere. The present report is based on the price of tablet
computers in UK. Various factors that helps in determining the price of tablet computers in
market and free market is focused discussion of this report. Further, market share of table
occupied by different vendor has been graphically presented and also the reasons behind decline
in the prices with increase in demand are described.
TASK 1
Factors that help in determining price of tablet computers in UK
Computers, tablets and phones are the devices of recent generation that have become
necessity in today's era. Once was a time when these devices were considered as a desire and not
a need. The main factor that has affected the necessity of theses devices is change and
improvement in technology (Asai, 2016). Change in technology has impacted positive as well as
negative demand and growth of these devices.
In UK more than half of the population is using tablet. However, even then prices of
tablet has been declined in past recent years. Before identifying the reasons for decline in the
market share and prices of tablets in UK, it would be beneficial to know the factors that effect
helps in determining the prices of tablets and computers in UK. These factors may be
summarised as below:
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Industry Standards: All types of industry have their set standards in determining price
of their product. A company cannot determine price of its product at its own basis, follow up of
rules and policies is necessary. This also includes prices of other competitors in the market.
However, advanced technology has made it easy to identify prices of products of other
competitors.
Competing products: In the industry of tablets and computer, buyers have numerous of
choices and also there are number of substitutes. Therefore, while determining price of a product,
prices of competitors is an important factor (Babai, Ali, Boylan and Syntetos, 2013). For setting
the prices while taking in consideration prices of competitors, company can also use competitive
pricing methodology. There are many competitors in the field of table and computers like Apple,
Samsung, ASUS, Microsoft, etc. Pricing higher than the prices of competitors by providing same
features will cause company loss of market share and customer rotation.
Consumer Demand: Demand of customer changes with the change in technology. Prices
must be accordance with the technology. More the latest technology product more will be the
demand of customers, therefore prices of such products can be set at high profits. While tablets
with obsolete technology will not attract high demand (Miyagawa and et.al., 1997). Keeping
prices of such products high would negatively impact the market share and demand of the
company products. It is generally assumed that, consumer will be willing to pay high for good
quality products and latest technology products rather than paying for old and obsolete products.
Product Positioning: prices of the products of the company are important factor that
affects the view point of customers regarding the company and also about the quality of the
product. Consumer assumes high quality if the prices of the products are high. It is general
perception of consumers that low priced products have low quality (Chan-Olmsted and Shay,
2016). Therefore, in order to position a product in high market, prices plays an important role.
High priced product companies set themselves as luxury and upscale brands.
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Global Growth of tablet market
(Source: Number of tablet users worldwide from 2013 to 2020 (in billions), 2017)
Market of tablet is increasing and market of traditional computers has been declining
from the past few years. Main reason behind this is that the tablets are easy to handle anywhere
while one cannot think of carrying a traditional computer with him on a trip. As per the new
report, it is expected that global tablet shipments will increase at 9.1% CAGR at the end of 2026.
Hence, considering the trend of tablet market it can be stated that global tablet market will nearly
reach on US $ 600 by 2026 (Growth of Global Tablet Market, 2017). Along with this, growth of
tablet market can also be seen through the means of number of users. The above depicted graph
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shows that in 2013, number of tablets users were .66 billion, whereas level of the same
accounted for 1.23 billion at the end of 2017.
Global growth of tablet market is highly influenced from the changing taste and
preferences of customers. This is one of the main factors that have high level of impact on
demand level. Tablet’s offer high level of convenience to the customers as compared to personal
computer’s. Moreover, customers can carry tablets easily wherever they want. In addition to this,
after the recessionary session purchasing power of customers are increased significantly
(Rosenfield, Jahan, Nunez and Chan, 2015). Further, overall economic development also gives
indication in relation to market growth. Hence, considering the overall evaluation it can be stated
that taste, preferences and attitude of customers towards specific product is high then demand
level increases and vice versa.
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Illustration 1: Fall in average selling price of tablet
(Growth of Global Tablet Market, 2017)
The above graph shows that the average price of tablets have been falling and according
to market researchers it has been forecasted that it will continue to fall in the future. Following
are the factors that explains fall in the price of tablets:
 Price skimming: There was an element of price skimming after the launch of Apple
tablet at the rate of $700. Apple company attracted those customers who were willing to
pay high prices by charging the high price for its product. This caused new firms to
become more price sensitive (Huberty and et.al., 2011). By charging high price, company
reflected quality of its product as the best quality and new firms charging less price have
become less keen to claim the best quality for their product.
 Economies of scale in production: There was a growth in the market of tablet that
benefited firms by reducing costs due to economies of scale.
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 Development in technology: Technology is developing day by day that along with
positive effect to the firms is giving negative impact too (Chen, 2017). Development in
technology has benefited the industry by enabling them to produce more powerful
computers at lower cost. However, continuous advancement in technology is also causing
early obsolescence of those products which once were of the latest technology. Therefore,
due to innovation, prices of tablets has been fallen because customer will not be willing
to pay high for the product which after few months will become obsolete. Low profit margin: In order to be in the competition, many companies are selling their
tablets at very low profit margin so that they can gain high market share. These
companies will get high rewards in the long term as this will increase the possibility of
those firms to sell their secondary products at more profitable margin.
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Market share of leading price vendors :
Illustrat
ion 2: Market share of leading price vendors in UK from 2012 to 2016
(Market share, 2017)
From the above graph it has been clear that the maximum market share of tablet is
covered by Apple by charging high rates it portrayed the best quality of its tablet attracted
maximum customers. Having a product of apple has become a leisure for consumers (Daganzo,
2014). It can be seen that, after Apple, Samsung is the second to cover the highest market share
of tablet in UK and is continuously increasing its market share. However, market share of Apple
is showing a declining trend.
Factors due to which demand in Tablet computers has declined in UK is last 10 years
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As discussed above that there are various issues and factors that can affect demand of
tablet computers in UK. The slowing growth along with decline in the shipment of tablet has
caused the emergence of Phablet that are larger screen smartphones (Huberty and et.al., 2011).
This section was first introduced by Android manufactures and then Apple finally followed the
suit. Further, following are the factors that have significantly affected negatively to the demand
of tablet computers in UK:
Long use of Tablet:
Tablet is classified under luxurious products, price of which is also high. Therefore, users
and buyers of tablet are hanging on them for longer period that indirectly reduces its demand.
Regular up-gradation of software's also helps them in holding on for longer.
Larger screen Smart Phone:
As discussed above, substitute of tablet computers such as larger screened smartphones
and tablets are more preferred by consumers as they can perform more tasks than a tablet can do
and are also easy to carry anywhere.
Economy of UK: The role of government and its intervention in UK
Prices and demand of a product largely depends upon the type of economy a country has.
Economy of United Kingdom is based on the system of capitalist on global economy and free
trade. However, its limits are established by the Government. Capitalist market refers to an
economic system that is characterised by free trade and where the government intervention in the
economy is also not present (Choi, Shin and Lee, 2013). Market of UK is decision maker and not
the government. However, some decisions like road building, construction of hospitals and
schools and other infrastructure related decisions are made by government.
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Factors that determine price of tablet in free markets:
In order to determine price of tablet computers in free market, there is a significant
impact of factors that affects demand and supply of tablet computers (Whitney, 2013). Below are
the following internal factors that will affect demand and supply:
Price of Tablet: Prices of tablets is declining on yearly basis as the new competitors are entering
into the market with their latest products and new brain storming ideas. With the regular research
and innovation there is progress in development and hence the demand is increasing.
Price of substitutes: The main substitute of tablet is a laptop that have become highly popular in
today's generation. As these provides extra benefits than tablet. A person can carry out number of
tasks using laptop than the tablet. Therefore, prices of laptops and other high tech smart phone
plays a vital role in determining demand and supply of tablets. It is also expected that the laptop
industry will show a significant growth in future and thus, this will definitely affect demand and
supply of tablet computers (Factors that determines price of computers in free market, 2017).
Income of Consumers: Income of potential consumers significantly affects the demand of tablet
consumers. Those who have low income would hardly prefer to purchase tablet than those
having good income. It also affects the market share of different industries as consumer having
high income would prefer high priced tablets like that of Apple and consumers having low or
moderate income would prefer low priced tablets like that of other companies.
Future price expectations: Future price expectation of a product also affects the demand of
product (Rosenfield, Jahan, Nunez and Chan, 2015). If it is expected that in future the price of
tablets will decline, consumer will refrain to buy product in present and if it is expected that price
of tablet computers are expected to rise in the future, present demand will increase.
However, the above factor can be better understood with the demand and supply theories:
Law of demand and supply are considered one of the fundamental principle governing an
economy.
Law of demand:
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Demand refers to willingness and power to purchase a good. If any of them is not holded
by customers, demand will not exist. It also refers to the quantity of a good that consumer is
willing to or attempts to buy at a certain price is demand. Demand of a product can be identified
by using demand schedule or demand curve (Estelami and et.al., 2016). A list that shows
willingness of a consumer to purchase different quantity of goods at different prices, remaining
all other variables constant is a demand schedule and its graphical representation that shows a
relationship between quantity demanded and prices is demand curve. However, law of demand
refers to the negative relation between price and quantity demanded. It states that, quantity
demanded will rise with the fall in price and quantity demanded will fall with the rise in price.
In case of tablet computers in UK, prices of tablet computers are declining while, there is
an increase in demand (Whitney, 2013). It is the effect of law of demand. However, law of
demand works on the following assumptions:
 No change in consumer income
 Fashion, tastes and habits remains constant
 No change in the prices of related goods
 No effect of future expectations
For example 1: DEMAND CHART
PRICE QUANTITY DEMANDED
£98 (P1) 2000 UNITS (Q1)
£110 (P2) 1850 UNITS (Q2)
£150 (P3) 1550 UNITS (Q3)
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