The influence of Iphone5 in Cambodia

            Publication of an advance technology product is always heart-stirring and motivated the consumer in the market, and now, especially the Iphone 5 which published on September 12, 2012(http://www.apple.com/hotnews/). In 90s', hand phone’s market was control by a few companies such as Nokia, Sony Ericsson and Black Berry, but there was a big incident which forced this sector get into a new war - the release of Iphone. Steve Jobs, who was a well-known director of Apple Inc., his integration concept changed the pattern of a phone we ever know, every other company that producing handset were changed their design to make it similar with Iphone. After a few years, along with every generations' Iphone release, Apple Inc. leave all other competition far behind from them and hold the market. According to the last annual report of Apple Inc., Iphone 4s sold by 37.04millions in just a quarter, which brings a huge turn over in USD 24,417millions(RM 75,814millions). Today, Iphone 5 is released for only a few weeks, but the demand occurred serious scarcity in many country, analyst forecast that Iphone 5 can sold 10millions in 3 days, but the result indicated only 5millions Iphone 5 were sold (not including pre-order), the incident influence the stock price of Apple Inc. to fell about 1.3% on a day (Forbes, September 24, 2012).Tim cook, present CEO of Apple Inc., explained this is the shortfall of manufacturing. As we known, economics is the study of human behave, from the said incident, we will discuss in the focus on how Iphone changed the market, the shortage of Iphone 5 in Cambodia and the elasticity of Iphone5.

           The cost spent on produce a smartphone is definitely higher than produce a hand phone, but what is the reason of most company which gained huge profit from producing hand phone decided to spent more opportunity cost to produce smartphone? After the Iphone released, people are no longer satisfied by only the improvement of how many mega pixel does updated, how the design does changed or how many colour does provided, the element that motivated consumer to buy a handset become the new function provided by a phone and the convenience it brings. Apple Inc. was actually changed the demand by provide a trans-generations device, other competitors are forced to upgrade their production and enter this new demand field which actually created by Iphone. In this case, we can actually found that, the demand of hand phone decrease and the demand of smartphone increase, as a result, the supplier decided to produce smartphone rather than hand phone. The evidence of this is the largely publication of different kind of smartphone such as Samsung Galaxy X,Y,Z, Iphone 1 to 5 and so on. We can no longer find any hand phone advertising publication such as Nokia 3310.

           After this new market created, the new equilibrium price existed. The law of demand tell us that, when a price rise will decrease the quantity of demand, and the law of supply tell us that, when a price rise will increase the quantity of supply. After combine both of the laws, there would occur 3 situations which is shortage, surplus and balance (assuming that other factors remaining the same). Shortage occurs when the quantity of demand is higher than quantity of supply, and the surplus will occur when the quantity of supply exceed quantity of demand; when quantity of both demand and supply is equal, equilibrium occurred. Price equilibrium point would be the balance point which both supplier and consumer are satisfied with and looking forward to. The huge number of Iphone fanatic and the improved of Iphone itself created a tremendous demand that supplier unable to bear for it, shortage occurred. In Cambodia, there is no any specialise of Apple store located, the market prices of Iphone5 is determine by a few suppliers, on 24th September, average price of an 16GB Iphone5 is USD1,200 each which is twice higher than the official pricing, and it is still rising, the highest rate is rise by USD50 over 15minutes.(SinChew, 24th September 2012). The incident occurred is matched with the theory of Microeconomics - "The price of a good regulates the quantities demanded and supplied". Besides, there is a small Oligopoly game occurred. As seller realise that people are willing to pay a higher price to get an Iphone5 and they are the only few Iphone5 stock holder at that moment, so they keep offer the price higher and higher, try to make their profit the maximum. However, along with the rising price, the quantity of demand would be decreased as the price has already over the budget of consumer, the shortages taper off after that. The prices will stop rising until it reached the maximum of what consumer willing to pay, and the prices is what we called price equilibrium. At that moment, shortage will be regulated, in Cambodia, there will be no more shortage of Iphone5.

            The Cambodia’s case is also reflecting the elastic of Iphone5. As the price rise twice from the original price and the quantity of demand is still high, from here, we discover that the price is not the impact issue to influence the quantity of Iphone5 demand. Because of the limited inventory of supplier and the huge demand, in the current stage, a 1 percent price rise decrease less than 1 percent quantity sold, so the total revenues which gain by supplier increase, we define the current stage of Iphone5 demand as price inelastic of demand. This also means that, the total revenue will increase by every increasing in market price. As the Iphone5 demand is inelastic, we found that, Samsung, HTC and other substitutes have not enough close with Iphone5 to influence its demand. However, this kind of business can only exist until more competitor start to supply Iphone5 and the official stationed in Cambodia, as the stabilize pricing and supply of official retail shop, quantity of demand would be satisfied. Furthermore, as consumer already know the official pricing, free-retailer can no longer set the pricing as before, to raise the total revenue, they start to drop their pricing to attract consumer, in that stage, 1 percent price drop may increase more than 1 percent quantity sold, and we said the good have an elastic demand. Thus it can be seen, the price elasticity of Iphone5 is changing by the factor of quantity of official supply and the time.