Establishing financial patterns and predictions for any electronic product is difficult, especially for relatively new technology such as tablet computers. For this example, there are three different types of tablet. X5 is a tablet that is all about value. Its customers do not care very much about its performance. X6 is the opposite. It is the strongest, performance-wise, of the three, and is the one consumers are willing to pay the most for. X7 is the all-rounder, and strikes a balance between price and performance. This review will cover the sales over several years of each of these three tablets, their market saturation, and offer recommendations for alternate courses of actions for these tablets regarding things like pricing, or even whether one particular model should be discontinued. The most important thing to consider with tablets is that they ride a fine line between performance and portability. In fact, portability is one of the largest gray-areas facing tablets today (Forman & Zahorjan, 1994).
To start with, X5 is the "safest" of the three tablets, being the lowest-performing, and only costing $285 per unit. Unfortunately, while it is easy to produce and sell, it was not the most profitable. While in the first two years, between 2012 and 2013, growth in profits more than doubled (from $62 million to almost $200 million). In the last two years, however, the market stagnated, and the sales of X5 dropped back to 2012 levels (i.e. less than $60 million). The most probable reason for this sharp decline in sales is that the units are so cheap that by 2014, everyone who already wanted one had one, and the company was predominantly selling replacement units at that point, rather than garnering new customers. Nevertheless, even at X5's lowest point, in 2015, it was still selling almost one million units per year, which is nothing to scoff at, and certainly not worth discontinuing the product, especially since this would largely alienate the customers who purchased the X5 in 2012 and 2013 and are merely looking to buy replacements for it, leading them to competing tablet companies, which would be bad in the long term. One suggestion to keep the X5 afloat is to begin offering extra features or upgrades to existing models of the X5 in 2014, which would prompt users who had not purchased a tablet yet to at least consider the X5, which hinges on value-oriented customers for much of its sales.
The X6, while completely opposite the X5 in priorities (i.e. performance over price), faces a similar predicament as the X5, although it retails for much more, at $430. That is, it performs extremely well (even better than the X5) between 2011 and 2014, but then drops off drastically in 2015. This is strange because in 2014, the product hit an all-time high in revenue, at over $1 billion, which is fantastic, of course. However, like the X5, it faced a sharp decline in 2014, likely for similar reasons as the X5. The X6, being the model for the performance-minded customer, likely simply ran out of customers. The rapid change of technology likely just left the overall format and performance of the X6 outdated, and left consumers with little incentive to pay top dollar for a product that is not necessarily adequate in the performance department. One way to remedy this is to initiate a preemptive price drop. That is, sometime in 2013, to lower the price of the X6 to about $300, which brings it very close to the price of the X5, although it performs much better. This ensures that the X6 will continue to attract performance-minded buyers but also those who want to stretch their dollar as far as possible.
The X7 was the black sheep of the three tablets. Despite the fact that it maintained the middle ground between the X5 and X6, it simply never took off, garnering, at its best, a relatively paltry $95 million. It should be mentioned that the X7 was the only one of the three tablets that actually saw improvement in 2014. While the X5 and X6 nosedived, the X7 appeared to be picking up steam. This might correlate to why the tablet sold so poorly in the first place. That is, tablets are a new technology, and customers were taking a long time to trust a model that does not specialize in anything (i.e. price or performance). These tepid customers appeared to gain some courage in 2014, when sales of the X7 appeared to be replacing at least some of the sales of the X5 and X6, likely because of this shift in consumer priorities. However, the pricing of the X7 is strange. While it is the all-rounder, it is actually cheaper than the X5, which is focused more on being cheap than being good at performance. This creates a dichotomy in image for the consumers. In the future, it might be prudent to adjust the prices for these two tablets, perhaps by simply switching them, so that this dichotomy between price and performance is remedied.
In terms of competition with these tablets, Apple obviously presents the greatest threat, at least for the immediate future. Their main tablet product, the Apple iPad, saturates multiple price points, with models ranging in price from $400 to $600 (Kolakowski, 2010). Apple is also capable of satiating many different consumer needs, such as introducing an "iPad mini," which helps to bridge the gap that tablets have been struggling with between performance and mobility. In addition, Apple has an extremely strong brand association with its products that gives competing companies an immediate disadvantage and largely makes them the "up-and-comer" that must unseat Apple with some sort of mind-blowing technology. There are other, rising contenders to Apple, such as the Windows and Android tablets, but, as of yet, these have been underwhelming when compared to Apple. While the tablets of our company will be competing directly with Apple, the hope among the company is that the price-to-performance ratio of these tablets will be much greater than Apple's. That is, they will be slightly cheaper, yet offer comparable performance to Apple's flagship tablet products. This is about the only way the company stands a chance against Apple. Apple has been a booming company lately. Between fiscal year 2010 and fiscal year 2012, its net income almost tripled, from $14 billion in 2010 to over $41 billion in 2012 (Apple, 2013). This gives their tablets "top dog" status, and makes the tablets from our company have to do the catching up, which could give an advantage in the marketing department.
The most reliable solutions to these problems, particularly the sharp declines in sales in the later parts of the tablet's lifecycle, can be solved by adjustments in lifetime estimates of these tablets. The most reliable method to ensure continual profits from the tablet division is to discontinue all three tablets at the end of 2013 and begin a new line of tablets with similar market saturation (i.e. one for performance minded customers, one for value-minded customers, and one all-rounder) but with upgraded hardware and software. It is no secret that technology becomes outdated after a time, and with tablets, this concept is doubly true. Around the beginning of 2013, R&D should examine the current market of tablets and begin formulating a strategy to remake tablets that is best in line with that market. This will help to prevent the sharp decline in sales that occurs at the beginning of fiscal year 2014. In addition, tablet X7 should be reworked from the ground up. Rather than create a tablet that tries to be a middle ground, X7 should be a tablet that focuses on a simple, clean interface, reliability, and branding to be successful, much like Apple does. This might be a risky venture at first, but the X7 is already not very profitable at the moment, and the venture would, in the long run, be relatively low-risk. As for market saturation, the changes proposed to the X7 would allow the tablets to saturate three entirely different price points using relatively similar hardware, which helps to reduce costs and increase net income for the company. As for more specific solutions relating to pricing, the X5 should be reduced in price by $100 in fiscal year 2013 so as to attract more value-minded customers. This would make the X5 about $200, which is a very reasonable price for a tablet computer, even one that doesn't have the performance of the X6 or an iPad, and considering this price cut would only come at the tail end of its life span, it would serve as an effective incentive to get customers to continue purchasing the X5. The X6 is currently the best performing of the three tablets and thus, its pricing can remain largely unchanged, although a price increase of $50 would be advisable, since it has been proven that consumers are willing to pay top dollar for solid performance. This would make the price of the X6 almost $500, but considering the performance it offers, as well as the price of Apple's iPad, this price is more than reasonable. The changes proposed to the X7 earlier would help to supplement these changes in price. As for R&D allocation, it should be dynamic, and should be geared (approx a 60/20/20) toward the tablet that is doing the worst, so that its design may be improved, and so that sales performance for all three tablets will at least be more even across the board.
While these three tablets appear to have declining sales later on in their lifespan, it is possible, through changes in the technology as well as price and R&D allocation, to at least alleviate some of these declines in sales. It should be noted that Joe Schmoe, the employee here previously, did a fairly good job of balancing price and R&D allocation, but there can always be more done.
Apple, Inc. (2013). Investor Relations. Financial History. Retrieved from http://investor.apple.com/financials.cfm
Forman, G. H., & Zahorjan, J. (1994). The challenges of mobile computing. Computer, 27(4), 38-47.
Kolakowski, N. (2010). Apple iPad, iPhone expected to boost quarterly numbers. eWeek.Retrieved from www.eweek.com/pc-hardware/apple-ipad-iphone