2013-11-02

Idea: Google and Apple Purposely Produce Less Devices Than Market Demand

The sudden thought occurred to me, though perhaps not new, there's a strong possibility that large companies like Google and Apple and Microsoft purposely supply less than demand. It seems like just about every time a device is produced, it sells out.

I know producing millions of phones is a lot of work, but for the purposes of this post, I'm going to consider that these large companies choose to throttle output.

Determining market demand is not an exact science, but it can be determined to a degree of significance how much demand there is, even just looking at past trends. So, if companies can't determine exact demand, then they will either produce more or less needed (:idea:). If they produce more, then the extras could be sold eventually. If they produce less, then they sell less (at least in the beginning).

Now for more specifics for meeting demand.

If companies produce supply to meet demand, then they do have the opportunity of making more money in the short run, but the long term revenue differences would be insignificant. Another benefit of satisfying demand might be that more consumers have the brand's device in their hands.

On the other hand, there are many benefits to under supplying demand. A list might be easier here:

1. More publicity. Journalists don't know exactly how many devices are produced/shipped, all they know is when something is out of stock.
2. Inflate prices/value. Google sells the Nexus 5 for $349-399, but you can find some pre-orders selling for $600-650. Also, more publicity.
3. The large companies don't have to worry as much about their devices flopping. Aka, mitigating risks.
4. More publicity. This time the reason is for when the large tech companies ship their second and third rounds of devices.
5. Chance to fix some [software] bugs before "everybody" gets the device.
6. Also, minimize costs of a recall... just in case.


Any more thoughts that I missed?

~ Simply Advanced ~



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