Sold out: the latest must have sales strategy. Have you noticed that every time a new, hyped piece of gadgetry is released, it seems to sell-out? The recent iPhone phenomenon is a case-in-point. Last Thursday, the 3G iPhone went on sale worldwide. Four days later, Apple is believed to have sold 1 million iPhones. According to Bloomberg, “carriers in the U.K., Germany and Japan said many shops ran out of stock on the first day.”
The sell-out was hardly a surprise. The Nintendo Wii sold out just before Christmas in Australia and the US. It took more then two months for new units to be shipped to Australia. Last month, US store Best Buy sold out of the Sony Playstation 3 bundles. The quickest sell-out of them all was the Amazon Kindle (which is an electronic book reading device), which by some reports, was sold out only minutes after it was released on the Amazon website.
The sell-outs appear to be an intentional marketing ploy, aimed at boosting demand and garnering free publicity from content hungry broadcasters. Apple could have easily produced additional iPhones to satisfy forecast demand (the one million unit figure was expected by most analysts) — but that would have fewer geeks turning up at phone stores at 12.01am. Further, the strategy works. Nintendo managed to increase the price of its Wii this year – a virtually unprecedented occurrence for an electrical good.
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Tearing down the iPhone 3G. Not only did Apple sell 1 million iPhone 3Gs in three days, but the company is making a healthy margin on each one sold. That’s the conclusion of researchers at market research firm iSuppli, who took apart the new device to learn who made what inside, and how much Apple spent on the parts. The total cost of materials used inside the latest iPhone is $US174.33, a dollar and change higher than the preliminary estimate iSuppli made in June (BusinessWeek.com, 6/23/08), about two weeks before the phone was actually released. If the analysis is correct, Apple is spending about $53 less on materials than it did with the first iPhone, which iSuppli says costs $US227 to make.
After accounting for a subsidy from AT&T (T), iSuppli reckons Apple makes a per-unit gross profit of 55%. That’s a fatter margin than other phone manufacturers tend to make on their own handsets and reflects falling component costs and Apple’s ability to negotiate a bargain from suppliers. Nokia, the world’s largest handset maker, averages 36% hardware margins across all its products, while certain high-end models command hardware margins of 45%. — Arik Hesseldahl, BusinessWeek
Does NAB boss John Stewart have the best job in the world? Last year, Stewart earned $8.1 million, but he’s not exactly directing an army. He has a mere eight direct reports, including Australian boss Ahmed Fahour who himself collects $6.8 million and UK chief, Lynn peacock who is paid $5.1 million.
The bank is implicitly guaranteed by the Australian taxpayer, meaning it is able to pay depositors less interest than non-bank borrowers. As Paul Krugman noted in the New York Times with relation to Freddie and Fannie (but the principle extends to Australian banks), the “implicit guarantee means that profits are privatized but losses are socialized. If [NAB or CBA] do well, their stockholders reap the benefits, but if things go badly, [Canberra] picks up the tab. Heads they win, tails we lose.”
NAB, like the other major Australian banks, also doesn’t operate in a competitive environment. In the last week, all five major banks increased variable interest rates outside the RBA. On one hand, the Government protects the banks by guaranteeing their deposits – then the banks tell the government to get stuffed when it comes to setting interest rates. “We’ll gouge as much as we can”, joke the banks as they laugh, ironically, all the way to the bank.
Oh, let’s not forget that Australian banks seize billions in what are most likely illegal penalty fees from customers, further fattening profits and contributing to executives like John Stewart’s massive, undeserved salaries. Yes there probably aren’t too many jobs as easy and as fruitful as being CEO of NAB.
Boomtime for the global bourgeoisie. In the midst of the current widespread gloom and doom in the west, it is important not to lose sight of the true structural themes shaping our era. Linked to the current mood, commentators often depict an embattled and shrinking middle class, with sharply rising financial inequality. However, globally, this is simply not true. One of the most startlingly positive phenomena for many generations continues to unfold around the world. We are in the middle of an explosion of the world’s middle class.
As two of my colleagues, Dominic Wilson and Raluca Dragusanu, showed in a paper Goldman Sachs published last week (“The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality), about 70 million people a year globally are entering this wealth group, as defined by those on incomes of between $US6,000 and $US30,000, in purchasing power parity terms. The phenomenon may continue for the next 20 years, with this global middle accelerating to 90 million a year by 2030. If this happens, an astonishing 2 billion people will have joined the ranks of the middle class. This demonstrates that, contrary to widespread opinion, global inequality is declining significantly, not increasing. — Jim O’Neill, Financial Times
EU considers “green” legislation. Opponents call it an eco-dictatorship. Proponents say it’s one of the most effective ways of cutting energy consumption so the European Union can meet its ambitious goals on cutting greenhouse gases. On Wednesday the European Commission is expected to make proposals for how energy efficient goods like computers, shower heads and window frames must be. The rules would tighten existing standards for some products and introduce new rules on a range of others. The goal is to force consumers to make greener choices. Goods that fail to meet minimum standards could be banned from the European market. The commission also would force more towns, cities and regions to make environmental considerations an important factor in procurement policies. The proposed legislation comes at a time when the EU is struggling to reconcile its aspirations to be a global leader on the environment with its own economic development. — James Kanter, International Herald Tribune