The paper analyzes a recent transaction which involves the purchase of a smartphone from Samsung Electronics Co. Ltd. In terms of consumer preference, the decisions to buy the smartphone from Samsung was due to its high-end features and low prices compared to other smartphone devices. Consumer preference and choices in microeconomic perspective play a fundamental role in terms of demand and supply, as well as opportunity cost and elasticity of demand in the products being purchased (Porter, 2010). Though pricing is not the only deciding factor, it affects largely the consumer decision-making process. Principles of microeconomics state that if the prices for products rises, the demand for those products lowers, conversely if the price for those products lowers, the demand rises if all the other factors are held constant (Baumol and Blinder, 2015). Moreover, the other main deciding factor is the taste and preferences. In the case of Samsung, certain features set it apart from other competitors with its cutting edge being quality and low price inclusion.
Rationale for product creation
The supremacy of Samsung in the smartphone industry is as a result of giving consumers what they want. The ability to offer what suits the consumer requirement make it even have a more competitive advantage over its competitors. One of the main reason for the creation of development of smartphone products is to address the technological gaps in the current technological and dynamic world. The incorporation of research and development (R&D) activities also contribute to the identification of new opportunities in the market that addresses consumer needs (Frank, and Cartwright, 2013). The case can be in reference to Samsung smartphones devices that incorporate advanced innovative features that suit the consumer needs, a market gap previously not tapped into. The design and product innovation capabilities of the Samsung smartphone suppliers make it dominate in the production of different consumer products. Furthermore, efficiency in vertical integration enables a company to have a solid supply chain in the production of smartphone devices that satisfy a common need. Therefore, as a consumer, the need to secure their smartphone devices is the satisfaction from their appealing features and the functionalities they entail.
The need for low prices is the other contributing factor to the creation of new economical products in a market. Pricing plays a fundamental role in the demand for economically friendly products in the market (Varian, 2014). In the case of Samsung, creation their smartphone devices was also heightened by the need to low cost of the smartphones and also maintain quality standards. Therefore, Samsung domination in the smartphone industry is as a result of synergic effects of quality production and low cost. Pricing played a fundamental role in relation to its substitute products offered by competing firms such as Apple but their devices were costly. Samsung identified these gap and in capturing more customers, they developed low-cost devices that still had high-end features. Buying their products, therefore, guarantees quality at the same time it's economical from a consumer's perspective.
Factors of demand and supply
Taste and preference influence the demand and supply of products (Baumo and Blinder, 2015). The concept also refers to substitutes products. The more preferred a product is the more its demand and consecutively the more its supply in meeting the demand function (Frank and Cartwright, 2013). The case can be of Samsung smartphone devices. Samsung ability to develop unique products that satisfy the consumer needs make it outstanding. Greater preference for their products would imply a rise in demand of their products shifting the demand curve to a higher level. Specifically, the changes in new model designs for the smartphones influence their demand and supply. From a supplier side, the supply would also increase to cater for the demand. The shifts in demand and supply curves also concurrently shift with the price of Samsung smartphone devices products. The more demand for Samsung smartphone devices would mean a rise in their prices. However, the price fluctuations being a major factor influencing the supply and demand market, would imply their prices would have to be lowered as it also necessitates the need to cut its production by the suppliers in stabilizing the value of their products.
The other major factor that influences demand and supply is changes in prices of related products. If the price of one product rises the demand for the other products rises as consumers perceive the substitute product to have the same utility (Frank and Cartwright, 2013). The case can be of firms such as Apple and Huawei that offer competitive smartphone products in relation to Samsung. The shifts in the price of their products affect the demand and supply of Samsung smartphone devices. If the prices of those substitute products rise, the demand for Samsung smartphone devices would rise as customer's preference shifts away from the substitute products. Moreover, the supply of the company's smartphone devices would also rise to satisfy the market demand for their products. However, on the other hand, if the price of those substitute products lowers, it would affect the demand of Samsung smartphone products as they would have to lower their price to be in line with other competitive products. Furthermore, the aspect of substitute products plays a key role in demand elasticity, Moreover, if the changes in prices of substitute of products do not affect the prices of the main products, the demand is said to be inelastic.
Price elasticity of demand
Price elasticity of demand (PED) refers to responsiveness of quantity demanded to changes in price. A greater proportionate shift or response as a result of a slight change in price refers to demand elasticity (Dudu and Agwu, 2014). In the case of the Samsung smartphone, despite its domination in the market share, price elasticity of demand would be higher as there exist other substitute products from Huawei and Apple. Therefore, high pricing of the products would mean lower demand for its products. In terms of revenue, raising the prices of Samsung smartphone devices would have a negative impact. The rationale being that fewer sales would be derived from Samsung products as consumers shift to other substitute products that offer the same products at lower prices. Price inelasticity offers a better flexibility in establishing or setting up pricing strategies especially in oligopolistic market structures, such as the one of Samsung (Varian, 2014). Therefore, the choices or decisions Samsung makes, influences their market value and share, especially in the pricing of their smartphone devices in relation to other substitute devices. The concept of micro economics in relation to Samsung smartphone industry help explain what would happen if there are shifts in the pricing of their products in relation to demand elasticity. Furthermore, the smartphone industry is a type of transitional marketing that emphasizes more on the sales transaction.
References
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Nelson Education.
Dudu, O.F. and Agwu, M.E., 2014. A review of the effect of pricing strategies on the purchase of consumer goods. International Journal of Research in Management, Science " Technology, 2(2), pp.88-102.
Frank, R. and Cartwright, E., 2013. Microeconomics and behaviour. McGraw Hill.
Porter, M.E., 2010. Microeconomics of competitiveness. Institute for Competitiveness and Strategy, Harvard.
Varian, H.R., 2014. Intermediate Microeconomics: A Modern Approach: Ninth International Student Edition. WW Norton " Company.
