QUESTION 5 Apple Inc. is well known for developing innovative products like the iPhone, iPad and iPod. Such devices are manufactured with complex electronic components and incur substantial closely guarded secret. While the manufacturing and distribution costs are important factors in setting a price for such devices, other factors affect pricing policy too, according to industry analysts and reviewers. Taking the iPhone as an example, the first factor is the features and capability of the device, whereby for example, the price increases according to the storage capacity. As the iPhone has developed through to the current (early 2011) iPhone 4 , additional functionality has been offered. Rumours of a complete re-design for the iPhone 5 have even spawned a website www. Iphone5rumours.com, although Apple is remaining silent. The additional functionality has increased manufacturing costs, but in general end-consumer pricing has remained relatively static for each new iPhone model. How has Apple kept prices low, despite increasing costs? The answer lies, at least partly, in a change in pricing policy which forces mobile phone operators to offer heavy subsidies to new customers wanting an iPhone. And operators typically comply as the demand for iPhones remains high. REQUIRED: 5.1 Do devices like iPhones have differing prices during various stages of their life cycle? Discuss your answer to indicate how the sales price change within every stage of the life cycle. 5.2 Can companies like Apple adopt price-skimming policies? Why or why not